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Exhibit 10.23
AGREEMENT AND CONSENT
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This AGREEMENT AND CONSENT (hereinafter the "Consent") is made in
Dublin, Ohio, as of the date set forth below, by and among WENDY'S
INTERNATIONAL, INC., an Ohio corporation (hereinafter "Wendy's"); WM LIMITED
PARTNERSHIP-1998, a Michigan limited partnership ("Franchisee"); and S&Q
MANAGEMENT, LLC, a Michigan limited liability company ("S&Q"); MERITAGE
HOSPITALITY GROUP INC., a Michigan corporation ("Meritage"); MHG FOOD SERVICE
INC., a Michigan corporation ("MHG"); ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇. ("▇▇▇▇▇▇▇▇"); ▇▇▇ ▇.
▇▇▇▇▇ ("▇▇▇▇▇"); MERITAGE CAPITAL CORP., a Florida corporation ("MCC"); MCC FOOD
SERVICE INC., a Michigan corporation ("Food Service") and ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
("▇▇▇▇▇▇"). Meritage, MHG, MCC, Food Service, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ are
hereinafter collectively referred to as the "Guarantor Group." Meritage, MHG and
▇▇▇▇▇▇▇▇ are hereinafter collectively referred to as the "Continuing
Guarantors." S&Q and ▇▇▇▇▇ are hereinafter together referred to as the "New
Guarantors." MCC, Food Service and ▇▇▇▇▇▇ are hereinafter collectively referred
to as the "Released Guarantors."
WHEREAS, the Franchisee is the sole franchisee under the various
Wendy's Unit Franchise Agreements for the Wendy's Old Fashioned Hamburgers
Restaurants set forth on Exhibit A attached hereto and made a part hereof; and
WHEREAS, the Wendy's Unit Franchise Agreements set forth on Exhibit A,
and any and all amendments and modifications thereto, including, without
limitation, a Consent Agreement dated May 16, 1997 ("Original Consent"), and an
Agreement and Consent dated August 7, 1998 ("August, 1998 Consent") are
hereinafter collectively referred to as the "Franchise Agreements"; and
WHEREAS, under the August, 1998 Consent, Meritage, MHG, MCC, Food
Service, ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ guaranteed the obligations of Franchisee under the
Franchise Agreements, and are jointly and severally liable with Franchisee
thereunder; and
WHEREAS, as the result of an overall reorganization in connection with
the Franchisee and the Guarantor Group, and in accordance with a letter to
Wendy's dated October 19, 1998, the Articles of Organization and Operating
Agreement of S&Q and the Resolution of Meritage dated October 12, 1998
(collectively, the "Purchase Agreement"), the parties desire to obtain Wendy's
consent and agreement to (i) the replacement of Food Service with S&Q as the
general partner of the Franchisee, (ii) the clarification of the ownership
structure of the Franchisee, the Continuing Guarantors and the New Guarantors,
and Wendy's restrictions with respect to those entities and individuals, (iii)
the release, discharge and acquittal of the Released Guarantors from further
obligations under the Franchise Agreements, (iv) the addition of S&Q and ▇▇▇▇▇
as guarantors under the Franchise Agreements, and (v) the reaffirmation and
continuation of the obligations of the Continuing Guarantors, as guarantors
under the Franchise Agreements; and
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WHEREAS, all Wendy's Old Fashioned Hamburgers Restaurants referenced
above are hereinafter collectively referred to as the "Restaurants"; and
WHEREAS, Wendy's is willing to grant its consent and waive its right of
first refusal in the aforementioned transfers subject to certain terms and
conditions contained herein.
NOW, THEREFORE, in consideration of the premises and the mutual
promises contained herein, the parties, intending to be legally bound, mutually
agree as follows:
1. Upon the effective date of this Consent, Wendy's hereby consents and
agrees to (i) the replacement of Food Service by S&Q as the general
partner of the Franchisee, (ii) the clarification of the ownership
structure of Franchisee, the Continuing Guarantors and the New
Guarantors, as set forth herein, (iii) except as specifically set forth
herein, the release, discharge and acquittal of the Released Guarantors
from further obligation under the Franchise Agreements, (iv) the
addition of S&Q and ▇▇▇▇▇ as guarantors of the Franchise Agreements,
and (v) the reaffirmation and continuation of the guarantees of
Meritage, MHG and ▇▇▇▇▇▇▇▇, as guarantors of the Franchise Agreements.
