FRANCHISE AGREEMENT
TABLE OF CONTENTS
I. INTRODUCTION
II. AGREEMENT
1. Definitions
2. Franchise Grant; Term
2.1 Grant
2.2 Term
2.3 No Renewal Right: No Exclusivity
2.4 Continuous Operation
2.5 Best Efforts
3. Consideration for Franchise Grant
4. Management, Control and Corporate Documents of Franchisee
4.1 Managing Director
4.2 Director of Operations
4.3 Substitute Director of Operations
4.4 Restaurant Manager
4.5 Corporate Documents
4.5.1 Single Purpose Entity
4.5 2 Managing Director's Authority
4.5.3 Issuance and Transfer of Shares
4.5.4 Amendments
5. Standards and Uniformity
5.1 Strict Compliance
5.2 The MOD Manual
5.3 Building and Premises
5.3.1 Initial Construction
5 3 2 Repair and Maintenance
5 3.3 Current Image
5.4 Signs
5.5 Equipment
5.6 Vending Machines, Etc.
5 7 Menu Service and Hygiene
5.8 Hours of Operations
5.9 Uniforms
5.10 Advertising and Promotion Materials
5.11 Interference with Employment Relations of Others
5.12 Improvements
5.13 Self-Audit
5.14 Health Problems
5.15 Right of Entry, Inspection and Closure
5.16 Sources of Supply
5.16.1 Authorized Suppliers
5.16.2 Self-Supply
5.16.3 Limit on BKC Responsibility
5. 16.4 Franchisee's Responsibilities
6. Services to Franchisee
6.1 Services Provided By BKC
6.2 Services Not Provided By BKC
6.3 Optional Services
7. Location
7.1 Exclusive Purpose
7.2 Damage to Franchised Restaurant
8. Training and Staffing
8.1 Pre-Opening Training
8.2 New Director of Operations
8.3 Training Program
9. Royalty and Advertising Contribution
9.1 Royalty
9.1.1 Payment of Royalty
9.1.2 Inability to Remit Royalty
9. 2. Advertising and Sales Promotion
9.2.1 Franchisee's Administration of Ad Fund
9.2.2 BKC's Right to Administer Funds
9.2.3 Administration
9.2.4 Compliance with Laws and Policies
9.3 Gross Sales
9.4 Interest and Attorney's Fees
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10. Accounting Procedures; Right of Audit.
10.1 Accounting
10.2 Annual Financial Statements
10.3 Audits
10.4 Release of Financial Information
10.5 Polling
10.5.1 POS Systems
10.5.2 Authorized Polling
10.5.3 Other Information
11. Limitations of Franchise
11.1 Trademarks, Trade Names, Service Marks and Trade Secrets
11.1.1 Registration Assistance by Franchisee
11.1.2 Ownership
11 1.3 Confidentiality of trade Secrets
11.1 4 Registered User Agreements
11.1.5 No Impairment of Marks
11.1.6 Assignment of Righits in Marks
11.1.7 Infringement, Etc.
11.1.8 Registered Marks
11.1 9 Franchisee Name
11.1.10 Registration of Agreement
11.2 Independent Contractor
11.2.1 No Agency
11.2.2 Public Notice of Independence
12. Unfair Competition
13. Insurance; Indemnification
13.1 General Liability Insurance
13.2 Workers Compensation, Etc.
13.3 Indemnity
14. Taxes
14.1 Payment When Due
14.2 Withholding Taxes
14.3 Election
15. Disposal
15.1 Transfer of Interest by Franchisee
15.2 Transfer of Interest by Principals
15.3 Notice of Proposed Transfer
15.4 Right of First Refusal
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15.4.1 Notice; Exercise of Option
15.4.2 No Waiver
15.4.3 Unauthorized Transfer Void
15.4.4 Sale; BKC Consent
15.5 BKC Consent to Transaction
15.5.1Transfer of Substantially All Assets or Transfer of
Stock by Principal
15.5.2 Securities Offerings
15.5.2 1 Compliance with BKC Requirements
15.5.2.2 Submission to BKC
15.5.2.3 Registration Rights: Secondary Offerings
15.5.2.4 BKC ' Expenses
15.5.3 Certain Exceptions
15.6 No Waiver
15.7 Death or Mental Incapacity of Principal
15.8 Corporate Documents
15.9 Assignment by BKC
16. The Principals
16.1 Stock Ownership
16.2 Compliance by Principals
16.3 Guaranty
17. Defaults and Effects of Termination
17.1.1 Events of Default by Franchisee
17.1.2 Event of BKC De fault
1 7.2 Termination
17.3 Effect of Termination
17.4 Post-Termination Option
17.5 Post-Termination Obligations of Franchisee
17.5.1 Options to Purchase Location
17.5.2 Deidentification
17.5.3 BKC Lien
17.5.4 Acceleration of Payments
17.6 Dispute Resolution
18. Restrictive Covenant
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19. Miscellaneous: General Conditions
19.1 Interpretation
19.2 Non-Waiver
19.3 Governing Law/Jurisdiction
19.4 Licenses, Permits. Etc.
19.5 Compliance with Laws
19.6 Remedies
19.7 Severability
19.8 Notices
19.8.1 Notice to BKC
19.8.2 Notice to Franchisee/Principals
19.8.3 Delivery
19.9 Language
19.10 Modification
19.11 Binding Effect
19.12 Currency
19.13 Survival
19.14 Agency
20. Entire Agreement
21. independent Advice
III. SCHEDULE 1
IV. SCHEDULE 2
V. EXHIBIT A - Poland Trademarks
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FRANCHISE AGREEMENT
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Corporate
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AGREEMENT dated 199
Between BURGER KING CORPORATION a company incorporated in Florida,
United States of America with its principal office and place
of business at 00000 Xxx Xxxxxx Xxxx, Xxxxx, Xxxxxxx, Xxxxxx
Xxxxxx of America ("BKC")
AND The party specified as the Franchisee on SCHEDULE 1 attached
hereto (the "Franchisee")
AND The party or parties specified as the Principals on SCHEDULE 1
attached hereto (collectively, the "Principals" and individually,
a "Principal")
INTRODUCTION
A. BKC has developed a system (the "Burger King System") for the
operation of quick service restaurants ( "Burger King Restaurants"). The Burger
King System includes proprietary designs for restaurant buildings, equipment and
decor, a proprietary service format, standardized product and quality
specifications, and such trademarks, service marks and other marks as BKC may
authorize for use in connection with the operation of Burger King Restaurants
(the "Burger King Marks").
B. The Franchisee possesses knowledge and market information concerning
the operation of Burger King Restaurants in the Republic of Poland and the
Franchisee recognizes that BKC has not made any representations concerning the
level and extent of the awareness of the Burger King Marks or the Burger King
System or the likelihood that any such awareness can or will be established in
Poland or as to the availability of local sources of supply in Poland or the
ability of any supplier to meet standards for approval by BKC. The Franchisee
has requested a license to operate a Burger King Restaurant. The Franchisee
represents that BKC has not made, and the Franchisee is not relying upon, any
representation as to the profits and/or sales volumes which Franchisee might be
expected to realize, or costs or levels of costs which Franchisee might be
expected to incur, or the prospects of success for Franchisee or Burger King
Restaurants in Poland.
