EXHIBIT 10.12

 

Buffalo Wild Wings®

 

Area Development Agreement

 

 

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Developer

 

 

Effective Date:

 

 

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(To be completed by Us)

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TABLE OF CONTENTS

 

SECTION

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   PAGE

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RECITALS    1 1.   DEFINITIONS    1 2.   GRANT OF DEVELOPMENT RIGHTS    2 3.  
DEVELOPMENT FEE    4 4.   DEVELOPMENT SCHEDULE    4 5.   TERM    7 6.   YOUR
DUTIES    7 7.   DEFAULT AND TERMINATION    8 8.   RIGHTS AND DUTIES OF PARTIES
UPON TERMINATION OR EXPIRATION    8 9.   TRANSFER    10 10.   MISCELLANEOUS   
10

 

APPENDICES

 

A. DEVELOPMENT TERRITORY

B. DEVELOPMENT SCHEDULE

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BUFFALO WILD WINGS®

AREA DEVELOPMENT AGREEMENT

 

This Area Development Agreement is made this          day of              ,
20     between BUFFALO WILD WINGS INTERNATIONAL, INC., an Ohio corporation with
its principal business located at 1600 Utica Avenue South, Suite 700,
Minneapolis, Minnesota 55426 (“we” or “us”) and                     , a(n)
                     whose principal business address is                     
(“developer” or “you”). If the developer is a corporation, partnership or
limited liability company, certain provisions of the Agreement also apply to
your owners and will be noted.

 

RECITALS

 

A. Our parent company has developed a unique system for operating video
entertainment oriented, fast casual restaurants that feature chicken wings,
sandwiches, unique food service and other products, beverages and services using
certain standards and specifications;

 

B. Many of the food and beverage products are prepared according to specified
recipes and procedures, some of which include proprietary sauces and mixes;

 

C. Our parent company owns the BUFFALO WILD WINGS® Trademark and other
trademarks used in connection with the Operation of a BUFFALO WILD WINGS
restaurant;

 

D. Our parent company has granted to us the right to sublicense the right to
develop and operate BUFFALO WILD WINGS restaurants;

 

E. You desire to develop and operate several BUFFALO WILD WINGS restaurants and
we, in reliance on your representations, have approved your franchise
application to do so in accordance with this Agreement.

 

In consideration of the foregoing and the mutual covenants and consideration
below, you and we agree as follows:

 

DEFINITIONS

 

1. For purposes of this Agreement, the terms below have the following
definitions:

 

A. “Menu Items” means the chicken wings, sandwiches and other products and
beverages prepared according to our specified recipes and procedures, as we may
modify and change them from time to time.

 

B. “Principal Owner” means any person who directly or indirectly owns a 10% or
greater interest in the developer when the developer is a corporation, limited
liability company, a partnership, or a similar entity. However, if we are
entering into this Agreement totally or partially based on the financial
qualifications, experience, skills or managerial qualifications of any person or
entity who directly or indirectly owns less than a 10% interest in the
developer, that person or entity may, in our sole discretion, be considered a
Principal Owner for all purposes under this Agreement, including, but not
limited to, the execution of the personal guaranty referenced in Section 10.J
below. In addition, if the developer is a partnership entity, then each general
partner is a Principal Owner, regardless of the percentage ownership interest.
If the developer is one or more individuals, each individual is a Principal
Owner of the developer. You must have at least one Principal Owner.

 

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C. “Restaurants” means the BUFFALO WILD WINGS Restaurants you develop and
operate pursuant to this Agreement.

 

D. “System” means the BUFFALO WILD WINGS System, which consists of distinctive
food and beverage products prepared according to special and confidential
recipes and formulas with unique storage, preparation, service and delivery
procedures and techniques, offered in a setting of distinctive exterior and
interior layout, design and color scheme, signage, furnishings and materials and
using certain distinctive types of facilities, equipment, supplies, ingredients,
business techniques, methods and procedures together with sales promotion
programs, all of which we may modify and change from time to time.

 

E. “Trademarks” means the BUFFALO WILD WINGS Trademark and Service Mark that
have been registered in the United States and elsewhere and the trademarks,
service marks and trade names set forth in each Franchise Agreement, as we may
modify and change from time to time, and the trade dress and other commercial
symbols used in the Restaurants. Trade dress includes the designs, color schemes
and image we authorize you to use in the operation of the Restaurants from time
to time.

 

GRANT OF DEVELOPMENT RIGHTS

 

2. The following provisions control with respect to the rights granted
hereunder:

 

A. We grant to you, under the terms and conditions of this Agreement, the right
to develop and operate              (        ) BUFFALO WILD WINGS Restaurants
(the “Restaurants”) within the territory described on Appendix A (“Development
Territory”).

 

B. You are bound by the development schedule (“Development Schedule”) set forth
in Appendix B. Time is of the essence for the development of each Restaurant in
accordance with the Development Schedule. Each Restaurant must be developed and
operated pursuant to a separate Franchise Agreement that you enter into with us
pursuant to Section 4.B below.

