MANAGEMENT AND LICENSE AGREEMENT
 
This Management and License Agreement (“Agreement”) is entered into this 26th
day of June, 2008, by and between Shells Seafood Restaurants, Inc. (the
“Manager”), a Delaware corporation maintaining its business office at 16313
North Dale Mabry Highway, Tampa, Florida 33618, and Rock Beach Grill of Pembroke
Pines, LLLP (the “Owner”), a Florida limited liability limited partnership,
maintaining its business offices at 16313 North Dale Mabry Highway, Tampa,
Florida 33618.
 
BACKGROUND INFORMATION
 
Pursuant to that certain Limited Partnership Agreement of Owner of even date
herewith by and among the Manager, Rock Beach Holdings, LLC, a Florida limited
liability company, and Philip R. Chapman and Barry Bernstein (each a “Investor
Limited Partner”) (the “Partnership Agreement”), the Owner owns and operates a
former Shells restaurant located at 11825 Pines Boulevard, Pembroke Pines,
Florida (the “Restaurant”). The Manager currently acts as the exclusive manager
for all existing Shells restaurants and has agreed to manage the Restaurant and
license certain proprietary information to the Owner, but only on the terms and
conditions contained herein. The Owner desires to employ the Manager as its
agent to operate the Restaurant and to license the proprietary information.
Accordingly, in consideration of the covenants and agreements contained herein,
the Owner and the Manager agree as follows:
 
OPERATIVE PROVISIONS
 
ARTICLE 1. 
 
APPOINTMENT OF MANAGER; LICENSE: KEY TERMS AND CONDITIONS
 
Section 1.1.  Appointment of Manager; License of Proprietary Information. Owner
hereby appoints and employs Manager to act as the Owner’s exclusive agent for
the supervision, direction and control of the operation and management of the
Restaurant and in connection with such management, the Manager hereby
acknowledges he is applying to register the service mark “Rock Beach Grill” and
thereafter, regardless of the success of said registration, will license such
service mark to the Owner as well as certain other proprietary information (the
“Proprietary Information”) necessary to operate the Restaurant, all upon the
terms and conditions hereinafter set forth. The location of the Restaurant may
not be changed without the prior written consent of the Manager, which consent
may not be unreasonably withheld.
 
Section 1.2.  Key Terms. The following are certain of the key terms of this
Agreement, cross-referenced to the sections of this Agreement in which they are
more fully discussed:

(a)
Original Term:
30 years.
     
(b)
Renewal Terms:
An indefinite number of five year terms.
     
(c)
Management and License Fee:
Six percent (6.0%) of Gross Sales.

 
 
 

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ARTICLE 2. 
 
THE TERM
 
Section 2.1. The Term. The term of this Agreement shall mean the Original Term
and any Renewal Terms, as such terms are defined below.
 
Section 2.2. Original Term. The original term of this Agreement (the “Original
Term”) shall commence on the day following the last day of operation of Shells
of Pembroke Pines as a Shells restaurant (the “Commencement Date”) and shall
continue for 30 years thereafter.
 
Section 2.3. Renewal Terms. The Original Term of this Agreement shall
automatically be extended by an unlimited number of five year renewal terms (the
“Renewal Terms”), unless the Manager gives the Owner written notice at least 90
days prior to the expiration of the Original or any Renewal Term, as applicable,
of the Manager’s intent not to extend this Agreement beyond the end of such
Original or Renewal Term. The terms and conditions set forth in this Agreement
shall continue to apply during all Renewal Terms.
 
ARTICLE 3. 
 
COMPENSATION OF MANAGER
 
Section 3.1.  Management and License Fee. In consideration for the services
rendered by Manager hereunder, as well as the Owner’s use of the Proprietary
Information in connection with the Restaurant’s operations, the Owner agrees to
pay Manager a management and license fee (the “Management and License Fee”) as
follows:
 
(a) Fee Structure. The amount of the Management and License Fee shall be six
percent (6%) of the Restaurant’s Gross Sales, as such term is defined below.
 
(b) Definition of Gross Sales. The term “Gross Sales” as used herein shall mean
all sales made (and not refunded or returned) at or from the Restaurant and/or
revenues derived from or in connection with the operation of the Restaurant
including, without limitation, all sales of food, beverages, merchandise or
services at or from the Restaurant. Sales made at less than the stated menu
price shall be included in Gross Sales only in the amount paid by the customer,
and the amount of any discount or promotional allowance shall not be included in
Gross Sales. In computing the Management and License Fee, there shall be
excluded from Gross Sales (or there shall be deducted from Gross Sales to the
extent previously included) the following:
 

(i)
Any gratuities or service charges added to a customer’s bill or statement in
lieu of gratuities, which are payable to the Restaurants’ employees;

 

(ii)
All sales taxes, excise taxes, gross receipt taxes, occupational license taxes,
admission taxes, entertainment taxes, tourist taxes or similar charges (but the
Management and License Fee shall be computed before the payment of federal,
state or municipal income or franchise taxes);

 
 
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(iii)
All sums and credits received in settlement of claims for loss or damage to
furnishings, equipment of the Restaurant or to the building where the Restaurant
is located;

 

(iv)
Gain or loss from the sale of any capital assets or furniture, fixtures and
equipment used in connection with the Restaurant;

 

(v)
Any compensation payments or insurance proceeds for claims against third parties
arising out of or during the course of the operation of the Restaurant;

 

(vi)
The proceeds of any financing or refinancing of the Restaurant or any
improvements, fixtures or equipment used in connection with the Restaurant;

 

(vii)
Proceeds from the condemnation, sale or other disposition of the Restaurant; and

 

(viii)
Proceeds from intercompany transactions.

 
(c)  Payment of the Management and License Fee. The Management and License Fee
shall be paid at the end of every monthly accounting period (on a 4-4-5 basis),
in arrears, in the amount set forth on the Monthly Statement prepared in
accordance with Section 7.2 hereof. The monthly Management and License Fee
payments shall constitute installment payments of the Management and License
Fee, subject to reconciliation based on the Annual Statement prepared in
accordance with Section 7.4 hereof. Any overpayment or underpayment shall be
adjusted by payment or refund, as appropriate, within 30 days after the
preparation of the Annual Statement.
 
ARTICLE 4. 
 
