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EXHIBIT 10-92
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ADDENDUM NO. 1 TO
BOSTON CHICKEN, INC.
AREA DEVELOPMENT AGREEMENT
THIS ADDENDUM No. 1 is to the BOSTON CHICKEN, Inc. Area
Development Agreement (the "Agreement"), dated as of January __, 1994 by and
between BOSTON CHICKEN, Inc., ("COMPANY"), which has its principal office at
1804 Centre Point Drive, Naperville, IL 60563, and Carl Karcher Enterprises,
Inc., which has its principal office at 1200 North Harbor Boulevard, P.O. Box
4349, Anaheim, California 92803-4349 (hereinafter referred to as "DEVELOPER").
The following shall amend and be incorporated into the
Agreement. In the event of any conflict between the terms of the Agreement and
the terms of this Addendum, then the terms of this addendum shall control. All
capitalized terms not defined in this Addendum shall have the respective
meanings set forth in the Agreement.
1. Section 2 is hereby amended by deleting the
definition of "Catering Area" in its entirety and restating it to read as
follows:
"CATERING AREA" - The geographic area in which COMPANY in its
sole discretion, authorizes the owner of a Franchise to provide
Catering Service pursuant to a Catering Rider, which area may be the
same as, smaller than, larger than or different from the Territory
(defined in the Franchise Agreement) of a BOSTON CHICKEN Unit.
COMPANY may, at any time in its sole discretion, with or without cause
and regardless of the investment made by DEVELOPER in establishing or
conducting Catering Service: (1) reduce, modify, or expand the
Catering Area from time to time (provided, that any reduction or
modification which amounts to a termination of substantially all of
DEVELOPER's rights to provide such services shall be governed by
clause (2), below) or (2) upon written notice to DEVELOPER in
accordance with Section 4.D, suspend or terminate DEVELOPER's right to
offer Catering Services.
2. Section 2 is hereby further amended by inserting at
the end of the definition of "Competitive Business" the following:
COMPANY acknowledges Carl's Jr. restaurants constitute
Permitted Competitive Business within the meaning of this Agreement
and Exhibit E hereto, provided that such Carl's Jr. restaurants do not
offer (1) rotisserie chicken, or (2) any other products prepared in
accordance with COMPANY's recipes or specifications unless such
products are developed by DEVELOPER and sold in Carl's Jr. restaurants
prior to the
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development of such products by COMPANY, provided, further, that no
Confidential Information is used in connection with Carl's Jr.
restaurants providing any services or products.
3. Section 2 is hereby further amended by deleting the
definition of "Computer System" in its entirety and restating it to read as
follows:
"COMPUTER SYSTEM" - Those brands, types, makes, and/or models
of communications and computer systems or hardware specified or
required by COMPANY for use by, between, or among UNITS and/or
DEVELOPER, including, but not limited to, back office and point of
sale systems, data, audio, video and voice storage, retrieval, and
transmission systems for use at UNITs and/or DEVELOPER between or
among UNITs and/or DEVELOPER, and between UNITs and/or DEVELOPER and
COMPANY, security systems, printers, and archival and back-up systems.
4. Section 2 is hereby further amended by deleting the
definition of "Delivery Area" in its entirety and restating it to read as
follows:
"DELIVERY AREA" - The geographic area in which COMPANY, in its
sole discretion, authorizes a franchise owner to provide Delivery
Service pursuant to a Delivery Rider, which area may be the same as,
smaller than, larger than or different from the Territory (defined in
the Franchise Agreement) of a BOSTON CHICKEN Unit. COMPANY may, at
any time and its sole discretion, with or without cause and regardless
of the investment made by DEVELOPER in establishing and conducting
Delivery Service or the length of time DEVELOPER has offered Delivery
Service: (1) reduce, modify, or expand the Delivery Area from time to
time (provided, that any reduction or modification which amounts to a
termination of substantially all of DEVELOPER's rights to provide such
services shall be governed by clause (2), below) or (2) upon written
notice to DEVELOPER in accordance with Section 4.C suspend or
terminate DEVELOPER's (or Authorized Entity's) right to offer Delivery
Service.
5. Section 2 is hereby further amended by adding the
following immediately before the definition of Rotisserie Unit":
"REQUIRED TELEVISION ADVERTISING" - Television advertising in
the Area of Dominant Influence (as determined by the Arbitron Ratings
Company or suitable replacement therefor if Arbitron Ratings are not
available from time to time) in which the Development Area is located
at a minimum level of 200 gross ratings points, at least forty percent
(40%) of which gross ratings points must be in prime television
viewing time.
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6. Section 2 is hereby further amended by adding the
following immediately before the definition of "Sub-Areas":
"SPECIFIED SOFTWARE" - Such software, programming, and
services other than the Licensed Program, which COMPANY from time to
time specifies or requires in connection with utilization of the
Computer System.
7. Section 3.A is hereby amended by adding the following
at the end of the second paragraph thereof:
Notwithstanding the foregoing, DEVELOPER shall not be required
to cause the execution and delivery of the Guaranties referred
to in this paragraph.
8. Section 3.B is hereby amended by adding the following
between the second and third paragraphs thereof:
Notwithstanding any other provisions of this Agreement,
DEVELOPER shall have the option, exercisable in DEVELOPER's sole
option by written notice to COMPANY at least 12 months prior to the
expiration of the Development Term, to develop up to one hundred (100)
additional UNITs in the Development Area. In the event that DEVELOPER
exercises this option, the additional UNITs shall be subject to all
the terms and provisions of this agreement. DEVELOPER and COMPANY
agree to negotiate in good faith as to how many of such UNITs shall be
developed in each Sub-Area and an appropriate development schedule for
each Sub-Area. The Development Term and other appropriate provisions
of this Agreement shall be modified to reflect the addition of such
additional UNITs and the development schedule for such additional
UNITs.
