Management Agreement - Friendly Ice Cream Corp. and FriendCo Restaurants Inc.
MANAGEMENT AGREEMENT
BETWEEN
FRIENDLY ICE CREAM CORPORATION
1855 Boston Road
Wilbraham, Massachusetts 01095
AND
FRIENDCO RESTAURANTS, INC.
1657 Crofton Boulevard
Crofton, Maryland 21114
DATED
July_____, 1997
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TABLE OF CONTENTS
Section Page
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1. Defined Terms 1
2. Scope 4
3. Term 4
4. Authority to Act 5
5. Compensation 5
6. Restaurant Capital Requirements 6
7. Non-Solicitation 6
8. Termination 7
9. Indemnification 8
10. Breach; Notice and Right to Cure 9
11. Reporting of Sales 9
12. Assignment 9
13. Conflict of Interest 10
14. Choice of Law; Arbitration of Disputes 10
15. Insurance 10
16. Notices 11
17. General Provisions 12
EXHIBITS:
Exhibit A: List of Managed Restaurants
Exhibit B: Arbitration Program
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MANAGEMENT AGREEMENT
This Management Agreement is made and dated this _____day of_____,
1997, by and between Friendly Ice Cream Corporation, a Massachusetts
Corporation with its principal location at 1855 Boston Road, Wilbraham,
Massachusetts, 01095 (hereinafter "FICC"), and FriendCo Restaurants, Inc., a
Maryland Corporation with its principal location at 1657 Crofton Boulevard,
Crofton, Maryland, 21114 (hereinafter "FriendCo").
1. DEFINED TERMS
a. "Definitive Agreement" shall mean all documents executed
between FriendCo, FICC and Friendly's Restaurants, Franchise, Inc. relating
to the acquisition by FriendCo of the right to lease and operate thirty-four
(34) Friendly's Restaurants and to construct an additional seventy-four (74)
Friendly's Restaurants.
b. "Dispute" shall mean any claim of breach, action to enforce,
material disagreement in interpretation, or legal proceeding involving or
arising out of this Agreement.
c. "Exclusive Territory" shall mean the territory in the States of
Delaware and Maryland, the District of Columbia, and such portion of Northern
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Virginia as is assigned to FriendCo in the Definitive Agreement wherein
FriendCo has the exclusive right to construct and to operate Friendly's
Restaurants.
d. "Net Sales" shall mean all sales of all food, beverage, other
menu items, merchandise, and goods and other services sold or performed by or
for you or the Restaurant, in, upon, or from the Premises, or through or by
means of the business conducted at the Restaurant or the Premises, whether
for cash or credit. Sales and service taxes collected from customers and
paid to the appropriate taxing authority, all management or employee meals,
and sale of cigars, cigarettes and newspapers as well as income from pay
telephones shall not be included in Net Sales. The discounted portion of on
menu prices whether by way of coupons, promotions or otherwise shall not be
included in Net Sales.
e. "Restaurant Capital Requirements" shall mean any replacement,
improvement or addition of equipment, fixtures or improvements which, in
accordance with generally accepted accounting principles would be treated as
a capitalized cost rather than an expense.
f. "Restaurant Cash Flow" shall mean Net Sales less (i) restaurant
cost of food and merchandise, (ii) restaurant labor including all restaurant
employee wages, sick, holiday and vacation pay and in-restaurant cleaning
services, (iii) restaurant fringes including payroll taxes, group and
workers' compensation insurance
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and pension, (iv) restaurant supplies including china, glassware, utensils,
cleaning supplies, uniforms, and paper & plastic supplies, (v) restaurant
utilities including electricity, allocated Friendly Ice Cream energy
management fees, natural gas, telephone and water and sewer, (vi) restaurant
maintenance costs including landscaping, snow removal, maintenance service
contracts and repairs to property and equipment that would not be considered
a Restaurant Capital Requirement, (vii) restaurant administrative costs
including office expense, trash, other services (rug cleaning services,
music, etc.) allocated property and general liability insurance, employee
relocation expense, travel costs, credit card expenses, bank service charges,
commission income, safety program costs, police and security costs, use taxes
and other miscellaneous restaurant expenses, (viii) restaurant advertising
and promotional costs including allocated advertising costs, local restaurant
promotions (team sponsorships, etc.), required lease advertising, specific
billboard costs and mall displays and (ix) restaurant occupancy costs
including rent, common area maintenance, real estate and personal taxes and
decorating expenses.