DUTIES OF THE MANAGER
 
Section 4.1.  Standard of Operations. The Manager shall manage and operate the
Restaurant in a manner consistent with the standards of quality that are
characteristic of the other Shells restaurants managed by Manager. There shall
apply to the Restaurant the same policies, practices and procedures as apply
generally such other Shells restaurants with respect to restaurant management,
operations, accounting, purchasing, control of operating expenses and general
administration; provided that (a) the Manager shall otherwise have sole
discretion to establish all policies for the Restaurant, including, without
limitation, menu items, prices, purchasing, design and decor, maintenance,
employment, standards of operation, quality of service, marketing and
promotional activities, and other matters affecting customer opinion of the
Restaurant and its operation, and (b) exceptions to general policies, practices
and procedures may be made by the Manager at the Restaurant or other Shells
restaurants managed by Manager to deal with exceptional circumstances affecting
a particular store if, in the Manager’s reasonable judgment, there is an
adequate business justification for doing so and if the Restaurant is not
treated in an arbitrary or discriminatory manner. Subject to such justified
exceptions, the Manager shall make the same efforts at the Restaurant as it does
at other Shells restaurants to achieve, and to balance, the objectives of
increasing sales, optimizing profits, maintaining standards, maintaining and/or
improving the level of customer service and quality of product, and other
objectives that apply to the Shells chain of restaurants generally. The Manager
shall periodically review the Restaurant’s operations and performance with the
Owner at a mutually convenient time and place. At such times, the Manager shall
review with the Owner the results of any pertinent financial planning,
forecasting, sales budgeting or other reports or analyses that may be prepared
by the Manager for the Restaurant (which shall be done for the Restaurant on the
same general basis as for all other Shells restaurants). It is understood that
as part of such a review the Owner may make suggestions or recommendations
relating to the operation of the Restaurant. The Manager shall give such
suggestions or recommendations its reasonable consideration, but the Manager
shall not be obligated to adopt or implement them.
 
 
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Section 4.2.  Personnel. The Manager shall be responsible for hiring,
supervising, directing the work of, promoting, discharging and determining the
compensation and other benefits of all personnel working in the Restaurant. With
the exception of the Restaurant’s general manager and assistant manager(s), all
personnel of the Restaurant shall be considered the employees of the Owner,
provided that the compensation and benefits of all Restaurant personnel,
including the Restaurant’s general manager and assistant manager(s), shall be
considered a Restaurant expense and an obligation of the Owner. The salaries,
other compensation and benefits of such personnel shall be consistent with those
that apply at other Shells restaurants (with appropriate allowance for factors
that may affect the labor market serving the Restaurant). The Manager may incur,
at the Owner’s expense, reasonable and customary employment agency fees and
employee relocation expenses for employees of the Restaurant. The Owner shall
also bear the financial burden of the wages and other compensation of any
management personnel, such as area directors, who are employed to oversee the
Restaurant, on a pro rata basis1  For example, if a area director supervised
eight restaurants in a geographical area, one of which was the Restaurant, the
Owner would bear 12.5% of the expenses associated with the employment and
expenses incurred by such area director.. The Owner shall not hire or solicit
any of Manager’s on-site managers or assistant managers for a period of two
years after the termination of this Agreement, unless this Agreement is
terminated due to a breach by the Manager.
 
Section 4.3.  Permits and Licenses. The Manager, at the Owner’s expense, shall
be responsible for obtaining, maintaining and renewing all licenses and permits
that may be required for the renovation and operation of the Restaurant,
including liquor, bar, restaurant, and sign licenses and permits. The Manager
shall pursue such responsibility with due diligence and in good faith, and the
Owner shall in good faith cooperate with the Manager as may reasonably be
required to obtain such licenses and approvals.
 
Section 4.4.  Contracts. The Manager, as agent of the Owner, shall have
authority to enter into such concessionaire, service and other contracts or
agreements, which are in the ordinary course of business, as are in the
Manager’s reasonable professional judgment necessary for the operation, supply
and maintenance of the Restaurant as required by this Agreement.
 
Section 4.5.  Maintenance. Subject to the limitations set forth in Section 4.4,
the Manager, at the Owner’s expense, shall be responsible for maintaining the
Restaurant in good condition and repair consistent with the standards applicable
to the other Shells restaurants managed by Manager, including without
limitation, all necessary repairs and replacements of the furniture, fixtures
and equipment used in connection with the Restaurant. The Manager will, at
Owner’s expense, insure that the Owner will comply with the Owner’s leasehold
maintenance obligations.
 
________________

1
For example, if a area director supervised eight restaurants in a geographical
area, one of which was the Restaurant, the Owner would bear 12.5% of the
expenses associated with the employment and expenses incurred by such area
director.

 
 
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Section 4.6.  Alterations to the Restaurant. The Manager shall have the right to
make such alterations, additions or improvements in or to the Restaurant as it
deems necessary, including without limitation (a) alterations, additions or
improvements to the Restaurant’s buildings and (b) additions to the fixed asset
list of furniture, fixtures and equipment used at the Restaurant; provided that
such alterations, additions or improvements are consistent with what the Manager
is doing in other Shells restaurants managed by the Manager. The cost of such
alterations, additions or improvements shall be charged directly to current
expenses or capitalized on the books of account of the Restaurant in accordance
with the Manager’s standard accounting practices. The Manager will furnish the
Owner substantiating documentation for capitalized expenditures.
 
In the event that, at any time during the Term of this Agreement, repairs or
alterations to the Restaurant shall be required by reason of any laws,
ordinances, rules or regulations now or hereafter in force, or by order of any
governmental or municipal power, department, agency, authority or officer, such
repairs or changes may be made by Manager on, Owner’s behalf and at Owner’s
expense.
 
Section 4.7.  Professional Services. The Manager may, at the Owner’s expense,
hire independent contractors to provide such legal, accounting, and other
professional or technical service as the Manager reasonably deems advisable for
the management, operation and maintenance of the Restaurant. During the Term of
this Agreement, the professional and technical services of the Manager’s
corporate staff shall be provided to the Restaurant to the same extent as they
are provided to other Shells restaurants managed be the Manager. The Management
and License Fee shall cover such services, except that any out-of-pocket
expenses incurred in performing such services shall be reimbursed to the Manager
as an operating expense of the Restaurant. It is understood and agreed that the
basic functions performed by the Manager in consideration of the Management and
License Fee shall remain substantially the same as they are as of the date of
this Agreement, but it is acknowledged and agreed that there may be changes in
the allocation of certain tasks as between corporate overhead (covered by the
Management and License Fee) and the Restaurant (paid out of Working Capital, as
such term is defined herein); provided that (a) there is a reasonable business
justification for the change, (b) the change is not being made solely for the
benefit of the Manager and is not detrimental to the Owner, and (c) the
Restaurant is treated the same as the other Shells restaurants managed by the
Manager. The Manager may use outside contractors to provide services that are
covered by the Management and License Fee; provided that the quality of the
services rendered to the Restaurant is not reduced and the cost to the Owner is
not increased.
 
Section 4.8.  Compliance With Laws. The Manager shall make good faith and
reasonable efforts to comply with all applicable statutes, ordinances, rules and
regulations of federal, state and local governmental bodies having jurisdiction
over the Restaurant or its operation including, without limitation, laws
governing the sale of alcoholic beverages (“Governing Laws”). Notwithstanding
anything herein to the contrary, the Manager may contest the application of any
Governing Laws to the Restaurant in the event the Manager deems it prudent to do
so. The cost of any such contest shall be included in the operating expenses of
the Restaurant. The Manager, at Owner’s expense, may institute, defend and
settle litigation and claims affecting the Restaurant. No settlement involving
injunctive relief against, or prohibiting any act on the part of, the Owner
shall be entered into by the Manager, without the prior written approval of the
Owner.
 
