Exhibit 10.1

Development Agreement #618533

Northeast Houston, Texas

FRANCHISE DEVELOPMENT AGREEMENT

(Exclusive)

THIS FRANCHISE DEVELOPMENT AGREEMENT (“Agreement”) is made and entered into this
20th day of August, 2014, by and between EL POLLO LOCO, INC., a Delaware
corporation, with its principal place of business at 3535 Harbor Blvd, Suite
100, Costa Mesa, California 92626 (referred to herein as “El Pollo Loco” or
“Franchisor”) and ANIL YADAV, an individual and ATOUR EYVAZIAN, an individual
with their principal place of business at 21734 Provincial Blvd., #250, Katy, TX
77450 (collectively, “Developer”).

RECITALS

A. Franchisor owns certain proprietary and other property rights and interests
in and to the “El Pollo Loco®” trademark and service mark, and such other
trademarks, service marks, logo types, insignias, trade dress designs and
commercial symbols as Franchisor may from time to time authorize or direct
Developer to use in connection with the operation of a(n) “El Pollo Loco®”
restaurant (the “El Pollo Loco® Marks”). Franchisor has a distinctive plan for
the operation of retail outlets for the sale of fire-grilled food items and
related products, which plan includes but is not limited to the El Pollo Loco®
Marks and the Operations Manual (the “Manual”), policies, standards, procedures,
employee uniforms, signs, menu boards and related items, and the reputation and
goodwill of the El Pollo Loco® chain of restaurants (collectively, the “El Pollo
Loco® System”).

B. Developer represents that it is experienced in and has independent knowledge
of the nature and specifics of the restaurant business. Developer represents
that in entering into this Agreement it has relied solely on its personal
knowledge and has not relied on any representations of Franchisor or any of its
officers, directors, employees or agents, except those representations contained
in any legally required Franchise Disclosure Document delivered to Developer.

C. Developer desires to obtain development rights for multiple restaurants under
the El Pollo Loco® System (each, an “El Pollo Loco® Restaurant”) from Franchisor
within a specified geographical territory (the “Territory”) specified in Exhibit
“A” attached hereto and made a part hereof.

D. Franchisor is willing to grant the exclusive right to develop and open El
Pollo Loco® Restaurant(s) within the Territory referenced in Exhibit “A.”

E. Developer and Franchisor are entering simultaneously with this Agreement, a
Franchise Development Agreement #618534 for the San Antonio, Texas territory
(“San Antonio Agreement”).

 

Exhibit G of Multi-State Disclosure Document Control No. 040114 – Franchise
Development Agreement

Page 1 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

NOW, THEREFORE, in consideration of the mutual covenants and obligations herein
contained, the parties hereto agree as follows:

1. Development Rights in Territory.

1.1 Franchisor hereby grants to Developer, subject to the terms and conditions
of this Agreement and specifically Section 2.20 hereof, and as long as Developer
shall not be in default of this Agreement or any other development, franchise or
other agreement between Developer and Franchisor, exclusive development rights
to establish and operate twelve (12) franchised restaurants, and to use the El
Pollo Loco® System solely in connection therewith, at specific locations to be
designated in separate Franchise Agreement(s) (the “Franchise Agreements”).
Developer expressly acknowledges that the exclusive rights granted herein apply
only to the right to develop new restaurants in the Territory, and no exclusive
territory or radius protection for the term of any Franchise Agreement is
granted herein. The Franchise Agreements (and all ancillary documents attached
as Exhibits to the Franchise Agreement, including the Personal Guarantee)
executed in accordance with this Agreement shall be in the form currently in use
by Franchisor at the time of execution of the Franchise Agreement and shall be
executed individually by each person, partner, member or shareholder.

1.2 Prior to or concurrent with the execution of this Agreement, Developer shall
meet with Franchisor’s development representatives and prepare a market
development plan for the units to be constructed and opened by Developer in the
Territory (identifying specific key areas, key intersections and trade areas in
the Territory) and all development pursuant to this Agreement shall be in
accordance with this plan (the “Market Plan”). The Market Plan shall include
proposed areas where sites may be located, ranking and prioritization of site
locations and other information customarily used by market planners in the
restaurant industry. Developer and Franchisor shall jointly approve the Market
Plan.

2.0 Limitation on Development Rights.

2.1 Developer must submit one or more sites for approval, enter into binding
leases or purchase agreements and open to the public the number of El Pollo
Loco® Restaurants on such approved sites each calendar year as required on the
Development Schedule, all as set forth on Exhibit “B” attached hereto and made a
part hereof.

2.2 For purposes of the Development Schedule in Exhibit “B”, no credit will be
given for the development of El Pollo Loco® Restaurants outside the Territory,
regardless of the fact that Developer may, upon proper application, obtain from
Franchisor an El Pollo Loco® Franchise Agreement (“Franchise Agreement”) for any
such development.

2.3 Although this Agreement affords the Developer the right to develop and open
El Pollo Loco® restaurants within the Territory, as set forth on Exhibit “A”,
all Restaurants developed under this Agreement must be duly licensed through
individual Franchise

 

Exhibit G of Multi-State Disclosure Document Control No. 040114 – Franchise
Development Agreement

Page 2 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

Agreements. Developer will execute El Pollo Loco’s then standard Franchise
Agreement in use at the time of execution for each restaurant developed under
this Agreement, and agrees to pay Franchisor the current fees, royalties and
other required payments in accordance with the Franchise Disclosure Document
then in effect. Execution of the appropriate Franchise Agreement and payment of
the initial franchise fee and/or any other required fees must be accomplished
prior to the commencement of construction at any site.

2.4 Developer must satisfy all Franchisor’s financial and operational criteria
then in effect and in addition, if Developer is also a Franchisee of one or more
El Pollo Loco Restaurants, Franchisee must also be in good standing with
Franchisor and satisfy all Franchisor’s financial and operational criteria then
in effect prior to El Pollo Loco’s execution of each standard Franchise
Agreement issued pursuant to this Agreement. Developer shall provide Franchisor
with current information pertaining to Developer’s financial condition and the
financial condition of the majority and managing members/partners/shareholders
of Developer at any time upon El Pollo Loco’s request and in no event less than
once annually. Developer acknowledges that, among other things, it will be
required to submit annual financial statements of Developer and personal
financial statements of each of its principal owners and Managing Members to be
eligible for financial approval by El Pollo Loco. In the event any of the
majority owners of Developer shall also be the Managing Members and/or majority
owners of any other entity which is a franchisee of El Pollo Loco, then each
such franchisee entity must be operationally and financially approved by
Franchisor before approval for expansion will be granted to any one franchisee
entity. “Managing Members” shall be any individuals who are designated as the
primary decision makers or general managers of the franchisee entity and those
individuals who (individually or collectively) own at least 51% interest in the
franchisee entity.

2.5 Developer shall use its best efforts to retain qualified real estate
professionals (including licensed brokers) to locate proposed sites for the El
Pollo Loco® Restaurant(s). Developer shall submit proposed sites for each El
Pollo Loco® Restaurant unit to be developed under this Agreement for acceptance
by Franchisor’s Real Estate Site Approval Committee (“RESAC”), together with
such site information as may be reasonably required by Franchisor to evaluate
the proposed site, no later than the dates set forth in Exhibit “B” as RESAC
Submittal Dates, the first of which shall be approximately ninety (90) days
after execution of this Agreement. Should the site be accepted by RESAC, it will
be referred to as the “Approved Site”. Such acceptance will expire one (1) year
from the RESAC approval date. Franchisor may require, as a condition to its
approval of a site, a “Market Study”, which shall include a site description and
analysis, traffic and other demographic information and an analysis of the
impact of the proposed site on other franchise restaurants surrounding or within
the vicinity of such proposed site all in such format as the Franchisor may
require. All such analyses, information and studies shall be prepared at the
sole cost and expense of Developer. (Note that in certain circumstances, you may
also be required to pay for an Impact Analysis if any existing franchisees
within a certain radius of your proposed Restaurant site object to the site you
selected.)

 

Exhibit G of Multi-State Disclosure Document Control No. 040114 – Franchise
Development Agreement

Page 3 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

2.6 Franchisor shall send representatives to evaluate proposed site(s) for each
El Pollo Loco® Restaurant to be developed under this Agreement, and Franchisor
will do so at its own expense for the first two proposed sites for each El Pollo
Loco® Restaurant. If Franchisee proposes, and Franchisor evaluates, more than
two sites for each El Pollo Loco® Restaurant, then Franchisee shall reimburse
Franchisor for the reasonable costs and expenses incurred by Franchisor’s
representatives in connection with the evaluation of such additional proposed
site(s), including, without limitation, the costs of lodging, travel, meals and
wages. In addition, as a condition to reviewing a proposed site for the
Restaurant, Franchisor may require Franchisee to pay for the Market Study
referred to in Section 2.5 above.

2.7 Provided there exists no default by Developer under this Agreement or any
other development, franchise or other agreement between Franchisor and
Developer, Franchisor shall evaluate each site proposed for which Developer has
provided all necessary evaluation information, and shall promptly after receipt
of Developer’s proposal, send to Developer written notice of acceptance or
non-acceptance of the site.

2.8 If RESAC determines through its evaluation of the proposed site that the
proposed site may impact sales at any Franchisor-owned El Pollo Loco®
Restaurant, Franchisor has the right to accept or reject the proposed site,
without any obligation to discuss a possible resolution with Developer. However,
Franchisor may elect to discuss with Developer a possible resolution with regard
to the proposed site; however, if such an agreement cannot be reached,
Franchisor has the right to reject the proposed site. If RESAC determines
through its evaluation of the proposed site that the proposed site may
potentially impact sales at any existing El Pollo Loco® franchisee’s restaurant,
Franchisor shall notify Developer of the existing El Pollo Loco® franchisees’
locations and contact information. Developer must seek to obtain a written
waiver from those existing El Pollo Loco® franchisees of any claims they might
have against Developer and Franchisor with respect to the proposed new El Pollo
Loco® Restaurant, including a waiver of any development disputes procedures to
which those existing El Pollo Loco® franchisees may be entitled (e.g., those
associated with the franchise agreements of those existing El Pollo Loco®
franchisees, which may the same or different from those in the Development
Disputes Procedures that appear as Exhibit E to this Development Agreement).
Such waiver, if obtained, must be submitted along with the evaluation
information required pursuant to this Section. If Developer cannot obtain such a
waiver, and if Franchisor indicates that it is willing to allow the development
disputes procedures to proceed, Developer may decide to continue with the
development of the proposed site; however, Developer acknowledges that if
Developer continues to develop such proposed site, Developer may be subject to
the Development Disputes Procedures and such development disputes procedures
that the existing El Pollo Loco® franchisees are entitled to under those
franchisees’ franchise agreements. In addition, if the existing El Pollo Loco®
franchisees involved are subject to a version of the development disputes
procedures that would require Franchisor to pay for an impact analysis, a
mediation agreement payment or an arbitration award, Developer shall indemnify
and hold harmless Franchisor for any such costs or amounts awarded under such
development disputes procedures.

 

Exhibit G of Multi-State Disclosure Document Control No. 040114 – Franchise
Development Agreement

Page 4 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

2.9 No later than the Site Commitment Dates set forth in Exhibit “B”, Developer
shall submit for the Approved Site to Franchisor for its review and approval of:

a) A fully negotiated but unexecuted lease, which may only subject to obtaining
necessary governmental permits, for which the term with renewal options are not
less than the initial term of the Franchise Agreement. The unexecuted form of
the lease must be submitted to Franchisor to review for the required terms and
conditions listed in this Section and Section 2.10 prior to full execution of
the lease. Franchisor will promptly notify Developer upon their approval of the
inclusion of such required terms and conditions. Developer will promptly then
provide a final executed copy of the lease to Franchisor; or

b) A purchase agreement. Should Developer purchase the site using another entity
other than the franchise entity, Developer must then enter into a lease with the
Franchise entity as the lessee and the purchasing entity as the lessor and must
comply with all the requirements of Section 2.9).

2.10 Any lease to be entered into by Developer shall include the terms and
conditions set forth in Exhibit “C” which may be contained in the body of the
lease or in a signed addendum to the lease in a form approved by Franchisor.

2.11 Franchisor shall have no liability under any lease or purchase agreement
for the any El Pollo Loco® Restaurant location developed under this Agreement
and shall not guaranty Developer’s obligations thereunder. Upon approval by
Franchisor of the form of Developer’s lease and execution of a lease for a site
by Developer, Developer shall furnish to Franchisor a fully executed copy of
such lease and any amendments thereto within fifteen (15) calendar days of such
execution. Franchisor shall have no obligation to assist Developer to negotiate
its leases.

2.12 The lease or deed may not contain a non-competition covenant which
restricts Franchisor or any franchisee or licensee of Franchisor, from operating
an El Pollo Loco® Restaurant or any other retail restaurant, unless such
covenant is approved by Franchisor in writing prior to the execution by
Developer of the lease.

2.13 Each subsequent site to be developed pursuant to the Development Schedule
shall be submitted for approval by RESAC by the date set forth in Exhibit “B”.
Similarly, each fully executed lease (executed upon prior review and approval by
Franchisor) or purchase agreement (with all contingencies to Developer’s
obligations waived or satisfied, except permitting contingencies) relating to
each subsequent Approved Site shall: (1) be delivered to Franchisor on or before
the Site Commitment Date for each respective El Pollo Loco® Restaurant as set
forth in Exhibit “B” and (2) prior to the execution of your Franchise Agreements
(3) prior to the payment of your initial Franchise Fees for each site and
(4) prior to the commencement of construction of the El Pollo Loco® Restaurant.

2.14 RESAC site approval does not assure that a Franchise Agreement will be
executed. Execution of the Franchise Agreement is contingent upon Developer
completing the purchase or lease of the proposed site within sixty (60) days
after approval of the site by the Franchisor.

 

Exhibit G of Multi-State Disclosure Document Control No. 040114 – Franchise
Development Agreement

Page 5 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

2.15 Developer acknowledges that time is of the essence in this Agreement. If
Developer has not obtained approval and entered into a binding lease or purchase
agreement for each site for El Pollo Loco® Restaurants to be developed under
this Agreement by the applicable Site Commitment Date, Developer shall be in
default of its obligations under the Development Schedule. Unless both parties
agree that circumstances outside of the control of the Developer caused the
default, Franchisor shall be entitled to exercise its rights and remedies under
this Agreement, up to and including termination of this Agreement.

2.16 Developer also acknowledges that it is required pursuant to this Agreement
to open El Pollo Loco® Restaurants in the future pursuant to dates set forth in
the Development Schedule attached as Exhibit “B”. If Developer fails to meet the
opening date for any El Pollo Loco® Restaurant to be developed under this
Agreement, Developer shall be in default and, unless both parties agree that
circumstances outside of the control of the Developer caused the default,
Franchisor shall be entitled to exercise all rights and remedies available to
Franchisor set forth in Section 11.0.

2.17 Developer acknowledges that the estimated initial investment and estimated
expenses set forth in Items 6 and 7 of our Franchise Disclosure Document are
subject to and likely to increase over time, and that future El Pollo Loco®
Restaurants will likely involve a greater initial investment and operating
capital requirements than those stated in the Franchise Disclosure Document
provided to you prior to your execution of this Agreement.

2.18 Developer understands and acknowledges that in accepting Developer’s
proposed site or by granting a franchise for each approved site, Franchisor does
not in any way, endorse, warrant or guarantee either directly or indirectly the
suitability of such site or the success of the franchise business to be operated
by Developer at such site. The suitability of the site and the success of the
franchise business depend upon a number of factors outside of Franchisor’s
control, including, but not limited to, the Developer’s operational abilities,
site location, consumer trends and such other factors that are within the direct
control of the Developer.

2.19 Franchisor shall retain the right, without the need to comply with the
Procedures for Resolving Disputes Relating to the Development of New Restaurants
(attached as Exhibit 1 to the Franchise Agreement), to:

a) Open and operate El Pollo Loco® non-traditional restaurants or franchise
others to open and operate El Pollo Loco® non-traditional restaurants, at all
universities, colleges, airports, hospitals, municipal facilities, public
transportation facilities, shopping malls (not including out parcels), stadiums,
amusement parks, drug stores, supermarkets, department stores, truck stops,
hotel or motel chains, stadiums and similar locations of a “non-standard”
nature, regardless of location within or outside of the Territory;

 

Exhibit G of Multi-State Disclosure Document Control No. 040114 – Franchise
Development Agreement

Page 6 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

b) INTENTIONALLY OMITTED;

c) Sell the same or similar products (whether or not using the Marks) to
customers at retail locations, through internet, telemarketing or direct
marketing means whether within or outside of the Territory; and

d) Convert the Territory from an exclusive to a non-exclusive Territory upon
sixty (60) days written notice in the event Franchisor completes an acquisition
of ten (10) or more real estate locations (some or all of which may contain
existing restaurants) in a single transaction (“Acquisition Locations”), some or
all of which are located within the Territory, including restaurants operating
under another trade name. Notwithstanding the foregoing, Franchisor shall grant
Developer a fifteen (15) day right of first refusal to acquire Franchisor’s
rights in the Acquisition Locations in the Territory at the same purchase price
paid by Franchisor for each location (and for each restaurant if the locations
contain existing restaurants), including reasonable closing costs. If Developer
submits written notice of its intent to exercise the right of first refusal
within the fifteen (15) days, it shall complete the transaction for the
Acquisition Locations within sixty (60) days from the date of its notice and
retain its exclusive rights to the Territory.