C. The Franchisee acknowledges and represents to BKC that it is
entering into this Agreement after having made an independent investigation of
BKC and its operations and of market and economic conditions in the Republic of
Poland. The Franchisee represents that BKC has not made, and that the Franchisee
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is not relying upon, any representation as to the profits and/or sales volumes
which Franchisee might be expected to realize, or costs or levels of costs which
the Franchisee might be expected to incur, or the prospects of success for the
Franchisee or Burger King Restaurants in Poland, or the level or extent of the
awareness of the Burger King Marks or the Burger King System or brand in Poland
or the likelihood that any such awareness can or will be established in Poland,
or the availability of local sources of supply in Poland or the ability of any
such local sources of supply to meet standards for approval by BKC. The
Franchisee further represents and agrees that BKC and persons acting on its
behalf have not made, and the Franchisee is not relying upon, any
representations or promises that are not contained in this Agreement.
D. Each of the Principals owns an equity interest in the Franchisee.
AGREEMENT
In consideration of the fees and other sums payable by the Franchisee and
the mutual covenants herein, the parties agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following expressions
shall have the meanings given to them below:
1.1 "Affiliate" means any company which is directly or indirectly
controlled by BKC, controls BKC, or is controlled by a company which in turn
controls BKC, and "control" for these purposes means de facto control.
1.2 "Burger King Marks" has the meaning ascribed to it in Paragraph A of
the introduction.
1.3 "Burger King System" has the meaning ascribed to it in Paragraph A
of the introduction.
1.4 "Current Image" means the then current, BKC approved physical
appearance of new Burger King Restaurants as it relates to signage, fascia,
color schemes, menu boards, lighting, furniture, finishes and other
non-structural matters generally.
1.5 "Franchised Restaurant" means the buildings at the Location and the
business carried out at the Location.
1.6 "Gross Sales" has the meaning ascribed to it in Subparagraph 9.3.
1.7 "Location" has the meaning ascribed to it on SCHEDULE 1.
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1.8 "Director of Operations" has the meaning ascribed to it in
Subparagraph 4.1 and on SCHEDULE 1.
1.9 "Managing Director" has the meaning ascribed to it in Subparagraph
4.3 and on SCHEDULE 1.
1.10 "MOD Manual" means all volumes of the Manual of Operating Data
setting out BKC's standards, specifications and procedures of operation, as
revised from time to time by BKC including both required and recommended.
2. FRANCHISE GRANT TERM.
2.1 GRANT. In reliance upon the application and information furnished by
the Franchisee, and subject to the terms and conditions contained in this
Agreement, BKC grants to the Franchisee a license to use the Burger King System
and the Burger King Marks in the operation of a Burger King Restaurant at that
Location.
2.2 TERM. The license hereby granted shall commence on the date the
Franchised Restaurant opens for business (the "Commencement Date"), and, unless
sooner terminated in accordance with the terms and provisions of this Agreement,
shall continue for the period of years set forth on SCHEDULE 1 hereto (the
"Term").
2.3 NO RENEWAL RIGHT; NO EXCLUSIVITY. The Franchisee acknowledges and
agrees that this license is a license for the operation of a Burger King
Restaurant at the Location only and that the Franchisee has no right to any
exclusive territory or to object to the location of an additional Burger King
Restaurant at a site which is in the immediate proximity of the Franchised
Restaurant and/or in the same trading area of the Franchised Restaurant Subject
to the Restaurant Development Agreement between BKC and International Fast Food
Corporation dated March 14, 1997, (the "Development Agreement"), the development
and location of additional Burger King Restaurants shall be determined by BKC in
its sole business judgment and BKC may develop or franchise additional Burger
King Restaurants anywhere, including sites in the immediate proximity of the
Franchised Restaurant and/or in the same trading area of the Franchised
Restaurant, in its sole business judgment. The Franchisee hereby waives any
right it has, may have, or might in the future have, to oppose such development
and location, and any claim for compensation from BKC in respect of any and all
detriment or los s suffered by it as a result of the development and location of
additional Burger King Restaurants in the immediate proximity of the specified
Location and/or in the same trading area of the Franchised Restaurant.
2.4 CONTINUOUS OPERATION. Franchisee shall continuously operate the
Franchised Restaurant at the Location throughout the full term of this
Agreement. Except as permitted under this Section 2.4, any failure to do so
shall constitute an Event of Default under this Agreement and BKC shall be
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entitled to alI rights and remedies available under Section 17.2 of this
Agreement. Provided, however, that t he Franchisee may temporarily cease
operations for a period of time reasonably necessary to comply with the
requirement of any competent governmental authority that it repair, clean
remodel, or refurbish the Location. The Franchisee may also temporarily cease
operations on national holidays and for a period of time reasonably necessary to
complete repairs or deal with an act of God, a labor strike, civil unrest, or
other emergency situation which would endanger the public or the Franchisee's
employees. However, in the event that any temporary closing or discontinuance of
operation permitted under this Section 2.4 exceeds 180 days, BKC shall have the
right to terminate this Agreement, whereupon all rights granted to Franchisee
under this Agreement shall terminate, without liability to BKC.
2.5 BEST EFFORTS. Franchisee shall use its best efforts to diligently
market and promote the Franchised Restaurant.
3. CONSIDERATION FOR FRANCHISE GRANT. At least seven (7) days before the
Commencement Date, the Franchisee shall pay to BKC the initial franchise fee
described in SCHEDULE 1, which sum shall be fully earned by BKC and
non-refundable upon execution of this Agreement.
4. MANAGEMENT. CONTROL AND CORPORATE DOCUMENTS OF FRANCHISEE.
4.1 MANAGING DIRECTOR. The Franchisee shall, subject to BKC's approval,
appoint an individual as the "Managing Director" who shall be responsible for
the overall management of the Franchisee. The Managing Director and Director of
Operations may be the same individual.
4.2 DIRECTOR OF OPERATIONS. Franchisee shall, subject to BKC's approval,
appoint an individual as the "Director of Operations" who shall be trained in
the Burger King System. The Director of Operations shall be granted the
authority to direct any action necessary to ensure that the day-to-day operation
of the Franchised: Restaurant is in compliance with all agreements with BKC
relating to the Franchised Restaurant. The Director of Operations shall devote
full time and best efforts to the overall supervision of the Franchised
Restaurant and any other Burger King Restaurants owned by the Franchisee as to
which he/she is designated as the "Director of Operations. "
4.3 SUBSTITUTE DIRECTOR OF OPERATIONS. If the position of Director of
Operations becomes vacant for any reason, the vacancy shall be filled within
ninety (90) days by a new Director of Operations approved by BKC.
4.4 RESTAURANT MANAGER. At all times during the Term of this Agreement,
Franchisee shall employ at least one (1) individual (the "Restaurant Manager")
who is responsible for the direct, personal supervision of the Franchise d
Restaurant .
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4.5 CORPORATE DOCUMENTS.
4.5.1 SINGLE PURPOSE ENTITY. Franchisee's sole business activity
shall be the development and operation of Burger King restaurants. The articles
of incorporation, bylaws and other governing documents of Franchisee must
provide that Franchisee is a single purpose entity formed solely for the purpose
of developing and operating Burger King restaurants.