9. Right of First Negotiation for Additional UNITs.
Section 3.B is further amended by adding the following at the end thereof:
(1) Notwithstanding anything to the contrary contained in
this section 3.B, for a period of twelve (12) months after the
expiration of the Sub-Area Term for any Sub-Area (the "Post
Development Period"), COMPANY or its Affiliates determines to itself
develop and operate, or grant to others the right to develop and
operate (whether such rights are granted pursuant to area development
agreements or individual franchise agreements), additional BOSTON
CHICKEN Units in such Sub-Area (such BOSTON CHICKEN Units are
hereafter collectively referred to as "Post-Development UNITs"), then
COMPANY shall notify DEVELOPER of such intention during the Post
Development Period or at any time within the twelve (12) month period
preceding the anticipated end of such Sub-Area Term by providing to
DEVELOPER COMPANY's proposed development plan and
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schedule for such Post-Development UNITs ("COMPANY's Development Plan
Notice"). Notwithstanding anything to the contrary, in the event the
proposed development plan is for more than 100 additional
Post-Development UNITs, any excess over 100 shall be proposed in the
form of an option exercisable by DEVELOPER in its sole discretion once
the first 100 Post-Development UNITs are developed in accordance with
the development schedule.
(2) If, during the Post Development Period or at any time
within the twelve (12) month period preceding the anticipated end of
such Sub-Area Term, DEVELOPER desires that COMPANY grant to DEVELOPER
rights to develop and operate additional BOSTON CHICKEN Units after
the expiration of such Sub-Area Term and COMPANY has not previously
delivered COMPANY's Development Plan Notice to DEVELOPER, then
DEVELOPER shall notify COMPANY of such desire during the Post
Development Period or at any tie within the twelve (12) month period
preceding the anticipated end of such Sub-Area Term by providing to
Company DEVELOPER's proposed development plan and schedule for such
Post-Development Units ("DEVELOPER's Development Plan Notice").
Within thirty (30) days after COMPANY's receipt of DEVELOPER's
Development Plan Notice, COMPANY shall review, consider, and respond
to DEVELOPER's Development Plan Notice by providing to DEVELOPER
COMPANY's Development Plan Notice which may modify DEVELOPER's
Development Plan Notice in some or all respects (subject to the last
sentence of sub-paragraph (1) above). Notwithstanding the above,
DEVELOPER's rights pursuant to this Subparagraph (2) shall terminate
without further action or notice by COMPANY if COMPANY delivers
COMPANY's Development Plan Notice to DEVELOPER pursuant to
Subparagraph (1) above and DEVELOPER fails to timely deliver its
Negotiation Notice (defined below) pursuant hereto and thereafter
COMPANY will have no further obligation to negotiate with DEVELOPER
and its Affiliates pursuant hereto for such development right and
COMPANY may develop or operate, or pursue negotiations with and offer
to third parties the right to develop and operate, BOSTON CHICKEN
Units and/or Rotisserie Units in the particular Sub-Area.
(3) If, within thirty (30) days after DEVELOPER's receipt
of COMPANY's Development Plan Notice, DEVELOPER notifies COMPANY, in
writing that DEVELOPER desires to negotiate with COMPANY for the right
to develop and operate such Post-Development UNITs (the "Negotiation
Notice"), then COMPANY and DEVELOPER will promptly commence
negotiations in good faith toward the execution of a new Development
Agreement (the "Post-Development Agreement") in accordance with
COMPANY's
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Development Plan Notice and the terms of COMPANY's then current
Development Agreement for BOSTON CHICKEN Units (which may contain
different terms and provide for new and/or higher fees from this
Agreement and which will require the execution of COMPANY's then
current form of franchise agreement which similarly may contain
different terms and provide for new and/or higher fees than the
Franchise Agreement used hereunder) for the right to develop and
operate the Post-Development UNITs in accordance with COMPANY's
Development Plan Notice. If DEVELOPER fails to timely deliver the
Negotiation Notice, COMPANY shall have no obligation to negotiate with
DEVELOPER pursuant hereto for such development rights and COMPANY and
its Affiliates may develop and operate, or pursue negotiations with
and offer to third parties the right to develop and operate, BOSTON
CHICKEN Units in the Sub-Area. If COMPANY and DEVELOPER are unable to
agree on the terms of and execute the Post-Development Agreement
within ninety (90) days after COMPANY's receipt of the Negotiation
Notice, then COMPANY will have no further obligation to negotiate with
DEVELOPER pursuant hereto for such development rights and COMPANY may
develop or operate, or pursue negotiations with and offer to third
parties the right to develop and operate, BOSTON CHICKEN Units in such
Sub-Area.
(4) If COMPANY and DEVELOPER timely agree on the terms of
and execute the Post-Development Agreement within the period specified
in Subparagraph (3), then DEVELOPER shall be required to pay all fees
due thereunder concurrently with the execution of the Post-Development
Agreement. If DEVELOPER fails to timely execute the Post-Development
Agreement and pay all fees due under the Post-Development Agreement,
DEVELOPER's rights to develop Post-Development UNITs will terminate
without further action or notice by COMPANY and thereafter COMPANY
will have no further obligation to negotiate with DEVELOPER pursuant
hereto for such development rights and COMPANY may develop or operate,
or pursue negotiations with and offer to third parties the right to
develop and operate, BOSTON CHICKEN Units in such Sub-Area.
