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EXHIBIT 10.33
GREEN BURRITO MASTER FRANCHISE AGREEMENT
THIS AGREEMENT is made as of the 5th day of June, 2000 and shall take
effect 30 days thereafter ("Effective Date"), by and among CKE Restaurants, Inc.
("CKR"), Carl Karcher Enterprises, Inc. ("CKE") and Hardee's Food Systems, Inc.
("HFS") (CKR, CKE and HFS shall be collectively referred to as the "CKR
Companies"), and Green Burrito Grill Franchise Corporation (formerly known as GB
Franchise Corporation) and Santa Barbara Restaurant Group, Inc. (collectively
"GBGF").
RECITALS
CKE has developed and owns a unique and distinctive system ("Carl's Jr.
System") relating to the development, establishment and operation of fast
service restaurants ("Carl's Jr. Restaurants").
HFS has developed and owns a unique and distinctive system ("Hardee's
System") relating to the development, establishment and operation of fast
service restaurants ("Hardee's Restaurants").
GBGF has developed and owns a unique and distinctive system ("GB
System") relating to the development, establishment and operation of fast
service restaurants that feature Mexican food products.
GBGF also has successfully developed a method for inserting the GB
System into an existing restaurant concept which permits operation of the GB
System and the other restaurant system side-by-side from the same location ("GB
Dual Concept System").
The CKR Companies and GBGF have entered into a number of agreements,
including but not limited to, a Settlement and Development Agreement dated May
30, 1995, as subsequently amended ("Settlement Agreement"), a Master
Subfranchise Agreement dated December 1, 1995, as subsequently amended ("Master
Agreement") and individual Franchise Agreements, pursuant to which the CKR
Companies have been licensed by GBGF to develop and operate at company-owned
Carl's Jr. and Hardee's Restaurants, and to subfranchise Carl's Jr. and Hardee's
franchisees to develop and operate at franchised Carl's Jr. and Hardee's
Restaurants, Carl's Jr. and Hardee's Restaurants that utilize the GB Dual
Concept System ("Dual Concept Restaurants").
As a result of the parties' experience in developing and operating, and
subfranchising franchisees to develop and operate, Dual Concept Restaurants, the
parties desire to restructure their relationship.
GBGF desires to assign to CKE, and CKE is willing to assume, GBGF's
rights and obligations as franchisor under certain Green Burrito Franchise
Agreements with third party franchisees ("GB Franchise Agreements").
Accordingly, the parties are entering into this Agreement to terminate
all prior agreements between or among them pertaining to the development,
operation or subfranchising of Dual Concept Restaurants by the CKR Companies and
replace those prior agreements with this Agreement and to assign to CKE certain
of the GB Franchise Agreements.
NOW THEREFORE, in consideration of the mutual covenants, agreements and
obligations set forth below, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
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I. GENERALLY APPLICABLE PROVISIONS
1. TERMINATION OF PRIOR AGREEMENTS
As of the Effective Date, the Settlement Agreement, the Master
Agreement and all prior agreements between or among the parties pertaining to
the development, operation or subfranchising of Dual Concept Restaurants by the
CKR Companies are terminated and are replaced by this Agreement.
2. GRANT OF RIGHTS
A. GRANT
GBGF hereby grants to the CKR Companies the right, throughout the
United States, during the Development Term (as defined below): (1) to develop
and operate Dual Concept Restaurants utilizing the GB Dual Concept System ("CKR
Dual Concept Restaurants"); and (2) to license existing and prospective Carl's
Jr. and Hardee's franchisees ("Franchisees") to develop and operate Dual Concept
Restaurants utilizing the GB Dual Concept System in connection with their Carl's
Jr. or Hardee's Restaurants ("Franchised Dual Concept Restaurants"). The
provisions of this Agreement also shall apply to the Dual Concept Restaurants
operated and subfranchised by CKE that are in existence as of the date of this
Agreement.
B. SCOPE OF LIMITED EXCLUSIVITY GRANTED TO THIRD PARTIES
In order to avoid restricting the development of Dual Concept
Restaurants by the CKR Companies and their Franchisees, GBGF agrees that, unless
otherwise agreed to by the CKR Companies and GBGF, during the Development Term
(as defined below), GBGF will not, in the state of California and Pima County,
Arizona, grant, or permit their subsidiaries or affiliates to grant, exclusivity
to any franchisee or subfranchisee of the GB System or the GB Dual Concept
System in excess of a radius of 1.5 miles of the restaurant licensed to use the
GB System or the GB Dual Concept System.
3. DEVELOPMENT TERM
The initial term of the rights granted to the CKR Companies pursuant to
this Agreement to develop and subfranchise the development of Dual Concept
Restaurants shall begin as of the Effective Date and terminate on December 31,
2004 ("Development Term"). Unless this Agreement has been terminated prior to
the expiration of the Development Term, the CKR Companies shall have the option
to renew this Agreement for a renewal Development Term; provided the parties are
able to agree, prior to the expiration of the Development Term, on a development
schedule for, and the length of, the renewal Development Term.
The expiration or termination of the Development Term shall only affect
the right of the CKR Companies to develop or subfranchise additional Dual
Concept Restaurants and shall not affect the operation of existing Dual Concept
Restaurants the term of which, for CKR Dual Concept Restaurants, shall be as
provided in Part III of this Agreement, and the term of which, for Franchised
Dual Concept Restaurants, shall be as provided in the each franchise or license
agreement entered into by CKE or HFS and a Franchisee.
