Amacom Franchising And Licensing_10 pdf

318 FINANCIAL STRATEGIES of competing or complementary franchise systems are a viable strategy for responding to these pressures. Thus, some of the most common reasons that franchisors consider a merger or acquisition with another franchisor or why nonfranchise companies consider franchise systems as viable acquisition tar- gets include: ❒ The desire to add new products or services to its existing lines without the expense and uncertainty of internal research and development ❒ The desire to expand into a new geographic market or customer base without the expense of attracting new franchisees into these locations or developing a new advertising and marketing program ❒ The need to increase size to effectively compete with larger companies or to eliminate the threat of a smaller competitor ❒ The desire for market efficiencies through the acquisition of suppliers (backward integration) or existing franchisees or distributors (forward integration) ❒ The need to strengthen marketing capabilities or improve the quality of management personnel There are numerous complex issues involved in the merger or acquisition of any company, including both legal and business considerations. This is especially true for franchisors, however, who must address not only the po- tential issues related to taxes, securities regulation, labor laws, employee benefits, antitrust, environmental regulation, corporate governance, bank- ruptcy, and antitrust compliance but who also must understand the nature of the assets of the franchise system being acquired and the unique relationship between the franchisor and its franchisees. Franchisors that are considering their first acquisition must understand that the transaction is a process, not an event. The management of the process, the quality of the franchisor’s team of advisors, and a clear understanding of the franchisor’s transactional objec- tives will all go a long way toward ensuring that the completed deal is ulti- mately a success for the franchisor, its shareholders, and the overall system. A key component of the management of this process will also be an analysis of how the proposed transaction may affect the franchisor-franchisee rela- tionship, including the potential dilution of its brands, the overlap of its territorial rights, and potential confusion in the product and service mixes offered to consumers. Key Trends and Observations It goes without saying that the last few years have been very challenging for M&A transactions from deal offer, deal valuation, and deal structuring perspectives and in getting deals done, especially when compared to the 1997 to 2000 time frame. The events of September 11, 2001, have not made things any easier, but it is premature to throw in the towel in regard to getting deals done or in thinking that the near future will not once again be a vibrant 10376$ CH16 10-24-03 09:38:34 PS 319 SPECIAL ISSUES IN MERGERS AND ACQUISITIONS and active period for M&A activity. Set forth below are some of my observa- tions on the current state of the M&A marketplace. 1. The pace and frenzy of M&A deals had slowed—even before September 11th and more recent events and fears, but seem to be picking up slowly. The better deals are getting done, but there are fewer players pushing their way for a place to sit at the table. 2. Capital is still available to get certain types of transactions completed— capital has tightened to weed out the weaker deals—which is part of a natural economic cycle and not necessarily a bad thing, given that many deals in 1999 and 2000 should never have been consummated. 3. Valuations on the seller’s side have become much more realistic, creating many opportunities for buyers who have cash (or access to cash) and the right internal and advisory teams to get deals done. The Federal Re- serve’s active bias toward low interest rates reduces borrowing and transactional costs for the right types of transactions, which lend them- selves to leveraged finance. 4. Reduced valuations have also created opportunities for consolidation; many venture capitalists and private equity funds are very motivated and willing to sell the ‘‘dogs’’ and perceived underperforming compa- nies at a fraction of what they paid, and failed roll-ups are starting to liquidate some of their holdings. 5. Deals are closing within a slower time frame—the rush to get deals done quickly has subsided except in special circumstances and the due dili- gence periods have become extended and issues more complex, ranging from increased litigation, more challenging intellectual property issues, underwater stock option plans, etc.—especially in a post–Sarbanes- Oxley environment. 