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Exhibit 10-85
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CARL'S JR. RESTAURANT
FRANCHISE AGREEMENT
THIS FRANCHISE AGREEMENT ("Agreement") is made and entered into April
7, 1993, between CARL KARCHER ENTERPRISES, INC., a California corporation
("CKE"), and CARL LEO KARCHER ("Franchisee").
WHEREAS, CKE, as the result of the expenditure of time, skill, effort,
and money, has developed and owns a unique and distinctive system ("System")
relating to the establishment and operation of fast service restaurants;
WHEREAS, the distinguishing characteristics of the System include,
without limitation, distinctive exterior and interior design and layout,
including specially designed decor and furnishings; a highly refined and
efficient kitchen layout featuring an automatic charbroiling cooking process;
special recipes and menu items; procedures and techniques for food and beverage
preparation and service; automated management information and control systems
for inventory controls, cash controls, and sales analysis; technical assistance
and training through course instruction and manuals; and advertising and
promotional programs; all of which may be changed, improved, and further
developed by CKE from time to time;
WHEREAS, CKE identifies the System by means of certain trade names,
service marks, trademarks, logos, emblems, and indicia of origin, including but
not limited to the mark "CARL'S JR.", and such other trade names, service
marks, and trademarks as are now designated, and may hereafter be designated by
CKE in writing, for use in connection with the System ("Proprietary Marks");
WHEREAS, CKE continues to develop, use, and control the use of such
Proprietary Marks in order to identify for the public the source of services
and products marketed thereunder and under the System, and to represent the
System's high standards of quality, appearance, and service;
WHEREAS, Franchisee desires to enter into the business of operating a
Carl's Jr. restaurant under CKE's System and wishes to obtain a franchise from
CKE for that purpose, as well as to receive the training and other assistance
provided by CKE in connection therewith;
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WHEREAS, Franchisee understands and acknowledges the importance of
CKE's high standards of quality, cleanliness, appearance, and service and the
necessity of operating the business franchised hereunder in conformity with
CKE's standards and specifications;
NOW, THEREFORE, the parties, in consideration of the undertakings and
commitments of each party to the other party set forth herein, hereby agree as
follows:
I. GRANT
A. CKE hereby grants to Franchisee, upon the terms and conditions
herein contained, the right and franchise, and Franchisee undertakes the
obligation, to operate a Carl's Jr. restaurant ("Restaurant" or "franchised
business") and to use solely in connection therewith the Proprietary Marks and
the System, as it may be changed, improved, and further developed from time to
time, only at the approved location described in Section I.B.
B. The street address of the location approved hereunder shall be
set forth in Attachment A hereto. Franchisee shall not relocate the franchised
business without the express prior written consent of CKE.
C. Franchisee expressly acknowledges that the rights conferred do
not include any marketing exclusivity therein. Franchisee expressly
acknowledges and understands that all Carl's Jr. Restaurants (whether
Company-owned, Franchised or otherwise) may solicit and service customers
regardless of the customer's geographic location.
D. Franchisee acknowledges that this franchise is non-exclusive
and is granted subject to the terms of Section VI.C. 6 hereof.
II. TERM AND RENEWAL
A. Except as otherwise provided herein, the term of this
Agreement shall commence upon its execution by the parties and shall expire
twenty (20) years from the date on which the Restaurant is opened for business;
provided, however, that if Franchisee's approved location is leased, this
Agreement shall expire at the earlier of twenty (20) years from the date of
opening for business or upon expiration or termination of the initial term of
the lease.
B. Franchisee may, at its option, renew this Agreement for one
(1) additional consecutive term of ten (10) years, provided that prior to the
end of the initial term:
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1. Franchisee has given CKE written notice of its
election to renew not less than twenty-four (24) months nor more than
thirty-six (36) months prior to the end of the initial term;
2. Franchisee has made or has provided for, in a manner
satisfactory to CKE, renovation and modernization of the Restaurant premises as
CKE may reasonably require, including, without limitation, renovation of signs,
furnishings, fixtures, and decor, to reflect the then-current standards and
image of the System as designated in the Confidential Operating Manual ("OPM");
3. Franchisee is not in default of any provision of this
Agreement, any amendment hereof or successor hereto, or any other agreement
between Franchisee and CKE or its subsidiaries and affiliates, and has complied
with all the terms and conditions of such agreements during the terms thereof;
4. Franchisee has satisfied all monetary obligations
owed by Franchisee to CKE and its subsidiaries and affiliates and has timely
met those obligations throughout the term of this Agreement;
5. Franchisee shall present satisfactory evidence that
Franchisee has the right to remain in possession of the approved location for
the renewal term;
6. Franchisee shall have executed CKE's then-current
form of renewal franchise agreement, which agreement shall supersede this
Agreement in all respects, and the terms of which may differ from the terms of
this Agreement, including, without limitation, a higher percentage royalty fee
and advertising contribution; provided, however, that Franchisee shall pay, in
lieu of an initial franchise fee, a renewal fee not to exceed seventy-five
percent (75%) of the then-current initial franchise fee;
7. Franchisee shall execute a full and general release,
in a form prescribed by CKE, of any and all claims against CKE and its
subsidiaries and affiliates, and their respective officers, directors, agents,
and employees; and
8. Franchisee shall comply with CKE's then-current
qualification and training requirements.
III. DUTIES OF CKE
A. CKE shall provide an initial training program for Franchisee,
Franchisee's Restaurant Manager and any other employees of Franchisee who are
to be trained in
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accordance with Section V.C. hereof and shall make available such other
training programs as it deems appropriate. All training provided by CKE shall
be subject to the terms set forth in Section V.D. of this Agreement.
B. CKE may provide Franchisee, in its OPM, Franchise Development
Guide ("Guide") or otherwise, with standard plans and specifications for the
construction of the Restaurant and for the exterior and interior design,
layout, fixtures, furnishings and signs. Franchisee shall, at his sole
expense, employ architects, designers, engineers or others as may be necessary
to complete, adapt, modify or substitute the sample plans and specifications
for the Restaurant. Franchisee shall submit to CKE a complete set of final
plans and specifications prior to commencing construction of the Restaurant.
CKE shall review such plans and specifications promptly and approve or provide
comments on the plans and specification to Franchisee. Franchisee shall not
commence construction of the Restaurant until CKE has approved in writing the
final plans and specifications to be used in constructing the Restaurant.
CKE shall consult with Franchisee, to the extent CKE deems necessary,
on the construction and equipping of the Restaurant, but it is, shall be and
shall remain the sole responsibility of Franchisee to diligently design,
construct, equip and otherwise ready and open the Restaurant.
C. Upon Franchisee's request or in CKE's discretion, CKE shall
provide such on-site opening assistance as CKE deems advisable, subject (as to
timing) to the availability of personnel. CKE shall provide such continuing
advisory assistance to Franchisee in the operation of the franchised business
as CKE deems advisable.
D. CKE shall make available, from time to time, advice and
assistance in local advertising and, at Franchisee's expense, promotional
materials for local advertising by Franchisee. CKE shall have the right to
review and approve or disapprove all advertising and promotional materials
which Franchisee proposes to use, pursuant to Section X.D. hereof.
E. CKE shall provide Franchisee, on loan, one or more copies of
the OPM, as more fully described in Section VII. hereof. CKE shall also
provide to Franchisee, from time to time as CKE deems appropriate, advice and
written materials concerning techniques of managing the franchised business.
F. CKE shall seek to maintain the high standards of quality,
appearance, and service of the System, and to that end shall conduct, as it
deems advisable, inspections of the
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Restaurant franchised hereunder, and evaluations of the products sold and
services rendered therein.
IV. FEES
A. Franchisee shall pay to CKE an initial franchise fee of
Twenty-Five Thousand Dollars ($25,000), payable as follows:
(1) Ten Thousand Dollars ($10,000) within twenty (20)
days of notification of CKE's approval of the Franchisee's proposed site and
(2) Fifteen Thousand Dollars ($15,000) within ten (10)
days of commencement of construction of the Restaurant.
Upon payment of each portion of the initial franchise fee,
that portion shall be deemed fully earned and nonrefundable in consideration
for administrative and other expenses incurred by CKE in granting this
franchise and for CKE's lost or deferred opportunity to franchise others.
B. During the term of this Agreement, Franchisee shall pay to CKE
a continuing weekly royalty fee in an amount not to exceed four percent (4%) of
the gross sales of the Restaurant, as defined in Section IV.E. hereof, as set
forth in Exhibit 2.
C. Franchisee shall also expend and/or contribute, on a weekly
basis, a percentage of the gross sales of the Restaurant, said percentage to be
at least four percent (4%) but no greater than six percent (6%) of the gross
sales of the Restaurant, allocated as provided in Section X. hereof, for
advertising and promotion.
D. All weekly payments required by this Section IV. shall be paid
to CKE by the fifth (5th) business day immediately following the fiscal week,
as designated by CKE, during which the sales were made and shall be submitted
to CKE together with any reports or statements required under Section IX.B.
hereof. Any payment or report not actually received by CKE on or before such
date shall be deemed overdue. If any payment is overdue, Franchisee shall pay
CKE, in addition to the overdue amount, interest on such amount from the date
it was due until paid at the equivalent of eighteen percent (18%) per annum
calculated on a daily basis, or the maximum rate permitted by law, whichever is
less. Entitlement to such interest shall be in addition to any other remedies
CKE may have.
E. As used in this Agreement, "gross sales" shall include all
revenue from the sale of all services and products and all other income of
every kind and nature related to the
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franchised business, whether for cash or credit and regardless of collection in
the case of credit; provided, however, that "gross sales" shall not include any
sales taxes or other taxes collected from customers by Franchisee for
transmittal to the appropriate taxing authority.
F. On execution of this Agreement, Franchisee shall deposit with
CKE N/A Dollars ($N/A) as a security deposit for the performance by Franchisee
of the provisions of this Agreement, any lease or sublease between Franchisee
and CKE, any promissory note in favor of CKE or any other obligation to CKE
such as but not limited to payment for food, goods and products sold by CKE, or
any of its affiliates. If Franchisee is in default of any such payment of
obligation, CKE can use the security deposit, or any portion of it, to cure the
default or to compensate CKE for all damage sustained by CKE resulting from
Franchisee's default. Franchisee shall immediately on demand pay to CKE a sum
equal to the portion of the security deposit expended or applied by CKE as
provided in this Section so as to maintain the security in the sum initially
deposited with CKE. If Franchisee is not in default at the expiration or
termination of this Agreement, CKE shall return the security deposit to
Franchisee. CKE's obligations with respect to the security deposit are those
of a debtor and not a trustee. CKE shall not be required to segregate the
security deposit from other funds or to pay Franchisee interest on the security
deposit.
V. DUTIES OF FRANCHISEE
A. Franchisee understands and acknowledges that every detail of
the franchised business is important to Franchisee, CKE, and other franchisees
in order to develop and maintain high operating standards, to increase the
demand for the services and products sold by all franchisees, and to protect
CKE's reputation and goodwill.
B. Promptly following CKE's written approval of the proposed
site, for the Restaurant, Franchisee shall proceed to complete the acquisition
of the site. Unless Franchisee is leasing or subleasing the premises from CKE,
Franchisee shall lease directly or purchase, as the case may be, the Restaurant
site. CKE shall have no liability under any such direct lease. Such direct
lease shall be subject to CKE's written approval. Franchisee shall include in
any such direct lease the following terms and conditions prior to the execution
of such direct Lease:
1. As long as the lessee, or lessee's successor or
assign, is a Carl's Jr. franchisee, the premises must
be used only for the operation of a CARL'S JR.
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Restaurant, or a restaurant under another trade name
adopted by CKE and permitted by this Franchise
Agreement.
2. The lessor consents to the Franchisee's use of such
Proprietary Marks and signage as CKE may prescribe
for the franchised business.
3. The Lessor agrees to furnish to CKE, copies of any
and all letters and notices sent to the Franchisee
pertaining to the lease and the premises, at the same
time that such letters and notices are sent to the
Franchisee.
4. The Franchisee may not sublease or assign all or any
part of its occupancy rights or extend the term of or
renew the lease without CKE's prior written consent.
5. Lessor agrees that CKE has the right to enter the
Premises to make any modification necessary to
protect CKE's Proprietary Marks or to cure any
default under the lease or under this Franchise
Agreement.
6. Lessor agrees that CKE has the right to cure any
monetary default under the lease.
7. Lessor agrees that CKE has the option to assume the
Franchisee's occupancy rights, and the right to
sublease, for all or any part of its terms, upon the
Franchisee's default or termination under such lease
or this Franchise Agreement.
8. The lease is conditioned upon the prior approval of
CKE, to insure inclusion of the above described terms
and compliance with this Franchise Agreement.
The Franchisee shall furnish CKE with a copy of the executed lease
with all exhibits attached thereto within ten (10) days after execution of such
lease.