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4. DEVELOPMENT SCHEDULE
For each calendar year listed in the Development Schedule attached as
Appendix A, the CKR Companies shall develop (either by CKE, HFS or Franchisees)
and open the number of Dual Concept Restaurants specified in the Development
Schedule. On or before December 31 of each year during the Development Term, the
CKR Companies shall provide GBGF with a list of all Dual Concept Restaurants
then operated by the CKR Companies or Franchisees.
If the CKR Companies have not complied with the Development Schedule as
of the end of any calendar year listed in Appendix A, GBGF may in its sole
discretion, following 30 days' prior written notice to the CKR Companies,
terminate the right to develop (and the right to subfranchise the development
of) additional Dual Concept Restaurants. Notwithstanding the foregoing, if the
CKR Companies have developed at least 80% of the Dual Concept Restaurants
required by the Development Schedule, the CKR Companies shall have the options
described below, which can be exercised no more than twice during the
Development Term (and which must be exercised by providing GBGF written notice
prior to the expiration of 30 days following GBGF's notice). The CKR Companies
may avoid termination of the right to develop (and the right to subfranchise the
development of) additional Dual Concept Restaurants by paying GBGF the initial
fee specified in Section III.2.A. for each Dual Concept Restaurant the CKR
Companies were required to develop, but failed to develop, in that calendar
year. Such election by the CKR Companies shall not affect the obligation of the
CKR Companies to develop those Dual Concept Restaurants in the next calendar
year unless the CKR Companies pay GBGF the additional sum of $10,000 to
compensate GBGF for the ongoing royalty fees that would have been paid to GBGF
if those Dual Concept Restaurants had been developed. In that event, the
Development Schedule shall be modified to delete the obligation by the CKR
Companies to develop those Dual Concept Restaurants.
5. SITE AND FRANCHISEE SELECTION
The CKR Companies shall not be required to obtain GBGF's approval of
any site for a Dual Concept Restaurant; however, the CKR Companies shall not
open (and shall not permit a Franchisee to open) a Dual Concept Restaurant
within a 1.5 mile radius of any then-existing Green Burrito Restaurant or Grill
by Green Burrito Restaurant (or such similar name as may be adopted by GBGF)
operated or franchised by GBGF. The CKR Companies shall use their best efforts
to offer Franchisees the opportunity to operate Dual Concept Restaurants. The
CKR Companies shall use those standards that they reasonably deem appropriate
for the selection of Franchisees to operate Dual Concept Restaurants, which may
include requirements that a Franchisee be in good standing and be operationally
and financially capable of operating a Dual Concept Restaurant. The CKR
Companies shall not be required to obtain GBGF's approval with respect to any
Franchisee that desires to operate a Dual Concept Restaurant.
6. ADVERTISING
The CKR Companies intend to use internal creative departments or
consultants to develop promotional materials for Dual Concept Restaurants. All
such advertising and promotional materials shall properly utilize GBGF's
Proprietary Marks, but the CKR Companies shall not be required to submit any
advertising or promotional materials to GBGF for its review and approval. The
CKR Companies may, but are not required to, establish advertising funds for the
promotion of Dual Concept Restaurants.
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7. GREEN BURRITO FOOD PRODUCTS AND SUPPLIERS
A. GB FOOD PRODUCTS
All Dual Concept Restaurants, except Dual Concept Restaurants that
offer a limited menu of Carl's Jr. or Hardee's products ("Express Units"), shall
offer for sale a minimum of 12 items from the list of GB Food Products attached
as Appendix B. Express Units shall offer for sale a reasonable number of GB Food
Products, taking into account space and other limitations applicable to each
Express Unit. The CKR Companies shall have the right, without GBGF's consent, to
make minor changes to food specifications and to the GB Food Products. All other
changes to the food specifications or to any GB Food Products must be approved
in writing by GBGF prior to use in any Dual Concept Restaurant.
B. GREEN BURRITO SUPPLIERS
Dual Concept Restaurants must use proprietary products in the
preparation and sale of certain GB Food Products and currently must purchase the
proprietary products from GBGF, an affiliate of GBGF or a designated supplier.
The CKR Companies shall have the right to obtain such proprietary products from
alternative suppliers, provided the alternative suppliers are able to
consistently supply quality products and provided that the CKR Companies have
given GBGF advance written notice of their intent to utilize an alternative
supplier and GBGF has not objected to the proposed alternative supplier(s)
within 14 days after receipt of notice from the CKR Companies. In addition, the
CKR Companies agree that they may not seek an alternative supplier if such
action would result in a violation of any existing contract GBGF has with an
existing supplier. GBGF shall be entitled to retain all rebates received from
existing suppliers through the expiration of current supply contracts.
All other products used in the preparation and sale of GB Food Products
also shall be obtained from suppliers selected by the CKR Companies that are
able to consistently supply quality products. The parties agree to work together
with respect to the purchase of all items used by Dual Concept Restaurants and
restaurants operated and franchised by GBGF in order to realize the best
available pricing from suppliers.
8. PROPRIETARY MARKS
The term "Proprietary Marks" as used in this Agreement refers to all
words, symbols, insignia, devices, designs, trade names, service marks or
combinations thereof designated by GBGF as identifying the GB Dual Concept
System and the products sold and services provided in connection with the GB
Dual Concept System. The right of the CKR Companies to use and sublicense the
use of the Proprietary Marks is limited to use of the Proprietary Marks in the
operation of Dual Concept Restaurants. The CKR Companies shall not use the
Proprietary Marks or any variations of the Proprietary Marks or marks or names
confusingly similar to any of the Proprietary Marks in any manner not authorized
by GBGF.