Wendy's consent and agreement are subject to, and in reliance upon, the
following terms, conditions, representations and warranties:
A. The Franchisee, the Continuing Guarantors and the New
Guarantors warrant, represent and agree that:
(1) The Franchisee is and shall remain the sole
franchisee under the Franchise Agreements. The
Franchisee is owned as follows:
Limited Partnership
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Units
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(a) The sole General Partner is S&Q 00.1%
(b) MHG 99.9%
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Total: 100.0%
(2) S&Q is a duly organized Michigan limited liability
company, and all legal actions necessary have been
taken to replace Food Service as the sole general
partner of the Franchisee. S&Q is owned free and
clear of liens and encumbrances as follows:
Members Percentage of Interest
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. 50%
▇▇▇ ▇. ▇▇▇▇▇ 50%
---
Total: 100%
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(3) MHG currently owns 99.9% of the limited partnership
units in the Franchisee, and MHG is a wholly-owned
subsidiary of Meritage.
(4) The Franchisee, S&Q, Meritage and MHG are
duly-organized entities, in good standing, and are
either registered or authorized to do business in the
State of Michigan. The activities of the Franchisee
and of S&Q are currently, and shall remain, limited
solely to the ownership and operation of Wendy's Old
Fashioned Hamburgers Restaurants.
(5) All of the Continuing Guarantors shall guarantee all
obligations under the Franchise Agreements, as
specifically defined herein, and except as otherwise
provided herein, in accordance with the provisions of
Paragraph 1(C) of the August, 1998 Consent. The New
Guarantors hereby agree to execute Wendy's Guaranty,
in the form attached hereto and made a part hereof as
Exhibit B, such that the New Guarantors shall be
liable under the terms of such Guaranty and under the
Franchise Agreements. Specifically, the New
Guarantors shall individually comply with the
noncompetition and confidentiality provisions of the
Franchise Agreements, and acknowledge and agree that
their failure to do so shall constitute a default
under the Franchise Agreements.
(6) Wendy's hereby releases, discharges and acquits the
Released Guarantors from further obligation under the
Franchise Agreements, provided, however, that the
Released Guarantors shall have continuing obligations
under Paragraph 1(C) of this Consent.
B. Franchisee, the Continuing Guarantors, the New Guarantors and
the Released Guarantors acknowledge and agree that the
obligations referenced on Exhibit C attached hereto and made a
part hereof must be paid or otherwise resolved to Wendy's
satisfaction or Wendy's may elect not to execute this Consent.
However, execution of this Consent by Wendy's shall not
constitute and is not intended as a waiver of any amounts
outstanding. Franchisee, the Continuing Guarantors and the New
Guarantors jointly and severally assume responsibility for all
obligations of the Released Guarantors to Wendy's, its
subsidiaries and any advertising cooperatives under the
Franchise Agreements which arose or have accrued up to the
effective date of this Consent. Franchisee, the Continuing
Guarantors, the New Guarantors and the Released
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Guarantors further agree that it shall be the responsibility
of the Franchisee, the Continuing Guarantors and the New
Guarantors to structure with the Released Guarantors
provisions (such as indemnities and set-offs) as may be
necessary to ensure full performance by Franchisee, the
Continuing Guarantors and the New Guarantors under the
Franchise Agreements and this Consent. Without limiting the
generality of this provision, the Franchisee, Continuing
Guarantors and New Guarantors jointly and severally agree to
assume direct and primary responsibility for royalties and
advertising fees for the entire month of October, 1998, and
thereafter.
C. The Released Guarantors agree that as to the Released
Guarantors the following provisions of the Franchise
Agreements shall continue in full force and effect and shall
survive beyond the effective date of this Consent. In this
regard, the Released Guarantors shall continue to be jointly
and severally liable under the following provisions of the
Franchise Agreements:
(1) The terms of the noncompetition provision of the
Franchise Agreements shall apply to the Released
Guarantors for a period of two (2) years from the
date of this Consent. In addition, the Released
Guarantors shall remain liable to Wendy's under the
confidentiality provision of the Franchise
Agreements.