Section 4.9.  Arms-Length Transactions. The Manager shall not enter into any
contracts with any entity that is affiliated with the Manager unless the same
are at market rates and on competitive terms. Except as expressly permitted in
this Agreement, the Manager shall not add any markup, profit or other add-on
charge to the cost of any items purchased by the Manager for the Restaurant. The
Restaurant shall receive the benefit of any discounts or rebates that are netted
out by the vendor against the price of items that are purchased for the
Restaurant. The Restaurant shall be treated the same as the other Shells
restaurants managed by the Manager with respect to the allocation or other
disposition of any savings resulting from the Manager’s buying power in the
marketplace, quantity discounts, rebates and promotional allowances or other
cost reductions or advantages that are not netted out against the price of the
item purchased.
 
 
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Section 4.10. Compliance with Leases. The Manager shall, subject to the
availability of funds therefor, cause the Owner to remain in compliance with its
leasehold obligations.
 
ARTICLE 5. 
 
OWNER’S FINANCIAL OBLIGATIONS
 
Section 5.1.  Obligations of Owner and Manager. All cost and expense of
operating the Restaurant, including without limitation the funding of operating
deficits and working capital and other obligations and liabilities hereunder
(“Owner’s Financial Obligations”) shall be the sole and exclusive responsibility
and obligation of Owner, except where it is expressly and specifically stated in
this Agreement that such item shall be at the Manager’s expense. It is
understood that statements herein indicating that Manager shall “furnish,”
“provide” or otherwise supply items or perform services hereunder shall not be
interpreted or construed to mean that the Manager shall be obligated to pay for
such items or services unless it is expressly and specifically so provided.
Owner’s Financial Obligations shall include, without limitation, the following:
 

(a)
The Working Capital (as defined in Section 6.1 hereof);

 

(b)
Capital Expenditures (as defined in Section 6.2 hereof);

 

(c)
The operating expenses of the Restaurant including, without limitation,
Restaurant employee payroll and benefits, food and beverage inventory, supplies,
repair and maintenance, contract services, professional services, training,
advertising, marketing, and insurance;

 

(d)
The cost of all licenses and permits required for the occupancy or operation of
the Restaurant including, without limitation, any certificate of occupancy,
health permit, food service license, liquor license or the like;

 

(e)
Bank charges and processing fees charged by the local depository bank for the
Restaurant or by credit card companies for the processing of credit card sales
made at the Restaurant;

 

(f)
All taxes applicable to the Restaurant, including, without limitation, real
estate taxes, franchise taxes, gross receipts taxes, rent taxes or income taxes
(other than any income taxes payable by the Manager on the Management and
License Fee);

 

(g)
Occupancy costs of the Restaurant, including, without limitation, depreciation,
amortization, interest, rent, common area charges, impact fees, user fees,
parking charges, dues or assessments and the like; and

 

(h)
The Management and License Fee.

 
 
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The Manager shall have complete and absolute control of the receipts from the
Restaurant and the bank accounts into which such receipts are to be deposited.
The above mentioned obligations of the Owner shall be paid by the Manager on
behalf of the Owner out of the Working Capital and/or from the current
distributions payable to Owner pursuant to Section 6.3 hereof, to the extent
available.
 
The following services shall be provided by the Manager during the Term of this
Agreement in consideration of the Management and License Fee and shall not be
charged as operating expenses of the Restaurant: (i) supervisory operations
management, above the store level, exclusive of the Restaurant’s pro rata
expense of the district and regional manager, which is borne, in part, by the
Owner as set forth above; (ii) accounting performed out of the Manager’s
corporate accounting department, including accounts payable, accounts
receivable, fixed assets, financial reporting, record keeping, revenue/cost
variance analysis, financial analysis and forecasting; (iii) payroll and
corporate-level personnel and benefits administration; (iv) corporate-level data
processing services; (v) tax administration; (vi) corporate legal services;
(vii) corporate support, including real estate, architectural and
construction-related support services; (viii) corporate facilities department
support services regarding maintenance, repair and capital alterations and
additions; (ix) corporate marketing administration; (x) multi-unit procurement
services; and (xi) research and development.
 
Section 5.2.  Manager Not Obligated to Advance Funds. Except as otherwise
provided in the Partnership Agreement, the Manager shall have no obligation to
pay for any of the Owner’s Financial Obligations. Except as otherwise provided
in the Partnership Agreement, subject to the consolidation of certain payables
and receivables of the Restaurant with those of other Shells restaurants managed
by the Manager, the Manager shall not be obligated to advance any of its own
funds to or for the account of the Owner or to incur on its own account any
liability with respect to the Restaurant.
 
Section 5.3.  Consolidated Payables and Receivables. The cash flow and
accounting functions for the Restaurant will be handled by Manager, to the
extent reasonably practicable, in the same manner that they are handled for
other Shells restaurants managed by the Manager and on a consolidated basis with
such other stores; provided, however, that separate books and records (with
appropriate substantiating documentation) showing the revenues and expenses of
the Restaurant on an unconsolidated basis shall be maintained by the Manager as
provided in Article 7 hereof; and provided further that any discounts or rebates
obtained as a result of such consolidation shall be subject to the provisions of
Section 4.9 hereof. The Manager shall not impose any additional fees or add-on
charges as a result of any such consolidation. As a general rule, to the extent
reasonably practicable, the following items will be handled on a consolidated
basis:
 
(a)  The processing of revenues from sales made through the use of credit cards;
 
(b)  The payment of vendors who sell to other Shells restaurants in addition to
the Restaurant.
 
Payables that relate solely to the Restaurant, including without limitation the
payroll for the Restaurant, shall, to the extent of available funds belonging to
the Owner, be paid out of the Manager’s corporate office by the Manager’s
corporate check, subject to the Manager’s right to be reimbursed out of the
Working Capital of the Restaurant as provided in Article 6 hereof. It is
understood that payment directly by the Restaurant may be required in the case
of certain vendors or local service contractors. Regardless of whether payment
in the first instance is made directly by the Restaurant or by the Manager’s
corporate check, the Owner shall bear any loss arising out of any breach of
contract, breach of warranty or other failure to perform any contract with any
vendor, supplier or contractor of the Restaurant.
 
 
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ARTICLE 6.
 
WORKING CAPITAL AND DISTRIBUTIONS TO OWNER
 
Section 6.1.  Working Capital . The Owner shall maintain with the Manager
sufficient working capital for the ongoing operation of the Restaurant (“Working
Capital”). Working Capital shall consist of the following: (a) an amount that
approximates the average value of the food and beverage inventory of the
Restaurant carried at cost, (b) the cash balance in the Restaurant account at
the Restaurant local depository bank, (c) the cash on hand at the Restaurant,
and (d) an amount determined by the Manager to be adequate for the operation of
the Restaurant based upon the Manager’s estimate of the reasonably foreseeable
income and expenses of the Restaurant, including, without limitation,
capitalized expenditures for the replacement of furniture, fixtures and
equipment, which is initially estimated to be $50,000. It is the intention of
the parties to operate on a “pay as you go” basis to the extent possible,
without the retention by the Manager of any reserves or contingency funds except
for immediately foreseeable needs. The Owner shall fund any deficit in the
Working Capital within 30 days after the Owner’s receipt of written notice from
the Manager of the need for additional Working Capital; provided that the Owner
shall use its best efforts to fund such a deficit within three days or as soon
thereafter as possible. If the Owner fails to do so, then in addition to any
other right or remedy that the Manager may otherwise have, the Manager shall
have the right to deduct such amount from any amount payable to the Owner
hereunder.
 