 

C. If you are in compliance with the Development Schedule set forth on Appendix
B, we will not develop or operate or grant anyone else a franchise to develop
and operate a BUFFALO WILD WINGS Restaurant business in the Development
Territory prior to the earlier of (i) the expiration or termination of this
Agreement; (ii) the date on which you must execute the Franchise Agreement for
your last restaurant pursuant to the terms of the Development Schedule or (iii)
the date on which the Designated Area for your final Restaurant under this
Agreement is determined, except (a) for the Special Sites defined in Section 2.D
below; (b) in the event that the Development Territory covers more than one
city, county or designated market area, the protection for each particular city,
county or designated market area shall expire upon the earliest of (1) any of
the foregoing events or (2) the date when the Designated Area for your final
Restaurant to be developed in such city, county or designated market area under
this Agreement is determined; or (c) as otherwise provided in this Agreement.
Notwithstanding anything in this Agreement, upon the earliest occurrence of any
of the foregoing events (i) the Development Territory shall expire and (ii) we
will be entitled to develop and operate, or to franchise others to develop and
operate, BUFFALO WILD WINGS restaurants in the Development Territory, except as
may be otherwise provided under any Franchise Agreement that has been executed
between us and you and that has not been terminated. At the time you execute
your final Franchise Agreement under the Development Schedule, you must have an
Authorized Location for your final Restaurant.

 

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D. The rights granted under this Agreement are limited to the right to develop
and operate Restaurants located in the Development Territory, and do not include
(i) any right to sell products and Menu Items identified by the Trademarks at
any location or through any other channels or methods of distribution, including
the internet (or any other existing or future form of electronic commerce),
other than at Restaurants within the Development Territory, (ii) any right to
sell products and Menu Items identified by the Trademarks to any person or
entity for resale or further distribution, or (iii) any right to exclude,
control or impose conditions on our development or operation of franchised,
company or affiliate owned restaurants at any time or at any location outside of
the Development Territory. You may not use any the words BUFFALO, WILD or WINGS
or any of the other Trademarks as part of the name of your corporation,
partnership, limited liability company or other similar entity.

 

You acknowledge and agree that (i) we and our affiliates have the right to
operate or franchise within the Designated Area one or more facilities selling,
for dine in or take out, all or some of the Menu Items, using the Trademarks or
any other trademarks, service marks or trade names, without compensation to any
franchisee, provided, however, that such facilities shall not have an interior
area larger than 2,400 square feet and shall not have seating capacity for more
than 48 people; (ii) we and our affiliates have the right outside of the
Development Territory to grant other franchises or operate company or affiliate
owned BUFFALO WILD WINGS restaurants and offer, sell or distribute any products
or services associated with the System (now or in the future) under the
Trademarks or any other trademarks, service marks or trade names or through any
distribution channel or method, all without compensation to any developer; and
(iii) we and our affiliates have the right to operate and franchise others to
operate restaurants or any other business within and outside the Development
Territory under trademarks other than the BUFFALO WILD WINGS Trademarks, without
compensation to any developer, except that our operation of, or association or
affiliation with, restaurants (through franchising or otherwise) in the
Development Territory that compete with BUFFALO WILD WINGS restaurants in the
video entertainment oriented, fast casual restaurant segment will only occur
through some form of merger or acquisition with an existing restaurant chain.

 

In addition, we and our affiliates have the right to offer, sell or distribute,
within the Development Territory, any frozen, pre-packaged items or other
products or services associated with the System (now or in the future) or
identified by the Trademarks, or any other trademarks, service marks or trade
names, except for Prohibited Items (as defined below), through any distribution
channels or methods, without compensation to any developer. The distribution
channels or methods include, without limitation, grocery stores, club stores,
convenience stores, wholesale, hospitals, clinics, health care facilities,
business or industry locations (e.g. manufacturing site, office building),
military installations, military commissaries or the internet (or any other
existing or future form of electronic commerce). The Prohibited Items are the
following items that we will not sell in the Development Territory through other
distribution channels or methods: any retail food service Menu Items that are
cooked or prepared to be served to the end user or customer for consumption at
the retail location (unless sold at the limited seating facilities referenced in
subparagraph (i) of the paragraph above). For example, chicken wings cooked and
served to customers at a grocery store or convenience store would be a
Prohibited Item, but the sale of frozen or pre-packaged chicken wings at a
grocery store or convenience store would be a permitted form of distribution in
the Development Territory.

 

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Further, you acknowledge that certain locations within the Development Territory
are by their nature unique and separate in character from sites generally
developed as BUFFALO WILD WINGS restaurants. As a result, you agree that the
following locations (“Special Sites”) are excluded from the Development
Territory and we have the right, subject to our then-current Special Sites
Impact Policy, to develop or franchise such locations: (1) military bases; (2)
public transportation facilities; (3) sports facilities, including race tracks;
(4) student unions or other similar buildings on college or university campuses;
(5) amusement and theme parks; and (6) community and special events.

 

E. This Agreement is not a Franchise Agreement and you have no right to use in
any manner the Trademarks by virtue of this Agreement. You have no right under
this Agreement to sublicense or subfranchise others to operate a business or
restaurant or use the System or the Trademarks.