(5) Notwithstanding the above, DEVELOPER's rights to
develop Post-Development Units shall terminate without further action
or notice by COMPANY if:
(a) DEVELOPER fails to meet its development
obligations with regard to such Sub-Area hereunder (in which event
DEVELOPER's rights to develop Post-Development UNITs in such Sub-Area
only shall terminate), including without limitation, the timely
opening of any UNIT pursuant to Schedule C attached
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hereto (taking into account Section 3.C of the Agreement as amended by
paragraph 10 hereof) or;
(b) This Agreement is terminated prior to its
applicable expiration date.
10. The second sentence of 3.C is hereby amended by
adding the following provision at the end thereof:
In the event that DEVELOPER has, to COMPANY's reasonable
belief, made good faith and diligent efforts to comply with the
applicable required opening date for any BOSTON CHICKEN Unit, but
fails to open such BOSTON CHICKEN Unit by the required opening date
specified in Exhibit C hereto because of fire, flood, earthquake, war,
insurrection, water or sewer moratoriums or other similar force
majeure (which shall not include general or local business or economic
conditions) not within control of DEVELOPER, then such BOSTON CHICKEN
Unit shall be deemed opened on a timely basis under this Agreement if
it actually opens for regular and continueous business within six
months of the required opening date set forth on Exhibit C hereto,
provided further, however, that the foregoing proviso shall not apply
unless at least 75% (which number shall be rounded up to the next
whole number) of the BOSTON CHICKEN Units required to be open from
time to time by DEVELOPER or its Authorized Entities as specified on
Exhibit C hereto have been opened by the dates actually specified on
Exhibit C hereto. Additionally, in the event that DEVELOPER fails to
open a BOSTON CHICKEN Unit within a Sub-Area by the required opening
date (without extension pursuant to the immediately preceding sentence
in this paragraph) specified in Exhibit C hereto, then such BOSTON
CHICKEN Unit shall be deemed opened on a timely basis under this
Agreement if it actually opens for regular and continuous business
within six months of the required opening date specified in Exhibit C
hereto, provided, however, the foregoing proviso shall not apply
unless the number of BOSTON CHICKEN Units that are open and
continuously operating at such required opening date in the aggregate
in all Sub-Areas is equal to or greater than 100% of the BOSTON
CHICKEN Units required to be open, in the aggregate, for all Sub-Areas
as of such required opening date.
10A. The third sentence of Section 3.C is hereby amended
by deleting the reference to "five (5) days" and substituting therefor
"one-hundred eighty (180) days."
11. Section 3.E is amended by adding the following at the
end thereof:
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If, during the applicable Sub-Area Term for a particular
Sub-Area, COMPANY notifies DEVELOPER of a Target Site in a Sub-Area pursuant to
this Section 3.E, and DEVELOPER gives written notice to COMPANY during the ten
(10) business day period referred to in the first paragraph of this Section 3.E
that it declines to lease or purchase (as applicable) one or more of such
Target Sites, DEVELOPER shall have the option, exercisable by written notice to
COMPANY within such ten (10) business day period, to count each such Target
Site toward the Sub-Area Quota for such Sub-Area. Notwithstanding any other
provision of this Section 3.E, COMPANY shall have the right to designate Target
Sites for a particular Sub-Area hereunder only to the extent that the number of
Target Sites designated by COMPANY in any Sub-Area does not exceed 25% of the
total number of BOSTON CHICKEN Units that DEVELOPER is required to develop in
such Sub-Area.
12. Section 3.F is hereby amended by deleting the word
"DEVELOPER's" in the second paragraph thereof and replacing it with the word
"COMPANY's", and by deleting the word "Target" in the last line of the third
paragraph thereof and replacing it with the word "Conversion."
12A. Section 3.f. is further amended by adding the
following at the end thereof:
If during the applicable Sub-Area Term for a particular
Sub-Area, COMPANY offers one or more Conversion Sites to DEVELOPER in a
Sub-Area pursuant to this Section 3.F and DEVELOPER gives written notice to
COMPANY during the thirty (30) day period referred to in the first paragraph of
this Section 3.E that it declines to purchase one or more of such Conversion
Sites, DEVELOPER shall have the option, exercisable by written notice to
COMPANY within such thirty (30) day period, to written notice to COMPANY within
such thirty (30) day period, to count each such Conversion Site that is
actually converted to a BOSTON CHICKEN Unit toward the Sub-Area Quota for such
Sub-Area.
13. Section 4.A is hereby deleted in its entirety and
restated to read as follows:
DEVELOPER acknowledges and agrees that: (1) DEVELOPER is not
granted any rights within or outside the Development Area to offer,
perform, or participate in the development or operation of Special
Distribution Arrangements ("SDA"), other than as expressly provided in
this Paragraph A, and (2) COMPANY reserves all such rights to offer,
perform, or participate in the development or operation of SDA, within
any Sub-Area within the Development Area in which DEVELOPER (or any
Authorized Entity) operates a BOSTON CHICKEN Unit or has unexpired and
unterminated rights to develop one or more BOSTON CHICKEN Units.
Notwithstanding anything to the contrary contained in this Paragraph
A, if COMPANY, during the Agreement Term, determines to itself develop
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and operate, or grant to others the right to develop and operate, SDA,
then COMPANY shall notify DEVELOPER of such intention by providing to
DEVELOPER COMPANY's proposed plan for such SDA and the form of an
initial Special Distribution Agreement which COMPANY proposes to
DEVELOPER to execute and deliver with regard to such SDA ("COMPANY's
SDA Plan Notice").
