STANDARD FORM

 

 

GARFIELD'S RESTAURANT & PUB

 

 

FRANCHISE AGREEMENT

 

between

 

Eateries, Inc.

and

_________________________

(Franchisee Name)

FOR

_________________________

(Restaurant Location)

FRANCHISE AGREEMENT

TABLE OF CONTENTS

Page

ARTICLE I FRANCHISE GRANT; TERM AND RENEWAL 1

1.1 Franchise Grant. *

1.2 Initial Term. *

1.3 Renewal. *

1.3.1 *

1.3.2 *

1.3.3 *

1.3.4 *

1.3.5 *

1.3.6 *

ARTICLE II FRANCHISE AND ADVERTISING FEES *

2.1 Franchise Fees. *

2.1.1 Initial Fee. *

2.1.2 Continuing Royalty Fee. *

2.2 Advertising Fees. *

2.3 Form of Payment. *

ARTICLE III DUTIES OF FRANCHISOR *

3.1 Assist Franchisee. *

3.2 Training. *

3.2.1 *

3.2.2 *

3.3 Informational Material. *

3.4 Plans and Specifications. *

3.5 Promotional Material. *

3.6 Garfield's Operations Manual. *

3.7 Quarterly Inspections. *

3.8 No Third Party Reliance. *

ARTICLE IV DUTIES OF FRANCHISEE *

4.1 Attendance at Training Programs. *

4.2 Lease of Premises. *

4.2.1 *

4.2.2 *

4.2.3 *

4.2.4 *

4.2.5 *

4.2.6 *

4.3 Construction of Restaurant. *

4.3.1 *

4.3.2 *

4.3.3 *

4.3.4 *

4.4 Use of Premises. *

4.5 Maintenance of Restaurant. *

4.6 Improvements and Modifications *

4.7 Remodeling of Restaurant. *

4.8 Operation of Restaurant. *

4.8.1 *

4.8.2 *

4.8.3 *

4.8.4 *

4.8.5 *

4.8.6 *

4.8.7 *

4.8.8 *

4.8.9 *

4.9 Purchase of Ingredients, Supplies, and Materials. *

4.9.1 *

4.9.2 *

4.9.3 *

4.9.4 *

4.9.5 *

4.9.6 *

4.9.7 *

4.10 Right to Set-Off. *

4.11 Right to Enter. *

4.12 Accounting and Records. *

4.12.1 Maintenance of Records. *

4.12.2 Financial Reports. *

4.12.3 Other Reports. *

4.12.4 Recordation. *

4.12.5 Examinations. *

4.13 Liquor License. *

4.14 No Waiver. *

ARTICLE V PROPRIETARY MARKS *

5.1 Representations of Franchisor. *

5.1.1 *

5.1.2 *

5.1.3 *

5.2 Agreement of Franchisee. *

5.2.1 *

5.2.2 *

5.2.3 *

5.2.4 *

5.2.5 *

5.2.6 *

5.2.7 *

5.2.8 *

5.2.9 *

5.2.10 *

5.3 Acknowledgments of Franchisee. *

5.3.1 *

5.3.2 *

5.3.3 *

5.3.4 *

5.3.5 *

ARTICLE VI CONFIDENTIAL OPERATIONS *

6.1 Compliance with Manual Standards. *

6.2 Confidentiality of Manual. *

6.3 Property of Franchisor. *

6.4 Maintenance of Manual at Restaurants. *

ARTICLE VII CONFIDENTIAL INFORMATION *

7.1 Proprietary Information. *

7.1.1 *

7.1.2 *

7.1.3 *

7.2 Injunctive Relief. *

7.3 Investments in Publicly Traded Companies. *

7.4 Reforming Provisions. *

7.5 Confidentiality Agreements. *

ARTICLE VIII USE OF NAME; ADVERTISING *

8.1 Advertising Under Trade Name. *

8.2 National Advertising and Marketing Program. *

8.2.1 *

8.2.2 *

8.2.3 *

8.2.4 *

8.2.5 *

8.3 Local Advertising. *

8.4 Cooperative Advertising Campaigns. *

8.5 Opening Promotions. *

8.6 Prior Approval of Franchisor. *

ARTICLE IX INSURANCE *

9.1 Procurement of Policies. *

9.2 Coverage and Amounts. *

9.3 Additional Coverage. *

9.4 Obligation Not Limited. *

9.5 Evidence of Insurance. *

9.6 Authority of Franchisor to Procure Insurance. *

ARTICLE X TRANSFERS OF INTEREST *

10.1 Transfer by Franchisor. *

10.2 Transfer by Franchisee. *

10.2.1 Conditions on Transfer. *

10.2.2 Consent. *

10.2.3 No Security Interest. *

10.3 Right of First Refusal. *

10.3.1 Right. *

10.3.2 Consideration. *

10.4 Transfer Upon Death or Mental Incompetency. *

10.5 Non-Waiver of Claims. *

10.6 Permitted Assignments. *

ARTICLE XI DEFAULT AND TERMINATION *

11.1 Termination by Franchisor Without Notice. *

11.2 Termination by Franchisor with Notice. *

11.2.1 *

11.2.2 *

11.2.3 *

11.2.4 *

11.2.5 *

11.2.6 *

11.2.7 *

11.2.8 *

11.3 Termination by Franchisor with Notice and Opportunity to Cure. *

11.4 Termination by Franchisee. *

ARTICLE XII OBLIGATIONS UPON TERMINATION OR EXPIRATION *

12.1 General Obligations. *

12.1.1 *

12.1.2 *

12.1.3 *

12.1.4 *

12.1.5 *

12.1.6 *

12.1.7 *

12.1.8 *

12.1.9 *

12.1.10 *

12.1.11 *

12.2 Obligations Upon Termination by Franchisee. *

12.3 Refund of Initial Fee Upon Termination. *

ARTICLE XIII AGREEMENTS *

13.1 Best Efforts. *

13.2 Franchisee and Principal Shareholders Agreement

Not to Compete. *

13.3 Franchisor Agreement Not to Compete. *

13.3.1 *

13.3.2 *

13.3.3 *

13.4 Interference with Employment Relations. *

13.5 Reduction of Scope of Agreement. *

13.6 Reforming Provisions. *

ARTICLE XIV TAXES, PERMITS AND INDEBTEDNESS *

14.1 Prompt Payment of Taxes. *

14.2 Bona Fide Dispute. *

14.3 Compliance with Laws. *

14.4 Notification of Legal Proceedings. *

ARTICLE XV FRANCHISEE ORGANIZATION, AUTHORITY,

AND FINANCIAL CONDITION *

15.1 Entity Representations & Warranties. *

15.2 Covenants. *

15.3 Financial Statements. *

15.4 Ownership. *

15.5 Guarantees. *

ARTICLE XVI RELATIONSHIP AND INDEMNIFICATION *

16.1 Relationship. *

16.2 Indemnification. *

ARTICLE XVII GENERAL PROVISIONS *

17.1 Request for Approval. *

17.2 No Liability Assumed. *

17.3 No Waiver. *

17.4 Notices. *

17.5 Entire Agreement. *

17.6 Severability and Construction. *

17.6.1 *

17.6.2 *

17.6.3 *

17.6.4 *

17.6.5 *

17.6.6 *

17.7 Remedies. *

17.8 Force Majeure. *

17.9 Applicable Law. *

17.10 Final and Binding Arbitration. *

17.11 Injunctive Relief; Venue. *

17.12 Legal Fees. *

17.13 Acknowledgments. *

17.13.1 *

17.13.2 *

17.13.3 *

17.13.4 *

SCHEDULE A

*

SCHEDULE 15.4

*

SCHEDULE 17.4

*

APPENDIX A

*

APPENDIX B AUTHORIZATION AGREEMENT FOR PRE-ARRANGED PAYMENTS

*

GARFIELD'S RESTAURANT & PUB
FRANCHISE AGREEMENT

THIS FRANCHISE AGREEMENT (this "Agreement") made and entered into as of this
____ day of ____________, ______ (the "Effective Date"), by and between
EATERIES, INC., an Oklahoma corporation ("Franchisor "); ____________________, a
___________________ corporation ("Franchisee"); and ________________________
(collectively the "Principal Shareholders" and individually, a "Principal
Shareholder" of Franchisee):

WHEREAS, Franchisor is the owner of certain service marks and trademarks
relating to "Garfield's Restaurant & Pub" restaurants, in particular the two
federally registered marks "Garfield's" (Registration No. 1,539,694) and "Casey
Garfield's" (Registration No. 1,543,014) (the "Proprietary Marks"); and

WHEREAS, Franchisor is engaged in the business of owning, operating and
licensing or franchising restaurant/bars utilizing the Proprietary Marks
(collectively, the "System"); and, in connection therewith, using and licensing
or franchising the use of the Proprietary Marks; and

WHEREAS, Franchisor owns valuable goodwill connected with the System and has
formulated and developed methods, trade secrets, designs, processes, technical
and operational information, know- how, and other intellectual property relating
to the operation and implementation of "Garfield's Restaurant & Pub" (the
"Concept"); and

WHEREAS, Franchisor, Franchisee and the Principal Shareholders have entered into
a Development Agreement dated ___________, ______ ("Development Agreement"),
relating to the development by Franchisee of additional franchises for
Garfield's Restaurant & Pub restaurants and/or other franchises offered by
Franchisor; within the "Territory" as defined therein; and

WHEREAS, Franchisee desires to be franchised to operate "Garfield's Restaurant &
Pub" pursuant to the provisions hereof and the Development Agreement, and at the
location of the Restaurant as specified on Schedule A hereof, and Franchisee
acknowledges that it has had a full and adequate opportunity to be thoroughly
advised of the terms and conditions of this Agreement, and to have its legal
counsel review this Agreement.

NOW, THEREFORE, in consideration of the undertakings, commitments and mutual
covenants contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, covenant and
agree as follows:

ARTICLE I
FRANCHISE GRANT; TERM AND RENEWAL

1.1 Franchise Grant.

Subject to the terms and conditions of this Agreement, Franchisor hereby grants
to Franchisee, and Franchisee accepts, the right and license to construct, open
and operate a "Garfield's Restaurant & Pub" (the "Restaurant") at the location
defined in Schedule A, in accordance with the Concept, as it may be changed,
improved and further developed from time to time, and the Proprietary Marks and
such other trade secrets, marks and know-how as may be designated from time to
time. Franchisee shall have no right under this Agreement to license or grant
franchises to others. During the term of this Agreement until its expiration or
earlier termination, Franchisor shall not establish a restaurant utilizing the
mark "Garfield's Restaurant & Pub" or the Proprietary Marks or license another
franchisee to establish such a restaurant, at any location, other than airports,
state and federally owned properties, and sports complexes, within the lesser of
(i) a three mile radius of the Restaurant or (ii) a radius from the Restaurant
which includes a daytime or residential population of 40,000 or more people.
Notwithstanding the foregoing, Franchisor may establish a restaurant or may
license a restaurant to a third party within the geographic area set forth in
the preceding sentence, provided that such restaurant does not utilize the
System or the service mark "Garfield's Restaurant & Pub" or the Proprietary
Marks. The area consisting of the lesser of (i) or (ii) above is hereinafter
referred to as the "Protected Territory").

1.2 Initial Term.

Except as otherwise provided in this Agreement, the initial term of this
Agreement shall be for a period of twenty years from the date of execution of
this Agreement.

1.3 Renewal

. Franchisee may, at its option, renew the right and license to operate its
Restaurant for four additional five-year periods; provided, however, that prior
to the end of the applicable term:

1.3.1

Franchisee has given Franchisor written notice of its election to renew not less
than twelve months nor more than eighteen months prior to the end of the initial
term and each five-year renewal term, as applicable; and Franchisee has made or
provided for renovation of the premises of the Restaurant (the "Premises"), as
Franchisor may reasonably require, including, without limitation, upgrading of
equipment, renovation and modernization of the restaurant building, the
premises, signs, fixtures and equipment so as to reflect the then-current
design, decor, specifications and standards of the System and the Concept;

1.3.2

Franchisee and the Principal Shareholders are not in default of any provision of
this Agreement, any amendment hereof or successor hereto, or any other agreement
between Franchisee, Franchisor and the Principal Shareholders, or their
subsidiaries and affiliates, and have substantially complied with all of the
terms and conditions of such agreements and have exercised all prior renewals
during the term and renewal term(s) hereof;

1.3.3

Franchisee and the Principal Shareholders have satisfied all monetary
obligations owed by Franchisee to Franchisor and its subsidiaries and affiliates
and have timely met these obligations throughout the term of this Agreement; and
Franchisee shall present satisfactory evidence that Franchisee has the right to
remain in possession of the Premises for the renewal term, or has obtained
Franchisor's approval of a new location for the Restaurant;

1.3.4

Franchisee and the Principal Shareholders have executed Franchisor's
then-current form of franchise agreement (with appropriate modifications to
reflect the granting of a renewal) for the renewal term described in this
Section 1. 3, which agreement shall supersede this Agreement in all respects,
and the terms of which may differ from the terms of this Agreement, including,
without limitation, a higher Continuing Royalty Fee as defined below in
subsection 2.1.2;

1.3.5

Franchisee and the Principal Shareholders have executed a general release, in a
form prescribed by Franchisor, of any and all claims against Franchisor and its
subsidiaries and affiliates, and their respective officers, directors, agents
and employees; and

1.3.6

Franchisee has complied with Franchisor's then-current qualification and
training requirements.

ARTICLE II
FRANCHISE AND ADVERTISING FEES

2.1 Franchise Fees.

Franchisee shall pay Franchisor the following franchise fees:

2.1.1 Initial Fee.

Upon execution of this Agreement or earlier if required by the Development
Agreement, Franchisee shall pay Franchisor a nonrefundable, initial fee of
Thirty Thousand Dollars ($30,000) for the Restaurant (the "Initial Fee").
Franchisee shall be given credit towards the Initial Fee for any amounts paid as
a Franchise Fee Deposit and/or application fee as allocable to the Restaurant
pursuant to the Development Agreement.

2.1.2 Continuing Royalty Fee.

Commencing with the opening of the Restaurant for business to the public,
Franchisee shall pay to Franchisor, without set-off, credit, or deduction of any
kind, a monthly "Continuing Royalty Fee" of the greater of $3,000.00 per month
or 4% of the monthly Gross Receipts (as defined herein) of the Restaurant
(prorated during any partial month), due and payable ten business days after
month end. The term "Gross Receipts" shall mean the total of all sales of food
products, beverages and other merchandise and products to customers of
Franchisee, sold at, from and by reason of the Restaurant, including without
limitation all vending machines, video game machines and juke box sales, less
sales, use or service taxes collected and paid to the appropriate taxing
authority and customer refunds made in the ordinary course of business.

2.2 Advertising Fees.

Franchisee shall pay Franchisor the monthly and/or quarterly advertising fees as
Franchisor may require pursuant to Article VIII hereof.