 

DEVELOPMENT FEE

 

3. You must pay a Development Fee as described below:

 

A. As consideration for the rights granted in this Agreement, you must pay us a
“Development Fee” of $            , representing one-half of the Initial
Franchise Fee for each Restaurant to be developed under this Agreement. The
Initial Franchise Fee for the first Restaurant is $            . The Initial
Franchise Fee for the second Restaurant is $            . The Initial Franchise
Fee for each subsequent Restaurant is $            .

 

The Development Fee is consideration for this Agreement and not consideration
for any Franchise Agreement, is fully earned by us upon execution of this
Agreement and is non-refundable. The part of the Initial Franchise Fee that is
included in the Development Fee is credited against the Initial Franchise Fee
payable upon the signing of each individual Franchise Agreement. The balance of
the Initial Franchise Fee for the first Restaurant must be paid at the time of
execution of this Agreement, together with the execution by you of the Franchise
Agreement for the first Restaurant. The total amount to be paid by you at the
time of execution of this Agreement pursuant to this Section, including both the
Development Fee and the balance of the Initial Franchise Fee for your first
Restaurant is $            . The balance of the Initial Franchise Fee for each
subsequent Restaurant is due as specified in Section 3.B.

 

B. You must submit a separate application for each Restaurant to be established
by you within the Development Territory as further described in Section 4. Upon
our consent to the site of your Restaurant, a separate Franchise Agreement must
be executed for each such Restaurant, at which time the balance of the Initial
Franchise Fee for that Restaurant is due and owing. Such payment represents the
balance of the appropriate Initial Franchise Fee, as described above in Section
3.A. Upon the execution of each Franchise Agreement, the terms and conditions of
the Franchise Agreement control the establishment and operation of such
Restaurant.

 

DEVELOPMENT SCHEDULE

 

4. The following provisions control with respect to your development rights and
obligations:

 

A. You are bound by and strictly must follow the Development Schedule. By the
dates set forth under the Development Schedule, you must enter into Franchise
Agreements with us pursuant to this Agreement for the number of Restaurants
described under the Development

 

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Schedule. You also must comply with the Development Schedule requirements
regarding (i) the restaurant type to be developed and the opening date for each
Restaurant and (ii) the cumulative number of Restaurants to be open and
continuously operating for business in the Development Territory. If you fail to
either execute a Franchise Agreement or to open a Restaurant according to the
dates set forth in the Franchise Agreement, we, in our sole discretion, may (i)
require that you hire a franchise development expert with recognized experience
in developing franchises in a similar line of business to ours or (ii)
immediately terminate this Agreement pursuant to Section 7.B.

 

B. You may not develop a Restaurant unless (i) at least 45 days, but no more
than 60 days, prior to the date set forth in the Development Schedule for the
execution of each Franchise Agreement, you send us a notice (a) requiring that
we send you our then current disclosure documents, (b) confirming your intention
to develop the particular Restaurant and (c) sending us all information
necessary to complete the Franchise Agreement for the particular Restaurant and
(ii) all of the following conditions have been met (these conditions apply to
each Restaurant to be developed in the Development Territory):

 

1. Your Submission of Proposed Site. You must find a proposed site for the
Restaurant which you reasonably believe to conform to our site selection
criteria, as modified by us from time to time, and submit to us a complete site
report (containing such demographic, commercial, and other information and
photographs as we may reasonably require) for such site.

 

2. Our Consent to Proposed Site. You must receive our written consent to your
proposed site. We agree not to unreasonably withhold consent to a proposed site.
Prior to granting our consent to a site, you must have the site evaluated by the
proprietary site evaluator software that has been developed by GeoVue, Inc. You
will pay GeoVue, Inc. an evaluation fee of $400 per site evaluated, provided,
that you must purchase the rights to have at least 3 sites evaluated. In
approving or disapproving any proposed site, we will consider such matters as we
deem material, including demographic characteristics of the proposed site,
traffic patterns, competition, the proximity to other businesses, the nature of
other businesses in proximity to the site, and other commercial characteristics
(including the purchase or lease obligations for the proposed site) and the size
of premises, appearance and other physical characteristics. Our consent to a
proposed site, however, does not in any way constitute a guaranty by us as to
the success of the Restaurant.

 

3. Your Submission of Information. You must furnish to us, at least 30 days
prior to the earliest of (i) the date set forth in the Development Schedule by
which you must execute a Franchise Agreement or (ii) the actual date in which
the Franchise Agreement would be executed, a franchise application for the
proposed Restaurant, financial statements and other information regarding you,
the operation of any of your other Restaurants within the Development Territory
and the development and operation of the proposed Restaurant (including, without
limitation, investment and financing plans for the proposed Restaurant) as we
may reasonably require.

 

4. Your Compliance with Our Then-Current Standards for Franchisees. You must
receive written confirmation from us that you meet our then-current standards
for franchisees, including financial capability criteria for the development of
a new Restaurant. You acknowledge and agree that this requirement is necessary
to ensure the proper development and operation of your Restaurants, and preserve
and enhance the reputation and goodwill of all BUFFALO WILD WINGS restaurants
and the goodwill of the Trademarks. Our confirmation that you meet our
then-current standards for the development of a new Restaurant, however, does
not in any way constitute a guaranty by us as to your success.