4.5.2 MANAGING DIRECTOR'S AUTHORITY. The articles of incorporation,
bylaws and other governing documents of Franchisee must mandate the designation
of a Managing Director and describe the Managing Director's authority to bind
the Franchisee and to direct any actions necessary to ensure compliance with
this Franchise Agreement and any ancillary agreements.
4.5.3 ISSUANCE AND TRANSFER OF SHARES. The articles of
incorporation, the bylaws and each stock certificate of Franchisee shall
restrict the issuance and the transfer of shares of Franchisee as provided in
Paragraph 15.8 below.
4.5.4 AMENDMENTS. BKC must be immediately provided with any
amendments, shareholder agreements, addenda, revisions or other alterations to
the articles of incorporation, bylaws or constitution of Franchisee. No
amendment to such governing documents may be made, nor may any resolution be
adopted by the board of directors of Franchisee, without the written consent of
an authorized officer of BKC, if such amendment or resolution would (1) change
the description of the Franchisee's purpose or authorized activities; (2) change
the designation of, or the procedures for designating, the Managing Director;
(3) change the authority delegated to the Managing Director; or (4) materially
alter promises or representations contained in the application approved by BKC.
5. STANDARDS AND UNIFORMITY.
5.1 STRICT COMPLIANCE. The Franchisee agrees to comply strictly at all
times with the Burger King System, which Franchisee acknowledges is a
fundamental term of this Agreement and a necessary and reasonable requirement in
the interests of the Franchisee and others operating under the Burger King
System. In particular, the Franchisee shall at all times comply with the
following provisions of this Section 5.
5.2 THE MOD MANUAL. The MOD Manual shall be kept at the Franchised
Restaurant and all changes or additions shall be inserted upon receipt. The
Franchisee agrees that changes in standards, specifications and procedures may
become necessary and desirable from time to time and shall comply with such
modifications, revisions and additions to the MOD Manual as BKC in the good
faith exercise of its judgment believes to be desirable. The information
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contained in the MOD Manual is confidential and the Franchisee shall use the MOD
Manual only in connection with the operation of the Franchised Restaur ant and
other licensed Burger King Restaurants
5.3 BUILDING AND PREMISES.
5.3.1 INITIAL CONSTRUCTION. The Franchised Restaurant shall be
constructed and the premises initially improved in the manner approved by BKC,
and shall be decorated, furnished, and equipped with equipment, furnishings, and
fixtures which meet BKC's specifications and Current Image. The appearance of
the Franchised Restaurant shall not thereafter be altered except as approved by
BKC in writing.
5.3.2 REPAIR AND MAINTENANCE. The Franchisee shall, at its own
expense, continuously throughout the Term of this Agreement, maintain the
Franchised Restaurant in good condition and repair in accordance with BKC's then
current repair and maintenance standards.
5.3.3 CURRENT IMAGE. During the year immediately following the
expiration of one half of the Term of this Agreement (e.g., in the 11th year of
a 20 year term), the Franchisee shall remodel, improve and alter the exterior of
the Franchised Restaurant to conform with the Current Image in effect during the
prior year .
5.4 SIGNS. The Burger King Marks will be displayed only in the manner
and at such locations as are authorized by BKC. The Franchisee agrees to
maintain and display signs conforming to the Current Image. The Franchisee shall
discontinue the use of and destroy such signs as are declared obsolete by BKC.
5.5 EQUIPMENT. Only equipment and equipment layouts approved by BKC
shall be used at the Location. All equipment shall be maintained in a condition
that meets operational standards specified in the MOD Manual, and as equipment
becomes obsolete or inoperable, the Franchisee will replace such items with the
types and kinds of equipment as are then approved for use in new Burger King
Restaurants at the time of replacement. If BKC determines that additional or
substitute equipment is needed in any part of the Location due to a change in
menu items or method of preparation and service, or because of health or safety
considerations, the Franchisee will install the new equipment within such time
as BKC may reasonably specify.
5.6 VENDING MACHINES, ETC. No telephone booths, newspaper racks, juke
boxes, vending machines, games, rides or any other type of machines shall be
installed without the prior written approval of BKC.
5.7 MENU, SERVICE AND HYGIENE. The Franchised Restaurant shall serve all
menu items and brands specified by BKC, and shall not serve any items that are
not set forth in the MOD Manual or otherwise authorized and approved by BKC in
writing. The Franchisee shall adhere to all specifications contained in the MOD
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Manual or as otherwise prescribed by BKC as to ingredients, storage, handling,
method of preparation and service, weight and dimensions of products served, and
standards of cleanliness, health, and sanitation. All food, drinks, and other
items will be served and sold in packaging that meets BKC's specifications. Only
food, paper products, packaging and supplies from sources approved by BKC (which
expression includes sources of both product and distribution) shall be used in
the Franchised Restaurant.
5.8 HOURS OF OPERATION. Subject to the provisions of Paragraph 2.4
above, or unless otherwise authorized or directed by BKC the entire Franchised
Restaurant shall be open for business a minimum of the hours indicated on
SCHEDULE 1 daily, seven (7) days a week, except where prohibited by law or
government regulation. BKC recognizes that considerations peculiar to the
location of the Franchised Restaurant may make it necessary to alter the
aforesaid hours of operation, and BKC will not unreasonably withhold its consent
to do so.
5.9 UNIFORMS. All employees at the Location shall wear uniforms
previously approved by BKC as meeting the design, color and specification as are
from time to time prescribed by BKC.
5.10 ADVERTISING AND PROMOTION MATERIALS. Only such advertising or
promotional materials, slogans or other items as are authorized by BKC in
writing prior to use shall be used, sold, or distributed, and no display or use
of the Burger King Marks shall be made without the prior written permission of
BKC. All materials on which Burger King Marks are used shall bear such notice of
registration or license legend as BKC may specify. The Franchisee agrees to
comply with the advertising and promotional standards established from time to
time by BKC.
5.11 INTERFERENCE WITH EMPLOYMENT RELATIONS OF OTHERS. The Franchisee
will not attempt, directly or indirectly, to entice or induce any employee of
BKC or of an Affiliate of BKC or of another franchisee of BKC to leave such
employment, nor to employ such employee within six (6) months after his or her
termination of employment with such employer, except with the prior written
consent of such employer.
5.12 IMPROVEMENTS. The Franchisee shall notify BKC of any potential
improvements or new features which it identifies as capable of benefitting the
Burger King System. The Franchisee shall not use potential improvements or new
features at the Franchised Restaurant unless authorized by BKC in writing and at
its sole discretion, but BKC is under no obligation to authorize such use. The
Franchisee acknowledges and agrees that all such potential improvements and new
features shall become the exclusive property of BKC without payment of any
consideration to the Franchisee, and BKC is free to evaluate such potential
improvements or new features in its own restaurants and introduce any such
improvements or new features into the Burger King System for the benefit of BKC
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and other franchisees. The Franchisee agrees to execute any additional documents
which BKC may deem necessary to effect or perfect the provisions of this
Paragraph 5.12.
5.13 SELF-AUDIt. The Franchisee shall participate in any self-audit
scheme which may from time to time form part of the Burger King System.