Restaurant Cash Flow specifically excludes (i) restaurant depreciation,
amortization, interest or taxes, (ii) any allocation of costs except for
insurance, pension, energy management, maintenance contracts and advertising
and (iii) costs relating to the supervision of the restaurants by district,
division, area and corporate personnel.
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2. SCOPE
Upon execution of this Agreement, FICC grants to FriendCo the
exclusive right to manage the Friendly's Restaurants identified on Exhibit A,
attached hereto, for the duration of the Term, unless this Agreement is
terminated by either party as of some earlier date.
3. TERM
This Agreement shall be in effect for one (1) year from the date
first written above, unless terminated by either party in accordance with
Paragraph 8, infra. At the option of FICC, this Agreement may be extended
for two (2) successive six (6) month periods, as long as all payments due
hereunder are current and timely made. Thereafter, the parties agree to
negotiate in good faith concerning any further extensions hereof.
4. AUTHORITY TO ACT
For each managed restaurant, FriendCo and its management employees shall
have the authority to approve hiring, discipline, and termination of all crew
(i.e. waiter/waitress, host/hostess, Guest Service Supervisor, grill worker,
fountain worker, and dish washers) providing all FICC policies and procedures
are followed. Failure by FriendCo to adhere to FICC's policies and
procedures in performing the foregoing functions shall obligate FriendCo to
indemnify FICC (pursuant to Section 9 of this Agreement) from any liabilities
caused therefrom. FriendCo shall have the right to
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seek guidance from FICC on a case-by-case basis to interpret FICC's policies
and procedures as applied to case specific situations. FriendCo will have
authority to schedule and assign employee jobs as well as schedule deliveries
of milk, bread and produce. FriendCo will also have authority to perform
routine restaurant maintenance and such other incidences of routine
restaurant operations. FriendCo and its management employees will not have
authority to alter any other secondary restaurant management position (i.e.
general managers or assistant managers) without FICC approval as well as
contract for or approve any extraordinary expenses, hire consultants or
arrange for or approve capital expenditures without the prior express written
consent of FICC.
5. COMPENSATION
For each fiscal month or partial fiscal month during the Term for
which this Agreement is in effect, FICC shall pay to FriendCo a management
fee equal to four percent (4%) of the Net Sales for each managed restaurant
prorated for such days the restaurant was open. This management fee shall be
paid on or before the 20th day following the end of such month or partial
month.
In addition to the management fee, FICC shall pay FriendCo an operations
improvement fee in an amount equal to fifteen percent (15%) of the
improvement in Restaurant Cash Flow ("RCF") which will be calculated based
upon one of two ways:
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(1)FriendCo manages for a full year -- to the anniversary date of this
agreement; operations improvement is calculated based on aggregate RCF for
the twelve (12) month period of FriendCo's oversight less aggregate RCF for
prior twelve (12) month corresponding period;
(2)FriendCo manages less than a full year (i.e., to a termination date
for the Agreement); operations improvement is calculated based on aggregate
RCF corresponding partial period of the prior year (in whole months).
This operations improvement fee will be paid on or before the 45th day
following the end of the measurement period.
6. RESTAURANT CAPITAL REQUIREMENTS
Any Restaurant Capital Requirements shall be determined on a monthly
basis by mutual agreement between FICC and FriendCo. All agreed upon
Restaurant Capital Requirements shall be the sole responsibility of FICC, and
FICC agrees to reimburse FriendCo for any expenditures made by FriendCo for
any approved Restaurant Capital Requirements.