2.3 Form of Payment.

The Initial Fee shall be paid by Franchisee or the Principal Shareholders to
Franchisor by electronic or wire transfer in U.S. Dollars. All other payments
required by this Article II shall be paid by means of an Electronic Depository
Transfer Account ("Electronic Depository Transfer Account") pursuant to that
certain Authorization Agreement for Pre-Arranged Payments in the form attached
hereto as Appendix B, which shall be executed by Franchisee simultaneously with
the execution of this Agreement. Immediately following the execution of this
Agreement, Franchisee shall set up an Electronic Depository Transfer Account,
and Franchisor shall have access to such account for the purpose of receiving
payment for any payments required under this Agreement and any other amounts
which Franchisee owes to Franchisor (with the exception of the Initial Fee). At
least twenty-four hours prior to the date any applicable payment is owed to
Franchisor by Franchisee under this Agreement, Franchisee shall make deposits to
the Electronic Depository Transfer Account in an amount sufficient to cover the
applicable payments owed to Franchisor hereunder. Deposits for any other amounts
owned to Franchisor shall be in accordance with the procedures set forth in the
Manual.

Any payment not actually received by Franchisor on or before the date due shall
be deemed overdue. If any such payment is overdue, Franchisee shall pay
Franchisor, in addition to the overdue amount, interest on such amount from the
due date until paid at the rate of 18% per annum, provided that the rate shall
not in any event exceed the maximum rate permitted by law. Entitlement to such
interest shall be in addition to any other remedies Franchisor may have or
possess.

ARTICLE III
DUTIES OF FRANCHISOR

3.1 Assist Franchisee.

Franchisor shall assist Franchisee in establishing and maintaining the
Restaurant and in familiarizing Franchisee with the proper operation of the
Restaurant.

3.2 Training.

3.2.1

Franchisor shall provide, at a location designated by Franchisor, training for
Franchisee and/or Franchisee's general manager and all other managers for the
Restaurant. The training program will commence at least ten weeks prior to
opening of the Restaurant, and will last for eight weeks. The training program
syllabus shall be as described in the Garfield's Operations Manual (the
"Manual"). Transportation, room and board, compensation and any other expense
incurred by Franchisee and its managers in connection with attending the
training school will be borne solely by Franchisee. Franchisor will bear the
costs relating to its instructors, the training materials and administrative
overhead.

3.2.2

Franchisor shall provide to Franchisee during the opening of the Restaurant a
kitchen trainer, floor trainer, manager and supervisor. The kitchen trainer will
be available for up to four weeks, and all others will be available for up to
two weeks. Longer periods are negotiable. Franchisee will bear the expense of
transportation, room and board, visas, work permits and local fees and income
taxes of such persons. Franchisor will bear the expense of their compensation.

3.3 Informational Material.

Franchisor shall provide Franchisee with such periodic newsletters, bulletins
and additional informational material as Franchisor deems advisable. Such
additional information will include new recipes and menu items to be added to,
or substituted for, recipes and menu items previously furnished to Franchisee.

3.4 Plans and Specifications.

Franchisor shall make available at no charge to Franchisee a preliminary floor
plan and design elements for the construction of a typical franchised restaurant
and for the exterior and interior design and layout, fixtures, furnishings, and
signs. Franchisee will obtain architectural and engineering services
independently and at its own expense. Franchisee shall advise Franchisor of, and
be responsible for, architectural plans and specifications for the Restaurant,
as well as any alterations to the preliminary floor plan and design elements and
specifications that may be required to comply with local laws. Franchisor shall
have the right to review all such architectural and/or engineering plans which
Franchisee obtains and to prohibit the implementation of a plan, or part
thereof, which Franchisor, in its sole and absolute discretion, believes is not
consistent with the best interests of the System. In the event that Franchisor
desires to prohibit the implementation of such plan, or part thereof, Franchisor
shall so notify Franchisee within thirty business days of receiving such
architectural and/or engineering plans for review. Failure of Franchisor to so
notify Franchisee within such thirty business day period shall be deemed to be
an approval of such plans. In the event Franchisor does object to any such plan,
Franchisor shall provide Franchisee with a reasonable detailed list of changes
necessary to make such plans acceptable to Franchisor. Franchisor shall, upon
Franchisee's resubmission of such plans with such changes as Franchisee has
prepared, notify Franchisee within fifteen business days of receiving such plans
whether they are acceptable. Failure to so notify Franchisee within such fifteen
business day period shall be deemed to be an approval of such amended plans.

3.5 Promotional Material.

Franchisor shall make available from time to time promotional materials for in
store marketing by Franchisee for which Franchisee shall pay the reasonable
value thereof, if used. Franchisor must review and approve all advertising and
promotional material which Franchisee proposes to use.

3.6 Garfield's Operations Manual.

Franchisor shall loan Franchisee one copy of Franchisor's Manual for use at the
Restaurant, subject to the conditions set forth in Article VI hereof. The use of
additional copies shall be controlled by Franchisor at fees set by it.

3.7 Quarterly Inspections.

Franchisor seeks to maintain the standards of quality, professionalism,
appearance and service of the System and the Concept, and to that end may
conduct each calendar quarter an inspection of the Premises and such other
periodic inspections as may be desirable, subject to two days prior notice to
Franchisee. The cost of such quarterly inspections will be borne by Franchisor;
provided, to the extent that Franchisee requests the assistance of Franchisor
personnel at times other than the regular quarterly inspections, costs incurred
by Franchisor in furnishing such personnel and assistance will be borne by
Franchisee.

3.8 No Third Party Reliance.

All of the obligations of Franchisor arising under this Agreement are to
Franchisee, and no other party is entitled to rely upon, enforce, or obtain
relief for any breach thereof, either directly or by subrogation.

ARTICLE IV
DUTIES OF FRANCHISEE

4.1 Attendance at Training Programs.

Franchisee, the Principal Shareholders and Franchisee's general manager and all
other managers must attend training sessions conducted by Franchisor, until, in
the judgment of Franchisor, they are sufficiently trained in Franchisor's
operating requirements and procedures, including the Concept. The operation and
manner of conducting such training school shall be in the manner determined by
Franchisor. Transportation, room and board, compensation and any other expense
incurred by Franchisee and its managers in connection with attending the
training school will be borne solely by Franchisee. Franchisor will bear the
costs relating to its instructors, the training materials and administrative
overhead.

4.2 Lease of Premises.

In the event Franchisee will occupy the Premises under a lease, sublease, or
other contract of tenancy with a third party (the "Lease"), Franchisee shall, at
least thirty days prior to the execution of the Lease, submit the Lease in the
English language to Franchisor for its written approval, which Lease shall be
for a term at least as long as the initial term of this Agreement and shall
include such terms and conditions as Franchisor may reasonably request to
protect its interest in the Restaurant, the System and the Concept including,
without limitation, the following provisos:

4.2.1

A provision reserving to Franchisor the right, at Franchisor's election, to
receive an assignment of the leasehold interest upon termination or expiration
of the franchise grant;

4.2.2

A provision that expressly permits the lessor of the Premises to provide
Franchisor all sales and other information it may have related to the operation
of the Restaurant, as Franchisor may request;

4.2.3

A provision that requires the lessor of the Premises concurrently to provide
Franchisor with a copy of any written notice of deficiency under the Lease sent
to Franchisee and that grants to Franchisor, in its sole discretion and sole
option, the right (but not the duty) to cure any deficiency under the Lease,
should Franchisee fail to do so within fifteen days after the expiration of the
period in which Franchisee may cure the default;

4.2.4

A provision that evidences the right of Franchisee to display the Proprietary
Marks in accordance with the specifications required by the Manual, subject only
to the provisions of applicable law;

4.2.5

A provision that the Premises shall be used only for the operation of the
Restaurant; and

4.2.6

A provision that expressly states that any default under the Lease shall
constitute a default under the Franchise Agreement, and a provision that
Franchisor shall have the option to require an assignment of the Lease of the
Premises from Franchisee to Franchisor, without the lessor of the Lease having
any right to impose conditions on such an assignment or to obtain any payment in
connection therewith in the event of any default or termination of Franchisee
under the Franchise Agreement or Development Agreement or the termination of any
such agreement.

Franchisee shall furnish Franchisor with a fully executed copy of the Lease
within ten days after execution of the Lease.

4.3 Construction of Restaurant.

Prior to the commencement of any construction (including leasehold improvements)
on the Premises, Franchisee, at its expense, shall comply, to Franchisor's
satisfaction, with all of the following requirements:

4.3.1

Franchisee shall employ a qualified architect, or construction consultant,
approved in advance by Franchisor, to review and adapt plans and specifications
provided by Franchisor for construction of the Restaurant on the Premises;

4.3.2

Franchisee shall submit to Franchisor, for Franchisor's approval, detailed plans
and specifications adapting Franchisor's then-current standard floor plans and
design elements and specifications to Franchisee's location and to local and
state laws, regulations and ordinances. When approved by Franchisor, such plans
and specifications shall not thereafter be materially changed or modified
without the prior written consent of Franchisor;

4.3.3

Franchisee shall employ a qualified general contractor, approved in advance by
Franchisor, to supervise construction of the building on the Premises, including
completion of all improvements; and

4.3.4

Franchisee shall obtain all permits and certifications required for lawful
construction and operation of the Restaurant, including, without limitation,
zoning, access, sign and fire requirements, and provide to Franchisor such
evidence as Franchisor may reasonably request that all such permits and
certifications have been obtained.

4.4 Use of Premises.

Franchisee shall use the Premises solely for the operation of the Restaurant;
shall keep the Restaurant open and in normal operation for such minimum hours
and days as Franchisor may from time to time specify in the Manual or as
Franchisor may otherwise approve in writing; and shall refrain from using or
permitting the use of the Premises for any other purpose or activity at any time
without first obtaining the written consent of Franchisor.

4.5 Maintenance of Restaurant.

Franchisee shall maintain the Restaurant in a high degree of sanitation, repair
and condition, and in connection therewith shall make such additions,
alterations, repairs and replacements thereto (but no others without
Franchisor's prior written consent) as may be required for that purpose.

4.6 Improvements and Modifications

. Franchisee agrees that from time to time Franchisor may change or modify the
System and/or the Concept, including without limitation changes in the kinds or
preparations of foods or beverages offered for sale, improvements or alterations
in the decor of the Restaurant, or modifications in the operating procedures or
requirements of the Restaurant. Franchisee shall accept such changes and
modifications, as if they were part of this Agreement at the time of its
execution, and shall promptly undertake and complete the changes and
modifications; provided that Franchisee need not accept a Material Change as
defined herein unless such change is or will be made throughout the System. A
"Material Change" as defined herein is an improvement or modification that
requires out-of-pocket expenditures by Franchisee in excess of $5,000.
Franchisee shall not change, modify or alter in any way the System or the
Concept.

4.7 Remodeling of Restaurant.

In order to assure the continued success of the Restaurant, Franchisee shall,
any time from time to time after five years from the date of this Agreement as
reasonably required by Franchisor (taking into consideration the cost and
then-remaining term of this Agreement), modernize the Premises, equipment,
signs, interior and exterior decor items, fixtures, furnishings, supplies and
other products and materials required for the operation of the Restaurant to
Franchisor's then-current design, decor, specifications and standards of the
Concept; provided that, at the time Franchisor requires Franchisee to so
modernize the Premise at least 25% of Franchisor-owned and operated restaurants
meet such standards and specifications. Franchisee's obligations under this
section are in addition to, and shall not relieve Franchisee from, any of its
other obligations under this Agreement, including those contained in the Manual.

4.8 Operation of Restaurant.

Franchisee shall operate the Restaurant in strict conformity with such uniform
methods, standards and specifications as Franchisor may from time to time
prescribe in the Manual to insure that the highest degree of quality, timeliness
and service is uniformly maintained. Franchisee agrees:

4.8.1

To maintain in sufficient supply and use at all times, only such food,
beverages, furnishings, supplies, menus, fixtures and equipment as conform with
Franchisor's standards and specifications, and to refrain from deviating
therefrom by using nonconforming items without Franchisor's prior written
consent;

4.8.2

To sell or offer for sale only such food, beverages and other products as have
been expressly approved for sale in writing by Franchisor; to sell or offer for
sale all approved food, beverages and other products; and to discontinue selling
and offering for sale any food, beverages and other products as Franchisor may,
in its discretion, disapprove in writing at any time. With respect to the offer
and sale by Franchisee of all food, beverages and other products, Franchisee
shall have sole discretion as to the prices to be charged to its customers and
as to product brands conforming to Franchisor's standards and specifications.
Franchisee shall honor any gift certificates issued pursuant to a System-wide
gift certificate program;

4.8.3

To insure that the approved food products sold by Franchisee hereunder shall be
of the highest quality, and the method of preparing and serving and the nature,
quality, ingredients and composition of the food products sold hereunder shall
comply with the instructions and recipes provided by Franchisor or contained in
the Manual, and with the further written requirements of Franchisor as
Franchisee may be advised from time to time. All recipes and requirements shall
remain the property of Franchisor and shall be returned to it by Franchisee upon
the expiration, termination or assignment by Franchisee of this Agreement;
provided, Franchisee may, from time to time, request Franchisor to amend its
instructions, recipes and requirements, which requests, upon a demonstration of
good cause and a determination that such amendment would not conflict with, or
cause damage or injury to, the Concept or the System, shall be approved by
Franchisor;

4.8.4

To permit Franchisor or its agents, at any reasonable time, to remove from
Franchisee's inventory, or from the Restaurant, at Franchisor's option, samples
of items without payment therefor, in amounts reasonably necessary for testing
by Franchisor or an independent laboratory to determine whether said samples
meet Franchisor's then current standards and specifications. In addition to any
other remedies it may have under this Agreement, Franchisor may require
Franchisee to bear the cost of such testing if the supplier of the items has not
previously been approved by Franchisor or if the sample fails to conform to
Franchisor's specifications;

4.8.5

To purchase and install, at Franchisee's expense, all fixtures, furnishings,
signs and equipment as Franchisor may reasonably direct from time to time in the
Manual or otherwise in writing; and to refrain from installing or permitting to
be installed on or about the Premises, without Franchisor's prior written
consent, any equipment or other improvements not previously approved as meeting
Franchisor's standards and specifications; provided, the purchase and
installation of any such fixtures, furnishings, signs and equipment shall be
subject to, and in compliance with, the terms of all local laws and the Lease,
if any, for the Premises;

4.8.6

To maintain all equipment in a condition that meets operational standards
specified in the Manual and, as equipment becomes obsolete or inoperable, to
replace such equipment with the types and kinds of equipment as are then
approved for use in the System. Franchisee shall also purchase and install new
equipment within such reasonable times as are specified by Franchisor in the
event Franchisor determines that Franchisee needs additional or substitute
equipment to operate under the Concept;

4.8.7

To establish and utilize a point-of-sale system, including without limitation
the acceptance of credit cards, that is compatible with a system specified by
Eateries, as may change from time to time, and in accordance with the procedures
of Franchisor and as contained in the Manual, as amended from time to time;

4.8.8

The Restaurant shall at all times be under the direct, on-premises supervision
of Franchisee, a Principal Shareholder or a trained and competent employee
acting as full-time manager. Within six months from the Effective Date,
Franchisee shall notify Franchisor in writing of the person(s) selected to be
manager(s) of the Restaurant. Thereafter, Franchisee shall keep Franchisor
informed at all times of the identity of any employee(s) acting as manager(s) of
the Restaurant. Franchisee and the Principal Shareholders agree that they will
at all times faithfully, honestly and diligently perform their obligations
hereunder and that they will not engage in any business or other activities that
will conflict with their obligations hereunder; and

4.8.9

To employ the minimum number of employees, and to implement a training program
for such employees, as may be prescribed by Franchisor, and to comply with all
applicable federal, state and local laws, rules and regulations with respect to
such employees.