Company shall notify DEVELOPER in writing as to whether
COMPANY, in its sole discretion, elects to have DEVELOPER (i) perform
the development or operation of the SDA, or (ii) participate in the
net cash flow, if any, derived by COMPANY solely from the development
and performance of such SDA ("Net Cash Flow") in the event a
Cannibalization Impact is established, as defined below.
Notwithstanding anything to the contrary, including any such election
by COMPANY, DEVELOPER acknowledges that COMPANY need not permit
DEVELOPER to perform the development or operation of such SDA and
COMPANY shall have no obligation to enter into any Special
Distribution Agreement with DEVELOPER with respect to such SDA unless
DEVELOPER demonstrates, to COMPANY's reasonable satisfaction, that it
has or will acquire the appropriate resources (financial and
otherwise) to take full advantage of the SDA and to discharge all of
its obligations under the Special Distribution Agreement. If COMPANY
elects for DEVELOPER to develop and operate such SDA pursuant to (i),
above, then, COMPANY and DEVELOPER will promptly commence negotiations
in good faith toward the execution of a revised Special Distribution
Agreement in accordance with COMPANY's SDA Plan Notice. If COMPANY
and DEVELOPER are unable to agree, in good faith, on the terms of and
execute the revised Special Distribution Agreement within sixty (60)
days after COMPANY's delivery to the DEVELOPER of the COMPANY's SDA
Plan Notice and DEVELOPER does not execute and deliver the initial
Special Distribution Agreement, or in the event COMPANY determines
DEVELOPER does not have and cannot acquire appropriate resources to
take full advantage of the SDA and to discharge all of its obligations
under the Special Distribution Agreement, then COMPANY will have no
further obligation to negotiate with the DEVELOPER pursuant hereto for
such SDA other than to permit DEVELOPER to participate in Net Cash
Flow, if any, pursuant to (ii), above, and COMPANY may develop or
operate, or pursue negotiations with and offer to third parties the
right to develop and operate, such SDA.
If COMPANY elects (ii), above, the COMPANY shall have the
right to develop and operate or grant the right to others to develop
and operate such SDA within such Sub-Area and, if such SDA is so
developed or operated within such Sub-Area during the Agreement Term,
DEVELOPER may, by written notice to COMPANY at any time within one
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year after commencement of such SDA, require COMPANY to engage a
reputable unaffiliated third-party market survey company, at COMPANY's
expense, which shall, within sixty (60) days or engagement render a
report to the COMPANY as to whether such SDA has caused more than a 5%
permanent cannibalization ("Cannibalization Impact") of the gross
sales of the BOSTON CHICKEN Unit within whose Territory (as defined in
the Franchise Agreement for such Unit) the SDA is located or, if not
within the Designated Territory of any UNIT or DEVELOPER, of the
BOSTON CHICKEN Unit of such DEVELOPER closest to the location where
such SDA is operated. If such Cannibalization Impact is so reported,
then the market survey company shall determine if the projected
annualized cash flow of such UNIT for the next four (4) years will
yield to DEVELOPER an annualized after-tax average cash return on the
book value of such UNIT (which book value shall never be deemed to
exceed invested capital to date in such UNIT) equal to or exceeding
25%. If such return equals or exceeds 25%, then no portion of the Net
Cash Flow shall be paid to DEVELOPER. If such return is less than
25%, then, COMPANY shall pay to DEVELOPER a reasonable portion of the
Net Cash Flow, if any, as it is earned from time to time (less any net
cash losses for prior periods), as determined by the COMPANY from time
to time in good faith, taking into account all relevant factors,
including but not limited to, the scope of DEVELOPER's activities, the
amount of the reported Cannibalization Impact of the SDA on DEVELOPER,
whether such impact is mitigated by positive factors.
If DEVELOPER fails to comply with any of its material
obligations under this Agreement, COMPANY shall have no obligation to
negotiate with DEVELOPER pursuant hereto for such SDA rights pursuant
to (i), above and COMPANY may develop and operate or pursue
negotiations with and offer to third parties the right to develop and
operate such SDA within such Sub-Area without any obligation of
payment which would have otherwise been owed to DEVELOPER in the event
of a proper election pursuant to (ii), above. Notwithstanding
anything else to the contrary herein, DEVELOPER'S rights to enter into
a Special Distribution Agreement pursuant to (i) or receive payments
pursuant to (ii) for such Sub-Area shall terminate without further
action or notice by COMPANY if:
(a) DEVELOPER fails to meet its development
obligations hereunder with regard to such Sub-Area, including
without limitation, the timely opening of any UNIT pursuant to
Schedule C (taking into account Section 3C of the Agreement as
amended by paragraph 10 hereof) attached hereto; or
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(b) This Agreement is terminated prior to its
applicable expiration date; or
If DEVELOPER (or such Authorized Entity) has executed a
Special Distribution Agreement, COMPANY reserves the right, at any
time and in its sole discretion with or without cause and regardless
of the investment made by DEVELOPER (or such Authorized Entity) in
establishing or operating the Special Distribution Arrangement or the
length of time the Special Distribution Arrangement has been in
effect, to suspend or terminate DEVELOPER's (or such Authorized
Entity's) right to operate the Special Distribution Arrangement upon
one hundred eighty (180) days prior written notice to DEVELOPER;
provided, however, that notwithstanding such termination, DEVELOPER
shall be entitled during such one hundred eighty (180) day period to
fulfill any contractual obligations it had incurred prior to receipt
of such notice, but may not incur or undertake any new obligations or
commitments.