In the event Franchisee acquires the Restaurant Premises by purchase,
Franchisee hereby agrees that concurrently with recordation of the deed
conveying the Premises, or, if Franchisee already owns the Premises within ten
(10) days after execution hereof, Franchisee shall record a written agreement
between CKE and Franchisee, providing CKE the option to purchase the Premises,
at its market value at time of exercise, upon termination hereof on account of
expiration of the term or Franchisee's breach hereof. Such agreement shall be
acceptable to CKE in form and substance.
C. Franchisee shall use a licensed general contractor reasonably
satisfactory to CKE to perform construction work at the Restaurant. If CKE
shall request, Franchisee shall
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immediately furnish to CKE prior to the commencement of construction and/or
remodeling and/or refurnishing of Restaurant, and from time to time thereafter
upon request, the names and addresses of any sub-contractor and/or vendor to be
involved in such construction, furnishing or design activity; copies of all
permits, licenses, contractors' liability insurance certificates or other items
required for the lawful construction, equipping and operation of the
Restaurant; and, copies of all construction contracts, and documents, and
construction time-line for construction of the Restaurant and originals of all
lien waivers as CKE may require.
CKE shall not be responsible for delays in the construction, equipping
or decoration of the Restaurant, or for any loss resulting from the Restaurant
design or construction. CKE must approve in writing any and all changes to the
Restaurant plans furnished by Franchisee prior to construction of the
Restaurant or the implementation of such changes. CKE shall have access to the
Restaurant while work is in progress and may require such reasonable
alterations or modifications of the construction of the Restaurant as it deems
necessary. Franchisee's failure to promptly commence the design, construction,
equipping and opening of the Restaurant with due diligence shall be grounds for
the termination of this Agreement.
CKE shall be permitted, at its option, to conduct a final inspection
of the completed Restaurant and may require such corrections and modifications
as it deems necessary to bring the Restaurant into compliance with approved
plans and specifications. The Restaurant will not be allowed to open if it
does not conform to the plans and specifications approved by CKE, including
changes thereof approved by CKE. Failure to promptly correct any unauthorized
variance from the approved plans and specifications may result in the
termination of the Agreement.
D. The typical fixtures, furniture and equipment specifications
which may be furnished to Franchisee by CKE do not limit the obligation of
Franchisee to provide all required fixtures, furniture and equipment for the
Restaurant at Franchisee's sole expense. If CKE suggests certain manufacturers
or suppliers, it does so only as an accommodation to Franchisee. Franchisee
shall have the right to substitute manufacturers and suppliers and shall have
the right to purchase the required fixtures, furniture and equipment from any
source, provided that the items to be purchased are in strict accordance with
the specifications of CKE. The prior written consent of CKE must be obtained
before making any
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such substitutions. Any changes in the design, construction, utilities, or
installations necessitated by such substitutions shall be made at the sole
expense of Franchisee.
1. Franchisee is strictly responsible for the acts or
omissions of his contractors regarding compliance with Item V of this Agreement
and CKE shall have no responsibility for such acts or omissions. CKE shall not
be liable for any loss or damage arising from the design or plan of the
Restaurant by reason of its approval of plans and specifications, or otherwise.
Franchisee shall indemnify CKE for any loss, cost or expense, including
attorneys' and experts' fees, that may be sustained by CKE because of the acts
or omissions of Franchisee's contractors arising out of or related to the
design or construction of the Restaurant.
2. All signs to be used in connection with the
Restaurant, both exterior and interior, must conform to CKE sign criteria as to
type, logo usage, format, color, size, design and location. All signs must be
approved in writing by CKE prior to installation and display.
3. Prior to the commencement of operation of the
Restaurant, Franchisee agrees to procure and install such data processing
equipment computer hardware, required dedicated telephone and power lines,
modem(s), printer(s), and other computer-related accessory or peripheral
equipment as CKE specifies in its OPM (as same may be amended from time to
time) or otherwise. Franchisee is further required to provide any assistance
required by CKE to bring such computer system "on-line" with CKE's computers at
CKE headquarters at the earliest possible time and Franchisee expressly affirms
and agrees that CKE shall thereafter have the free and unfettered right to
retrieve such data and information from Franchisee's computer(s) as CKE, in its
sole and exclusive discretion, deems necessary, desirable and appropriate, with
the telephonic cost of such retrieval to be borne by CKE including
electronically polling the daily sales, menu mix and other data of the
Restaurant. All of the foregoing items specified to be installed or purchased,
or activities specified to be accomplished by Franchisee, and the delivery
costs of all hardware and software, shall be accomplished/borne at Franchisee's
sole expense.
Further, Franchisee shall utilize CKE's proprietary Carl's Jr.
software program, system documentation manuals and other proprietary materials
heretofore and hereafter developed by CKE in connection with the operation of
the Restaurant; shall, upon request by CKE execute CKE's standard form Software
License Agreement and shall input and maintain in Franchisee's computer(s) such
data and information as CKE prescribes, in its OPM (as same
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may be amended from time to time) its software programs and otherwise. CKE
shall initially furnish to Franchisee such programs, manuals and materials at
CKE's expense. Franchisee shall purchase from CKE such new or upgraded
proprietary software programs, manuals, and/or computer-related materials
whenever CKE determines to adopt such new or upgraded programs, manuals and/or
materials systemwide, at such prices and on such terms as CKE in its sole and
exclusive discretion, shall establish.
Franchisee understands that computer systems are designed to
accommodate a certain maximum amount of data and terminals, and that, as such
limits are achieved, and/or as technology and/or software is developed in the
future, CKE at it sole discretion may mandate that Franchisee add memory, ports
and other accessories and/or peripheral equipment and/or additional, new or
substitute software to the original computer system purchased by Franchisee.
Franchisee further understands that at a certain point in time it may become
necessary for Franchisee to replace or upgrade the entire computer system with
a larger system capable of assuming and discharging all of those
computer-related tasks and functions as are specified by CKE. Franchisee
further understands and agrees that computer designs and functions change
periodically and that CKE may be required to make substantial modifications to
its computer specifications, or to require installation of entirely different
systems, during the term of this Agreement, or upon renewal thereof. To ensure
full operational efficiency and communication capability between CKE's
computers and those of all franchised Restaurants, Franchisee agrees, at his
expense, to keep his computer system in good maintenance and repair, and, at
his expense, and following CKE's testing and determination that same will prove
economically or systemically beneficial to Franchisee and CKE, to install such
additions, changes, modifications, substitutions and/or replacements to his
computer hardware, software, telephone and power lines and other
computer-related facilities as CKE directs, and on those dates and within those
times specified by CKE in its sole and exclusive discretion, in its OPM (same
may be amended from time to time) or otherwise. Upon termination or expiration
of this Agreement, all computer software, disks, tapes and other magnetic
storage media shall be returned to CKE in good condition (allowing for normal
wear and tear).
E. Franchisee agrees that it is important to the operation of the
System and the Restaurant franchised hereunder that a competent management team
be in place to supervise and conduct the franchised business and to that end
agrees as follows:
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There shall be at all times a minimum of two individuals, of
whom Franchisee may be one, who have completed CKE's initial training program
and who are fully qualified to operate the Restaurant.
1. Franchisee shall designate an individual to serve as
the "Restaurant Manager" of the franchised business. The Restaurant Manager
shall meet the following qualifications:
a. The Restaurant Manager shall be a full-time
employee of Franchisee, shall work in the Restaurant and shall devote full time
and best efforts to the supervision and conduct of the business franchised
hereunder.
b. The Restaurant Manager shall be a person
acceptable to both Franchisee and CKE and shall have successfully completed to
CKE's satisfaction, CKE's initial training program.
2. Franchisee, or, if more than one individual has
executed this Agreement, one of the signed franchisees, shall be designated to
serve as the "Owner/Operator" of the franchised business. The Owner/Operator
shall meet the following qualifications:
a. The Owner/Operator shall devote full time and
best efforts to the supervision and conduct of the business franchised
hereunder and any other businesses that Franchisee may franchise from CKE.
b. The Owner/Operator shall have successfully
completed to CKE's satisfaction CKE's initial training program or an
abbreviated training program as set forth in Section V.D.3.
3. In the event that the Owner/Operator should elect not
to attend CKE's initial training program, the Owner/Operator shall attend an
abbreviated training program and Franchisee shall designate an individual to
serve as "Operations Supervisor" of the franchised business. The Operations
Supervisor shall meet the following qualifications:
a. The Operations Supervisor shall be a
full-time employee of the Franchisee and shall devote full time and best
efforts to the supervision and conduct of the business franchised hereunder and
any other businesses that Franchisee may franchise from CKE.
b. The Operations Supervisor shall be a person
acceptable to both Franchisee and CKE and shall have successfully completed to
CKE's satisfaction CKE's initial training program.
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4. If, at any time or for any reason, the designated
Restaurant Manager or supervisory individual no longer qualifies to act as
such, Franchisee shall promptly designate another individual subject to the
applicable qualifications listed above.
E. Franchisee agrees that it is important to the operation of the
System and the Restaurant franchised hereunder that Franchisee and Franchisee's
employees receive such training as CKE may require, and to that end agrees as
follows:
1. Prior to the opening of the Restaurant, the
Owner/Operator or the Operations Supervisor, if one has been designated, and
the Restaurant Manager shall attend and complete, to CKE's satisfaction, the
initial training program offered by CKE. Provided however, should an
Operations Supervisor be designated, the Owner/Operator can elect to attend and
complete, to CKE's satisfaction, an abbreviated initial training program. At
Franchisee's expense, the Owner/Operator, the Operations Supervisor and
Franchisee's employees shall also attend such courses, seminars, and other
training programs as CKE may require from time to time. CKE shall provide
instructors and training materials for all required training programs; and
Franchisee or its employees shall be responsible for any and all other expenses
incurred by them in connection with any training programs, including, without
limitation, the cost of transportation, lodging, meals, and wages. Any person
subsequently employed by Franchisee in the position of Restaurant Manager and
each subsequent Owner/Operator and Operations Supervisor, if any, shall attend
and complete, to CKE's satisfaction, such initial training program as CKE may
require prior to managing or supervising the franchised business. Franchisee
shall pay to CKE a training fee at the then-current rate being charged by CKE
to franchisees for such training. The training fee shall be in addition to any
other training costs and expenses to be borne by Franchisee as provided herein.
2. The Owner/Operator and Franchisee's employees may
also attend such optional training programs and seminars as CKE may offer from
time to time. Franchisee shall pay to CKE, for each person attending such
programs, the training fee, if any, then charged by CKE. If any such training
fee is imposed by CKE, the training fee shall be in addition to any other
expenses incurred by the persons attending training as provided in Section
V.E.1 hereof.
F. Franchisee shall use the Restaurant premises solely for the
operation of the business franchised hereunder; shall keep the business open
and in normal operation for such
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hours and days as CKE may from time to time specify in the OPM or as CKE may
otherwise approve in writing; and shall refrain from using or permitting the
use of the premises for any other purpose or activity at any time without first
obtaining the written consent of CKE.
G. Franchisee agrees to maintain a competent, conscientious,
trained staff and to take such steps as are necessary to ensure that its
employees preserve good customer relations and comply with such dress code as
CKE may prescribe.
H. Franchisee shall meet and maintain the highest health
standards and ratings applicable to the operation of the Restaurant.
I. To insure that the highest degree of quality and service is
maintained, Franchisee shall operate the Restaurant in strict conformity with
such methods, standards, and specifications as CKE may from time to time
prescribe in the OPM or otherwise in writing. Franchisee agrees:
1. To maintain in sufficient supply, and to use and/or
sell at all times, only such menu items, ingredients, products, materials,
supplies, and paper goods as conform with CKE's standards and specifications,
and to refrain from deviating therefrom by the use or offer of non-conforming
items, without CKE's prior written consent.
2. To sell or offer for sale only such menu items,
products, and services as have been expressly approved for sale in writing by
CKE; to sell or offer for sale all types of menu items, products, and services
specified by CKE; to refrain from any deviation from CKE's standards and
specifications without CKE's prior written consent; and to discontinue selling
and offering for sale any menu items, products, or services which CKE may, in
its discretion, disapprove in writing at any time. With respect to the offer
and sale of all menu items, products, and services, Franchisee shall have sole
discretion as to the prices to be charged to customers.
3. To permit CKE or its agents, at any reasonable time,
to remove samples of food or non-food items from Franchisee's inventory, or
from the Restaurant, without payment therefor, in amounts reasonably necessary
for testing by CKE or an independent laboratory to determine whether said
samples meet CKE's then-current standards and specifications. In addition to
any other remedies it may have under this Agreement, CKE may require Franchisee
to bear the cost of such testing if the supplier of the item has not previously
been approved by CKE or if the sample fails to conform with CKE's
specifications.
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4. To purchase and install, at Franchisee's expense, all
fixtures, furnishings, equipment, playground equipment, decor, and signs
meeting the standards and specifications of CKE, as CKE may direct from time to
time in the OPM or otherwise in writing; and to refrain from installing or
permitting to be installed on or about the Restaurant premises, without CKE's
prior written consent, any fixtures, furnishings, equipment, playground, decor,
signs, games, vending machines, or other items not previously approved as
meeting CKE's standards and specifications.