2.20 The purpose of this Agreement is to promote orderly incremental growth
within the El Pollo Loco® System. The acquisition of existing El Pollo Loco®
restaurants by Developer does not represent incremental growth and, therefore,
does not satisfy the terms of this Agreement pertaining to development.

2.21 Developer acknowledges that Franchisor has approved a new site for
development as an El Pollo Loco® restaurant for the location identified in
Exhibit “D” attached hereto and incorporated herein by this reference. Developer
further acknowledges that Franchisor retains discretion to approve or disapprove
any proposed location for development under this Agreement if, in Franchisor’s
reasonable judgment: (i) such proposed location is not suitable for an El Pollo
Loco® Restaurant or (ii) such proposed location will have a material adverse
effect on the profitability of another existing El Pollo Loco® location (or
approved site) in the Territory. Developer covenants to use its reasonable best
efforts to avoid selecting proposed locations that would adversely impact
pre-existing approved site in the Territory.

3.0 Development Fee.

Developer shall pay to Franchisor upon execution of this Agreement a
non-refundable Development Fee (the “Development Fee”) equal to Ten Thousand
Dollars ($10,000) in immediately available funds, for each El Pollo Loco®
Restaurant to be developed under this Agreement. The Development Fee is
consideration for this Agreement. The Development Fee is not consideration for
any Franchise Agreement and is non-refundable. The $10,000 Development Fee for
each El Pollo Loco® Restaurant shall be applied against the initial franchise
fee payable upon the execution of the Franchise Agreement applicable to such El
Pollo Loco® Restaurant. As a benefit

 

Exhibit G of Multi-State Disclosure Document Control No. 040114 – Franchise
Development Agreement

Page 7 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

of signing the Development Agreement, the Initial Fee for the second and each
subsequent restaurant developed under the same Development Agreement will be
reduced by us to $30,000. As an example, the Initial Fee for the first
restaurant developed under a Development Agreement would be $40,000 to which
$10,000 from the Development Fee will be credited. The Initial Fee for the
second and remaining restaurants developed under the same Development Agreement
would be $30,000, to which $10,000 from the Development Fee will be credited. If
this Agreement is terminated pursuant to Sections 10.0 or 11.0 below, Developer
will lose its right to develop and its Development Fee.

4.0 Term of Development Agreement.

This Agreement shall commence on the date specified in Exhibit “B”. Unless
terminated pursuant to Section 10.0 or 11.0 below, it shall expire upon the
earlier of the date specified in Exhibit “B” or upon the opening of the last El
Pollo Loco® Restaurant listed in the Development Schedule.

5.0 Territory Conflicts.

5.1 INTENTIONALLY OMITTED.

5.2 The rights granted Developer in this Agreement are subject to any prior
territorial rights of other franchisees which may now exist in the Territory,
whether or not those rights are currently being enforced. In the event of a
conflict in territorial rights, whether under a Franchise Agreement or separate
territorial or development agreement. Developer shall be free to negotiate with
any person, corporation or other entity, which claims territorial rights adverse
to the rights granted under this Agreement, for the assignment of those prior
territorial rights. For this purpose, Franchisor agrees to approve any such
assignment not in conflict with the other terms of this Agreement, subject to
the condition of any Franchise Agreements involved, and current policies
pertaining to assignments, including, but not limited to, satisfaction of all
past due debts owed to Franchisor and the execution of a General Release.

5.3 In the event of third party claims to the right to develop any Territory
other than those specified above, it is the sole responsibility of El Pollo
Loco, where the right is exclusive, to protect and maintain Developer’s right to
the Development of the Territory. However, if it appears to El Pollo Loco, in
its sole discretion, that protection of the Territory by legal action is not
advisable, whether due to the anticipation of, or the actual protracted nature
of the action, the costs involved, the uncertainty of outcome, or otherwise,
Franchisor has the right to terminate this Agreement, provided that it refunds
to Developer the balance, if any, of the Development Fee made pursuant to
Section 3.0, which has not been applied against the initial franchise fees for
Franchise Agreements to be acquired under this Agreement.

 

Exhibit G of Multi-State Disclosure Document Control No. 040114 – Franchise
Development Agreement

Page 8 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

6.0 Proprietary Rights of El Pollo Loco.

6.1 Developer expressly acknowledges El Pollo Loco’s exclusive right, title, and
interest in an to the trade name, service mark and trademark “El Pollo Loco”,
and such other trade names, service marks, and trademarks which are designated
as part of the El Pollo Loco® System (the “Marks”), and Developer agrees not to
represent in any manner that Developer has any ownership in El Pollo Loco®
Marks. This Agreement is not a Franchise Agreement. Developer may not open an El
Pollo Loco® Restaurant or use the El Pollo Loco® Marks at a particular site
until it executes a Franchise Agreement for that site. Developer’s use of the El
Pollo Loco® Marks shall be limited to those rights granted under each individual
Franchise Agreement. Notwithstanding the foregoing, El Pollo Loco® may authorize
Developer in writing to use the Marks in connection with advertising and
marketing activities in connection with this Agreement. Developer expressly
agrees that such usage is limited to those specific activities or promotional
materials approved by El Pollo Loco’s marketing department in advance. Developer
further agrees that its use of the Marks shall not create in its favor any
right, title, or interest in or to El Pollo Loco® Marks, but that all of such
use shall inure to the benefit of El Pollo Loco, and Developer has no rights to
the Marks except to the degree specifically granted by the individual Franchise
Agreement(s). Building designs and specifications, color schemes and
combinations, sign design specifications, and interior building layouts
(including equipment, equipment specification, equipment layouts, and interior
color schemes and combinations) are acknowledged by Developer to comprise part
of the El Pollo Loco® System. Developer shall have no right to license or
franchise others to use the Marks by virtue of this Agreement.

6.2 Developer acknowledges that, in connection with its execution of this
Agreement, it may receive confidential and proprietary information regarding the
El Pollo Loco® System, including but not limited to the El Pollo Loco
Operational Manual. Developer recognizes the unique value and secondary meaning
attached to the El Pollo Loco® Marks and the El Pollo Loco® System, and
Developer agrees that any noncompliance with the terms of this Agreement or any
unauthorized or improper use will cause irreparable damage to Franchisor and its
franchisees. Developer, therefore, agrees that if it should engage in any such
unauthorized or improper use during, or after, the term of this Agreement,
Franchisor shall be entitled to both seek temporary and permanent injunctive
relief from any court of competent jurisdiction in addition to any other
remedies prescribed by law.

6.3 Developer acknowledges that it will receive one (1) copy of the Operations
Manual on loan from Franchisor and that the Operations Manual shall at all times
remain the sole property of the Franchisor.

7.0 Insurance and Indemnification.

7.1 Throughout the term of this Agreement, Developer shall obtain and maintain
insurance coverage for public liability, including products liability, in the
amount of at least One Million Dollars ($1,000,000.00) combined single limit.
Developer also shall carry such worker’s compensation insurance as may be
required by applicable law.

 

Exhibit G of Multi-State Disclosure Document Control No. 040114 – Franchise
Development Agreement

Page 9 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

7.2 Franchisor shall be named as an additional insured on all such insurance
policies and shall be provided with certificates of insurance evidencing such
coverage. All public liability and property damage policies shall contain a
provision that El Pollo Loco, although named as an insured, shall nevertheless
be entitled to recover under such policies on any loss incurred by El Pollo
Loco, its affiliates, agents and/or employees, by reason of the negligence of
Developer, its principals, contractors, agents and/or employees. All policies
shall provide Franchisor with at least thirty (30) days’ notice of cancellation
or termination of coverage.

7.3 Franchisor reserves the right to specify reasonable changes in the types and
amounts of insurance coverage required by this Section 7.0. In the event that
Developer fails or refuses to obtain or maintain the required insurance coverage
from an insurance carrier acceptable to El Pollo Loco, Franchisor may, in its
sole discretion and without any obligations to do so, procure such coverage for
Developer. In such event, Developer shall pay the required premiums or reimburse
such premiums to Franchisor upon written demand.

7.4 Developer shall defend immediately upon tender of defense, at its own cost,
the Franchisor, its subsidiaries, parent and affiliates, shareholders,
directors, officers, employees and agents (collectively for this section only
known as “Franchisor”), from and against any and all claims, lawsuits,
complaints, cross complaints, arbitrations, demands, allegations, costs embraced
by indemnity, loss, costs, expenses (including attorneys’ fees), liens and
damages (collectively for this section only known as “Losses”), however caused,
and reimburse Franchisor for all costs and expenses (including attorneys’ fees)
incurred by the Franchisor in defense of any Losses, resulting directly or
indirectly from or pertaining to or arising out of, or alleged to arise out of,
or in connection with Developer’s activities under the Development Agreement,
including any labor, any employee related claims whatsoever, including, without
limitation any claims made by an employee of Developer resulting from the
employee’s training in a Franchisor operated facility or restaurant, and
including Developer’s failure for any reason to fully inform any third party of
Developer’s lack of authority to bind the Franchisor for any purpose. Such
Losses shall include, without limitation, those arising from the death of or
injury to any person or arising from damage to the property of Developer or the
Franchisor, or any third person, firm or corporation, whether or not resulting
from any strict liability imposed by fact, law, statute, or ordinance, on the
Franchisor. Developer further agrees that Developer’s duty to defend the
Franchisor is separate from, independent of and free-standing of Developer’s
duty to indemnify the Franchisor and applies whether the issue of Developer’s
negligence, breach of contract, or other fault or obligation has been
determined. Developer’s duty to defend is regardless of the outcome of liability
even if Developer is ultimately found not negligent and not dependent on the
ultimate resolution of issues arising out of any claims, lawsuits, complaints,
cross complaints, arbitration, demands, allegations, costs embraced by
indemnity, loss, costs, expenses (including attorneys’ fees), liens or damages.

 

Exhibit G of Multi-State Disclosure Document Control No. 040114 – Franchise
Development Agreement

Page 10 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

7.5 Developer shall indemnify and hold harmless the Franchisor (as defined
above) from and against any and all Losses (as defined above), however caused,
resulting directly or indirectly from or pertaining to or arising out of or in
connection with Developer’s activities under the Development Agreement,
including any labor, any employee related claims whatsoever, including, without
limitation any claims made by an employee of Developer resulting from the
employee’s training in a Franchisor operated facility or restaurant, and
including Developer’s failure for any reason to fully inform any third party of
Developer’s lack of authority to bind the Franchisor for any purpose. Such
Losses shall include, without limitation, those arising from latent or other
defects in the restaurant whether or not discoverable by Franchisor, and those
arising from the death of or injury to any person or arising from damage to the
property of Developer or the Franchisor, or any third person, firm or
corporation, whether or not resulting from any strict liability imposed by fact,
law, statute, or ordinance, on the Franchisor. Developer further agrees to
indemnify and hold harmless Franchisor from all said Losses and shall pay for
and be responsible for all said Losses, however caused, whether by any
individual, employee, third person or party, vendor, visitor, invitee,
trespasser or any firm or corporation whatsoever, whether caused by or
contributed to by Franchisor, the combined conduct of Developer and Franchisor,
or active or passive negligence of Franchisor, but for the sole negligence or
willful misconduct of Franchisor.

7.6 The provisions of this Section 7.0 shall expire as to each El Pollo Loco®
Restaurant to be developed under this Agreement upon execution of a Franchise
Agreement for such El Pollo Loco® Restaurant. The provision of the Franchise
Agreement, in particular, Section 9 thereof (insurance and Indemnification)
shall supersede this Section 7.0 and govern the rights and obligations of the
parties prospectively.

8.0 Transfer of Rights.

8.1 This Agreement shall inure to the benefit of Franchisor and its successors
and assigns, and is fully assignable by El Pollo Loco.

8.2 The parties acknowledge and agree that this Agreement is personal in nature
with respect to Developer, being entered into by Franchisor in reliance upon and
in consideration of the personal skills, qualifications and trust and confidence
reposed in Developer and Developer’s present partners, managing members or
officers if Developer is a partnership, a limited liability company or a
corporation. Therefore, the rights, privileges and interests of Developer under
this Agreement shall not be assigned, sold, transferred, leased, divided or
encumbered, voluntarily or involuntarily, in whole or in part, by operation of
law or otherwise without the prior written consent of El Pollo Loco, which
consent may be given or withheld in El Pollo Loco’s sole discretion. For
purposes of this Section, a sale of stock, or any membership or partnership
interest in Developer, or a merger or other combination of Developer shall be
considered a transfer of Developer’s interest prohibited hereunder.
Notwithstanding the foregoing, Developer shall be permitted to assign business
organizations to serve as Franchisee after Developer individually executes the
Franchise Agreements, provided the

 

Exhibit G of Multi-State Disclosure Document Control No. 040114 – Franchise
Development Agreement

Page 11 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

ownership mirrors that of Developer (e.g., Developer consists of persons A
(50%), B (25%) and C (25%). Franchisee also must be owned and controlled by the
same three (3) persons with each retaining the same percentage of ownership).
All other entity structures shall require the prior written approval of
Franchisor. Developer shall pay an administrative fee of Five Hundred Dollars
($500.00) per transfer for each permitted transfer to an Entity where such
transfer is for the convenience of ownership only and does not involve a change
of principals of the business. Where Developer desires to add new principals to
the Developer or any Franchisee entity, Developer shall pay to Franchisor an
additional Two Thousand Five Hundred Dollars ($2,500) per new principal to cover
Franchisor’s administrative costs for reviewing the application and suitability
of each new principal as participants in the franchise business.

9.0 Acknowledgment of Selected Terms and Provisions of the Franchise Agreement.

Developer represents that it has read each of the terms and provisions of the
current form of Franchise Agreement and acknowledges and is willing to agree to
each and every obligation of Franchisee thereunder (as they may be modified in
then-current forms of Franchise Agreement) including, but not limited to:

a) The obligation to deliver execute Personal Guarantees or Investor Covenants
Regarding Confidentiality and Non-Competition in connection with the execution
of each franchise agreement for El Pollo Loco® Restaurants to be developed under
this Agreement;

b) The obligation to obtain the consent of Franchisor to any security interests
to be granted by Developer in the assets or business of the El Pollo Loco®
Restaurant to lenders or other financing sources in advance of any agreement to
provide those security interests to such third parties;

c) All in-term and post-term restrictive covenants; and

d) All territorial rights, options and rights of first refusal retained by
Franchisor under the franchise agreement.

10.0 Termination by Developer; Expiration Date.

This Agreement shall terminate immediately upon El Pollo Loco’s receipt of
Developer’s notice to terminate. In such event, the Development Fee shall be
forfeited to Franchisor in consideration of the rights granted in the Territory
up to the time of termination. Notwithstanding any provision to the contrary
contained herein, unless earlier terminated by either party, this Agreement
shall expire on December 25, 2019, and all rights of Developer herein shall
cease and all unapplied or unused Development Fees paid pursuant to Section 3.0
hereof shall be forfeited to Franchisor.

 

Exhibit G of Multi-State Disclosure Document Control No. 040114 – Franchise
Development Agreement

Page 12 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

11.0 Events of Default.

11.1 The following events shall constitute a default by Developer, which shall
result in El Pollo Loco’s right to declare the immediate termination of this
Agreement.

a) Failure by Developer to meet the requirements of the Development Schedule
within the time periods specified therein, including failure by Developer to
meet the Site Commitment Date or Opening Date for each site for a El Pollo Loco®
Restaurant in a timely manner as set forth in Exhibit “B” and Section 2.0 above.

b) Any assignment, transfer or sublicense of this Agreement by Developer without
the prior written consent of El Pollo Loco.

c) Any violation by Developer of any covenant, term, or condition of any note or
other agreement (including any El Pollo Loco® Franchise Agreement) between
Developer and Franchisor (or an affiliate of El Pollo Loco), the effect of which
is to allow Franchisor to terminate (or accelerate the maturity of) such
agreement before its stated termination (or maturity) date.

d) Developer’s assignment for the benefit of creditors or admission in writing
of its inability to pay its debts generally as they become due.

e) Any order, judgment, or decree entered adjudicating Developer bankrupt or
insolvent.

f) Any petition, or application, by Developer to any tribunal for the
appointment of a trustee, receiver, or liquidator of Developer (or a substantial
part of Developer’s assets), or commencement by Developer of any proceedings
relating to Developer under any bankruptcy, reorganization, compromise,
arrangement, insolvency, readjustment of debt, dissolution, or liquidation law
of any jurisdiction, whether now or hereinafter in effect.

g) Any filing of a petition or application against Developer, or the
commencement of such proceedings, in which Developer, in any way, indicates its
approval thereof, consent thereto, or acquiescence therein; or the entry of any
order, judgment, or decree appointing any trustee, receiver, or liquidator, or
approving the petition in any such proceedings, where the order, judgment, or
decree remains unstayed and in effect for more than thirty (30) days.

h) Any entry in any proceeding against the Developer of any order, judgment, or
decree, which requires the dissolution of Developer, where such order, judgment,
or decree remains unstayed and in effect for more than thirty (30) days.

i) Developer’s voluntary abandonment of any of Developer’s restaurants.

