Development Agreement - Champps Entertainment Inc. and Dean P. Vlahos
CHAMPPS RESTAURANT DEVELOPMENT AGREEMENT
February 2, 1998
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TABLE OF CONTENTS
1. GRANT OF DEVELOPMENT RIGHTS
2. DEVELOPMENT SCHEDULE
3. DEVELOPMENT PROCEDURES
4. TRANSFERABILITY OF INTEREST
5. DEFAULT AND TERMINATION
6. OBLIGATIONS UPON TERMINATION
7. COVENANTS
8. RELATIONSHIP OF THE PARTIES
9. INDEMNIFICATION
10. APPROVALS AND WAIVERS
11. NOTICES
12. ENTIRE AGREEMENT
13. SEVERABILITY AND CONSTRUCTION
14. GOVERNING LAW, FORUM AND LIMITATIONS
15. REPRESENTATIONS
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THIS AGREEMENT is made as of February 2, 1998, by and between Champps
Entertainment, Inc., ("Champps"), a Minnesota corporation with its business
headquarters at One Corporate Place, 55 Ferncroft Road, Danvers, Massachusetts
01923, and Dean P. Vlahos ("Developer"), an individual with his principal
address at 80 Gideons Point Road, Tonka Bay, Minnesota 55331.
RECITALS
As a result of the expenditure of time, skill, effort and money,
Champps has developed and owns a unique and distinctive system ("Champps System"
or the "System") relating to the development, establishment and operation of
sports theme restaurants that provide the public with high-quality food and
beverages ("Champps Restaurants").
The distinguishing characteristics of the Champps System include a
distinctive and identifying combination of foods and beverages; services;
exterior and interior building designs; color scheme and decor; signage;
furnishings and materials; special recipes and formulae; menus; preparation,
service and delivery procedures and techniques; operating procedures for
sanitation and maintenance, and methods and techniques for inventory and cost
controls, record keeping and reporting, personnel management, purchasing, sales
promotion and advertising.
Champps identifies the Champps System by means of certain names,
trademarks, logos, service marks, insignias, slogans, emblems, symbols and
designs (collectively "Proprietary Marks") which Champps has designated or may
in the future designate for use with the Champps System.
Champps, by reason of its maintenance of high standards of quality for
the food and beverages sold by Champps Restaurants operated by it or under its
supervision and by reason of its maintenance of high standards of service
rendered by these restaurants over a period of years, has created a substantial
goodwill and demand for restaurants operated under the Champps System and the
foods served at those restaurants.
Developer acknowledges that the Champps System provides a firm
foundation for a franchise operation featuring the highest standards of
management, training, supervision, merchandising, service procedures and quality
food products.
Developer desires, upon the terms and conditions in this Agreement, to
obtain a non-exclusive license to develop Champps Restaurants ("Franchised
Restaurants") in the limited geographic area described in Appendix A
("Development Territory') under the supervision of, and in accordance with, the
standards and specifications adopted and promulgated by Champps.
Champps is ready to grant a license to Developer to develop Franchised
Restaurants in the Development Territory upon the terms and conditions set forth
below.
In consideration of the mutual agreements set forth below and in the
Separation Agreement and other good and valuable consideration, acknowledged by
each of the parties to be satisfactory and adequate, Champps and Developer agree
as follows:
1. GRANT OF DEVELOPMENT RIGHTS
1.1 Champps hereby grants to Developer the non-exclusive right to
develop Franchised Restaurants in the Development Territory during the
Development Term, upon the terms and conditions contained in this Agreement. The
Development Term begins on the date this Agreement is signed by Champps and
expires on the earlier of: (A) the date Developer opens the last Franchised
Restaurant it is permitted to develop pursuant to this Agreement; or (B) the
date that the last Franchised Restaurant is required to be opened pursuant to
the attached Appendix B. There is no renewal term for this Agreement. Each
Franchised Restaurant shall be located in the Development Territory at a
specific location approved by Champps.
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1.2 This Agreement is not a license or a franchise agreement. It does
not give Developer the right to operate Champps Restaurants or use the System,
nor does this Agreement give Developer any right to license others to operate
Champps Restaurants or use the System. This Agreement only gives Developer an
option to enter into Franchise Agreements for the operation of Franchised
Restaurants at locations in the Development Territory approved by Champps. Each
Franchised Restaurant developed pursuant to this Agreement shall be established
and operated only in strict accordance with a separate Franchise Agreement.
1.3 This Agreement does not give Developer any exclusive rights to use
the Champps System or the Proprietary Marks in the Development Territory.
Nothing in this Agreement shall prohibit Champps from: (A) operating or
licensing others to operate Champps Restaurants at any location in the
Development Territory other than the location of a Franchised Restaurant; (B)
operating or licensing others to operate, after this Agreement terminates or
expires, Champps Restaurants, any other restaurants or any other business at any
location, including the location of a Franchised Restaurant, subject to the
terms of applicable franchise agreements; (C) merchandising and distributing
goods and services identified by the Proprietary Marks at any location through
any method or channel of distribution other than restaurants; and (D) selling or
distributing goods identified by the Proprietary Marks to restaurants other than
Champps Restaurants. Champps reserves to itself all rights to use and license
the Champps System and the Proprietary Marks other than those expressly granted
under this Agreement.