4.9 Purchase of Ingredients, Supplies, and Materials.

Franchisee agrees that:

4.9.1

Franchisee shall purchase all food supplies and ingredients used in the
composition of all menu items and other approved auxiliary products from
approved suppliers which are in conformity with Franchisor's standards, as the
same may be modified from time to time. Franchisor shall notify Franchisee of
approved suppliers in its market area. If Franchisee desires to purchase food
supplies, ingredients or auxiliary products from other than approved suppliers,
Franchisee shall submit a written request for the same to Franchisor. If
Franchisor determines that such proposed supplier or auxiliary products meet the
quality standards of Franchisor, then Franchisor shall so notify Franchisee, and
in such event Franchisee may then purchase food supplies and ingredients from
such approved supplier, or purchase such auxiliary products. In the event
Franchisor does not disapprove such request within forty-five days after
receipt, such request shall be deemed to have been approved. Upon request,
Franchisor shall furnish Franchisee with a list of any contracts entered into by
Franchisor with national or regional suppliers used in the restaurant
operations;

4.9.2

Franchisee agrees to comply with and honor any and all rebate and/or purchasing
programs that Franchisor establishes for the System. Franchisor shall use
commercially reasonable efforts to negotiate with suppliers for the lowest
possible price for food and beverages for all franchisees in the System. In
conjunction with such efforts, if Franchisor agrees to a rebate program with a
supplier, all such rebates will be payable to Franchisor who shall distribute to
Franchisee its pro-rata share of its rebates, less a 15% handling charge.

4.9.3

The parties hereto agree that Franchisor's method of cooking and preparing its
food is a highly confidential trade secret and that because of the importance of
quality and uniformity of product, it is to the mutual benefit of both parties
hereto that Franchisor closely control the method of cooking and preparing such
food;

4.9.4

Franchisee may purchase from Franchisor or its subsidiaries, upon such terms as
Franchisor shall determine, such items and supplies as Franchisor offers for
sale to its Franchisees;

4.9.5

Franchisee shall require all of its employees to dress in conformity with the
styles that have been approved by Franchisor;

4.9.6

Franchisee shall make all payments to third parties, when due for obligations
resulting from or incurred in the operation, or by virtue of the existence of
the Restaurant, whether for services, goods, supplies, rent or otherwise; and

4.9.7

Franchisor, in its sole discretion, shall have the right to make, on behalf of
Franchisee, any payment specified in this Agreement or the Lease of the
Premises, or due and owed by Franchisee to any third party and which Franchisee
shall have failed to pay when due, whether directly or through Franchisee.
Franchisor shall bill Franchisee for any amount so paid by Franchisor, together
with a delinquency charge of 18% per annum, provided that the rate of interest
shall not in any event exceed the maximum rate permitted by law. Imposition of
any such delinquency charge shall not constitute a waiver of the right of
Franchisor to treat said failure of payment by Franchisee as a default under
this Agreement or any other agreement, or to seek other available legal
remedies.

4.10 Right to Set-Off.

In the event that any of the obligations owing under this Agreement shall be due
and payable, yet remain unpaid for thirty days or more, Franchisor is hereby
authorized by Franchisee at any time and from time to time, without prior
notice, any such notice being expressly waived, to set off and appropriate and
apply any funds held or owing by Franchisor (in any capacity) to or for the
credit or the account of Franchisee against and on account of obligations and
liabilities of Franchisee under this Agreement and claims of every nature and
description of Franchisor against Franchisee, whether arising under this
Agreement or otherwise, regardless of whether Franchisor has made demand for
payment, and although such obligations, liabilities or claims are contingent or
unmatured. Franchisor agrees to notify Franchisee of any such set-off and the
application made by Franchisor, provided that the failure to give notice shall
not affect the validity of the set-off and application. The right of set-off
provided by this section is in addition to other rights and remedies that
Franchisor may have.

4.11 Right to Enter.

Franchisee shall grant Franchisor and its agents the right to enter upon the
Premises at any reasonable time for the purpose of conducting inspections;
cooperate with Franchisor's representatives in such inspections by rendering
such assistance as they may reasonably request; and, upon notice from Franchisor
or its agents, and without limiting Franchisor's other rights under this
Agreement, take such steps as may be necessary immediately to correct the
deficiencies detected during any such inspection, including, without limitation,
immediately desisting from the further use of any food, beverages, equipment,
advertising materials, products or supplies that do not conform with
Franchisor's then-current specifications, standards or requirements.

4.12 Accounting and Records.

4.12.1 Maintenance of Records.

Franchisee shall maintain and preserve, during the term of this Agreement, full,
complete, and accurate books, records and accounts in accordance with the
standard accounting system prescribed by Franchisor in the Manual or otherwise
in writing. Franchisee shall retain during the term of this Agreement and for
three years thereafter all books and records related to the Restaurant,
including without limitation, sales checks, purchase orders, invoices, payroll
records, customer lists, check stubs, sales and all other tax records and
returns, cash receipts and disbursement journals, and general ledgers. [CHECKING
WITH TAX ATTORNEY ON THIS ONE.]

4.12.2 Financial Reports.

In the form and manner as may be required by the Manual, Franchisee shall submit
financial reports to Franchisor as required by this Section 4.12. Franchisee
shall complete and submit to Franchisor weekly reports of the Gross Receipts for
the Restaurant on or before 11:00 a.m. central time on the Monday following the
calendar week to which the report relates. Franchisee shall also supply to
Franchisor on or before the tenth day of each month an activity report for the
last preceding month for the Restaurant, including without limitation, a report
of the Restaurant's Gross Receipts for such month. Additionally, Franchisee
shall, at its expense, submit to Franchisor the following financial statements
for the Restaurant: (i) within thirty days of the end of each calendar quarter
during the term of this Agreement, a profit and loss statement for the preceding
quarter and a balance sheet as of the last day of the preceding quarter and (ii)
no later than seventy-five days after the Franchisee's fiscal period during the
term of this Agreement, a profit and loss statement for the prior fiscal period
and a balance sheet as of the last day of such fiscal period, prepared on an
accrual basis including all adjustments necessary for fair presentation of the
financial statements. All such financial statements shall be prepared in
accordance with generally accepted accounting principles and shall be certified
to be true and correct by Franchisee. Franchisor reserves the right to require
annual financial statements reviewed or audited by an independent certified
public accountant chosen by Franchisee and acceptable to Franchisor; such review
or audit shall be at the expense of Franchisee. Franchisor also reserves the
right to require that all financial statements be prepared in accordance with
specimen forms provided to Franchisee by Franchisor.

4.12.3 Other Reports.

Franchisee shall submit to Franchisor such other periodic reports, forms and
records as specified, and in the manner and at the time as specified in the
Manual or otherwise in writing.

4.12.4 Recordation.

Franchisee shall record all sales on point of sale systems approved by
Franchisor or on such other types of point of sale systems as may be designated
by Franchisor in the Manual or otherwise in writing. Franchisee agrees that
Franchisor shall have the right to require Franchisee to utilize point-of-sale
systems that are fully compatible with any program or system which Franchisor,
in its discretion, may employ. Franchisor shall have full access to all of
Franchisee's data, system and related information by means of direct access,
whether in person or by telephone/modem.

4.12.5 Examinations.

Franchisor or its designated agents shall have the right at all reasonable times
to examine and copy, at its expense, the books, records and tax returns of
Franchisee. Franchisor shall also have the right, at any time, to have an
independent audit made of the books of Franchisee at Franchisor's expense. If an
inspection should reveal that any payments to Franchisor have been understated
in any report to Franchisor, then Franchisee shall immediately pay to Franchisor
the amount understated upon demand, in addition to interest from the date such
amount was due until paid, at 18% per annum, provided that the rate of interest
shall not exceed the maximum rate permitted by law. If an inspection discloses
an understatement in any report of 2% or more, Franchisee shall, in addition,
reimburse Franchisor for any and all costs and expenses connected with the
inspection (including, without limitation, reasonable accounting and attorneys'
fees). The foregoing remedies shall be in addition to any other remedies
Franchisor may have.

4.13 Liquor License.

The grant of the rights which are the subject of this Agreement is expressly
conditioned upon the ability of Franchisee to obtain and maintain any and all
required state and/or local licenses permitting the sale of liquor by the drink
on the Premises, and Franchisee agrees to use its best efforts to obtain such
licenses. In the event Franchisee fails, after a good faith effort, to obtain
any and all such required liquor licenses prior to or simultaneous with the
opening of the Restaurant, then, at the option of Franchisor, this Agreement may
be terminated immediately by Franchisor upon written notice to Franchisee, in
which event, Franchisor shall refund to Franchisee, without interest, the
Initial Fee, less (i) any application fees and/or franchise fee deposit
allocated to the Initial Fee and (ii) any expenses incurred and damages
sustained by Franchisor in connection with its performance hereunder prior to
the date of such termination. After obtaining the necessary state and/or local
liquor licenses, Franchisee shall thereafter comply with all applicable laws and
regulations relating to the sale of liquor on the Premises. If, during any
twelve-month period during the term of this Agreement, Franchisee is prohibited
for any reason from selling liquor on the Premises for more than thirty days
because of a violation or violations of state or local liquor laws, then, at the
option of Franchisor, this Agreement may be terminated immediately by Franchisor
upon written notice to Franchisee.

4.14 No Waiver.

Franchisee and the Principal Shareholders acknowledge that nothing contained
herein constitutes Franchisor's agreement to accept any payments after same are
due or a commitment by Franchisor to extend credit to or otherwise finance
Franchisee's operation of the Restaurant. Further, Franchisee and the Principal
Shareholders acknowledge that Franchisee's or the Principal Shareholders'
failure to pay all amounts when due shall constitute grounds for termination of
this Agreement, as herein provided.

ARTICLE V
PROPRIETARY MARKS

5.1 Representations of Franchisor.

Franchisor represents with respect to the Proprietary Marks that:

5.1.1

Franchisor has the full and exclusive right to the use of the Proprietary Marks,
within the Protected Territory for restaurant and bar services and will take all
reasonable steps to preserve and protect its ownership and validity in and to
the Proprietary Marks in the Protected Territory;

5.1.2

Franchisor will use and permit Franchisee and other franchisees of Franchisor to
use the Proprietary Marks only in accordance with the Concept in order to
protect the goodwill associated with and symbolized by the Proprietary Marks;
and

5.1.3

In the event that Franchisee is precluded from operating the Restaurant within
the Protected Territory because Franchisor determines that a third person has
acquired rights under the law of any state in such mark, which so precludes
Franchisee, Franchisor agrees to assist Franchisee, at Franchisee's request, in
locating an alternative site for the Restaurant. In the event that an
alternative site cannot be located within ninety days of Franchisee's request,
Franchisor shall repay the Initial Fee to Franchisee. Franchisee and the
Principal Shareholders agree that the remedies set forth in this subsection and
in Subsection 5.2.5 below, shall constitute their sole remedies against
Franchisor in such event.

5.2 Agreement of Franchisee.

With respect to Franchisee's use of the Proprietary Marks pursuant to this
Agreement, Franchisee agrees that:

5.2.1

Franchisee shall use only the Proprietary Marks designated by Franchisor and
only in the manner authorized and permitted by Franchisor. Franchisee shall use
the Proprietary Marks only in connection with the operation of the Restaurant;

5.2.2

During the term of this Agreement, Franchisee shall identify itself as the owner
of the Restaurant in conjunction with any use of the Proprietary Marks,
including, but not limited to, on invoices, order forms, receipts and contracts,
as well as at such conspicuous locations on the Premises as Franchisor shall
designate in writing. Any identification which specifies Franchisee's name shall
be followed by the term "A Franchisee of Garfield's Restaurant & Pub" or such
other identification as shall be approved by Franchisor, if used in connection
with the Restaurant;

5.2.3

Franchisee's right to use the Proprietary Marks is limited to such uses as are
authorized under this Agreement, and any unauthorized use thereof shall
constitute an infringement of Franchisor's rights in the Proprietary Marks or
otherwise;

5.2.4

Franchisee shall not use the Proprietary Marks to incur any obligation or
indebtedness on behalf of Franchisor;

5.2.5

In the event that litigation involving the Proprietary Marks is instituted or
threatened against Franchisee, Franchisee shall promptly notify Franchisor and
shall cooperate fully in defending or settling such litigation. Franchisee
agrees that Franchisor, upon notification to Franchisee, may elect to assume
control over, and responsibility for, any litigation instituted against
Franchisee involving the Proprietary Marks. In the event of any such litigation,
Franchisor shall bear all costs of such litigation and should Franchisee be
found liable for damages or penalties in connection with any such litigation,
Franchisor shall indemnify and hold Franchisee harmless from such damages or
penalties to the extent such actions or omissions for which Franchisee was held
liable were conducted or performed in good faith and not in a manner negligently
or recklessly giving rise to such liability. Furthermore, Franchisee shall
execute any documents deemed necessary by Franchisor or its counsel to obtain
protection for the Proprietary Marks or to maintain their continued validity and
enforceability. Should Franchisee be forced to remove, replace or alter any
signs, menus, advertising, paper goods or other items by reason of litigation in
connection with the Proprietary Marks, Franchisor agrees to reimburse Franchisee
for the reasonable costs of such removal, replacement or alteration;

5.2.6

Franchisee shall require all advertising and promotional materials, signs,
decorations, paper goods (including forms, business cards, labels, boxes,
envelopes and stationery), and other items designated by Franchisor to bear the
Proprietary Marks in the form, color, location and manner required by
Franchisor;

5.2.7

No item of merchandise, equipment, supplies, furnishings or utensils bearing the
Proprietary Marks shall be used or sold in, upon, or on behalf of the Restaurant
unless the same shall have been first submitted to and approved in writing by
Franchisor as meeting Franchisor's existing standards of quality and utility;

5.2.8

Any Proprietary Marks subsequently provided to Franchisee for use within the
Concept or the System shall enjoy the same protection as the Proprietary Marks
herein used;

5.2.9

Franchisor is party to an agreement with United Feature Syndicate, Inc. ("UFS"),
the trademark owner of the GARFIELD THE CAT cartoon strip characters. This
agreement delineates the respective rights of Franchisor and UFS in the name
GARFIELD. Under such agreement, Franchisor has agreed that neither Franchisor
nor its franchisees will make any use of the GARFIELD THE CAT character or other
characters from that comic strip in connection with the restaurant and/or bar
services rendered by Franchisor and its franchisees. Franchisee and the
Principal Shareholders acknowledge their understanding that such prior agreement
between Franchisor and UFS is binding upon Franchisee and the Principal
Shareholders, and Franchisee and the Principal Shareholders agree to comply with
the restrictions contained in such agreement; particularly the restriction
prohibiting usage by franchisees of Franchisor of the GARFIELD THE CAT character
or any other characters from that comic strip in connection with any franchised
restaurant of Franchisor; and

5.2.10

Franchisee shall not use any of the Proprietary Marks as part of an electronic
mail address, or on any sites on the Internet or World Wide Web and shall not
use or register any of the Proprietary Marks as a domain name on the Internet.