J. Franchisee shall purchase all food items, ingredients,
supplies, materials, and other products used or offered for sale at the
Restaurant solely from suppliers (including manufacturers, distributors and
other sources) who demonstrate, to the continuing reasonable satisfaction of
CKE, the ability to meet CKE's then-current standards and specifications for
such items; who possess adequate quality controls and capacity to supply
Franchisee's needs promptly and reliably; and who have been approved in writing
by CKE and not thereafter disapproved. If Franchisee desires to purchase any
products from an unapproved supplier, Franchisee shall submit to CKE a written
request for such approval, or shall request the supplier itself to do so. CKE
shall have the right to require that its representatives be permitted to
inspect the supplier's facilities, and that samples from the supplier be
delivered, either to CKE or to an independent laboratory designated by CKE for
testing. A charge not to exceed the reasonable cost of the inspection and the
actual cost of the test shall be paid by Franchisee or the supplier. CKE
reserves the right, at its option, to re-inspect the facilities and products of
any such approved supplier and to revoke its approval upon the supplier's
failure to continue to meet any of CKE's then-current criteria. Nothing in the
foregoing shall require CKE to approve any supplier.
K. Franchisee acknowledges and agrees that certain products of
CKE, among which is the product known as "special sauce", are highly
confidential secret recipes and are trade secrets of CKE. Because of the
importance of quality and uniformity of production and the significance of such
products in the System it is to the mutual benefit of the parties that CKE
closely control the production and distribution of such products. Similar
considerations may also apply to other trade secret items which CKE may develop
in the future. Accordingly, Franchisee agrees to use only CKE's secret recipe
products and to purchase from CKE or from a source designated by CKE all of
Franchisee's requirements of CKE's current and future secret recipe products.
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L. Franchisee shall require all advertising and promotional
materials, signs, decorations, paper goods (including disposable food
containers, napkins, menus, and all forms and stationery used in the franchised
business), and other items which may be designated by CKE to bear the
Proprietary Marks in the form, color, location, and manner prescribed by CKE.
M. Franchisee shall maintain the Restaurant in a high degree of
sanitation, repair, and condition, and in connection therewith shall make such
additions, alterations, repairs, and replacements thereto (but no others
without CKE's prior written consent) as may be required for that purpose,
including, without limitation, such periodic repainting or replacement of
obsolete signs, furnishings, equipment, and decor as CKE may direct and
installation of charbroiler emission regulators as may be required by federal,
state, or local agencies.
N. At CKE's request, but not more often than twice during the
initial term of this Agreement, and in any case not before at least twenty-five
percent (25%) of System restaurants owned by CKE have made such improvements,
Franchisee shall make all improvements and alterations as may be determined by
CKE to be necessary to have the Restaurant conform with the System image as it
may be prescribed by CKE at that time. Franchisee shall undertake and complete
such improvements and alterations within reasonable times specified by CKE.
O. Franchisee shall grant CKE and its agents the right to enter
upon the Restaurant premises at any time for the purpose of conducting
inspections; shall cooperate with CKE's representatives in such inspections by
rendering such assistance as they may reasonably request; and, upon notice from
CKE or its agents and without limiting CKE's other rights under this Agreement,
shall take such steps as may be necessary to correct immediately any
deficiencies detected during any such inspection. Should Franchisee, for any
reason, fail to correct such deficiencies within a reasonable time as
determined by CKE, CKE shall have the right and authority (without, however,
any obligation to do so), to correct such deficiencies and to charge Franchisee
a reasonable fee for CKE's expenses in so acting, payable by Franchisee
immediately upon demand.
P. Franchisee shall comply with all other requirements set forth
in this Agreement.
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VI. PROPRIETARY MARKS
A. CKE represents with respect to the Proprietary Marks that:
1. CKE is the owner of all right, title, and interest in
and to the Proprietary Marks.
2. CKE has taken and will take all steps reasonably
necessary to preserve and protect the ownership and validity in and of the
Proprietary Marks.
3. CKE will permit Franchisee and other franchisees to
use the Proprietary Marks only in accordance with the System and the standards
and specifications attendant thereto which underlie the goodwill associated
with and symbolized by the Proprietary Marks.
B. With respect to Franchisee's licensed use of the Proprietary
Marks pursuant to this Agreement, Franchisee agrees that:
1. Franchisee shall use only the Proprietary Marks
designated by CKE, and shall use them only in the manner authorized and
permitted by CKE.
2. Franchisee shall use the Proprietary Marks only for
the operation of the business franchised hereunder and only at the location
authorized hereunder, or in advertising for the business conducted at or from
that location.
3. Unless otherwise authorized or required by CKE,
Franchisee shall operate and advertise the franchised business only under the
name "Carl's Jr. Restaurant" without prefix or suffix.
4. During the term of this Agreement and any renewal
hereof, Franchisee shall identify itself as a Franchisee of CKE and operator of
the franchised business in conjunction with any use of the Proprietary Marks,
including, but not limited to, uses on stationery, business cards, invoices,
order forms, receipts, and contracts, as well as the display of a notice in
such content and form and at such conspicuous locations on the premises of the
franchised business as CKE may designate in writing.
5. Franchisee's right to use the Proprietary Marks is
limited to such uses as are authorized under this Agreement, and any
unauthorized use thereof shall constitute an infringement of CKE's rights.
6. Franchisee shall not use the Proprietary Marks to
incur any obligation or indebtedness on behalf of CKE.
7. Franchisee shall not use the Proprietary Marks as
part of its corporate or other legal name.
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8. Franchisee shall comply with CKE's instructions in
filing and maintaining the requisite trade name or fictitious name
registrations, and shall execute any documents deemed necessary by CKE or its
counsel to obtain protection for the Proprietary Marks or to maintain their
continued validity and enforceability.
9. In the event that litigation involving the
Proprietary Marks is instituted or threatened against Franchisee, Franchisee
shall promptly notify CKE and shall cooperate fully in defending or settling
such litigation.
C. Franchisee expressly understands and acknowledges that:
1. CKE is the owner of all right, title and interest in
and to the Proprietary Marks and the goodwill associated with and symbolized by
them.
2. The Proprietary Marks are valid and serve to
identify the System and those who are authorized to operate under the System.
3. Franchisee shall not directly or indirectly contest
the validity or CKE's ownership of the Proprietary Marks.
4. Franchisee's use of the Proprietary Marks pursuant to
this Agreement does not give Franchisee any ownership interest or other
interest in or to the Proprietary Marks, except the license granted by this
Agreement.
5. Any and all goodwill arising from Franchisee's use of
the Proprietary Marks in its franchised operation under the System shall inure
solely and exclusively to CKE's benefit, and upon expiration or termination of
this Agreement and the license herein granted, no monetary amount shall be
assigned as attributable to any goodwill associated with Franchisee's use of
the System or the Proprietary Marks.
6. The right and license of the Proprietary Marks
granted hereunder to Franchisee is non-exclusive, and CKE thus has and retains
the rights, among others:
a. To use the Proprietary Marks itself in
connection with selling products and services;
b. To grant other licenses for the Proprietary
Marks, in addition to those licenses already granted to existing franchisees;
c. To develop and establish other systems using
the same or similar Proprietary Marks, or any other proprietary marks, and to
grant licenses or franchises thereto without providing any rights therein to
Franchisee.
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7. CKE reserves the right to substitute different
Proprietary Marks for use in identifying the System and the businesses
operating thereunder if CKE's currently owned Proprietary Marks no longer can
be used.
VII. CONFIDENTIAL OPERATIONS PROCEDURES MANUAL ("OPM")
A. In order to protect the reputation and goodwill of CKE and to
maintain high standards of operation under CKE's Proprietary Marks, Franchisee
shall conduct its business in accordance with CKE's OPM. CKE shall loan to
Franchisee and certain employees of Franchisee as many copies of the OPM as CKE
deems necessary for Franchisee to conduct the business franchised hereunder.
B. Franchisee shall at all times treat the OPM, any other manuals
created for or approved for use in the operation of the franchised business,
and the information contained therein, as confidential, and shall use all
reasonable efforts to maintain such information as secret and confidential.
Franchisee shall not at any time copy, duplicate, record, or otherwise
reproduce the foregoing materials, in whole or in part, nor otherwise make the
same available to any unauthorized person.
C. The OPM shall at all times remain the sole property of CKE.
D. CKE may from time to time revise the contents of the OPM, and
Franchisee expressly agrees to comply with each new or changed standard.
E. Franchisee shall at all times maintain the OPM at the
Restaurant in a secure place and shall insure that the OPM is kept current and
up to date; and, in the event of any dispute as to the contents of the OPM, the
terms of the master copy of the OPM maintained by CKE at CKE's home office
shall be controlling.
VIII. CONFIDENTIAL INFORMATION
A. Franchisee shall not, during the term of this Agreement or
thereafter, communicate, divulge, or use for the benefit of any other person,
persons, partnership, association, or corporation any confidential information,
knowledge, or know-how concerning the methods of operation of the business
franchised hereunder which may be communicated to Franchisee or of which
Franchisee may be apprised by virtue of Franchisee's operation under the terms
of this Agreement. Franchisee shall divulge such confidential information only
to such of its employees as must have access to it in order to operate the
franchised business.
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Any and all information, knowledge, know-how, and techniques which CKE
designates as confidential shall be deemed confidential for purposes of this
Agreement, except information which Franchisee can demonstrate came to its
attention prior to disclosure thereof by CKE; or which, at the time of
disclosure by CKE to Franchisee, had become a part of the public domain,
through publication or communication by others; or which, after disclosure to
Franchisee by CKE, becomes a part of the public domain, through publication or
communication by others.
B. Franchisee acknowledges that any failure to comply with the
requirements of this Section VIII. will cause CKE irreparable injury, and
Franchisee agrees to pay all court costs and reasonable attorney's fees
incurred by CKE in obtaining specific performance of, or an injunction against
violation of, the requirements of this Section VIII.
IX. ACCOUNTING AND RECORDS
A. Franchisee shall maintain during the term of this Agreement,
and shall preserve for at least five years from the dates of their preparation,
full, complete, and accurate books, records, and accounts in accordance with
generally accepted accounting principles and in the form and manner prescribed
by CKE from time to time in the OPM or otherwise in writing.
B. Franchisee shall submit to CKE, no later than the fifth (5th)
business day immediately following the fiscal week, as designated by CKE,
during which the sales were made, a remittance report, in the form prescribed
by CKE, accurately reflecting all gross sales made during the preceding fiscal
week and such other data or information as CKE may require.
C. Franchisee shall, at Franchisee's expense, submit to CKE, in
the form prescribed by CKE, a periodic profit and loss statement (which may be
unaudited) within twenty (20) days after the end of each period for the first
twelve periods of each fiscal year of the franchised business during the term
hereof. A period shall be defined as every four-week interval, beginning on
the day immediately following the end of CKE's fiscal year. Franchisee shall,
at Franchisee's expense, also submit to CKE, in the form prescribed by CKE, a
quarterly balance sheet (which may be unaudited) within thirty (30) days after
the end of each of the first three quarters of each fiscal year of the
franchised business during the term
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hereof. Each such statement shall be signed by Franchisee or by Franchisee's
treasurer or chief financial officer attesting that it is true and correct.
D. Franchisee shall, at its expense, provide to CKE an unaudited
compilation of profit and loss statement and balance sheet within sixty (60)
days after the end of each fiscal year of the franchised business during the
term hereof, with reports from said year's operations audited by an independent
certified public accountant in respect to gross sales and amounts spent on
royalty and advertising fees, all to be signed by Franchisee or by Franchisee's
treasurer or chief financial officer attesting that the financial statements
present fairly the financial position of Franchisee and the results of
operations of the franchised business during the period covered. CKE shall
have the right, in its reasonable discretion, to require that Franchisee submit
audited statements for any fiscal year or any period or periods of a fiscal
year of Franchisee during the term of this Agreement.
E. Franchisee shall also submit to CKE, for review or auditing,
such other forms, reports, records, information, and data as CKE may reasonably
designate, in the form and at the times and places reasonably required by CKE,
upon request and as specified from time to time in the OPM or otherwise in
writing.
F. CKE or its designated agents shall have the right at all
reasonable times to examine and copy, at CKE's expense, the books, records, and
tax returns of Franchisee. CKE shall also have the right, at any time, to have
an independent audit made of the books of Franchisee. If an inspection should
reveal that any payments have been understated in any report to CKE, then
Franchisee shall immediately pay to CKE the amount understated upon demand, in
addition to interest from the date such amount was due until paid, at eighteen
percent (18%) per annum calculated on a daily basis, or the maximum rate
permitted by law, whichever is less. If an inspection discloses an
understatement in any report of two percent (2%) or more, Franchisee shall, in
addition, reimburse CKE for any and all costs and expenses connected with the
inspection, including, without limitation, reasonable accounting and attorneys'
fees. The foregoing remedies shall be in addition to any other remedies CKE
may have.