6. Professional advisors must be extra careful in drafting the Representa- tions and Warranties in the Acquisition Agreement to address the new due diligence challenges and demands brought on in the new age of scrutiny—as well as the scope and terms of indemnification and other covenants to protect the buyer against surprises. 7. Tax breaks to facilitate mergers and acquisitions may be in the works as part of the overall economic stimulus packages currently being consid- ered by Congress and the White House and—the regulatory and antitrust approval process should also be a bit more relaxed as we strive toward economic recovery. 8. Cross-border deals have slowed down as more global companies are fo- cused on shoring things up in their own backyard and are reluctant to travel; it seems as though the desires to live in a global village and build global companies have been put on hold for awhile, as overseas compa- nies refine their U.S. penetration and capital investment strategies. 9. The elimination of pooling by FASB has not completely killed mergers and acquisitions activity (as feared), but the new rules do require a game plan in place for several key financial issues, such as how goodwill will 10376$ CH16 10-24-03 09:38:34 PS 320 FINANCIAL STRATEGIES be allocated and amortized (if at all), the impact of the proposed deal on earnings, and other related tax and accounting issues. 10. During these challenging times, it is more critical than ever to have the right ‘‘deal team’’ assembled, made up of both internal executives and external advisors who have the experience and the tenacity to get deals done properly. Unlike the go-go times of a few years ago, the leaner and meaner economy leaves little margin for error and is quick to penalize those companies that overpay or make structural mistakes in their M&A strategy. The list of house- hold-named acquirers whose stocks are down 60, 70, or 80 percent off their highs because they persisted in doing deals where intended synergies were never achieved, the buying prices were too high, or the post-merger cultures are not melding is too long to mention here—but we all know who they are and don’t want to join their misery. As franchisors considering M&A as a growth or expansion strategy, some issues for consideration include: 1. What lessons can we learn from the meltdown and significantly reduced postclosing valuations of the companies that were very acquisitive in 1998–2001? Is the GE–Tyco model dead? How can conglomerates built via acquisition ever achieve scale and full value? What can we learn from the multibranded franchising systems models of Cendant, YUM, the Dwyer Group, and others? 2. What new due diligence, deal structuring, and negotiation techniques and practices have emerged in a post–Sarbanes-Oxley environment? Will these new ‘‘rules of the game’’ put a damper on the M&A environment? 3. How will global events and fears affect the level cross-border transac- tional activity? Will everyone decide to focus on his or her own backyard? Or are those just the growing pains of globalization as we move toward a truly interdependent world? 4. What does postclosing synergy really mean anymore? What went wrong? Why have so many deals failed to achieve postclosing integration and economics of scale objectives? Will shareholders trust their leaders and recommended deals? 5. Are your advisory teams prepared to deal with the fact that intellectual property and intangible assets (e.g., brands, relationships, know-how, databases, patents, teams, etc.) make up the lion’s share of the assets or value being purchased? Does the team have the skills and experience to recognize these assets, make sure they have been properly protected, and identify their full potential on a postclosing basis? Analysis of One or More Target Companies The acquiring company must begin the acquisition or merger process with a plan identifying the specific objectives to be accomplished by the transaction 10376$ CH16 10-24-03 09:38:34 PS 321 SPECIAL ISSUES IN MERGERS AND ACQUISITIONS and the criteria to be applied in analyzing a potential target company operat- ing within the targeted industry. Once acquisition objectives have been iden- tified, the next logical step is to narrow the field of candidates. Some of the qualities that a viable acquisition target might possess include: ❒ Operates in an industry that demonstrates growth potential. ❒ Has taken steps necessary to protect any proprietary aspects of its prod- ucts and services. ❒ Has developed a well-defined and established market position. ❒ Possesses ‘‘strong’’ franchise agreements with its franchisees with mini- mal amendments or ‘‘special exceptions.’’ ❒ Has good relationships with its franchisees and strong customer satis- faction and brand loyalty to its core products and services offered by its franchisees. ❒ Is involved in a minimal amount of litigation (especially if the litigation is with key customers, distributors, franchisees, or suppliers). ❒ Is in a position to readily obtain key third-party consents from lessors, bankers, creditors, suppliers, and investors (where required); the failure to obtain necessary consents to the assignment of key contracts or to clear encumbrances on title to material assets may seriously impede the completion of the transaction. ❒ Is in a position to sell so that negotiations focus on the terms of the sale, not whether to sell in the first place. In addition to the general business issues discussed above, the following issues should be examined when evaluating the potential acquisition of a franchise system: ❒ The strength and registration status of the target’s trademarks and other intellectual property ❒ The quality of the target’s agreements and relationships with its fran- chisees ❒ The status of any litigation or regulatory inquiries involving the target ❒ The quality of the target franchise sales staff ❒ The quality of the franchisee relationships, including the regularity of the franchisor’s cash flow from royalty obligations ❒ The strength of the target franchisor’s training, operations, and field sup- port programs; manuals; and personnel ❒ The existence of any franchisee association and its relationship with the franchisor ❒ The strength and performance of the target’s company-owned units (where applicable) Sometimes, instead of the acquisitor’saffirmatively seeking acquisition tar- gets, the process is reversed, and it is the target, rather than the acquisitor, 10376$ CH16 10-24-03 09:38:35 PS 322 FINANCIAL STRATEGIES that is soliciting offers to be acquired. Such an acquisition candidate may offer an excellent opportunity for the acquisitor, although the target’s opera- tions and financial condition should be closely inspected for any liability or potential pitfall that may be hidden behind the good intentions of the sellers. (See Figure 16-1 for a breakdown of the acquisition process.) The inspection of a potential target will be necessary regardless of who approaches whom (often referred to as the due diligence review). Prelimi- nary due diligence may be undertaken before any offer is made, and more thorough due diligence will certainly need to be completed by the acquisi- tor’s in-house and outside business and legal advisors before completing the deal. The Due Diligence Review Before conducting a thorough due diligence review of an acquisition candi- date, the franchisor may want to conduct a preliminary analysis. In most cases, the principals of each of the companies will meet to discuss the possi- ble transaction. The key areas of inquiry at this stage are the financial per- formance to date and projected performance of the target, the strength of the target’s management team, the target’s intellectual property, the condition of the target’s franchise system, including an understanding of the terms of the target’s existing franchise and area development agreements, any potential liabilities of the target that may be transferred to the franchisor as a successor company, and the identification of any legal or business impediments to the transaction, such as regulatory restrictions or adverse tax consequences. In addition to a direct response from the target’s management, information may be obtained from outside sources, such as trade associations, customers and suppliers of the target, industry publications, franchise regulatory agencies, Figure 16-1. The franchisor’s acquisition process. The franchisor’s planning and implementation of an acquisition program typically involves the following steps: 1. Develop acquisition objectives. 2. Analyze projected economic and financial gains to be achieved by the acquisition. 3. Assemble an acquisition team (managers, attorneys, accountants, and investment bankers) and begin the search for acquisition candidates. 4. Prepare due diligence analysis of prime candidates (franchise systems, vertical suppliers, systems that could be developed or converted into franchise systems, etc.). 5. Begin initial negotiations and valuation of the selected target. 6. Select the structure of the transaction. 7. Identify sources of financing for the transaction. 8. Undergo detailed bidding and negotiations. 9. Obtain all shareholder and third-party consents and approvals. 10. Structure the legal documents. 11. Prepare for the closing. 12. Hold the closing. 13. Perform post-closing tasks and responsibilities. 14. Implement the integration of the two entities. 