The CKR Companies shall have the right to adopt and use new Proprietary
Marks with respect to the GB Dual Concept System and, as determined by the CKR
Companies, to seek additional registrations in GBGF's name. GBGF shall own all
right, title and interest in all new Proprietary Marks used, adopted and/or
registered by the CKR Companies. The CKR Companies at their expense shall
undertake, with GBGF's consent, all actions necessary to maintain and protect
the Proprietary Marks, including without limitation, the pursuit of infringers
of the Proprietary Marks. (If damages are recovered by the CKR Companies from an
infringer, such damages shall be shared equally with GBGF.)
The CKR Companies agree that the Proprietary Marks (including any
Proprietary Marks adopted and/or registered after the Effective Date) are the
sole property of GBGF and affiliates, that the CKR
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Companies shall not directly or indirectly contest the validity or ownership of
the Proprietary Marks or GBGF's right to license the Proprietary Marks, and that
any and all uses by the CKR Companies of the Proprietary Marks and the goodwill
arising therefrom shall inure exclusively to the benefit of GBGF and affiliates.
9. NONCOMPETITION RESTRICTIONS
A. BY GBGF
In addition to the provisions of Section I.2.B., during the Development
Term, GBGF shall not operate, or grant a franchise to operate, a restaurant
using the GB System or the GB Dual Concept System within a 1.5 mile radius of a
Dual Concept Restaurant operated by the CKR Companies or their Franchisees.
B. BY THE CKR COMPANIES
During the Development Term, and for 2 years after the expiration or
termination of the Development Term, the CKR Companies will not feature or
operate in their company or franchised Carl's Jr. or Hardee's Restaurants any
concept which they develop, own, operate or are a licensee of if that concept
features Mexican food (similar to the menu offerings under the GB Dual Concept
System) as the principal menu offerings. The foregoing restriction does not
apply to: (1) Mexican style food items offered at Carl's Jr. Restaurants prior
to August 9, 1994; (2) any sandwich comprised of bread or buns and a main
component of hamburger, chicken or fish even though garnished with traditional
Mexican sauces or flavorings; and (3) the ownership by the CKR Companies of any
Mexican food concept, company, restaurant or restaurant chain if the menu items
are not offered in Carl's Jr. or Hardee's Restaurants.
10. TRANSFER
This Agreement may not be assigned, transferred, voluntarily or
involuntarily, in whole or in part, by operation of law or otherwise without the
written consent of the other parties. Notwithstanding the foregoing, no consent
will be required for assignments or transfers by any party as a result of any
sale of all or substantially all of the stock or assets of such party, or any
merger by a party with another entity; provided that the assignee, transferee or
successor assumes in writing each of the transferor's or assignor's obligations
hereunder.
11. INDEMNIFICATION
A. The CKR Companies shall indemnify and hold harmless GBGF and their
directors, officers, employees, agents and representatives against all claims,
damages, liabilities and losses, including reasonable attorneys' fees and
defense costs, arising directly or indirectly from: (1) the operation of Dual
Concept Restaurants by the CKR Companies or Franchisees; (2) the grant of
subfranchises by the CKR Companies to Franchisees to operate Dual Concept
Restaurants; (3) the services to be provided by the CKR Companies to Franchisees
under the franchise or license agreements for Franchised Dual Concept
Restaurants, including the failure to properly provide those services; (4) any
action by a franchisee of the CKR Companies based on the rights granted to the
CKR Companies by this Agreement; and (5) the failure by the CKR Companies to
comply with any franchise or similar law with respect to the rights granted the
CKR Companies by this Agreement.
B. GBGF shall indemnify and hold harmless the CKR Companies and their
directors, officers, employees, agents and representatives against all claims,
damages, liabilities and losses,
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including reasonable attorneys' fees and defense costs, arising directly or
indirectly from: (1) any action by a franchisee of GBGF (who is not a Franchisee
of a Dual Concept Restaurant) based on the rights granted to the CKR Companies
by this Agreement; and (2) GBGF's failure to comply with any franchise or
similar law with respect to the rights granted by this Agreement.
12. RELATIONSHIP OF THE PARTIES
This Agreement does not create or imply a fiduciary, agency,
employment, partnership or other special relationship between the parties.
Neither GBGF nor the CKR Companies shall be agent, legal representative,
partner, subsidiary, joint venturer or employee of the other. Neither party
shall have the right or power to, and shall not, bind or obligate the other in
any way or manner, nor represent that it has any right to do so. The sole
relationship between GBGF and the CKR Companies is a commercial, arms' length
business relationship and there are no third party beneficiaries to this
Agreement.
13. CONSENTS, APPROVALS AND WAIVERS
A. Whenever this Agreement requires the prior approval or consent of
another party, the requesting party shall make a timely written request to the
other therefor; and any approval or consent received, in order to be effective
and binding, must be obtained in writing.
B. Neither party makes any warranties or guarantees upon which the
other may rely by providing any waiver, approval, consent or suggestion to the
other in connection with this Agreement, and neither party assumes any liability
or obligation to the other therefor, or by reason of any neglect, delay, or
denial of any request therefor.