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X. ADVERTISING
Recognizing the value of advertising and the importance of the
standardization of advertising programs to the furtherance of the goodwill and
public image of the System, the parties agree as follows:
A. During the term of this Agreement, Franchisee shall have a
weekly advertising and promotion obligation ("APO") in an amount to be
determined by CKE, said amount to be at least four percent (4%) but not to
exceed six percent (6%) of the Restaurant's gross sales and Franchisee shall
satisfy that obligation as prescribed in this Section X. The amount of the APO
and its allocation among the various advertising activities described in this
Section X may be modified by CKE from time to time, subject to the limitations
set forth below; until so modified, the APO shall be met as stated in Exhibit
1, attached hereto and incorporated herein by reference.
1. If CKE elects to require Franchisee to engage in
local store marketing ("LSM"), Franchisee shall allocate and spend such portion
of the APO as CKE may direct for such LSM, as more fully described in Section
X.B.
2. Franchisee shall pay weekly such portion of the APO
as CKE may direct, but not more than one percent (1%) of gross sales, to the
advertising fund described in Section X.C. ("Fund"), for general administrative
advertising expenditures.
3. The remainder of the APO, if any, shall be paid by
Franchisee weekly as follows:
a. The remainder shall be paid to the Fund and
spent by the Fund for advertising in Franchisee's region.
b. If a cooperative, approved by CKE, for
Franchisee's region is in existence or is established at any later time during
the term of this Agreement pursuant to Section X.D., then the remainder shall
be paid to the Cooperative rather than to the Fund.
4. The APO shall at no time exceed six percent (6%) of
gross sales, and CKE may not increase the APO by more than one-half percent
(1/2%) of gross sales in a particular fiscal year (as defined by CKE).
5. Throughout the term of this Agreement, Franchisee is
encouraged and will be permitted to conduct additional local advertising, at
Franchisee's expense, subject to the terms and conditions contained in Section
X.E. hereof.
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6. Franchisee understands that some franchisees of
Carl's Jr. Restaurants operate under different forms of franchise agreements
and that the APO amounts paid by franchisees may vary.
B. If so directed by CKE Franchisee shall spend the portion of
the APO designated as the LSM allocation, for local store marketing and
advertising programs as approved from time to time by CKE in the local trade
area of the Restaurant.
1. Franchisee shall spend the LSM allocation pursuant to
a schedule determined by Franchisee with CKE's assistance and subject to CKE's
approval.
2. Within thirty (30) days of the end of each fiscal
quarter in which the requirement for LSM is in effect, Franchisee shall provide
to CKE evidence of LSM expenditure by submitting tear sheets of the advertising
and marketing accompanied by invoices as requested by CKE.
3. Should Franchisee fail to timely submit proof of
expenditure for LSM, CKE, at its option, may require the LSM allocation to be
paid to the advertising Fund as described in Section X.C. below.
4. CKE reserves the right, subject to the provisions of
this Section X, to change or eliminate the LSM allocation.
C. The remainder of Franchisee's APO not otherwise allocated
shall be allocated to the Fund and shall be used for both general
administration and regional advertising expenditures as described below.
1. Unless and until modified by CKE, Franchisee's
required contribution for the general administrative advertising expenses of
the Fund described in Section X.C.3b hereof is as set forth in Exhibit 1. CKE
undertakes no obligation in administering these general monies to make
expenditures for Franchisee which are equivalent or proportionate to
Franchisee's contribution, or to ensure that any particular franchisee benefits
directly or pro rata from the advertising or promotion conducted under these
monies.
2. Unless and until modified by CKE, Franchisee's
required contribution for regional advertising expenditures of the Fund is as
set forth in Exhibit 1. CKE agrees to cause the Fund to make these regional
expenditures for advertising within the Area of Dominant Influence in which the
Restaurant is located as set forth on Exhibit 1 ("ADI") as established
periodically by Arbitron, Inc., or any other similar type of designation used
to
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identify regional advertising market areas. CKE reserves the right to change
the ADI designation for the Restaurant.
3. Franchisee agrees to make contributions to the Fund
as required under Section X.A. hereof, and further agrees that the Fund shall
be maintained and administered by CKE or its designee, as follows:
a. CKE shall oversee all advertising and
promotional programs with sole discretion to approve or disapprove the creative
concepts, materials and media used in such programs, and the placement and
allocation thereof.
b. The Fund, all contributions thereto, and any
earnings thereon, shall be used exclusively to meet any and all costs of
maintaining, administering, directing, and preparing advertising and/or
promotional activities (including, without limitation, the cost of preparing
and conducting television, radio, magazine, and newspaper advertising
campaigns; marketing surveys and other public relations activities; employing
advertising agencies to assist therein; and providing promotional brochures and
other marketing materials to the restaurants operated under the System). All
sums paid by Franchisee to the Fund shall be maintained in an account separate
from the other monies of CKE and shall not be used to defray any of CKE's
expenses, except for such reasonable administrative costs and overhead, if any,
as CKE may incur in activities reasonably related to the administration or
direction of the Fund and advertising programs for franchisees and the System.
The Fund and its earnings shall not otherwise inure to the benefit of CKE. CKE
or its designee shall maintain separate bookkeeping accounts for the Fund.
c. Franchisee shall contribute to the Fund by
separate check made payable to the Fund.
d. CKE will contribute to the Fund a percentage
of the annual gross sales of the Carl's Jr. restaurants operated by CKE in the
continental United States. Said percentage shall be equivalent to the average
percentage contributed to the Fund for regional expenditures by all franchise
restaurants in the System.
e. It is anticipated that all contributions to
and earnings of the Fund shall be expended for advertising and/or promotional
purposes during the taxable year within which the contributions and earnings
are received. If, however, excess amounts remain in the Fund at the end of
such taxable year, all expenditures in the following taxable year(s) shall be
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made first out of accumulated earnings from previous years, next out of
earnings in the current year, and finally from contributions.
f. The Fund shall not be an asset of CKE or its
designee. A statement of the operations of the Fund as shown on the books of
CKE or its designee shall be prepared annually by an independent certified
public accountant selected by CKE at CKE's cost and shall be made available to
Franchisee.
g. Although the Fund is intended to be of
perpetual duration, CKE maintains the right to terminate the Fund. The Fund
shall not be terminated, however, until all monies in the Fund have been
expended for advertising and/or promotional purposes.
D. Franchisee agrees that CKE shall have the right, in its
discretion, to designate any geographical area as a region for purposes of
establishing an advertising cooperative ("Cooperative"). If a Cooperative has
been established for Franchisee's region at the time Franchisee commences
business hereunder, Franchisee shall immediately become a member of such
Cooperative. If a Cooperative for Franchisee's region is established at any
later time during the term of this Agreement, Franchisee shall become a member
of such Cooperative no later than thirty (30) days after the date on which the
Cooperative commences operation as provided below:
1. Each Cooperative shall be organized and governed in a
form and manner, and shall commence operation on a date approved in advance by
CKE in writing.
a. Each Cooperative shall be organized for the
exclusive purposes of administering regional advertising programs and
developing, subject to CKE's approval, standardized promotional materials for
use by the members in local advertising.
b. Each Cooperative shall be CKE's designee for
maintaining and administering advertising and promotional programs in each
region, and all contributions to and expenditures of each Cooperative shall be
subject to provisions applicable to the Fund set forth herein in Section X.C.3.
c. No advertising or promotional plans or
materials may be used by a Cooperative or furnished to its members without the
prior approval of CKE. All such plans and materials shall be submitted to CKE
in accordance with the procedure set forth in Section X.E. hereof.
d. Each member franchisee shall submit to the
Cooperative, no later than the fifth (5th) business day immediately following
the fiscal week (as designated by CKE) during
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which the sales were made, its contribution for the preceding fiscal week as
provided in Section X.A. hereof, together with such other statements or reports
as may be required by CKE or by the Cooperative with CKE's prior written
approval.
2. CKE, in its sole discretion, may grant to any
franchisee an exemption for any length of time from the requirement of
membership in a Cooperative, upon written request of such franchisee stating
reasons supporting such exemption. CKE may require as a condition of granting
such exemption that the franchisee expend on local advertising, in a manner
approved in advance by CKE, and supported by such proof of expenditures as CKE
may require, at least the amount that the franchisee would have contributed to
a Cooperative. CKE's decision concerning such request for exemption shall be
final.
E. All local advertising and promotion by Franchisee in any
medium shall conform to the standards and requirements of CKE as set forth in
the OPM or otherwise. Franchisee shall obtain CKE's prior approval of all
advertising and promotional plans and materials that Franchisee desires to use
and that have not been prepared or previously approved by CKE within one (1)
year. Franchisee shall submit such unapproved plans and materials to CKE, by
personal delivery or through the mail, return receipt requested, and CKE shall
approve or disapprove such plans and materials within thirty (30) days from the
date of receipt thereof by CKE. Franchisee shall use no such plans or
materials until they have been approved by CKE and shall promptly discontinue
use of any advertising or promotional plans or materials upon notice from CKE.
F. Franchisee shall have the right to advertise and sell its
products and offer its services at any prices Franchisee may determine, and
shall in no way be bound by any price which may be recommended or suggested by
CKE.
XI. INSURANCE
A. Franchisee shall procure, prior to the commencement of any
operations under this Agreement, and shall maintain in full force and effect at
all times during the term of this Agreement at Franchisee's expense, an
insurance policy or policies protecting Franchisee and CKE, and their officers,
directors, partners, agents, and employees, as well as CKE's subsidiaries,
affiliates, and applicable landlords and mortgagees against any loss,
liability, personal injury, death, property damage, or expense whatsoever
arising or occurring upon or in connection with the franchised business.
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B. Such insurance required must be written through companies
holding a general policy holder's rating of at least A+ as set forth in the
most current issue of "Best Insurance Guide". During the term of each policy,
should an insurance carrier providing required insurance coverage change or
decrease its financial rating, CKE can require the Franchisee to change
insurance carriers to meet the necessary A+ rating. Any requests to correct
inadequacies in the required insurance program will be completed at the sole
cost of Franchisee. The minimum coverage and policy limits (except for
additional coverages and higher policy limits that may reasonably be specified
by the CKE from time to time) are as follows:
1. Comprehensive General Liability Insurance, including
bodily injury, personal injury, products liability, blanket contractual
liability, broad form property damage, non-owned auto, completed operations,
and property damage coverage in the greater amount of One Million Dollars
($1,000,000.00) per occurrence or that required by CKE's or Franchisee's lease
for the Restaurant premises.
2. Property Insurance written on an "All Risks" policy
for fire and related peril (including Earthquake and Flood where applicable),
for the full replacement cost of the Restaurant premises, equipment, stock,
leasehold improvements and all other property in which the CKE may have
interests.
3. Business Interruption and Extra Expense coverage to
include rental payment continuation for a minimum of twelve (12) months, loss
of profits and other extra expenses experienced during the recovery from
property loss.
4. Plate Glass coverage for replacement of glass from
breakage.
5. Employer's Liability coverage in the amount of Five
Hundred Thousand Dollars ($500,000).
6. Workers' Compensation and such other insurance as may
be required by statute or rule of the state or locality in which the franchised
business is located and operated.
The Franchisee may, with the prior written consent of
CKE, elect to have reasonable deductibles in connection with the coverage
described in Sections XI B.1 and 2, above, provided, however, in no event shall
such insurance have a deductible or self-insured retention in excess of Five
Thousand Dollars ($5,000.00).
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C. In connection with any construction, renovation,
refurbishment, or remodeling of the Restaurant, Franchisee shall maintain
Builder's All Risks insurance and performance and completion bonds in forms and
amounts, and written by a carrier or carriers, reasonably satisfactory to CKE.
D. Franchisee's obligation to obtain and maintain the foregoing
policy or policies in the amounts specified shall not be limited in any way by
reason of any insurance which may be maintained by CKE, nor shall Franchisee's
performance of that obligation relieve it of liability under the indemnity
provisions set forth in Section XVIII of this Agreement.
E. All policies required to be maintained by Franchisee hereunder
shall be written as primary policies and not contributing with or in excess of
any coverage which CKE may carry, and shall cover and insure CKE and other
Indemnities identified in Section XVIII as an additional insured. All public
liability and property damage policies shall contain a provision that CKE,
although named as an insured, shall nevertheless be entitled to recover under
said policies on any loss occasioned to it, its servants, agents and employees
by reason of the negligence of Franchisee, its servants, agents and employees.
F. Franchisee shall deliver to CKE at least thirty (30) days
prior to the time any insurance is first required to be carried by Franchisee,
and thereafter at least thirty (30) days prior to the expiration of any such
policy, Certificates of Insurance evidencing the proper coverage with limits
not less than those specified herein. Such Certificates, with the exception of
Workers' Compensation, shall name CKE, and each of its partners, subsidiaries,
affiliates, directors, agents and employees as additional insureds, and shall
expressly provide that any interest of same therein shall not be affected by
any breach by Franchisee of any policy provisions for which such Certificates
evidence coverage. Further, all Certificates shall expressly provide that no
less than thirty (30) days' prior written notice shall be given CKE in the
event of material alteration to or cancellation of the coverages evidenced by
such Certificates.