Section 6.2.  Capital Expenditures. Capital expenditures during the Term for
furniture, fixtures and equipment and capital improvements at the Restaurant
shall, to the extent possible, be paid for out of the Working Capital.
 
Section 6.3.  Distributions to Owner. Any amount in the Restaurant’s account
held by the Manager in excess of (a) the amount of Working Capital required
pursuant to Section 6.1 above, (b) the amount of the Management and License Fee
payable to Manager and (c) the operating expenses of the Restaurant (including
allocations for insurance, marketing and management training), less the amount
of any offsets or deductions provided for hereunder, shall be distributed to the
Owner within 30 days after the end of each fiscal month. The monthly
distributions to the Owner shall constitute prepayments subject to
reconciliation based on the Annual Statement for the fiscal year in which such
monthly distributions are made, with the payment for the final fiscal month
being adjusted as may be necessary.
 
ARTICLE 7. 
 
ACCOUNTING
 
Section 7.1.  Standards. The Manager, at the Manager’s own cost and expense,
shall maintain books and records of account relating to the Manager’s operation
and management of the Restaurant and prepare and deliver to Owner the statements
required under Sections 7.2, 7.3 and 7.4 hereof. The books and records for the
Restaurant shall be kept substantially in accordance with the systems utilized
by the Manager for the other Shells restaurants managed by the Manager. The
Owner and its designees shall have the right, upon 10 days prior written notice
to the Manager, to examine said books and records at the Manager’s corporate
headquarters at any reasonable time during regular business hours. Such books
and records of account shall be in sufficient detail to show compliance with the
requirements of Rule 7A-3.0141(2)(a), Florida Administrative Code, or any
successor regulation, with regard to the percentage of food and non-alcoholic
beverage sales.
 
Section 7.2.  Monthly Statement. Within 30 days of the end of each month, the
Manager shall provide the Owner with a balance sheet and a profit and loss
statement showing the Restaurant’s financial position as of the date of the
balance sheet and the operating results for the preceding fiscal month and
fiscal year to date (collectively the “Monthly Statement”).
 
Section 7.3.  Quarterly Statement. Within 45 days of the end of each fiscal
quarter, the Manager shall provide the Owner a balance sheet, profit and loss
statement, and statement of cash flows, and supporting schedules, showing the
Restaurant’s financial position as of the date of the balance sheet and the
operating results and statement of cash flows for the preceding fiscal quarter
and fiscal year to date (collectively the “Quarterly Statement”).
 
Section 7.4.  Annual Statement. Within 90 days following the end of each fiscal
year, the Manager shall provide the Owner a statement showing the Restaurant’s
operating results for the preceding fiscal year (the “Annual Statement”). The
Annual Statement shall contain a balance sheet, profit and loss statement,
statement of cash flows and supporting schedules, and shall be certified as true
and correct by the Manager’s Chief Financial Officer.
 
 
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Section 7.5.  Adjustments. Any adjustment required to make up an underpayment or
to refund an overpayment by the Owner or the Manager shall be made within 30
days after completion of the statement that shows the need for an adjustment.
Adjustments based on the Annual Statement shall be made during the first month
following completion of the Annual Statement. Adjustments made upon the
expiration or termination of this Agreement shall be made through payment or
refund, as required, within 30 days after the end of the Term of this Agreement.
 
Section 7.6.  Right to Audit. At any time during the two year period following
the Owner’s receipt of an Annual Statement, the Owner shall have the right, upon
10 days’ prior written notice to the Manager, at Owner’s expense, to have an
accountant selected by the Owner audit the Manager’s books and records relating
to the Restaurant for the period covered by such Annual Report. If there is a
discrepancy between such financial statements and the findings of Owner’s
accountant or any other dispute between the parties regarding the financial
statements, the Manager’s accountants and the Owner’s accountant shall attempt
to resolve such discrepancy, and their mutual decision shall be binding upon
Owner and Manager. If the accountants for the parties are unable to resolve the
discrepancy, the matter shall be referred to an arbitration panel composed of
the Owner’s independent CPA, the Manager’s independent CPA, and a third
independent CPA selected by the parties’ independent CPA’s, and the decision of
such arbitration panel shall be binding upon Owner and Manager. The cost of
conducting an independent audit of the Restaurant’s financial statements shall
be paid by the Owner unless the audit shows an underpayment to Owner in excess
of three percent of the amount that should have been distributed to Owner; in
such case Manager shall bear the cost of the audit. In the event that the actual
amount is resolved in favor of the Owner, the Manager shall pay the amount due
plus interest thereon at the Interest Rate specified in Section 16.13.
 
Section 7.7.  Fiscal Year. The fiscal year of the Restaurant shall be the fiscal
year used by Manager for its company-owned restaurants. As of the date of this
Agreement, the Manager proposes using a fifty-two (52) or fifty-three (53) week
period ending on the Sunday nearest to December 31.
 
Section 7.8.  GAAP. All financial statements to be prepared by the Manager
hereunder shall be prepared in accordance with generally accepted accounting
principles.
 
ARTICLE 8. 
 
INSURANCE AND INDEMNITY
 
Section 8.1.  Required Coverage. Except for such coverage otherwise maintained
by the landlord of the Restaurant under the lease agreement with such landlord,
the following forms of insurance coverage shall be maintained by the Restaurant:
 
(a)  Property Insurance: Property insurance covering the interior and exterior
improvements made by the Owner. Property insurance shall insure against any and
all risks of direct physical loss to the Restaurant and its furniture, fixtures
and equipment, with limits of not less than the full replacement cost thereof,
subject to the same deductible that applies to other Shells restaurants managed
by the Manager;
 
 
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(b)  Business Interruption: All Risk Business Interruption insurance with a
limit sufficient to reimburse the Owner for loss of income resulting from the
Owner’s inability to continue operations due to the Restaurant’s sustaining a
loss from an insured peril. The limit shall also include sufficient insurance to
ensure that the Owner will be able to meet its monetary obligations to the
Manager under this Agreement, including Section 9.1 hereof;
 
(c)  General Liability: Comprehensive general liability insurance, including
product and liquor liability coverage, with a combination of primary and excess
limits of not less than $3,000,000, each occurrence, bodily injury and property
damage combined, including dram shop insurance or similar coverage if required
by applicable statute or rule;
 
(d)  Employers’ Liability: Workers’ Compensation and Employers’ Liability
insurance, as well as other insurance as may be required by law, in such amounts
as may be required by applicable statute or rule; provided that the Employer’s
Liability insurance shall carry a limit of not less than $500,000;
 
(e)  Fidelity Coverage: Comprehensive Dishonesty, Disappearance and Destruction
(3-d) Coverage, insuring employee dishonesty and depositors forgery; and
 
(f)  Additional Coverage: Such additional coverages and higher policy limits as
may reasonably be required from time to time by the Manager for Shells
restaurants managed by the Manager.
 