C. No failure of either party to exercise any power reserved to it by
this Agreement or to insist upon strict compliance by the other with any
obligation or condition hereunder, and no custom or practice of the parties at
variance with the terms of this Agreement, shall constitute a waiver of that
party's right to demand exact compliance with any of the terms of this
Agreement.
14. NOTICES
No notice, demand, request or other communication to the parties shall
be binding upon the parties unless the notice is in writing, refers specifically
to this Agreement and is addressed to each party at the notice address provided
the other parties. Any party may designate a new address for notices by giving
written notice of the new address pursuant to this Section. Notices shall be
effective upon receipt (or first refusal) and may be: (A) delivered personally;
(B) transmitted by facsimile to a party's facsimile number; (C) mailed in the
United States mail, postage prepaid, certified mail, return receipt requested;
or (D) mailed via overnight courier.
15. FORCE MAJEURE
As used in this Agreement, the term "Force Majeure" means any act of
God, strike, lock-out or other industrial disturbance, war (declared or
undeclared), riot, epidemic, fire or other catastrophe, act of any government or
other third party and any other cause not within the control of the party
affected thereby. If the performance of any obligation by either party under
this Agreement is prevented, hindered or delayed by reason of Force Majeure,
which cannot be overcome by reasonable commercial measures, the parties shall be
relieved of their respective obligations (to the extent that the parties, having
exercised best efforts, are prevented, hindered or delayed in such performance)
during the period of such Force Majeure.
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16. ENTIRE AGREEMENT
This Agreement and the attachments hereto constitute the entire, full
and complete agreement between the parties concerning the development, operation
and subfranchising of Dual Concept Restaurants by the CKR Companies, and
supersede any and all prior or contemporaneous negotiations, discussions,
understandings or agreements, including, but not limited the Settlement
Agreement and Master Agreement as amended. There are no other representations,
inducements, promises, agreements, arrangements, or undertakings, oral or
written, between the parties relating to the matters covered by this Agreement
other than those set forth in this Agreement and in the attachments hereto. No
obligations or duties that contradict or are inconsistent with the express terms
of this Agreement may be implied into this Agreement. Except as expressly set
forth herein, no amendment, change or variance from this Agreement shall be
binding on any party unless mutually agreed to by the parties and executed in
writing.
17. SEVERABILITY AND CONSTRUCTION
A. Each article, section, subsection, term and condition of this
Agreement, and any portions thereof, will be considered severable. If, for any
reason, any portion of this Agreement is determined to be invalid, contrary to,
or in conflict with, any applicable present or future law, rule or regulation in
a final, unappealable ruling issued by any court, agency or tribunal with valid
jurisdiction, that ruling will not impair the operation of, or have any other
effect upon, any other portions of this Agreement; all of which will remain
binding on the parties and continue to be given full force and effect.
B. No provision of this Agreement shall be interpreted in favor of, or
against, any party because of the party that drafted this Agreement.
18. GOVERNING LAW, ARBITRATION FORUM AND LIMITATIONS
A. This Agreement and any claim or controversy arising out of, or
relating to, the rights and obligations of the parties under this Agreement and
any other claim or controversy between the parties shall be governed by and
construed in accordance with the laws of the State of California without regard
to conflicts of laws principles.
B. Except as provided in Section I.18.C., any claim, controversy or
dispute arising out of or relating to this Agreement or with respect to a breach
of the terms of this Agreement and any other claim, controversy or dispute
between the parties shall be submitted to final and binding arbitration before
the American Arbitration Association ("AAA") as the sole and exclusive remedy.
The arbitration will be governed by the AAA commercial arbitration rules in
effect on the date the demand for arbitration is filed and shall be conducted
before one neutral arbitrator with restaurant and franchise experience selected
in accordance with the AAA commercial arbitration rules from the AAA's national
or regional arbitrator lists. The arbitration shall be administered by the AAA
office nearest to Orange County, California and all hearings shall take place in
Orange County, California. Any demand for arbitration shall specify the amount
of damages sought.
The arbitrator shall have no authority to amend or modify the
provisions of this Agreement. The award and decision of the arbitrator shall be
conclusive and binding upon all parties thereto and judgment upon the award may
be entered in any court of competent jurisdiction, and GBGF and the CKR
Companies waive any right to contest the validity or enforceability of the
award. GBGF and the CKR Companies will obtain the agreement of the arbitrator
that: (1) the arbitrator shall provide a written ruling, stating in separate
sections the findings of fact and conclusions of law on which the ruling is
based; and (2) the ruling is due not later than 60 days after the final hearing.
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C. Notwithstanding the provisions of Section I.18.B., any party shall
be entitled to file suit in a court of competent jurisdiction to obtain
equitable relief, including preliminary and permanent injunctive relief.
D. The parties waive, to the fullest extent permitted by law, any right
or claim of any consequential, punitive or exemplary damages against each other
and agree that, in the event of a dispute between them, each shall be limited to
the recovery of actual damages sustained by it. The parties waive, to the
fullest extent permitted by law, the right to bring, or be a class member in,
any class action arbitration or litigation and the right to trial by jury in any
action not subject to Section I.18.B.
19. MISCELLANEOUS
A. GENDER AND NUMBER
All references to gender and number shall be construed to include such
other gender and number as the context may require.
B. CAPTIONS
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 of this Agreement.
C. COUNTERPARTS
This Agreement may be executed in counterparts, and each copy so
executed and delivered shall be deemed an original.
D. MODIFICATIONS
No amendment or modification of this Agreement shall be binding on
either party unless in writing and executed by both parties.