5.14 HEALTH PROBLEMS. The Franchisee shall immediately notify BKC of any
actual or suspected occurrence of any serious communicable disease or infection
at or among staff or customers at the Franchised Restaurant.
5.15 RIGHT OF ENTRY, INSPECTION AND CLOSURE. BKC shall have the
unrestricted right to enter the Franchised Restaurant to conduct such reasonable
activities as it deems necessary to ascertain compliance with this Agreement.
The inspections may be conducted without prior notice at any time when the
Franchisee or any one of its responsible employees or representatives is at the
Franchised Restaurant. The inspections shall be performed in a manner which
minimizes interference with the operation of the Franchised Restaurant. BKC may
require the removal of any items which do not comply with this Agreement at the
Franchisee's cost. In the event that BKC identifies, or reasonably suspects the
existence of, any significant risk to health or safety in any aspect of the
operation at the Location, BKC may require the Franchisee immediately to close
the Franchised Restaurant until the hazard as been eliminated. BKC shall specify
the grounds for taking such action and such steps if any a it believes are
necessary to eliminate the hazard and shall cooperate with the Franchisee to
enable the Franchisee to re-open the Franchised Restaurant as soon as possible.
5.16 SOURCES OF SUPPLY.
5.16.1 AUTHORIZED SUPPLIERS. BKC may require that any item required
for or used in the operation of the Franchised Restaurant shall be previously
approved by BKC in its sole and absolute discretion and that the supplier and
distributor of such items also be previously approved by BKC in its sole and
absolute discretion. The Franchisee shall in such case purchase only from BKC
authorized suppliers and distributors. Should the Franchisee propose an
alternative supplier and distributor, BKC shall evaluate such supplier and
distributor against its then-current criteria, as established by BKC in its sole
discretion, and either approve or disapprove such supplier and distributor. Any
supplier and distributor proposed by the Franchisee may be required to sign a
suitable confidentiality undertaking before BKC's confidential specifications
are disclosed. In approving or disapproving suppliers and distributors, the
Franchisee acknowledges and agrees that BKC may devote such resources and time
as BKC may reasonably determine is necessary to evaluate any such supplier or
distributor in its sole discretion. BKC agrees that it will apply those criteria
in good faith toward the Franchisee. If BKC denies the Franchisee's request for
approval of a supplier or distributor BKC shall advise the Franchisee of the
reasons for its decision. If BKC fails to approve or deny the Franchisee's
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request for approval of a supplier or distributor within thirty (30) business
days then approval shall be deemed to have been given. Approval of any suppler
or distributor by BKC is subject to revocation in its sole discretion.
5.16.2 SELF-SUPPLY. Franchisee may, upon prior written notice to
BKC, invest in BKC approved suppliers and/or distributors to the Franchised
Restaurant or request approval from BKC to become an approved supplier and/or
distributor to the Franchised Restaurant. BKC shall not unreasonably withhold
its approval of the Franchisee as a supplier and/or distributor to the
Franchised Restaurant and/or other Burger King Restaurants. Franchisee expressly
acknowledges and agrees, however, that the Franchisee must meet all of BKC's
then current conditions for supplier and/or distribution agreements.
5.16.3 LIMITS ON BKC RESPONSIBILITY. BKC shall NOT be responsible
for the following:
(a) Arranging, assuring, or facilitating the delivery or
availability o labor, food, paper, equipment, furniture,
fixtures, or any other goods or services in connection with
the operation of the Franchised Restaurant.
(b) Arranging, assuring, or facilitating the delivery or
availability of labor, food, paper, equipment, furniture,
fixtures or any other goods or services in connection with the
operation of the Franchised Restaurant at a reasonable or at
any other particular cost (whether stated as a percentage of
sales or otherwise to the Franchised Restaurant or to the
Franchisee).
5.16.4 FRANCHISEE'S RESPONSIBILITIES. Franchisee shall be
responsible for locating and submitting to BKC for approval, pursuant to Section
5.16.1 above, suppliers and distributors capable of manufacturing and/or
delivering all BKC required goods and services to the Franchised Restaurant on a
consistent and reliable basis.
6. SERVICES TO FRANCHISEE.
6.1 SERVICES PROVIDED BY BKC. BKC, its designee or an Affiliate of BKC
shall periodically advise and consult with the Franchisee in connection with the
operation of the Franchised Restaurant and shall provide to he Franchisee:
(a) The MOD Manual, including all revisions and updates thereto,
which will be loaned to the Franchisee for the term of this Agreement. The
loaned copy of the MOD Manual and other specifications, standard and operating
procedures furnished by BKC shall be written in English, and any translation to
another language shall be at the Franchisee's responsibility and cost.
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Franchisee shall translate the MOD Manual into the native language of the
employees at the Franchised Restaurant upon request by BKC. The delivery of a
copy of the MOD Manual, including all revisions and updates thereto, by BKC to
the Franchisee satisfies and fulfills any obligation BKC may be deemed to have
to provide the Franchisee with use of the Burger King System or expertise
regarding he Burger King System.
(b) A representative of BKC who shall make not less than two (2) one
day visits to Poland per annum to provide the Franchisee with any requested
reasonable operations or marketing guidance and advice. Franchisee shall have
the option to participate, at its sole cost and expense, in any additional
training pro grams offered by BKC to other franchisees generally. Such training
programs shall be at locations designated by BKC.
(c) Communication of new developments, techniques and improvements
of BKC which BKC deems in its sole discretion to be relevant to the operation of
the Franchised Restaurant and which BKC may otherwise make available to all
other franchisees in Europe.
6.2 SERVICES NOT PROVIDED BY BKC. The Franchisee acknowledges and agrees
that compliance by BKC with its obligations under Section 6.1 above shall
satisfy all obligations of BKC to provide operational, marketing, and other
support to the Franchisee, and that any other support provided by BKC shall be
at BKC's sole discretion. The Franchisee further acknowledges and agrees that
BKC shall have no obligation with regard to the establishment, development and
for maintenance of consumer awareness or recognition of the Burger King Marks,
Restaurants or System.
6.3 OPTIONAL SERVICES. BKC may, but shall under no circumstances be
required to, offer the following services and/or assistance to Franchisee, in
BKC's sole discretion:
(a) If requested by Franchisee, BKC may, at its sole and absolute
discretion, provide Franchisee with a pre-opening training program at
Franchisee's sole cost and expense at whatever location BKC may designate in its
sole discretion.
(b) If requested by Franchisee, BKC may, in its sole and absolute
discretion, provide Franchisee with pre-opening and opening supervision and
assistance by personnel of BKC, its designee or an Affiliate of BKC at
Franchisee's sole cost and expense at whatever location BKC may designate in its
sole discretion.
7. LOCATION.
7.1 EXCLUSIVE PURPOSE. During the term of this Agreement the Location
shall be used exclusively for the purpose of operating a Burger King Restaurant.