5.3 Acknowledgments of Franchisee.

Franchisee expressly understands and acknowledges that:

5.3.1

Franchisor has the exclusive right and interest in and to the Proprietary Marks
and the goodwill associated with and symbolized by the Proprietary Marks, and
the Proprietary Marks will serve to identify the Concept and those restaurants
within the System;

5.3.2

Franchisee shall not directly or indirectly contest or conflict with the
validity of Franchisor's ownership of the Proprietary Marks. Franchisee's use of
the Proprietary Marks pursuant to this Agreement does not give Franchisee any
ownership interest or other interest in or to the Proprietary Marks, except the
franchise granted herein;

5.3.3

Any and all goodwill arising from Franchisee's use of the Proprietary Marks in
the Restaurant under the Concept shall inure solely and exclusively to
Franchisor's benefit, and upon expiration or termination of this Agreement and
the franchise herein granted, no monetary amount shall be assigned as
attributable to any goodwill associated with Franchisee's use of the Concept or
the Proprietary Marks;

5.3.4

The right and license of the Proprietary Marks granted hereunder to Franchisee
is nonexclusive (with the exception of Franchisee's rights in the Protected
Territory), and Franchisor thus has and retains the rights among others:

(i) To grant additional franchises for Proprietary Marks, and to use the
Proprietary Marks in connection with selling food and other products;

(ii) To develop and establish other systems for the same Proprietary Marks or
similar proprietary marks, and grant licenses or franchises thereto without
providing any rights therein to Franchisee; and

5.3.5

Franchisor reserves the right to substitute different Proprietary Marks for use
in identifying the Concept, the System and the business operating thereunder, if
Franchisor can no longer use, license or franchise the use of the Proprietary
Marks.

ARTICLE VI
CONFIDENTIAL OPERATIONS

6.1 Compliance with Manual Standards.

In order to protect the reputation and goodwill of Franchisor and to maintain
uniform standards of operation, Franchisee shall conduct its business in
accordance with the Manual. Franchisee will receive on loan from Franchisor one
copy of the Manual for the Restaurant. Franchisee shall return to Franchisor the
Manual and any other manuals created or approved for use in the operation of the
Restaurant, as well as any unauthorized copies of the foregoing materials, upon
termination of this Agreement.

6.2 Confidentiality of Manual.

Franchisee shall at all times treat the Manual, any other manuals created or
approved for use in the operation of the Restaurant, and the information
contained therein, as confidential, and shall use all reasonable efforts to
maintain such information as secret and confidential. Franchisee shall not at
any time copy, duplicate, record, or otherwise reproduce the foregoing
materials, in whole or in part, nor otherwise make the same available to any
unauthorized person.

6.3 Property of Franchisor.

The Manual shall at all times remain the sole property of Franchisor. Franchisor
may from time to time revise the contents of the Manual, and Franchisee and the
Principal Shareholders expressly agree to comply with each new or changed
standard.

6.4 Maintenance of Manual at Restaurants.

Franchisee shall, at all times, maintain the copy of the Manual at the
Restaurant and insure that the Manual is kept current and up-to-date, and in the
event of any dispute as to the contents of the Manual, the terms of the master
copy of the Manual maintained by Franchisor at Franchisor's home office shall be
controlling.

ARTICLE VII
CONFIDENTIAL INFORMATION

7.1 Proprietary Information.

Franchisee and the Principal Shareholders acknowledge that, over the term of
this Agreement, they are to receive proprietary information which Franchisor has
developed over time at great expense, including, but not limited to, information
regarding the System, the Concept, methods of site selection, marketing and
public relations methods, product analysis and selection, recipes for preparing,
cooking and serving food and beverages, and service methods and skills relating
to the development and operation of Restaurants. They further acknowledge that
this information, which includes, but is not necessarily limited to, that
contained in the Manual, is not generally known in the industry and is beyond
their own present skills and experience, and that to develop it themselves would
be expensive, time consuming and difficult. Franchisee and the Principal
Shareholders further acknowledge that Franchisor's information provides a
competitive advantage and will be valuable to them in the development of their
business, and that gaining access to it is therefore a primary reason why they
are entering into this Agreement. Accordingly, Franchisee and the Principal
Shareholders agree that Franchisor's information, as described above, which may
or may not be "trade secrets" under prevailing judicial interpretations or
statutes, is private and valuable, and constitutes trade secrets belonging to
Franchisor; and in consideration of Franchisor's confidential disclosure to them
of these trade secrets, Franchisee and the Principal Shareholders agree as
follows (subject to the provisions of the Development Agreement and any other
franchise agreement between Franchisor, Franchisee, and the Principal
Shareholders):

7.1.1

During the term of this Agreement, neither Franchisee nor any Principal
Shareholder, for so long as such Principal Shareholder owns an interest in
Franchisee, may, without the prior written consent of Franchisor, directly or
indirectly engage in, or acquire any financial or beneficial interest (including
any interest in corporations, partnerships, limited liability companies, trusts,
unincorporated associations or joint ventures) in, advise, help, guarantee loans
or make loans to, any restaurant business whose menu or method of operation is
similar, in the reasonable opinion of Franchisor, to that employed by restaurant
units within the System which is either (i) located in the "Territory" as
defined in the Development Agreement, (ii) located in the Designated Market Area
(as defined and established by Nielsen Media Research Company in its 1998-1999
map, a copy of which will be maintained by the Franchisor at the address set
forth in Section 17.4) of any restaurant developed pursuant to the Development
Agreement, (iii) located within a five-mile radius of any restaurant unit
(whether owned by Franchisor or operated by a franchisee of Franchisor) within
the System, or (iv) determined by Franchisor, exercising reasonable good faith
judgment, to be a direct competitor of the System;

7.1.2

Neither Franchisee, for two years following the termination of this Agreement,
nor any Principal Shareholder, for two years following the termination of all of
his interest in Franchisee or the termination of this Agreement, whichever
occurs first, may directly or indirectly engage in, or acquire any financial or
beneficial interest (including any interest in corporations, partnerships,
limited liability companies, trusts, unincorporated associations or joint
ventures) in, advise, help, guarantee loans or make loans to, any restaurant
business whose menu or method of operation is similar, in the reasonable opinion
of Franchisor, to that employed by restaurant units within the System which is
located either (i) in the "Territory" as defined in the Development Agreement,
or if there is no Development Agreement, then in the Protected Territory (ii) in
the Designated Market Area (as defined and established by Nielsen Media Research
Company in its 1998-1999 map, a copy of which will be maintained by the
Franchisor at the address set forth in Section 17.4) of any restaurant developed
pursuant to the Development Agreement, (iii) within a five-mile radius of any
restaurant unit (whether owned by Franchisor or operated by a franchisee of
Franchisor) within the System, or (iv) within any area for which an active,
currently binding development agreement has been granted by Franchisor to
another franchisee as of the date of the termination; and

7.1.3

Neither Franchisee nor any Principal Shareholder shall at any time (i)
appropriate or use the Concept, or any portion thereof, in any restaurant
business which is not within the System, (ii) disclose or reveal any portion of
the Concept or the System to any person, other than to Franchisee's employees at
the Restaurant as an incident of their training, (iii) acquire any right to use
the Proprietary Marks, except in connection with the operation of the
Restaurant, or (iv) communicate, divulge or use for the benefit of any other
person or entity any confidential information, knowledge or know-how concerning
the methods of development or operation of a restaurant utilizing the Concept
and the System, which may be communicated by Franchisor in connection with the
Restaurant.

7.2 Injunctive Relief.

Franchisee and Principal Shareholders agree that the provisions of this Article
VII are and have been a primary inducement to Franchisor to enter into this
Agreement, and that, in the event of breach thereof, Franchisor would be
irreparably injured and would be without adequate remedy at law. Therefore, in
the event of a breach, or a threatened or attempted breach, of any of such
provisions, Franchisor shall be entitled, in addition to any other remedies
which it may have hereunder or in law or in equity (including without limitation
the right to terminate this Agreement), to a preliminary and/or permanent
injunction and a decree for specific performance of the terms hereof without the
necessity of showing actual or threatened damage, and without being required to
furnish a bond or other security.

7.3 Investments in Publicly Traded Companies.

The restrictions contained in Subsections 7.1.1 and 7.1.2 above shall not apply
to ownership of less than 2% of the shares of a company whose shares are listed
and traded on a national securities exchange, if such shares are owned for
investment only and are not owned as an officer, director, employee, or
consultant of such publicly traded company.

7.4 Reforming Provisions.

If any court or other tribunal having jurisdiction to determine the validity or
enforceability of this Article VII determines that it would be invalid or
unenforceable as written, then the provisions hereof shall be deemed to be
modified or limited to such extent or in such manner as necessary for such
provisions to be valid and enforceable to the greatest extent possible.

7.5 Confidentiality Agreements.

Franchisee shall require its general manager and each of its managers to execute
a confidentiality agreement in the form attached hereto as Appendix A.
Franchisee shall be responsible for compliance of its employees with the
agreements identified in this Article VII. Furthermore, at the request of
Franchisor, Franchisee shall provide Franchisor with executed confidentiality
agreements from all executive officers, directors and holders of a beneficial
interest of 10% or more in Franchisee. With respect to each person who becomes
associated with Franchisee in one of the capacities enumerated above subsequent
to execution of this Agreement, Franchisee, at the request of Franchisor, shall
require and obtain executed confidentiality agreements from such persons and
promptly provide Franchisor with copies of such agreements. In no event shall
any person enumerated be granted access to any confidential aspect of the
Concept, the System, the Manual or the Restaurant prior to execution of a
confidentiality agreement.

ARTICLE VIII
USE OF NAME; ADVERTISING

8.1 Advertising Under Trade Name.

During the term of this Agreement, Franchisee agrees to advertise under the
trade name "Garfield's Restaurant & Pub" or similar variations thereof, and to
diligently promote and make every reasonable effort to steadily increase the
business of the Restaurant by proper use of advertising media.

8.2 National Advertising and Marketing Program.

Franchisee shall monthly remit 0.5% of the monthly Gross Receipts for the
Restaurant to the Garfield's National Advertising and Marketing Program (the
"Program"), due and payable with the Continuing Royalty Fee. "Gross Receipts"
shall be as defined in Subsection 2.1.2 of this Agreement. The Program will be
maintained and administered as follows:

8.2.1

Franchisor shall direct all advertising and marketing programs with sole
discretion over the materials and media used in such programs and the placement
and allocation thereof. Franchisor may delegate such authority in writing to one
or more of its franchisees, and may terminate the delegation at any time in its
sole discretion. Franchisee agrees and acknowledges that the Program is intended
to maximize general public recognition and acceptance of the Proprietary Marks
for the benefit of those employing the Concept within the advertising coverage
area and that Franchisor and its delegate(s) undertake no obligation in
administering the Program to make expenditures for Franchisee which are
equivalent or proportionate to its remittance, or to ensure that any particular
franchisee benefits directly or pro rata from the placement of advertising;

8.2.2

Franchisee agrees that the funds may be used to meet any and all costs of
maintaining, administering, directing and implementing advertising (including,
without limitation, the cost of preparing and conducting television, radio,
magazine and newspaper advertising campaigns, promotional and merchandising
programs and other public relations and marketing research activities; employing
advertising agencies, which may be affiliated with Franchisor, to assist
therein). All sums paid by Franchisee to the Program shall be maintained in a
separate account from the other funds of Franchisor and shall not be used to
defray any of Franchisor's general operating expenses, except for administrative
costs and overhead, as Franchisor may incur in activities reasonably related to
the administration or direction of the Program and advertising programs;

8.2.3

It is anticipated that most contributions to the Program shall be incurred for
advertising, market research and promotional purposes during Franchisor's fiscal
year within which contributions are made. If, however, excess amounts remain in
the Program at the end of such fiscal year, all expenditures in the following
fiscal year(s) shall be made first out of any current interest or other earnings
of the Program, next out of any accumulated earnings, and finally from
principal. Franchisor may issue to its franchisees credit memo while excess
amounts are outstanding;

8.2.4

Although Franchisor intends to maintain the Program continually, Franchisor
maintains the right to terminate the Program. The Program shall not be
terminated, however, until all monies in the Program have been expended for
advertising and promotional purposes or refunded to its franchisees without
interest; and

8.2.5

An accounting of the operation of the Program shall be prepared annually and
shall be made available to Franchisee upon request. Franchisor reserves the
right, at its option, to require that such annual accounting include an audit of
the operation of the Program prepared by an independent certified public
accountant selected by Franchisor and prepared at the expense of the Program.

8.3 Local Advertising.

Franchisee shall incur and pay monthly for electronic and print media (or such
other promotional campaign materials as Franchisor may approve) an amount equal
to 3.0% of its Gross Receipts for the preceding month (or such shorter period as
it has been open). Upon written request of Franchisee, Franchisor may, at its
discretion, reduce this requirement for a particular calendar year. Franchisee
acknowledges that it has primary responsibility for the promotion, advertising
and marketing of the Restaurant, and that, unless otherwise agreed in writing,
such responsibility is neither altered nor diminished by required contributions
to a fund or funds established by Franchisor for the promotion of the Concept
and the System.

8.4 Cooperative Advertising Campaigns.

From time to time, Franchisor may designate a local, regional or national
advertising coverage area in which at least two or more franchised restaurants
of Franchisor or Franchisor-owned restaurants are located for purposes of
developing short-term, cooperative advertising campaigns. Franchisee agrees to
participate in and contribute its share to such campaigns. The cost of the
campaign shall be allocated among such franchised restaurants of Franchisor and
Franchisor-owned restaurants within the advertising coverage area. Each
franchisee's share shall be in proportion to the ratio of its sales to aggregate
sales of all such franchised restaurants of Franchisor and Franchisor-owned
restaurants within the advertising coverage area during the quarter preceding
the commencement of the campaign; provided, that the contributions shall not
exceed 3.5% of Franchisee's Gross Receipts for such quarter. Contributions to
such campaigns will be credited towards the advertising expenditures required
under Section 8.2, and then towards the advertising fee required under Section
8.3. At the time a campaign is submitted, Franchisor shall submit a list to
Franchisee of all franchised restaurants and Franchisor-owned restaurants within
the advertising coverage area.