E. PRESS RELEASES
Neither the CKR Companies nor GBGF will issue any press releases
relating to this Agreement or either party's performance under this Agreement
without first providing a copy of the press release to the other party.
II. SUBFRANCHISE RIGHTS
1. RIGHT TO SUBFRANCHISE
GBGF hereby grants to the CKR Companies the right throughout the United
States, during the Development Term, to license existing and prospective
Franchisees to develop Franchised Dual Concept Restaurants utilizing the GB Dual
Concept System in connection with their Carl's Jr. or Hardee's Restaurants.
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2. FORMS OF AGREEMENT
A. EXISTING FRANCHISED DUAL CONCEPT RESTAURANTS
All existing Franchised Dual Concept Restaurants shall continue to be
governed by the existing franchise or license agreement executed by CKE or HFS
and the Franchisee.
B. NEW FRANCHISED DUAL CONCEPT RESTAURANTS
CKE or HFS and each Franchisee for a new Franchised Dual Concept
Restaurant shall execute that form of franchise or license agreement as
determined by CKE or HFS. The CKR Companies shall not be required to provide
GBGF a copy of any franchise or license agreement for a Franchised Dual Concept
Restaurant.
3. FEES
A. INITIAL AND OTHER FEES
For all Franchised Dual Concept Restaurants, the CKR Companies shall
pay GBGF, beginning as of the Effective Date, 40% of all fees (excluding royalty
fees and advertising contributions) a Franchisee is required to pay the CKR
Companies under his franchise or license agreement with respect to the rights
granted to the Franchisee to utilize the GB Dual Concept System. Unless approved
in writing by GBGF, the CKR Companies shall not charge a Franchisee of a
Franchised Dual Concept Restaurant an initial fee relating to the right to use
the GB Dual Concept System that is less than $5,000.
B. ROYALTY FEES
For all Franchised Dual Concept Restaurants, the CKR Companies shall
pay GBGF, beginning as of the Effective Date, 40% of all royalty fees a
Franchisee is required to pay the CKR Companies under his franchise or license
agreement relating to the Gross Sales of GB Food Products. Unless approved in
writing by GBGF, the percentage royalty a Franchisee of a Franchised Dual
Concept Restaurant pays with respect to Gross Sales of GB Food Products shall
not be less than the percentage royalty the Franchisee pays with respect to
non-Green Burrito sales at his Carl's Jr. or Hardee's Restaurant.
As used in this Agreement, "Gross Sales of GB Food Products" shall mean
all gross sales derived from the sale of GB Food Products (which are listed in
attached Appendix B) and the Green Burrito proportionate share of beverage sales
included in total gross sales. The Green Burrito proportionate share of beverage
sales shall be computed by comparing the relationship between the Gross Sales of
GB Food Products and total gross sales (exclusive of beverage sales) and
multiplying that percentage by all beverage sales for the relevant period.
C. ADVERTISING CONTRIBUTIONS
The CKR Companies shall not pay to GBGF any portion of the advertising
contributions paid by Franchised Dual Concept Restaurants, which includes,
without limitation, payments for point of purchase advertising materials and
other Green Burrito advertising materials and contributions to any advertising
funds established by CKE.
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D. METHOD OF PAYMENT
Franchised Dual Concept Restaurants shall pay all initial fees, other
fees and royalty fees directly to CKE or HFS, which will remit to GBGF the GBGF
portion of each such payment within 10 days after the fiscal week (as defined by
GBGF from time to time) in which the payment was received by CKE or HFS. The CKR
Companies shall have the sole right and obligation to collect monies from
Franchised Dual Concept Restaurants, and shall use reasonable efforts to collect
monies from such Franchisees. The CKR Companies may compromise payments of
initial fees, other fees or royalty fees in a dispute without GBGF's written
consent.
GBGF shall not be entitled to payment of any monies from the CKR
Companies relating to Franchised Dual Concept Restaurants until the monies are
actually received by CKE or HFS, and the CKR Companies shall not have any
recourse liability to GBGF for the payment of monies unless the monies are
actually received by CKE or HFS and CKE or HFS fail to pay to GBGF the GBGF
portion of any monies received. If CKE or HFS receive a partial royalty fee
payment from a Franchised Dual Concept Restaurant, they shall pay GBGF 40% of
such payment applicable to Gross Sales of GB Food Products and each subsequent
payment until GBGF has received the portion of the royalty fee payment it would
have received had the Franchisee initially paid the royalty fee payment in full.
CKE and HFS shall pay GBGF 40% of any interest arising from late payments by a
Franchisee CKE or HFS receive applicable to Gross Sales of GB Food Products.
4. SUPPORT OBLIGATIONS
A. TRAINING
GBGF has trained the CKR Companies' management and selected personnel
in the operation of the GB Dual Concept System and has provided the CKR
Companies training materials and operations manuals for use by Franchised Dual
Concept Restaurants. GBGF shall have no further obligations with respect to
training or training materials. The CKR Companies will have sole responsibility
for providing training for Franchised Dual Concept Restaurants and for all
updates to training materials and operations manuals. GBGF shall have the right,
but not the obligation, to be present at, and participate in, training sessions
and inspections conducted by the CKR Companies personnel to the extent GBGF
deems necessary to ensure that Franchised Dual Concept Restaurants meet GBGF's
quality standards.