Provided, however, such one hundred eighty (180) day period
may be extended by an additional period not to exceed the lesser of
(a) the period required to amortize (in accordance with generally
accepted accounting principles) the balance of DEVELOPER's investment
in the SDA, or (b) eighteen months. Notwithstanding the foregoing one
hundred eighty (180) day notice period, COMPANY may terminate
DEVELOPER's right to operate the SDA upon such shorter notice
(pursuant to procedures promulgated by COMPANY and applied to a
majority of the BOSTON CHICKEN Units in the system) as COMPANY
determines in its sole discretion if the reason for such termination
is DEVELOPER's failure to meet COMPANY's operational standards with
respect to such special Distribution Arrangement.
Notwithstanding any other provision of this Section 4.A.,
COMPANY shall not have the right to propose a Special Distribution
Arrangement to DEVELOPER pursuant hereto during the first three years
of the Agreement Term, unless such Special Distribution Arrangement is
being conducted, or COMPANY has committed to conduct it, in Areas of
Dominant Influence whose population is equal to 25% or more of the
aggregate population of all the Areas of Dominant Influence in which
BOSTON CHICKEN Units are open or under development. Further, during
the Agreement Term, COMPANY shall consult with DEVELOPER prior to
finalizing any material (with regard to any particular Unit) SDA
within the Development Area. Such consultation shall be for advice
only and COMPANY shall not be bound by any advice or recommendation of
DEVELOPER.
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14. Section 4.B is hereby deleted.
15. Section 4.C is hereby amended by inserting the
parenthetical "(provided, that any reduction or modification which amounts to a
termination of substantially all of DEVELOPER's rights to provide such services
shall be governed by clause (2), below)" immediately before the phrase, or (2)"
in the last sentence thereof, by inserting the phrase "upon one hundred eighty
(180) days prior written notice from COMPANY to DEVELOPER," after the phrase,
", or (2)" located in the last sentence thereof, and by inserting the following
at the end thereof:
Provided, however, such one hundred eighty (180) day period
may be extended by an additional period not to exceed the
lesser of (a) the period required to amortize (in accordance
with generally accepted accounting principles) the balance of
DEVELOPER's investment in delivery vehicles and facilities or
(b) eighteen months. Notwithstanding the foregoing one
hundred eighty (180) day notice period, COMPANY may terminate
DEVELOPER's right to operate the Delivery Service upon such
shorter notice (pursuant to procedures promulgated by COMPANY
and applied to a majority of the BOSTON CHICKEN Units in the
system) as COMPANY determines in its sole discretion if the
reason for such termination is DEVELOPER's failure to meet
COMPANY's operational standards with respect to such Delivery
Service.
15A. Section 4.C is further amended by adding the
following at the end thereof:
COMPANY and DEVELOPER agree that DEVELOPER may undertake a
test of Delivery Service in the Development Area for a period to be agreed upon
by COMPANY and DEVELOPER and in a manner consistent with COMPANY's standards
and procedures for such tests. Upon completion of the test, COMPANY and
DEVELOPER will review and evaluate together the results of such test and, after
good faith consultation with each other, determine whether DEVELOPER will have
the right to offer Delivery Service in some or all of the Sub-Areas.
16. Section 4.D is hereby amended by deleting the second
sentence thereof and inserting the following in lieu thereof:
Notwithstanding the foregoing, if COMPANY, at any time and in
its sole discretion, determines to offer Catering Service in
the designated Catering Area, COMPANY will offer DEVELOPER (or
the appropriate Authorized Entity) the right to offer
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Catering Service by delivering the DEVELOPER (or such
Authorized Entity) a Catering Rider to the appropriate
Franchise Agreement(s) authorizing DEVELOPER (or such
Authorized Entity) to offer Catering Service from a Catering
Facility within the designated Catering Area.
16A. Section 4.D is hereby further amended by inserting
the parenthetical "(provided that any reduction or modification which amounts
to a termination of substantially all of DEVELOPER's rights to provide such
services shall be governed by clause (2), below)" immediately before the phrase
"; or (2)" in the last sentence thereof, by inserting the phrase "upon one
hundred eighty (180) days prior written notice from COMPANY to DEVELOPER,"
after the phrase "; or (2)" in the last sentence thereof, and by inserting the
following at the end of Section 4.D;
Provided, however, such one hundred eighty (180) day period
may be extended by an additional period not to exceed the
lesser of (a) the period required to amortize (in accordance
with generally accepted accounting principles) the balance of
DEVELOPER's investment in its catering facilities or (b)
eighteen (18) months. After receipt of notice terminating
DEVELOPER's Catering Service or reducing DEVELOPER's Catering
Area, DEVELOPER will not accept any new orders for catering
or, as applicable, will not accept any new orders for catering
from the portion of the Catering Area which has been
terminated which orders are to be delivered or provided after
the effective date of termination; provided, however,
DEVELOPER shall have the right to complete any catering orders
during such one hundred eighty (180) day period, but which
were received prior to receipt of such notice of termination
of Catering Service or reduction of Catering Area.
Notwithstanding the foregoing one hundred eighty (180) day
notice period, COMPANY may terminate DEVELOPER's right to
operate the Catering Service upon such shorter notice
(pursuant to procedures promulgated by COMPANY and applied to
a majority of the BOSTON CHICKEN Units in the system) as
COMPANY determines in its sole discretion if the reason for
such termination is DEVELOPER's failure to meet COMPANY's
operational standards with respect to such Catering Service.