 

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5. Good Standing. You must not be in default of this Agreement, any Franchise
Agreement entered into pursuant to this Agreement or any other agreement between
you or any of your affiliates and us or any of our affiliates. You also must
have satisfied on a timely basis all monetary and material obligations under the
Franchise Agreements for all existing Restaurants.

 

6. Execution of Franchise Agreement. You and we must enter into our then-current
form of Franchise Agreement for the proposed Restaurant. You understand that we
may modify the then-current form of Franchise Agreement from time to time and
that it may be different than the current form of Franchise Agreement, including
different fees and obligations. You understand and agree that any and all
Franchise Agreements will be construed and exist independently of this
Agreement. The continued existence of each Franchise Agreement will be
determined by the terms and conditions of such Franchise Agreement. Except as
specifically set forth in this Agreement, the establishment and operation of
each Restaurant must be in accordance with the terms of the applicable Franchise
Agreement.

 

C. You must begin substantial construction of each of the Restaurants at least
150 days before the deadline to open each of the Restaurants if the Restaurant
will be in a free standing location or at least 120 days before the deadline to
open the Restaurant if the Restaurant will be in a non-free standing location.
In addition, on or before the deadlines to start construction you must submit to
us executed copies of any loan documents and/or any other document that proves
that you have secured adequate financing to complete the construction of the
Restaurant by the date you are obligated to have that Restaurant open and in
operation. In the event that you fail to comply with any of these obligations,
we will have the right to terminate this Agreement without opportunity to cure
pursuant to subparagraph 7.B.

 

D. You acknowledge that you have conducted an independent investigation of the
prospects for the establishment of Restaurants within the Development Territory,
and recognize that the business venture contemplated by this Agreement involves
business and economic risks and that your financial and business success will be
primarily dependent upon the personal efforts of you and your management and
employees. We expressly disclaim the making of, and you acknowledge that you
have not received, any estimates, projections, warranties or guaranties, express
or implied, regarding potential gross sales, profits, earnings or the financial
success of the Restaurants you develop within the Development Territory.

 

E. You recognize and acknowledge that this Agreement requires you to open
Restaurants in the future pursuant to the Development Schedule. You further
acknowledge that the estimated expenses and investment requirements set forth in
Items 6 and 7 of our Uniform Franchise Offering Circular are subject to increase
over time, and that future Restaurants likely will involve greater initial
investment and operating capital requirements than those stated in the Uniform
Franchise Offering Circular provided to you prior to the execution of this
Agreement. You are obligated to execute all the Franchise Agreements and open
all the Restaurants on the dates set forth on the Development Schedule,
regardless of (i) the requirement of a greater investment, (ii) the financial
condition or performance of your prior Restaurants, or (iii) any other
circumstances, financial or otherwise. The foregoing shall not be interpreted as
imposing any obligation upon us to execute the Franchise Agreements under this
Agreement if you have not complied with each and every condition necessary to
develop the Restaurants.

 

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TERM

 

5. Unless sooner terminated in accordance with Section 7 of this Agreement, the
term of this Agreement and all rights granted to you will expire on the date
that your last BUFFALO WILD WINGS Restaurant is scheduled to be opened under the
Development Schedule.

 

YOUR DUTIES

 

6. You must perform the following obligations:

 

A. You must comply with all of the terms and conditions of each Franchise
Agreement, including the operating requirements specified in each Franchise
Agreement.

 

B. You and your owners, officers, directors, shareholders, partners, members and
managers (if any) acknowledge that your entire knowledge of the operation of a
BUFFALO WILD WINGS Restaurant and the System, including the knowledge or
know-how regarding the specifications, standards and operating procedures of the
services and activities, is derived from information we disclose to you and that
certain information is proprietary, confidential and constitutes our trade
secrets. The term “trade secrets” refers to the whole or any portion of
know-how, knowledge, methods, specifications, processes, procedures and/or
improvements regarding the business that is valuable and secret in the sense
that it is not generally known to our competitors and any proprietary
information contained in the manuals or otherwise communicated to you in
writing, verbally or through the internet or other online or computer
communications, and any other knowledge or know-how concerning the methods of
operation of the Restaurants. You and your owners, officers, directors,
shareholders, partners, members and managers (if any), jointly and severally,
agree that at all times during and after the term of this Agreement, you will
maintain the absolute confidentiality of all such proprietary information and
will not disclose, copy, reproduce, sell or use any such information in any
other business or in any manner not specifically authorized or approved in
advance in writing by us. We may require that you obtain nondisclosure and
confidentiality agreements in a form satisfactory to us from the individuals
identified in the first sentence of this paragraph and other key employees.