7. NON-SOLICITATION
During the Term of this Agreement, and for a period of six (6)
months following the termination of this Agreement, FriendCo and its
affiliates agree that they shall not solicit for employment, offer to employ
or employ any employees of FICC employed at any managed restaurant without
the express written consent of FICC. FriendCo agrees that, in addition to
other remedies, FICC may seek an injunction in a court of competent
jurisdiction to enforce this provision.
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During the term of this Agreement and for a period of six (6) months
following the termination of this Agreement, FICC agrees that it shall not
solicit for employment, offer to employ or employ any employees of FriendCo
or its affiliates without the express written consent of FriendCo. FICA
agrees that, in addition to other remedies, FriendCo may seek an injunction
to a court of competent jurisdiction to enforce this provision.
8. TERMINATION
a. This Agreement may be terminated by FICC without cause, with
such termination effective upon the ninetieth (90th) day following the
receipt of a written notice of termination.
b. Termination for failure of payment or abandonment of any
restaurant shall be effective upon the tenth (10th) day following the receipt
of a written notice of Termination for Cause issued by either party.
c. The termination of this Agreement pursuant to Subparagraph a.,
supra, shall operate to release both parties from any claims for lost
business opportunities, lost future economic benefit, interference with
existing or future contractual relations or trade disparagement, as well as
from any claims for consequential damages arising from such termination.
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d. The termination of this Agreement pursuant to either
Subparagraph a. or Subparagraph b. shall not operate to release either party
from any obligation arising under this Agreement.
9. INDEMNIFICATION
FICC and FriendCo shall indemnify, defend and hold each other
harmless from claims, demands and causes of action asserted against the
indemnitee by any person (including, without limitation, FICC's and
FriendCo's employees) for personal injury, death, or loss of or damage to
property resulting from the indemnitor's active or passive negligence or
willful misconduct. Where such personal injury, death, or loss of or damage
to property is the result of joint active or passive negligence or willful
misconduct of FICC and FriendCo, the indemnitor's duty of indemnification
shall be in proportion to its allocable share of joint active or passive
negligence or willful misconduct. If FICC is strictly liable under law,
FriendCo's duty of indemnification shall be in the same proportion that the
negligent acts or omissions or willful acts of FriendCo contributed to the
personal injury, death, or loss of or damage to property for which FICC is
strictly liable. If FriendCo is strictly liable under law, FICC's duty of
indemnification shall be in the same proportion that the negligent acts or
omissions or willful acts of FICC contributed to the personal injury, death,
or loss of or damage to property for which FriendCo is strictly liable.
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10. BREACH; NOTICE AND RIGHT TO CURE
For any claim of breach of this Agreement to be effective, the
breaching party must be sent written notice detailing the particulars of the
breach and provided not less than ten (10) days in which to cure the claim of
breach or to dispute such claim. For any claim of breach which does not
create grounds for a Termination for Cause, the breaching party may cure the
breach within such ten (10) day period, or, if such breach is not capable of
being cured within such ten (10) day period, the breaching party must
commence its efforts to cure the breach within such ten (10) day period and
thereafter must diligently pursue such cure.
11. REPORTING OF SALES
FICC shall provide FriendCo with a complete report of monthly sales
and a unit level profit and loss statement within ten (10) days of the close
of each financial reporting period.
12. ASSIGNMENT
Neither party to this Agreement can assign its interest herein
(other than to an affiliate or subsidiary) without the prior written consent
of the other party, and the granting of such consent is at the sole
discretion of the granting party.
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13. CONFLICT OF INTEREST
FICC and FriendCo will exercise utmost care and diligence in the
application of reasonable business practices, to prevent any actions or
conditions which could result in a conflict with the other's best interest.
14. CHOICE OF LAW; ARBITRATION OF DISPUTES
This Agreement shall be governed and interpreted in accordance with
the substantive laws (but not the choice of law provisions) of the State of
Delaware. No party to this Agreement may bring or maintain an action
against, or which includes, another party to this Agreement except in the
federal or state courts located in the State of Delaware. All parties to
this Agreement expressly waive any defense of lack of jurisdiction or
improper venue to any action brought in the State of Delaware.