 

Exhibit G of Multi-State Disclosure Document Control No. 040114 – Franchise
Development Agreement

Page 13 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

11.2 The following events shall constitute a default by Developer, which shall
result in El Pollo Loco’s right to declare the termination of this Agreement, if
such default is not cured within thirty (30) days after written notice by
Franchisor to Developer:

a) Developer’s default in the performance or observance of any covenant, term,
or condition contained in this Agreement not otherwise specified in Section 11.1
above.

b) The creation, incurrence, assumption, or sufferance to exist of any lien,
encumbrance, or option whatsoever upon any of Developer’s property or assets,
whether now owned or hereafter acquired, the effect of which substantially
impairs Developer’s ability to perform or observe any covenant, term, or
condition of this Agreement.

c) Refusal by Developer or Developer’s partners, members, or shareholders to
enter individually into the then current form of Franchise Agreements and
Personal Guarantee as provided in Section 1.0 above.

d) Any change, transfer or conveyance (“Transfer”) in the ownership of
Developer, which Transfer has not been approved in advance by Franchisor.
Franchisor reserves the right to approve or disapprove any Transfer in its sole
discretion.

11.3 If Franchisor is entitled to terminate this Agreement in accordance with
Sections 11.1 or 11.2 above, Franchisor shall have the right to undertake the
following action instead of terminating this Agreement:

a. Franchisor may terminate or modify any rights that Developer may have with
respect to protected exclusive rights in the Territory, as granted under
Section 1.1 above, effective ten (10) days after delivery of written notice
thereof to Developer.

If any of such rights are terminated or modified in accordance with this
Section 11.3, such action shall be without prejudice to Franchisor’s right to
terminate this Agreement in accordance with Sections 11.1 or 11.2 above, and/or
to terminate any other rights, options or arrangements under this Agreement at
any time thereafter for the same default or as a result of any additional
defaults of the terms of this Agreement.

12.0 Effect of Termination.

12.1 Immediately upon termination or expiration of this Agreement, for any
reason, all of Developer’s development rights granted pursuant to this Agreement
shall revert to El Pollo Loco. At the time of termination, only restaurants
operating or to be operated under the El Pollo Loco® System by virtue of a fully
executed Franchise Agreement shall be unaffected by the termination of this
Agreement. Franchisor shall have no duty to execute any Franchise Agreement with
Developer after the termination of this Agreement. The foregoing remedies are
nonexclusive, and nothing stated in this Section 12.0 shall prevent El Pollo
Loco’s pursuit of any other remedies available to Franchisor in law or at equity
due to the termination of this Agreement.

 

Exhibit G of Multi-State Disclosure Document Control No. 040114 – Franchise
Development Agreement

Page 14 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

12.2 Developer understands and agrees that upon the expiration or termination of
this Agreement (or in the event of an exclusive development agreement, the
failure of Developer to meet the Development Schedule and the resulting loss of
exclusive development rights), Franchisor or its subsidiaries or affiliates, in
their sole discretion, may open and/or operate restaurants in the Territory, or
may authorize or franchise others to do the same, whether it is in competition
with or in any other way affects the sales of Developer at the restaurants.

13.0 Non-Waiver.

El Pollo Loco’s consent to or approval of any act or conduct of Developer
requiring such consent or approval shall not be deemed to waive or render
unnecessary El Pollo Loco’s consent to or approval of any subsequent act or
conduct hereunder.

14.0 Independent Contractor and Indemnification.

14.1 This Agreement does not constitute Developer an agent, legal
representative, joint venturer, partner, employee or servant of Franchisor for
any purpose whatsoever, and it is understood between the parties hereto that
Developer shall be an independent contractor and is in no way authorized to make
any contract, agreement, warranty or representation on behalf of El Pollo Loco.
The parties agree that this Agreement does not create a fiduciary relationship
between them.

14.2 Under no circumstances shall Franchisor be liable for any act, omission,
contract, debt, or any other obligation of Developer. Developer shall indemnify
and save Franchisor harmless against any such claim and the cost of defending it
arising directly or indirectly from or as a result of, or in connection with,
Developer’s actions pursuant to this Agreement.

15.0 Entire Agreement.

This Agreement, including Exhibits “A”, “B”, “C” “D” and “E” attached hereto,
constitutes the entire full and complete agreement between Franchisor and
Developer concerning the subject matter hereof and supersedes any and all prior
written agreements. No other representations have induced Developer to execute
this Agreement, and there are no representations, inducements, promises, or
agreements, oral or otherwise, between the parties, not embodied herein, which
are of any force or effect with reference to this Agreement or otherwise.
Notwithstanding the foregoing, nothing in this Agreement shall disclaim or
require Developer to waive reliance on any representation that Franchisor made
in the most recent disclosure document (including its exhibits and amendments)
that Franchisor delivered to Developer or its representative, subject to any
agreed-upon changes to the contract terms and conditions described in that
disclosure document and reflected in this Agreement (including any riders or
addenda signed at the same time as this Agreement). The

 

Exhibit G of Multi-State Disclosure Document Control No. 040114 – Franchise
Development Agreement

Page 15 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

provisions of this Agreement may not be contradicted by any other statement
concerning the subject matter herein. No amendment or modification of this
Agreement shall be binding on either party unless written and fully executed.

16.0 Dispute Resolution Procedures

16.1 Resolution of Development Disputes – Any dispute that arises out of a
decision by Developer to develop a new El Pollo Loco® Restaurant within a
certain radius of another El Pollo Loco® franchisee’s El Pollo Loco® Restaurant
shall (except as noted in the next sentence) be resolved solely in the manner
contemplated by the Development Disputes Procedures, a copy of which is attached
as Exhibit “E” and which is incorporated into this Agreement. However, Developer
acknowledges and agrees that a development dispute with an El Pollo Loco®
franchisee whose El Pollo Loco® Restaurant is within a certain radius of the
proposed new El Pollo Loco® Restaurant may require a different method of
resolution, including the development disputes procedures associated with that
El Pollo Loco® franchisee’s franchise agreement, or through a court proceeding
if no development disputes procedures are associated with that El Pollo Loco®
franchisee’s franchise agreement. (However, if those development disputes
procedures require Franchisor to pay for any impact analysis, mediation
agreement payment or arbitration award, Developer agrees to indemnify Franchisor
for any such payment.)

16.2 For all other matters, the following shall apply to any controversy between
Franchisor and Developer (including its affiliates, investors, and Owners)
relating (a) to this Agreement, (b) the parties business activities conducted as
a result of this Agreement, or (c) the parties’ relationship or business
dealings with each other generally.

16.3 The parties shall meet and discuss and negotiate a resolution of the
controversy. If negotiation efforts do not succeed, the parties shall engage in
mandatory but non-binding mediation by a mediator jointly chosen by the parties
or if the parties cannot agree upon a mediator, by the American Arbitration
Association for disputes relating to locations outside of California or
Franchise Arbitration and Mediation Services, Newport Beach, California, for
disputes relating to locations within California.

16.4 A mediation meeting will be held at a place and at a time mutually
agreeable to the parties and the mediator. The Mediator will determine and
control the format and procedural aspects of the mediation meeting which will be
designed to ensure that both the mediator and the parties have an opportunity to
present and hear an oral presentation of each party’s views regarding the matter
in controversy. The parties act in good faith to resolve the controversy in
mediation.

16.5 The mediation will be held as soon as practicable after the negotiation
meeting is held. The mediator will be free to meet and communicate separately
with each party either before, during or after the mediation meeting within 60
days of demand by either party.

 

Exhibit G of Multi-State Disclosure Document Control No. 040114 – Franchise
Development Agreement

Page 16 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

16.6 At the election of the Franchisor, the provisions of this Section 16 shall
not apply to controversies relating to any fee due the Franchisor by Developer
or its affiliates, any promissory note payments due the Franchisor by Developer,
or any trade payables due the Franchisor by Developer as a result of the
purchase of equipment, goods or supplies. The provisions of this Section 16
shall also not apply to any controversies relating to the use and protection of
the El Pollo Loco Marks, the Manual or the El Pollo Loco System, including
without limitation, the Franchisor’s right to apply to any court of competent
jurisdiction for appropriate injunctive relief for the infringement of the El
Pollo Loco Marks or the El Pollo Loco System.

17.0 Severability.

Each section, part, term and/or provision of this Agreement shall be considered
severable, and if, for any reason, any section, part, term and/or provision
herein is determined to be invalid, contrary to, or in conflict with, any
existing or future law or regulation, by any court or agency having valid
jurisdiction, then such shall be deemed not to be a part of this Agreement, but
such shall not impair the operation of, or affect the remaining portions,
sections, parts, terms and/or provisions of this Agreement, which will continue
to be given full force and effect and bind the parties hereto.

18.0 Applicable Law; Choice of Forum; Waiver of Jury Trial.

This Agreement, after review by Developer and El Pollo Loco, was accepted in the
state in which Franchisor’s headquarters (currently the State of California) is
located and shall be governed by and construed in accordance with the laws of
such state. THE PARTIES AGREE THAT ANY ACTION BROUGHT BY EITHER PARTY AGAINST
EACH OTHER IN ANY COURT, WHETHER FEDERAL OR STATE, WILL BE BROUGHT WITHIN THE
STATE IN WHICH FRANCHISOR’S HEADQUARTERS (CURRENTLY THE STATE OF CALIFORNIA) IS
THEN LOCATED. THE PARTIES HEREBY WAIVE ANY RIGHT TO DEMAND OR HAVE TRIAL BY JURY
IN ANY ACTION RELATING TO THIS AGREEMENT IN WHICH THE FRANCHISOR IS A PARTY. THE
PARTIES CONSENT TO THE EXERCISE OF PERSONAL JURISDICTION OVER THEM BY SUCH
COURTS AND TO THE PROPRIETY OF VENUE OF SUCH COURTS FOR THE PURPOSE OF CARRYING
OUT THE PROVISION, AND THEY WAIVE ANY OBJECTION THAT THEY WOULD OTHERWISE HAVE
TO THE SAME. ANY ACTION BETWEEN DEVELOPER AND FRANCHISOR SHALL INVOLVE ONLY THE
INDIVIDUAL CLAIMS OF DEVELOPER AND SHALL NOT INVOLVE ANY CLASS, GROUP,
CONSOLIDATED, REPRESENTATIVE OR ASSOCIATIONAL ACTION.

19.0 Document Interpretation.

All terms and words used in this Agreement, regardless of the number and gender
in which they are used, shall be deemed and construed to include the singular or
plural tense, and any gender, whether masculine, feminine or neuter, as the
context or sense of this Agreement or any paragraph or clause may require, the
same as if such words had been fully and properly written in the appropriate
number or gender. In the

 

Exhibit G of Multi-State Disclosure Document Control No. 040114 – Franchise
Development Agreement

Page 17 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

event of a conflict in the language, terms, or conditions between this Agreement
and any Franchise Agreement issued pursuant to this Agreement, the Franchise
Agreement shall control.

20.0 Covenant Not to Compete.

20.1 To further protect the El Pollo Loco® System while this Agreement is in
effect, Developer and each officer, director, shareholder, member, manager,
partner and other equity owner, as applicable, of Developer, if Developer is an
entity, shall neither directly nor indirectly own, operate, control or any
financial interest in any other business which would constitute a “Competitive
Business” (as hereinafter defined) without the prior written consent of
Franchisor; provided further, that Franchisor may, in its sole discretion,
consent to the Developer’s continued operation of any business already in
existence and operating at the time of execution of this Agreement. In addition,
Developer covenants that, except as otherwise approved in writing by the
Franchisor, Developer shall not, for a continuous, uninterrupted period
commencing upon the expiration, termination or assignment of this Agreement,
regardless of the cause for termination, and continuing for two (2) years
thereafter, either directly or indirectly, for itself, or through or on behalf
of, or in conjunction with any person, partnership, corporation or other entity,
own, operate, control or have any financial interest in any Competitive Business
which is located or has outlets or restaurant units within the Territory. The
foregoing shall not apply to operation of an El Pollo Loco® restaurant by
Developer pursuant to a Franchise Agreement with Franchisor or the ownership by
Developer of less than five percent (5%) of the issued or outstanding stock of
any company whose shares are listed for trading on any public exchange or on the
over-the-counter market, provided that Developer does not control or become
involved in the operations of any such company. For purposes of this
Section 20.1, a Competitive Business shall mean a self-service restaurant or
fast-food business which sells chicken and/or Mexican food products, which
products individually or collectively represent more than twenty percent
(20%) of the revenues from such self-service restaurant or fast-food business
operated at any one location during any calendar quarter. A “Competitive
Business” shall not include a full-service restaurant.

20.2 In the event that any provision of Section 20.1 above shall be determined
by a court of competent jurisdiction to be invalid or unenforceable, this
Agreement shall not be void, but such provision shall be limited to the extent
necessary to make it valid and enforceable.

20.3 Developer understands and acknowledges that Franchisor shall have the right
to reduce the scope of any obligation imposed on Developer by Section 20.1,
without Developer’s consent, and that such modified provision shall be effective
upon Developer’s receipt of written notice thereof.

20.4 Developer acknowledges that violation of the covenants not to compete
contained in this Agreement would result in immediate and irreparable injury to
Franchisor for which no adequate remedy at law will be available. Accordingly,
Developer hereby consents to the entry of a preliminary and permanent injunction

 

Exhibit G of Multi-State Disclosure Document Control No. 040114 – Franchise
Development Agreement

Page 18 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

prohibiting any conduct by Developer in violation of the terms of those
covenants not to compete set forth in this Agreement. Developer expressly agrees
that it may conclusively be presumed that any violation of the terms of said
covenants not to compete was accomplished by and through Developer’s unlawful
utilization of Franchisor’s Confidential Information, know-how, methods and
procedures

21.0 Notices.

21.1 For the purpose of this Agreement, all notices shall be in writing and
shall be sent to the party to be charged with receipt thereof either (i) served
personally, or (i) sent by certified or registered United States mail, or
(ii) sent by reputable overnight delivery service, or (iv) sent by facsimile.
Notices served personally are effective immediately on delivery, and those
served by mail shall be deemed given forty-eight (48) hours after deposit of
such notice in a United States post office with postage prepaid and duly
addressed to the party to whom such notice or communication is directed. Notices
served by overnight delivery shall be deemed to have been given the day after
deposit of such notice with such service. Notices served via facsimile shall be
deemed to have been given the day of faxing such notice. All notices to El Pollo
Loco® shall be addressed as follows:

El Pollo Loco, Inc.

Attn: Legal Department

3535 Harbor Blvd, Suite 100

Costa Mesa, CA 92626

(714) 599-#### (fax)

21.2 All notices to Developer shall be faxed and mailed or sent via overnight
service to the Developer’s number and address shown on Exhibit “B”. Either party
may from time to time change its address for the purposes of this Section by
giving written notice of such change to the other party in the manner provided
in this Section. Notwithstanding anything to the contrary contained herein, the
Franchisor may deliver bulletins and updates to the Developer by electronic
means, such as by the internet (e-mail) or an intranet, if any, established by
Franchisor.

22.0 Section Headings.

The section headings appearing in this Agreement are for reference purposes only
and shall not affect, in any way, the meaning or interpretation of this
Agreement.

23.0 Acknowledgments.

23.1 Developer acknowledges that it has received a complete copy of the El Pollo
Loco® Franchise Disclosure Document, issuance date April 1, 2014 (Control
No. 040114) at least 14 calendar days prior to the date on which this Agreement
was executed by Developer or payment of any monies to the Franchisor.

 

Exhibit G of Multi-State Disclosure Document Control No. 040114 – Franchise
Development Agreement

Page 19 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

23.2 Developer acknowledges that it has read and understands this Agreement, the
Franchise Agreement, the attachments thereto and the agreements relating thereto
contained in the Franchise Disclosure Document received by Developer on May 5,
2014 and June 20, 2014, and that Franchisor has accorded Developer ample
opportunity and has encouraged Developer to consult with advisors of Developer’s
own choosing about the potential benefits and risks of entering into this
Agreement.

SIGNATURE PAGE TO FOLLOW

 

Exhibit G of Multi-State Disclosure Document Control No. 040114 – Franchise
Development Agreement

Page 20 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

IN WITNESS WHEREOF, the parties hereto have duly executed, sealed and delivered
this Agreement in duplicate original as of the date and year first written
above.

 

FRANCHISOR:

EL POLLO LOCO, INC., a Delaware corporation

By:  

/s/ Jeff Little

Name: Jeff Little Its: Vice President of Development

DEVELOPER:

ANIL YADAV, an individual

By:  

/s/ Anil Yadav

  Anil Yadav, individually

 

Statement of Ownership of Developer – Anil Yadav - 75%

ATOUR EYVAZIAN, an individual By:  

/s/ Atour Eyvazian

  Atour Eyvazian, individually

 

Statement of Ownership of Developer – Atour Eyvazian - 25%

 

Exhibit G of Multi-State Disclosure Document Control No. 040114 – Franchise
Development Agreement

Page 21 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

EXHIBIT “A” TO DEVELOPMENT AGREEMENT

TERRITORY

Northeast Houston, Texas Territory is defined as:

Starting at the intersection of I-45 and Hwy 105 extending east along Hwy 105 to
the intersection of Hwy 105 & Hwy 146, continuing south along Hwy 146 to the
intersection of Hwy 146 and US-90, extending west along US-90/Hwy 146,
continuing south along Hwy 146 to the intersection of Hwy 146 and I-10,
continuing west along I-10 to the intersection of I-10 & Hwy 59, continuing
north along Hwy 59 to the intersection of Hwy 59 and I-610, continuing west
along I-610 to the Hardy Toll Road, extending north along the Hardy Toll Road to
the intersection of the Hardy Toll Road and I-45, continuing north along I-45
and ending at the intersection of I-45 & Hwy 105 as described within the pink
boundary on the attached map.