 

C. You must comply with all requirements of federal, state and local laws, rules
and regulations.

 

D. If you at some time in the future desire to make either a public or a private
offering of your securities, prior to such offering and sale, and prior to the
public release of any statements, data, or other information of any kind
relating to the proposed offering of your securities, you must secure our
written approval, which approval will not be unreasonably withheld. You must
secure our prior written consent to any and all press releases, news releases
and any and all other publicity, the primary purpose of which is to generate
interest in your offering. Only after we have given our written approval may you
proceed to file, publish, issue, and release and make public any said data,
material and information regarding the securities offering. It is specifically
understood that any review by us is solely for our own information, and our
approval does not constitute any kind of authorization, acceptance, agreement,
endorsement, approval, or ratification of the same, either expressly or implied.
You may make no oral or written notice of any kind whatsoever indicating or
implying that we and/or our affiliates have any interest in the relationship
whatsoever to the proposed offering other than acting as Franchisor. You agree
to indemnify, defend, and hold us and our affiliates harmless, and our
affiliates’ directors, officers, successors and assigns harmless from all
claims, demands, costs, fees, charges, liability or expense (including
attorneys’ fees) of any kind whatsoever arising from your offering of
information published or communicated in actions taken in that regard.

 

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E. If neither you, your Principal Owner, nor any other person in your
organization possesses, in our judgment, adequate experience and skills to allow
you to locate, obtain and develop prime locations in the Development Territory
to allow you to meet your development obligations under this Agreement, we can
require that you hire or engage a person with those necessary skills.

 

DEFAULT AND TERMINATION

 

7. The following provisions apply with respect to default and termination:

 

A. The rights and territorial protection granted to you in this Agreement have
been granted in reliance on your representations and warranties, and strictly on
the conditions set forth in Sections 2, 4 and 6 of this Agreement, including the
condition that you comply strictly with the Development Schedule.

 

B. You will be deemed in default under this Agreement if you breach any of the
terms of this Agreement, including the failure to meet the Development Schedule,
or the terms of any Franchise Agreement or any other agreements between you or
your affiliates and us or our affiliates. All rights granted in this Agreement
immediately terminate upon written notice without opportunity to cure if: (i)
you become insolvent, commit any affirmative action of insolvency or file any
action or petition of insolvency, (ii) a receiver (permanent or temporary) of
your property is appointed by a court of competent authority, (iii) you make a
general assignment or other similar arrangement for the benefit of your
creditors, (iv) a final judgment remains unsatisfied of record for 30 days or
longer (unless supersedeas bond is filed), (v) execution is levied against your
business or property, (vi) suit to foreclose any lien or mortgage against the
premises or equipment is instituted against you and not dismissed within 30
days, or is not in the process of being dismissed, (vii) you fail to meet the
development obligations set forth in the Development Schedule attached as
Appendix B, (viii) failure to start substantial construction of any of the
Restaurants by the date established in Section 4.C (ix) failure to secure
financing for the construction of any of the Restaurants by the date set forth
in Section 4.C (x) you violate the provisions of Section 10.N; (xi) you fail to
comply with any other provision of this Agreement and do not correct the failure
within 30 days after written notice of that failure is delivered to you, or
(xii) we have delivered to you a notice of termination of a Franchise Agreement
in accordance with its terms and conditions.

 

RIGHTS AND DUTIES OF PARTIES UPON TERMINATION OR EXPIRATION

 

8. Upon termination or expiration of this Agreement, all rights granted to you
will automatically terminate, and:

 

A. All remaining rights granted to you to develop Restaurants under this
Agreement will automatically be revoked and will be null and void. You will not
be entitled to any refund of any fees. You will have no right to develop or
operate any business for which a Franchise Agreement has not been executed by
us. We will be entitled to develop and operate, or to franchise others to
develop and operate, BUFFALO WILD WINGS restaurants in the Development
Territory, except as may be otherwise provided under any Franchise Agreement
that has been executed between us and you and that has not been terminated.

 

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B. You must immediately cease to operate your business under this Agreement and
must not thereafter, directly or indirectly, represent to the public or hold
yourself out as a present or former developer of ours.

 

C. You must take such action as may be necessary to cancel or assign to us or
our designee, at our option, any assumed name or equivalent registration that
contains the name or any of the words BUFFALO, WILD or WINGS or any other
Trademark of ours, and you must furnish us with evidence satisfactory to us of
compliance with this obligation within 30 days after termination or expiration
of this Agreement.

 

D. You must assign to us or our designee all your right, title, and interest in
and to your telephone numbers and must notify the telephone company and all
listing agencies of the termination or expiration of your right to use any
telephone number in any regular, classified or other telephone directory listing
associated with the Trademarks and to authorize transfer of same at our
direction.

 

E. You must within 30 days of the termination or expiration pay all sums owing
to us and our affiliates, including the balance of the Initial Franchise Fees
that we would have received had you developed all of the Restaurants set forth
in the Development Schedule. In addition to the Initial Franchise Fees for
undeveloped Restaurants, you agree to pay as fair and reasonable liquidated
damages (but not as a penalty) an amount equal to $50,000 for each undeveloped
Restaurant. You agree that this amount is for lost revenues from Continuing Fees
and other amounts payable to us, including the fact that you were holding the
development rights for those Restaurants and precluding the development of
certain Restaurants in the Development Territory, and that it would be difficult
to calculate with certainty the amount of damage we will incur. Notwithstanding
your agreement, if a court determines that this liquidated damages payment is
unenforceable, then we may pursue all other available remedies, including
consequential damages.