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17. Section 5.A is hereby amended by adding the following
paragraph after the second paragraph:
Notwithstanding anything to the contrary, DEVELOPER shall not
be obligated to purchase the Demographic Detail Report, maps
or any other demographic services from COMPANY so long as it
provides such reports, maps or other necessary demographic
information through its own in-house services or other third
party service providers.
18. Section 5.B is hereby amended by deleting the first
paragraph thereof and substituting the following instead:
DEVELOPER shall cause the lessor of each Approved Site to
include in the lease, sublease or assignment of lease
(referred to herein as the "Site Agreement"), as applicable,
for such Approved Site, the standard terms which COMPANY
requires from time to time in its sole discretion, and such
other terms as COMPANY may specifically approve in writing. A
copy of COMPANY's current Standards Required Site Agreement
Terms, which COMPANY requires be inserted in Site Agreements,
is attached hereto as Exhibit G. Among other provisions
contained in the Standards Required Site Agreement Terms is a
requirement that DEVELOPER collateral assign such Site
Agreement to COMPANY or its designee. Provided, however,
DEVELOPER shall only be obligated to use its best efforts to
have the Standard Required Site Agreement for Approved sites
that are operating as a Carl's Jr. and which are leased from
independent third party landlords.
19. Section 5.C is hereby amended by adding the following
after the end of the first sentence:
DEVELOPER and its Authorized Entities shall be deemed
to be in full compliance with this Agreement and their
Franchise Agreements so long as there are no defaults under
this Agreement or any of the Franchise Agreements with respect
to which COMPANY has delivered written notice and which are
uncured (taking into account all applicable cure periods).
20. Section 5.C is further hereby amended deleting the
third sentence thereof, in its entirety and inserting in lieu thereof the
following:
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In addition, DEVELOPER must guaranty all obligations of an
Authorized Entity under any Franchise Agreement issued to such
an Authorized Entity.
21. Section 5.D is amended to add the following at the
end thereof:
; and (3) the required advertising and marketing expenditures
shall not exceed those required pursuant to Section 12 of the
form of Franchise Agreement attached hereto as Exhibit I as of
the date of execution hereof; and (4) the form of franchise
agreement used for the grant of each Franchise will contain a
"reasonableness" provision substantially similar to Section
16.M hereof; and (5) the fees and charges set forth or
required by Section 4.E of the Franchise Agreement shall not
exceed those set forth or required by Section 4.E (as amended)
of the form of Franchise Agreement attached hereto as
Exhibit I.
22. Section 5 is hereby further amended by adding the new
subsection 5.E at the end thereof to read as follows:
5.E ADVERTISING EXPENDITURES
DEVELOPER shall cause each UNIT it owns, and shall
cause each Authorized Entity which owns one or more UNITs to
cause each UNIT it owns, to contribute to the Local Ad Fund
(as defined in the Franchise Agreement) for such UNIT an
amount equal to the greater of:
(1) the standard Local Ad Fund contribution
required pursuant to the applicable Franchise Agreement; or
(2) an amount which, when aggregated with the
Local Ad Fund contributions of the other UNITs, will be
sufficient to enable DEVELOPER, through the Local Ad Fund, to
commence Required Televisions Advertising commencing with the
second anniversary (the third anniversary in the case of the
Los Angeles Area of Dominant Influence) of the execution of
this Agreement and to continue Required Television Advertising
thereafter for 12 out of 16 weeks during 4 consecutive Retail
periods for either the San Diego or the Los Angeles Area of
Dominant Influence.
CKEADD.FIN 14
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23. Section 9.E is amended by adding the following after
the end thereof:
COMPANY represents and warrants that, to the actual knowledge
of its current officers, COMPANY's use of the market "BOSTON
CHICKEN" or its use of its current logo with the words "BOSTON
CHICKEN ROTISSERIE" on such logo do not infringe on the rights
of any party in the Development Area.
24. Section 11.A is amended by adding the following at
the end thereof:
The parties intend that the titles used in Sections 11.B.,
11.C., 11.D., and 11.E. be only descriptive of functions and
DEVELOPER may use different titles for the persons who perform
those functions.
25. Section 11.B is amended by deleting the third
sentence thereof and replacing it with the following:
The Chief Operating Officer shall have appropriate multi-unit
food service experience and be an Owner holding a significant
(as to such officer), direct equity interest, or the right to
obtain a significant (as to such officer) equity interest, in
Carl Karcher Enterprises, Inc. or Developer, at all times
during the Agreement Term.
26. Sections 11.D and 11.E are hereby amended to delete
the words "acceptable to COMPANY" in the first sentence of each of those
sections.
27. Section 11.I is hereby amended by deleting the first
sentence thereof in its entirety and restating it to read as follows:
DEVELOPER shall install, use and transmit information
to, or allow the electronic collection of information by,
COMPANY through the Computer System, in such form as is
specified by COMPANY from time to time. Such portion of the
Computer System Specified Software, and Licensed Program as is
purchased may involve one-time and periodic fees or payments
to COMPANY.
CKEADD.FIN 15
17
28. The first sentence of Section 11.J is hereby amended
by adding the following immediately before the parenthetical definition of
"Development Manual":
whether by way of supplements, replacements pages, Franchise
Bulletin or Partner Bulletin disclosure, or other official
pronouncements or means.