G. Should Franchisee, for any reason, fail to procure or maintain
the insurance required by this Agreement, as such requirements may be revised
from time to time by CKE in the OPM or otherwise in writing, CKE shall have the
right and authority, but not obligation, immediately to procure such insurance
and to charge same to Franchisee, which charges, together with a reasonable fee
for CKE's expenses in so acting, shall be payable by
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Franchisee immediately upon notice. The foregoing remedies shall be in
addition to any other remedies CKE may have.
H. The minimum limits of insurance coverage required to be
procured by Franchisee may be modified from time to time by CKE in its sole and
exclusive discretion, by written notice transmitted by CKE to Franchisee. Upon
delivery (or attempted delivery) of such written notice, Franchisee shall be
obligated to immediately purchase insurance conforming to the newly-established
standards and limits prescribed by CKE.
Franchisor suggests, but does not require, that Franchisee
purchase and maintain the following categories of insurance coverage for
Franchisee, the franchised Business and his staff of employees:
1. All Risk Office Contents Insurance other than the
coverages required above;
2. Major Medical Insurance for Franchisee's staff
employees;
3. Valuable Papers and Records Insurance; and,
4. Plate Glass Insurance (if applicable).
I. Franchisee shall notify CKE of any and all claims or demands
against Franchisee, the business franchised Restaurant and/or CKE within three
(3) days of Franchisee receiving actual notice of any such claim or demand.
Franchisee agrees to respond to all claims within the time required by law,
rule or regulation. Franchisee shall cooperate with CKE (or its designee) in
every fashion possible to defend CKE and Franchisee against any and all claims
made by employees, customers or third parties. Franchisee shall, when
necessary, make appearance at administrative or other hearings to present or
reinforce such defenses.
Failure by Franchisee to purchase or maintain any insurance
required by this Agreement, or failure to reimburse Franchisor for its purchase
of such insurance on behalf of Franchisee, shall constitute a material and
incurable breach of this Agreement which, unless waived by Franchisor, shall
entitle Franchisor to terminate this Agreement unilaterally and immediately
upon notice to Franchisee, and this Agreement shall thereafter be null, void
and of no effect (except for those post-termination and post-expiration
provisions which by their nature shall survive).
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XII. TRANSFER OF INTEREST
A. Transfer by CKE
CKE shall have the right to transfer or assign all or any part of its
rights or obligations herein to any person or legal entity.
B. Transfer by Franchisee
1. Franchisee understands and acknowledges that the
rights and duties set forth in this Agreement are personal to Franchisee, and
that CKE has granted this franchise in reliance on Franchisee's business skill,
financial capacity, and personal character. Accordingly, neither Franchisee
nor any immediate or remote successor to any part of Franchisee's interest in
this franchise, nor any individual, partnership, corporation, or other legal
entity which directly or indirectly owns any interest in this franchise or in
Franchisee shall sell, assign, transfer, convey, give away, pledge, mortgage,
or otherwise encumber any direct or indirect interest in this franchise or in
any legal entity which owns this franchise without the prior written consent of
CKE; provided, however, that CKE's prior written consent shall not be required
for a transfer of less than a two percent (2%) interest in a publicly-held
corporation. A publicly-held corporation is a corporation registered under the
Securities Exchange Act of 1934. Any purported assignment or transfer, by
operation of law or otherwise, not having the written consent of CKE required
by this Section XII.B.1 shall be null and void and shall constitute a material
breach of this Agreement, for which CKE may then terminate without opportunity
to cure pursuant to Section XIII.B. of this Agreement.
2. CKE shall not unreasonably withhold its consent to a
transfer of any interest in Franchisee or in this franchise; provided, however,
that if a transfer, alone or together with other previous, simultaneous, or
proposed transfers, would have the effect of transferring a controlling
interest in the franchised business, CKE may, in its sole discretion, require
any or all of the following as conditions of its approval:
a. All of Franchisee's accrued monetary
obligations and all other outstanding obligations to CKE shall have been
satisfied;
b. Franchisee is not in default of any provision
of this Agreement, any amendment hereof or successor hereto, or any other
agreement between Franchisee and CKE, or its subsidiaries and affiliates;
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c. The transferor shall have executed a full and
general release, in a form satisfactory to CKE, of any and all claims against
CKE and its officers, directors, shareholders, and employees, in their
corporate and individual capacities, including, without limitation, claims
arising under federal, state, and local laws, rules, and ordinances;
d. The transferee shall enter into a written
assignment, in a form satisfactory to CKE, assuming and agreeing to discharge
all of Franchisee's obligations under this Agreement; and, if the obligations
of Franchisee were guaranteed by the transferor, the transferee shall guarantee
the performance of all such obligations in writing in a form satisfactory to
CKE;
e. The transferee shall demonstrate to CKE's
satisfaction that it meets CKE's educational, managerial, and business
standards; possesses a good business reputation, and credit rating; has the
aptitude and ability to conduct the business franchised herein (as may be
evidenced by prior related business experience or otherwise); and has adequate
financial resources and capital to operate the business;
f. At CKE's option, the transferee shall
execute, and/or, upon CKE's request, shall cause all interested parties to
execute, for a term ending on the expiration date of this Agreement and with
such renewal term as may be provided by this Agreement, the standard form
franchise agreement then being offered to new System franchisees and other
ancillary agreements as CKE may require for the franchised business, which
agreements shall supersede this Agreement in all respects and the terms of
which agreements may differ from the terms of this Agreement, including,
without limitation, a higher percentage royalty rate and advertising
contribution; provided, however, that the transferee shall not be required to
pay any initial franchise fee;
g. The transferee, at its expense, shall upgrade
the Restaurant to conform to the then-current standards and specifications of
System restaurants, and shall complete the upgrading and other requirements
within the time specified by CKE;
h. Franchisee shall remain liable for all of the
obligations to CKE in connection with the franchised business prior to the
effective date of the transfer and shall execute any and all instruments
reasonably requested by CKE to evidence such liability;
i. At the transferee's expense, the transferee,
the transferee's manager and the transferee's Owner/Operator shall complete any
training programs then in effect for franchisees upon such terms and conditions
as CKE may reasonably require;
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j. Except in the case of a transfer to a
corporation formed for the convenience of ownership, Franchisee shall pay a
transfer fee not to exceed CKE's reasonable costs and expenses, including legal
and accounting expenses, in connection with CKE's review of the application to
transfer.
3. Franchisee shall grant no security interest in the
franchised business or in any of its assets unless the secured party agrees
that in the event of any default by Franchisee under any documents related to
the security interest, CKE shall have the right and option to purchase the
rights of the secured party upon payment of all sums then due to such secured
party.
4. Franchisee acknowledges and agrees that each
condition which must be met by the transferee is necessary to assure such
transferee's full performance of the obligations hereunder.
C. Partnership and Corporate Franchisees
In the event Franchisee is a partnership the following
requirements shall also apply to Franchisee:
1. Franchisee shall be newly organized and its Agreement
of Partnership shall at all times provide that its activities are confined
exclusively to operating the business franchised herein.
2. Copies of Franchisee's Agreement of Partnership and
other governing documents, and any amendments thereto shall be promptly
furnished to CKE.
3. The Agreement of Partnership shall provide that
assignment or transfer of any partnership interest is subject to, all
restrictions imposed upon assignments by this Agreement.
4. Franchisee shall maintain a current list of all
limited partners and shall furnish the list to CKE upon request.
5. All general partners of Franchisee shall jointly and
severally guarantee Franchisee's performance hereunder and shall bind
themselves to the terms of this Agreement.
6. In the event that a general partner of Franchisee is
a corporation, all shareholders of the corporation shall jointly and severally
guarantee Franchisee's performance hereunder and shall bind themselves to the
terms of this Agreement.
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In the event Franchisee is a corporation, the following requirements
shall also apply to Franchisee:
1. Franchisee shall be newly organized and its articles
of incorporation or charter shall at all times provide that its activities are
confined exclusively to operating the business franchised herein.
2. Copies of Franchisee's Articles of Incorporation or
Charter, Bylaws, and other governing documents, and any amendments thereto,
including the resolution of the Board of Directors authorizing entry into this
Agreement shall be promptly furnished to CKE.
3. Franchisee shall maintain stop-transfer instructions
against the transfer on its records of any equity securities; and each stock
certificate of Franchisee shall have conspicuously endorsed upon its face a
statement in a form satisfactory to CKE that it is held subject to, and that
further assignment or transfer thereof is subject to, all restrictions imposed
upon assignments by this Agreement; provided, however, that the requirements of
this Section XII.C.3 shall not apply to a publicly-held corporation.
4. Franchisee shall maintain a current list of all
owners of record and all beneficial owners of any class of voting stock of
Franchisee and shall furnish the list to CKE upon request.
5. All shareholders of Franchisee shall jointly and
severally guarantee Franchisee's performance hereunder and shall bind
themselves to the terms of this Agreement; provided, however, that the
requirements of this Section XII.C.5 shall not apply to a publicly-held
corporation.
D. Right of First Refusal
1. Any party holding any direct or indirect interest in
Franchisee or in this franchise and who desires to accept any bona fide offer
from a third party to purchase such interest shall notify CKE in writing of
each such offer, and CKE shall have the right and option, exercisable within
forty five (45) days after receipt of such written notification, to send
written notice to the seller that CKE intends to purchase the Seller's
interest, on the same terms and conditions offered by the third party. In the
event that CKE elects to purchase the Seller's interest, closing on such
purchase must occur within ninety (90) days from the date of notice to the
seller of the election to purchase by CKE. Any material change in the terms of
any offer prior to closing shall constitute a new offer subject to the same
rights of first refusal by CKE as in the case of an initial offer. Failure of
CKE to
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exercise the option afforded by this Section XII.D. shall not constitute a
waiver of any other provision of this Agreement, including all of the
requirements of this Section XII., with respect to a proposed transfer.
2. In the event the consideration, terms, and/or
conditions offered by a third party are such that CKE may not reasonably be
required to furnish the same consideration, terms, and/or conditions, then CKE
may purchase the interest in the franchised business proposed to be sold for
the reasonable equivalent in cash. If the parties cannot agree within a
reasonable time on the reasonable equivalent in cash of the consideration,
terms, and/or conditions offered by the third party, an independent appraiser
shall be designated by CKE, and his determination shall be binding.
E. Transfer Upon Death or Mental Incapacity
Upon the death or mental incapacity of any person with a direct or
indirect interest in the franchise or in Franchisee, the executor,
administrator, conservator or personal representative of such person shall
transfer his interest to a third party approved by CKE within six (6) months
after such death or mental incapacity. Mental incapacity shall be evidenced by
court order appointing a conservator on such grounds or signed certificates
describing such incapacity from two licensed physicians. Such transfers,
including, without limitation, transfers by devise or inheritance, shall be
subject to the same conditions as any inter vivos transfer. However, in the
case of transfer by devise or inheritance, if the heirs or beneficiaries of any
such person are unable to meet the conditions in this Section XII., the
personal representative of the deceased Franchisee shall have a reasonable time
to dispose of the deceased's interest in the franchise, which disposition shall
be subject to all the terms and conditions for transfers contained in this
Agreement. If the interest is not disposed of within a reasonable time, CKE
may terminate this Agreement.
F. Non-Waiver of Claims
CKE's consent to a transfer of any interest in the franchise granted
herein shall not constitute a waiver of any claims it may have against the
transferring party, nor shall it be deemed a waiver of CKE's right to demand
exact compliance with any of the terms of this Agreement by the transferee.
G. Offerings by Franchisee
Securities or partnership interests in Franchisee may be offered to
the public, by private offering or otherwise, only with the prior written
consent of CKE, whether or not
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CKE's consent is required under Section XII.B. hereof, which consent shall not
be unreasonably withheld. All materials required for such offering by federal
or state law shall be submitted to CKE for review prior to their use or filing
with any government agency; and any materials to be used in any offering exempt
from federal or state securities laws shall be submitted to CKE for review
prior to their use. No offering by Franchisee shall imply (by use of the
Proprietary Marks or otherwise) that CKE is participating in underwriting,
issuing, or offering securities of Franchisee or CKE; and CKE's review of any
offering shall be limited solely to the subject of the relationship between
Franchisee and CKE. Franchisee and the other participants in the offering must
fully indemnify CKE in connection with the offering. For each proposed
offering, Franchisee shall pay to CKE a non-refundable fee not to exceed CKE's
reasonable costs and expenses associated with reviewing the proposed offering,
including, without limitation, legal and accounting fees. Franchisee shall
give CKE written notice at least thirty (30) days prior to the date of
commencement of any offering or other transaction covered by this Section
XII.G.