B. OTHER SUPPORT OBLIGATIONS
GBGF shall have no obligation to provide ongoing support or assistance
to any Franchised Dual Concept Restaurant or to the CKR Companies in connection
with any Franchised Dual Concept Restaurant.
C. INSPECTIONS
The CKR Companies shall conduct inspections and audits of Franchised
Dual Concept Restaurants in the same manner and with the same frequency as the
CKR Companies conduct inspections of franchised Carl's Jr. or Hardee's
Restaurants. The CKR Companies shall provide GBGF on a quarterly basis a copy of
all inspection reports.
5. DEFAULTS
The CKR Companies shall have the sole right to notice defaults by a
Franchised Dual Concept Restaurant and to enforce remedies under the applicable
agreements. The CKR Companies shall keep
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GBGF informed as to the status of all such enforcement actions. GBGF agrees to
cooperate with the CKR Companies and to provide such assistance as the CKR
Companies may reasonably request in connection with any enforcement action.
6. FRANCHISE LAW COMPLIANCE
Except as otherwise required by law, the CKR Companies shall be
responsible for the filing of the applicable registrations with state franchise
regulatory authorities and for the preparation and distribution of required
franchise offering circulars for the offer and sale of franchises for Franchised
Dual Concept Restaurants. GBGF agrees to cooperate with the CKR Companies in
supplying information required to complete these regulatory filings and
franchise offering circulars.
III. OPERATION OF DUAL CONCEPT RESTAURANTS BY THE CKR COMPANIES
1. OPERATION OF DUAL CONCEPT RESTAURANTS
A. GRANT
GBGF hereby grants to the CKR Companies the right throughout the United
States, during the Development Term, to develop CKR Dual Concept Restaurants
utilizing the GB Dual Concept. With respect to all existing CKR Dual Concept
Restaurants as of the Effective Date ("Existing Dual Concept Restaurants"), the
provisions of this Agreement shall supersede the existing Franchise Agreements
between the CKR Companies and GBGF for those Existing Dual Concept Restaurants,
all of which Franchise Agreements are hereby terminated. The provisions of this
Agreement shall govern all existing and future CKR Dual Concept Restaurants,
without the need for the parties to execute any additional agreements with
respect to individual Dual Concept Restaurants
B. OPERATING TERM
With respect to each Existing Dual Concept Restaurant, the initial
operating term of the license to use the GB Dual Concept System and operate the
restaurant as a Dual Concept Restaurant pursuant to this Agreement shall expire
on the date on which the existing Franchise Agreement between GBGF and the CKR
Companies for that Existing Dual Concept Restaurant would have expired (as
identified in Appendix C). (The parties acknowledge that, as of the date of this
Agreement, Appendix C is incomplete. Accordingly, the parties agree that they
shall diligently pursue completion of Appendix C and substitute a completed
Appendix C for the form of Appendix C currently attached to this Agreement.) For
all Dual Concept Restaurants developed by the CKR Companies after the Effective
Date, the initial term of the license to use the GB Dual Concept System and
operate the restaurant as a CKR Dual Concept Restaurant shall be 15 years from
the date the restaurant first opens to the public as a Dual Concept Restaurant.
The initial operating term for each CKR Dual Concept Restaurant shall
automatically be extended for a renewal term of 15 years unless the CKR
Companies provide GBGF notice of its intent not to renew the term at least 30
days prior to the expiration of the initial term for that CKR Dual Concept
Restaurant.
2. FEES
A. INITIAL FEE
The CKR Companies shall pay GBGF a nonrefundable initial fee of $2,500
for each CKR Dual Concept Restaurant to be developed and operated pursuant to
this Agreement. The initial fee for each CKR Dual Concept Restaurant shall be
paid before that CKR Dual Concept Restaurant first opens for business. The CKR
Companies shall not be required to pay any additional initial fee with respect
to any Existing Dual Concept Restaurant.
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B. ROYALTY FEE
For each CKR Dual Concept Restaurant, the CKR Companies shall pay GBGF
a weekly royalty fee (to be paid, for each fiscal week (as defined by GBGF from
time to time), within 10 days after the end of that fiscal week) equal to 3% of
Gross Sales of GB Food Products (as defined in Section II.3.B.), along with a
statement of Gross Sales of GB Food Products for each CKR Dual Concept
Restaurant.
C. RENEWAL FEE
No renewal fee shall be paid to renew the operating term for any CKR
Dual Concept Restaurant developed after the Effective Date. With respect to each
Existing Dual Concept Restaurant, a renewal fee shall be paid only, if under the
prior Franchise Agreement between GBGF and the CKR Companies for that CKR Dual
Concept Restaurant, a portion of the initial franchise fee was deferred. In that
event, the previously deferred portion of the initial franchise fee shall be
paid to GBGF as a renewal fee. (Appendix C identifies those Existing Dual
Concept Restaurants for which a portion of the initial franchise fee had been
deferred and the amount of the deferred fee.)
D. INTEREST
If any payments by the CKR Companies owed to GBGF with respect to CKR
Dual Concept Restaurants under this Agreement are not received by GBGF by the
date due, the CKR Companies, in addition to paying the amount owed, shall pay
GBGF, no later than the next due date of any payment owed to GBGF, interest on
the total amount owed from the date due until paid at the rate of 1.5% per
month, not to exceed the maximum rate permitted for indebtedness of this nature
in the state in which the applicable CKR Dual Concept Restaurant is located.