29. Section 11 is further amended by adding the following
at the end thereof:
11.L COMMUNICATION AND INFORMATION SYSTEMS
DEVELOPER agrees to install at its head office and
use in performing its obligations under this Agreement those
brands, types, makes, and/or models of communications and
computer systems or hardware which COMPANY has from time to
time specified or required for the Computer System and the
Specified Software and the Licensed Program, as comprised from
time to time in accordance with the specifications and
requirements of COMPANY. DEVELOPER acknowledges that COMPANY
and its Affiliates and designees are in the process of
completing the development of the Licensed Program and COMPANY
is in the process of completing the development of
specifications for certain components of the Computer System
and may modify such specifications and the components of the
Licensed Program and the Computer System from time to time.
During the term hereof, COMPANY may require DEVELOPER to
obtain specified computer hardware and/or software, including,
without limitation, the Computer System, the Specified
Software, and a license to use the Licensed Program from
COMPANY or its designee under a separate agreement after
COMPANY notifies DEVELOPER to commence use thereof. COMPANY's
development and/or modification of such specifications for the
components of the Computer System, the Specified Software, and
the Licensed Program may require DEVELOPER to incur costs to
purchase, lease and/or licensee new or modified computer
hardware and/or software and to obtain service and support for
the Computer System, the Specified Software, and the Licensed
Program during the term of this Agreement. DEVELOPER
acknowledges that COMPANY cannot estimate the cost of future
additions, enhancements and modifications of the Computer
System, the Specified Software, and the Licensed Program and
that the cost to DEVELOPER of obtaining the additions,
enhancements and modifications thereto may not fully
amortizable over the remaining
CKEADD.FIN 16
18
term of this Agreement. Nevertheless, DEVELOPER agrees to
incur such costs provided that the Computer System, the
Specified Software, and the Licensed Program that COMPANY
specifies for use by DEVELOPER is substantially the same
Computer System, Specified Software and Licensed Program which
COMPANY is then currently specifying for use in COMPANY-owned
BOSTON CHICKEN Units. Within one hundred twenty (120) days
after DEVELOPER receives notice from COMPANY, DEVELOPER shall
obtain the components of the Computer System, the Specified
Software, and the Licensed Program which COMPANY designates
and requires. DEVELOPER further acknowledges and agrees that
COMPANY has the right to require DEVELOPER to pay to COMPANY
or its designee a reasonable periodic systems fee for
modifications and enhancements made to the Licensed Program
and a reasonable periodic fee for other maintenance and
support services provided to DEVELOPER related to the Licensed
Program, Specified Software, and the Computer System.
Notwithstanding anything to the contrary contained in
this Agreement, COMPANY hereby acknowledges and agrees that
(i) the aggregate software license fees to be paid by
DEVELOPER or FRANCHISE OWNER directly to COMPANY (unless
COMPANY is simply acting as a collection agent for third party
developed software) with regard to each BOSTON CHICKEN Unit in
connection with the use of the Licensed Program at such UNIT
shall not exceed the lesser of (a) $15,000.00 or (b) amounts
charged to other Boston Chicken area developers of similar
size, and (ii) the periodic systems fee for each BOSTON
CHICKEN Unit (the "Subscription Fee") for any software
subscription service for the Licensed Program which COMPANY
provides directly to such BOSTON CHICKEN Unit (which service
shall consist of software error corrections, remote diagnostic
support services which COMPANY determines in its sole
discretion are advisable to cause the Licensed Program to
perform in accordance with the standards for the Licensed
Program as specified by the COMPANY, and the provision of
upgrades, modifications, improvements, enhancements,
extensions and other changes to the Licensed Program developed
or adopted by COMPANY for the Licensed Program which are
usable in connection with the Computer System and which are
made available generally to all franchisees) shall not exceed
the sum of Four Hundred Dollars ($400.00) per four (4) week
period, provided that such maximum may be increased by COMPANY
from time to time, at its
CKEADD.FIN 17
19
sole option, upon written notice to DEVELOPER, provided that
the increase in any one calendar year shall not exceed 10% (or
such lesser percentage that may be applied on a permanent
basis to other Boston Chicken area developers of similar size)
of the last effective maximum in the immediately preceding
calendar year. It is understood and agreed by COMPANY and
DEVELOPER that nothing in this paragraph shall limit any
amounts payable by DEVELOPER to COMPANY or any third party in
connection with the procurement of computer hardware by
DEVELOPER from COMPANY or any third party and the use and
maintenance of such hardware, whether or not part of the
Computer System, or any amounts payable in connection with
maintenance, support, procurement, enhancement, or upgrade of
any Specified Software.
30. Section 12.A is amended by adding the following at
the end thereof:
; provided that COMPANY shall remain liable for its
obligations hereunder for the balance of the term of this
Agreement after the date of any transfer or assignment of this
Agreement.
31. Section 12.B is amended by adding the following after
the end thereof:
Notwithstanding the foregoing, the restrictions in this
Section 12.B shall not apply to transfers of ownership
interests in Carl Karcher Enterprises, Inc. or to changes in
the members of its Board of Directors.