XIII. DEFAULT AND TERMINATION
A. Franchisee shall be deemed to be in default under this
Agreement, and all rights granted herein shall automatically terminate without
notice to Franchisee, if Franchisee shall become insolvent or makes a general
assignment for the benefit of creditors; or if a petition in bankruptcy is
filed by Franchisee or such a petition is filed against and not opposed by
Franchisee; or if Franchisee is adjudicated a bankrupt or insolvent; or if a
bill in equity or other proceeding for the appointment of a receiver of
Franchisee or other custodian for Franchisee's business or assets is filed and
consented to by Franchisee; or if a receiver or other custodian (permanent or
temporary) of Franchisee's assets or property, or any part thereof, is
appointed by any court of competent jurisdiction; or if proceedings for a
composition with creditors under any state or federal law should be instituted
by or against Franchisee; or if a final judgment in a total amount of at least
$25,000 remains unsatisfied or of record for thirty (30) days or longer (unless
supersedeas bond is filed); or if Franchisee is dissolved; or if execution is
levied against Franchisee's business or property; or if suit to foreclose any
lien or mortgage against the premises or equipment is instituted against
Franchisee and not dismissed within thirty (30) days; or if the real or
personal property of
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Franchisee's Restaurant shall be sold after levy thereupon by any sheriff,
marshal, or constable.
B. Franchisee shall be deemed to be in default and CKE may, at
its option, terminate this Agreement and all rights granted hereunder, without
affording Franchisee any opportunity to cure the default, effective immediately
upon receipt of notice by Franchisee, upon the occurrence of any of the
following events:
1. If Franchisee fails to construct and open the
franchised business within the time limits as provided in Section V.B.;
2. If Franchisee at any time ceases to operate or
otherwise abandons the franchised business, or loses the right to possession of
the premises, or otherwise forfeits the right to do or transact business in the
jurisdiction where the Restaurant is located; provided, however, that if,
through no fault of Franchisee, the premises are damaged or destroyed by an
event such that they cannot, in CKE's judgment, be repaired or restored within
a reasonable time, then Franchisee shall have thirty (30) days after such event
in which to apply for CKE's approval to relocate and/or reconstruct the
premises, which approval shall not be unreasonably withheld, but which may be
conditioned upon the payment of an agreed minimum royalty to CKE during the
period in which the Restaurant is not in operation;
3. If Franchisee is convicted of a felony, a crime
involving moral turpitude, or any other crime or offense that is reasonably
likely, in the sole opinion of CKE, to adversely affect the System, the
Proprietary Marks, the goodwill associated therewith, or CKE's interest
therein;
4. If Franchisee fails to designate a qualified
Owner/Operator within a reasonable time, as required under Section V.C.
hereof;
5. If Franchisee or any partner or shareholder in
Franchisee purports to transfer any rights or obligations under this Agreement
or any interest in Franchisee to any third party without CKE's prior written
consent, contrary to the terms of Section XII. of this Agreement;
6. If Franchisee fails to comply with the in-term
covenants in Section XV.B. hereof or fails to obtain execution of the covenants
required under in Section XV.I. hereof;
7. If, contrary to the terms of Sections VII. or VIII.
hereof, Franchisee discloses or divulges the contents of the OPM or other
confidential information provided to Franchisee by CKE;
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8. If an approved transfer is not effected within a
reasonable time, as required by Section XII.E. hereof, following Franchisee's
death or mental incapacity;
9. If Franchisee knowingly maintains false books or
records, or submits any false reports to CKE;
10. If Franchisee, after curing a default pursuant to
Section XIII.C. hereof, commits the same default again, whether or not cured
after notice; or
11. If Franchisee repeatedly is in default under Section
XIII.C. hereof, for failure substantially to comply with any of the
requirements imposed by this Agreement, whether or not cured after notice.
C. Except as provided in Sections XIII.A. and XIII.B. of this
Agreement, Franchisee shall have thirty (30) days after its receipt from CKE of
a written Notice of Termination within which to remedy any default hereunder
and provide evidence thereof to CKE. If any such default is not cured within
that time, or such longer period as applicable law may require, the Agreement
shall terminate without further notice to Franchisee effective immediately upon
the expiration of the thirty (30) day period or such longer period as
applicable law may require. Franchisee shall be in default hereunder for any
failure to comply with any of the requirements imposed by this Agreement, as it
may from time to time reasonably be supplemented by the OPM, or to carry out
the terms of this Agreement in good faith. Such defaults shall include, for
example, without limitation, the occurrence of any of the following events:
1. If Franchisee fails, refuses, or neglects promptly to
pay any monies owing to CKE or its subsidiaries or affiliates when due, or to
submit the financial or other information required by CKE under this Agreement
or is in default of any promissory note, security agreement, lease or sublease
with CKE.
2. If Franchisee fails to maintain or observe any of the
standards or procedures prescribed by CKE in this Agreement, the OPM, or
otherwise in writing.
3. Except as provided in Section XIII.B.5 hereof, if
Franchisee fails, refuses, or neglects to obtain CKE's prior written approval
or consent as required by this Agreement.
4. If Franchisee misuses or makes any unauthorized use
of the Proprietary Marks or otherwise materially impairs the goodwill
associated therewith or CKE's rights therein.
5. If Franchisee engages in any business or markets any
service or product under a name or mark which, in CKE's opinion, is confusingly
similar to the Proprietary Marks.
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Franchisee shall be in default hereunder for any defaults in monetary
obligations owed by Franchisee to CKE, including but not limited to,
distribution or commissary purchases or amounts due under any promissory note
to CKE.
XIV. OBLIGATIONS UPON TERMINATION OR EXPIRATION
Upon termination or expiration of this Agreement, all rights granted
hereunder to Franchisee shall forthwith terminate, and:
A. Franchisee shall immediately cease to operate the business
franchised under this Agreement, and shall not thereafter, directly or
indirectly, represent to the public or hold itself out as a present or former
franchisee of CKE.
B. Franchisee shall immediately and permanently cease to use, in
any manner whatsoever, any confidential methods, procedures and techniques
associated with the System; the Proprietary Mark "CARL'S JR."; and all other
Proprietary Marks and distinctive forms, slogans, signs, symbols, and devices
associated with the System. In particular, Franchisee shall cease to use,
without limitation, all signs, advertising materials, displays, stationery,
forms, and any other articles which display the Proprietary Marks.
C. Franchisee shall take such action as may be necessary to
cancel any assumed name or equivalent registration which contains the mark
"CARL'S JR." or any other service mark or trademark of CKE, and Franchisee
shall furnish CKE with evidence satisfactory to CKE of compliance with this
obligation within thirty (30) days after termination or expiration of this
Agreement.
D. Franchisee shall, at CKE's option, assign to CKE any interest
which Franchisee has in any lease or sublease for the Restaurant premises. In
the event CKE does not elect to exercise its option to acquire the lease or
sublease for the Restaurant premises, Franchisee shall make such modifications
or alterations to such premises (including, without limitation, the changing of
the telephone number) immediately upon termination or expiration of this
Agreement as may be necessary to distinguish the appearance of such premises
from that of other restaurants under the System, and shall make such specified
additional changes thereto as CKE may reasonably request for that purpose. In
the event Franchisee fails or refuses to comply with the requirements of this
Section XIV., CKE shall have the right to enter upon the Restaurant premises
without being guilty of trespass or any other tort, for the
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purpose of making or causing to be made such changes as may be required at the
expense of Franchisee, which expense Franchisee agrees to pay upon demand.
E. Franchisee agrees, in the event it continues to operate or
subsequently begins to operate any other business, not to use any reproduction,
copy, or colorable imitation of the Proprietary Marks, either in connection
with such other business or the promotion thereof, which is likely to cause
confusion, mistake, or deception, or which is likely to dilute CKE's rights in
and to the Proprietary Marks, and further agrees not to utilize any designation
of origin or description or representation which falsely suggests or represents
an association or connection with CKE constituting unfair competition.
F. Franchisee shall promptly pay all sums owing to CKE and its
subsidiaries and affiliates. In the event of termination for any default of
Franchisee, such sums shall include all damages, costs, and expenses, including
reasonable attorneys' fees, incurred by CKE as a result of the default, which
obligation shall give rise to and remain, until paid in full, a lien in favor
of CKE against any and all of the personal property, furnishings, equipment,
signs, fixtures, and inventory owned by Franchisee and on the premises operated
hereunder at the time of default.
G. Franchisee shall pay to CKE all damages, costs, and expenses,
including reasonable attorneys' fees, incurred by CKE subsequent to the
termination or expiration of this Agreement in obtaining injunctive or other
relief for the enforcement of any provisions of this Section XIV.
H. Franchisee shall immediately deliver to CKE all manuals,
including the OPM, records, files, instructions, correspondence, all materials
related to operating the franchised business, including, without limitation,
brochures, agreements, invoices, and any and all other materials relating to
the operation of the franchised business in Franchisee's possession, and all
copies thereof (all of which are acknowledged to be CKE's property), and shall
retain no copy or record of any of the foregoing, except Franchisee's copy of
this Agreement and of any correspondence between the parties and any other
documents which Franchisee reasonably needs for compliance with any provision
of law.
I. Within ten (10) days after the date of termination or
expiration, Franchisee and CKE shall arrange for an inventory to be made, at
CKE's expense, of all the furnishings, equipment, signs, fixtures, and
inventory of Franchisee related to the operation of the franchised business
except for personalized items of no value to CKE. CKE shall then
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purchase from Franchisee any or all of those items at Franchisee's fair market
value. If the parties cannot agree on a fair market value within a reasonable
time, an independent appraiser shall be designated by CKE, and his
determination shall be binding. CKE shall have the right to set off all
amounts due from Franchisee, and the cost of the appraisal, if any, against any
payment therefor.
J. Franchisee shall comply with the covenants contained in
Section XV.C. of this Agreement.
XV. COVENANTS
A. Franchisee covenants that during the term of this Agreement except
as otherwise approved in writing by CKE, the Owner/Operator or the Operations
Supervisor, as the case may be, shall devote full time, energy, and best
efforts to the management and operation of the business franchised hereunder.
B. Franchisee specifically acknowledges that, pursuant to this
Agreement, Franchisee will receive valuable specialized training and
confidential information, including, without limitation, information regarding
the operational, sales, promotional and marketing methods and techniques of CKE
and the System. Franchisee covenants that during the term of this Agreement,
except as otherwise approved in writing by CKE, Franchisee shall not, either
directly or indirectly, for itself, or through, on behalf of, or in conjunction
with any person, persons, partnership, or corporation:
1. Divert or attempt to divert any business or customer
of the business franchised hereunder to any competitor, by direct or indirect
inducement or otherwise, or do or perform, directly or indirectly, any other
act injurious or prejudicial to the goodwill associated with CKE's Proprietary
Marks and the System.
2. Employ or seek to employ any person who is at that
time employed by CKE or by any other franchisee or developer of CKE, or
otherwise directly or indirectly induce such person to leave his or her
employment.
3. Own, maintain, engage in, or have any interest in:
a. Any restaurant business, selling (i)
hamburgers or (ii) any other product which constitutes ten percent (10%) of
CKE's average System-wide entree sales, which is located in any of the counties
of California or elsewhere; or
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b. Any fast service restaurant business which is
substantially similar to the franchised business and which is located at or
within a radius of fifteen (15) miles of the location approved hereunder or the
location of any other restaurant under the System which is in existence at any
time during the term of this Agreement.
C. Franchisee covenants that, except as otherwise approved in
writing by CKE, Franchisee shall not, for a continuous uninterrupted period
commencing upon the expiration or termination of this Agreement, regardless of
the cause for termination, and continuing for two (2) years thereafter, either
directly or indirectly, for itself, or through, on behalf of, or in conjunction
with any person, persons, partnership, or corporation, own, maintain, engage
in, or have any interest in any restaurant business, selling (i) hamburgers or
(ii) any other products which constitute ten percent (10%) of CKE's average
System-wide entree sales, and which is located within a radius of fifteen (15)
miles of the location approved hereunder or the location of any restaurant
under the System which is in existence on the date of expiration or termination
of this Agreement.
D. Sections XV.B.3 and XV.C. shall not apply to ownership by
Franchisee of less than two percent (2%) beneficial interest in the outstanding
equity securities of any publicly-held corporation.
E. The parties agree that each of the foregoing covenants shall
be construed as independent of any other covenant or provision of this
Agreement. If all or any portion of a covenant in this Section XV. is held
unreasonable or unenforceable by a court or agency having valid jurisdiction in
an unappealed final decision to which CKE is a party, Franchisee expressly
agrees to be bound by any lesser covenant subsumed within the terms of such
covenant that imposes the maximum duty permitted by law, as if the resulting
covenant were separately stated in and made a part of this Section XV.
F. Franchisee understands and acknowledges that CKE shall have
the right, in its sole discretion, to reduce the scope of any covenant set
forth in Sections XV.B and XV.C. in this Agreement, or any portion thereof,
without Franchisee's consent, effective immediately upon receipt by Franchisee
of written notice thereof; and Franchisee agrees that it shall comply forthwith
with any covenant as so modified, which shall be fully enforceable
notwithstanding the provisions of Section XX. hereof.
G. Franchisee expressly agrees that the existence of any claims
it may have against CKE, whether or not arising from this Agreement, shall not
constitute a defense to the
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enforcement by CKE of the covenants in this Section XV. Franchisee agrees to
pay all costs and expenses, including reasonable attorneys' fees, incurred by
CKE in connection with the enforcement of this Section XV.