The Manager shall be named as an additional insured and loss payee in all
policies required hereunder, and all such policies shall be primary to any
policies which either of the parties hereto may carry on its own. The limits set
forth above in this Section 8.1 shall be subject to adjustment periodically
(annually if reasonably possible) to reflect current costs and availability.
 
Section 8.2.  Responsibility For Obtaining Coverage. Although the Owner shall
bear the financial responsibility for the insurance coverage required under
Section 8.1 hereof, the Manager shall negotiate, obtain and be responsible for
obtaining such policies on behalf of the Owner. The Manager will make an annual
presentation of proposed insurance programs to the Owner and the Owner shall
have at least 45 days to obtain alternative coverage.
 
Section 8.3.  Evidence of Coverage. Upon a request from the Owner, the Manager
shall cause to be delivered to the Owner a certificate of insurance to evidence
that the foregoing insurance coverage requirements have been complied with by
the Manager. Such evidence shall include a statement by the insurer that the
policy or policies will not be canceled or materially altered without at least
30 days prior written notice to Owner and Manager.
 
 
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Section 8.4.Indemnity.
 
(a)  Owner’s Indemnification of Manager. The Owner agrees to indemnify, defend
and hold the Manager free and harmless from any liability for injury or death to
persons or damage or destruction of property, as a result of the Manager’s
performance of its duties in accordance with this Agreement, as well as the
performance by the Manager’s agents, officers, directors or employees.
Notwithstanding the foregoing, the Owner shall not be obligated to indemnify and
hold the Manager harmless or to reimburse the Manager or to defend the Manager
from any liability which results from the negligence, fraud or willful
misconduct of the Manager, its agents, employees, officers or directors, or any
action by the Manager, its agents, employees, officers or directors in violation
of any provision of this Agreement.
 
(b)  Manager Indemnification of Owner. The Manager agrees to indemnify, defend
and hold the Owner free and harmless from any liability for injury or death to
persons or damage or destruction of property arising out of the operation of the
Restaurant by the Manager or resulting from any act of the Manager, its agents,
officers, directors or employees in violation of any provision of this
Agreement, and from any liability resulting from any breach of any law, rule or
ordinance, including by way of example, but not limitation, any “employment”
violations, antitrust action, any liquor license violations or any other matter
within the control of the Manager. Notwithstanding the foregoing, the Manager
shall not be obligated to indemnify and hold the Owner harmless or to reimburse
the Owner or to defend the Owner from any liability that results from the
negligence, fraud or willful misconduct of the Owner, its agents, employees,
officers or directors, or any action of the Owner, its agents, employees,
officers or directors in violation of any provision of this Agreement.
 
Section 8.5.  Waiver of Subrogation. Each party hereto (the “Releasing Party”)
hereby releases the other (the “Released Party”) from any liability which the
Released Party would, but for this paragraph, have had to the Releasing Party
arising out of or in connection with any accident or occurrence or casualty (a)
which is or would be covered by a property damage policy (with fire, extended
coverage, vandalism and malicious mischief endorsement included) or by a
sprinkler leakage or water damage policy regardless of whether or not such
coverage is being carried by the Releasing Party, and (b) to the extent of
recovery under any other casualty or property damage insurance being carried by
the Releasing Party at the time of such accident or occurrence or casualty,
which accident or occurrence or casualty may have resulted in whole or in part
from any act or neglect of the Released Party, its officers, agents or
employees; provided, however, the release hereinabove set forth shall become
inoperative and null and void if the Releasing Party contracts for insurance
with an insurance company which (i) takes the position that the existence of
such release vitiates or would adversely affect any policy so insuring the
Releasing Party in a substantial manner and notice thereof is given to the
Released Party, or (ii) requires the payment of a higher premium by reason of
the existence of such release, unless in the latter case the Released Party
within 10 days after notice thereof from the Releasing Party pays such increase
in premium.
 
ARTICLE 9. 
 
[RESERVED]
 

 
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ARTICLE 10. 

REPRESENTATIONS AND WARRANTIES
 
Section 10.1.  Title to the Restaurant and/or Leasehold Interests. Except as
otherwise provided in the lease agreement for the lease of the Restaurant
premises, the Owner covenants that it has, and that throughout the Term of this
Agreement it will maintain, (i) either full ownership of the location where the
Restaurant is located or a valid leasehold estate in the building where the
Restaurant is located, and (ii) full ownership of or a valid leasehold estate in
the furniture, equipment and operating supplies that are used in the Restaurant.
The Owner represents and warrants that there is and shall be no material
conflict between this Agreement and any provision of any lease or deed, mortgage
or deed of trust, restrictive covenant or other agreement affecting the
Restaurant. The Owner further agrees that throughout the Term of this Agreement,
it will keep, observe and perform all terms, covenants, conditions and
obligations to be kept, observed or performed by the Owner under the Owner’s
lease or any concession or other agreement or security instrument in respect of
the Restaurant, and the furniture, fixtures and equipment in the Restaurant. The
Owner agrees that it will not amend or modify any provision of a lease that has
a material effect on this Agreement or the operation of the Restaurant, without
in each instance obtaining the prior written consent of the Manager, which must
be granted or withheld by the Manager within 30 days after the Manager’s receipt
of the Owner’s request for consent. The Owner hereby agrees to indemnify the
Manager and hold the Manager harmless from and against any loss, cost or damage
incurred by the Manager as a result of the Owner’s breach of any of the
foregoing representations, warranties or covenants or as a result of any claim
made against the Manager by any landlord, mortgagee or other party in privity
with the Owner.
 
Section 10.2.  Liquor License. The Owner represents and warrants that the
jurisdictions in which the Restaurant is located permit the sale of alcoholic
beverages at tables and a stand-up bar seven (7) days per week and that the
Restaurant is not located in an area in which the issuance of the appropriate
licenses or permits would be prohibited. The Owner shall use reasonable efforts
and all due diligence to maintain the liquor license for the Restaurant. The
Owner and the Manager shall cooperate with each other and with the licensing
authority in renewing the liquor license for the Restaurant.
 
Section 10.3.  Operation of the Restaurant. The Owner represents and warrants
that there is no legal impediment to the operation of the Restaurant by the
Manager as contemplated by this Agreement; that the Owner shall not create or
suffer to exist any condition that materially interferes with the normal use of
the Restaurant, including without limitation the accessways, parking areas,
lighting, service areas and utilities serving the Restaurant; and that the Owner
shall not interfere with the Manager’s operation of the Restaurant or give, or
attempt to give, orders or instructions to personnel employed at the Restaurant.
 