(2) The Released Guarantors hereby jointly and severally
agree to indemnify, defend and hold Wendy's, its
successors, assigns, subsidiaries, officers,
directors, employees and agents, harmless from any
and all claims, judgments, actions or expenses
(including reasonable attorney fees), arising out of
or otherwise connected with the past operation of the
Restaurants, the interest of any party comprising the
Released Guarantors or the Franchise Agreements, or
otherwise connected with the transactions referenced
herein, to which transactions Wendy's consents but
assumes no responsibility for effectuating. This
indemnity shall be binding upon the respective heirs
or successors of the Released Guarantors as a
contingent claim.
(3) The Released Guarantors acknowledge and agree that
the Released Guarantors are in compliance with all
provisions of the Franchise Agreements up to the
effective date of this Consent.
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D. Franchisee warrants, represents and agrees that the
Restaurants shall be operated only by the Franchisee, and that
Franchisee has the contractual right to possession of the
premises associated with the Restaurants.
E. Franchisee, the Continuing Guarantors and the New Guarantors
warrant and represent that as of the effective date of this
Consent, Franchisee, the Continuing Guarantors and the New
Guarantors will have in full force and effect and will have
delivered to Wendy's a certificate of insurance specifically
covering each of the Restaurants under the Franchise
Agreements and which complies with the insurance provisions of
the Franchise Agreements, and includes the street locations on
the front or back of the certificate or attached to it as an
exhibit, naming Franchisee, the Continuing Guarantors and the
New Guarantors (or any of them) as the insured and naming
Wendy's as additional insured.
F. Franchisee, the Continuing Guarantors and the New Guarantors
acknowledge and agree that Assignor has voted in favor of the
1998/'99 WNAP increase and that they have reviewed the
memorandum and ballot related to such increase. Franchisee,
the Continuing Guarantors and the New Guarantors hereby agree
to comply with the terms of such memorandum and ballot.
G. Franchisee, the Continuing Guarantors and the New Guarantors
acknowledge and agree that they have received and reviewed a
copy of Wendy's transaction policy dated April 1, 1994, as
amended November 4, 1994, and will comply with the provisions
therein.
H. All parties represent that to the best of their respective
knowledge, information and belief, the facts as set forth in
the WHEREAS clauses of this Consent accurately reflect their
understanding and intent.
I. All parties acknowledge and agree that unless specifically
modified herein, all provisions of the Franchise Agreements,
including, without limitation, the Original Consent and the
August, 1998 Consent, remain unchanged and continue in full
force and effect.
2. Franchisee, the Continuing Guarantors and the New Guarantors agree that
except with respect to Meritage, which is a publicly-owned entity,
there shall be no change in the structure or ownership of the
Franchisee, the Continuing Guarantors and the New Guarantors or the
Franchise Agreements, and no interest in the Franchisee, the Continuing
Guarantors (except Meritage) and the New Guarantors or the Franchise
Agreements shall be pledged, hypothecated, assigned or otherwise
transferred voluntarily, by operation of law or otherwise, without in
each instance Wendy's prior written consent and waiver of its right of
first refusal, PROVIDED, HOWEVER, that this restriction shall
specifically not apply to any interests the Franchisee, the Continuing
Guarantors and the New Guarantors may have in any real estate,
equipment, personal property or
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business value pertaining to the Restaurants. Franchisee, the
Continuing Guarantors and the New Guarantors acknowledge and agree that
in connection with the transactions described herein, Wendy's has not
consented to the collateral assignment of the Franchise Agreements or
any interest in Franchisee, the Continuing Guarantors and the New
Guarantors, and Franchisee, the Continuing Guarantors and the New
Guarantors warrant and represent that no security interest in the
Franchise Agreements or in Franchisee, the Continuing Guarantors and
the New Guarantors exists, PROVIDED, HOWEVER, that this restriction
shall specifically not apply to any interests the Franchisee, the
Continuing Guarantors and the New Guarantors may have in any real
estate, equipment, personal property or business value pertaining to
the Restaurants. Franchisee, the Continuing Guarantors and the New
Guarantors further acknowledge and agree that any future collateral
assignment of the Franchise Agreements or any franchise or licensed
rights to any third party under any promissory note, loan agreement or
other documentation shall be specifically subject to the terms of the
Franchise Agreements, and shall require Wendy's prior written consent.