H. Franchisee acknowledges that Franchisee's violation of the
terms of this Section XV. would result in irreparable injury to CKE for which
no adequate remedy at law may be available, and Franchisee accordingly consents
to the issuance of an injunction prohibiting any conduct by Franchisee in
violation of the terms of this Section XV. Franchisee expressly agrees that it
may be conclusively presumed that any violation of the terms of said covenants
not to compete was accomplished by and through Franchisee's utilization of
CKE's confidential information, know-how, methods and procedures.
I. At CKE's request, Franchisee shall require and obtain
execution of covenants similar to those set forth in this Section XV.
(including covenants applicable upon the termination of a person's relationship
with Franchisee) from any or all of the following persons:
1. All managers of Franchisee and any other personnel
employed by Franchisee who have received training from CKE;
2. All officers, directors, and holders of a beneficial
interest of two percent (2%) or more of the securities of Franchisee, and of
any corporation directly or indirectly controlling Franchisee, if Franchisee is
a corporation; and
3. The general partners and any limited partners
(including any corporation, and the officers, directors, and holders of a
beneficial interest of two percent (2%) or more of the securities of any
corporation which controls, directly or indirectly any general or limited
partner), if Franchisee is a partnership. Every covenant required by this
Section XV.I. shall be in a form satisfactory to CKE, including, without
limitation, specific identification of CKE as a third party beneficiary of such
covenants with the independent right to enforce them. Failure by Franchisee to
obtain execution of a covenant required by this Section XV.I. shall constitute
a default under Section XIII.B.6 hereof.
XVI. TAXES, PERMITS, AND INDEBTEDNESS
A. Franchisee shall promptly pay when due all taxes levied or
assessed, including, without limitation, unemployment and sales taxes, and all
accounts and other indebtedness of every kind incurred by Franchisee in the
conduct of the business franchised under this
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Agreement. Franchisee shall pay to CKE an amount equal to any sales tax, or
similar tax imposed on CKE with respect to any payments to CKE required under
this Agreement, unless the tax is credited against income tax otherwise payable
by CKE.
B. In the event of any bona fide dispute as to Franchisee's
liability for taxes assessed or other indebtedness, Franchisee may contest the
validity or the amount of the tax or indebtedness in accordance with procedures
of the taxing authority or applicable law; however, in no event shall
Franchisee permit a tax sale or seizure by levy of execution or similar writ or
warrant, or attachment by a creditor, to occur against the premises of the
franchised business, or any improvements thereon.
C. Franchisee shall comply with all federal, state, and local
laws, rules, and regulations, and shall timely obtain any and all permits,
certificates, or licenses necessary for the full and proper conduct of the
business franchised under this Agreement, including, without limitation,
licenses to do business, fictitious name registrations, sales tax permits, and
fire clearances.
D. Franchisee shall notify CKE in writing within ten (10) days of
the commencement of any action, suit, or proceeding, and of the issuance of any
order, writ, injunction, award, or decree of any court, agency, or other
governmental instrumentality, which may adversely affect the operation or
financial condition of the franchised business.
XVII. INDEPENDENT CONTRACTOR
A. It is understood and agreed by the parties hereto that this
Agreement does not create a fiduciary relationship between them, that
Franchisee shall be an independent contractor, and that nothing in this
Agreement is intended to constitute either party an agent, legal
representative, subsidiary, joint venturer, partner, employee, or servant of
the other for any purpose whatsoever.
B. Franchisee shall conspicuously identify himself and his
Restaurant and in all dealings with his clients, contractors, suppliers, public
officials and others, as an independent Franchisee of CKE, and shall place such
notice of independent ownership on all forms, business cards, stationery,
advertising, signs and other materials and in such fashion as CKE may, in its
sole and exclusive discretion, specify and require from time to time, in its
OPM (as same may be amended from time to time) or otherwise.
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Except as otherwise expressly authorized by this Agreement, neither
party hereto will make any express or implied agreements, warranties,
guarantees or representations or incur any debt in the name of or on behalf of
the other party, or represent that the relationship between CKE and Franchisee
is other than that of Franchisor and Franchisee. CKE does not assume any
liability, and will not be deemed liable, for any agreements, representations,
or warranties made by Franchisee which are not expressly authorized under this
Agreement, nor will Franchisor be obligated for any damages to any person or
property which directly or indirectly arise from or relate to the operation of
the Restaurant.
C. It is understood and agreed that nothing in this Agreement
authorizes Franchisee to make any contract, agreement, warranty, or
representation on CKE's behalf, or to incur any debt or other obligation in
CKE's name, and that CKE shall in no event assume liability for, or be deemed
liable hereunder as a result of, any such action, or by reason of any act or
omission of Franchisee in its conduct of the franchised business or any claim
or judgment arising therefrom against CKE. Franchisee shall indemnify and hold
CKE, and CKE's officers, directors, and employees harmless against any and all
claims arising directly or indirectly from, as a result of, or in connection
with Franchisee's operation of the franchised business, as well as the costs,
including attorneys' fees, of defending against them.
XVIII. INDEMNIFICATION
Franchisee agrees at all times to defend at his own cost, and to
indemnify and hold harmless to the fullest extent permitted by law, CKE, its
corporate parent, the corporate subsidiaries, affiliates, successors, assigns
and designees of either entity, and the respective directors, officers,
employees, agents, shareholders, designees, and representatives of each (CKE
and all other hereinafter referred to collectively as "Indemnitees") from all
losses and expenses (as hereinafter defined) incurred in connection with any
action, suit, proceeding, claim, demand, investigation, or formal or informal
inquiry (regardless of whether same is reduced to judgment) or any settlement
thereof which arises out of or is based upon any of the following Franchisee's
alleged infringement or any other violation or any other alleged violation of
any patent, mark or copyright or other proprietary right owned or controlled by
third parties; Franchisee's alleged violation or breach of any contract,
federal, state or local law, regulation, ruling, standard or directive or of
any industry standard; libel, slander or any other form of defamation by
Franchisee; Franchisee's alleged violation or breach of any
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warranty, representation, agreement or obligation in this Agreement; any acts,
errors or omissions of Franchisee or any of its agents, servants, employees,
contractors, partners, proprietors, affiliates or representatives; latent or
other defects in the Restaurant whether or not discoverable by CKE or
Franchisee; the inaccuracy, lack of authenticity or Restaurant; any service
provided by Franchisee at, from or related to the operation at the franchised
business or the action by any customer of the franchised business or visitor to
the Restaurant; and, any damage to the property of Franchise or CKE, their
agents or employees, or any third person, firm or corporation, whether or not
such losses, claims, costs, expenses, damages or liabilities were actually or
allegedly caused in part through the active or passive negligence of CKE or any
of its agents or employees, or resulted from any strict liability imposed on
CKE or any of its agents or employees.
For the purpose of this Section XVIII, the term "losses and expenses"
shall be deemed to include all losses, compensatory, exemplary or punitive
damages, fines, charges, costs, expenses, lost profits, attorneys' fees,
experts' fees, court costs, settlement amounts, judgments, compensation for
damages to CKE's reputation and goodwill, costs of or resulting from delays,
financing, costs of advertising material and media time/space, and costs of
changing, substituting or replacing same, and any and all expenses of recall,
refunds, compensation, public notices and other such amounts incurred in
connection with the matters described.
Franchisee agrees to give CKE notice of any such action, suit,
proceeding, claim, demand, inquiry or investigation. At the expense and risk
of Franchisee, CKE may elect to assume (but under no circumstance is obligated
to undertake) the defense and/or settlement of any such action, suit,
proceeding, claim, demand, inquiry or investigation, provided that CKE will
seek the advice and counsel of Franchisee, and shall keep Franchisee informed,
with regard to any such proposed or contemplated settlement(s). Such an
undertaking by CKE shall in no manner or form diminish Franchisee's obligation
to indemnify CKE and to hold it harmless.
In order to protect persons or property, or its reputation or
goodwill, or the reputation or goodwill of others, CKE may, at any time and
without notice as it in its judgment deems appropriate, offer, order, consent
or agree to settlements or take such other remedial or corrective actions as it
deems expedient with respect to the action, suit, proceeding, claim,
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demand, inquiry or investigation if, in CKE's sole judgment, there are
reasonable grounds to believe that:
1. any of the acts or circumstances enumerated in this
Section XVIII have occurred, or
2. any act, error, or omission of Franchisee may result
directly or indirectly in damage, injury or harm to any person or any property.
All losses and expenses incurred under this Section XVIII shall be
chargeable to and paid by Franchisee pursuant to his obligations of indemnity
under this Section, regardless of any actions, activity or defense undertaken
by CKE or the subsequent success or failure of such actions, activity or
defense.
Indemnitees do not assume any liability whatsoever for acts, errors,
or omission of those with whom Franchisee may contract, regardless of the
purpose. Franchisee shall hold harmless and indemnify Indemnitees for all
losses and expenses which may arise out of any acts, errors or omissions of
these third parties.
Under no circumstances shall Indemnitees be required or obligated to
seek recovery from third parties or otherwise mitigate their losses in order to
maintain a claim against Franchisee. Franchisee agrees that the failure to
pursue such recovery or mitigate loss will in no way reduce the amounts
recoverable by Indemnitees from Franchisee.
XIX. APPROVALS AND WAIVERS
A. Whenever this Agreement requires the prior approval or consent
of CKE, Franchisee shall make a timely written request to CKE therefore, and
such approval or consent shall be obtained in writing.
B. In no event shall Franchisee be entitled to make, nor shall
Franchisee make, any claim, and Franchisee hereby waives any claim for money
damages, nor shall Franchisee claim any money damages by way of set-off,
counterclaim or defense, based upon any claim or assertion by Franchisee that
CKE has unreasonably withheld or unreasonably delayed any consent or approval
to a proposed act by Franchisee under any of the terms of this Franchise
Agreement. Franchisee's sole remedy for any such claim shall be an action or
proceeding to enforce any such provisions, or for specific performance, or
declaratory judgment.
C. No delay, waiver, omission, or forbearance on the part of CKE
to exercise any right, option, duty, or power arising out of any breach or
default by Franchisee under any
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of the terms, provisions, covenants, or conditions hereof, shall constitute a
waiver by CKE to enforce any such right, option, duty, or power as against
Franchisee, or as to subsequent breach or default by Franchisee. Subsequent
acceptance by CKE of any payments due to it hereunder shall not be deemed to be
a waiver by CKE of any preceding breach by Franchisee of any terms, provisions,
covenants, or conditions of this Agreement.
XX. NOTICES
Any and all notices required or permitted under this Agreement shall
be in writing and shall be personally delivered or mailed by certified or
registered mail, return receipt requested, to the respective parties at the
following addresses unless and until a different address has been designated by
written notice to the other party:
Notices to CKE: Carl Karcher Enterprises, Inc.
Attn: Franchise Department
P. O. Box 4349
Anaheim, California 92803
Notices to Franchisee: Carl Leo Karcher
CLK, Inc.
73-101 Highway 111, Suite #1
Palm Desert, CA 92260-3956
Any notice by certified or registered mail shall be deemed to have been given
at the date and time of receipt.
XXI. ENTIRE AGREEMENT
This Agreement, the documents referred to herein, and the
Attachment(s) hereto constitute the entire, full, and complete Agreement
between CKE and Franchisee concerning the subject matter hereof, and supersede
all prior agreements, no other representations having induced Franchisee to
execute this Agreement. No amendment, change, or variance from this Agreement
shall be binding on the parties unless mutually agreed to by the parties and
executed by their authorized officers or agents in writing.
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XXII. SEVERABILITY AND CONSTRUCTION
A. Except as expressly provided to the contrary herein, each
portion, section, part, term, and/or provision of this Agreement shall be
considered severable; and if, for any reason, any section, part, term, and/or
provision herein is determined to be invalid and contrary to, or in conflict
with, any existing or future law or regulation by a court or agency having
valid jurisdiction, such shall not impair the operation of, or have any other
effect upon, such other portions, sections, parts, terms, and/or provisions of
this Agreement as may remain otherwise intelligible; and the latter shall
continue to be given full force and effect and bind the parties hereto; and
said invalid portions, sections, parts, terms and/or provisions shall be deemed
not to be a part of this Agreement.
B. Except as expressly provided to the contrary herein, nothing
in this Agreement is intended, nor shall be deemed, to confer upon any person
or legal entity other than Franchisee, CKE, CKE's officers, directors, and
employees, and such of Franchisee's and CKE's respective successors and assigns
as may be contemplated by Section XII. hereof, any rights or remedies under or
by reason of this Agreement.
C. Franchisee expressly agrees to be bound by any promise or
covenant imposing the maximum duty permitted by law which is subsumed within
the terms of any provision hereof, as though it were separately articulated in
and made a part of this Agreement, that may result from striking from any of
the provisions hereof any portion or portions which a court may hold to be
unreasonable and unenforceable in a final decision to which CKE is a party, or
from reducing the scope of any promise or covenant to the extent required to
comply with such a court order.
D. All captions in this Agreement are intended solely for the
convenience of the parties, and none shall be deemed to affect the meaning or
construction of any provision hereof.