8.5 Opening Promotions.

Franchisee shall submit to Franchisor, for Franchisor's approval, an advertising
campaign plan relating to the promotion of the opening of the Restaurant which
is sufficient to meet the needs of the relevant market. The Manual contains a
Press Release kit to assist Franchisee in this regard. Franchisee shall conduct
the approved advertising campaign and make all expenditures for advertising to
promote the opening of the Restaurant no later than sixty days after the
Restaurant opens for business. Franchisor will reimburse 50% of Franchisee's
out-of-pocket opening advertising expenditures up to a maximum of Two Thousand
Five Hundred Dollars ($2,500), if Franchisee meets the following criteria:

(i) Franchisee's opening advertising expenditures are made within sixty days
after the opening of the Restaurant;

(ii) Franchisee submits to Franchisor within one hundred twenty days after the
opening of the Restaurant documentation for the opening advertising
expenditures, such as paid invoices from suppliers of goods or services
evidencing expenditure on the opening advertising promotion; and

(iii) Franchisee's opening advertising expenditures are made pursuant to the
approved advertising campaign plan and in accordance with the "Grand Opening
Reimbursement Program Policy Guidelines" set forth in the Manual.

8.6 Prior Approval of Franchisor.

No coupon, promotional campaign, design, advertisement, sign, or form of
publicity, including the form, color, number, location and size of the same,
shall be used by Franchisee unless such is first submitted to, and approved by,
Franchisor in writing. Without limiting the generality of the foregoing
sentence, such advertising materials shall include without limitation the use of
the Internet and Websites established and maintained by the Franchisee. Upon
written notice by Franchisor, Franchisee agrees to remove, shut down or modify,
at the discretion of Franchisor, any advertising materials (including without
limitation Websites) found to be objectionable by Franchisor. If said materials
are not removed, shut down or modified within five days after such notice,
Franchisor, or its authorized agents, may at any time enter the Restaurant or
upon the Premises or elsewhere, remove such objectionable signs or advertising
media, or take any other action required to remove such advertising, and may
keep or destroy such signs or other media without paying therefor, and without
incurring liability to Franchisee for trespass or other tort.

ARTICLE IX
INSURANCE

9.1 Procurement of Policies.

Franchisee shall procure, at Franchisee's expense, prior to the commencement of
any operations under this Agreement, and maintain in full force and effect
during the term of this Agreement, an insurance policy or policies protecting
Franchisee and Franchisor, and their respective officers, directors, partners
and employees, against any loss, liability, personal injury, death, property
damage, or expense whatsoever arising or occurring upon or in connection with
the Restaurant and the Premises, as well as such other insurance applicable to
such other special risks as Franchisor may reasonably require for its own and
Franchisee's protection.

9.2 Coverage and Amounts.

Such policy or policies shall be written by an insurance company satisfactory to
Franchisor in accordance with standards and specifications set forth in the
Manual or otherwise in writing, and shall include, at a minimum, the following :

KIND OF INSURANCE

MINIMUM LIMITS OF LIABILITY

Worker's Compensation

Statutory

Employer's Liability

$500,000 bodily injury by accident

$500,000 bodily injury by disease

Employment Practices Liability

$500,000 each occurrence

Comprehensive General Public

Liability, including Product

Liability, Injury and

Liquor Liability

$1,000,000 each person

$1,000,000 each occurrence

$2,000,000 aggregate

Fire, Vandalism and Extended

Coverage

Full replacement value

Umbrella Liability Insurance

$10,000,000

Other Required by Law

Lawful Limits

Except for worker's compensation, Franchisor shall be named as an additional
insured in all such policies. Franchisor may require such additional coverage
(in either kinds or amounts) as it determines to be reasonable under the
circumstances.

9.3 Additional Coverage.

Franchisee must also carry business interruption insurance written by an
insurance company satisfactory to Franchisor. In connection with any
construction, renovation, refurbishing, or remodeling of the Restaurant,
Franchisee shall require the general contractor to maintain, with a reputable
insurer, comprehensive general liability insurance (with builder's risk, product
liability, completed operations and independent contractors' coverage) in at
least the amount of Five Hundred Thousand Dollars ($500,000), with Franchisor
named as an additional insured, as well as worker's compensation, employer's
liability insurance and such other insurance as may be required by law. Except
for worker's compensation, Franchisor shall be named as an additional insured in
all such policies.

9.4 Obligation Not Limited.

Franchisee's obligation to obtain and maintain the foregoing policy or policies
in the amounts specified shall not be limited in any way by reason of any
insurance which may be maintained by Franchisor, nor shall Franchisee's
performance of that obligation relieve it of liability under the indemnity
provisions set forth in Section 16.2 of this Agreement.

9.5 Evidence of Insurance.

Upon obtaining the insurance required by this Agreement, and on each policy
renewal date thereafter, Franchisee shall promptly submit evidence of
satisfactory insurance and proof of payment therefor to Franchisor together
with, upon request, copies of all policies and policy amendments. The evidence
of insurance shall include a statement by the insurer that the policy or
policies will not be canceled or materially altered without at least thirty
days' prior written notice to Franchisor.

9.6 Authority of Franchisor to Procure Insurance.

Should Franchisee, for any reason, fail to procure or maintain the insurance
required by this Agreement, as revised from time to time by the Manual or
otherwise in writing by Franchisor for all franchisees, Franchisor shall have
the right and authority (without, however, any obligation to do so) immediately
to procure such insurance and to charge same to Franchisee, which charges,
together with a reasonable fee for Franchisor's expenses in so acting, shall be
payable by Franchisee immediately upon notice.

ARTICLE X
TRANSFERS OF INTEREST

10.1 Transfer by Franchisor.

Franchisor shall have the right to transfer or assign all or any part of its
rights or obligations herein to any person or legal entity.

10.2 Transfer by Franchisee.

10.2.1 Conditions on Transfer.

Franchisee understands and acknowledges that the rights and duties set forth in
this Agreement are personal to Franchisee and the Principal Shareholders, and
Franchisor has granted this franchise in reliance on Franchisee's and Principal
Shareholders' business skills, financial capacity, and personal character.
Accordingly, Franchisee shall neither sell, assign, transfer, pledge, mortgage
or otherwise encumber this franchise, the Restaurant, the Premises, or this
Agreement or any right or interest herein, nor permit any such assignment,
transfer or encumbrance to occur by operation of law without the prior written
consent of Franchisor. Franchisee may not, without the prior written consent of
Franchisor, fractionalize any of the rights of Franchisee granted pursuant to
this Agreement. Franchisee shall not permit any person or persons (if acting as
a group) owning an equity interest in excess of 20% in Franchisee to sell,
assign, transfer, fractionalize, pledge, mortgage or otherwise encumber his or
their equity interest in Franchisee, nor permit any such assignment, transfer or
encumbrance to occur by operation of law without the prior written consent of
Franchisor. For purposes of this Agreement, a merger, consolidation, conveyance
of the properties and assets of Franchisee substantially as an entirety to any
person, any sale (or series of sales) of Franchisee's equity that reduces the
equity ownership of the prior, remaining shareholders by 20% or more during the
term of this Agreement, or any reorganization of Franchisee shall be deemed to
be a transfer subject to the provisions of this Section 10.2. The assignment of
any interest, other than as provided in this Agreement, any purported assignment
or transfer, by operation of law or otherwise, not having the written consent of
Franchisor required by this Section 10.2 shall be null and void and shall
constitute a material breach of this Agreement, for which Franchisor may then
terminate without opportunity to cure pursuant to Section 11.2 of this
Agreement.

10.2.2 Consent.

Franchisor shall not unreasonably withhold its consent to a transfer of any
interest in this Agreement, the Restaurant, the Premises or Franchisee;
provided, however, that if a transfer, alone or together with other previous,
simultaneous, or proposed transfers, would have the effect of transferring
Franchisee's interest in this Agreement, the Restaurant, the Premises or a
controlling interest in Franchisee, Franchisor may, in its sole discretion,
require as a condition of its approval the satisfaction of any or all of the
following conditions set forth below. As the term is used in this Section 10.2,
"Transferor" shall include Franchisee and all Principal Shareholders in case of
a transfer by Franchisee, and in case of a transfer by one or more Principal
Shareholders, the term shall include such Principal Shareholders and Franchisee:

(i) All of Transferor's accrued monetary obligations to Franchisor and all other
outstanding obligations related to the Restaurant or any other franchised
restaurant granted to Franchisee from Franchisor shall have been satisfied;

(ii) Transferor is not in default of any provisions of this Agreement, any
amendment hereof or successor hereto, or the Development Agreement, if
applicable, or any other agreement between Transferor and Franchisor or its
subsidiaries and affiliates;

(iii) Transferor shall have executed a general release in a form satisfactory to
Franchisor, of any and all claims against Franchisor and its officers,
directors, shareholders and employees, in their corporate and individual
capacities, including, without limitation, claims arising under all applicable
laws, rules and ordinances;

(iv) The transferee shall enter into a written agreement, in a form satisfactory
to Franchisor, assuming and agreeing to discharge all of Transferor's
obligations under this Agreement, or if the obligation of Franchisee were
guaranteed by the transferor, the transferee shall guarantee the performance of
all such obligations in writing in a form satisfactory to Franchisor;

(v) The transferee shall demonstrate to Franchisor's satisfaction that
transferee and its owners and employees meet Franchisor's managerial and
business standards; possess a good moral character, business reputation and
credit rating; have the aptitude and ability to conduct the Restaurant (as may
be evidenced by prior related business experience or otherwise); and have
adequate financial resources and capital to operate the Restaurant;

(vi) At Franchisor's option, Franchisee or the transferee, as the case may be,
shall execute (and/or, upon Franchisor's request, shall cause all interested
parties to execute), for a term ending on the expiration date of this Agreement,
the standard form franchise agreement then being offered to new System
franchisees and other ancillary agreements as Franchisor may require for a
franchised restaurant of Franchisor, which agreements shall supersede this
Agreement in all respects and the terms of which agreements may differ from the
terms of this Agreement;

(vii) At its own expense, the transferee shall upgrade, or cause to be upgraded,
the Restaurant to conform to the then-current standards and specifications of
System restaurants, and shall complete the upgrading and other requirements
within the time specified by Franchisor;

(viii) Transferor shall remain liable for all obligations of the Restaurant
prior to the effective date of transfer and shall execute any and all
instruments reasonably requested by Franchisor to evidence such liability; and

(ix) Transferee shall have paid to Franchisor a transfer fee equal to 20% of the
then current initial fee charged to franchisees of Franchisor for the training,
supervision, administrative costs, overhead and other Franchisor expenses
incurred in connection with the transfer.

10.2.3 No Security Interest.

In addition to the requirement to obtain Franchisor's consent as required by
Subsection 10.2.1 above, Franchisee shall not grant a mortgage, security
interest or other encumbrance in the Restaurant, the Premises or in any of its
assets unless the mortgagee, secured party or similar party agrees that in the
event of any default by Franchisee under any documents related to the
encumbrance, Franchisor shall have the right and option to purchase the rights
of the mortgagee, secured party or similar party upon payment of all sums then
due to such party.

10.3 Right of First Refusal.

10.3.1 Right.

If Franchisee or the Principal Shareholders (collectively the "Seller"), desires
to accept any bona fide offer from a third party to purchase an interest in this
Agreement, the Restaurant, the Premises or an equity interest in Franchisee, as
the case may be, the Seller shall notify Franchisor in writing of each such
offer by a full and complete statement of the terms and conditions including the
considerations therefor. Franchisor shall have the right and option, exercisable
within thirty days after receipt of such written notification, to send written
notice to the Seller that Franchisor or its assignee intends to purchase the
Seller's interest on the same terms and conditions offered by the third party.
Seller shall promptly notify Franchisor of any modification of the
aforementioned terms and conditions, which modification shall constitute a
modification of Franchisor's option subject to the provision of Subsection
10.3.2 and shall commence a new thirty day option period. In the event that
Franchisor or its assignee elects to purchase the Seller's interest, the closing
on such purchase must occur within sixty days from the date of notice to the
Seller of the election to purchase by Franchisor. Failure of Franchisor to
exercise the option afforded by this subsection shall not constitute a waiver of
any other provision of this Agreement, including all of the requirements of this
Article X, with respect to a proposed transfer.

10.3.2 Consideration.

In the event the consideration, terms and/or conditions offered by the Seller
are such that Franchisor may not reasonably be required to furnish the same
consideration, terms and/or conditions, then Franchisor or its assignee may
purchase such interest proposed to be sold for the reasonable equivalent in
cash. If the parties hereto cannot agree within a reasonable time on the
reasonable equivalent in cash of the consideration, terms and/or conditions
offered by the Seller, Franchisor and Franchisee shall select an independent
appraiser whose determination of a reasonable equivalent in cash shall be
binding. If Franchisor and Franchisee cannot agree on an independent appraiser
in a reasonable time, an independent appraiser shall be designated by Franchisor
and Franchisee, and the two independent appraisers so designated shall select a
third independent appraiser. The determination of a reasonable equivalent in
cash by a majority of the appraisers so chosen shall be binding. Franchisor and
Franchisee shall bear the costs of the appraisals on an equal basis.

10.4 Transfer Upon Death or Mental Incompetency.

Upon the death or mental incompetency of Franchisee or a Principal Shareholder,
the personal representative of such Principal Shareholder shall transfer his or
her interest to a third party approved by Franchisor within six months after
such death or mental incompetency. Such transfers, including, without
limitation, transfers by devise or inheritance, shall be subject to the same
conditions as any inter vivos transfer as set forth in this Article X. However,
in the case of transfer by devise or inheritance, if the heirs or beneficiaries
of any such person are unable to meet the conditions in this Article X, the
personal representative of the deceased shall have six months to dispose of the
deceased's interest in this Agreement, the Restaurant, the Premises or
Franchisee, which disposition shall be subject to all the terms and conditions
for transfers contained in this Article X. If the interest is not disposed of
within such time, Franchisor may terminate this Agreement.

10.5 Non-Waiver of Claims.

Franchisor's consent to a transfer of any interest in the franchise granted
herein, this Agreement, the Restaurant, the Premises, or any equity interest in
Franchisee shall not constitute a waiver of any claims it may have against the
transferring party, nor shall it be deemed a waiver of Franchisor's right to
demand exact compliance with any of the terms of this Agreement or the
agreement(s) executed by any transferee.

10.6 Permitted Assignments.

Notwithstanding anything to the contrary contained herein, Franchisee or any
Principal Shareholders may assign its or their interest in this Agreement the
Restaurant, the Premises, or in Franchisee to other existing shareholders of
Franchisee or to such person's spouse, child or parent; provided, however, that
in each case, any such assignments, individually or in the aggregate, will not
result in a change in "control" of Franchisee. For purpose of this section,
"control" shall mean possession of the power, directly or indirectly, through
stock ownership or otherwise, to direct the management and policies of
Franchisee. A Principal Shareholder may also transfer any interests in
Franchisee to a revocable living trust created by such Principal Shareholder, to
a family limited partnership (or similar family entity), so long as the
Principal Shareholder or his or her spouse is the general partner of such
partnership, and/or to an irrevocable trust solely for the benefit of the
Principal Shareholder's lineal descendants. Any such permitted assignments shall
be subject to all terms and conditions of this Agreement, including, without
limitation, restrictions on subsequent assignment or sale of ownership.