 

Exhibit A of Development Agreement (Exhibit G of Multi-State Disclosure Document
Control No. 040114)

Page 22 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

LOGO [g778193g52f78.jpg]

 

Exhibit A of Development Agreement (Exhibit G of Multi-State Disclosure Document
Control No. 040114)

Page 23 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

EXHIBIT “B” TO DEVELOPMENT AGREEMENT

DEVELOPMENT SCHEDULE

 

FRANCHISE NAME:   

Anil Yadav, an individual

Atour Eyvazian, an individual

PRINCIPALS:    Same as Franchise Name above NOTICE ADDRESS:    ##### ##########
#####, ####, ####, ## ##### FAX NUMBER:    (###) ###-#### EMAIL:   
##############, ####################### COMMENCEMENT DATE:    August 20, 2014
EXPIRATION DATE:    December 25, 2019 DEVELOPMENT FEE (SECTION 3.0):    One
Hundred Twenty Thousand ($120,000)

DEVELOPMENT SCHEDULE FOR NORTHEAST HOUSTON, TEXAS:

 

     INITIAL
FRANCHISEE
AMOUNT1    RESAC
SUBMITTAL
DATES    SITE
COMMITMENT
DATES
(Date for delivery
of signed leases
or purchase
agreements)    OPENING DATE
OF
RESTAURANT

Restaurant #1

   $40,000.00    Jan. 31, 2015    Mar. 1, 2015    Mar. 31, 2016

Restaurant #2

   $30,000.00    Jan. 31, 2015    Mar. 1, 2015    Mar. 31, 2016

Restaurant #3

   $30,000.00    Oct. 1, 2015    Dec. 1, 2015    Dec. 28 2016

Restaurant #4

   $30,000.00    Oct. 1, 2015    Dec. 1, 2015    Dec. 28 2016

Restaurant #5

   $30,000.00    Jan. 31, 2016    Mar. 1, 2016    Mar. 31, 2017

Restaurant #6

   $30,000.00    Oct. 1, 2016    Dec. 1, 2016    Dec. 27, 2017

Restaurant #7

   $30,000.00    Oct. 1, 2016    Dec. 1, 2016    Dec. 27, 2017

Restaurant #8

   $30,000.00    Oct. 1, 2016    Dec. 1, 2016    Dec. 27, 2017

Restaurant #9

   $30,000.00    Oct. 1, 2017    Dec. 1, 2017    Dec. 26, 2018

Restaurant #10

   $30,000.00    Oct. 1, 2017    Dec. 1, 2017    Dec. 26, 2018

Restaurant #11

   $30,000.00    Oct. 1, 2018    Dec. 1, 2018    Dec. 25, 2019

Restaurant #12

   $30,000.00    Oct. 1, 2018    Dec. 1, 2018    Dec. 25, 2019

 

1  Initial Franchise Fee is the total amount applicable to this unit, without
applying the Development Fee deposited with Franchisor at the time of execution
of this Agreement.

 

Exhibit B of Development Agreement (Exhibit G of Multi-State Disclosure Document
Control No. 040114)

Page 24 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

EXHIBIT “C” TO DEVELOPMENT AGREEMENT

LEASE ADDENDUM

THIS ADDENDUM is made and entered into this      day of                 , 20    
by and between                                                      
                                        
                                         (“Lessor”) and
                                                                             
(“Lessee”).

WITNESSETH

WHEREAS, Lessor and Lessee entered into a Lease dated                         
(the “Lease”) pertaining to the real property commonly known as
                                         (the “Premises”) allowing for operation
of an El Pollo Loco Restaurant; and

WHEREAS, Lessor and Lessee desire to incorporate the following terms into the
body of the Lease;

NOW, THEREFORE, in consideration of the covenants herein and therein, the
parties hereto agree as follows:

1. Notwithstanding anything contained elsewhere in the Lease to the contrary,
Lessee may use the Premises for the purpose of conducting thereon the business
of an El Pollo Loco Restaurant and for incidental purposes related thereto,
including, but not limited to, the use of the proprietary marks and signage that
may now or hereinafter be required by Lessee’s franchisor, El Pollo Loco, Inc.
(“EPL”); provided, however, that Lessee shall not use the Premises in such a
manner as to violate any applicable law, rule, ordinance or regulation of any
governmental body which would have a material impact upon Lessee’s ability to
use the Premises. Lessor represents and warrants that use as an El Pollo Loco
restaurant is not prohibited or limited by zoning or other restrictions. In the
event use as an El Pollo Loco restaurant is hereafter prohibited or restricted
by any law, ordinance or order of any governmental authority, Lessee shall have
the right to terminate this Lease by giving Lessor thirty (30) days’ notice in
writing.

2. In the event the Franchise Agreement between EPL, as Franchisor, and Lessee,
as Franchisee, is terminated or expires prior to the expiration of the Lease,
EPL shall have the right, but not the obligation, to assume those rights and
obligations of Lessee under the Lease arising on or after the date Lessee
vacates the Premises, including taking possession of the Premises, all fixtures,
and leasehold improvements. Lessor shall give EPL written notice of Lessee’s
vacation of the Premises, and thereafter EPL shall exercise such right to assume
Lessee’s rights and obligations by written notice to Lessor mailed or delivered
not later than fifteen (15) days after EPL’s receipt of written notice from
Lessor of Lessee’s vacation of the Premises.

 

Exhibit C of Development Agreement (Exhibit G of Multi-State Disclosure Document
Control No. 040114)

Page 25 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

3. Lessor shall give EPL a copy of any and all notices of default given to
Lessee, as required to be given by Lessor to Lessee under the terms of the
Lease, at the same time such notice is given to Lessee. Within seven (7) days
after Lessee’s right to cure expires, EPL shall have the right, but not the
obligation, to cure any such default.

4. Lessor hereby grants EPL, or its designee, the option, without Lessor’s
further consent, to assume all of Lessee’s rights under the Lease, including the
right to assign or Lease, upon Lessee’s default or termination under the Lease.

5. The assumption of Lessee’s obligations under the Lease by EPL shall in no way
relieve Lessee/Franchisee from any obligations, expenses, charges or liabilities
of Lessee/Franchisee to EPL under the terms of the Franchise Agreement mentioned
above.

6. Lessor hereby grants Lessee the unrestricted right to assign or sublet the
Lease to EPL.

7. During the term of the Franchise Agreement, Lessee is prohibited from
subleasing or assigning all or any part of its occupancy rights or extending the
term or renewing the Lease without EPL’s prior written consent.

8. Lessor hereby grants EPL, or its assignee, the right to enter the Premises to
make any modifications necessary to protect the proprietary marks and the
distinctive system relating to the operation of an El Pollo Loco Restaurant,
without being deemed guilty of trespass or any other tort, to make such
modifications necessary at the reasonable expense of Lessee, which expense
Lessee shall pay EPL on demand.

9. Upon the expiration or earlier termination of the Lease for any reason,
Lessee shall, upon written demand of EPL, remove all El Pollo Loco trademarks
from all buildings, signs, fixtures and furnishings, and alter to and paint all
buildings and other improvements maintained pursuant to the Lease a design and
color which is basically different from El Pollo Loco’s authorized building
design and paint schedule. In addition to and without limiting the generality of
the foregoing, Lessee shall make any other changes which EPL deems prudent.

If Lessee shall fail to make or cause to be made any such removal, alteration or
repainting within thirty (30) days after written notice, Lessor shall give EPL
written notice of such failure, and EPL shall have the right to enter upon the
Premises, without being deemed guilty of trespass or any other tort, and make or
cause to be made such removal, alterations and repainting at the reasonable
expense of Lessee, which expense Lessee shall pay EPL on demand.

 

Exhibit C of Development Agreement (Exhibit G of Multi-State Disclosure Document
Control No. 040114)

Page 26 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

10. The Lease is contingent upon Lessee receiving all necessary franchise rights
from EPL to operate an El Pollo Loco restaurant, and do business as an El Pollo
Loco Franchise, at the Premises.

11. All notices which Lessor may serve on EPL hereunder shall be made in
accordance with the Lease to:

El Pollo Loco, Inc.

3535 Harbor Blvd., Ste. 100

Costa Mesa, CA 92626

Attention: Legal Department EPL #            

12. Notwithstanding anything to the contrary elsewhere in the Lease or any
addendum or amendment thereto, Lessor and Lessee agree that the terms and
provisions set forth in this Addendum shall control and shall not be superseded,
terminated or modified without the prior written consent of EPL, a third party
beneficiary to the Lease, and this Addendum.

IN WITNESS WHEREOF, the parties have executed this Addendum as of the date
hereinabove set forth.

LESSOR:

 

By:  

 

Name:  

 

Its:  

 

Date:  

 

LESSEE:  

By:  

 

Name:  

 

Its:  

 

Date:  

 

 

Exhibit C of Development Agreement (Exhibit G of Multi-State Disclosure Document
Control No. 040114)

Page 27 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

EXHIBIT “D” TO DEVELOPMENT AGREEMENT

APPROVED NEW SITE FOR FRANCHISOR DEVELOPMENT IN THE TERRITORY

 

Unit #

  

Address

   City    County    State

6114

   Tract (Pad) A of the Shopping Center located at FM 1960 Humble Bypass Road
West and Whitaker Drive, commly known as Deerbrook Commons, as depicted on the
Shopping Center Site Plan below    Humble    Harris    TX

 

LOGO [g778193g19e49.jpg]

 

Exhibit D of Development Agreement (Exhibit G of Multi-State Disclosure Document
Control No. 040114)

Page 28 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

EXHIBIT “E” TO DEVELOPMENT AGREEMENT

PROCEDURES FOR RESOLVING DISPUTES RELATING TO

THE DEVELOPMENT OF NEW RESTAURANTS

 

LOGO [g778193g01o86.jpg]

PROCEDURES FOR RESOLVING DISPUTES RELATING TO

THE DEVELOPMENT OF NEW RESTAURANTS

(August 2013)

 

Exhibit E of Development Agreement (Exhibit G of Multi-State Disclosure Document
Control No. 040114)

Page 29 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

 

TABLE OF CONTENTS

 

            Page  

ARTICLE I - Statement of Purpose, Nature of Procedures

     31   

SECTION 1.1. Statement of Purpose

     31   

SECTION 1.2. Nature of Procedures

     31   

ARTICLE II - Definitions

     31   

ARTICLE III - Pre-Development Communication

     34   

SECTION 3.1. Procedures Prior to Development of New Restaurant

     34   

SECTION 3.2. New Restaurant Site in Jeopardy

     37   

ARTICLE IV - Financial Support during ADR Procedures

     38   

SECTION 4.1. Conditions Precedent

     38   

SECTION 4.2. Royalty Deferral

     39   

SECTION 4.3. Quarterly

     39   

ARTICLE V - Initiation of ADR Procedures

     40   

SECTION 5.1. Initiation of ADR Procedures

     40   

SECTION 5.2. Monitoring Period

     40   

SECTION 5.3. Withdrawal from ADR Procedures

     41   

ARTICLE VI - Negotiation/Mediation Procedures

     41   

SECTION 6.1. Pre-Mediation Negotiations

     41   

SECTION 6.2. Mediation Commencement

     41   

SECTION 6.3. Mediator Selection

     41   

SECTION 6.4. Mediation Meeting

     41   

SECTION 6.5. Privileges of the Mediator

     42   

SECTION 6.6. Information Requested by Mediator

     42   

SECTION 6.7. Settlement through Mediation

     43   

SECTION 6.8. Conclusion of Mediation

     43   

ARTICLE VII - Arbitration

     43   

SECTION 7.1. Initiating Arbitration

     43   

SECTION 7.2. Arbitrator Selection and Duties

     43   

SECTION 7.3. Disclosures

     44   

SECTION 7.4. Arbitration Session

     45   

SECTION 7.5. Management Negotiations

     46   

SECTION 7.6. Arbitration Award

     46   

ARTICLE VIII - General Matters Relating To Mediation and Arbitration

     49   

SECTION 8.1. Mediators and Arbitrators

     49   

SECTION 8.2. Fees and Expenses of Mediation and Arbitration

     49   

SECTION 8.3. Confidentiality

     50   

ARTICLE IX - Miscellaneous

     50   

SECTION 9.1. Time

     50   

SECTION 9.2. Miscellaneous Matters

     51   

 

Exhibit E of Development Agreement (Exhibit G of Multi-State Disclosure Document
Control No. 040114)

Page 30 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

PROCEDURES FOR RESOLVING DISPUTES

RELATING TO THE DEVELOPMENT OF NEW RESTAURANTS

ARTICLE I

STATEMENT OF PURPOSE; NATURE OF PROCEDURES

SECTION 1.1. Statement of Purpose. Disputes may arise between EPL, its
franchisees and its prospective franchisees concerning the development of new
restaurants near existing restaurants. The objectives of the alternative dispute
resolution procedures described in this document are first, to initiate open
communication between EPL, its franchisees and prospective franchisees in order
to avoid disputes concerning the development of new restaurants, and second, to
resolve disputes concerning the development of new restaurants without resorting
to litigation.

SECTION 1.2. Nature of Procedures. The alternative dispute resolution procedures
described in these procedures are private and consensual proceedings and
constitute the sole and exclusive rights and remedies for those EPL franchisees
party to these procedures with respect to New Restaurant Disputes (as that term
is defined below). Neither such alternative dispute resolution procedures nor
any notice request or other communication delivered in connection with
alternative dispute resolution procedures constitutes an admission of any
wrongdoing.

ARTICLE II

DEFINITIONS

“ADR Deposit” means a deposit in the amount of two thousand five hundred
($2,500) United States Dollars.

“ADR Procedures” means, collectively, the alternative dispute resolution
procedures described herein, as they may be modified from time to time,
including negotiation, Mediation and the Arbitration Procedures.

“Allowable Transfer Factor” has the meaning specified in Section 7.6.2.

“Arbitration Agreement” means an agreement, substantially in the form of Exhibit
B, whereby all parties thereto agree to resolve the New Restaurant Dispute
through the ADR Procedures set forth in Articles VI and VII.

“Arbitration Procedures” means the arbitration procedures described in Article
VII.

“Arbitration Proceedings” has the meaning specified in Section 7.1.

“Arbitration Session” means an informal arbitration session conducted by the
Arbitrator.

“Arbitrator” means an arbitrator selected pursuant to Section 7.2.1.

 

Exhibit E of Development Agreement (Exhibit G of Multi-State Disclosure Document
Control No. 040114)

Page 31 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

“Designated Representative” means an employee of EPL designated by EPL to
participate in the meetings required herein.

“Developer” means either EPL or a new or proposed franchisee (whether or not a
party to an EPL Development Agreement) that desires to develop a New Restaurant
at a Target Site.

“Dispute Resolution Entity” means JAMS or another third party dispute resolution
organization designated by EPL and consented to by Objecting Franchisee and the
Developer (if other than EPL), which consent shall not be unreasonably withheld,
which is qualified to create a panel of mediators and arbitrators.

“EPL” means El Pollo Loco, Inc., a Delaware corporation.

“Existing Site” means the specific site approved by EPL for the operation of an
Objecting Franchisee’s El Pollo Loco® restaurant and which is described in a
Franchise Agreement between the Objecting Franchisee and EPL.

“Gross Percentage” has the meaning specified in Section 7.6.4.

“Independent Consultant” means one of several independent suppliers identified
by EPL who are experienced in analyzing demographics and predicting the transfer
of sales from an existing restaurant to a new restaurant.

“JAMS” means J.A.M.S./Endispute, a California corporation, organized to resolve
business disputes without resorting to litigation.

“Mediation” means the procedure of mediation described in Article VI.

“Mediation Meeting” means an informal mediation session held before the Mediator
pursuant to Section 6.4.

“Mediator” means a mediator selected pursuant to Section 6.3.

“New Restaurant” means a proposed restaurant to be developed at a Target Site.

“New Restaurant Dispute” means a dispute among any Objecting Franchisee and
Developer concerning the development of a New Restaurant at a Target Site,
including any claims asserted by such Objecting Franchisee relating to
encroachment or an unreasonable impact on sales.

“New Restaurant Rights” means that right of an Objecting Franchisee to locate a
Target Site for a New Restaurant within the Target Area.

“Notification Radius” means, with respect to each Existing Site, the lesser of
(a) two (2) miles radiating from the Existing Site or (b) the area within a ring
radiating out from the location of such Existing Site which contains, by U.S.
Government Bureau of Census survey, a population of at least 30,000 people.

 

Exhibit E of Development Agreement (Exhibit G of Multi-State Disclosure Document
Control No. 040114)

Page 32 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

The Notification Radius in prior forms of Franchise Agreements for Existing
Sites (“Prior Notification Radius”) may be different than described above. If
so, that Prior Notification Radius will control with respect to those Existing
Sites.

“Notification Radius Franchisees” means all EPL franchisees who own or lease an
Existing Site for which a Target Site falls within such franchise restaurant’s
Notification Radius and who have entered into a Franchise Agreement with EPL for
such Existing Site which contains the ADR Procedures.