 

All unpaid amounts will bear interest at the rate of 18% per annum or the
maximum contract rate of interest permitted by governing law, whichever is less,
from and after the date of accrual. In the event of termination for any default
by you, the sums due will include all damages, costs, and expenses, including
reasonable attorneys’ fees and expenses, incurred by us as a result of the
default. You also must pay to us all damages, costs and expenses, including
reasonable attorneys’ fees and expenses, that we incur subsequent to the
termination or expiration of this Agreement in obtaining injunctive or other
relief for the enforcement of any provisions of this Agreement.

 

F. If this Agreement is terminated solely for your failure to meet the
Development Schedule and for no other reason whatsoever, and you have opened at
least 50% of the total number of Restaurants provided for in the Development
Schedule, you may continue to operate those existing Restaurants under the terms
of the separate Franchise Agreement for each Restaurant. On the other hand, if
this Agreement is terminated under any other circumstance, we have the option to
purchase from you all the assets used in the Restaurants that have been
developed prior to the termination of this Agreement. Assets include leasehold
improvements, equipment, furniture, fixtures, signs, inventory, liquor licenses
and other transferable licenses and permits for the Restaurants.

 

We have the unrestricted right to assign this option to purchase. We or our
assignee will be entitled to all customary warranties and representations given
by the seller of a business including, without limitation, representations and
warranties as to (i) ownership, condition and

 

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title to assets; (ii) liens and encumbrances relating to the assets; and (iii)
validity of contracts and liabilities, inuring to us or affecting the assets,
contingent or otherwise. The purchase price for the assets of the Restaurants
will be determined in accordance with the post-termination purchase option
provision in the individual Franchise Agreement for each Restaurant (with the
purchase price to include the value of any goodwill of the business attributable
to your operation of the Restaurant if you are in compliance with the terms and
conditions of the Franchise Agreement for that Restaurant). The purchase price
must be paid in cash at the closing of the purchase, which must take place no
later than 90 days after your receipt of notice of exercise of this option to
purchase, at which time you must deliver instruments transferring to us or our
assignee: (i) good and merchantable title to the assets purchased, free and
clear of all liens and encumbrances (other than liens and security interests
acceptable to us or our assignee), with all sales and other transfer taxes paid
by you; and (ii) all licenses and permits of the Restaurants that may be
assigned or transferred. If you cannot deliver clear title to all of the
purchased assets, or in the event there are other unresolved issues, the closing
of the sale will be accomplished through an escrow. We have the right to set off
against and reduce the purchase price by any and all amounts owed by you to us,
and the amount of any encumbrances or liens against the assets or any
obligations assumed by us. You and each holder of an interest in you must
indemnify us and our affiliates against all liabilities not so assumed. You must
maintain in force all insurance policies required pursuant to the applicable
Franchise Agreement until the closing on the sale.

 

G. All of our and your obligations that expressly or by their nature survive the
expiration or termination of this Agreement will continue in full force and
effect subsequent to and notwithstanding its expiration or termination and until
they are satisfied or by their nature expire.

 

TRANSFER

 

9. The following provisions govern any transfer:

 

A. We have the right to transfer all or any part of our rights or obligations
under this Agreement to any person or legal entity.

 

B. This Agreement is entered into by us with specific reliance upon your
personal experience, skills and managerial and financial qualifications.
Consequently, this Agreement, and your rights and obligations under it, are and
will remain personal to you. You may only Transfer your rights and interests
under this Agreement if you obtain our prior written consent and you transfer
all of your rights and interests under all Franchise Agreements for Restaurants
in the Development Territory. Accordingly, the assignment terms and conditions
of the Franchise Agreements shall apply to any Transfer of your rights and
interests under this Agreement. As used in this Agreement, the term “Transfer”
means any sale, assignment, gift, pledge, mortgage or any other encumbrance,
transfer by bankruptcy, transfer by judicial order, merger, consolidation, share
exchange, transfer by operation of law or otherwise, whether direct or indirect,
voluntary or involuntary, of this Agreement or any interest in it, or any rights
or obligations arising under it, or of any material portion of your assets, or
of any interest in you.

 

MISCELLANEOUS

 

10. The parties agree to the following provisions:

 

A. You agree to indemnify, defend, and hold us, our affiliates and our officers,
directors, shareholders and employees harmless from and against any and all
claims, losses,

 

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damages and liabilities, however caused, arising directly or indirectly from, as
a result of, or in connection with, the development, use and operation of your
Restaurants, as well as the costs, including attorneys’ fees, of defending
against them (“Franchise Claims”). Franchise Claims include, but are not limited
to, those arising from any death, personal injury or property damage (whether
caused wholly or in part through our or our affiliates active or passive
negligence), latent or other defects in any Restaurant, or your employment
practices. In the event a Franchise Claim is made against us or our affiliates,
we reserve the right in our sole judgment to select our own legal counsel to
represent our interests, at your cost.