2. DEVELOPMENT
During the Development Term, Developer shall have the right to develop
in the Development Territory the number of Franchised Restaurants specified in
the attached Appendix B, subject to the terms set forth in such Appendix B.
3. DEVELOPMENT PROCEDURES
3.1 Developer assumes all cost, liability and expense for locating,
obtaining and developing sites for Franchised Restaurants and constructing and
equipping Franchised Restaurants at approved sites. Developer shall be
responsible for, all loss or damage originating in, or incurred in connection
with, the development or operation of each Franchised Restaurant and for all
claims or demands for damages to property or for injury, illness or death of
persons directly or indirectly resulting from the development or operation of
each Franchised Restaurant.
3.2 Champps will provide Developer, as Champps may deem advisable, site
selection assistance as part of its evaluation of Developer's request for site
approval.
3.3 For each proposed site for a Franchised Restaurant, Developer shall
submit to Champps a complete real estate package (containing that information as
Champps may reasonably require) for a proposed site which Developer reasonably
believes to conform to site selection criteria Champps establishes from time to
time for demographic characteristics, traffic patterns, parking, character of
the neighborhood, competition from other businesses in the area, the proximity
to other businesses (including other Champps Restaurants), the nature of other
businesses in proximity to the site and other commercial characteristics
(including the purchase price, rental obligations and other lease terms for the
proposed site) and the size, appearance, other physical characteristics, and a
site plan of the premises. Developer shall submit such real estate package to
Champps within five (5) days of Developer entering into a letter of intent
(whether binding or not) or purchase and sale agreement with respect to the
lease or purchase any site on which Developer proposes to develop a Champps
Restaurant.
Developer acknowledges that, in order to preserve and enhance the
reputation and goodwill of all Champps Restaurants and the goodwill of the
Proprietary Marks, all Champps Restaurants must be properly developed and
operated. Accordingly, Developer agrees that Champps may refuse to approve a
site for a proposed Franchised Restaurant unless Developer demonstrates
sufficient financial capabilities, in Champps' sole judgment, applying standards
consistent with the then-existing criteria Champps uses to establish Champps
Restaurants in other comparable market areas, to properly develop and operate
the proposed Franchised Restaurant. To this end, Developer shall furnish Champps
with such financial statements and other information regarding and the
development and operation of the proposed Franchised Restaurant, including,
without limitation, investment and financing plans for the proposed Franchised
Restaurant, as Champps reasonably may require.
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3.4 Within 60 days after Champps' receipt of the real estate package
discussed above, Champps shall advise Developer in writing whether it has
approved a particular site. If Champps does not respond to a completed real
estate package within 60 days, Champps shall be deemed to have denied approval
of the site. Champps' approval or denial of approval of a site shall be
determined by Champps in its reasonable discretion and shall be based on
Champps' then-existing requirements for franchisees. (A site which Champps has
approved shall be referred to as an "Authorized Site.")
Champps' approval of one or more sites is not a representation or a
promise by Champps that a Franchised Restaurant at an Authorized Site will
achieve a certain sales volume or a certain level of profitability. Similarly,
Champps' approval of one or more sites and its refusal to approve other sites is
not a representation or a promise that an Authorized Site will have a higher
sales volume or be more profitable than a site which Champps did not approve.
Champps assumes no liability or responsibility for: (A) evaluation of an
Authorized Site's soil for hazardous substances; (B) inspection of any structure
on the Authorized Site for asbestos or other toxic or hazardous materials; or
(C) compliance with the Americans With Disabilities Act ("ADA"). It is
Developer's sole responsibility to obtain satisfactory evidence and/or
assurances that the Authorized Site (and any structures thereon) is free from
environmental contamination and in compliance with the requirements of the ADA.
3.5 Developer may not commence construction of a Franchised Restaurant
at an Authorized Site until Developer and Champps have fully executed the
then-current form of Champps Restaurant Franchise Agreement for the Authorized
Site, modified, however, to provide that: (i) Developer shall pay no franchise
fee with respect to such Franchised Restaurant, (ii) Developer shall pay a
royalty with respect to such restaurant equal to 1.25% (subject to increase to
1.75% as provided in Section 8 of that certain Separation Agreement by and
between Unique Casual Restaurants, Inc., Champps and the Developer dated as of
the date hereof in the event of a sale or change of control of the applicable
Franchised Restaurant , (ii) Developer shall promptly reimburse Champps for all
costs and expenses incurred by Champps in connection with providing pre-opening
support to Developer with respect to any Champps Restaurant developed by
Developer pursuant to this Agreement, and (iii) subject to clause (ii) above,
Champps agrees to provide pre-opening support to Developer with respect to the
first three Champps Restaurants developed by Developer pursuant to this
Agreement. The following conditions must be met before Champps will forward to
Developer the then-current Champps Restaurant Franchise Agreement for execution:
3.5.1 Developer must not be in default under this Agreement or any
other agreement between Developer and Champps and, for the
previous 6 months, Developer has not been in default beyond the
applicable cure period under any agreement with Champps.
3.5.2 Developer must be current on all obligations due Champps.
3.5.3 Developer must be in compliance with terms of Appendix B.
3.5.4 Champps has determined, in its sole discretion, that Developer
is operating each of its Franchised Restaurants, and is capable
of operating the proposed Franchised Restaurant, in accordance
with all Franchise Agreements and with the Champps System.