For any action or Dispute arising under this Agreement, the parties
expressly agree that the sole forum shall be in arbitration before the
American Arbitration Association pursuant to the terms of the Arbitration
Program attached hereto as Exhibit B. Add attorneys fees/cost to prevailing
party.
15. INSURANCE
During the term of this Agreement, and for a period of one (1) year
following the termination of this Agreement, FICC agrees to maintain in
effect such policies of commercial general liability, workers compensation,
unemployment,
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property and hazard insurance as are commercially reasonable and necessary to
fulfill each of its obligations under Paragraph 11, supra; and to provide
FriendCo with certificates of insurance naming FriendCo as an additional
insured on such policies.
16. NOTICES
To F.I.C.C.:
Friendly Ice Cream Corporation
1855 Boston Road
Wilbraham, Massachusetts 01095
Attention: Donald N. Smith
Chairman and President
Facsimile No.: (413)543-3282
with a copy to:
Aaron B. Parker
Associate General Counsel
Friendly Ice Cream Corporation
1855 Boston Road
Wilbraham, Massachusetts 01095
Facsimile No.: (413)543-3282
To FriendCo:
FriendCo Restaurants, Inc.
1657 Crofton Boulevard
Crofton, Maryland 21114
Attention: Ronald D. Kirstien
Chairman, President and CEO
Facsimile No.: (410)793-0754
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with a copy to:
David J. Norman
Mason, Ketterman & Morgan, P.A.
1657 Crofton Boulevard
Suite 100
Crofton, Maryland 21114
Facsimile No.: (410)793-0522
17. GENERAL PROVISIONS
a. Modifications. No change or modification of this Agreement
shall be valid or binding upon the parties hereto, nor shall any waiver of
any term or condition in the future unless such change, modification or
waiver shall be in writing and signed by all of the parties hereto.
b. Binding Effect. This Agreement shall inure to the benefit of
and shall be binding upon the parties, their transferees, successors and
assigns.
c. Entire Agreement. This Agreement represents the entire and
integrated agreement of the parties with respect to the subject matter
hereof, and supersedes all prior agreements, oral and written, relating to
the subject matter hereof.
d. Exhibits. All exhibits which are referenced herein and
attached hereto are incorporated herein by reference.
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e. Severability. In the event any provision of this Agreement is
held to be unenforceable or invalid, such finding of unenforceability or
invalidity shall not affect the enforceability or validity of the remaining
provisions of this Agreement.
f. Continuing Obligations. Each indemnity provided for herein
shall survive the termination of this Agreement for any reason whatsoever and
each covenant which provides for or permits performance hereunder after
termination or by its nature requires performance after termination shall
survive the termination of this Agreement.
g. Audit. Either party, at its expense, shall have the right to audit
the other's books and records relating to any managed restaurant from
time-to-time, limited, however, to two (2) times during the Term of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and date first written above.
ATTEST: FRIENDLY ICE CREAM CORPORATION
By:___________________________ By:
Name:_________________________ Name:
Title:________________________ Title:
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ATTEST: FRIENDCO RESTAURANTS, INC.
By:___________________________ By:
Name:_________________________ Name:
Title:________________________ Title:
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E X H I B I T A
Management Agreement Properties (14 Total)
No. Rest. No. City Address State
1 0384 Baltimore 6901 Security Boulevard MD
2 0780 Cockeysville 240 Hunt Valley MD
3 0880 Randallstown 9428 - 30 Liberty Road MD
4 0905 Laurel 14750 Baltimore Washington Blvd. MD
5 0919 Gaithersburg 701 Russell Avenue MD
6 0929 Fredericksburg 280 Spotsylvania Mall VA
7 0939 Waldorf 2850 Crain Highway MD
8 0956 Manassas 8891 Centerville Road VA
9 0972 Alexandria 6550-A Little River Turnpike VA
10 1013 Columbia 8660 Guilford Road MD
11 1028 Glen Burnie 7900 Ritchie Highway MD
12 0393 Wilmington Concord Mall DE
13 0452 Towson 825 Dulaney Valley Road MD
14 0835 Woodbridge 14510 Jefferson Davis Highway VA