32. Section 12.E is hereby amended by deleting in its
entirety and replacing it with the following:
DEVELOPER and Carl Karcher Enterprises, Inc. ("CKE")
may make public or private offerings of securities, provided
that DEVELOPER shall not, unless otherwise required by law and
any relevant governmental agency, include in any published
financial statements, in any prospectus or other offering
document, or in any publicly filed or disseminated report
(including any Form 10-K, 10-Q, or 8-K or any Proxy Statement
or Annual Report to Stockholders) or in any Management
Discussion and Analysis or in any footnotes accompanying any
of the foregoing any category, line-item, breakdown, or type
of information concerning its operation of BOSTON CHICKEN
Units that COMPANY does not utilize in its published financial
CKEADD.FIN 18
20
statements, prospectuses or offering documents, or publicly
filed or disseminated reports. Additionally, DEVELOPER and
CKE shall not disclose information regarding its Boston
Chicken business during 1994 by segment although, DEVELOPER
and CKE shall have the right, during 1994, to discuss, using
general statements in the Management Discussion and Analysis
section of any of the documents referred to in this paragraph,
its Boston Chicken business. Provided, however, neither
DEVELOPER nor CKE shall make a disclosure of same store sales
comparisons or average store revenue for its Boston Chicken
Units unless otherwise required by applicable law and any
relevant governmental agency.
33. Section 13.B is hereby amended as follows:
(a) Clause (3) is hereby amended by deleting it
in its entirety and replacing it with the following:
DEVELOPER is convicted by a trial court of or pleads
guilty or no contest to a felony, or to any other crime or
offense that may adversely affect the reputation of BOSTON
CHICKEN Units or the goodwill associated with the Marks, or
engages in any misconduct which may adversely affect the
reputation of BOSTON CHICKEN Units or the goodwill associated
with the Marks, or has made any material misrepresentation or
omission in its application for this Agreement or in
connection with any transfer hereunder.
(b) Clause (4) of Section 13.B is hereby amended
by adding the following after the phrase "Development Manual"
or the "Copyrighted Works" in the first sentence thereof:
(unless the foregoing prohibited act is inadvertent and does
not have, or threaten to have, an adverse effect upon COMPANY,
its business concept, its business operations, the business of
any UNIT, any Mark, the Confidential Information, the
Development Manual, or the Copyrighted Works, and DEVELOPER
ceases and desists any such prohibited act promptly upon
notice and reimburses COMPANY for all damages, losses, costs,
and expenses incurred by COMPANY in connection with such
prohibited acts).
(c) Clause (5) is hereby amended by adding the
following after the parenthetical clause:
CKEADD.FIN 19
21
; provided, that a violation of a confidentiality covenant
under a Confidentiality and Non-Competition Agreement shall
not be grounds for termination if such violation is
inadvertent and does not have, or threaten to have, an
adverse effect upon COMPANY, its business concept, its
business operations, the business of any UNIT, any Mark, the
Confidential Information, the Development Manual or the
Copyrighted Works, and DEVELOPER ceases and desists any such
violation promptly upon notice and reimburses COMPANY for all
damages, losses, costs and expenses incurred by COMPANY in
connection with such violation.
(d) Clause (6) is deleted.
(e) Clause (7) is amended by deleting the text
which follows clause (d) and by replacing it with the
following:
in accordance with COMPANY's standards, specifications and
procedures therefor, and (a) does not correct such failure
within thirty (30) days after DEVELOPER's receipt of COMPANY's
written notice of such failure; or (b) if such failure cannot
reasonably be corrected within the aforesaid thirty (30) day
period, but can be corrected within a reasonably short time
(note to exceed an additional thirty (30) days), undertake
within ten (10) days after DEVELOPER's receipt of COMPANY's
written notice, and continue until completion, best efforts to
correct such failure within such reasonably short time (not to
exceed an additional thirty (30) days) and furnish proof
acceptable to COMPANY, upon its request, of such efforts and
the date full compliance will be achieved.
(f) Clause (9) is hereby amended by deleting the
term "twenty-four (24)" and replacing it with the term
"eighteen (18)."
(g) Clause (10) is deleted and replaced with the
following:
COMPANY has delivered a notice of termination of five (5) or
more Franchise Agreements executed pursuant to this Agreement
in accordance with its terms and conditions or DEVELOPER (or
any Authorized Entity) has terminated a Franchise Agreement
with COMPANY without cause.
34. Section 13.C is hereby amended by adding the
following provision at the end of clause (2) thereof:
CKEADD.FIN 20
22
provided, however, COMPANY shall not have the right to
terminate the territorial rights granted pursuant to Paragraph
3.A for a Sub-Area based solely on the fact that DEVELOPER has
failed to open a UNIT in another Sub-Area on its required
opening date as set forth on Exhibit C.
35. Clause 16.A is amended by deleting the first
paragraph thereof in its entirety and by deleting the word "other" from the
first sentence of the second paragraph.
36. Section 16.B is hereby amended by deleting the phrase
"of ten (10) days' prior written notice" at the end of the second paragraph and
by replacing it with the following:
of forty-five (45) days' prior written notice, unless COMPANY
determines, in its reasonable discretion, that a shorter
notice period is necessary.
37. Sections 16.E and 16.H are hereby deleted.
38. Notwithstanding Section 7 of the Agreement:
(a) DEVELOPER shall not be required to obtain
written consent with respect to information described in clauses (i)
and (ii) thereof; and
(b) The restrictions on DEVELOPER's disclosure
and use of the Confidential Information shall not apply to knowledge
of the food service business which DEVELOPER already possesses and
which has not been obtained in contravention of any obligation of
confidentiality owed to COMPANY.
IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound hereby, have duly executed this Addendum in duplicate as of the
date written below:
DATE: January 14, 1994 DATE: January 14, 1994
COMPANY: DEVELOPER:
BOSTON CHICKEN, INC. CARL KARCHER ENTERPRISES, INC.
/s/ SAAD J. NADHIR /s/ DONALD E. DOYLE
By: _______________________________ By:________________________________
Its: Vice Chairman Its: President
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