3.5.5 Developer has provided financial information as Champps
reasonably may request regarding Developer and Developer
continues to meet Champps' minimum financial criteria for
opening a Franchised Restaurant.
Provided Developer has met all of the preceding conditions, Champps
will prepare and forward to Developer duplicate originals of the then-current
form of Champps Restaurant Franchise Agreement (modified as described in Section
3.5 above) which Developer must execute and return to Champps within 20 days.
Champps promptly will execute the Champps Restaurant Franchise Agreement and
return one fully-executed Agreement to Developer. Upon receipt of a
fully-executed Agreement Developer will be authorized to commence construction
of a Franchised Restaurant at an Authorized Site.
3.6 Developer agrees that Developer shall commence construction of a
Champps Restaurant on a proposed site within six (6) months after the date on
which Champps notifies Developer that such proposed site is acceptable to
Champps. In the event that Developer does not commence construction of a Champps
Restaurant on such site within such six (6) month period, Developer shall have
no further rights to develop a Champps Restaurant on such site.
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4. TRANSFERABILITY OF INTEREST
4.1 Transfer by Champps. Champps shall have the right to transfer or
assign all or any part of its rights or obligations under this Agreement to any
person or legal entity. Such conveyance or assignment shall be drafted as to
recognize the pre-existing rights of Developer under this Agreement.
4.2 Transfer by Developer. Developer understands and acknowledges that
the rights and duties set forth in this Agreement are personal to Developer and
that Champps has entered into this Agreement in reliance upon Developer's
business skills, financial capacity and personal character. Accordingly,
Developer shall not without the prior written consent of Champps, sell, assign,
transfer, convey, donate, pledge, mortgage, or otherwise encumber this
Agreement, any interest in this Agreement or any interest which, alone or
together with other previous, simultaneous or contemplated transfers, would, or
could by operation of law, result in a loss of control of Developer. These
transactions shall be collectively referred to as "Transfers" in this Agreement.
Any purported Transfer, by operation of law or otherwise, not having the prior
written consent of Champps shall be null and void and shall constitute a
material default by Developer, permitting Champps to terminate this Agreement,
pursuant to Section 5. Champps acknowledges that Developer may incorporate one
or more corporations to operate Champps Restaurants developed pursuant to this
Agreement and that Developer contemplates transferring to one or more third
parties up to an aggregate of 50% of the equity interests in each such operating
company and Champps hereby consents to such transfers provided that Developer
(i) continues to be the beneficial and actual owner of at least 50% of the
equity interests in such operating company and (ii) retains at all times control
of and operating responsibility with respect to each such restaurant.
5. DEFAULT AND TERMINATION
5.1 Developer shall be deemed to be in default and Champps may, at its
option, terminate this Agreement and all of the rights granted by this
Agreement, upon written notice to Developer without affording Developer any
opportunity to cure the default, upon the occurrence of any of the following
events:
5.1.1 Developer begins construction of a Franchised Restaurant at a
site before Developer has received from Champps for execution a
Champps Restaurant Franchise Agreement.
5.1.2 Developer is convicted of, or pleads no contest to, a felony
charge; provided, however, that if the felon owns less than a
controlling ownership interest in Developer, this Agreement
shall not be terminable by Champps by reason of the felony if,
within 30 days of conviction or plea of no contest, the felon
has entirely terminated his interest in Developer by transfer to
his co-owners.
5.1.3 Developer intentionally misuses or makes any material
unauthorized use of the Proprietary Marks or any other
identifying characteristic of the Champps System in a manner
that reflects materially and unfavorably upon a Franchised
Restaurant or the Champps System, or otherwise intentionally and
materially impairs the goodwill associated therewith or Champps'
rights therein, or there is a breach of any other obligation in
Section 7.
5.1.4 Champps discovers that Developer made a material
misrepresentation or omitted a material fact in the information
that was furnished to Champps in connection with its decision to
enter into this Agreement.
5.1.5 Developer knowingly falsifies any report required to be
furnished Champps or makes any material misrepresentation in its
dealings with Champps or fails to disclose any material facts to
Champps.
5.1.6 Any Transfer, that requires Champps' prior written approval,
occurs without Developer having obtained Champps' prior written
approval.
5.1.7 Developer is insolvent or is unable to pay its creditors; files
a petition in bankruptcy, an arrangement for the benefit of
creditors or a petition for reorganization; there is filed
against Developer a petition in bankruptcy, an arrangement for
the benefit of creditors or petition for reorganization, which
is not dismissed within 60 days of the filing; Developer makes
an assignment for the benefit of creditors; or a receiver or
trustee is appointed for Developer and not dismissed within 60
days of the appointment.
5.1.8 Execution is levied against Developer's business or property;
suit to foreclose any lien or mortgage against the premises or
equipment of any Franchised Restaurant developed hereunder is
instituted against Developer and is not dismissed within 60
days; or the real or personal property of any Franchised
Restaurant developed hereunder shall be sold after levy
thereupon by any sheriff, marshal or constable.