Section 10.4.  Authority of Owner and Manager. The Owner represents and warrants
that it has full right, power and lawful authority to execute and deliver this
Agreement and to perform its obligations hereunder in the manner and upon the
terms contained herein, with no other person needing to join in the execution of
this Agreement in order for it to be binding upon all persons. The person(s)
executing this Agreement on behalf of the Owner represent and warrant that they
are the only person(s) required to execute this Agreement in order to bind the
Owner. The Manager represents and warrants that it has full right, power and
lawful authority to execute and deliver this Agreement and to perform its
obligations hereunder in the manner and upon the terms contained herein. The
person(s) executing this Agreement on behalf of the Manager represent and
warrant that they are the only person(s) required to execute this Agreement in
order to bind the Manager.
 
 
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Section 10.5.  Confidentiality. The Owner represents and warrants that it shall
at all times treat as confidential any proprietary information, trade secrets,
knowledge or know-how relating to the Restaurant that the Owner may acquire in
connection with this Agreement or otherwise, including, without limitation, any
financial information relating to the revenues, costs or profits of the
Restaurant; personnel policies or procedures; budgets and compensation figures;
operating systems and methods; and recipes or training materials (referred to
collectively as “Confidential Information”); and that it shall use its best
efforts to keep any Confidential Information secret and confidential, both
during and after the Term of this Agreement. The Owner may disclose pertinent
information relating to the Restaurant on an as-needed basis to lenders, joint
ventures, accountants, attorneys, and potential purchasers; provided that the
Owner shall use reasonable efforts to ensure that such information is
disseminated on a “need to know” basis only. The Manager represents and warrants
that it shall at all times treat as confidential any proprietary information,
trade secrets, knowledge or know-how relating to the Owner or the Owner’s
business that the Manager may acquire in connection with this Agreement or
otherwise.
 
ARTICLE 11. 
 
DEFAULT, TERMINATION AND REMEDIES
 
Section 11.1.  Default, Notice and Cure. If either party hereto shall default in
the performance of any of its obligations under this Agreement and such default
is a result of that party’s gross negligence, gross abuse of authority, fraud or
criminal misconduct, and such default is not cured within 40 days after written
notice from the non-defaulting party then the party who delivered the notice of
such default shall have, in addition to its rights at law or in equity, the
right to terminate this Agreement.
 
Section 11.2.  Limitation of Liability. Notwithstanding anything to the
contrary, the Manager shall in no event have any liability, directly or
indirectly, for:
 

 
(i)
 
Any liability of the Owner under the Owner’s lease or any damages payable to the
landlord; or

 

 
(ii)
 
Any liability of the Owner to any mortgagee or lender of the Owner or any
damages payable to any such mortgagee or lender;

 
provided that the limitation of liability set forth in this Section 11.2 shall
not limit the Manager’s liability with respect to any of the insurance coverage
for which the Manager is responsible to obtain on the Owner’s behalf under
Article 8 hereof and shall not limit the Manager’s liability for negligence or
other tortious or unlawful conduct. Each party to this Agreement shall be bound
to make reasonable efforts to mitigate any damages incurred as the result of any
breach of this Agreement by the other party.
 
 
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ARTICLE 12.
 
SUCCESSORS AND ASSIGNS
 
Section 12.1.  Assignment by the Manager. The Manager may, without the Owner’s
consent, assign its interest in this Agreement to (i) an affiliate of the
Manager, provided that the Restaurant continues to be operated as a Shells
restaurant and the Manager continues to remain fully liable under this
Agreement; or (ii) a successor of the Manager that may result from a merger,
reorganization, consolidation or acquisition, provided that the surviving or
acquiring entity acquires all or substantially all of the assets of the Manager
relating to the Shells restaurants owned and/or managed by the Manager;
otherwise the Manager shall not assign all or any part of its interest in this
Agreement to any person without the prior written consent of the Owner. The
Manager shall furnish the Owner with any information regarding the proposed
assignee that is reasonably requested by the Owner.
 
Section 12.2.  Assignment by the Owner. The Owner may, without the Manager’s
consent, make a collateral assignment of this Agreement to Owner’s lender or
assign Owner’s interest in this Agreement to (i) an affiliate of the Owner,
provided that the Owner continues to be fully liable under this Agreement, or
(ii) a purchaser of the Owner’s entire interest in the Restaurant; otherwise the
Owner shall not assign all or any part of its interest in this Agreement to any
person or entity without the prior written consent of the Manager. In a case in
which the Manager’s consent to an assignment is required, the Manager shall not
unreasonably withhold its consent to the Owner’s transfer of its interest in
this Agreement, but the Manager’s consent to such a transfer may be conditioned
upon the following:
 

(a)
All of the Owner’s accrued monetary obligations to the Manager and all other
outstanding obligations related to the Restaurant shall have been satisfied;

 

(b)
The Owner shall have executed a general release, in a form satisfactory to the
Manager, of any and all claims against the Manager and its affiliates and their
shareholders and employees, in their corporate and individual capacities;

 

(c)
The transferee shall enter into a written assumption agreement, in a form
satisfactory to the Manager, assuming and agreeing to discharge all of the
Owner’s obligations under this Agreement and reducing to writing any custom,
usage or course of dealings that has been accepted in practice by the Owner and
the Manager without having been memorialized in a formal amendment to this
Agreement;

 

(d)
The transferee shall demonstrate to the Manager’s satisfaction that it meets the
Manager’s managerial and business standards; has a good business reputation and
credit rating; meets the criteria relating to character, reputation and the like
that apply in connection with the issuance, and/or renewal of liquor licenses
and other licenses or permits required for the Restaurant; and has the requisite
financial resources and capital to fund the operation of the Restaurant as
required by this Agreement;

 

(e)
The Owner shall not be in default under this Agreement, any amendments thereto
or any other agreements with the Manager, its subsidiaries or affiliates; or

 

(f)
The assignee must have been approved as a licensee of a liquor license suitable
for use at the Restaurant before the assignment is binding upon the Manager.

 
 
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Section 12.3.  Transfer to Affiliates. Transfers of a party’s interest in this
Agreement to an affiliate (as defined below) shall not require the consent of
the other party provided that the transferor remains fully liable under this
Agreement. The term “affiliate” as used herein shall mean any parent,
subsidiary, affiliated or related corporation or other entity of the Owner or
the Manager, respectively, or of any said parent, subsidiary, affiliated or
related corporation or other entity.
 
Section 12.4.  Parties Bound. The terms, provisions, covenants, undertakings,
agreements, obligations and conditions of this Agreement shall be binding upon
and shall inure to the benefit of the successors-in-interest and assigns of the
parties hereto with the same effect as if mentioned in each instance where the
party hereto is named or referred to, except that no assignment, transfer,
pledge, mortgage, lease or sublease made by either the Owner or the Manager in
violation of this Agreement shall vest any rights in the assignee, transferee,
mortgagee, pledge, lessee, sublessee or occupant.
 
ARTICLE 13. 
 
