Franchise Agreement - Big Entertainment Inc. and Martin Ergas
[BIG ENTERTAINMENT LETTERHEAD]
MEMORANDUM
Via FAX 305-854-8601
TO: Marty Ergas
FROM: Mitchell Rubenstein
RE: Franchise Agreement
DATE AS OF: December 15, 1997
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BACKGROUND:
There is an existing franchise agreement providing for you to have the
exclusive right to open (or license others to open) Super-Kiosks in
Canada in return for certain payments ($700,00 for the rights).
However, the agreement has not been fully effectuated and the payment
has not been made. As discussed, you were awaiting additional
information on our franchise plans for the U.S. in order to have that
information for the development of a chain of these kiosk units in
Canada. In the meantime, we also entered into a franchise agreement for
Super-Kiosks in the Philadelphia, PA area. Also, in October and
November 1997, we opened three prototype Studio Stores in in-line
locations in malls in New Jersey. This was an expansion of our kiosk
concept. Each in-line store averages about 3,000 sq. ft. compared to
166 sq. ft. for a kiosk, so the opportunities for carrying a wider
range of merchandise and more styles and sizes is greatly enhanced with
the new in-line studio store. In attendance at these openings was the
francisee for the Philadelphia market. Upon seeing the new prototypes
and discussing the matter with us, we agreed to convert his agreement
from one covering kiosks to in-line units in order to maximize the
potential opportunity.
PROPOSAL:
As a result of the launch of the in-line studio stores and the
conversion of our first U.S.-based franshisee from kiosks to in-line
studio stores, we would like to extend that same opportunity to you.
<PAGE>
Mr. Martin Ergas
December 15, 1997
Page 2
I am proposing the following:
1. Studio Stores: The type of unit is changed from kiosks to in-line
studio store units.
2. Area: Change from Canadian territory to the Phoenix, Arizona market
area.
3. Pricing: Reduce from $700,000 to $350,000 the territorial exclusivity
fee, payable one-third (1/3) now; and two-thirds (2/3) within 120 days.
4. Roll-out commitment: At least one (1) unit to be opened by December 31,
1999; at least one (1) unit annualy thereafter.
5. Big's obligations to you: None. It is agreed that Big will not be
providing any training program or materials.
6. Ongoing Royalty Fees due Big: Same as set forth in our original
agreement.
7. Option: At the option of Big, exercisable at anytime by Big on or
before December 31, 1998, and provided no unit is open hereunder at the
time of this exercise, you will transfer your territorial rights
hereunder back to Big in return for 100,000 shares of BIGE common
stock, which stock shall be registered on or before the earlier of (a)
December 31, 1998, or (b) six months from the date of such exercise.
Such exercise shall not affect the financial obligation set forth in
Paragraph 3 above. In the case Big exercises this option, then the
term of your pre-existing option to acquire shares of BIGE common stock
will be extended by one (1) year.
Please sign where indicated below your approval to this amendment to
our arrangement.
Agreed:
Big Entertainment, Inc.
/S/ MITCHELL RUBENSTEIN, AS C.E.O.
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Mitchell Rubenstein
/S/ MARTIN ERGAS
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Martin Ergas