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5.1.9 Developer remains in default beyond the applicable cure period
under the Separation Agreement or any other agreement with
Champps or its affiliates, or Developer remains in default
beyond the applicable cure period under any real estate lease,
equipment lease, or financing instrument relating to a
Franchised Restaurant, or Developer remains in default beyond
the applicable cure period with any vendor or supplier to a
Franchised Restaurant, or Developer fails to pay when due any
taxes or assessments relating to a Franchised Restaurant or its
employees, unless Developer is actively prosecuting or defending
the claim or suit in a court of competent jurisdiction or by
appropriate government administrative procedure or by
arbitration or mediation conducted by a recognized alternative
dispute resolution organization.
5.2 Except for those items listed in preceding Section 5.1, Developer
shall have 30 days after written notice of default from Champps within which to
remedy the default and provide evidence of that remedy to Champps. If any such
default is not cured within that time, this Agreement shall terminate without
further notice to Developer effective immediately upon expiration of that time,
unless Champps notifies Developer otherwise in writing. Notwithstanding the
foregoing, if the default cannot be corrected within 30 days, Developer shall
have such additional time to correct the default as reasonably required (not to
exceed 90 days) provided that Developer begins taking the actions necessary to
correct the default during the 30 day cure period and diligently and in good
faith pursues those actions to completion. Developer shall be in default under
this Agreement for its failure substantially to comply with any of the
requirements imposed by this Agreement or any other agreement between Champps
and Developer, as the foregoing may from time to time be supplemented, or its
failure to carry out the terms of this Agreement in good faith.
5.3 Notwithstanding the provisions of preceding Section 5.2, if
Developer defaults in the payment of any monies owed to Champps when such monies
become due and payable and Developer fails to pay such monies within 10 days
after receiving written notice of default, then this Agreement will terminate
effective immediately upon expiration of that time, unless Champps notifies
Developer otherwise in writing.
5.4 If Developer has received one or more notices of default under
Sections 5.2 or 5.3 within the previous 12 months, Champps shall be entitled to
send Developer a notice of termination upon Developer's next default within that
12 month period under Section 5.2 or 5.3 without providing Developer an
opportunity to remedy the default.
5.5 If any valid, applicable law or regulation of a competent,
governmental authority with jurisdiction over this Agreement requires a notice
or cure period prior to termination longer than set forth in this Section, this
Agreement will be deemed amended to conform to the minimum notice or cure period
required by the applicable law or regulation.
6. OBLIGATIONS UPON TERMINATION
6.1 Upon termination or expiration of this Agreement all rights granted
by this Agreement to Developer immediately shall terminate and:
6.1.1 Developer shall have no further right to develop or open
Franchised Restaurants in the Development Territory, except that
Developer shall be entitled to complete and open a Franchised
Restaurant for which a Franchise Agreement has been fully
executed. Termination or expiration of this Agreement shall not
affect Developer's right to continue to operate Franchised
Restaurants that were open and operating as of the date this
Agreement terminated or expired.
6.1.2 Developer promptly shall return to Champps all materials and
information furnished by Champps, except materials and
information furnished with respect to a Franchised Restaurant
for which there is an effective Franchise Agreement.
6.1.3 Developer and all persons subject to the covenants contained in
Section 7 shall continue to abide by those covenants and shall
not, directly or indirectly, take any action that violates those
covenants.
6.1.4 Developer promptly shall pay all sums owed to Champps and its
affiliates. In the event of termination for any default of
Developer, those sums shall Include, without limitation, all
damages, costs and expenses, including reasonable attorneys'
fees, incurred by Champps as a result of the default. Developer
also shall pay to Champps all damages, costs and expenses,
including reasonable attorneys' fees, incurred by Champps
subsequent to the termination or expiration of this Agreement in
obtaining injunctive or other relief to enforce any provisions
of this Section 6.
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6.1.5 Developer shall furnish Champps, within 30 days after the
effective date of termination or expiration, evidence reasonably
satisfactory to Champps of Developer's compliance with this
Section 6.
6.1.6 Developer shall not, except with respect to a franchised Champps
Restaurant which is then open and operating pursuant to an
effective Franchise Agreement: (A) operate or do business under
any name or in any manner that might tend to give the public the
impression that Developer is connected in any way with Champps
or has any right to use the Champps System or the Proprietary
Marks; or (B) make use or avail itself of any of the materials
or information furnished or disclosed by Champps under this
Agreement or disclose or reveal any such materials or
information or any portion thereof to anyone else; or (C) assist
anyone not licensed by Champps to construct or equip a food
service outlet substantially similar to a Champps Restaurant.
7. COVENANTS
7.1 During the term of this Agreement, Developer shall devote its best
efforts to the development, management and operation of the Franchised
Restaurants in the Development Territory.
7.2 Developer acknowledges that Champps owns all right, title and
interest in and to the Champps System. Developer further acknowledges that: the
Champps System consists of trade secrets and confidential and proprietary
information and know-how that gives Champps a competitive advantage; Champps has
taken measures to protect the trade secrets and the confidentiality of the
proprietary information and know-how comprising the Champps System; all material
or other information now or hereafter provided or disclosed to Developer
regarding the Champps System is disclosed in confidence; Developer has no right
to disclose any part of the Champps System to anyone who is not an employee,
agent, consultant or counsel of Developer; Developer will disclose to its
employees, agents, consultants or counsel only those parts of the Champps System
that an employee, agent, consultant or counsel needs to know; and if requested
by Champps, Developer shall obtain from those of its employees, agents,
consultants or counsel designated by Champps an executed Confidential Disclosure
Agreement in the form reasonably prescribed by Champps. Developer further
acknowledges that it will not, other than as a Champps franchisee, acquire any
interest in the Champps System and that the use or duplication of the Champps
System or any part of the Champps System in any other business would constitute
an unfair method of competition. Provided however, that none of the preceding or
foregoing provisions shall apply to any information documents or know-how which
is then generally known to the public or is disclosed in accordance with an
order of a court of competent jurisdiction or in a manner otherwise required by
law.