E. GBGF'S RIGHT TO AUDIT
GBGF or its designated agents shall have the right at all reasonable
times (both during and after the term of this Agreement) to examine and copy, at
GBGF's expense, the CKR Companies' books of account relating to CKR Dual Concept
Restaurants. GBGF also shall have the right, at any time, to have an independent
audit made of the CKR Companies' books of account relating to CKR Dual Concept
Restaurants. If an audit reveals that payments due GBGF have been understated,
the CKR Companies promptly shall pay GBGF the deficiency plus interest. If an
audit reveals that payments due GBGF have been understated by 3% or more in any
report to GBGF, then GBGF may, at its option, charge the CKR Companies for any
and all costs and expenses connected with the audit (including, without
limitation, reasonable accounting and attorneys' fees). These expenses shall be
paid within 15 days of receipt of a statement therefor.
3. DUAL CONCEPT RESTAURANT DEVELOPMENT AND OPERATION
The CKR Companies assume all cost, liability, expense and
responsibility for developing, constructing and operating each CKR Dual Concept
Restaurant. GBGF shall not have any obligations to provide the CKR Companies any
assistance with respect to the development, construction or operation of any CKR
Dual Concept Restaurant. In that regard, the provisions of Sections II.4.A.-B.
and the absence of any obligation on GBGF to provide training or ongoing support
or assistance shall be applicable to all CKR Dual Concept Restaurants.
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4. OPERATION AND MANAGEMENT
A. PERFORMANCE STANDARDS
In recognition of the mutual benefits that come from maintaining the
reputation for quality enjoyed by the GB Dual Concept System, the CKR Companies
covenant and agree, with respect to the operation of CKR Dual Concept
Restaurants, that the CKR Companies and their employees shall comply with all of
the requirements of the GB Dual Concept System, and the CKR Companies
additionally shall comply with the following:
(1) The CKR Companies will operate each CKR Dual Concept Restaurant
in a clean, safe and orderly manner, providing courteous, first-class service to
the public.
(2) The CKR Companies shall maintain all structures, furnishings,
fixtures, equipment and decorations at each CKR Dual Concept Restaurant in good
condition and repair.
(3) The CKR Companies shall use their best efforts, skills and
diligence in the conduct of business and shall regulate their employees so that
they will be courteous and helpful to the public.
(4) The CKR Companies shall ensure that qualified personnel
supervise the operation of each CKR Dual Concept Restaurant at all times during
business hours.
(5) The CKR Companies shall operate each CKR Dual Concept Restaurant
in strict compliance with applicable laws, rules and regulations of governmental
authorities.
(6) The CKR Companies shall prevent the operation of any CKR Dual
Concept Restaurant in such a way as to impair the value of the GB Dual Concept
System.
(7) The CKR Companies shall prevent the use of any CKR Dual Concept
Restaurant for any immoral or illegal purpose, or for any other purpose,
business activity, use or function which is not expressly authorized by this
Agreement.
B. RIGHT OF INSPECTION
GBGF personnel or designated agents shall have the right, but not the
obligation, to enter each CKR Dual Concept Restaurant, without prior notice, at
any time during regular business hours, for the purpose of examining the
premises, conferring with the CKR Companies or their employees, and inspecting
and checking merchandise and supplies, furnishings, fixtures, equipment,
operating methods, and books and records.
5. INSURANCE
The CKR Companies shall be responsible for all loss or damage
originating in, or incurred in connection with, the construction or operation of
the CKR Dual Concept Restaurants and for all claims
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or demands for damages to property or for injury, illness or death of persons
directly or indirectly resulting from the construction or operation of the CKR
Dual Concept Restaurants. The CKR Companies shall maintain in full force and
effect an insurance policy or policies protecting the CKR Companies and GBGF and
their respective officers, directors and employees against any loss, liability,
personal injury, property damage or expense whatsoever arising or occurring
upon, or in connection, with the CKR Dual Concept Restaurants. GBGF, and any
entity with an insurable interest designated by GBGF, shall be an additional
named insured in such policy or policies to the extent each has an insurable
interest. The CKR Companies may self-insure some or all these obligations.
6. TERMINATION AND EXPIRATION
A. BY THE CKR COMPANIES
The CKR Companies may cease operating a CKR Dual Concept Restaurant as
a Dual Concept Restaurant with GBGF's prior written consent.
B. BY GBGF
If any CKR Dual Concept Restaurant fails to materially comply with the
requirements of the GB Dual Concept System, GBGF may provide the CKR Companies
written notice of default with respect to that CKR Dual Concept Restaurant. If
the CKR Companies fails to materially cure the noticed default within 60 days
after receipt, GBGF may terminate the right of that particular CKR Dual Concept
Restaurant to continue to be operated as a Dual Concept Restaurant. Termination
with respect to a particular CKR Dual Concept Restaurant shall not affect any
other CKR Dual Concept Restaurant.
C. EFFECT OF TERMINATION OR EXPIRATION
Upon termination or expiration of the operating term with respect to a
particular CKR Dual Concept Restaurant, all rights granted by this Agreement
with respect to that particular CKR Dual Concept Restaurant shall terminate and:
(1) the CKR Companies shall cease operating that restaurant as a Dual Concept
Restaurant, shall cease using the Proprietary Marks and the GB Dual Concept
System at the restaurant and shall make all necessary modifications to the
restaurant; (2) the CKR Companies shall give GBGF a final accounting of all
monies due under this Agreement to GBGF with respect to that CKR Dual Concept
Restaurant within 30 days after the effective date of termination or expiration;
and (3) the restrictions contained in Section I.9.B. shall be applicable to that
CKR Dual Concept Restaurant for a period of 2 years after the expiration or
termination of the operating term.