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7.2 DAMAGE TO FRANCHISED RESTAURANT. In the event of the building being
damaged or destroyed by fire or any other peril, or required to be repaired or
altered by any competent authority, the Franchisee shall at its own expense
repair or reconstruct the building within a reasonable time to reflect the then
Current Image of Burger King Restaurants, having first submitted to BKC all
plans and specifications related thereto for prior approval. Where the
Franchised Restaurant is insured by a person other than the Franchisee, the
Franchisee's obligations shall be limited to taking such steps as are reasonably
available to the Franchisee to assure that any insurance moneys ar paid out in
accordance with this subparagraph. Notwithstanding the foregoing, if (a) the
building is leased, (b) the Franchisee is prohibited under the terms of the
applicable lease from repairing or reconstructing the building as provided
above, and (c) the Franchisee has exhausted its best efforts to convince the
landlord to consent to such repair or reconstruction, then the Franchisee shall
be released from its obligations under this Paragraph 7.2 and this Agreement
shall terminate.
8. TRAINING AND STAFFING.
8.1 PRE-OPENING TRAINING. Before the Franchised Restaurant opens, the
Director of Operations and such members of the Franchisee's staff charged with
the responsibility for the day to day operation of the Franchised Restaurant as
BKC may determine must have successfully completed BKC's training program at
such location in the U.S. or elsewhere as may be designated by BKC. Such members
of t e Franchisee's restaurant staff as BKC may determine shall undertake and
complete continuing raining programs from time to time as may be directed by BKC
in order to implement current operational standards. There shall be no charge
for participation in the training programs, but the Franchisee shall be
responsible for all travel and living expenses, all compensation of the
Franchisee's employee while enrolled in the training program, and any other
personal expenses incurred.
8.2 NEW DIRECTOR OF OPERATIONS. Any new Director of Operations as BKC
may approve shall successfully complete the above program before taking up such
position.
8.3 TRAINING PROGRAM. The Franchisee shall implement a training program
for Franchised Restaurant employees in accordance with training standards and
procedures prescribed by BKC and shall staff the Franchised Restaurant at all
times with a sufficient number of trained employees including the minimum number
of managers required by BKC who have completed BKC's training program at an
accredited location.
9. ROYALTY AND ADVERTISING CONTRIBUTION.
9.1 ROYALTY.
9.1.1 PAYMENT OF ROYALTY. Except as otherwise provided in Section 5
3 of the Development Agreement, by the fifteenth (15th) day of each month, the
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Franchisee shall deliver to BKC a return of Gross Sales for the preceding month
and pay to BKC or its designee a royalty for the use of the Burger King Marks an
the Burger King System calculated by applying the percentage set forth in
SCHEDULE 1 against the Gross Sales for the preceding calendar month. All
royalties shall be paid by the Franchisee to BKC or its designee in United
States currency into such bank account in the United States of America or
elsewhere as BKC shall designate by prior written notice to the Franchisee. Such
payments shall be made by such method as BKC may from time to time stipulate
including direct debit, in accordance with applicable law. Each conversion from
local currency to United States currency shall be at the maximum selling rate of
exchange quoted by Citibank, N.A. in New York, New York, U.S.A., or at the
maximum selling rate of a nationally recognized bank in the country where the
Franchised Restaurant is located, at the sole discretion of BKC, as of the last
bank trading day of the month on which the royalty payment is based. The
Franchisee will, at its expense, make all necessary and appropriate applications
to such governmental authorities as may be requested by BKC or as may be
required for transmittal and payment of United States currency to BKC.
9.1.2 INABILITY TO REMIT ROYALTY. In the event that the Franchisee
shall at any time be prohibited from making any payment in the United States and
in United States currency, the Franchisee shall immediately notify BKC of this
fact and such payment shall thereupon be made at such place and in such currency
as may be selected by BKC and acceptable to the appropriate governmental
authorities of the country in which the Franchised Restaurant is located, all in
accordance with remittance instructions furnished by BKC. If, having pursued
every reasonable endeavor, the parties are thereafter unable to secure any
method of payment to BKC as required in Subparagraph 9.1.1 above, then BKC may,
in its sole discretion, either (a) accept subsequent payments in a manner and
currency acceptable to BKC in its sole discretion, or (b) by one-hundred eighty
(180) days prior written notice to the Franchisee, immediately terminate this
Agreement without any claim being mad by either party against the other in
respect to such termination. The acceptance by BKC of; ny payment pursuant to
Subparagraph 9.1.2(a) above shall not excuse the Franchisee from its obligation
to pay all subsequent payments as required under Subparagraph 9.1.1 and BKC
remain free to exercise its right under Subparagraph 9.1.2(b) as each monthly
royalty payment comes due.
9.2 ADVERTISING AND SALES PROMOTION.
9.2.1 FRANCHISEE'S ADMINISTRATION OF AD FUND. Pursuant to the terms
of the Ad Fund Agreement dated March 14, 1997 between the Franchisee and BKC,
the Franchisee shall expend monthly, in the country where the Franchised
Restaurant is located, monies for advertising, sales promotion and public
relation services for he benefit of Burger King Restaurants in the country where
the Franchised Restaurant is locate, including creative, production, media and
clearance costs of advertising and sales promotion materials, and marketing
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research expenses directly related to the development and evaluation of the
effectiveness of advertising and sales promotion. (SUBJECT TO A PENDING REQUEST
FOR CONFIDENTIAL TREATMENT)
9.2.2 BKC'S RIGHT TO ADMINISTER FUNDS. Notwithstanding the language
in Subparagraph 9.2.1 above, BKC and the Franchisee agrees that, in the event
BKC develops company-owned Burger King Restaurants directly or through a
subsidiary or joint venture in the country where the Franchised Restaurant is
located or franchises Burger King Restaurants in the country where the
Franchised Restaurant is located to someone other than the Franchisee, BKC shall
have the right to terminate the Ad Fund Agreement pursuant to its terms and
require that the Franchisee pay to BKC or its designee by the fifteenth (15th')
day of each month, in the currency of the country where the Franchised
Restaurant is located an amount equal to the amount calculated by applying the
advertising percentage stated in SCHEDULE 1 to the Gross Sales for the preceding
calendar month. Any monies received by BKC under this Subparagraph shall be
administered by BKC as provided in Subparagraph 9.2.3 below. In the event BKC
requires and the Franchisee makes these payments, the direct expenditure
obligation of Subparagraph 9.2.1 above will be deemed fully satisfied.
9.2.3 ADMINISTRATION. Any amounts received by BKC pursuant to
Subparagraph 9.2.2 above, less administrative expenses and any applicable taxes,
will be combined with payments from other Burger King Restaurants to form an ad
fund which will be used for (a) market research expenditures directly related to
the development and evaluation of the effectiveness of advertising and sales
promotions, (b) creative, production and other costs incurred in connection with
the development of advertising sales promotions and public relations, both in
the market area of the Franchised Restaurant as reasonably defined from time to
time by BKC, and on a national basis and (c) various methods of delivering the
advertising or promotional message, including without limitation, television,
radio, outdoor and print. The allocation of the Advertising Contribution between
international, national, regional, and local expenditures shall be made by BKC
in its sole business judgment. All general and administrative expenses and
overhead associated with the ad fund, including salaries of relevant BKC
employees, shall be paid out of the assets of the ad fund. The Franchisee is
encouraged to participate in the planning of advertising, sales promotions and
public relations for the Franchised Restaurant, but all expenditures for such
matters shall be the sole discretion of BKC. In addition to the percentage of
Gross Sales, the Franchisee agrees to transfer to BKC or its designee for
inclusion in the market fund all advertising or promotional allowances given by
suppliers of products which are sold in the Franchised Restaurant uncle a brand
name. Such payment to be made to BKC or its designee by the fifteenth (15th) day
of the month following receipt of the said allowance. The market fund will be
run by BKC directly or by delegation to its designee.