Developer shall not, during the Development Tem or at any time
thereafter, communicate or disclose any trade secrets or confidential or
proprietary information or know-how of the Champps System to any unauthorized
person, or do or perform, directly or indirectly, any other acts injurious or
prejudicial to the Proprietary Marks or the Champps System. Any and all
information, knowledge, know-how and techniques, including all drawings,
materials, equipment, specifications, recipes, techniques and other data that
Champps designates as confidential shall be deemed confidential for purposes of
this Agreement.
If Developer develops any new concepts, processes or Improvements
relating to the Champps Restaurants developed pursuant to this Agreement and to
the Champps System, Developer promptly shall notify Champps and provide Champps
with all information regarding the new concept, process or improvement, all of
which shall become the property of Champps and which may be incorporated into
the Champps System without any payment to Developer.
7.3 Developer acknowledges that: pursuant to this Agreement, Developer
will have access to valuable trade secrets, specialized training and
confidential information from Champps regarding the development, operation,
purchasing, sales and marketing methods and techniques of Champps and the
Champps System; the Champps System and the opportunities, associations and
experience established and acquired by Developer under this Agreement are of
substantial and material value; in developing the Champps System, Champps has
made and continues to make substantial investments of time, technical and
commercial research and money; Champps would be unable adequately to protect the
Champps System and its trade secrets and confidential and proprietary
information against unauthorized use or disclosure and would be unable
adequately to encourage a free exchange of ideas and information among Champps
Restaurants if franchisees or developers were permitted to hold interests in
competitive businesses; and restrictions on Developer's right to hold interests
in, or perform services for, competitive businesses will not hinder its
activities.
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Accordingly, Developer covenants and agrees that during the Development
Term, and for a period of 2 years following its expiration or earlier
termination, Developer shall not, either directly or indirectly, for itself, or
through, on behalf of, or in conjunction with, any person, firm, partnership,
corporation, or other entity:
(A) divert or attempt to divert any business or customer, or
potential business or customer, of any Champps Restaurant to any
competitor, by direct or indirect inducement or otherwise;
(B) knowingly employ or seek to employ any person then employed by
Champps or any franchisee of Champps as a manager, or otherwise
directly or indirectly induce such person to leave his or her
employment without Champps' prior written consent; or
(C) own, maintain, operate, engage in, advise, help, make loans to,
or have any interest in, either directly or indirectly, any
restaurant business: (i) that is the same as, or substantially
similar to, a Champps Restaurant or a Fuddruckers restaurant; or
(ii) whose method of operation or trade dress is similar to that
employed in the Champps System or in the operation of
Fuddruckers restaurants. Champps trade dress includes, without
limitation, the use of several of the following elements in the
design and operation of the restaurant: extensive use of
televisions, patio with fireplace, open kitchen, dining on
multiple levels, disc jockey at restaurant. While it is
understood that the use of some of these items are used in
"casual dining" restaurants (i.e. Houston's Bandera, P.F.
Chang's, TGI Friday's, Houlihan's, Landry's Seafood, Applebee's,
Capitol Grille, Macaroni Grill, Cheesecake Factory, Z-Tejas,
Palomino, Rock Bottom, J. Alexander's, etc.), the way in which
several of these items are used in combination by Champps
constitutes its distinctive trade dress. This covenant is not
intended to cover all "casual dining" or sports-themed concepts.
During the Development Term, there is no geographical limitation
on this restriction. Following the expiration or earlier
termination of the Development Term, this restriction shall
apply within 15 miles of any then-existing Champps Restaurant or
Fuddruckers restaurant, except as otherwise approved in writing
by Champps. This restriction shall not apply to Developer's
existing restaurant or foodservice operations, if any, which are
identified in Appendix B.
Champps acknowledges and agrees that, notwithstanding anything to the
contrary herein, Vlahos may be engaged in and is hereby permitted to engage in
the ownership operation, and management of new restaurant businesses including
but not limited to "casual dining", formal dining, sports-themed and fast food
restaurants, some of which may have elements of the trade dress of the Champps
system (other than the extensive use of televisions), provided that those
restaurants are not substantially similar to Champps or Fuddruckers restaurants.
If any part of these restrictions is found to be unreasonable in time
or distance, each month of time or mile of distance may be deemed a separate
unit so that the time or distance may be reduced by appropriate order of the
court to that deemed reasonable. If Champps files suit to enforce the
post-termination portion of these restrictions, the 2-year period shall begin
running upon the entry of a final, non-appealable judgment.
7.4 Champps shall have the right, in its sole discretion, to reduce the
scope of any covenant in this Section 7 effective immediately upon Developer's
receipt of written notice, and Developer agrees that it shall comply forthwith
with any covenant as so modified, which shall be fully enforceable
notwithstanding the provisions of Section 12, so long as any such reduction does
not add additional burden, limitation or restriction on Developer.