 

B. Should one or more clauses of this Agreement be held void or unenforceable
for any reason by any court of competent jurisdiction, such clause or clauses
will be deemed to be separable in such jurisdiction and the remainder of this
Agreement is valid and in full force and effect and the terms of this Agreement
must be equitably adjusted so as to compensate the appropriate party for any
consideration lost because of the elimination of such clause or clauses.

 

C. No waiver by us of any breach by you, nor any delay or failure by us to
enforce any provision of this Agreement, may be deemed to be a waiver of any
other or subsequent breach or be deemed an estoppel to enforce our rights with
respect to that or any other or subsequent breach. This Agreement may not be
waived, altered or rescinded, in whole or in part, except by a writing signed by
you and us. This Agreement together with the application form executed by you
requesting us to enter into this Agreement constitute the sole agreement between
the parties with respect to the entire subject matter of this Agreement and
embody all prior agreements and negotiations with respect to the business. You
acknowledge and agree that you have not received any warranty or guarantee,
express or implied, as to the potential volume, profits or success of your
business. There are no representations or warranties of any kind, express or
implied, except as contained in this Agreement.

 

D. Except as otherwise provided in this Agreement, any notice, demand or
communication provided for must be in writing and signed by the party serving
the same and either delivered personally or by a reputable overnight service or
deposited in the United States mail, service or postage prepaid, and if such
notice is a notice of default or of termination, by registered or certified
mail, and addressed as follows:

 

1. If intended for us, addressed to General Counsel, Buffalo Wild Wings
International, Inc., 1600 Utica Avenue South, Suite 700, Minneapolis, Minnesota
55416;

 

2. If intended for you, addressed to you at                                     
; or,

 

in either case, to such other address as may have been designated by notice to
the other party. Notices for purposes of this Agreement will be deemed to have
been received if mailed or delivered as provided in this subparagraph.

 

E. Any modification, consent, approval, authorization or waiver granted in this
Agreement required to be effective by signature will be valid only if in writing
executed by the Principal Owner or, if on behalf of us, in writing executed by
our President or one of our authorized Vice Presidents.

 

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F. The following provisions apply to and govern the interpretation of this
Agreement, the parties’ rights under this Agreement, and the relationship
between the parties:

 

1. Applicable Law and Waiver. Subject to our rights under federal trademark
laws, the parties’ rights under this Agreement, and the relationship between the
parties, is governed by, and will be interpreted in accordance with, the laws
(statutory and otherwise) of the state in which your first Restaurant is
located. You waive, to the fullest extent permitted by law, the rights and
protections that might be provided through the laws of any state relating to
franchises or business opportunities, other than those of the state in which
your first Restaurant is located.

 

2. Our Rights. Whenever this Agreement provides that we have a certain right,
that right is absolute and the parties intend that our exercise of that right
will not be subject to any limitation or review. We have the right to operate,
administrate, develop, and change the System in any manner that is not
specifically precluded by the provisions of this Agreement, although this right
does not modify the express limitations set forth in this Agreement.

 

3. Our Reasonable Business Judgment. Whenever we reserve discretion in a
particular area or where we agree to exercise our rights reasonably or in good
faith, we will satisfy our obligations whenever we exercise Reasonable Business
Judgment in making our decision or exercising our rights. Our decisions or
actions will be deemed to be the result of Reasonable Business Judgment, even if
other reasonable or even arguably preferable alternatives are available, if our
decision or action is intended, in whole or significant part, to promote or
benefit the System generally even if the decision or action also promotes our
financial or other individual interest. Examples of items that will promote or
benefit the System include, without limitation, enhancing the value of the
Trademarks, improving customer service and satisfaction, improving product
quality, improving uniformity, enhancing or encouraging modernization and
improving the competitive position of the System.

 

G. Any cause of action, claim, suit or demand allegedly arising from or related
to the terms of this Agreement or the relationship of the parties that is not
subject to arbitration under Section 10.M must be brought in the Federal
District Court for the District of Minnesota or in Hennepin County District
Court, Fourth Judicial District, Minneapolis, Minnesota. Both parties
irrevocably submit themselves to, and consent to, the jurisdiction of said
courts. The provisions of this Section will survive the termination of this
Agreement. You are aware of the business purposes and needs underlying the
language of this subparagraph, and with a complete understanding, agree to be
bound in the manner set forth.

 

H. All parties hereby waive any and all rights to a trial by jury in connection
with the enforcement or interpretation by judicial process of any provision of
this Agreement, and in connection with allegations of state or federal statutory
violations, fraud, misrepresentation or similar causes of action or any legal
action initiated for the recovery of damages for breach of this Agreement.

 

I. You and us and our affiliates agree to waive, to the fullest extent permitted
by law, the right to or claim for any punitive or exemplary damages against the
other and agree that in the event of any dispute between them, each will be
limited to the recovery of actual damages sustained.

 

J. If you are a corporation, partnership, limited liability company or
partnership or other legal entity, all of your Principal Owners must execute the
form of undertaking and guarantee at the end of this Agreement. Any person or
entity that at any time after the date of this Agreement becomes a Principal
Owner must execute the form of undertaking and guarantee at the end of this
Agreement.