“Objecting Franchisee” means any Notification Radius Franchisee that submits an
objection Notice pursuant to Section 3.1.2.

“Objection Notice” means a notice submitted by a Notification Radius Franchisee
to EPL of its objection to the development of a New Restaurant on the grounds of
“unreasonable impact” and which conforms to the requirements set forth at
Section 3.1.2.

“Preliminary Meeting” has the meaning specified in Section 3.1.2 (a).

“Pre-Mediation Negotiations” means good faith negotiations between EPL,
Developer (if other than EPL) and an Objecting Franchisee occurring prior to
Mediation.

“Prior Notification Radius” means the Notification Radius in prior forms of
Franchise Agreements for Existing Sites.

“Reduced Profit” has the meaning specified in Section 7.6.4.

“Royalty Deferral” means the conditional deferral of payment of EPL royalty fees
(but not advertising fees, such advertising fees to remain payable during such
period of conditional deferral) payable under the Franchise Agreement for the
Objecting Franchisee’s restaurant pursuant to Section 4.2.

“Impact Analysis” means a trade area study prepared by an Independent Consultant
analyzing the impact, if any, that a New Restaurant may have on an Objecting
Franchisee’s EPL Restaurant.

“Impact Analysis Deposit” means a deposit in the amount of five thousand United
States Dollars ($5,000.00).

“Target Area” means an area with distinct geographic boundaries as agreed upon
by EPL and Franchisee, such boundaries to be no greater than a two mile radius.

“Target Site” means a specific site for the development of a New Restaurant.

 

Exhibit E of Development Agreement (Exhibit G of Multi-State Disclosure Document
Control No. 040114)

Page 33 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

“Transferred Sales” has the meaning specified in Section 7.6.4.

“Year Factor” means a factor selected by the Arbitrator which will not be
(a) less than one (1) or (b) greater than eight (8).

ARTICLE III

PRE-DEVELOPMENT COMMUNICATION

SECTION 3.1. Procedures Prior to Development of New Restaurant.

3.1.1. When a Target Site for a New Restaurant is identified by EPL (whether or
not at the request of a Developer other than EPL), EPL will notify all
Notification Radius Franchisees. If the New Restaurant is to be developed by a
Developer other than EPL, EPL will also provide Developer’s address to all
Notification Radius Franchisees for notice purposes.

3.1.2. If any Notification Radius Franchisee wishes to object to the New
Restaurant on the grounds of “unreasonable impact,” it will submit to EPL (and
to Developer, if other than EPL, at the address provided by EPL pursuant to
Section 3.1.1, above) an Objection Notice within fifteen (15) days of its
receipt of the notice given by EPL pursuant to Section 3.1.1 above. The
Objection Notice must be in writing and specifically identify the Existing Site
and state the reasons why the New Restaurant will unreasonably impact the
Objecting Franchisee’s franchise restaurant at the Existing Site. The Objection
Notice must also include a summary report, in the form attached hereto as
Exhibit A, which sets forth such information as the Objecting Franchisee
believes is relevant to EPL’s decision on whether a New Restaurant should be
developed at a Target Site. Notwithstanding the foregoing, a Notification Radius
Franchisee shall not be entitled to submit an Objection Notice or otherwise
proceed hereunder if such franchisee or its affiliate will own directly or
indirectly any interest in the New Restaurant or the entity owning the New
Restaurant. In addition, an Objecting Franchisee’s rights hereunder shall
automatically terminate with respect to any franchise restaurant located within
a Notification Radius if the Franchise Agreement for such restaurant is
terminated by EPL or such Objecting Franchisee for any reason.

 

(a) Within fifteen (15) days after receipt by EPL and Developer (if other than
EPL) of an Objecting Franchisee’s Objection Notice, such Objecting Franchisee, a
representative of EPL, and Developer (if other than EPL) will meet at the
Objecting Franchisee’s offices or at such other location as is mutually agreed
upon by the Objecting Franchisee, EPL, and Developer (if other than EPL) (the
“Preliminary Meeting”). At such Preliminary Meeting the participants will review
the objections of the Objecting Franchisee and attempt to resolve any New
Restaurant Dispute.

 

(b)

(i) If, at or after the Preliminary Meeting between EPL, Objecting Franchisee,
and Developer (if other than EPL), EPL or Developer (if other than EPL) elects
to continue with the development of the New Restaurant, it shall give to the
Objecting Franchisee (and, if Developer is other than EPL, to EPL) following

 

Exhibit E of Development Agreement (Exhibit G of Multi-State Disclosure Document
Control No. 040114)

Page 34 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

  such Preliminary Meeting a written notification of that decision. Thereafter,
the Objecting Franchisee may request an Impact Analysis for each of its
franchise restaurants located at Existing Sites within the Notification Radius
and that the results of each such Impact Analysis be considered by EPL and
Developer (if other than EPL) prior to making a final decision with regard to
the New Restaurant. The Objecting Franchisee will cooperate with all reasonable
requests for information by EPL, Developer (if other than EPL) and the
Independent Consultant in the preparation of each Impact Analysis.

(ii) If an Objecting Franchisee requests an Impact Analysis, the Objecting
Franchisee and Developer (if other than EPL) will initially bear the cost of
such Impact Analysis subject to their individual right to a refund of such
amounts or a portion thereof pursuant to Section 3.1.2(b)(iv) below. If the New
Restaurant is to be developed by EPL, the Objecting Franchisee will deposit with
EPL, within five (5) business days of its receipt of the notification from EPL
described at Section 3.1.2(b)(i) above, an Impact Analysis Deposit for each of
such Objecting Franchisee’s restaurants for which an Impact Analysis is
requested, to be held in escrow by EPL. EPL will, upon receipt of the Impact
Analysis Deposit for an existing franchise restaurant of an Objecting
Franchisee, order an Impact Analysis from the Independent Consultant for such
franchise restaurant. If the New Restaurant is to be developed by a Developer
other than EPL, Objecting Franchisee and that Developer will, within five
(5) business days of the notification provided by that Developer described at
Section 3.1.2(b)(1) above, deposit with EPL an Impact Analysis Deposit for each
of the Objecting Franchisee’s restaurants for which an Impact Analysis is
requested. EPL will, upon receipt of the Impact Analysis Deposits from the
Objecting Franchisee and the Developer for an existing franchise restaurant of
an Objecting Franchisee, order an Impact Analysis from the Independent
Consultant for such franchise restaurant. A copy of the results of such Impact
Analysis (whether the New Restaurant is to be developed by EPL or a Developer
other than EPL) will be forwarded directly to the Objecting Franchisee, EPL and
Developer (if other than EPL) by the Independent Consultant. The failure by the
Objecting Franchisee (in a case where the New Restaurant is to be developed by
EPL) or the failure by either the Objecting Franchisee or the Developer (in a
case where the New Restaurant is to be developed by a Developer other than EPL)
to deposit with EPL the Impact Analysis Deposit within the allotted time frame
will relieve EPL of any obligation to order the Impact Analysis for such
franchise restaurant and/or allow EPL to delay its decision with regard to the
New Restaurant as provided below.

(iii) If the New Restaurant is to be developed by EPL, upon receipt of an Impact
Analysis Deposit from the Objecting Franchisee for an existing franchise
restaurant, EPL will delay announcing any final decision to proceed with the New
Restaurant until the fifth business day after the results of the Impact Analysis
have been submitted to EPL and the Objecting Franchisee. If the New Restaurant
is to be developed by a Developer other than EPL, EPL will delay such
announcement until the fifth (5th) business day after the results of the Impact
Analysis have been submitted to EPL, such Developer and the Objecting

 

Exhibit E of Development Agreement (Exhibit G of Multi-State Disclosure Document
Control No. 040114)

Page 35 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

Franchisee. During such five (5) business day period, EPL, Developer (if other
than EPL) and the Objecting Franchisee will consider the results of the Impact
Analysis in determining whether to continue developing the New Restaurant, in
the case of EPL or a Developer other than EPL, or pursuing its objection, in the
case of the Objecting Franchisee.

(iv) If the New Restaurant is to be developed by EPL and the Impact Analysis
relating to an existing franchise restaurant of the Objecting Franchisee
projects a transfer of sales from the Objecting Franchisee’s restaurant to the
New Restaurant of twelve percent (12%) or more, EPL will refund the Impact
Analysis Deposit relating to such restaurant to the Objecting Franchisee and EPL
will bear the cost of the Impact Analysis. If such projected transfer of sales
is less than twelve percent (12%), the Impact Analysis Deposit will be applied
against the cost of the Impact Analysis, and either (A) any shortfall between
such Impact Analysis Deposit and the actual cost of the Impact Analysis will be
paid immediately by the Objecting Franchisee or (B) any balance in the Impact
Analysis Deposit after payment of the cost of the Impact Analysis will be
returned to the Objecting Franchisee. If the New Restaurant is to be developed
by a Developer (other than EPL), and the Impact Analysis relating to an existing
franchise restaurant of the Objecting Franchisee projects a transfer of sales
from the Objecting Franchisee’s restaurant to the New Restaurant of twelve
percent (12%) or more, EPL will refund the Impact Analysis Deposit initially
paid by the Objecting Franchisee to the Objecting Franchisee and the Impact
Analysis Deposit initially paid by Developer (other than EPL) will be applied
against the cost of the Impact Analysis, and either (A) any shortfall between
the Impact Analysis Deposit initially paid by such Developer and the actual cost
of the Impact Analysis will immediately be paid by such Developer or (B) any
balance in the Impact Analysis Deposit after payment of the cost of the Impact
Analysis will be returned to such Developer. If such projected transfer of sales
is less than twelve percent (12%), EPL will refund the Impact Analysis Deposit
initially paid by the Developer (other than EPL) to such Developer, and the
Impact Analysis Deposit initially paid by the Objecting Franchisee will be
applied against the cost of the Impact Analysis, and either (A) any shortfall
between the Impact Analysis Deposit and the actual cost of the Impact Analysis
will immediately be paid by the Objecting Franchisee or (B) any balance in the
Impact Analysis Deposit after payment of the cost of the Impact Analysis will be
returned to the Objecting Franchisee.

(v) The Objecting Franchisee, EPL and Developer (if other than EPL), agree that
the results of any Impact Analysis and the twelve percent (12%) threshold
specified in Section 3.1.2 (b)(iv) above are not determinative of any matter
other than for the determination of which participant bears the cost of such
Impact Analysis, whether the Objecting Franchisee qualifies for Royalty Deferral
and interim financial support as set forth in Sections 4.2 and 4.3.2 below and
for EPL’s determination as set forth in Section 3.1.3 below, and may not be used
for any other purposes in connection with the New Restaurant Dispute, including
Mediation or the Arbitration Procedures.

 

Exhibit E of Development Agreement (Exhibit G of Multi-State Disclosure Document
Control No. 040114)

Page 36 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

3.1.3. After consideration of the information obtained by and/or provided to EPL
concerning the New Restaurant and its projected impact, if any, on the Objecting
Franchisee’s restaurant, including the Impact Analysis, if applicable, and if
Developer (if other than EPL) has indicated to EPL a desire to proceed with the
development of the New Restaurant, before EPL approves a Target Site for
development, EPL will notify in writing all Objecting Franchisees and Developer
(if other than EPL) that EPL will either:

 

  (a) not approve the Target Site; or

 

  (b) grant to an Objecting Franchisee the New Restaurant Rights; or

 

  (c) approve the development of a New Restaurant at the Target Site by the
Developer as proposed.

Notwithstanding anything contained herein to the contrary, including the right
of a Notification Radius Franchisee to submit an Objection Notice, EPL at all
times retains the absolute and unilateral right to elect any of the options
specified in Clause (a), (b) or (c) above, including, specifically, the right to
approve the development of a New Restaurant.

3.1.4 If EPL grants to an Objecting Franchisee the New Restaurant Rights in
accordance with Section 3.1.3(b) above, such Objecting Franchisee will have
fifteen (15) days after receipt of the notice given under Section 3.1.3 to
(i) accept the New Restaurant Rights by executing and delivering to EPL an
Agreement identifying the Target Area for the New Restaurant, and such other
terms as may reasonably be agreed upon by the parties; and (ii) reimburse EPL or
Developer (if other than EPL) for the cost of the Impact Analysis (if either EPL
or Developer had paid for the Impact Analysis). Objecting Franchisee will have
the right, but not the obligation, to accept the New Restaurant Rights. If such
Objecting Franchisee declines to accept the New Restaurant Rights, such
Objecting Franchisee will not be deemed to have waived any rights to participate
in the ADR Procedures.

Following the execution by Objecting Franchisee of the Agreement referenced in
this Section 3.1.4, the Developer will be treated as a Notification Radius
Franchisee if it operates a restaurant at an Existing Site and has executed a
Franchise Agreement for that site containing the ADR Procedures meeting the
criteria specified in the definition thereof.

3.1.5 If the New Restaurant is to be developed by a Developer other than EPL and
EPL elects the option at Section 3.1.3(c), above, Developer has thirty (30) days
after receipt of the Section 3.1.3 notification, to notify EPL and Objecting
Franchisee(s) of its decision whether to develop the New Restaurant.

SECTION 3.2. New Restaurant Site in Jeopardy.

3.2.1. On occasion, the Developer must commit to acquire a Target Site for a New
Restaurant prior to the results of the Impact Analysis becoming available. In
such cases, the Target Site for such New Restaurant may be considered by EPL to
be “In Jeopardy”.

 

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Control No. 040114)

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Development Agreement #618533

Northeast Houston, Texas

 

3.2.2. A Target Site may be considered “In Jeopardy” by EPL if, in its
reasonable judgment:

 

(a) the Site for the New Restaurant identified by the Developer is available for
development by others for uses other than as an El Pollo Loco® restaurant;

 

(b) the Site for the New Restaurant identified by the Developer is likely to
become unavailable for development as an El Pollo Loco® restaurant due to any
delay caused by the preparation of the Impact Analysis; or

 

(c) there is not an economically comparable alternative site available within
the geographic area surrounding the Target Site.

EPL may also consider any other relevant information in making its
determination.

3.2.3. If EPL determines that a Target Site is “In Jeopardy”, EPL may develop or
permit development by a Developer of such site without waiting for the results
of the Impact Analysis. If EPL so elects (or, if EPL permits a Developer to
develop and the Developer decides to do so), each Objecting Franchisee who has
satisfied the requirements at Section 4.1.1 and Sections 4.1.3 through 4.1.5
below will be treated as if an Impact Analysis had been conducted showing
results in excess of twelve percent (12%), and such Objecting Franchisee will be
entitled to (a) Royalty Deferral, as defined in Section 4.2 below, and
(b) quarterly meetings together with, if applicable, financial support, as
described in Section 4.3 below.

ARTICLE IV

FINANCIAL SUPPORT DURING ADR PROCEDURES

SECTION 4.1. Conditions Precedent. The provisions of Sections 4.2 and 4.3 will
apply with respect to an Objecting Franchisee if all of the following conditions
are met:

4.1.1. Such Objecting Franchisee requests an Impact Analysis and, if required by
Section 3.1.2(b)(ii) above, timely delivers the Impact Analysis Deposit.

4.1.2. The Impact Analysis projects a transfer of sales from such Objecting
Franchisee’s restaurant to the New Restaurant of twelve percent (12%) or more of
the Objecting Franchisee’s sales or, if a Target Site is in jeopardy, EPL makes
an election pursuant to Section 3.2.3 to develop the New Restaurant (or, EPL
permits a Developer to develop the New Restaurant and the Developer decides to
do so).

4.1.3. Such Objecting Franchisee is not granted the New Restaurant Rights.

4.1.4. Such Objecting Franchisee elects to pursue the ADR Procedures.

 

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Development Agreement #618533

Northeast Houston, Texas

 

4.1.5. The New Restaurant opens for business.

SECTION 4.2. Royalty Deferral. If each of the conditions listed in Section 4.1
above have been met with respect to an Objecting Franchisee and if the Objecting
Franchisee requests in writing, then commencing on the tenth (10th) day of the
first (1st) calendar month following the opening of the New Restaurant, such
Objecting Franchisee will be entitled to Royalty Deferral. The Royalty Deferral
will apply to the royalty fees payable in respect of any month for which a
decrease in sales, as compared to the same calendar month in the preceding
calendar year, has occurred and will remain in effect until the conclusion of
the ADR Procedures concerning the New Restaurant. The Royalty Deferral will be
discontinued if Franchisee does not comply with each of the requirements of or
otherwise discontinues its participation in the ADR Procedures. The granting of
such Royalty Deferral or the making of a loan described in Section 4.3. below
shall not be admissible as evidence or otherwise brought before the Mediator or
the Arbitrator in any mediation or arbitration nor be deemed proof of an
“Unreasonable Impact.”

SECTION 4.3. Quarterly Meetings.

4.3.1. As a further condition to an Objecting Franchisee’s right to continue to
receive Royalty Deferral pursuant to Section 4.2, each Objecting Franchisee and
a Designated Representative will engage in quarterly meetings. In addition, in
order for the Objecting Franchisee to continue to receive such Royalty Deferral,
at least five (5) business days prior to each such meeting, such Objecting
Franchisee will submit in writing to the Designated Representative (i) an
up-to-date profit and loss statement, balance sheet and gross sales report for
the trailing 12-month period and (ii) all other information and data relevant to
the operation, sales and/or profits of such Objecting Franchisee’s restaurant,
including any sales promotion activities.

