How does the issuance of securities by the Area Developer affect the Amorino Area Developer Agreement?
Amorino Franchise · 2025 FDDAnswer from 2025 FDD Document
(c) If Area Developer is a corporation, or a limited or general partnership, each of the following shall be deemed to be an assignment of this Agreement within the meaning of this Section, the death or legal incapacity of any shareholder owning twenty percent (20%) or more of the capital stock or voting power of Area Developer; (ii) if Area Developer is a general or limited partnership, the withdrawal, death or legal incapacity of a general partner, or a limited partner owning twenty percent (20%) or more of the voting power, property, profits or losses, of the partnership, or the admission of any additional general partner or transfer by any general partner of its interest in the property, management or profits and/or losses of the partnership; (iii) the issuance of any securities by Area Developer which itself or in combination with any other transaction(s) results in the shareholders or partners existing as of the Effective Date, as applicable, owning less than eighty percent (80%) of the outstanding shares or voting power of a corporate Area Franchise, or of the voting power or interests in the property, profits or losses of a limited partnership; (iv) the transfer of twenty percent (20%) or more in the aggregate of the capital stock or voting power of Area Developer, by operation of law or otherwise; and (v) any
Source: Item 22 — CONTRACTS (FDD pages 80–81)
What This Means (2025 FDD)
According to Amorino's 2025 Franchise Disclosure Document, the issuance of securities by an Area Developer can affect the Area Developer Agreement under specific conditions. If the Area Developer is a corporation, limited, or general partnership, the issuance of securities that results in the shareholders or partners who existed on the agreement's effective date owning less than 80% of the outstanding shares or voting power can be considered an assignment of the agreement.
This means that if an Area Developer issues securities that significantly dilute the ownership of the original shareholders or partners (to below 80%), Amorino may view this as a transfer of control. Consequently, this could trigger provisions in the agreement related to assignment, potentially requiring Amorino's approval or giving Amorino certain rights, such as the right of first refusal if the Area Developer seeks to assign the agreement.
This provision is designed to ensure that the individuals or entities Amorino initially contracted with maintain substantial control over the Area Development business. It protects Amorino's interests by preventing a change in control without their consent. A prospective franchisee should seek clarification from Amorino regarding the specific circumstances under which the issuance of securities would be considered an assignment and what steps would need to be taken to comply with the agreement.