 

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K. You and we are independent contractors. Neither party is the agent, legal
representative, partner, subsidiary, joint venturer or employee of the other.
Neither party may obligate the other or represent any right to do so. This
Agreement does not reflect or create a fiduciary relationship or a relationship
of special trust or confidence.

 

L. In the event of any failure of performance of this Agreement according to its
terms by any party due to force majeure will not be deemed a breach of this
Agreement. For purposes of this Agreement, “force majeure” shall mean acts of
God, State or governmental action, riots, disturbance, war, strikes, lockouts,
slowdowns, prolonged shortage of energy supplies or any raw material, epidemics,
fire, flood, hurricane, typhoon, earthquake, lightning and explosion or other
similar event or condition, not existing as of the date of signature of this
Agreement, not reasonably foreseeable as of such date and not reasonably within
the control of any party hereto, which prevents in whole or in material part the
performance by one of the parties hereto of its obligations hereunder.

 

M. Except as qualified below, any dispute between you and us or any of our or
your affiliates arising under, out of, in connection with or in relation to this
Agreement, the parties’ relationship, or the business must be submitted to
binding arbitration under the authority of the Federal Arbitration Act and must
be arbitrated in accordance with the then-current rules and procedures and under
the auspices of the American Arbitration Association. The arbitration must take
place in Minneapolis, Minnesota, or at such other place as may be mutually
agreeable to the parties. The decision of the arbitrators will be final and
binding on all parties to the dispute; however, the arbitrators may not under
any circumstances: (i) stay the effectiveness of any pending termination of this
Agreement; (ii) assess punitive or exemplary damages; or (iii) make any award
which extends, modifies or suspends any lawful term of this Agreement or any
reasonable standard of business performance that we set.

 

Before the filing of any arbitration, the parties agree to mediate any dispute
that does not include injunctive relief or specific performance actions covered
below, provided that the party seeking mediation must notify the other party of
its intent to mediate prior to the termination of this Agreement. Mediation will
be conducted by a mediator or mediation program agreed to by the parties.
Persons authorized to settle the dispute must attend any mediation session. The
parties agree to participate in the mediation proceedings in good faith with the
intention of resolving the dispute if at all possible within 30 days of the
notice from the party seeking to initiate the mediation procedures. If not
resolved within 30 days, the parties are free to pursue arbitration. Mediation
is a compromise negotiation for purposes of the federal and state rules of
evidence, and the entire process is confidential.

 

Nothing in this Agreement bars our right to obtain injunctive relief against
threatened conduct that will cause us loss or damages, under the usual equity
rules, including the applicable rules for obtaining restraining orders and
preliminary injunctions. Furthermore, we and our affiliates have the right to
commence a civil action against you or take other appropriate action for the
following reasons: to collect sums of money due to us; to compel your compliance
with trademark standards and requirements to protect the goodwill of the
Trademarks; to compel you to compile and submit required reports to us; or to
permit evaluations or audits authorized by this Agreement.

 

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The prevailing party in any action or proceeding arising under, out of, in
connection with, or in relation to this Agreement, any lease or sublease for the
Restaurant or Authorized Location, or the business will be entitled to recover
its reasonable attorneys’ fees and costs.

 

N. During the term of this Agreement, neither we nor you may employ or seek to
employ, directly or indirectly, any person who is at the time or was at any time
during the prior 6 months employed in any type of managerial position by the
other party or any of its subsidiaries or affiliates, or by any franchisee in
the system. In the event that you violate this provision, we will have the right
to terminate this Agreement without opportunity to cure pursuant to subparagraph
7.B. In addition, any party who violates this provision agrees to pay as fair
and reasonable liquidated damages (but not as a penalty) an amount equal to 2
times the annual compensation that the person being hired away was perceiving at
the time the violating party offers her/him employment. You agree that this
amount is for the damages that the non-violating party will suffer for the loss
of the person hired away by the other party, including the costs of finding,
hiring and training a new employee and for the loss of the services and
experience of the employee hired away, and that it would be difficult to
calculate with certainty the amount of damages that the non-violating party will
incur. Notwithstanding the foregoing, if a court determines that this liquidated
damages payment is unenforceable, then the non-violating party may pursue all
other available remedies, including consequential damages. This subparagraph
will not be violated if (i) at the time we or you employ or seek to employ the
person, the former employer has given its written consent or (ii) we employ or
seek to employ the person in connection with the transfer of the Restaurant(s)
to us or any of our affiliates. The parties acknowledge and agree that any
franchisee from whom an employee was hired by you in violation of this
subparagraph shall be a third-party beneficiary of this provision, but only to
the extent that they may seek compensation from you.

 

O. We will designate the “Effective Date” of this Agreement in the space
provided on the cover page. If no Effective Date is designated on the cover
page, the Effective Date is the date when we sign this Agreement.

 

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IN WITNESS WHEREOF, the parties have executed the foregoing Agreement as of the
dates written below.

 

DEVELOPER:

 

FRANCHISOR

,                        

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BUFFALO WILD WINGS INTERNATIONAL, INC.

a(n)

 

 

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