PROPRIETARY ITEMS: TRADEMARKS, TRADE SECRETS AND
INDICIA OF OWNERSHIP
 
Section 13.1.  Trademarks. The Owner understands that the Manager uses certain
proprietary names, trademarks, service marks and other terms and notations
(collectively referred to as the “Trademarks”) in its operation of Shells
restaurants, including, without limitation, the registered marks “Shells” and
the “jumping fish logo”.
 
Section 13.2.  Trade Secrets. The Owner understands that the Manager from time
to time creates or develops copyright materials and trade secrets in connection
with the management and operation of Shells restaurants (“Trade Secrets”),
including, without limitation, the standards and specifications for design,
construction, furniture, fixtures and equipment, decor, operating procedures,
recipes, and management, marketing, training and accounting programs and
materials.
 
Section 13.3.  Indicia of Ownership. The Owner recognizes that the Shells
restaurants and the system used by the Manager in operating them are
characterized by certain indicia of ownership (“Indicia of Ownership”)
including, without limitation, (i) certain unique features of concept, design,
appearance, and decor, which form the trade dress for Shells restaurants; and
(ii) certain concepts, presentations and menu items.
 
 
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Section 13.4.  Ownership By the Manager. The Manager covenants that it owns all
right, title and interest in and to the Trademarks, Trade Secrets and the
Indicia of Ownership (referred to collectively as the “Proprietary Items”) so as
to permit their use in connection with the Restaurant. The Owner expressly
acknowledges the Manager’s exclusive right, title and interest in and to the
Proprietary Items, both collectively and individually, and agrees not to
represent in any manner that the Owner has any ownership rights therein. The
Owner further agrees that use of the Proprietary Items at the Restaurant shall
not create in Owner’s favor any right, title or interest or other attributes of
ownership in or to the Proprietary Items. The Owner acknowledges and expressly
agrees that any and all goodwill associated with the Proprietary Items and the
Manager’s system for developing and operating Shells restaurants shall inure
exclusively to the benefit of the Manager. The Owner shall have no claim for
compensation for any part of the goodwill attributable to the use of the
Proprietary Items at the Restaurant or to the Owner’s performance of its duties
under this Agreement.
 
Section 13.5.  No Infringement By Owner. The Owner acknowledges that use of the
Proprietary Items by the Owner without in each instance obtaining the Manager’s
prior written consent shall be an infringement of the Manager’s exclusive right,
title and interest in and to the Proprietary Items. The Owner expressly
covenants that both during and after the Term of this Agreement, the Owner shall
not, directly or indirectly, (i) commit an act of infringement, (ii) contest or
aid in contesting the validity or ownership of the Proprietary Items, or (iii)
take any other action in derogation of the Manager’s rights in and to the
Proprietary Items. The Owner shall not hold out or otherwise employ the
Proprietary Items to perform any activity or to incur any obligation or
indebtedness in a manner that might in any way make the Manager liable therefor.
The Owner shall promptly notify the Manager of any attempt by any other person,
firm or corporation to use the Proprietary Items or any colorable variation
thereof, and of any claim, demand or cause of action based upon or arising
therefrom. The Owner shall also promptly notify the Manager of any litigation
instituted against the Owner involving the Manager’s Proprietary Items. The
Manager shall use its reasonable efforts, including prosecution or defense of
legal proceedings, to protect the Proprietary Items against infringement. In the
event the Manager undertakes the defense or prosecution of any litigation
relating to the Proprietary Items, the Owner agrees to execute any and all
documents and to do such acts and things as may, in the opinion of counsel for
the Manager, be necessary to carry out such defense or prosecution; provided
that the Manager shall reimburse the Owner for any out-of-pocket expenses that
the Owner incurs in doing so and the cost of the litigation shall be paid by the
Manager. If the Owner operates a business other than the Restaurant, the Owner
shall not use the Proprietary Items or any reproduction, copy or colorable
imitation thereof in either the operation or promotion of such business or
otherwise conduct such business in any manner that infringes any right of the
Manager or constitutes unfair competition with the Manager.
 
Section 13.6.  Subsequent Business. The Owner understands and agrees that
discontinuance of use of the Indicia of Ownership shall require substantial
revision of the decor of the Restaurant if the Owner intends to continue to
conduct any type of business at the Restaurant following termination of this
Agreement. Within 30 days after termination or expiration of this Agreement for
any reason, including but not limited to the breach of this Agreement by the
Manager, the Owner shall cease using the Trademarks, Trade Secrets, Indicia of
Ownership and any other Proprietary Items owned by the Manager; and the Owner
shall make such modifications or alterations to the Restaurant as may be
necessary to prevent the operation of any business thereon by Owner or others in
derogation of this Article 13; provided that structural changes to the
Restaurant shall not be required except to the extent specified below in this
Section 13.6. In the event the Owner fails or refuses to comply with the
requirements of this Article 13, the Manager shall have the right, subject to
and in accordance with the terms of the Owner’s lease, to enter upon the
Restaurant premises without being guilty of trespass or any other tort, for the
purpose of making or causing to be made such changes as may be required at the
expense of the Owner, which expense the Owner agrees to pay to the Manager upon
demand. The Owner shall alter or remove or cause to be removed from the
Restaurant premises the all Indicia of Ownership, including without limitation,
all signage and all Proprietary Items, such as menus, recipes or any other items
bearing the Manager’s name or any of the Manager’s Trademarks.
 
 
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Section 13.7.  Purchase of Proprietary Items. Upon termination or expiration of
this Agreement, the Manager shall have the option to purchase from the Owner any
or all items in the Restaurant that bear any of the Manager’s Trademarks, at
Owner’s cost or fair market value, whichever is less. If the parties cannot
agree on fair market value within 30 days after the termination of this
Agreement, a mutually acceptable independent appraiser shall be designated by
the parties hereto, and the appraiser’s determination shall be binding.
 
ARTICLE 14. 
 
ADVERTISING, PROMOTION AND TRAINING
 
Section 14.1.  Cost of Advertising. The cost of marketing and advertising for
the Restaurant shall be an operating expense of the Restaurant. The cost of
in-store advertising and promotion that applies only to the Restaurant shall be
one category of such expenses. In addition, the cost of marketing and
advertising that is applicable to all Shells restaurants on a state, regional,
or national basis shall be allocated among all of the Shells restaurants managed
by the Manager, based upon the Manager’s standard method of allocating such
cost. If the Manager provides marketing or advertising services within a defined
market area that includes the Restaurant and other Shells restaurants, the cost
of such marketing or advertising shall be allocated among the Restaurant and
such other Shells restaurants within such market area.
 
Section 14.2.  Promotions. The Manager may offer promotions, discounts and other
incentives at the Restaurant in a manner similar to those offered at other
Shells restaurants managed by the Manager. Sales made in connection with any
such promotion, discount or other incentive shall be included in Gross Sales in
the amount paid by the customer rather than at the menu price. The costs
incurred by the Restaurant in connection with such items shall be included in
the operating expenses of the Restaurant.
 