10376$ CH16 10-24-03 09:38:35 PS 323 SPECIAL ISSUES IN MERGERS AND ACQUISITIONS chambers of commerce, securities law filings if the company is publicly traded on a stock exchange or through the NASDAQ stock markets, or private data sources such as Dun & Bradstreet, Standard & Poor’s, and Moody’s. Some of this information may be readily available on the Internet. Once the two companies have agreed to move forward, a wide variety of legal documents and records, where applicable, should be carefully re- viewed and analyzed by the acquiring entity and its legal counsel. The pur- pose of due diligence is to help answer two very basic questions: (1) Why are we doing this deal? and (2) What risks will we assume if we decide to move forward? The following is an illustrative list of some of the questions that the acquisitor and its legal and accounting representatives will be trying to an- swer as they begin to draft the acquisition agreements that will memorialize the deal: ❒ What approvals will be needed to effectuate the transaction (e.g., director and stockholder approval, governmental consents, lenders’ and lessors’ consents, etc.)? ❒ Are there any antitrust problems raised by the transaction? Will filing be necessary under the premerger notification provisions of the Hart-Scott- Rodino Act? ❒ Are there any federal or state securities registration or reporting laws to comply with? ❒ What are the potential tax consequences to the buyer, seller, and their respective stockholders as a result of the transaction? ❒ What are the potential postclosing risks and obligations of the buyer? To what extent should the seller be held liable for such potential liability? What steps, if any, can be taken to reduce these potential risks or liabili- ties? What will it cost to implement these steps? ❒ Are there any impediments to the transfer of key tangible and intangible assets of the target company, such as real estate or intellectual or other property? ❒ Are there any issues relating to environmental and hazardous waste laws, such as the Comprehensive Environmental Response Compensation and Liability Act (the Superfund law)? ❒ What are the obligations and responsibilities of buyer and seller under applicable federal and state labor and employment laws (e.g., will the buyer be subject to successor liability under federal labor laws and as a result be obligated to recognize the presence of organized labor and there- fore be obligated to negotiate existing collective bargaining agreements?)? ❒ To what extent will employment, consulting, confidentiality, or noncom- petition agreements need to be created or modified in connection with the proposed transaction? ❒ What are the terms of the target’s agreements with its existing franchisees? Are these agreements assignable? Do they contain clauses giving the fran- 10376$ CH16 10-24-03 09:38:35 PS 324 FINANCIAL STRATEGIES chisor discretion to change the system or ownership? Could any of these terms cause problems for the acquiring franchisor at a later date? ❒ Is the target currently involved in litigation with franchisees, creditors, competitors, or suppliers? Threatened litigation? Potential litigation? What is the risk of exposure to the acquiring franchisor? ❒ Have the target’s registration and disclosure documents been properly filed and updated? Figure 16-2 provides some common mistakes made during due diligence. Some of the questions that will be analyzed by the acquisitor’s business and accounting advisors include: 1. Does the target franchisor fit into the long-range growth plans of the acquiring franchisor? 2. What are the target franchisor’s strong points and weaknesses? How does management of the acquiring franchisor plan to eliminate those weaknesses? 3. Has the acquiring franchisor’s management team developed a compre- hensive plan to integrate the resources of the target? 4. What is the target franchisor’s ratio of company-owned outlets to fran- chisees? Figure 16-2. Common due diligence mistakes. • Mismatch between the documents provided by the seller and the skills of the buyer’s review team. It may be the case that the seller has particularly complex financial statements or highly technical reports that must be truly understood by the buyer’s due diligence team. Make sure there is a capability fit. • Poor communication and misunderstandings. The communications should be open and clear between the teams of the buyer and the seller. The process must be well orchestrated. • Lack of planning and focus in the preparation of the due diligence questionnaires and in the interviews with the seller’s team. The focus must be on asking the right questions, not just a lot of questions. Sellers will resent wasteful ‘‘fishing expeditions’’ when the buyer’s team is unfocused. There should be a clear fit between the questions asked and the compelling strategic rationale that underlies the transaction. • Inadequate time devoted to tax and financial matters. The buyer’s (and seller’s) CFO and CPA must play an integral part in the due diligence process in order to gather data on past financial performance and tax reporting, unusual financial events, or disturbing trends or inefficiencies. • The buyer must insist that its team will be treated like welcome guests, not enemies from the IRS! Many times the buyer’s counsel is sent to a dark room in the corner of the building to inspect docu- ments without coffee, windows, or phones. It will enhance and expedite the transaction if the seller provides reasonable accommodations and support for the buyer’s due diligence team. • Failure to closely examine the intangible factors that drive a deal’s success. Many deals fail because of a lack of a shared vision or conflicting corporate cultures. The franchisor’s due diligence must include a process for measuring the likelihood that the two cultures and systems will ultimately fit on a post-closing basis. 