4.3.2. If it is determined by both the Objecting Franchisee and the Designated
Representative that additional financial support is necessary to enable the
Objecting Franchisee to generate additional net cash flow in the current year
from the operation of such Objecting Franchisee’s restaurant, EPL will loan to
such Objecting Franchisee, with no interest, amounts to be determined by EPL to
be sufficient to assist such Objecting Franchisee to achieve such additional net
cash flow but not to exceed the net cash flow level obtained in the preceding
year for the comparable period. Such Objecting Franchisee will execute one or
more demand promissory notes, in the form of Exhibit C, evidencing such loan
amounts.

4.3.3. If such Objecting Franchisee receives an award pursuant to Section 7.6.3
below or if the participants reach an agreement as set forth in Section 6.1.1,
6.7.2 or 7.5.3 below, and if EPL is required by either the award or such
agreement to make a payment to the Objecting Franchisee, the amount to be paid
to such Objecting Franchisee by EPL pursuant to such Sections will be decreased
by (a) the aggregate amount deferred as Royalty Deferrals pursuant to
Section 4.2 above plus (b) the aggregate unpaid principal amount of all loans
made pursuant to Section 4.3.2 above. If such Objecting Franchisee does not
receive an award to be paid by EPL (i.e., either no award or an

 

Exhibit E of Development Agreement (Exhibit G of Multi-State Disclosure Document
Control No. 040114)

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Development Agreement #618533

Northeast Houston, Texas

 

award to be paid by a Developer other than EPL), Objecting Franchisee must pay
Franchisor the aggregate amount deferred as Royalty Deferrals within ten
(10) days of receipt of the ruling and pay Franchisor in accordance with the
loan documents the aggregate unpaid principal amount of all loans made pursuant
to Section 4.3.2 (unless an agreement as set forth in Section 6.1.1, 6.7.2 or
7.5.3 below modifies these obligations).

ARTICLE V

INITIATION OF ADR PROCEDURES

SECTION 5.1. Initiation of ADR Procedures.

5.1.1. If EPL or Developer (if other than EPL) elects to develop the New
Restaurant, then any Objecting Franchisee, EPL and the Developer (if other than
EPL) shall proceed with premeditation negotiations and, if necessary, mediation
described in Article VI.

5.1.2. Upon conclusion of mediation as set forth in Section 6.8.1, such
Objecting Franchisee may elect to proceed with the Arbitration Procedures. If
such Objecting Franchisee elects not to proceed under the Arbitration
Procedures, it shall withdraw from the ADR Procedures in the manner provided for
at Section 5.3. If such Objecting Franchisee elects to proceed with the
Arbitration Procedures, such Objecting Franchisee, EPL, and the Developer (if
other than EPL) shall sign an Arbitration Agreement. At the time of the signing
of the Arbitration Agreement by such Objecting Franchisee, such Objecting
Franchisee will deposit with EPL the ADR Deposit to be held in escrow by EPL.
The ADR Deposit will either be (a) applied against the costs and expenses of the
Arbitration Sessions, (b) returned to such Objecting Franchisee pursuant to the
Arbitrator’s decision, or (c) applied pursuant to the agreement of the
participants. If such Objecting Franchisee elects to withdraw from the ADR
Procedures and release EPL and Developer (if other than EPL) as to the claims
relating to or arising out of the New Restaurant Dispute at any time prior to
the appointment of the Arbitrator, the ADR Deposit (less any sums expended or
committed to be expended by EPL in connection with the ADR Procedures) will be
returned to such Objecting Franchisee. The failure of such Objecting Franchisee
to execute the Arbitration Agreement or to deposit with EPL the ADR Deposit in a
timely manner will relieve EPL and Developer (if other than EPL), at EPL’s sole
discretion, of any obligation to resolve the New Restaurant Dispute through the
ADR Procedures and will be deemed a waiver by an Objecting Franchisee of its
rights hereunder.

5.1.3 Notwithstanding the text of these ADR Procedures, if the New Restaurant is
to be developed by a Developer other than EPL, EPL has the right, but not the
obligation, to participate in the ADR Procedures as described in Sections 5
through 7 (including, but not limited to, Pre-Mediation Negotiation, Mediation
Meeting, Mediation, and Arbitration Proceedings).

SECTION 5.2. Monitoring Period. After the New Restaurant is opened for business,
each of EPL and the Objecting Franchisee, at its own cost, will independently
monitor the performance of such Objecting Franchisee’s restaurant for a period
not to exceed twelve (12) months.

 

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Control No. 040114)

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Development Agreement #618533

Northeast Houston, Texas

 

SECTION 5.3 Withdrawal from ADR Procedures. An Objecting Franchisee may, at any
time, withdraw from the ADR Procedures upon delivery of a withdrawal notice to
EPL and Developer (if other than EPL) and upon such withdrawal, an Objecting
Franchisee will be deemed to release EPL and Developer (if other than EPL) as to
the claims relating to or arising out of the New Restaurant Dispute.

ARTICLE VI

NEGOTIATION/MEDIATION PROCEDURES

SECTION 6.1. Pre-Mediation Negotiations.

6.1.1. EPL, Objecting Franchisee and Developer (if other than EPL) will attempt,
in good faith, to resolve any New Restaurant Dispute by Pre-Mediation
Negotiation. Pre-Mediation Negotiation must be concluded no later than
forty-five (45) days following the first year anniversary of the opening of the
New Restaurant.

6.1.2. If the New Restaurant Dispute has not been resolved by negotiation prior
to commencement of Mediation as set forth below, the participants will submit
the New Restaurant Dispute to Mediation.

SECTION 6.2. Mediation Commencement.

6.2.1. Mediation will be mandatory and non-binding.

6.2.2. If the New Restaurant Dispute is resolved at the Preliminary Meeting, in
the Pre-Mediation Negotiations or otherwise, Mediation will be unnecessary. If,
however, the New Restaurant Dispute remains unresolved, Mediation will commence
following the opening of the New Restaurant within the time period set forth at
Section 6.4.2.

SECTION 6.3. Mediator Selection. Subject to the provisions relating to mediators
in Section 8.1, a mediator will be selected by the participants not later than
one hundred eighty (180) days after the opening of the New Restaurant from a
panel of three (3) candidates selected by the Dispute Resolution Entity from the
region where the Target Site is located. If the participants cannot agree on the
selection of a mediator from such panel, then the Dispute Resolution Entity will
select a mediator from its other panel members (but not from such panel of three
candidates) residing in the region where the Target Site is located.

SECTION 6.4. Mediation Meeting.

6.4.1. A Mediation Meeting will be held at a place and at a time agreeable to
EPL, such Objecting Franchisee, Developer (if other than EPL) and the Mediator.
The Mediator will determine and control the format and procedural aspects of the
Mediation Meeting which will be designed to ensure that both the Mediator and
the participants

 

Exhibit E of Development Agreement (Exhibit G of Multi-State Disclosure Document
Control No. 040114)

Page 41 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

have an opportunity to hear an oral presentation of the other participants’
views on the New Restaurant Dispute. The participants agree to cooperate in all
respects with the Mediator. The participants will attempt to resolve the New
Restaurant Dispute with the assistance of the Mediator.

6.4.2. The Mediation Meeting will be conducted not less than sixty (60) days nor
more than one hundred twenty (120) days following the first anniversary of the
opening of the New Restaurant.

6.4.3. The Mediator will be free to meet and communicate separately with each
participant.

6.4.4. In the event that any participant requires a substantial amount of
information in the possession of the other participant in order to adequately
prepare for the Mediation Meeting, the participants will attempt, in good faith,
to agree on procedures for the expeditious exchange of such information. If the
participants fail to agree on such procedures, the Mediator will determine such
procedures and which documents and information will be exchanged.

6.4.5. Each participant may be represented by one or more other persons,
including its counsel, one or more of its business persons, an accountant and a
financial consultant. At least one representative of each participant must have
the authority to negotiate a settlement of the New Restaurant Dispute.

SECTION 6.5. Privileges of the Mediator.

6.5.1. The Mediator may freely express his views to the participants on the
legal issues unless a participant objects to his doing so.

6.5.2. The Mediator may obtain assistance and independent expert advice with the
agreement of the participants and at the participants’ expense (which will be
shared evenly among the participants).

6.5.3. The Mediator will not be liable for any act or omission in connection
with the role of mediator, other than for his or her gross negligence or willful
misconduct.

SECTION 6.6. Information Requested by Mediator.

6.6.1. The Mediator may request that the participants present, and each
participant may elect to submit, a written summary of the New Restaurant Dispute
to the Mediator with such additional information as the Mediator deems necessary
to become familiar with the New Restaurant Dispute.

6.6.2.1 The Mediator may raise legal questions and arguments.

 

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Control No. 040114)

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Development Agreement #618533

Northeast Houston, Texas

 

SECTION 6.7. Settlement through Mediation.

6.7.1. If the participants have failed to reach an acceptable settlement prior
to the end of the Mediation Meeting, the Mediator, before concluding the
Mediation Meeting, may submit to the participants a settlement proposal based on
the same considerations to be used by an Arbitrator as set forth in Article VII
which the Mediator deems to be equitable to all participants. Each of the
participants will, in good faith, evaluate the proposal and discuss it with the
Mediator. In the event that a settlement is not reached, neither the terms of
the proposed settlement nor either party’s refusal to agree thereto shall be
admissible in the Arbitration Proceedings nor brought before the Arbitrator in
any way.

6.7.2. If a settlement is reached, the Mediator, or one of the participants at
the request of the Mediator, will prepare a settlement agreement for execution
by the participants. Such settlement agreement will be edited as necessary by
all participants until it is mutually acceptable. When a mutually acceptable
settlement agreement is completed, each participant will execute and deliver
such settlement agreement.

SECTION 6.8. Conclusion of Mediation.

6.8.1. The participants will cooperate and continue to mediate until the
Mediator terminates the Mediation. The Mediator will terminate the Mediation
upon the earlier of (i) execution of a settlement agreement, (ii) a declaration
by the Mediator that the Mediation is terminated, or (iii) completion of a full
day Mediation Meeting unless extended by agreement of the participants.

6.8.2. If an Objecting Franchisee has elected to proceed to arbitration, the
participants will proceed according to the Arbitration Procedures. If an
Objecting Franchisee does not elect to proceed to arbitration, it shall withdraw
from the ADR Procedures in the manner provided for, and under the terms, at
Section 5.3.

ARTICLE VII

ARBITRATION

SECTION 7. 1. Initiating Arbitration. The arbitration proceedings (the
“Arbitration Proceedings”) will be formally initiated by the execution of the
Arbitration Agreement as provided in Section 5.1.2. Such Arbitration Agreement
must be executed by the Objecting Franchisee and Developer (if other than EPL)
and delivered to EPL within ten (10) days following the conclusion of the
Mediation. Each Objecting Franchisee whose claim relates to the same Target Site
is entitled to a separate Arbitration Session although the Arbitrator for each
Arbitration Session will be the same.

SECTION 7.2. Arbitrator Selection and Duties.

7.2.1. A panel of three (3) arbitrator candidates from the general geographic
area where the Target Site is located will be submitted to the participants not
later than ten (10) days after the conclusion of the Mediation by the Dispute
Resolution Entity. The

 

Exhibit E of Development Agreement (Exhibit G of Multi-State Disclosure Document
Control No. 040114)

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Development Agreement #618533

Northeast Houston, Texas

 

participants will attempt to agree on an arbitrator from the panel not later
than thirty (30) business days after the execution of the Arbitration Agreement.
If the participants cannot agree on an arbitrator from such three member panel,
then the Dispute Resolution Entity will select the arbitrator from its other
panel members (but not from such panel of three candidates) residing in the
region where the Target Site is located. If the New Restaurant Dispute includes
more than one Objecting Franchisee and such Objecting Franchisees cannot
mutually agree on an arbitrator, each Objecting Franchisee will select one
arbitrator from the panel of three candidates and the Dispute Resolution Entity
will make a random selection from those arbitrator candidates selected by the
Objecting Franchisees as to which arbitrator candidate will serve as such
Objecting Franchisees’ selection.

7.2.2. The Arbitrator will assume the duties and functions described in this
Article VII and perform them in accordance with the procedures set forth herein.
The Arbitrator will also perform any additional duties and functions on which
the participants and the Arbitrator hereafter agree. The Arbitrator will execute
an Arbitrator Retention Agreement, substantially in the form of Exhibit D.

7.2.3. Except as specifically provided for in this Article VII or as agreed upon
by the participants, no participant, nor anyone acting on its behalf, will
separately communicate with the Arbitrator on any matter of substance.

7.2.4. The Arbitrator will promptly notify the participants to the Arbitration
Agreement and the Dispute Resolution Entity of his/her unavailability to conduct
the Arbitration Session, in which case a replacement Arbitrator will be selected
by the participants. If the participants cannot agree on a replacement
Arbitrator within the time specified by the Dispute Resolution Entity, then the
Dispute Resolution Entity will select the replacement Arbitrator from its other
members (but not from the original panel of three candidates) residing in the
region where the Target Site is located.

SECTION 7.3. Disclosures.

7.3.1. Not later than forty-five (45) days after the Objecting Franchisee’s and
Developer’s execution and delivery of the Arbitration Agreement, each
participant will send a summary of its position to the Arbitrator for the
purpose of familiarizing the Arbitrator with the facts and issues in the New
Restaurant Dispute with a copy being provided simultaneously to the other
participants. The participants will comply promptly with any requests by the
Arbitrator for additional documents or information relevant to the New
Restaurant Dispute.

7.3.2. The participants will attempt, in good faith, to agree on a plan for
reasonably necessary, expeditious discovery, including the deposition of any
expert or other witness of any other participant. If they fail to agree, any
participant may request a joint meeting (by telephone) with the Arbitrator, who
will assist the participants in agreeing on a discovery plan. In the absence of
an agreement by the participants, a discovery plan will be implemented by the
Arbitrator.

 

Exhibit E of Development Agreement (Exhibit G of Multi-State Disclosure Document
Control No. 040114)

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Development Agreement #618533

Northeast Houston, Texas

 

7.3.3. Before the Arbitration Session, at a time mutually agreed upon by the
participants but not later than thirty (30) days prior to the date set for the
Arbitration Session, all participants will exchange, and submit to the
Arbitrator, all documents and exhibits on which the participants intend to rely
during the Arbitration Session. In addition, the participants will exchange, and
submit to the Arbitrator, a brief that will include the following: (a) a summary
of all expert witness opinions to be expressed and the basis for such opinions,
including the data or other information relied upon in forming such opinions;
(b) the qualifications of any expert witness, including education and employment
history and a listing of other matters in which the expert witness has testified
as an expert; and (c) a summary of the statements to be made by such participant
during the Arbitration Session. The brief will not exceed fifteen (15) pages,
single-spaced or thirty (30) pages, double-spaced.

7.3.4. Each participant is under a duty to reasonably supplement or correct its
disclosures and submissions if such participant obtains information on the basis
of which it knows that the information previously disclosed was either
incomplete or incorrect when made or is no longer complete or true. The
Arbitrator will, upon request of an aggrieved participant, grant such
appropriate non-monetary relief to assure that these disclosure procedures are
followed and that adequate pre-Arbitration Session disclosure and submissions
are made as required by Section 7.3.2 and 7.3.3.

SECTION 7.4. Arbitration Session.

7.4.1. Not later than forty-five (45) days after execution of the Arbitration
Agreement, the participants and the Arbitrator will establish the date, which
will not be later than ninety (90) days after execution of the Arbitration
Agreement, and time of the Arbitration Session during which each participant
will make an oral presentation to the Arbitrator concerning the New Restaurant
Dispute. The Arbitration Session will be held before the Arbitrator at such
location as is agreed to by the participants, or failing such agreement on such
location, as specified by the Arbitrator.

7.4.2. During the Arbitration Session, each participant will make an oral
presentation of its case and each other participant will be entitled to a
rebuttal.

7.4.3. The order of oral presentations and rebuttals will be determined by
agreement between the participants, or failing such agreement, by the
Arbitrator. In order to allow each participant reasonable opportunity to present
his position, but with the express objective of reasonable brevity in mind,
unless otherwise agreed to by the participants: (a) each participant’s oral
presentation will not exceed two (2) hours, (b) each participant will have no
more than one (1) hour within which to question the other participant and its
witnesses, and (c) each participant’s rebuttal will not exceed one (1) hour. As
long as each participant is treated equally, the Arbitrator may extend or
shorten such time periods, provided that the Arbitration Session will not exceed
two (2) full days unless otherwise agreed to by the participants. The oral
presentation, questioning of participants and their witnesses and rebuttal of
any participant will not be interrupted by any other participant except the
Arbitrator.

 

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Control No. 040114)

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Development Agreement #618533

Northeast Houston, Texas

 

7.4.4. The Arbitrator will conduct and moderate the Arbitration Session. The
oral presentations and rebuttals of each participant may be made in any form,
and by any individual, as desired by such participant. Presentations by fact
witnesses and expert witnesses will be permitted. No rules of evidence,
including rules of relevance, will apply at the Arbitration Session, except that
no witness or participant will be required to disclose privileged communications
or the advice and/or work product of an attorney. Witnesses will be required to
testify under oath or affirmance.

7.4.5. Following each oral presentation by a participant, the Arbitrator may ask
questions of such participant, its counsel or any other persons appearing on its
behalf. Following the Arbitrator having the opportunity to ask questions, any
other participant or its representatives, including counsel, may ask questions
of such participant, its counsel and any other persons appearing on its behalf
which relate to the areas inquired about by the Arbitrator.