Section 14.3.  Training. The cost of store-level management training for the
Restaurant shall be borne by the Owner. If the Manager moves store level
management of the Restaurant to other Shells’ restaurants managed by the
Manager, other than the initial store level management of the Restaurant (to
which this Section 14.3 shall not apply), the recipient store will pay the Owner
the sum of $15,000 for a general manager or $12,000 for an assistant manager,
and if the Restaurant receives store level management trained at other
restaurants managed by the Manager, the Owner shall pay the transferor store the
sum of $15,000 for a general manager or $12,000 for an assistant manager.
 
ARTICLE 15. 
 
NOTICES
 
Section 15.1.  Notice Addresses. Written communications between the Owner and
the Manager shall be sent to their respective addresses shown on the first page
of this Agreement (“Notice Address”); provided that the Owner or the Manager may
change its Notice Address by giving written notice of such change to the other
party in accordance with this paragraph.
 
Section 15.2.  Notices. Wherever this Agreement provides for notice, such notice
shall be in writing and shall be delivered to a party at its Notice Address,
either by hand delivery or by United States mail, certified, with return receipt
requested. A hand-delivered notice shall be effective on the date of receipt by
the party being served with the notice. A mailed notice shall be effective on
the earlier of (i) the date of receipt or refusal of receipt, or (ii) five days
after the date of mailing. Either party may, in a written notice to the other
party, designate a reasonable number of third parties to receive a copy of
notices sent under this Agreement. Copies of notices may be sent by regular U.S.
mail.
 
 
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ARTICLE 16. 
 
GENERAL PROVISIONS
 
Section 16.1.  Relationship of the Parties. The provisions of this Agreement
relating to the determination and payment of management fees hereunder are
included solely for the purpose of providing a method whereby the such fees can
be measured and ascertained. The Manager and the Owner shall not be construed as
joint venturers or partners of each other and neither shall have the power to
bind or obligate the other except as set forth in this Agreement.
 
Section 16.2.  Entire Agreement. This Agreement supersedes all prior agreements
and understandings, whether written or oral. The Owner and the Manager have
neither made nor relied upon any promises, representations or warranties in
connection with this Agreement that are not expressly set forth in this
Agreement. In entering into this Agreement, the Owner and the Manager have
relied on the representations and warranties contained in this Agreement.
 
Section 16.3.  Modifications and Waiver. This Agreement may not be modified
except by a written agreement signed by the party against whom such modification
is sought to be enforced. No waiver of any condition or covenant in this
Agreement by either party shall be effective unless made in writing, nor shall
any waiver be deemed to imply or constitute a future waiver of the same or any
other condition or covenant of this Agreement.
 
Section 16.4.  Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Florida.
 
Section 16.5.  Construction. Whenever a word appears herein in its singular
form, such word shall include the plural; and the masculine gender shall include
the feminine and neuter genders. This Agreement shall be construed without
reference to the titles of Articles, Sections or Clauses, which are inserted for
convenient reference only. This Agreement shall be construed without regard to
any presumption or other rule permitting construction against the party causing
this Agreement to be drafted and shall not be construed more strictly in favor
of or against either of the parties hereto.
 
Section 16.6.  Severability. If any term or provision of this Agreement or the
application thereof to any person or circumstances shall to any extent be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
 
Section 16.7.  Consent or Approval . Whenever it is necessary under the terms of
this Agreement for either party to obtain the consent or approval of the other
party, such consent or approval shall not be unreasonably withheld or delayed.
 
Section 16.8.  Certificate of Performance. The Owner and the Manager shall,
within 20 days after receipt of a written request from the other, execute,
acknowledge and deliver a statement in writing certifying whether this Agreement
is unmodified and in full force and effect (or if modified, whether the same is
in full force and effect as so modified), whether any conditions to the full
enforceability of this Agreement remain unsatisfied, and such other facts,
including the nature of any claim of default on the part of the other, as either
party may reasonably request.
 
Section 16.9.  Excuse for Nonperformance. If either party hereto shall be
delayed or prevented, from the performance of any act required hereunder by
reason of acts of God, strikes, lockouts, labor troubles, inability to procure
materials, restrictive governmental laws or regulations, adverse weather,
unusual delay in transportation, delay by the other party hereto or other cause
without fault and beyond the control of the party obligated to perform
(financial inability excepted), then upon notice to the other party, the
performance of such act shall be excused for the period of the delay and the
period for the performance of such act shall be extended for a period equal to
the period of such delay; provided, however, the party so delayed or prevented
from performing shall exercise good faith efforts to remedy any such cause of
delay or cause preventing performance.
 
 
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Section 16.10.  Disputes. If a dispute shall arise as to any amount or sum of
money to be paid by one party to the other or any work to be performed by either
of them under the provisions hereof, a party shall have the right to make
payment or perform such work “under protest,” without waiver or prejudice to its
right to recover from the other party. If it shall later be determined (by
agreement of the parties, arbitration or litigation) that one party has paid or
performed an obligation that should have been paid or performed by the other
party, the party who paid or performed “under protest” shall be entitled to
recover the amount paid or the cost incurred, plus interest thereon at the
Interest Rate specified in Section 16.13 hereof, from the date on which such
payment was made until the date on which reimbursement is received.
 
Section 16.11.  Arbitration. All claims, disputes and other matters in question
between the parties to this Agreement arising out of or relating to this
Agreement or the breach thereof, shall be decided by mandatory and binding
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (“AAA”) or as otherwise agreed by the parties in such
controversy, and judgement on the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof.
 
Section 16.12.  Attorney’s Fees. If the Owner or the Manager brings action
through arbitration or at law or equity against the other in order to enforce
the provisions of this Agreement or as a result of an alleged default under this
Agreement, the prevailing party in such action shall be entitled to recover from
the other party reasonable attorney’s fees (including paralegals employed by
such attorney and costs of litigation at the trial and appellate level).
 
Section 16.13.  Interest. All monetary obligations under this Agreement shall
bear interest from the date on which they become due and payable until the date
on which payment is received by the party entitled to payment. Except where a
different rate of interest is expressly provided for elsewhere in this
Agreement, such interest shall be paid at an annual rate (the “Interest Rate”)
equal to ten percent (10%) per annum.
 
Section 16.14.  Date of Agreement. All references to the “date of this
Agreement,” the “date hereof,” and the like shall be deemed to be the last date
on which this Agreement shall be executed by the Owner and by the Manager.
 
In witness whereof, the Owner and the Manager do hereby execute this Management
and License Agreement on the date first appearing in the preamble to this
Agreement.
 

 
SHELLS SEAFOOD RESTAURANTS, INC.,
a Delaware corporation

By:/s/ Warren R Nelson
Name: Warren R Nelson
Title: President and CFO
 
ROCK BEACH GRILL OF PEMBROKE PINES, LLLP,
a Florida limited liability limited partnership

By: ROCK BEACH HOLDINGS, LLC,
its general partner

By: /s/ Warren R. Nelson
Name: Warren R Nelson
Title: President

 
 
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