10376$ CH16 10-24-03 09:38:36 PS 325 SPECIAL ISSUES IN MERGERS AND ACQUISITIONS 5. Are the target’s products and services competitive in terms of price, quality, style, and marketability? 6. Does the target franchisor manufacture its own products? What propor- tions are purchased from outside sellers? 7. What is the target’s past and current financial condition? What about future projections? Are they realistic? 8. What is the target franchisor’s sales history? Has there been a steady flow of franchise sales and royalty payments? 9. What is the target franchisor’s attrition rate? Have there been many re- cent terminations or transfers? Have any of these been contested by fran- chisees as lacking good cause? The Role of the Franchisee in a Proposed Merger or Acquisition Unlike other types of growing companies involved in mergers and acquisi- tions, franchisors have existing contractual vertical distribution systems in place through their franchisees. The interests of these franchisees ought to be taken into account when the franchisor’s counsel analyzes the legal conse- quences and potential costs of the proposed merger or acquisition. These franchisees are clearly ‘‘interested parties,’’ whose contractual and other legal and equitable rights must be considered. Although there is no statutory or legal basis for disclosing the intent to engage in a merger or acquisition, nor is there typically a contractual requirement to obtain their approval, good ‘‘franchisee relations’’ practice would dictate their involvement in some fashion. The cooperation of the franchisee networks of both buyer and seller can either greatly facilitate the transaction or virtually kill the deal, depend- ing on how this communication problem is handled. For example, if the franchisor acquires another franchisor in a competi- tive or parallel line of business, careful merger planning and negotiation will be necessary to ensure a smooth integration of the target’s franchise system into the buyer’s existing operations (assuming that only one system will sur- vive after the transaction) and to avoid potential litigation or costly settle- ment with affected franchisees of either system. In addition, if conversion or change is planned as a result of the merger or acquisition, franchisors should expect to involve franchisees, at least to a certain extent, in the decision- making process. The acquiring franchisor should not automatically assume that franchisees in the acquired system will be willing to convert to the buy- er’s existing system. When change or conversion is contemplated, some attri- tion and/or franchisee resistance should be expected in both systems, and the impact and costs of this attrition and resistance will typically be reflected in the purchase price of the target franchisor. On one hand, the franchisee is typically neither a shareholder, creditor, investor, officer, or director of the franchisor and would technically be gov- erned only by the terms of franchise agreements, which usually gives broad latitude to the franchisor to assign rights or modify the franchise system. Yet to ignore the fact that the franchisee is clearly an interested and affected 10376$ CH16 10-24-03 09:38:36 PS 326 FINANCIAL STRATEGIES party in any change in the franchisor’s organizational structure or system is unrealistic and could result in very costly litigation that might even out- weigh any anticipated benefits to the proposed merger or acquisition. See Figure 16-3 for a list of legitimate concerns that a franchisee might have re- garding a merger or acquisition. Figure 16-3. Legitimate concerns of the franchisee network in a merger or acquisition. Clearly, the franchisee will have some legitimate questions and concerns when it first learns of the proposed transaction. The savvy franchisor will anticipate these concerns and integrate the proposed solutions into its acquisition plan and communications with the franchisees and/or the franchisee association: 1. What are the acquiring franchisor’s plans for the acquired system? Consolidation and conver- sion? At whose cost? Liquidation? Growth? 