Notwithstanding anything contained in this paragraph, the Franchisee,
the Continuing Guarantors and the New Guarantors shall not at any time
in the future enter into a collateral assignment of the Franchise
Agreements or the franchise and licensed rights pertaining to any of
the Restaurants, without obtaining Wendy's prior written consent.
3. Franchisee, the Released Guarantors, the Continuing Guarantors and the
New Guarantors hereby agree to execute and date a General Release of
All Claims in the form attached hereto as Exhibit D contemporaneously
with the execution of this Consent. The parties further agree that if
the General Release of All Claims is returned to Wendy's undated, the
effective date of this Consent shall be the effective date of the
General Release of All Claims.
4. Franchisee, the Continuing Guarantors and the New Guarantors
acknowledge that they are aware of the obligation to become a member of
the local advertising cooperative, have investigated the structure and
requirements of that cooperative, and understand and agree to the
obligations of cooperative members.
5. Franchisee, the Continuing Guarantors and the New Guarantors warrant,
represent and agree that the terms and conditions of this Consent
modify the Franchise Agreements and are hereby incorporated therein;
any breach of the terms or conditions of this Consent shall constitute
a material default under the Franchise Agreements.
6. All parties understand that Wendy's may in the future approve offerings
and transfers under different terms, conditions and policies existing
at that time. Wendy's consent and waiver here shall not be relied upon
in future transactions as limiting Wendy's position or the conditions
associated with Wendy's consent and/or waiver of its right of first
refusal.
7. Franchisee, the Released Guarantors, the Continuing Guarantors and the
New Guarantors acknowledge and agree that Wendy's has no knowledge of,
and makes no
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warranties with respect to, the accuracy of any representations or
warranties made by said parties to each other in connection with these
transactions, and Wendy's assumes no obligation in this regard.
8. Wendy's and Franchisee agrees that the official mailing address of
Franchisee shall be as follows:
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
All parties agree that notice to Franchisee shall constitute notice to
the Continuing Guarantors and the New Guarantors.
9. In addition to the indemnity provision of the Franchise Agreements,
Franchisee, the Continuing Guarantors and the New Guarantors hereby
jointly and severally agree to indemnify, defend and hold Wendy's, its
successors, assigns, subsidiaries, officers, directors, employees and
agents, harmless from any and all claims, judgments, actions or
expenses (including reasonable attorney fees), arising out of or
otherwise connected with the past operation of the Restaurants, the
interest of any other party in Franchisee, the Continuing Guarantors
and the New Guarantors or the Franchise Agreements, or otherwise
connected with the transactions as referenced herein, to which
transactions Wendy's consents but assumes no responsibility for
effectuating. This indemnity shall be binding upon the respective heirs
or successors of Franchisee, the Continuing Guarantors and the New
Guarantors as a contingent claim and shall survive any termination of
the Franchise Agreements.
10. All parties acknowledge and agree that Wendy's consent in this Consent
is not intended to provide, and shall not be construed as providing,
Wendy's consent (or the consent of any subsidiary of Wendy's) with
regard to any other right or interest other than Wendy's consent to the
transactions described herein. Any other consent must be separately
obtained.
11. Franchisee, the Continuing Guarantors and the New Guarantors hereby
warrant and represent that the financial and other information which
has been provided by Franchisee, the Continuing Guarantors and the New
Guarantors to Wendy's in connection with this transaction is true and
accurate. Wendy's is relying upon the accuracy of that information in
consenting to this transaction. Any material misrepresentation as to
the capitalization, financial structure, credit worthiness, background
or ownership interest of Franchisee, the Continuing Guarantors or the
New Guarantors may be deemed by Wendy's to be a default of the
Franchise Agreements, in addition to any other rights or remedies
Wendy's may have.
12. The parties understand and acknowledge that Wendy's consent in no way
constitutes an acknowledgment, undertaking or representation by Wendy's
as to the financial viability of these transactions, any approval of
the monetary terms of these transactions or the earnings potential of
the Restaurants. The parties acknowledge that they have sepa-
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rately reviewed and evaluated this transaction and obtained independent
professional assistance and have in no way relied upon Wendy's consent
as an appraisal of these transactions.