ARTICLE XI
DEFAULT AND TERMINATION

11.1 Termination by Franchisor Without Notice.

Franchisee and the Principal Shareholders shall be deemed to be in default under
this Agreement, and all rights granted herein shall automatically terminate
without notice to Franchisee, if Franchisee or any Principal Shareholder become
insolvent or generally fails to pay, or admits in writing its inability to pay,
debts as they become due, or Franchisee or any Principal Shareholder applies
for, consents to, or acquiesces in the appointment of, a trustee, receiver or
other custodian for Franchisee or any Principal Shareholder or any of its or
their property or makes a general assignment for the benefit of creditors; or,
in the absence of such application, consent or acquiescence, a trustee, receiver
or other custodian is appointed for Franchisee or any Principal Shareholder, or
for a substantial part of its or their property and is not discharged within
thirty days; or any bankruptcy, reorganization, debt arrangement, or other case
or proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding, is commenced in respect of Franchisee or any Principal
Shareholders and, if such case or proceeding is not commenced by Franchisee or
any Principal Shareholder, it is consented to or acquiesced in by Franchisee or
any Principal Shareholder or remains for thirty days undismissed; or Franchisee
or any Principal Shareholder take any action to authorize, or in furtherance of,
any of the foregoing; or Franchisee's Gross Receipts for any rolling period of
twelve calendar months are less than $600,000.00.

11.2 Termination by Franchisor with Notice.

Franchisee and the Principal Shareholders shall be deemed to be in default, and
Franchisor may, at its option, terminate this Agreement and all rights granted
hereunder without affording Franchisee or the Principal Shareholders any
opportunity to cure the default, effective immediately upon receipt of notice by
Franchisee, upon the occurrence of any of the following events:

11.2.1

If Franchisee at any time ceases to operate or otherwise abandons the
Restaurant; provided, however, that if Franchisee ceases to operate the
Restaurant due to a casualty loss for a period of less than six consecutive
months, Franchisee will not be presumed to have abandoned the Restaurant;

11.2.2

If Franchisee, any Principal Shareholder, or any officer, director, or manager
of Franchisee is convicted of or pleads nolo contendere to a felony, a crime
involving moral turpitude, or any other crime or offense that is reasonably
likely, in the sole opinion of Franchisor, to adversely affect the System, the
Concept, the Proprietary Marks, the goodwill associated therewith, or
Franchisor's interest therein;

11.2.3

If Franchisee or any Principal Shareholder purports to transfer any rights or
obligations under this Agreement, the Restaurant, the Premises or any interest
in Franchisee to any third party without Franchisor's prior written consent,
contrary to the terms of Article X of this Agreement;

11.2.4

If Franchisee or a Principal Shareholder fails to comply in any respect with the
non-competition agreements in Article XIII hereof as to any person or if
Franchisee discloses or divulges, contrary to Articles VI or VII hereof, the
contents of the Manual or other trade secret or confidential information
provided to Franchisee or to the Principal Shareholder by Franchisor;

11.2.5

If an approved transfer is not effected within a reasonable time following a
death or mental incompetency as required by Section 10.4 hereof;

11.2.6

If Franchisor discovers that Franchisee or any Principal Shareholder made a
material misrepresentation or omitted any material fact in the information that
was furnished to Franchisor in connection with this Agreement;

11.2.7

If any part of this Agreement relating to the payment of fees to Franchisor, or
the preservation of any of Franchisor's Proprietary Marks or other trade names,
service marks, trademarks, trade secrets or secret formulae licensed or
disclosed hereunder is declared invalid or unenforceable for any reason; or

11.2.8

If Franchisee or a Principal Shareholder, after curing a default under Section
11.3, engages in the same default whether or not such default is cured after
notice, or Franchisee or Principal Shareholder is repeatedly in default under
Section 11.3 hereof for failure substantially to comply with any of the
requirements imposed by this Agreement, whether or not cured after notice.

11.3 Termination by Franchisor with Notice and Opportunity to Cure.

Except as provided in Sections 11.1 and 11.2 of this Agreement, Franchisee
and/or a Principal Shareholder shall be deemed to be in default hereunder for
any failure to comply with any of the requirements imposed by this Agreement, as
it may from time to time reasonably be supplemented by the Manual, or to carry
out the terms of this Agreement in good faith. After receipt from Franchisor of
a written notice of termination, Franchisee and the Principal Shareholders shall
have either ten days (for defaults Franchisor considers to relate to the
financial obligations of the Franchisee or the operation of the Restaurant) or
sixty days (for all other situations) within which to remedy any default under
this Agreement and to provide evidence thereof to Franchisor. Franchisor shall
specify in the notice the applicable cure period. If any such default is not
cured within the cure period, or such longer period as applicable law may
require or as agreed to in writing by the Franchisor, this Agreement shall
terminate without further notice to Franchisee or the Principal Shareholder(s)
effective immediately upon the expiration of the applicable cure period.

11.4 Termination by Franchisee.

In the event of any material breach by Franchisor of this Agreement, Franchisor
shall have sixty days after its receipt from Franchisee of a written notice of
intent to terminate within which to remedy such default and to provide evidence
thereof to Franchisee. If such default is not cured within that time, or such
longer period as applicable law may require, this Agreement shall terminate
without further notice to Franchisor effective immediately upon the expiration
of the sixty-day period or such longer period as applicable law may require.

Furthermore, this Agreement may be terminated by Franchisee, upon thirty days'
notice to Franchisor, in the event any bankruptcy, reorganization, debt
arrangement or other case or proceeding under any bankruptcy or insolvency law,
or any dissolution or insolvency proceeding, is commenced in respect of
Franchisor; provided, should such case or proceeding not be commenced by
Franchisor, this Agreement may be terminated only upon thirty days' notice to
Franchisor following any consent or acquiescence by Franchisor to the case or
proceeding or upon thirty days' notice to Franchisor should Franchisor not
consent or acquiesce thereto and the case or proceeding has not been dismissed
sixty days from the commencement thereof.

ARTICLE XII
OBLIGATIONS UPON TERMINATION OR EXPIRATION

12.1 General Obligations.

Except in the event of a termination of this Agreement pursuant to Section 11.4,
upon the termination or expiration of this Agreement all rights granted
hereunder to Franchisee and the Principal Shareholders shall immediately
terminate, and:

12.1.1

Franchisee and the Principal Shareholders shall immediately cease to operate the
Restaurant and shall not thereafter, directly or indirectly, represent to the
public or hold itself out as a present or former franchisee or Franchisor;

12.1.2

Upon demand by Franchisor, Franchisee and the Principal Shareholders shall
assign to Franchisor all of their right, title and interest in any lease then in
effect for the Restaurant or the Premises, and Franchisee and the Principal
Shareholders shall furnish Franchisor with evidence satisfactory to Franchisor
of compliance with this obligation within thirty days after termination or
expiration of this Agreement;

12.1.3

Franchisee and the Principal Shareholders shall immediately and permanently
cease to use, by advertising or in any other manner whatsoever, any confidential
methods, procedures and techniques associated with the Concept and the System;
the mark "Garfield's Restaurant & Pub"; and all other Proprietary Marks and
distinctive slogans, signs, symbols, or devices associated with the Concept and
the System. In particular, Franchisee and the Principal Shareholders shall cease
to use, without limitation, all signs, equipment, advertising materials,
stationery and any other articles which display the Proprietary Marks associated
with the Concept and the System;

12.1.4

Franchisee and the Principal Shareholders shall take such action as may be
necessary to cancel any assumed name or equivalent registration which contains
the mark "Garfield's Restaurant & Pub," the Proprietary Marks or any other
service mark or trademark of Franchisor, and, if applicable, Franchisee and the
Principal Shareholders will change its corporate name so as to delete therefrom
the words "Garfield's Restaurant & Pub," the Proprietary Marks or any other
similar combination, and Franchisee and the Principal Shareholders shall furnish
Franchisor with evidence satisfactory to Franchisor of compliance with this
obligation within ten days after termination or expiration of this Agreement;

12.1.5

If Franchisor does not demand an assignment of the Lease under
Subsection 12.1.2, Franchisee and the Principal Shareholders shall make such
modifications or alterations to the Premises operated hereunder (including,
without limitation, the changing of the telephone number) immediately upon
termination or expiration of this Agreement as may be necessary to prevent any
association between Franchisor or the System and any business subsequently
operated by Franchisee, the Principal Shareholders or others, and shall make
such specific additional changes thereto as Franchisor may reasonably request
for that purpose including, without limitation, the removal of all distinctive
physical and structural features identifying the Concept. In the event
Franchisee or the Principal Shareholders fail or refuse to comply with the
requirements of this section, Franchisor shall have the right to enter upon the
Premises where the Restaurant was operated, without being guilty of trespass or
any other tort, for the purpose of making or causing to be made such changes as
may be required at the expense of Franchisee and the Principal Shareholders,
which expense Franchisee and the Principal Shareholders agree to pay upon
demand;

12.1.6

Franchisee and the Principal Shareholders agree, in the event it or they
continue to operate or subsequently begins to operate any other business, not to
use any reproduction, counterfeit, copy, or colorable imitation of the
Proprietary Marks either in connection with such other business or the promotion
thereof, which is likely to cause confusion, mistake, or deception, or which is
likely to dilute Franchisor's rights in and to the Proprietary Marks, and
further agree not to utilize any designation of origin or description or
representation which falsely suggests or represents an association or connection
with Franchisor so as to constitute unfair competition;

12.1.7

Franchisee and the Principal Shareholders shall promptly pay all sums owing to
Franchisor and its subsidiaries and affiliates. In the event of termination for
any default of Franchisee or the Principal Shareholders, such sums shall include
all damages, costs and expenses, including reasonable attorneys' fees, incurred
by Franchisor as a result of the default, which obligation shall give rise to
and remain, until paid in full, a lien in favor of Franchisor against any and
all of the personal property, equipment, inventory and fixtures owned by
Franchisee and the Principal Shareholders and on the Premises operated hereunder
at the time of default;

12.1.8

Franchisee and the Principal Shareholders shall pay Franchisor all damages,
costs and expenses, including reasonable attorneys' fees, incurred by Franchisor
subsequent to the termination or expiration or other relief for the enforcement
of any provisions of this Section 12.1;

12.1.9

Franchisee and the Principal Shareholders shall immediately turn over to
Franchisor all material, including, without limitation, all manuals (including
the Manual) and all records, instructions, correspondence, brochures, agreements
and any and all other materials and all copies thereof in Franchisee's
possession relating to the operation of the Restaurant (all of which are
acknowledged to be Franchisor's property), and shall retain no copy or record of
any of the foregoing, excepting only Franchisee's copy of this Agreement and of
any correspondence between the parties hereto, and any other documents which
Franchisee or the Principal Shareholders reasonably need for proper business
purposes or compliance with any provision of law;

12.1.10

Franchisee shall not remove any property from the Restaurant Premises for a
period of thirty days after the termination of this Agreement. At the option of
Franchisor, within ten days after the date of termination or expiration of this
Agreement, Franchisee and Franchisor shall arrange for an inventory to be made,
at Franchisee's cost of all the personal property, fixtures, equipment and
inventory of Franchisee related to the operation of the Restaurant. As to items
that could be considered exclusively for use in a Garfield's Restaurant & Pub
Restaurant, Franchisor shall have the option to purchase from Franchisee any or
all of such items at fair market value. The determination of items deemed to be
exclusively used in a Garfield's Restaurant & Pub Restaurant shall be reasonably
made by Franchisor. If the parties hereto cannot agree on fair market value
within a reasonable time, the parties hereto shall select an appraiser whose
determination of fair market value shall be binding. If the parties cannot agree
on an appraiser within a reasonable time, one independent appraiser shall be
designated by Franchisor and another by Franchisee, and the two independent
appraisers so designated shall select a third independent appraiser. The
determination of fair market value of a majority of appraisers so chosen shall
be binding. Franchisee and Franchisor shall bear the costs of the appraisal on
an equal basis. If Franchisor elects to exercise the option to purchase herein
provided, it shall have ten days after determination of fair market value to
notify Franchisee of its exercise of the option to purchase and shall have the
right to set

off all amounts due from Franchisee and the Principal Shareholders under this
Agreement against any payment therefor.

As to the remaining items of personal property, fixtures, equipment and
inventory, Franchisee and the Principal Shareholders hereby grant Franchisor a
right of first refusal to purchase such items on the same terms and conditions
that a bona fide third party has made an offer to Franchisee or the Principal
Shareholders for the purchase of any or all of such items. Franchisee shall
promptly notify Franchisor of the receipt of an offer to purchase any or all of
such items, and if Franchisor elects to exercise its right of first refusal
provided herein, it shall have ten days to notify Franchisee of its election to
exercise the right. Furthermore, Franchisor shall have the right to set off all
amounts due from Franchisee and the Principal Shareholders under this Agreement
against any payment therefor; and

12.1.11

Franchisee and the Principal Shareholders shall comply with the agreements
contained in Section 13.4 of this Agreement.

12.2 Obligations Upon Termination by Franchisee.

Upon termination of this Agreement pursuant to Section 11.4, all rights granted
hereunder to Franchisee and the Principal Shareholders shall immediately
terminate, and Franchisee and the Principal Shareholders shall be subject to all
the terms of Section 12.1.

12.3 Refund of Initial Fee Upon Termination.

In the event of termination by reason of Franchisee's failure after a good faith
effort to obtain the necessary state or local liquor licenses as required in
Section 4.13, Franchisor shall refund to Franchisee, without interest, the
Initial Fee referred to in Subsection 2.1.1, less any expenses incurred and
damages sustained by Franchisor in connection with its performance hereunder
prior to the date of such termination. Franchisor shall also repay the Initial
Fee under the circumstances described in Subsection 5.1.3 hereof. In the event
of termination for any other reason, Franchisor shall have no obligation to
refund any amount previously paid by Franchisee or the Principal Shareholders,
and Franchisee and the Principal Shareholders shall be obligated to promptly pay
all sums which are then due Franchisor.

ARTICLE XIII
AGREEMENTS

13.1 Best Efforts.

Franchisee agrees that, during the term of this Agreement, except as otherwise
approved in writing by Franchisor, Franchisee, the Principal Shareholders or
Franchisee's general manager, shall devote full time, energy and best efforts to
the management and operation of the Restaurant.

13.2 Franchisee and Principal Shareholders Agreement Not to Compete.

Franchisee and the Principal Shareholders agree that, during the term of this
Agreement, except as otherwise approved in writing by Franchisor, Franchisee and
the Principal Shareholder shall not, either directly or indirectly, for itself
or themselves, or through, on behalf of, or in conjunction with, any person,
persons, partnership, or corporation, divert or attempt to divert any business
or customer of any Garfield's Restaurant & Pub Restaurant or any other franchise
or company-owned business of Franchisor to any competitor, by direct or indirect
inducement or otherwise, or do or perform, directly or indirectly, any other act
injurious or prejudicial to the goodwill associated with Franchisor's
Proprietary Marks, the Concept and the System.