7.5 The restrictions contained in this Section 7 shall not apply to
ownership of less than a 5% legal or beneficial ownership in outstanding equity
securities of any publicly held corporation by Developer. The existence of any
claim Developer may have against Champps, whether or not arising from this
Agreement, shall not constitute a defense to the enforcement by Champps of the
covenants in this Section 7.
7.6 Developer acknowledges that any failure to comply with the
requirements of this Section 7 will cause Champps irreparable injury, and
Developer hereby accordingly consents to the entry of an order by any court of
competent jurisdiction for specific performance of, or for an injunction against
violation of, the requirements of this Section 7. Champps may further avail
itself of any other legal or equitable rights and remedies that in may have
under this Agreement or otherwise.
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8. RELATIONSHIP OF THE PARTIES
This Agreement does not create a fiduciary or other special
relationship between the parties. Developer is an independent contractor with
entire control and direction of the development and operation of each Franchised
Restaurant, subject only to the conditions and covenants established by this
Agreement. No agency, employment, or partnership is created or implied by the
terms of this Agreement, and Developer is not and shall not hold itself out as
agent, legal representative, partner, subsidiary, joint venturer or employee of
Champps. Developer shall have no right or power to, and shall not, bind or
obligate Champps in any way or manner, nor represent that Developer has any
right to do so.
The sole relationship between Developer and Champps is a commercial,
arms' length business relationship and, except as provided in Section 9, there
are no third party beneficiaries to this Agreement. Developer's business is, and
shall be kept, totally separate and apart from any that may be operated by
Champps. In all public records, in relationships with other persons, and on
letterheads and business forms, Developer shall indicate its independent
ownership of the Franchised Restaurants and that Developer is solely a
franchisee of Champps.
9. INDEMNIFICATION
Developer and all guarantors of Developer's obligations under this
Agreement shall, at all times, indemnify, defend (with counsel selected by
Champps), and hold harmless (to the fullest extent permitted by law) Champps and
its affiliates, and their respective successors, assigns, past and present
directors, officers, employees, agents and representatives (collectively,
"Indemnitees") from and against all liability, damages, costs and expenses
(including reasonable attorneys' fees) incurred in connection with any action,
suit, proceeding, claim, demand, investigation, inquiry (formal or informal),
judgment or appeal thereof by or against Indemnitees or any settlement thereof
(whether or not a formal proceeding or action had been instituted), arising out
of or resulting from or connected with Developer's activities under this
Agreement. Developer promptly shall give Champps notice of any such action,
suit, proceeding, claim, demand, inquiry or investigation filed or instituted
against Developer and, upon request, shall furnish Champps with copies of any
documents from such matters as Champps may request.
At Developer's expense and risk, Champps may elect to assume (but under
no circumstances will Champps be obligated to undertake), the defense and/or
settlement of any action, suit, proceeding, claim, demand, investigation,
inquiry, judgment or appeal thereof subject to this indemnification. Such an
undertaking shall, in no manner or form, diminish Developer's obligation to
indemnify and hold harmless Champps. Champps shall not be obligated to seek
recoveries from third parties or otherwise mitigate losses.
10. APPROVALS AND WAIVERS
10.1 Whenever this Agreement requires the prior approval or consent of
Champps, Developer shall make a timely written request to Champps therefor, and
such approval or consent shall be obtained in writing. Failure to seek and
obtain such prior approval or consent shall constitute an event of default under
Section 5.2.
10.2 Champps makes no warranties or guarantees upon which Developer may
rely, and assumes no liability or obligation to Developer, by providing any
waiver, approval, consent or suggestion to Developer in connection with this
Agreement or by reason of any neglect, delay or denial of any request therefore.
10.3 No failure of Champps to exercise any power reserved to it by this
Agreement or to insist upon strict compliance by Developer with any obligation
or condition hereunder and no custom or practice of the parties at variance with
the terms of this Agreement shall constitute a waiver of Champps' right to
demand exact compliance with any of the terms of this Agreement. Waiver by
Champps of any particular default by Developer shall not affect or impair
Champps' right to exercise any or all of its rights and powers herein, nor shall
that constitute a waiver by Champps of any right hereunder, or of its right upon
any subsequent breach or default, to terminate this Agreement prior to the
expiration of its term
10.4 Champps shall not, by virtue of any approvals, advice or services
provided to Developer, assume responsibility or liability to Developer or to any
third parties to which Champps would not otherwise be subject.
<PAGE>
11. NOTICES
No notice, demand, request or other communication to the parties shall
be binding upon the parties unless die notice is in writing, refers specifically
to this Agreement and is addressed to: (A) if to Developer, addressed to
Developer at the notice address set forth in Appendix B; and (B) if to Champps,
addressed to Champps at its principal offices, current address: One Corporate
Place, 55 Femcroft Road, Danvers, MA 01923 (marked Attn:
General Counsel) (Facsimile: 508-774-1374).
Any party may designate a new address for notices by giving written
notice of die new address pursuant to this Section. Notices shall be effective
upon receipt and may be: (1) delivered personally; (2) transmitted by facsimile
or electronic mail to the number(s) set forth above (or in Appendix B) with
electronic confirmation of receipt; (3) mailed in the United States mail,
postage prepaid, certified mail, return receipt requested; or (4) mailed via
overnight courier.