IV. ASSIGNMENT OF THE GB FRANCHISE AGREEMENTS
1. ASSIGNMENT
GBGF shall have the right, to be exercised within 60 days after the
Effective Date, to assign to CKE all of GBGF's right, title and interest in and
to those GB Franchise Agreements for Green Burrito franchisees who elect not to
convert their franchised restaurants to GBGF's "Grill" concept. CKE agrees to
assume and perform all duties of GBGF under the assigned GB Franchise Agreements
from and after the date each such GB Franchise Agreement is assigned to CKE
("Assignment Date(s)"). GBGF and CKE agree to execute such further documents and
to take such further actions as necessary to effectuate the assignments
contemplated in this Section IV.1.
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2. NOTICE
Following the Assignment Date(s), GBGF shall give written notice of the
assignment to the franchisees under each of the GB Franchise Agreements assigned
to CKE.
3. ONGOING MATTERS
With respect to each GB Franchise Agreement assigned to CKE, from and
after the applicable Assignment Date, CKE shall pay GBGF 40% of all royalty fees
a franchisee is required to pay under the assigned GB Franchise Agreement. Such
royalty fees shall be paid in accordance with the provisions of Section II.3.D.
In addition, the provisions of Section II.3.C. and Sections II.4.-6. shall be
applicable to GBGF and CKE with respect to each GB Franchise Agreement assigned
to CKE.
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IN WITNESS WHEREOF, the parties have duly executed, sealed and
delivered this Agreement as of the day and year first written above.
ATTEST: CKE RESTAURANTS, INC.
By: By:
------------------------------- ---------------------------------
Title: Title:
---------------------------- -----------------------------
Date:
------------------------------
ATTEST: CARL KARCHER ENTERPRISES, INC.
By: By:
------------------------------- ---------------------------------
Title: Title:
---------------------------- -----------------------------
Date:
------------------------------
ATTEST: HARDEE'S FOOD SYSTEMS, INC.
By: By:
------------------------------- ---------------------------------
Title: Title:
---------------------------- -----------------------------
Date:
------------------------------
ATTEST: SANTA BARBARA RESTAURANT GROUP, INC.
By: By:
------------------------------- ---------------------------------
Title: Title:
---------------------------- -----------------------------
Date:
------------------------------
ATTEST: GREEN BURRITO GRILL FRANCHISE
CORPORATION
By: By:
------------------------------- ---------------------------------
Title: Title:
---------------------------- -----------------------------
Date:
------------------------------
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APPENDIX A
DEVELOPMENT SCHEDULE
NUMBER OF DUAL CUMULATIVE NUMBER OF
CONCEPT RESTAURANTS DUAL CONCEPT
TO BE DEVELOPED BY RESTAURANTS TO BE IN
CALENDAR YEAR YEAR END OPERATION BY YEAR END
------------- ------------------- ---------------------
2000 25 233
2001 25 258
2002 20 278
2003 20 298
2004 10 308
For purposes of determining whether the CKR Companies have met their
obligations under this Development Schedule, each CKR Dual Concept Restaurant
shall count as 1 Dual Concept Restaurant for purposes of this Development
Schedule and each Franchised Dual Concept Restaurant developed shall count as
.75 of a Dual Concept Restaurant for purposes of this Development Schedule.
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APPENDIX B
GB FOOD PRODUCTS
BURRITOS
Super Bean Burrito (Rice, beans, guacamole, enchilada sauce & cheese)
Super Meat Burrito (Choice of steak, chicken or carnitas)
Green Burrito (Pork, Green Chile Sauce, cheese & beans)
Meat, Bean & Cheese Burrito (Choice of steak, chicken or carnitas)
Meat & Cheese Burrito (Choice of steak, chicken or carnitas)
Wet Red Burrito (Steak & rice)
Wet Green Burrito (Rice, beans & pork)
Big Ed Burrito
NACHOS
Super Nachos (Choice of steak, chicken or carnitas)
Mini Super Nachos (Smaller version of Super Nachos)
Nachos (Chips with melted Jack & Cheddar Cheese)
SINGLES
Hard Taco
Soft Taco
Bean & Cheese Burrito
Tostada
Cheese Quesadilla
Two Taquitos with Guacamole Fajitas
Chile Relleno
Cheese Enchilada
Taco
Super Taco
COMBINATIONS
Any combination of any of the above
ADDITIONAL ITEMS
Any items offered by GBGF at solo franchise locations
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APPENDIX C
EXISTING DUAL CONCEPT RESTAURANTS
OPERATING TERM DEFERRED INITIAL
LOCATION EXPIRATION FRANCHISE FEE
------------------- -------------- ----------------
#56, Fullerton $ 577
#82, Huntington Beach $4,038
#102, West Covina $4,083
#105, Riverside $3,385
#106, Riverside $2,584
#109, Chino $5,042
#113, Newhall $3,958
#114, Inglewood $3,192
#135, Diamond Bar $4,625
#142, Victorville $1,154
#172, Burbank $1,333
#213, San Fernando $2,916
#222, Sacramento $6,792
#231, Sacramento $3,333
#248, Fontana $1,269
#255, Victorville $6,376
#296, Irvine $2,375
#302, San Gabriel $5,292
#304, Ontario $2,083
#590, Manteca $ 750
#608, Castaic $1,583
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