2. What is the reputation and management philosophy of the acquiring franchisor? What are its attitudes toward field support and ongoing training? 3. Will the acquiring franchisor be sensitive to the rights and concerns of the franchisees? Or will the franchisees adopt a ‘‘we’d rather fight than switch’’ mentality toward the new buyer in anticipation of hostile negotiations? 4. What is the financial strength of the acquiring franchisor? Will the acquiring franchisor open up new opportunities for the franchisees, such as access to new product lines, financing programs for growth and expansion, produce purchasing, and cooperative advertising programs? 5. If the target franchisor owns real property that is leased to franchisees, will the terms and conditions of the current leases be honored by the acquiring franchisor? What about other contractual obligations? Are there any special relationships with third-party vendors that will be affected or damaged by the transaction? Special Problems Relating to Franchisees of the Acquiring or the Acquired Franchise System There are a number of potential issues for dispute between the acquiring or acquired franchisor and its franchisees that may arise as a result of a merger or acquisition. Whether or not these issues will arise will, of course, depend on a variety of factors, including the similarity of the businesses of the merg- ing systems, the territories in which they operate, the terms of the contracts with existing franchisees in each system, the size and market power of the merging franchisors, the competitors (or lack of) of each of the franchisors, and most important, the plans of the surviving company. Because there is an implied obligation on franchisors to act in good faith and in a commercially reasonable manner, a covenant recognized by many state courts in their in- terpretation of the franchise relationship, the issues to which both fran- chisors should pay special attention include: ❒ The extent of any territorial exclusivity granted to the franchisees of each system. Is exclusivity given only for a certain trademark or line of busi- ness? Is territorial exclusivity conditioned on the performance of the fran- chisees? Will substantially similar franchisees violate this exclusivity? 10376$ CH16 10-24-03 09:38:37 PS 327 SPECIAL ISSUES IN MERGERS AND ACQUISITIONS ❒ Will all existing franchisees of both systems be maintained, or will a con- solidated distribution system result in termination of some franchisees? ❒ Will franchisees be required or requested to convert to a new business format? Who will pay the costs of building conversion, new training, products, and services? Will the franchisor finance all or part of the con- version costs? ❒ Will existing franchisees of each system be forced to add the products and services of the other? Will this present tying or full-line forcing problems? ❒ Does the acquiring franchisor have sufficient support staff to adequately service the new franchisees, or will the acquiring company’s existing fran- chisees be ignored in order to develop and market the new acquisitions? What rights do the existing franchisees have to challenge this lack of at- tention? ❒ Will a new, third type of system combining the products and services of the acquiring and acquired franchisors be offered to prospective fran- chisees of the surviving entity? ❒ Will existing franchisees of either system be eligible to convert to this new system? ❒ Can the acquiring franchisor legitimately enforce an in-term covenant against competition when the franchisor itself has acquired and is operat- ing what is arguably a competitive system? ❒ Do the franchisees of either franchisor have a Franchisee Association or Franchisee Advisory Council? Must these groups be consulted? What duty does the franchisor have to involve these groups in merger planning? What about regional and multiple franchisees holding development rights? ❒ Does either franchisor have company-owned outlets in its distribution system? What will be the status of these outlets after the merger or acquisi- tion? ❒ To what extent will royalty payments, renewal fees, costs of inventory, performance quotas, and advertising contributions be affected by the con- templated merger or acquisition? On what grounds could franchisees challenge these changes as unreasonable, breaches of contract, or viola- tions of antitrust laws? How and when will these changes be phased into the system? Will the franchisees be given a chance to opt in or opt out (mandatory vs. optional changes)? ❒ Will the proposed transaction result in the termination of some of the franchisees of either system due to oversaturation of the market, territorial overlap, or underperformance? What legal and statutory rights of the fran- chisee are triggered? The Consequences of Inadequate Planning and Due Diligence The consequences of inadequate pretransaction planning and investigation to both the acquisitor and the target in a transaction combining two or more 10376$ CH16 10-24-03 09:38:37 PS [...]