12. ENTIRE AGREEMENT
This Agreement, the documents referred to herein, and the attachments
hereto, constitute the entire, full and complete agreement between the parties
concerning Developer's rights, and supersede any and all prior or
contemporaneous negotiations, discussions, understandings or agreements. There
are no other representations, inducements, promises, agreements, arrangements,
or undertakings, oral or written, between the parties relating to the matters
covered by this Agreement other than those set forth in this Agreement and in
the attachments. No obligations or duties that contradict or are inconsistent
with the express terms of this Agreement may be implied into this Agreement.
Except as expressly set forth herein, no amendment, change or variance from this
Agreement shall be binding on either party unless mutually agreed to by the
parties and executed in writing.
13. SEVERABILITY AND CONSTRUCTION
13.1 The parties agree that each covenant and provision of this
Agreement shall be construed as independent of any other covenant or provision
of this Agreement. The provisions of this Agreement shall be deemed severable.
13.2 If all or any portion of a covenant or provision of this Agreement
is held unreasonable or unenforceable by a court or agency having valid
jurisdiction in a decision to which Champps is a party, Developer expressly
agrees to be bound by any lesser covenant or provision subsumed within the terms
of the invalidated covenant or provision, that imposes the maximum duty
permitted by law, as if the resulting covenant or provision were separately
stated in and made a part of this Agreement.
13.3 Except as otherwise provided in Section 9, nothing in this
Agreement is intended or shall be deemed to confer upon any person or legal
entity, other than Champps and those of their respective successors and assigns,
any rights or remedies under, or by reason of, this Agreement.
13.4 All captions in this Agreement are intended solely for the
convenience of the parties and none shall be deemed to affect the meaning or
construction of any provisions of this Agreement.
13.5 All references in this Agreement to the masculine, neuter or
singular shall be construed to include the masculine, feminine, neuter or
plural, where applicable.
13.6 This Agreement may be executed in two or more counterparts, and
each copy so executed shall be deemed an original.
13.7 Developer's obligations to Champps contained in this Agreement
shall not be affected by termination, cancellation or expiration of this
Agreement.
13.8 No provision of this Agreement shall be interpreted in favor of,
or against, any party because of the party that drafted this Agreement.
<PAGE>
14. GOVERNING LAW, FORUM AND LIMITATIONS
14.1 This Agreement and any claim or controversy arising out of, or
relating to, rights and obligations of the parties under this Agreement and any
other claim or controversy between the parties shall be governed by and
construed in accordance with the laws of the State of Minnesota without regard
to conflicts of laws principles. Nothing in this Section is intended, or shall
be deemed, to make any Minnesota law regulating the offer or sale of franchises
or the franchise relationship applicable to this Agreement if such law would not
otherwise be applicable.
14.2 The parties agree that, to the extent any disputes cannot be
resolved directly between them, Developer shall file any suit against Champps
only in the federal or state court, having jurisdiction where Champps' principal
office is located at the time suit is filed. Champps may file suit in the
federal or state court located in the jurisdiction where its principal office is
located at the time suit is filed or in the jurisdiction where Developer resides
or does business or where the Development Territory or any Franchised Restaurant
is or was located or where the claim arose.
14.3 Except for payments owed by one party to the other, any and all
claims and actions arising out of, or relating to, this Agreement (including,
without limitation, the offer and sale of a franchise to Developer), the
relationship of Developer and Champps and Developer's operation of a Franchised
Restaurant brought by any party against another party shall be commenced within
24 months from the occurrence of the facts giving rise to that claim or action
or that claim or action shall be banned.
14.4 Developer and Champps waive to the fullest extent permitted by law
any right or claim of any consequential, punitive or exemplary damages against
the other and agree that, in the event of a dispute between them, each shall be
limited to the recovery of actual damages sustained by it. Developer and Champps
waive, to the fullest extent permitted by law, the right to bring, or be a class
member in, any class action suits and the right to trial by jury.
14.5 No right or remedy conferred upon or reserved to Champps or
Developer by this Agreement is intended to be or shall be deemed exclusive of
any other right or remedy herein set forth or available in law or equity, but
each shall be cumulative of every other right or remedy.
14.6 If Champps is required to enforce this Agreement in a judicial
proceeding, the party prevailing in that proceeding shall be entitled to
reimbursement of costs and expenses, including, but not limited to, reasonable
accountants', attorneys', attorneys' assistants' and expert witness fees, the
cost of investigation and proof of facts, court costs, other litigation
expenses, and travel and living expenses, whether incurred prior to, in
preparation for, or in contemplation of the filing of, any proceeding. The
prevailing party shall be the party that prevails on its claims regardless of
whether judgment is entered in its favor. If there are multiple claims, the
costs and expenses shall be reimbursed accordingly. If Champps is required to
engage legal counsel in connection with any failure by Developer to comply with
this Agreement, Developer shall reimburse Champps for any of the above-listed
costs and expenses incurred by Champps. In any judicial proceeding, the amount
of these costs and expenses will be determined by the court and not by a jury.