13.3 Franchisor Agreement Not to Compete.

Franchisor agrees that during the term of this Agreement, except as otherwise
approved in writing by Franchisee, Franchisor shall not intentionally or
maliciously:

13.3.1

Divert or attempt to divert any material business from the Restaurant to any
competitor; provided, this Subsection 13.3.1 shall not apply to any present or
future Garfield's Restaurant & Pub Restaurants, or any other franchise or
company-owned business of Franchisor;

13.3.2

Employ or seek to employ any person who is at that time employed by Franchisee
or otherwise induce such person to leave his or her employment; or

13.3.3

Nothing in this Agreement shall prohibit Franchisor's ownership or operation of
any business which sells food and beverages.

13.4 Interference with Employment Relations.

During the term of this Agreement, neither Franchisor, Franchisee, nor the
Principal Shareholders shall employ or seek to employ in a managerial position
(i.e., in a position at a pay grade at or above that of an assistant restaurant
manager or kitchen manager), directly or indirectly, any person who is at the
time or was at any time during the prior six months employed by the other party
or any of its subsidiaries or affiliates, or by any franchisee in the System.
This section shall not be violated if, at the time Franchisor or
Franchisee/Principal Shareholders employs or seeks to employ such person, such
former employer has given its written consent. Notwithstanding any other
provision of this Agreement, the parties hereto acknowledge that if this section
is violated, such former employer shall be entitled to liquidated damages equal
to three times the annual salary of the employee involved, plus reimbursement of
all costs and attorneys' fees incurred. In addition to the rights granted to the
parties hereto, the parties hereto acknowledge and agree that any franchisee
from which an employee was hired by a party to this Agreement in violation of
the terms of this section shall be deemed to be a third-party beneficiary of
this provision and may sue and recover against the offending party the
liquidated damages herein set forth; provided, however, the failure by
Franchisee to enforce this section shall not be deemed to be a violation of this
section.

13.5 Reduction of Scope of Agreement.

Franchisee and the Principal Shareholders understand and acknowledge that
Franchisor shall have the right, in its sole discretion, to reduce the scope of
any agreement set forth in Sections 13.2 and 7.1 of this Agreement, or any
portion thereof, without consent, effective immediately upon receipt by
Franchisee of written notice thereof, and Franchisee and the Principal
Shareholders agree that they shall comply with any agreement as so modified,
which shall be fully enforceable notwithstanding the provisions of Article XVI
hereof.

13.6 Reforming Provisions.

If any court or other tribunal having jurisdiction to determine the validity or
enforceability of this Article XIII determines that it would be invalid or
unenforceable as written, then the provisions hereof shall be deemed to be
modified or limited to such extent or in such manner as necessary for such
provisions to be valid and enforceable to the greatest extent possible.

ARTICLE XIV
TAXES, PERMITS AND INDEBTEDNESS

14.1 Prompt Payment of Taxes.

Franchisee or the Principal Shareholders shall promptly pay when due all taxes
levied or assessed, including, without limitation, VAT (value added taxes),
unemployment and sales taxes and all accounts and other indebtedness of every
kind incurred by Franchisee in the conduct of the Restaurant. Franchisee or the
Principal Shareholders shall pay to Franchisor an amount equal to any sales tax,
withholding of tax, gross receipts tax, or similar tax imposed on Franchisor
with respect to any payments to Franchisor required under this Agreement.

14.2 Bona Fide Dispute.

In the event of any bona fide dispute as to liability for taxes assessed or
other indebtedness, Franchisee or the Principal Shareholders may contest the
validity or the amount of the tax or indebtedness in accordance with procedures
of the taxing authority or applicable law; however, in no event shall Franchisee
or the Principal Shareholders permit a tax sale or seizure by levy of execution
or similar writ or warrant, or attachment by a creditor, to occur against the
Premises, the Restaurant or any improvements thereon.

14.3 Compliance with Laws.

Franchisee and the Principal Shareholders shall comply with all federal, state
and local laws, rules and regulations, and shall timely obtain any and all
permits, certificates, or licenses necessary for the full and proper conduct of
the Restaurant under this Agreement, including, without limitation, licenses to
do business, fictitious name registration, sales tax permits, liquor licenses
and fire clearances.

14.4 Notification of Legal Proceedings.

Franchisee or the Principal Shareholders shall notify Franchisor in writing
within ten days of the commencement of any action, suit or proceeding, and of
the issuance of any order, writ, injunction, award or decree of any court,
agency or other governmental instrumentality, which may adversely affect the
operation or financial condition of the Restaurant.

ARTICLE XV

FRANCHISEE ORGANIZATION, AUTHORITY,
AND FINANCIAL CONDITION

15.1 Entity Representations & Warranties.

Franchisee and each Principal Shareholder represent and warrant that: (a)
Franchisee is a corporation duly incorporated, validly existing and in good
standing under the laws of the state of its incorporation; (b) Franchisee is
duly qualified and is authorized to do business and is in good standing as a
foreign corporation in each jurisdiction in which its business activities or the
nature of the properties owned by it requires such qualification; (c) the
execution and delivery of this Agreement and the transactions contemplated
hereby are within Franchisee's corporate power; (d) the execution and delivery
of this Agreement has been duly authorized by Franchisee; (e) the articles of
incorporation and by-laws of Franchisee delivered to Franchisor are true,
complete and correct, and there have been no changes therein since the date
thereof; (f) the certified copies of the minutes electing the officers of
Franchisee and authorizing the execution and delivery of this Agreement are
true, correct and complete, and there have been no changes therein since the
date(s) thereof; (g) the specimen stock certificate delivered to Franchisor is a
true specimen of Franchisee's stock certificate; (h) the balance sheet of
Franchisee as of ____________ ___, _______ and the balance sheets of the
Principal Shareholders as of _____________ ___, _______, ("Balance Sheets")
heretofore delivered to Franchisor, are true, complete and correct, and fairly
present the financial positions of Franchisee and each Principal Shareholder,
respectively, as of the dates thereof; (i) the Balance Sheets have been prepared
in accordance with generally accepted accounting principles; and (j) there have
been no materially adverse changes in the condition, assets or liabilities of
Franchisee or the Principal Shareholders since the date or dates thereof.

15.2 Covenants.

Franchisee and each Principal Shareholder covenant and agree that during the
term of this Agreement: (a) Franchisee shall do or cause to be done all things
necessary to preserve and keep in full force its corporate existence and shall
be in good standing as a foreign corporation in each jurisdiction in which its
business activities or the nature of the properties owned by it requires such
qualification; (b) Franchisee shall have the corporate authority to carry out
the terms of this Agreement; and (c) Franchisee shall print, in a conspicuous
fashion on all certificates representing shares of its stock when issued, a
legend referring to this Agreement and the restrictions on and obligations of
Franchisee and the Principal Shareholders hereunder, including the restrictions
in this Agreement on transfer of Franchisee's shares.

15.3 Financial Statements.

In addition to the financial information which Franchisee is required to provide
to Franchisor under Subsection 4.12.2 and Section 15.1 hereof, Franchisee and
the Principal Shareholders shall provide Franchisor with such other financial
information as Franchisor may reasonably request from time to time, including,
on an annual basis, copies of the then-most current financial statements of
Franchisee and each Principal Shareholder, dated as of the end of the last
preceding fiscal year of Franchisee or Principal Shareholder, said statements to
be delivered to Franchisor no later than April 15 of each year, which financial
statements shall be prepared in accordance with generally accepted accounting
principles.

15.4 Ownership.

Franchisee shall maintain a current list of all owners of record and all
beneficial owners of any class of equity security of Franchisee and shall
furnish the list to Franchisor upon request. Schedule 15.4 attached to this
Agreement and made a part hereof is a complete and correct listing of the
directors, officers, managers and equity holders of Franchisee. Franchisee and
each Principal Shareholder represent, warrant and covenant that all equity
interests in Franchisee are owned as set forth on Schedule 15.4, that no such
interest has been pledged or hypothecated (except in accordance with Article X,
and that no change will be made in the ownership of any such interest other than
as permitted by this Agreement, or otherwise consented to in writing by
Franchisor. Franchisee and Principal Shareholders agree to furnish Franchisor
with such evidence as Franchisor may request, from time to time, for the purpose
of assuring Franchisor that the interests of Franchisee and Principal
Shareholders remain as represented herein.

15.5 Guarantees.

Each Principal Shareholder, jointly and severally, hereby personally and
unconditionally guarantees each of Franchisee's financial obligations to
Franchisor (including, but not limited to, all obligations relating to the
payment of fees by Franchisee to Franchisor). Each Principal Shareholder agrees
that Franchisor may resort to such Principal Shareholder (or any of them) for
payment of any such financial obligation, whether or not Franchisor shall have
proceeded against Franchisee, any other Principal Shareholder or any other
obligor primarily or secondarily obligated to Franchisor with respect to such
financial obligation. Each Principal Shareholder hereby expressly waives
presentment, demand, notice of dishonor, protest and all other notices
whatsoever with respect to Franchisor's enforcement of this guaranty. In
addition, each Principal Shareholder agrees that, if the performance or
observance by Franchisee of any term or provision hereof is waived or the time
of performance thereof extended by Franchisor, or payment of any such financial
obligation is accelerated in accordance with any agreement between Franchisor
and any party hereto liable in respect thereof or extended or renewed, in whole
or in part, all as Franchisor may determine, whether or not notice to or consent
by any Principal Shareholder or any other party liable in respect to such
financial obligations is given or obtained, such actions shall not affect or
alter the guaranty of each Principal Shareholder described in this section.

ARTICLE XVI
RELATIONSHIP AND INDEMNIFICATION

16.1 Relationship.

It is understood and agreed by the parties hereto that this Agreement does not
create a fiduciary relationship between them, and that nothing in this Agreement
is intended to constitute any party an agent, legal representative, subsidiary,
joint venturer, partner, employee, or servant of the other for any purpose
whatsoever. Franchisee and the Principal Shareholders are independent
contractors and are not authorized to make any contract, agreement, warranty, or
representation on behalf of Franchisor, or to incur any debt or obligation,
express or implied, on behalf of Franchisor. Furthermore, except as expressly
provided in Section 5.2.5, Franchisor shall in no event assume liability for, or
be deemed liable hereunder as a result of, any such action, or by reason of any
act or omission of Franchisee or the Principal Shareholders in the conduct of
the Restaurant or any claim or judgment arising therefrom against Franchisor.
During the term of this Agreement, Franchisee shall hold itself out to the
public as operating the Restaurant pursuant to a franchise from Franchisor.
Franchisee agrees to take such affirmative action as may be necessary to do so,
including, without limitation, exhibiting a notice of that fact in a conspicuous
place in the Restaurant, the content of which Franchisor reserves the right to
specify.

16.2 Indemnification.

Franchisee and the Principal Shareholders shall indemnify and hold harmless
Franchisor and its officers, directors, employees, agents, affiliates,
successors and assigns from and against (a) any and all claims based upon,
arising out of, or in any way related to the operation or condition of any part
of the Restaurant or the Premises, the conduct of business thereat, the
ownership or possession of real or personal property, and any negligent act,
misfeasance or nonfeasance by Franchisee, the Principal Shareholders of any of
their agents, contractors, servants, employees or licensees (including, without
limitation, the performance by Franchisee or the Principal Shareholders of any
act required by, or performed pursuant to, any provision of this Agreement), and
(b) any and all fees (including reasonable attorneys' fees), costs and other
expenses incurred by or on behalf of Franchisor in the investigation of or
defense against any and all such claims.

ARTICLE XVII
GENERAL PROVISIONS

17.1 Request for Approval.

Whenever this Agreement requires the prior approval or consent of Franchisor,
Franchisee or the Principal Shareholder shall make a timely written request to
Franchisor therefor, and such approval or consent shall be obtained in writing.

17.2 No Liability Assumed.

Franchisor makes no warranties or guarantees upon which Franchisee or any
Principal Shareholder may rely, and assumes no liability or obligation to
Franchisee or any Principal Shareholder, by providing any waiver, approval,
consent or suggestion to Franchisee or any Principal Shareholder in connection
with this Agreement, or by reason of any neglect, delay, or denial of any
request therefor.

17.3 No Waiver.

No delay, waiver, omission or forbearance on the part of Franchisor to exercise
any right, option, duty, or power arising out of any breach or default by
Franchisee or any Principal Shareholder, or by any other franchisee or developer
of Franchisor, of any of the terms, provisions, or conditions hereof, shall
constitute a waiver by Franchisor to enforce any such right, option, duty or
power as against Franchisee or any Principal Shareholder, or as to any
subsequent breach or default by Franchisee or any Principal Shareholder.
Subsequent acceptance by Franchisor of any payments due to it hereunder shall
not be deemed to be a waiver by Franchisor of any preceding breach by Franchisee
or the Principal Shareholders of any terms, provisions or conditions of this
Agreement.

17.4 Notices.

Any and all notices required or permitted under this Agreement shall be in
writing and shall be deemed given when delivered in person, by overnight courier
service, facsimile transmission or mailed by certified or registered mail,
return receipt requested, to the respective parties hereto at the addresses set
forth below, unless and until a different address has been designated by written
notice to the others.

Franchisor: Eateries, Inc.

1220 S. Santa Fe

Edmond, Oklahoma 73003

Attention.: Larry Bader,

Vice President of Franchising

Facsimile: (405) 705-5001

Franchisee:

Facsimile: _____________________

Principal Shareholder: See Schedule 17.4

17.5 Entire Agreement.

This Agreement, the documents referred to herein, and the schedules, appendices,
and/or exhibits or other attachments hereto, constitute the entire, full and
complete agreement between Franchisor, Franchisee and the Principal Shareholders
concerning the subject matter hereof, and supersede all prior agreements, no
other representations having induced Franchisee to execute this Agreement.
Except for changes or modifications of the System made from time to time by
Franchisor, which shall be set forth in the Manual or in writing, no amendment,
change, or variance from this Agreement shall be binding on the parties hereto
unless mutually agreed to by the parties hereto and executed by their authorized
officers or agents in writing .

17.6 Severability and Construction.

The parties hereto agree that:

17.6.1

Except as expressly provided to the contrary herein, each section, subsection,
part, term and/or provision of this Agreement shall be considered severable; and
if, for any reason, any section, subsection, part, term and/or provision herein
is determined to be invalid and contrary to, or in conflict with, any existing
or future law or regulation by a court or agency having valid jurisdiction, such
shall not impair the operation of, or have any other effect upon, such other
sections, parts, terms and/or provisions of this Agreement as may remain
otherwise intelligible, and the latter shall continue to be given full force and
effect and bind the parties hereto; and said invalid sections, subsections,
parts, terms and/or provisions shall be deemed not to be a part of this
Agreement;

17.6.2

Unless otherwise specified in this Agreement, nothing in this Agreement is
intended, nor shall be deemed, to confer upon any person or legal entity other
than Franchisor or Franchisee and such of their respective successors and
assigns as may be contemplated by Article X hereof, any rights or remedies under
or by reason of this Agreement;

17.6.3

Franchisee and Principal Shareholders expressly agree to be bound by any promise
or covenant imposing the maximum duty permitted by law which is subsumed within
the terms of any provision hereof, as though it were separately articulated in
and made a part of this Agreement, that may result from striking from any of the
provisions hereof any portion or portions which a court may hold to be
unreasonable and unenforceable in a final decision to which Franchisor is a
party, or from reducing the scope of any promise or covenant to the extent
required to comply with such a court order;

17.6.4

All captions in this Agreement are intended solely for the convenience of the
parties hereto, and none shall be deemed to affect the meaning or construction
of any provision hereof;

17.6.5

All references herein to the masculine, neuter, or singular shall be construed
to include the masculine, feminine, neuter, or plural, where applicable, and all
acknowledgments, covenants, agreements and obligations herein made or undertaken
by Franchisee shall be deemed jointly and severally undertaken by all the
Principal Shareholders on behalf of Franchisee; and

17.6.6

This Agreement may be executed in several counterparts, and each copy so
executed shall be deemed an original.