... transfers, and conveys all of its right, title and interest in and to the Franchise to Transferee and Franchisor consents to said transfer, upon the terms and conditions in the said written Franchise Agreement and upon the terms and conditions herein 2 Release of Franchisor Transferor hereby releases and discharges Franchisor and its officers, directors, shareholders, and employees in their corporate and individual... System and Proprietary Marks (hereinafter ‘‘the Franchise’’) at the following location: ; WHEREAS, Transferor desires to sell, assign, transfer, and convey all of its right, title, and interest in and to the Franchise to Transferee and Franchisor is willing to consent to said transfer, upon the terms and conditions in the said written Franchise Agreement and upon the terms and conditions herein; and WHEREAS,... successors, and assigns, hereby forever releases and discharges Franchisor, its subsidiaries and affiliates, their respective officers, directors, agents, and employees from any and all claims, demands, controversies, actions, causes of action, obligations, liabilities, costs, expenses, attorney’s fees, and damages of whatsoever character, nature, and kind, in law or in equity, claimed or alleged and which... Agreement, and related agreements and documentation 8 Transferee’s Obligations Transferee hereby assumes and agrees to faithfully discharge all of the Transferor’s obligations under the Franchise Agreement entered into by and between Franchisor and Transferor 9 Guaranty by Transferee Transferee understands and acknowledges that the obligations of the Transferor under the Franchise Agreement entered into by and. .. Franchisee shall comply with Franchisor’s then current qualification and training requirements 7 Franchisee, its shareholders, directors, and officers shall execute a general release, in a form prescribed by Franchisor, of any and all claims against Franchisor and its subsidiaries and affiliates, and their respective officers, directors, agents, and employees provided, however, that Franchisee shall not be required... the due diligence and prior to closing are often hotly contested items The timing and scope of the financial statements as well as the standard to which they will be held is at issue The buyer and its team may prefer a ‘‘hotoff-the-press’’ and recently completed audited set of financials from a Big 5 accounting firm, and the seller will want to serve up a ‘‘best-efforts’’ unaudited and uncertified guesstimate... agreement and actual closing, the terms and structure of payment, the scope of postclosing covenants of competition, the deferred or contingent compensation components, and any predetermined remedies for breach of the contract Figure 16-4 is designed to be a diagnostic tool to ensure that the franchisor and its team and all other parties to the transaction understand the acquisition agreement and to ensure... between Franchisor and Transferor and with such renewal term(s) as may be provided by the Franchise Agreement entered into by and between Franchisor and Transferor Except as provided herein, the Franchise Agreement offered by Franchisor to Transferee, if executed by Transferee, shall supersede the Franchise Agreement entered into by and between Franchisor and Transferor in all respects and the terms of... or any other agreement between Franchisee and Franchisor, or its subsidiaries, affiliates, and suppliers and shall have substantially complied with all the terms and conditions of such agreements during the terms thereof 4 Franchisee shall have satisfied all monetary obligations owed by Franchisee to Franchisor and its subsidiaries, affiliates, and suppliers and M A N A G I N G T H E T R A N S F E R A... Agreement entered into by and between Transferor and tion Franchisor, to the extent applicable, shall survive this Agreement 13 Transferor’s Obligations Transferor acknowledges, and agrees that each of its obligations regarding transfer must be met by the Transferor and are reasonable and necessary 14 Transferor’s Monetary Obligations Transferor understands, acknowledges, and agrees that all of its . will 103 76$ CH16 10- 24-03 09:38:34 PS 320 FINANCIAL STRATEGIES be allocated and amortized (if at all), the impact of the proposed deal on earnings, and other related tax and accounting issues. 10. . circular. 103 76$ CH17 10- 24-03 09:38:39 PS 335 MANAGING THE TRANSFER AND RENEWAL PROCESS Figure 17-1. Renewal and release agreement. RENEWAL AND RELEASE AGREEMENT THIS AGREEMENT is made and entered. obligations owed by Fran- chisee to Franchisor and its subsidiaries, affiliates, and suppliers and 103 76$ CH17 10- 24-03 09:38:40 PS 337 MANAGING THE TRANSFER AND RENEWAL PROCESS shall have timely met