7.4.6. Each participant will be represented by at least one (1) member of its
management at the Arbitration Session who has authority to settle the Dispute.
In addition to legal counsel, each participant may have other advisors in
attendance at the Arbitration Session, provided that notice is given to all
participants and the Arbitrator of the identity of such advisors at least five
(5) days before commencement of the Arbitration Session.

SECTION 7.5. Management Negotiations.

7.5.1. At the conclusion of the rebuttals, the management representatives of
each participant will meet one or more times to try to agree on a resolution of
the New Restaurant Dispute.

7.5.2. The Arbitrator will control these negotiations. At the discretion of the
Arbitrator and with the agreement of the participants, negotiations may proceed
in the absence of counsel.

7.5.3. If a settlement is reached, the Arbitrator, or one of the participants at
the request of the Arbitrator, will prepare a settlement agreement for execution
by the participants. Such settlement agreement will be edited as necessary by
all participants until it is mutually acceptable. When a mutually acceptable
settlement agreement is completed, each participant will execute and deliver
such settlement agreement. Upon the execution and delivery of a settlement
agreement, such settlement agreement will be legally binding on the participants
and specifically enforceable by any court of competent jurisdiction.

SECTION 7.6. Arbitration Award.

7.6.1. If the participants do not resolve the New Restaurant Dispute as a result
of the negotiations between management representatives as facilitated by the
Arbitrator, then the Arbitrator will declare an impasse and render a decision or
an award as provided below. The declaring of an impasse is within the sole
discretion of the Arbitrator. The decision or award of the Arbitrator will be in
writing, dated and signed by

 

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Control No. 040114)

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Development Agreement #618533

Northeast Houston, Texas

 

the Arbitrator and will identify the prevailing participant and the amount of
the award, if any, due to the Objecting Franchisee. The Arbitrator will deliver
a copy of the decision or award to each participant either personally or by
registered or certified mail not later than thirty (30) days after the
conclusion of the Arbitration Session.

7.6.2. In rendering its decision or award, the Arbitrator will consider evidence
from the participants as to what percentage decrease, if any, in the annual
gross sales and profits of the Objecting Franchisee’s restaurant was reasonable
under the circumstances (the “Allowable Transfer Factor”). The participants may
agree on an Allowable Transfer Factor to be applied by the Arbitrator in
determining an award, if any, below.

7.6.3. The decision or award of the Arbitrator will be one of the following:

 

(a) A decision that the New Restaurant has not directly or proximately caused a
reduction in the annual gross sales of the Objecting Franchisee’s restaurant; or

 

(b) A decision that no compensation is due an Objecting Franchisee based on a
finding that the Objecting Franchisee has failed to prove that the New
Restaurant has directly or proximately caused a reduction in the annual gross
sales of the Objecting Franchisee’s restaurant in an amount in excess of the
Allowable Transfer Factor, if any; or

 

(c) A decision that compensation is due the Objecting Franchisee based on a
finding that the Objecting Franchisee has proven that the New Restaurant has
directly or proximately caused a percentage reduction in the gross sales of the
Objecting Franchisee’s restaurant in excess of the Allowable Transfer Factor, if
any.

7.6.4. If compensation is due the Objecting Franchisee pursuant to
Section 7.6.3(c), such compensation will be calculated in the following manner:

 

STEP 1: The Arbitrator makes a finding that the New Restaurant directly or
proximately caused a decrease in the gross sales of the Objecting Franchisee’s
restaurant by a certain percentage. Such percentage will relate to operations
for the first 12-month period following the opening of the New Restaurant.

 

STEP 2: The Arbitrator will subtract the Allowable Transfer Factor, if any, from
the percentage determined by the Arbitrator in Step 1 (the “Gross Percentage”).

 

STEP 3: The Arbitrator will multiply the “gross sales” of the Objecting
Franchisee’s restaurant for the 12-month period immediately preceding the
opening of the New Restaurant by the Gross Percentage calculated in Step 2 (the
“Transferred Sales”).

 

STEP 4: The Arbitrator will multiply the Transferred Sales calculated in Step 3
by twenty-eight percent (28%) (the “Reduced Profit”).

 

STEP 5: The Arbitrator will multiply the Reduced Profit calculated in Step 4 by
the Year Factor.

 

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Control No. 040114)

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Northeast Houston, Texas

 

7.6.5. The award calculated pursuant to Section 7.6.4 will be paid to the
Objecting Franchisee as follows:

 

(a) In those instances where the Arbitrator selects a Year Factor equal to one
(1), the award will be paid by EPL (if EPL developed the New Restaurant) or by
Developer (if Developer, other than EPL, developed the New Restaurant) to the
Objecting Franchisee within ten (10) business days following the date of the
Arbitrator’s award.

 

(b) In those instances where the Arbitrator selects a Year Factor that is
greater than one (1), EPL (if EPL developed the New Restaurant) or Developer (if
Developer, other than EPL, developed the New Restaurant) may elect to pay the
award to the Objecting Franchisee within the time period set forth in
Section 7.6.5(a) above or in installments, each installment equal to the amount
of the award divided by the Year Factor, the Year Factor to represent the number
of years over which such award is to be paid. The first installment of the award
will be paid within ten (10) business days following the date of the
Arbitrator’s award. Each subsequent installment will be paid annually within ten
(10) business days of the anniversary of the date of the Arbitrator’s award. If
EPL (if EPL developed the New Restaurant) or Developer (if Developer, other than
EPL, developed the New Restaurant) elects to pay the award in installments as
provided for in this Section 7.6.5(b), EPL (if EPL developed the New Restaurant)
or Developer (if Developer, other than EPL, developed the New Restaurant) shall
deliver to Objecting Franchisee a promissory note in the form of Exhibit E. The
outstanding balance of such promissory note shall bear interest at an interest
rate equal to the prime rate published in the Wall Street Journal on the date
the award is granted.

 

(c) If Objecting Franchisee has been awarded an Arbitrator’s award through
development disputes procedures associated with that Objecting Franchisee’s
franchise agreement which would require the award and/or other payments to be
paid by EPL and the New Restaurant is to be developed by a Developer other than
EPL, Developer is responsible for, and must indemnify EPL for, the award and all
other such payments to the same extent as if the Objecting Franchisee had
participated in the ADR Procedures as described herein.

7.6.6. The Arbitrator will provide an explanation for the decision or award and
will file the same with EPL and Developer (if other than EPL). Copies of such
decisions or awards will be provided to the parties involved in the arbitration.

 

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7.6.7. Subject only to the provisions of Section 9 of the Federal Arbitration
Act specifying the standards for challenging the decision or award of an
arbitrator, the decision or award of the Arbitrator will be binding.

7.6.8. The decision or award of the Arbitrator will be confirmed and enforced as
an arbitration award in accordance with the law of the appropriate court of
competent jurisdiction.

7.6.9. In determining the Gross Percentage Factor and the Year Factor, and in
carrying out its analysis as to whether there has been an unreasonable impact
resulting from the New Restaurant, the Arbitrator will consider, among other
things, the factors, examples and analyses described in Exhibit 6. The parties
understand and acknowledge that such factors, examples and analyses are not
exclusive and are incorporated to assist the Arbitrator in its determination of
the type of factors to be used in establishing the Gross Percentage and the Year
Factor.

ARTICLE VIII

GENERAL MATTERS RELATING TO MEDIATION AND ARBITRATION

SECTION 8.1. Mediators and Arbitrators.

8.1.1. A panel of mediators and arbitrators will be created by the Dispute
Resolution Entity.

Unless otherwise agreed to by the participants to the Mediation or Arbitration
Proceedings, no person selected as a mediator or arbitrator will:

 

(a) have been an EPL franchisee or a franchisee of any other franchise system;

 

(b) have been an officer, director or employee of EPL, any EPL franchisee, the
Developer, the Objecting Franchisee, the franchisee or franchisor of another
franchise system or of any affiliate of the foregoing; or

 

(a) have performed significant professional services for EPL or for one or more
EPL franchisees or any such franchisee’s affiliates.

8.1.2. If mutually agreeable to the participants, the Arbitrator may be the same
individual as the Mediator.

SECTION 8.2. Fees and Expenses of Mediation and Arbitration.

8.2.1. The Mediator’s and Arbitrator’s fees and other charges will be
established at the time of selection.

8.2.2. Unless the participants otherwise agree, or except as provided in the
following sentences, fees and expenses of the Mediator and any other expenses of
Mediation will be shared equally by the participants. Each participant will bear
its own costs, expenses and attorneys’ fees in preparing for and participating
in Mediation. If an Impact Analysis is conducted that projects that twelve
percent (12%) or more of sales

 

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will transfer to the New Restaurant from an Objecting Franchisee’s restaurant,
and EPL elects to approve the development of the New Restaurant, or if Developer
(if other than EPL) agrees to continue to develop the New Restaurant, EPL (or
Developer, if other than EPL) will pay all fees and charges of the Mediator and
any other expenses of conducting the Mediation, excluding, however, such
Objecting Franchisee’s expenses and attorneys’ fees.

8.2.3. Unless the participants otherwise agree, or except as provided in the
following sentences, fees and expenses of the Arbitrator and any other expenses
of the Arbitration Proceedings will be shared equally by the participants. Each
participant will bear its own costs, expenses and attorneys’ fees in preparing
for and participating in the Arbitration. Notwithstanding the foregoing, the
Arbitrator may, at the Arbitrator’s discretion, order the participant deemed by
the Arbitrator to be the non-prevailing party to pay all (or a portion of) the
costs, attorneys’ fees and expenses incurred by the prevailing party in
connection with the Arbitration Proceedings.

SECTION 8.3. Confidentiality.

8.3.1. The entire Mediation and Arbitration Proceeding will be considered
settlement negotiations. Except as otherwise provided in Section 8.3.3 below,
all offers, promises, conduct and statements, whether oral or written, made in
the course of the Mediation or Arbitration Proceedings by the participants,
their agents, employees, experts and attorneys, and by the Mediator or
Arbitrator, will be and remain confidential. Such offers, promises, conduct and
statements are privileged under any applicable mediation privilege, and will be
inadmissible and not discoverable for any purpose, or in any other dispute
between the parties or between one of the parties and any other person,
including impeachment.

8.3.2. Each of the Mediator and Arbitrator will be disqualified as a witness,
consultant, or expert for any participant, and in rendering a decision or award
as is hereinafter provided, the Arbitrator’s oral and written opinions will be
inadmissible for all purposes in this or any other dispute involving the
participants or any other person.

8.3.3. Notwithstanding the provisions of Section 8.3.1 and 8.3.2, these ADR
Procedures will not be deemed to preclude the disclosure of the terms of any
settlement arrived at through Mediation, or the decision or award of the
Arbitrator rendered as a result of the Arbitration Session.

ARTICLE IX

MISCELLANEOUS

SECTION 9.1. Time. Unless otherwise provided in the ADR Procedures, the time
periods provided in the ADR Procedures may be shortened or extended only by
mutual written agreement of the participants.

 

Exhibit E of Development Agreement (Exhibit G of Multi-State Disclosure Document
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SECTION 9.2. Miscellaneous Matters.

 

9.2.1. These ADR Procedures will become effective on the date set forth on the
cover page to these procedures.

9.2.2. These ADR Procedures do not amend any franchise or other agreement to
which EPL is a participant, except to the extent that they are incorporated by
specific reference into a Franchise Agreement. These ADR Procedures may only be
modified in the manner described in such Franchise Agreement. These ADR
Procedures will not create any third party beneficiary rights. Subject to
Section 9.2.5, below, these ADR Procedures represent the sole procedure and
remedy for an Objecting Franchisee and Developer (other than EPL) with respect
to any New Restaurant Dispute.

9.2.3. A franchisee that has submitted an Objection Notice will not be denied
expansion approval solely because of its objection provided that such franchisee
is otherwise fully approved to expand to new EPL locations and such franchisee
has formally entered into and remains in compliance with the ADR Procedures,
including execution of an Arbitration Agreement and depositing the ADR Deposit
with EPL.

9.2.4. These ADR procedures will be governed by and construed in accordance with
the laws of the State of California and the Federal Arbitration Act. All
notifications and communications required under these ADR procedures shall be in
writing and be given pursuant to the notification requirements set forth in the
Objecting Franchisee’s Franchise Agreement.

9.2.5 To the extent that the Objecting Franchisee may have agreed to terms and
procedures for resolving disputes relating to the development of new restaurants
that differ from those contained in this Exhibit E, those terms and procedures
may control over the terms and procedures of this Exhibit E with respect to the
rights and obligations of the participants. (However, if those development
disputes procedures require EPL to pay for any impact analysis, mediation
agreement payment or arbitration award, Developer agrees to indemnify EPL for
any such payment.)

[REMAINDER OF THIS PAGE IS LEFT BLANK INTENTIONALLY]

 

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EXHIBIT “A”

TO PROCEDURES FOR RESOLVING DISPUTES

RELATING TO THE DEVELOPMENT OF NEW RESTAURANTS

SUMMARY REPORT TO OBJECTION NOTICE

General Instructions

A. Complete a separate form for each existing El Pollo Loco® restaurant (an
“Existing Restaurant”) within the Notification Radius you believe may be
unreasonably encroached upon and impacted by the proposed new restaurant site
(the “Target Site”). “Notification Radius” has the meaning specified in Article
II of the Procedures for Resolving Disputes Relating to the Development of New
Restaurants promulgated by EPL.

B. Attach a street map of the area surrounding the Existing Restaurant and the
proposed Target Site (scale of the map should be approximately 1-10 mile or
larger).

Specific Information

A. Answer each of the following questions. Answers must be specific and not
contain any general or conclusory statements.

 

1.   EXISTING RESTAURANT      El Pollo Loco #                             
Cross Streets                                                               and
                                                                          
Address                                          
                                         
                                                                   2.   PROPOSED
SITE         Cross Streets                                          
                    and                                          
                                 Address
                                         
                                         
                                                                   3.   Shortest
driving distance and travel time between Existing Restaurant and proposed Target
Site      Distance                                          
                                         
                                                                               
     Time of Day                                                 
Minutes                                       Breakfast      Time of Day
                                                
Minutes                                       Lunch      Time of Day
                                                
Minutes                                       Dinner      Describe roads driven
to obtain above distance and time                     Shortest distance between
Existing Restaurant and proposed Target Site “as the crow flies” (straight line)
     Distance                                          
                                     

 

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4.   

From what geographic area do you think the Existing Restaurant currently is
drawing customers? Define the trade area and be specific - include street names,
radius, distance and traffic generators (i.e., a mall or schools).

 

 

5.   

What areas described in #4 do you think the proposed Target Site’s trade area
will encroach upon? Be specific.

 

 

6.   

In your opinion, what is the trade area of the proposed Target Site? Be specific
- include street names, radius, distance and traffic generators.

 

 

7.   

Which traffic arteries provide the main flow of traffic to the Existing
Restaurant? Include street names and directional flow.

 

 

8.   

Which main arteries do you think will be providing traffic flow to the proposed
Target Site? Include street names and directional flow.

 

 

9.   

Are there any natural or manmade barriers which separate the Existing Restaurant
from the proposed Target Site? If yes, please describe.

 

 

10.   

How would you rate the physical appearance of the Existing Restaurant compared
to a new El Pollo Loco® restaurant? Better than, equal to, or not as good as a
new facility (choose one). Give reasons for your opinion.

 

 

11.   

What is the date of the last remodel at the Existing Restaurant and what was the
scope of work? Be specific.

 

 

12.   

Does the franchisee currently have any plans to upgrade the Existing Restaurant?
If so, what are the proposed upgrades? Be specific, include scope of work and
dates.

 

 

13.   

What percentage of the Existing Restaurant’s sales do you think the proposed
Target Site will capture if it is built?

 

 

 

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14.   

Would lunch or dinner be most affected? Why?

 

 

15.   

What marketing activities have taken place at the Existing Restaurant in the
past six months other than national promotions? Please be specific. How
successful were they?

 

 

16.   

Do you believe the market can support an El Pollo Loco® restaurant at the
proposed Target Site if it is owned by the operator of the Existing Restaurant?
If so, please explain your reasons.

 

 

 

 

BY:

 

 

  DATE:                     , 20    

 

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EXHIBIT “B”

TO PROCEDURES FOR RESOLVING DISPUTES

RELATING TO THE DEVELOPMENT OF NEW RESTAURANTS

ARBITRATION AGREEMENT

For valuable considerations, the receipt of which each party to this agreement
acknowledges, the undersigned agree to resolve the following described dispute
by using the Procedures for Resolving Disputes Relating to the Development of
New Restaurants (the “ADR Procedure”) promulgated by El Pollo Loco, Inc.

Nature of Dispute:

The parties agree to forego the filing of any lawsuit or legal action relating
to the dispute and agree to be bound by the decision or award of the Dispute
Resolution Entity (as defined in the ADR Procedures) under the ADR Procedures.

The rules and provisions of the ADR Procedures are incorporated herein by
reference and the parties agree to be bound by same.