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9.2.4 COMPLIANCE WITH LAWS AND POLICIES. The Franchisee agrees to
adhere to all applicable statutory regulations and to KC's advertising, sales
promotion and public relations standards and all advertisements and other
material published, circulated or exhibited shall first be approved by BKC. The
Franchisee agree immediately to remove or discontinue the use of any
objectionable advertising material upon receiving notice from BKC.
9.3 GROSS SALES. The term "Gross Sales" as used in this Agreement
includes all sums charged for goods, merchandise, or services sold at or from
the Location. The sale of Burger King products away from the Location is not
authorized; however, should any such sales be approved in the future, they will
be included within the definition of Gross Sales. Gross Sales shall not include
any value added tax, turnover tax, or any similar tax collected by the
Franchisee from customers based upon sales.
9.4 INTEREST AND ATTORNEY'S FEES. The Franchisee shall pay to BKC
interest (in U.S. dollars in the United States) upon any sum overdue under this
Agreement, calculated at three (3) percent per annum above the prime rate of
merest charged by Citibank, N.A., against the overdue sum expressed in U.S.
dollars. By way of exception, any overdue sum required to be paid in a currency
other than U.S. dollars shall bear merest at three (3) percent per annum above
the base lending rate of any nationally recognized bank within the relevant
country designated by BKC. Nothing in this paragraph is meant to require the
Franchisee to pay interest at a rate greater than that allowed by applicable law
and, in the event that this paragraph would have such an effect, the Franchisee
shall only be required to pay interest at the maximum rate allowable by law. If
an excess amount is inadvertently collected, it shall be applied to reduce the
amounts due under Subparagraph 9.1.1 above. The Franchisee shall pay all costs,
including reasonable attorney's fees, incurred by BKC in enforcing the tern s of
this Agreement.
10. ACCOUNTING PROCEDURES; RIGHT OF AUDIT.
10.1 ACCOUNTING. The Franchisee agrees to keep complete records of the
business and shall furnish BKC with monthly and fiscal year-to-date profit and
loss statements for the Franchised Restaurant in the format prescribed by BKC.
The Franchisee shall also submit to BKC quarterly balance sheets for the
Franchisee itself and not merely of the Franchised Restaurant, the first of
which shall be for the period ending forty-five (45) days after the expiration
of the first calendar quarter after the Franchised Restaurant opens. All profit
and loss statements and balance sheets shall be submitted to BKC within
fifty-five (45) days after the end of the period covered by the report in a form
acceptable to BKC. In addition, the Franchisee shall submit to BKC copies of tax
returns relating to the Franchisee's sales at the Franchised Restaurant at the
same time the returns are filed, and such other records as BKC may reasonably
request from time to time.
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10.2 ANNUAL FINANCIAL STATEMENT. Within ninety (90) days after the close
of each fiscal year and at any time on request, the Franchisee shall submit a
full disclosure of all shareholders in the Franchisee, and of all persons with
an interest in the Franchised Restaurant. ln addition, the Franchisee shall
furnish an annual financial statement for the Franchisee and not merely the
Franchised Restaurant, which statement shall be certified by a Certified Public
Accountant or equivalent.
10.3 AUDITS. The Franchisee agrees that BKC or its representatives, at
BKC's expense shall, at all reasonable times, have the right to examine or audit
the books and accounts of the Franchisee. The Franchisee shall retain sales
records for a period of at least twenty-four (24) months. In the event the
reported Gross Sales are less than the actual Gross Sales, the Franchisee shall
make an additional payment to BKC in the amount of the discrepancy. In the event
that the discrepancy exceeds two percent (2%), th Franchisee shall also
reimburse BKC for all costs of the audit including travel, lodging and wages.
10.4 RELEASE OF FINANCIAL INFORMATION. BKC is authorized to release
financial and operational information on the Franchised Restaurant as part of
any disclosure of information on the Burger King System in the country where the
Franchised Restaurant is located or on the Burger King System as a whole. Except
as required by law or regulation, BKC shall not specifically identify the
Franchised Restaurant to which this information relates.
10.5 POLLING.
10.5.1 POS SYSTEMS. The Franchisee shall at all times operate at the
Franchised Restaurant POS systems previously approved by BKC as meeting its
performance standards and other criteria including compatibility with BKC's
polling standards, provided that such POS system operates in accordance with
applicable law. BKC shall have the right to call upon the Franchisee to upgrade
the POS systems as BKC may deem necessary or desirable in the interest of proper
administration of restaurants operating under the Burger King System, and the
Franchisee shall comply with such requirement within such reasonable time as may
be specified by BKC. Such authorized POS systems shall at all times be used to
record and process such information as BKC may from time to time require, and
such information shall be maintained in such format and kept available for
access by BKC on such POS system for such minimum period as BKC may require. The
Franchisee she effect the polling operation at such time or times as may be
required by BKC, but BKC may itself initiate polling whenever it deems
appropriate. BKC shall have no obligation to provide Franchisee with
information, consultation or advice concerning POS systems or accounting or
other financial systems for the operation of Franchisee's business.
10.5.2 AUTHORIZED POLLING. The Franchisee shall permit BKC or its
duly authorized agents at all times and from time to time to poll any
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information contained in such POS system. For the purposes of this Agreement the
term "poll" or "polling" means any process acceptable to BKC by which
information o data may be transmitted from a POS system operated by the
Franchisee or its agents into a computer or system operated by BKC, it agents or
Affiliates. If for any reason polling is not practicable, BKC may require the
Franchisee to download such information into machine readable form compatible
with the system operated by BKC, its agents or Affiliates and to derive such
information to BKC by such method and within such timescale as BKC may
reasonably determine.
10.5.3 OTHER INFORMATION. The Franchisee shall if requested and as
long as polling is not possible provide to BKC such information as BKC may from
time to time require regarding product volumes and production.
11. LIMITATIONS OF FRANCHISE.
11.1 TRADEMARKS, TRADE NAMES, SERVICE MARKS AND TRADE SECRETS.
11.1.1 REGISTRATION ASSISTANCE BY FRANCHISEE. The Franchisee shall,
upon request and at no expense to the Franchisee assist BKC in perfecting and
obtaining registration of unregistered Burger King Marks.
11.1.2 OWNERSHIP. The Franchisee acknowledges that ownership of all
right, title and interest to the Burger King System and the Burger King Marks
(registered and unregistered) is and shall remain vested solely in BKC. The
Franchisee acknowledges the uniqueness of the Burger King System an that the
Franchisee has had no part in its creation or development, no prior knowledge
of, and no proprietary or other rights or claims in or to any element of the
Burger King System or the Burger King Marks.