15. REPRESENTATIONS
Developer represents, acknowledges and warrants to Champps (and
Developer agrees that these representations, acknowledgments and warranties
shall survive termination of this Agreement) that:
15.1 This Agreement involves significant legal and business rights and
risks. Champps does not guarantee Developer's success. Developer has read this
Agreement in its entirety, conducted an independent investigation of the
business contemplated by this Agreement, has been thoroughly advised with regard
to the terms and conditions of this Agreement by legal counsel or other advisors
of Developer's choosing, recognizes that the nature of the business conducted by
Champps Restaurants may change over time, has had ample opportunity to
investigate all representations made by or on behalf of Champps, and has had
ample opportunity to consult with current and former Champps franchisees. The
prospect for success of the business undertaken by Developer is speculative and
depends to a material extent upon Developer's personal commitment, capability
and direct involvement in the day-to-day management of the business.
<PAGE>
15.2 Champps' approval of one or more sites and its refusal to approve
other sites is not a representation that the Authorized Sites will achieve a
certain sales volume or a certain level of profitability, or that an Authorized
Site will have a higher sales volume or be more profitable that an site which
Champps did not approve. Champps' approval merely means that the minimum
criteria which Champps has established for identifying suitable sites for
proposed Champps Restaurant have been met. Because real estate development is an
art and not a precise science, Developer agrees that Champps' approval, or
refusal to approve a proposed site, whether a site report is completed and/or
submitted to Champps or not, shall not impose any liability or obligation on
Champps. The decision to accept to reject a particular site is Developer's,
subject to Champps' approval. Preliminary approval of a proposed site by any
representative of Champps is not conclusive or binding, because his or her
recommendations may be rejected by Champps.
15.3 Champps makes no express or implied warranties or representations
that Developer will achieve any degree of success in the development or
operation of the Franchised Restaurants and that success in the development and
operation of the Franchised Restaurants depends ultimately on Developer's
efforts and abilities and on other factors, including, but not limited to,
market and other economic conditions, Developer's financial condition and
competition.
15.4 All information Developer provided to Champps in connection with
Developer's franchise application and Champps' consent to the development of
Champps' Restaurants is truthful and accurate.
15.5 Developer's rights under this Agreement are non-exclusive and
nothing prohibits Champps from operating or licensing others to operate Champps
Restaurants at any location other than the location of a Franchised Restaurant
and nothing in this Agreement prohibits Champps from operating restaurants,
other than Champps Restaurants, at any location.
15.6 The person signing this Agreement on behalf of Developer have full
authority to enter into this Agreement and the other agreements contemplated by
the parties. Execution of this Agreement or such other agreements by Developer
does not and will not conflict with or interfere with, directly or indirectly,
intentionally or otherwise, with the terms of any other agreement with any other
third party to which Developer or any person with an ownership interest in
Developer is a party.
15.7 Developer acknowledges receipt of Champps' Franchise Offering
Circular at least 10 business days prior to execution of this Agreement or
payment of any monies to Champps and that Developer received this Agreement in
the form actually executed at least 5 business days prior to the date of its
execution by Developer.
15.8 Developer has not received from Champps any representation of
Developer's potential sales, expenses, income, profit or loss and has not
received either from Champps, or anyone acting on its behalf, any representation
other than those contained in Champps' Franchise Offering Circular as
inducements to enter this Agreement.
15.9 Even though this Agreement contains provisions requiring Developer
to develop the Franchised Restaurants in compliance with the Champps Systems:
(A) Champps does not have actual or apparent authority to control the day-to-day
conduct and operation of Developer's business or employment decisions; and (B)
Developer and Champps do not intend for Champps to incur any liability in
connection with or arising from any aspect of the Champps System or Developer's
use of the Champps System.
15.10 In the event of a dispute between Champps and Developer, the
parties have waived their right to a jury trial.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed, sealed and
delivered this Agreement as of the day and year first above written.
CHAMPPS:
ATTEST: CHAMPPS ENTERTAINMENT, INC.
By: By:
Title: Title:
Date:
ATTEST/WITNESS: DEVELOPER:
Dean P. Vlahos
Date:
<PAGE>
APPENDIX A
DEVELOPMENT TERRITORY
The Development Territory shall be:
Any location within the United States of American that is not
within a twenty (20) mile radius of (i) an existing Champps Restaurant; (ii) any
Champps restaurant site under development by Champps or under negotiation for
development by Champps with a signed letter of intent, (iii) any Champps
restaurant site under development by a current or potential Champps franchisee
or licensee or under negotiation for development by a current or potential
Champps franchisee or licensee with a signed letter of intent; or (iv) any
exclusive territory granted by Champps to a third party franchisee or licensee.
Developer's rights in the Development Territory are non-exclusive, as described
in Section 2. Any political boundaries contained in the description of the
Development Territory shall be considered fixed as of the date of this Agreement
and shall not change notwithstanding a political reorganization or a change in
those boundaries. Unless otherwise specified, all street boundaries shall be
deemed to end at the center street line.
<PAGE>
APPENDIX B
DEVELOPMENT INFORMATION
Development Schedule (Section 2). Subject to the restrictions set forth in
Appendix A, Developer shall have the right to develop and operate five (5)
Champps Restaurants anywhere in the United States, provided that such
restaurants must be Developed within eight (8) years of the date hereof. If on
the eighth anniversary of the date hereof Developer has Developed fewer than
five (5) Champps Restaurants (excluding the Minnetonka Champps and the Eden
Prairie Champps) pursuant to this paragraph 2, Developer shall have no further
rights to develop or operate any additional Champps Restaurants under this
Agreement.
Developer's Notice Address (Section 11).
80 Gideons Point Road, Tonka Bay, Minnesota 55331.