E. All references herein to the masculine, neuter, or singular
shall be construed to include the masculine, feminine, neuter, or plural, where
applicable, and all acknowledgments, promises, covenants, agreements, and
obligations herein made or undertaken by Franchisee shall be deemed jointly and
severally undertaken by all those executing this Agreement on behalf of
Franchisee.
F. This Agreement may be executed in triplicate, and each copy so
executed shall be deemed an original.
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XXIII. APPLICABLE LAW
A. This Agreement takes effect upon its acceptance and execution
by CKE in California, and shall be interpreted and construed under the laws
thereof, which laws shall prevail in the event of any conflict of law;
provided, however, that the provisions of Section XV. Covenants, shall be
interpreted and construed under the laws of the jurisdiction within which the
franchised business is located.
B. The parties agree that any action brought by either party
against the other in any court, whether federal or state, shall be brought
within the State of California in the judicial district in which CKE has its
principal place of business and do hereby waive all questions of personal
jurisdiction or venue for the purpose of carrying out this provision.
C. No right or remedy conferred upon or reserved to CKE or
Franchisee by this Agreement is intended to be, nor shall be deemed, exclusive
of any other right or remedy herein or by law or equity provided or permitted,
but each shall be cumulative of every other right or remedy.
D. Nothing herein contained shall bar CKE's right to obtain
injunctive relief against threatened conduct that will cause it loss or
damages, under the usual equity rules, including the applicable rules for
obtaining restraining orders and preliminary injunctions.
XXIV. DEFINITION OF FRANCHISEE
The term "Franchisee" as used in this Agreement shall refer to each person
executing this Agreement as Franchisee whether such person is one of the
spouses, partners, proprietors, shareholders, trustees, trustors or
beneficiaries or persons named as included in Franchisee, and shall apply to
each such persons as if he/she were the only named Franchisee in this
Agreement. If Franchisee is a married couple, both husband and wife executing
this Agreement shall be liable for all obligations and duties of Franchisee
hereunder as if such spouse were the sole Franchisee hereunder. If Franchisee
is a partnership or proprietorship, or if more than one person executes this
Agreement as Franchisee, each partner, proprietor or person executing this
Agreement shall be liable for all obligations and duties of Franchisee
hereunder. If Franchisee is a trust, each trustee, grantor and beneficiary
signing this Agreement shall be liable for all of the obligations and duties of
Franchisee hereunder. If Franchisee is a corporation, all shareholders
executing this Agreement shall be liable for all obligations and duties of
Franchisee hereunder as if each such shareholder were the sole
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Franchisee hereunder. If Franchisee is an entity, each of his principals
and/or owners shall, concurrently with the execution of this Agreement execute
Franchisor's Standard Form Guarantee (annexed hereto as Exhibit "3"), pursuant
to which all obligations and duties of Franchisee are guaranteed by such
individuals. Should Franchisee be in breach or default under this Agreement,
CKE may proceed directly against each such spouse, partner, proprietor,
signatory to this Agreement, shareholder, trustee, trustor, owner, principal or
beneficiary without first proceeding against Franchisee and without proceeding
against or naming in such suit any other Franchisee, partner, proprietor,
signatory to this Agreement, shareholder, trustee, trustor or beneficiary. The
obligations of Franchisee and each such spouse, partner, proprietor, person
executing this Agreement, shareholder, trustee, trustor and beneficiary shall
be joint and several. Notice to or demand upon one spouse, partner,
proprietor, person signing this Agreement, shareholder, trustee, trustor,
owner, principal or beneficiary shall be deemed notice to or demand upon
Franchisee and all such spouses, partners, proprietors, persons signing this
Agreement, shareholders, trustees, trustors, owners, principal and
beneficiaries, and no notice or demand need be made to or upon all such
Franchisees, spouses, partners, proprietors, persons executing this Agreement,
shareholders, trustees, trustors, owners, principals or beneficiaries. The
cessation of or release from liability of Franchisee or any such spouse,
partner, proprietor, person executing this Agreement, shareholder, trustee,
trustor, owners, principals or beneficiary shall not relieve any other
Franchisee, spouse, partner, proprietor, person executing this Agreement,
shareholder, trustee, trustor, owner, principal or beneficiary from liability
hereunder, except to the extent that the breach or default has been remedied or
monies owed have been paid.
XXV. ACKNOWLEDGEMENTS
A. Franchisee acknowledges that it has conducted an independent
investigation of the business franchised hereunder, and recognizes that the
business venture contemplated by this Agreement involves business risks and
that its success will be largely dependent upon the ability of Franchisee as an
independent businessman. CKE expressly disclaims the making of, and Franchisee
acknowledges that it has not received, any warranty or guarantee, express or
implied, as to the potential volume, profits, or success of the business
venture contemplated by this Agreement.
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B. Franchisee acknowledges that it received a copy of the
complete Carl's Jr. Restaurant Franchise Agreement, the Attachments thereto,
and agreements relating thereto, if any, at least five (5) business days prior
to the date on which this Agreement was executed. Franchisee further
acknowledges that it received the disclosure document required by the Trade
Regulation Rule of the Federal Trade Commission entitled "Franchise Offering
Circular of Carl Karcher Enterprises, Inc. for Prospective Franchisees" at
least ten (10) business days prior to the date on which this Agreement was
executed.
C. Franchisee acknowledges that it has read and understood this
Agreement, the Attachments hereto, and agreements relating thereto, if any, and
that CKE has afforded Franchisee ample time and opportunity and has encouraged
Franchisee to consult with advisors of Franchisee's own choosing about the
potential benefits and risks of entering into this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed,
sealed, and delivered this Agreement in triplicate on the day and year first
above written.
CKE
FRANCHISEE CARL KARCHER ENTERPRISES, INC.
a California corporation
/s/ Carl L. Karcher By: /s/ Richard C. Celio
- - --------------------------------------- -------------------------------------
Carl Leo Karcher Richard C. Celio
Title: Vice President/General Counsel
OWNER/OPERATOR
/s/ Carl L. Karcher
- - ---------------------------------------
Carl Leo Karcher By: /s/ Rory J. Murphy
----------------------------------
Rory J. Murphy
Title: Senior Vice President
Operations
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ATTACHMENT A
APPROVED LOCATION
UNDER
CARL'S JR. RESTAURANT
FRANCHISE AGREEMENT
The location approved by CKE for the Restaurant franchised under the attached
Franchise Agreement shall be:
#7085
Highway 111 and Washington
La Quinta, CA
(Refer to Section I.B. of Franchise Agreement)
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EXHIBIT 1
FRANCHISEE'S ADVERTISING
AND
PROMOTION OBLIGATION
Franchisee's weekly advertising and promotion obligation (hereinafter
"APO") under Section X of the Franchise Agreement shall be as set forth below
unless and until modified by CKE as provided in Section X:
1. LSM allocation: .5% of gross sales
(Section X.B.)
2. Fund allocation, for .5% of gross sales
general administrative (not more than 1%)
advertising expenditures:
(Section X.C.1)
3. Fund allocation, for 3.0% of gross sales
regional advertising
expenditures:*
(Section X.C.2)
4. Cooperative allocation: N/A% of gross sales
(Section X.D)
TOTAL APO: 4.0% of gross sales
(not more than 6%)
* The ADI in which the Restaurant is located:
Palm Springs, CA
Note: a) CKE has the right to eliminate the LSM allocation
b) At no time will a percentage appear in both Number 3 and Number 4
simultaneously.
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EXHIBIT 2
WEEKLY ROYALTY FEE
The weekly royalty fee as provided for in Section IV of the Franchise
Agreement is as follows:
Year of Operation of the Restaurant Percentage of Gross Sales
----------------------------------- -------------------------
One through initial term 4%
Should Franchisee open the Restaurant pursuant to the terms of a Carl's Jr.
Restaurant Development Agreement and the Restaurant opens ahead of the required
Development Schedule, the following reductions shall apply:
Royalty
Number of Full Months Ahead of Schedule Fee Reduction
--------------------------------------- -------------
13+ 2%
1 - 12 1%
CKE also allows a temporary reduction in royalty fees for Restaurants which are
developed by a Franchisee with a valid Development Agreement, in the Assigned
Area, in excess of the number required by the development schedule and which
are opened prior to the last scheduled opening date. The reduction schedule is
as follows:
Year of Operation Fee Reduction
----------------- -------------
First 2%
Second 1%
Third and following None
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EXHIBIT 3
PERSONAL GUARANTY
The undersigned ****, jointly and severally ("Guarantors") each hereby
unconditionally guarantee the full performance of each and all of the terms,
covenants, and conditions of those certain Carl's Jr. Restaurant Agreement
dated ____________________________, 1993, between CARL KARCHER ENTERPRISES,
INC. ("CKE") and **, (a California Limited Partnership) (a ___________________
corporation), as franchisee ("Franchisee"), for restaurants #__________ Located
at ___________________________________________. The undersigned further agree
as follows:
1. Guarantors also, jointly and severally, unconditionally
guarantee the performance of all agreements, leases, subleases and promissory
notes between Franchisee and CKE.
2. This Guaranty will continue unchanged by any bankruptcy,
reorganization or insolvency of Franchisee or by and disaffirmance or
abandonment by a trustee of Franchisee.
3. The agreements and obligations herein of Guarantors shall
continue in favor of CKE notwithstanding any extension, modification, or
alteration of such Franchise Agreement entered into by and between the parties
thereto, or their successors or assigns, and no extension, modification,
alteration or assignment of such agreement shall in any manner release or
discharge the undersigned and it does hereby consent thereto.
4. The obligations hereunder are joint and several, and
independent of the obligations of Franchisee and a separate action or actions
may be brought and prosecuted against Guarantors whether action is brought
against Franchisee or whether Franchisee be joined in any such action or
actions. Guarantors waive the benefit or any statute of limitation affecting
their liability hereunder or the enforcement thereof.
5. Guarantors shall pay CKE's reasonable attorneys' fees and all
costs and other expenses incurred in any collection or attempted collection or
in any negotiations relative to the obligations hereby guaranteed or enforcing
this Guaranty against the undersigned, individually and jointly.
6. Guarantors waive any right to require CKE to:
a. proceed against Franchisee;
b. proceed against or exhaust any security held by
Franchisee; or
c. pursue any other remedy in CKE's power whatsoever.
Guarantors waive any defense arising by reason of any disability or other
defense of Franchisee or by reason of the cessation from any cause whatsoever
of the liability of Franchisee. Guarantors waive all presentments, demands for
performance, notices of nonperformance, protests, notices of protests, notices
of dishonor, and notices of acceptance of this Guaranty.
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The use of the singular herein shall include the plural. The
obligation of two or more parties shall be joint and several. The terms and
provisions of this Guaranty shall be binding upon and inure to the benefit of
the respective successors and assigns of the parties herein named.
IN WITNESS WHEREOF, the undersigned executed this Guaranty on
_________________________, 1993.
GUARANTORS:
_____________________________________
_____________________________________
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CARL'S JR. RESTAURANT
FRANCHISE AGREEMENT
TABLE OF CONTENTS
ITEM PAGE
---- ----
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
I. GRANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
II. TERM AND RENEWAL . . . . . . . . . . . . . . . . . . . . . . . 2
III. DUTIES OF CKE . . . . . . . . . . . . . . . . . . . . . . . . . 3
IV. FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
V. DUTIES OF FRANCHISEE . . . . . . . . . . . . . . . . . . . . . 6
VI. PROPRIETARY MARKS . . . . . . . . . . . . . . . . . . . . . . . 16
VII. CONFIDENTIAL OPERATIONS PROCEDURES MANUAL ("OPM") . . . . . . . 18
VIII. CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . . . 18
IX. ACCOUNTING AND RECORDS . . . . . . . . . . . . . . . . . . . . 19
X. ADVERTISING . . . . . . . . . . . . . . . . . . . . . . . . . . 21
XI. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
XII. TRANSFER OF INTEREST . . . . . . . . . . . . . . . . . . . . . 29
XIII. DEFAULT AND TERMINATION . . . . . . . . . . . . . . . . . . . . 34
XIV. OBLIGATIONS UPON TERMINATION OR EXPIRATION . . . . . . . . . . 37
XV. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
XVI. TAXES, PERMITS, AND INDEBTEDNESS . . . . . . . . . . . . . . . 41
XVII. INDEPENDENT CONTRACTOR . . . . . . . . . . . . . . . . . . . . 42
XVIII. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . 43
XIX. APPROVALS AND WAIVERS . . . . . . . . . . . . . . . . . . . . . 45
XX. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
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XXI. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 46
XXII. SEVERABILITY AND CONSTRUCTION . . . . . . . . . . . . . . . . . 47
XXIII. APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . . . . 48
XXIV. DEFINITION OF FRANCHISEE . . . . . . . . . . . . . . . . . . . 48
XXV. ACKNOWLEDGEMENTS . . . . . . . . . . . . . . . . . . . . . . . 49
ATTACHMENT A APPROVED LOCATION
EXHIBIT 1 FRANCHISEE'S ADVERTISING AND PROMOTION OBLIGATION
EXHIBIT 2 WEEKLY ROYALTY FEE
EXHIBIT 3 FRANCHISOR'S STANDARD FORM GUARANTEE
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