17.7 Remedies.

All rights and remedies of Franchisor shall be cumulative and not alternative,
in addition to and not exclusive of any other rights or remedies which are
provided for herein or which may be available at law or in equity in case of any
breach, failure or default or threatened breach, failure or default of any term,
provision or condition of this Agreement. Franchisor's rights and remedies shall
be continuing and shall not be exhausted by any one or more uses thereof, and
may be exercised at any time or from time to time as often as may be expedient;
and any option or election to enforce any such right or remedy may be exercised
or taken at any time and from time to time. The expiration or earlier
termination of this Agreement shall not discharge or release Franchisee or any
Principal Shareholder from any liability or obligation then accrued, or any
liability or obligation continuing beyond, or arising out of, the expiration or
earlier termination of this Agreement.

17.8 Force Majeure.

As used in this section, the term "Force Majeure" shall mean any act of God,
strike, lock-out or other industrial disturbance, war (declared or undeclared),
riot, epidemic, fire or other catastrophe, act or inaction of any government and
any other similar cause not within the control of the party hereto affected
thereby. If the performance of any obligation by any party hereto under this
Agreement is prevented or delayed by reason of Force Majeure, which cannot be
overcome by use of normal commercial measures, the parties hereto shall be
relieved of their respective obligations to the extent such parties are
respectively necessarily prevented or delayed in such performance during the
period of such Force Majeure. The party whose performance is affected by an
event of Force Majeure shall give prompt notice of such Force Majeure event to
the other parties by facsimile, telephone or telegram (in each case to be
confirmed in writing), setting forth the nature thereof and an estimate as to
its duration, and shall be liable for failure to give such timely notice only to
the extent of damage actually caused.

17.9 Applicable Law.

This Agreement takes effect upon its acceptance and execution by Franchisor in
Oklahoma and shall be interpreted and construed under the laws thereof, which
laws shall prevail in the event of any conflict of laws, except to the extent
governed by the United States Trademark Act of 1946, as amended.

17.10 Final and Binding Arbitration.

Except as provided in Section 17.11, any dispute, controversy or claim arising
out of or relating to this Agreement, or the breach, termination, or invalidity
of it, shall be settled by arbitration to be held in Oklahoma City, Oklahoma, in
accordance with and through the AAA Commercial Arbitration Rules in effect as of
the Effective Date, or such other rules to which the parties hereto may agree or
the law may require. The arbitration shall be conducted by a single arbitrator
selected by the American Arbitration Association. All proceedings of the
arbitration, including arguments and briefs, shall be conducted in English. The
arbitrator shall take evidence directly from witnesses and documents as
presented by the parties; all witnesses shall be made available for cross
examination. The arbitrator shall render a written award within three months of
the request for arbitration, and such award shall be final and binding upon the
parties hereto, non-appealable and without recourse. Judgment upon the award may
be entered in any court of record of competent jurisdiction, or application may
be made to such court for judicial confirmation of the award and an order of
enforcement, as the law of such jurisdiction may require or allow. The
prevailing party or parties (as determined by the arbitrator) shall be entitled
to reimbursement from the other party(ies) of the costs of the prevailing
party's own experts, evidence and legal counsel in any arbitration held under
this provision and in any action filed for judicial confirmation of the award.
The non-prevailing party(ies) shall also bear the expenses of arbitration.

17.11 Injunctive Relief; Venue.

Notwithstanding the provisions of Section 17.10, nothing herein contained shall
bar Franchisor's right to obtain injunctive relief against threatened conduct
that will cause it loss or damages, under the usual equity rules, including the
applicable rules for obtaining restraining orders and preliminary injunctions.
In that event, such action may be brought by Franchisor in the federal or state
judicial district in which Franchisor's principal place of business is located
or in any other court of competent jurisdiction.

Franchisor, Franchisee and the Principal Shareholders irrevocably consent to the
arbitration and venue provisions of Sections 17.10 and 17.11 and each submits to
the jurisdiction and venue in such arbitration and court(s) and waives any
defenses thereto. Each party hereto agrees to service of process in any such
proceeding by either personal delivery against receipt, telegram, telex,
facsimile, or registered mail (with postage prepaid and return receipt
requested) to the addresses set forth Section 17.4 and the attached Schedule
17.4, or any substitute addresses indicated by notice. A consent, notice or
waiver transmitted by telegram, telex, or facsimile will be deemed to have been
delivered two days after transmission and if mailed, seven days after mailing.

17.12 Legal Fees.

In the event that any party to this Agreement initiates any legal proceeding to
construe or enforce any of the terms, conditions and/or provisions of this
Agreement, including, but not limited to, its termination provisions, or to
obtain damages or other relief to which any party may be entitled by virtue of
this Agreement, the prevailing party or parties shall be paid its reasonable
attorneys' fees and expenses by other party or parties.

17.13 Acknowledgments.

Franchisee and the Principal Shareholders acknowledge, and represent and warrant
to Franchisor, that:

17.13.1

Franchisee and the Principal Shareholders have conducted an independent
investigation into the ownership and operation of the Restaurant, and recognize
that the business venture contemplated by this Agreement involves business risks
and that its success will be largely dependent upon the ability of Franchisee
and the Principal Shareholders as independent business operators and their
active participation in the daily affairs of the Restaurant. Franchisor
expressly disclaims the making of, and Franchisee and the Principal Shareholders
acknowledge that they have not received, any warranty or guarantee, express or
implied, as to the potential volume, profits, or success of the business venture
contemplated by this Agreement;

17.13.2

Franchisee has received a copy of this complete Agreement, the attachments,
schedules and/or exhibits hereto, and all agreements relating hereto, if any,
and the Development Agreement and all agreements relating thereto, at least five
business days prior to the date on which this Agreement was executed. Franchisor
further acknowledges that it has received the disclosure document required by
the Federal Trade Commission at the earliest of (1) the first personal meeting
held for the purpose of discussing the sale or possible sale of a franchise; or
(2) ten business days prior to the date on which this Agreement was executed; or
(3) ten business days before the payment of any consideration in connection with
the sale of the franchise contemplated hereunder;

17.13.3

Franchisee and the Principal Shareholders have read and understood this
Agreement, the attachments, schedules, and/or exhibits hereto, and any other
agreements related to this Agreement, including, without limitation, the
Development Agreement and all agreements relating thereto, if any, and that
Franchisor has accorded Franchisee and the Principal Shareholders ample time and
opportunity to consult with advisors of their own choosing about the potential
benefits and risks of entering into this Agreement; and

17.13.4

Franchisee and the Principal Shareholders understand that every detail of the
business franchised hereunder is important to Franchisee, Franchisor, the
Principal Shareholders and other franchisees in order to develop and maintain
high and uniform operating standards for the System and the Concept, to increase
the demand for the services and products sold by Franchisor and all franchisees
of Franchisor, and to protect Franchisor's reputation and goodwill.

IN WITNESS WHEREOF, the parties hereto have duly executed, sealed and delivered
this Agreement on the day and year first above written.

FRANCHISOR: EATERIES, INC.

 

By:

Laurence Bader

Vice President of Franchising

 

FRANCHISEE:

 

By:

PRINCIPAL SHAREHOLDER(S):

Name:

Name:

SCHEDULE A

[Street address for the Restaurant; for single franchise agreement]

SCHEDULE 15.4

to the Franchise Agreement between
Eateries, Inc. and

The directors, officers, managers and equity holders of Franchisee are:

Name of Director/Officer/Manager

Title

 

 

 

 

 

Class and Number

of Shares or Other

Name of Equity-holder

Units of Ownership

 

 

SCHEDULE 17.4

to the Franchise Agreement between

Eateries, Inc. and _________________

Name of Principal Shareholder

Address and Telephone Number

 

APPENDIX A

CONFIDENTIALITY AGREEMENT

THIS AGREEMENT is made this ___ day of __________, _____, by and between
_____________________________, a ______________ corporation ("Franchisee") and
__________________, an individual employed by Franchisee ("Employee ").

WITNESSETH:

WHEREAS, EATERIES, INC. ("Franchisor") is the owner of all rights in and to a
unique system for the development and operation of restaurants (the "System"),
which includes proprietary rights in valuable trade names, service marks and
trademarks, including the service mark Garfield's Restaurant & Pub and
variations of such mark, designs and color schemes for restaurant premises,
signs, equipment, procedures and formulae for preparing food and beverage
products, specifications for certain food and beverage products, inventory
methods, operating methods, financial control concepts, a training facility and
teaching techniques; and

WHEREAS, Franchisee is the owner of the exclusive right to develop restaurants
franchised by Franchisor which utilize the System ("Restaurants") for the period
and in the territory described in the Development Agreement between Franchisor
and Franchisee (the "Development Agreement"); and

WHEREAS, Franchisee has entered into a Franchise Agreement with Franchisor
covering the franchised restaurant (the "Restaurant") at which Employee is
employed; and

WHEREAS, Franchisee and Employee acknowledge that Franchisor' information as
described above was developed over time at great expense, is not generally known
in the industry and is beyond Franchisee's own present skills and experience,
and that to develop it itself would be expensive, time-consuming and difficult,
that it provides a competitive advantage and will be valuable to Franchisee in
the development of its business, and that gaining access to it was therefore a
primary reason why Franchisee entered into the Development Agreement; and

WHEREAS, in consideration of Franchisor's confidential disclosure to Franchisee
of these trade secrets, Franchisee has agreed to be obligated by the terms of
Franchise Agreement and/or the Development Agreement to execute, with each
employee of Franchisee who will have supervisory authority over the development
or operation of the Restaurant and/or other Restaurants in the Territory
described in the Development Agreement, a written agreement protecting
Franchisor' trade secrets and confidential information entrusted to Employee;

NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained herein, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto, intending to be legally bound, covenant and agree as
follows:

(1) The parties hereto acknowledge and agree that Employee is or will be
employed in a supervisory or managerial capacity and in such capacity will have
access to information and materials which constitute trade secrets and
confidential and proprietary information. The parties further acknowledge and
agree that any actual or potential direct or indirect competitor of Franchisor,
or of any of its Franchisees, shall not have access to such trade secrets and
confidential information.

(2) The parties hereto acknowledge and agree that the System includes trade
secrets and confidential information which Franchisor has revealed to Franchisee
in confidence, and that protection of said trade secrets and confidential
information and protection of Franchisor against unfair competition from others
who enjoy or who have had access to said trade secrets and confidential
information are essential for the maintenance of goodwill and special value of
the System.

(3) Employee agrees that he or she shall not at any time (i) appropriate or use
the trade secrets incorporated in the System, or any portion thereof, for use in
any business which is not within the System; (ii) disclose or reveal any portion
of the System to any person, other than to Franchisee's employees as an incident
of their training; (iii) acquire any right to use, or to license or franchise
the use of any name, mark or other intellectual property right which is or may
be granted by any franchise agreement between Franchisor and Franchisee; or (iv)
communicate, divulge or use for the benefit of any other person or entity any
confidential information, knowledge or know-how concerning the methods of
development or operation of the Restaurant or other Restaurants which may be
communicated to Employee or of which Employee may be apprised by virtue of
Employee's employment by Franchisee. Employee shall divulge such confidential
information only to such of Franchisee's other employees as must have access to
that information in order to operate the Restaurant or other Restaurants or to
develop a prospective site for the Restaurant or other Restaurants. Any and
information, knowledge and know-how, including, without limitation, drawings,
materials, equipment, specifications, techniques and other data, which
Franchisor designates as confidential, shall be deemed confidential for purposes
of this Agreement.

(4) Employee further acknowledges and agrees that the Garfield's Operations
Manual and any other materials or manuals provided or made available to
Franchisee by Franchisor (collectively, the "Manuals") are loaned by Franchisor
to Franchisee for limited purposes only, remain the property of Franchisor, and
may not be reproduced, in whole or in part, without the written consent of
Franchisor.

(5) Employee agrees to surrender to Franchisee or to Franchisor each and every
copy of the Manuals and any other information or material in his/her possession
or control upon request, upon termination of employment or upon completion of
the use for which said Manuals or other information or material may have been
furnished to Employee.

(6) The parties hereto agree that in the event of a breach of this Agreement,
Franchisor would be irreparably injured and would be without an adequate remedy
at law. Therefore, in the event of a breach or a threatened or attempted breach
of any of the provisions hereof, Franchisor shall be entitled to enforce the
provisions of this Agreement as a third-party beneficiary hereof and shall be
entitled, in addition to any other remedies which it may have hereunder at law
or in equity (including the right to terminate the Development Agreement), to a
temporary and/or permanent injunction and a decree for specific performance of
the terms hereof without the necessity of showing actual or threatened damage,
and without being required to furnish a bond or other security.

(7) If any court or other tribunal having jurisdiction to determine the validity
or enforceability of this Agreement determines that it would be invalid or
unenforceable as written, the provisions hereof shall be deemed to be modified
or limited to such extent or in such manner necessary for such provisions to be
valid and enforceable to the greatest extent possible.

IN WITNESS WHEREOF, the undersigned have entered into this Agreement as of the
date first above written.

FRANCHISEE EMPLOYEE

By: By:

Name: Name:

Title:

APPENDIX B
AUTHORIZATION AGREEMENT FOR PRE-ARRANGED PAYMENTS

COMPANY NAME

COMPANY I.D. NO.

I (WE) HEREBY AUTHORIZE EATERIES, INC., HEREINAFTER CALLED COMPANY, TO INITIATE
DEBIT ENTRIES TO OUR CHECKING ACCOUNT INDICATED BELOW AND THE DEPOSITORY NAMED
BELOW, HEREINAFTER CALLED DEPOSITORY, TO DEBIT THE SAME TO SUCH ACCOUNT.

DEPOSITORY NAME

BRANCH

CITY ______________________________STATE_________ZIP

TRANSIT/ABA NO.____________________ACCT. NO.

THIS AUTHORITY IS TO REMAIN IN FULL FORCE AND EFFECT UNTIL COMPANY AND
DEPOSITORY HAS RECEIVED WRITTEN NOTIFICATION FROM ME (OR EITHER OF US) OF ITS
TERMINATION IN SUCH TIME AND IN SUCH MANNER AS TO AFFORD COMPANY AND DEPOSITORY
A REASONABLE OPPORTUNITY TO ACT ON IT.

NAME_______________________________________ ID#

DATE___________________ SIGNED

SIGNED