11.1.3 CONFIDENTIALITY OF TRADE SECRETS. The Franchisee agrees that
all materials made available to the Franchise and all disclosures made to the
Franchisee, and not to the general public, by or at the direction of BKC at any
time before or during the term of this Agreement, including the MOD Manual in
its entirety and any translations thereof, are to be considered trade secrets of
BKC for purpose of this Agreement and shall be kept confidential and used by the
Franchisee only in the operation of the Franchised Restaurant and other licensed
Burger King Restaurants. The Franchise agrees not to divulge any of the trade
secrets to any person other than the Franchisee's employees and then only to the
extent necessary for the operation of the Franchised Restaurant, an d not to
permit anyone to reproduce, copy or exhibit any portion of the MOD Manual or any
other confidential or proprietary information received from BKC, except for
translating from English to the language of the country in which the Franchised
Restaurant is located, if the Franchisee's employees cannot read and understand
English.
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11.1.4 REGISTERED USER AGREEMENTS. The Franchisee shall, whenever
requested by BKC, enter into one or more Registered User Agreements authorizing
and permitting the use of the Burger King Marks as provided in this Agreement
and to execute any documents and/or do such things as are requested to assist
BKC in connection with registration of any Registered User Agreement. Nothing in
any Registered User Agreement shall be construed as giving the Franchisee the
right to transfer or sublicense the Franchisee's right to use the Burger King
Marks.
11.1.5 NO IMPAIRMENT OF MARKS. The Franchisee will not directly or
indirectly, at any time during the term of this Agreement or thereafter, do or
cause to be done any act or thing disputing, attacking or in any way impairing
the validity of and BKC's right, title or interest in the Burger King Marks and
the Burger King System.
11.1.6 ASSIGNMENT OF RIGHTS IN MARKS. The Franchisee hereby assigns
to BKC such rights (if any) as the Franchisee may hereafter acquire in any of
the Burger King Marks or the Burger King System and shall execute such documents
and do such acts at the cost of BKC as may be necessary to perfect such
assignment.
11.1.7 INFRINGEMENT, ETC. The Franchisee shall immediately notify
BKC of all infringements or imitations of the Burger King Marks which come to
the Franchisee's attention, and all challenges to the Franchisee's use c f any
of the Burger King Marks. BKC will take such action as it in its sole discretion
deems appropriate to prevent unauthorized persons from using the Burger King
Marks. The Franchisee agrees to cooperate in the prosecution of any action to
prevent the infringement, imitation, illegal se or misuse of the Burger King
Marks or the Burger King System and agrees to be named as a party in any such
action if so requested by BKC. BKC agrees to bear the legal expenses and costs
incidental to the Franchisee's participation in such action except for the cost
and expenses of the Franchisee's personal legal counsel if the Franchisee elects
to be represented by counsel of the Franchisee's own choosing. The Franchisee
shall not institute any legal action or other kind of proceeding based upon
Burger King Marks or the Burger King System without the prior written approval
of BKC.
11.1.8 REGISTERED MARKS. BKC represents that the marks listed on
Exhibit A are registered or applied for, but makes no expressed or implied
warranty with respect to the validity of any of the Burger King Marks. The
Franchisee accepts that the Franchisee may conduct business utilizing some
Burger King Marks which have not been registered and that registration may not
be granted for the unregistered marks and that some of the Burger King Marks may
be subject to use by third parties unauthorized by BKC.
11.1.9 FRANCHISEE NAME. In the adoption of a trade, corporate or
partnership name, the Franchisee shall not use any of the Burger King Marks, any
variations or abbreviations or any words confusingly similar to any of the
Burger King Marks.
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11.1.10 REGISTRATION OF AGREEMENT. If local law requires the
registration or recordation of this Agreement with any local governmental
agency, administrative board or banking agency, Franchisee shall request BKC's
consent to do so. If BKC grants its consent, Franchise shall effectuate such
registration(s) or recordation(s) at its sole cost and expense in strict
compliance with local laws as soon as possible.
11.2 INDEPENDENT CONTRACTOR.
11.2.1 NO AGENCY. The franchisee is an independent business entity
and is not an agent, partner, joint venture, representative, or employee of BKC,
and no express or implied fiduciary relationship exists between the parties. The
Franchisee shall not attempt to bind or obligate BKC in any way nor shall the
Franchisee represent that the Franchisee has any right to do so. BKC shall have
no control over the terms and conditions of employment of the Franchisee's
employees.
11.2.2 PUBLIC NOTICE OF INDEPENDENCE. In all public records and in
the Franchisee's relationship with other persons, on stationery, business forms
and cheques, the Franchisee shall indicate the independent ownership of the
Franchised Restaurant and that the Franchisee is a licensee of BKC. The
Franchisee shall exhibit on the Location in such places as may be designated by
BKC, a notification that the Franchised Restaurant is operated by an independent
operator under license from BKC.
12. UNFAIR COMPETITION. The Franchisee agrees, during the term of this
Agreement and thereafter, not to directly or indirectly engage in the operation
of any restaurant, except as licensed by BKC, which utilizes or duplicates the
Burger King System or any part thereof.
13. INSURANCE, INDEMNIFICATION.
13.1 GENERAL LIABILITY INSURANCE. Franchisee agrees to carry at its
expense during the Term of this Agreement Comprehensive General Liability
insurance, including Products Liability and Broad Form Contractual Liability, in
an amount which is at all times the local equivalent of not less than One
Million U.S. Dollars (U.S. $1,000,000.00) per occurrence for bodily injury and
Five Hundred Thousand U.S. Dollars (U.S. $500,000.00) per occurrence for
property damage, or in such increased amounts as BKC may reasonably request from
time to time during the Term of this Agreement. Each policy will name BKC, and
its subsidiaries, affiliated and parent companies as an additional insured, and
will provide hat the policy cannot be canceled without thirty (30) days prior
written notice to BKC, will insure against the liability of BKC for both its and
Franchisee's acts or omissions, and will insure the contractual liability of
Franchisee under paragraph 13.3 Additionally, Franchisee agrees to carry, at
Franchisee's expense, umbrella coverage in an amount which is at all times the
equivalent of One Million U.S. Dollars (U.S. $1,000,000) over the basic
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Comprehensive General Liability insurance per restaurant; except that if
Franchisee owns more than ten (10) Burger King Restaurants, the umbrella
coverage applicable to all such restaurants need not exceed an mount which is at
any time in excess of the equivalent of Ten Million U.S. Dollars (U.S.
$10,000,000). The insurance afforded by the policy or policies respecting
liability shall not exclude claims, actions or demands brought in the United
States or anywhere else outside the country in which the Franchised Restaurant
is located and shall not be limited in any way by reason of any insurance which
may be maintained by BKC prior to the Commencement Date, Franchisee shall
furnish to BKC Certificates of Insurance reflecting that the insurance coverage
is in effect pursuant to the terms of this Agreement. All policies shall be
renewed, and a renewal Certificate of Insurance mailed to BKC at its main
office, or at such other location as may be specified by BKC prior to the
expiration date of the policies. This obligation of Franchisee to maintain
insurance is separate and distinct from its obligation to indemnify BKC under
the provisions of Paragraph 13.3 and shall not be affected by reason of the
negligence of or a claim of negligence against BKC.