13. Franchisee hereby acknowledges the receipt of Wendy's Uniform Franchise
Offering Circular at the earlier of the first personal meeting with
Wendy's regarding this Consent or ten (10) business days prior to the
execution of this Agreement. Franchisee further acknowledges the
receipt of a final copy of this Consent at least five (5) business days
prior to the execution hereof.
14. The parties agree that if they fail to execute and return this Consent
to Wendy's within twenty-one (21) days of the receipt hereof, this
Consent may not be executed by Wendy's and the terms and conditions
contained herein shall not otherwise be binding upon Wendy's without
such execution.
15. Nothing contained in the Purchase Agreement or any collateral
documentation between the Franchisee, the Released Guarantors, the
Continuing Guarantors and the New Guarantors, and affiliated parties,
is intended to conflict with the terms and conditions of this Consent
or the Franchise Agreements as defined herein or to impose additional
requirements or restrictions on Wendy's except as may be specifically
set forth herein. In the event of a conflict, the terms and conditions
of the Franchise Agreements and the Consent will control over said
documents. In the event of a conflict between the Franchise Agreements
and this Consent, the Consent will control, provided every reasonable
effort is made to read the Consent as supplementing the Franchise
Agreements, except as specifically stated to the contrary. The parties
further agree to the following:
A. ALL PARTIES ACKNOWLEDGE AND AGREE THAT AS TO WENDY'S AND THE
RIGHTS OF WENDY'S, THE FRANCHISE AGREEMENTS AND THIS CONSENT
SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF OHIO.
16. If any material provision or restriction contained herein is void under
federal, state or local law, or held unenforceable and against public
policy, the parties shall negotiate in good faith to give each party
the benefit of its bargain consistent with the intent and rights of the
parties.
17. This Consent sets forth the entire understanding between the parties
concerning the subject matter of this Consent and incorporates all
prior negotiations and understandings. There are no covenants,
promises, agreements, conditions or understandings, either oral or
written, between the parties relating to the subject matter of this
Consent other than those set forth herein. No representation or
warranty has been made by or on behalf of any party to this Consent (or
any officer, director, employee or agent thereof) to induce the other
party to enter into this Consent or to abide by or consummate any
transactions contemplated by any terms of this Consent, except
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representations and warranties, if any, expressly set forth herein. No
alteration, amendment, change or addition to this Consent shall be
binding upon either party unless in writing and signed by the party to
be charged. The submission of any unexecuted copy of this Consent shall
not constitute an offer to be legally bound by any provision of the
document submitted, either currently or in the future; and no party
shall be bound by this Consent until it is fully executed and delivered
by all parties.
IN WITNESS WHEREOF, this Agreement and Consent is effective as of the
date it is executed by Wendy's International, Inc.
WENDY'S INTERNATIONAL, INC.
BY: /s/ W. ▇▇▇▇▇▇▇ ▇▇▇▇
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TITLE: Vice President
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DATE: 12/16/98
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FRANCHISEE:
WM LIMITED PARTNERSHIP-1998
BY S&Q MANAGEMENT, LLC,
ITS GENERAL PARTNER
BY: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
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TITLE: Member
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RELEASED GUARANTORS:
MERITAGE CAPITAL CORP.
BY: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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TITLE: President
---------------------------------
MCC FOOD SERVICE INC.
BY: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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TITLE: Chairman & CEO
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(SIGNATURES CONTINUED ON NEXT PAGE.)
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/s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, INDIVIDUALLY
CONTINUING GUARANTORS:
MERITAGE HOSPITALITY GROUP INC.
BY: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
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TITLE: President
---------------------------------
MHG FOOD SERVICE INC.
BY: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
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TITLE: President
---------------------------------
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
---------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇., INDIVIDUALLY
NEW GUARANTORS:
S&Q MANAGEMENT, LLC
BY: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
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TITLE: Member
---------------------------------
/s/ ▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------------
▇▇▇ ▇. ▇▇▇▇▇, INDIVIDUALLY
Franchise:__________
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