DATED this                      day of                     ,20    

 

EL POLLO LOCO, INC. BY:  

 

[OBJECTING FRANCHISEE] BY:  

 

[DEVELOPER] BY:  

 

 

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EXHIBIT “C”

TO PROCEDURES FOR RESOLVING DISPUTES

RELATING TO THE DEVELOPMENT OF NEW RESTAURANTS

DEMAND PROMISSORY NOTE

 

$                   

 

FOR VALUE RECEIVED, we, the undersigned (“Makers”) jointly and severally,
promise to pay to the order of EL POLLO LOCO, INC. (“EPL”), a Delaware
corporation, [INSERT ADDRESS], ON DEMAND, the principal sum of
                    Dollars ($            ). Until demand for payment is made,
this Note shall not accrue interest. Terms not otherwise defined in this Note
shall have the meanings specified in the Procedures for Resolving Disputes
Relating to the Development of New Restaurants (the “ADR Procedures”)
promulgated by EPL.

The Makers hereby waive presentment, notice, protest and all other notices
required or permitted hereunder and by law in connection with the delivery,
acceptance, performance, default or enforcement of this Note, and assent to any
extension or postponement of the time of payment or of any other indulgence,
substitution, exchange or release of collateral, and/or to the addition or
release of any other party or person primarily or secondarily liable on this
Note.

This Note is being given to evidence the loan by EPL to the Objecting Franchisee
pursuant to the ADR Procedures, the terms of which are expressly made a part of
this instrument. The Makers hereof acknowledge that payment may be demanded by
EPL upon the earlier to occur of: (i) settlement of the New Restaurant Dispute
through Mediation or otherwise, (ii) conclusion of the Arbitration Proceedings,
or (iii) any default by the Makers of the terms of any Franchise Agreement, or
the occurrence of an event of default by which there is a violation of the terms
and covenants of any other contractual obligation by the Makers hereof to EPL.
The terms, covenants and conditions of agreements between the Makers and EPL are
expressly made a part of this instrument.

This Note is payable by mail or in person at the office of EPL or such other
place as EPL may designate.

In the event of delinquency in the payment of any principal or interest due on
this Note or in the event of any other default under this Note it becomes
necessary to retain an attorney for collection or to enforce the terms and
conditions hereof, the Makers agree to pay reasonable attorneys’ fees, whether
suit is brought or not.

The enforceability of the terms of this Note and the legality of the interest
rate specified herein shall be interpreted in accordance with and governed by
the laws of the State of California. In the event of litigation involving this
Note, Makers agree that this Note shall be construed in accordance with
California law or the law of any other jurisdiction which has any relationship
to the transaction and under whose laws this Note would be enforceable.

 

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In the event payment in full is not made within thirty (30) days of demand,
interest on the unpaid balance shall accrue at the maximum rate allowed by
California law, or if no maximum rate relating to this Note is in effect in the
State of California, ten (10%) percent per annum.

During the term of this Note, and upon ten (10) days’ written request by EPL or
any other holder of this Note, each Maker agrees to give EPL or such holder
adequate assurances as to such Maker’s ability to comply with the terms of this
Note. Such assurances shall include, but not be limited to, such Maker’s then
current financial statement, which EPL or such holder may require be certified
by a Certified Public Accountant. Each Maker agrees that EPL or such holder may
disclose such financial statements, or any other financial information
pertaining to such Maker which EPL or such holder may possess, to any potential
buyer, assignee or holder in due course of this Note.

This Note is personal to the Makers and is not assignable. In the event any
Maker sells, assigns or transfers its interest in the Franchise Agreement for El
Pollo Loco® restaurant #            , the entire principal amount then
outstanding on this Note shall immediately become due and payable. This Note is
assignable by EPL.

The Makers acknowledge that a default under the terms of this Note shall
constitute a default under the terms of the Franchise Agreement between Makers
and EPL for Restaurant #            .

 

[OBJECTING FRANCHISEE] BY:  

 

[MAKER] BY:  

 

 

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EXHIBIT “D”

TO PROCEDURES FOR RESOLVING DISPUTES

RELATING TO THE DEVELOPMENT OF NEW RESTAURANTS

ARBITRATOR RETENTION AGREEMENT

This Arbitrator Retention Agreement is made this              day of
            , 20    .

A dispute involving the development of a new restaurant by El Pollo Loco, Inc.
has arisen between El Pollo Loco, Inc. (“EPL”),
[                                          (“Developer”)] and
                                                      (“Objecting Franchisee”).
EPL[, Developer] and Objecting Franchisee have agreed to participate in an
alternative dispute resolution procedure pursuant to the “Procedures For
Resolving Disputes Relating to the Development of New Restaurants,” (the “ADR
Procedures”) a copy of which is annexed hereto.
                                                      (“Arbitrator”) has been
chosen as a neutral arbitrator for the alternative dispute resolution
procedures. EPL, [Developer], Objecting Franchisee and the Arbitrator
accordingly agree as follows:

1. The Arbitrator agrees to be bound by and to use his best efforts to comply
faithfully with the ADR Procedures, including without limitation, the provisions
regarding confidentiality.

2. The Arbitrator and the Arbitrator’s employees, agents, partners and
shareholders, if applicable, shall not be liable for any respective act or
omission in connection with the ADR Procedures other than as a result of fraud
or an intentional and willful failure to comply with the material provisions of
the ADR Procedures after having received written notice of such failure and
refusal by the Arbitrator to correct such failure. Exercise of discretion shall
not, by itself, result in any liability.

3. The Arbitrator has made a reasonable effort to learn and has disclosed to the
parties in writing:

 

(a) All business or professional relationships the Arbitrator has had with the
parties or the parties’ law firms within the past five (5) years, including all
instances in which the Arbitrator has served as an attorney for any party or
adverse to any party;

 

(b) Any financial interests the Arbitrator has in any party;

 

(c) Any significant social, business or professional relationship the Arbitrator
has had with an officer or employee of any party or with an individual
representing any party; and

 

(d) Any other circumstances that may create doubt regarding the Arbitrator’s
impartiality.

4. Neither the Arbitrator nor the Arbitrator’s firm shall undertake any work for
or against a party regarding the subject matter of the dispute.

 

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5. Neither the Arbitrator nor any person assisting the Arbitrator with the ADR
Procedures shall personally work on any matter for or against any party or its
affiliates regardless of the subject matter, prior to one (1) year following
cessation of the Arbitrator’s services in this proceeding other than as an
arbitrator in this or another proceeding.

6. The Arbitrator’s firm may work on matters for or against a party during the
pendency of the ADR Procedures if such matters are unrelated to the subject
matter of the ADR Procedures, have been disclosed in advance to all parties
hereto, are discussed with all of the parties hereto, and are expressly
consented to in writing by such parties (“Unrelated Approved Activities”). The
Arbitrator shall establish appropriate safeguards to ensure that other members
or employees of the Arbitrator’s firm not working on the ADR Procedures do not
have access to any confidential information obtained by the Arbitrator during
the course of the ADR Procedures. The Arbitrator hereby represents that there
are no Unrelated Approved Activities as of the date hereof.

7. The Arbitrator shall be compensated for services performed in connection with
the ADR Procedures in accordance with paragraph 8.2.1 of the ADR Procedures. The
Arbitrator’s fee shall be taxed as costs and paid as determined by the
Arbitrator.

 

8. Counsel representing each party is as follows:

 

 

Counsel for Objecting Franchisee:

 

 

 

 

 

Counsel for EPL:

 

 

 

 

 

Counsel for Developer:

 

 

 

 

 

EL POLLO LOCO, INC. BY:         [ARBITRATOR] BY:         [OBJECTING FRANCHISEE]
BY:         [DEVELOPER] BY:    

 

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EXHIBIT “E”

TO PROCEDURES FOR RESOLVING DISPUTES

RELATING TO THE DEVELOPMENT OF NEW RESTAURANTS

PROMISSORY NOTE

 

$                                     

                                                         

FOR VALUE RECEIVED, the undersigned, [EPL or name of Developer (“Developer”),
[whichever is applicable] a                      corporation/limited liability
company/limited partnership] [INSERT ADDRESS], promises to pay to the order of
                            , (“Franchisee”) the principal sum of
                         Dollars ($ ) together with interest on the unpaid
principal balance hereof. Terms not otherwise defined in this Note shall have
the meanings specified in the Procedures for Resolving Disputes Relating to the
Development of New Restaurants (the “ADR Procedures”) promulgated by EPL.

Interest at the rate of     %¹ simple interest per annum shall be payable
annually concurrently with the payment of principal required herein.

[EPL/Developer] hereby waives presentment, notice, protest and all other notices
required or permitted hereunder and by law in connection with the delivery,
acceptance, performance, default or enforcement of this Note and assents to any
extension or postponement of the time of payment or of any other indulgence,
substitution, exchange or release of collateral, and/or to the addition or
release of any other party or person primarily or secondarily liable on this
Note.

This Note is being given to evidence [EPL/Developer]’s obligation to Franchisee
pursuant to the Arbitrator’s award granted under the ADR Procedures. The terms,
covenants and conditions of the ADR Procedures and other agreements between
Franchisee and [EPL/Developer] are expressly made a part of this instrument.

The principal of this Note shall be repaid in annual installments in accordance
with the Principal Repayment Schedule attached hereto as Schedule 1.

This Note may be prepaid in whole or in part by the undersigned at any time, or
from time to time, without premium or penalty.

 

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The enforceability of the terms of this Note and the legality of the interest
rate specified herein shall be interpreted in accordance with and governed by
the laws of the State of California.

 

[EL POLLO LOCO, INC., a Delaware corporation] or [Name of Developer, a
                     corporation/ limited liability company/limited partnership]

By:  

 

Name:  

 

Title:  

 

 

¹ The fixed interest rate will be equal to the prime rate published in the Wall
Street Journal for the day on which the award is granted.

Schedule 1

 

Date of Principal Repayment       Amount

EXHIBIT “F”

TO PROCEDURES FOR RESOLVING DISPUTES

RELATING TO THE DEVELOPMENT OF NEW RESTAURANTS

FACTORS, EXAMPLES AND ANALYSES

FOR DETERMINING GROSS PERCENTAGE AND YEAR FACTOR

OVERVIEW:

There are numerous factors that influence the sales of any EPL Restaurant. It is
the Arbitrator’s responsibility under these ADR Procedures to consider all such
factors which may be relevant to understanding the negative sales impact
experienced by an Existing Site. A few examples of factors other than a new EPL
Restaurant which may negatively impact an Existing Site’s sales and therefore
must also be considered by the Arbitrator include:

 

  -   Declining sales trends at the Existing Site pre-dating the New Restaurant

 

  -   Loss of traffic flows street (closures, construction activity, etc.)

 

  -   New, non-EPL competition

 

  -   Overall economic conditions/recession

 

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A useful hierarchy to understand the various components of the overall impact on
an Existing Site, and to isolate the influence of those specific factors to be
utilized in determining the award pursuant to Section 7.6.4, is as follows:

 

  A.      OverallImpact on Objecting Franchisee’s Existing Site Sales    XX%  
B.       Plus or Minus DMA-Wide Trends    +/- X%   C.       Impact Caused Within
Existing Site’s Trade Area    = XX%   D.       Plus or Minus Factors Other Than
New Restaurant    +/- X%   E.       Impact on Existing Site by New Restaurant   
= X%   F.       Less Allowable Transfer Factor    - X%   G.       Gross
Percentage Factor    = X%

Step I of the following methodology will assist in determining item C above- the
impact on the Existing Site’s sales that appears to be localized within that
restaurant’s trade area.

 

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Step II will assist in identifying how much of this localized impact appears
attributable to the New Restaurant in question, rather than other factors within
the Existing Site’s trade area. This will yield item E above, which is the
starting point in the award calculation described at Step 1. of Section 7.6.4.

METHODOLOGY TO ISOLATE IMPACT OF NEW RESTAURANT ON EXISTING SITE’S SALES:

STEP I:

Determine how much the sales of the Existing Site have been impacted overall
during the first 12 months of operations of the New Restaurant (the “Post
Period”) , and then isolate that portion of the impact attributable to factors
within the Existing Site’s trade area, by answering the following questions:

 

1. What has been the % change in the Existing Site’s year-over-year sales
(“Y-O-Y Growth Rate”) during the Post Period vs. the prior 12 months (the “Pre
Period”)?

 

2. How does this Y-O-Y Growth Rate compare to the average experience of other
EPL’S in the same county or demographic market area (“DMA”) over this same
period of time?

 

3. How closely did the Existing Site’s Y-O-Y Growth Rate track that of the
overall DMA average prior to the opening of the New Restaurant? How consistent
has the variation between the two Y-O-Y Growth Rates been, historically?

Example 1: Existing Site’s net sales decline 4% during the Post Period vs. the
Pre Period. However, the overall average decline of all restaurants in this DMA
during the same period is 6%. For the 2 years prior to the Pre Period, the
Existing Site’s Y-O-Y Growth Rate was 2% greater than the overall DMA average,
and this trend was fairly consistent from month to month.

Inference: While not conclusive in itself, this data suggests that the sales
decline experienced by the Existing Site during the Post Period is due to
factors other than the New Restaurant. In fact, we might have “expected” the
Existing Site to decrease by 4% during the Post Period based on its previous
trends vs. the overall DMA.

Example 2: All facts the same as Example 1, including a four percent
(4%) decline for the Existing Site, except the overall DMA Y-O-Y Growth Rate
Post vs. Pre Period is a positive six percent (6%).

Inference: Again, while not conclusive by itself, this data suggests that the
Existing Site has experienced a twelve percent (12%) decrease vs. expectation
during the Post Period due to localized factors specific to the Existing Site
trade area, and not due to DMA-wide variables.

 

Multi-State Disclosure Document Control No. 040114

Exhibit E to Procedures for Resolving Disputes Relating to the Development of
New Restaurants

Page 63 of 65

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Development Agreement #618533

Northeast Houston, Texas

 

STEP II:

If there appears to be an impact on the Existing Site that is due to factors
within its trade area, rather than due to broader, DMA-wide trends (Example 2
above), identify all significant factors that may have contributed to this
impact in addition to the New Restaurant. These could include but may not be
limited to the following:

 

1. Decline in potential customer traffic in Existing Site’s trade area:

A. Loss of traffic generators (closure of nearby military base, shopping center
Anchor tenant or large employer in trade area).

B. Loss of traffic flows (closure of streets, bridges or freeway ramps).

C. Newer traffic generators developed in nearby trade areas eclipse traffic
generators in Existing Site’s trade area.

 

2. New restaurant competition other than the new EPL in the Existing Site’s
trade area.

 

3. Change in the Management Team or deterioration in the quality of operations
of the Existing Site.

It may be conversely true that new traffic generators, improvement in traffic
flows or the closure of competing restaurants in an Existing Site’s trade area,
or an improvement in the quality of operations in an Existing Site would have
resulted in a positive impact on the Existing Site’s sales but for the opening
of the New Restaurant.

It may be difficult to separately identify the negative or positive impact of
the above factors on an Existing Site’s sales from the impact of the New
Restaurant. It may be that one can do so only by paying close attention to the
dates that each factor became relevant, and tracking the incremental impact of
each on the Existing Site’s Y-O-Y Growth Rate.

Example 3: Existing Site is in an older shopping center; many of the co-tenants
have never remodeled or updated their facilities. New regional “Power Center”
with a Walmart, Toys R Us, Home Depot, a 20 Theater Cinema and several new
restaurants (but no EPL’s) opens 3 miles away. Existing Site’s sales drop 8%
within one month. Assume overall DMA sales are flat during this period, and no
other new variables or any other change in the trade area.

Inference: Many of the Existing Site’s customers will be drawn to the traffic
generators in the new center, and allocate some of their limited eating out
dollars to whatever restaurant choices are available when they are there, since
it is convenient. All or a substantial portion of the 8% drop in sales can
reasonably be attributed to the new center.

 

Multi-State Disclosure Document Control No. 040114

Exhibit E to Procedures for Resolving Disputes Relating to the Development of
New Restaurants

Page 64 of 65

--------------------------------------------------------------------------------

Development Agreement #618533

Northeast Houston, Texas

 

Example 4: Same as Example 3, except that a new EPL Restaurant opens at the new
Power Center 6 months after the last anchor tenant opens. Existing Site’s sales
then decline further, to a 12% overall decline vs. before the Power Center
opened, as follows:

 

Existing Site’s Avg. Monthly Sales:

   Amount      Cumulative % Change  

12 months prior to New Power Center opening

   $ 83,333         —     

First 6 months New Power Center open

   $ 76,666         (8 %) 

Next 12 months New Restaurant Open

   $ 73,333         (12 %) 

Inference: It would appear that the majority of the decline is due to the
existence of the new Power Center (8%), and that only about 4% is due to the New
Restaurant (= 12%-8%).

DISCUSSION RE: YEAR FACTOR:

The intention of the Year Factor is to recognize that restaurant businesses are
often valued based upon a multiple of cash flows. If an Objecting Franchisee
suffers a permanent reduction in sales and cash flows in an Existing Site due to
unreasonable impact by a New Restaurant, then the business value of the Existing
Site has declined by some multiple of the reduction. If the sales reduction is
expected to become even greater over time, based upon trends observed during the
Post Period, a larger multiple should be selected by the Arbitrator. Conversely,
if trends observed during the Post Period or other evidence appear to indicate
that the impact of the New Restaurant upon the Existing Site will diminish over
time, a relatively smaller multiple should be used.

 

Multi-State Disclosure Document Control No. 040114

Exhibit E to Procedures for Resolving Disputes Relating to the Development of
New Restaurants

Page 65 of 65