13.2 WORKERS COMPENSATION, ETC. Franchisee agrees to participate in any
governmental Worker's Compensation Program, unemployment insurance program,
hospitalization program and any other similar program which may be required by
the laws of the country where the Franchised Restaurant is located.
13.3 INDEMNITY. Franchisee is responsible for all losses or damages and
contractual liabilities to third persons arising out of or in connection with
possession, ownership or operation of the Franchised Restaurant, and for all
claims or demands for damages to property or for injury, illness or death of
persons directly or indirectly resulting therefrom. Franchisee agrees to defend,
indemnify and save BKC, and its subsidiaries, affiliated and parent companies
harmless of, from and with respect to any such claims, demands, losses,
obligations, costs, expenses, liabilities, debts or damages, unless they are
caused by the gross negligence of BKC itself BKC's right to indemnity under this
Agreement shall arise and be valid notwithstanding that joint or concurrent
liability may be imposed on BKC by statute, ordinance, regulation or other law.
The indemnification of BKC by Franchisee for Franchisee's own negligence, acts
or omissions, shall not be limited by the amount of insurance required under
Paragraph 13.1, nor upon a claim that BKC is responsible for Franchisee's act or
omissions or that Franchisee was acting in the capacity of an agent of BKC. This
indemnity obligation shall include, but not be limited to, claims related to the
employment of Franchisee's employees. This obligation of Franchisee to indemnify
and defend BKC is separate and distinct from its obligation to maintain
insurance under the provisions of Paragraph 13.1.
BKC shall notify Franchisee of any claims, and Franchisee shall be
given the opportunity to assume the defense of the matter, however, BKC shall
have the right to participate in the defense of any claim or action against it
which is assumed by Franchisee, at BKC's own cost and expense. If Franchisee
fails to assume the defense, BKC may defend the action in the manner it deems
19
appropriate, and Franchisee shall pay to BKC all costs, including attorney's
fees, incurred by BKC in effecting such defense, in addition to any sum which
BKC may pay by reason of any settlement or judgment against BKC. No settlement
of any claim against BKC shall be made by Franchisee which is in excess of the
amount of insurance referred to in Paragraph 13.1 or which would subject BKC to
liability in any amount not covered by such insurance without the prior written
consent of BKC. Any final judicial determination of the negligence of BKC in an
amount in excess of the policy limits of insurance required under Paragraph 13.1
shall be the responsibility of BKC.
14. TAXES.
14.1 PAYMENT WHEN DUE. The Franchisee shall pay when due all taxes levied
or assessed by reason of the Franchisee's possession, ownership or operation of
the Franchised Restaurant or items loaned to the Franchisee by BKC including any
value added tax. In the event of any bona fide dispute as to the liability for a
tax assessed against it, the Franchisee may contest the validity or the amount
of the tax in accordance with the procedures of the taxing authority, however,
the Franchisee shall not permit a tax sale or seizure against the premises or
equipment.
14.2 WITHHOLDING TAXES. lt is understood and agreed by the parties that
any and all tax liabilities arising out of this Agreement will be paid by the
party owing such taxes. ln the event that BKC incurs withholding tax liability
in the country in which the Franchised Restaurant is located as a result of the
franchise fee or the royalty payments set forth above, it shall be the
responsibility and obligation of the Franchisee to withhold from such franchise
fee or royalty payments such withholding taxes as are required by law. The
Franchisee shall provide BKC with corresponding receipts from the relevant
taxing authorities to evidence such payments or amounts withheld. Taxes, such as
income taxes of the Franchisee, which are based on profits from operation of the
Franchised Restaurant are the sole responsibility of the Franchisee.
14.3 ELECTION. Where the law permits an election regarding the treatment
of any supply or deemed supply under this Agreement for the purposes of any
value added or other tax chargeable thereon, the Franchisee shall make or join
in any such election as BKC may from time to time require.
15. DISPOSAL.
15.1 TRANSFER OF LNTEREST BY FRANCHISEE. Except with the prior written
consent of an authorized officer of BKC, Franchisee shall not (a) directly or
indirectly sell, assign, convey, give away, mortgage, pledge, hypothecate,
charge, or otherwise transfer or encumber its rights or obligations under this
Agreement, or assign any of Franchisee's rights or delegate any of its duties
hereunder; (b) sell, issue, offer, transfer, convey, give away, or otherwise
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grant or deliver any additional equity interests in the Franchisee, or (c) sell,
assign, transfer, convey, or give away substantially all of the assets of the
Franchised Restaurant.
15.2 TRANSFER OF INTEREST BY PRINCIPALS. Except with the prior written
consent of an authorized officer of BKC, no Principal shall directly or
indirectly sell, assign, convey, give away, mortgage, pledge, hypothecate,
charge, or otherwise transfer or encumber any legal or beneficial equity
interest in Franchisee.
15.3 NOTICE OF PROPOSED TRANSFER. Any proposed transferor shall notify
BKC in writing of any proposed transfer of an interest referred to in Paragraph
15.1 or 15.2, as applicable, before the proposed transfer is to take place, and
shall provide such information and documentation relating to the proposed
transfer as BKC may reasonably require.
15.4 RIGHT OF FIRST REFUSAL.
15.4.1 NOTICE; EXERCISE OF OPTION. In the event Franchisee or the
Principals wish to accept a bona fide offer from a third party to purchase all
or substantially all of the assets constituting the Franchised Restaurant or of
the majority of the voting stock of the Franchisee, the proposed transferor(s)
shall give BKC written notice setting forth the name and address of the
prospective purchaser, the price and terms of the offer together with a
franchisee application completed by the prospective purchaser, a copy of the
Purchase and Sale Agreement, executed by both the seller and purchaser, and all
exhibits, copies of any real estate purchase agreement or agreements, proposed
security agreements and related promissory notes, assignment documents, and any
other information that BKC may request in order to evaluate the offer. BKC or
its designee shall then have the prior option to purchase the interests covered
by the offer at the price and upon the same terms of the offer. If the
consideration is not money, the purchase price shall be the cash equivalent of
the fair market value of the consideration. BKC shall have twenty (20) business
days after receipt of the notice of offer and the furnishing of all reasonably
requested information within which to notify Franchisee or the owners, as
applicable, of BKC's intent to exercise its right hereunder. Silence on the part
of BKC shall constitute rejection. If BKC rejects the offer, Franchisee shall
have 90 days to sell the Franchised Restaurant upon the terms offered to BKC,
subject to the approval of BKC a s required below. If the proposed sale includes
assets of Franchisee not related to the operation of franchised Burger King
Restaurants, BKC may, at its option, elect to purchase only the assets related
to the operation of franchised Burger King Restaurants and an equitable purchase
price shall be allocated to each asset included in the proposed sale. A bona
fide offer from a third party includes any transfer, conveyance, assignment,
consolidation, merger or any other transaction in which legal or beneficial
ownership of the franchise granted by this Agreement is vested in other than the
Franchisee.
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15.4.2 NO WAIVER. The election by BKC not to exercise its right of
first refusal as to any offer shall not affect its right of first refusal as to
any subsequent offer.
15.4.3 UNAUTHORIZED TRANSFER VOID. Any sale, attempted sale,
assignment, or other transfer of the interests described in Subparagraph 15.4.1
without first giving BKC the right of first refusal described above shall be
void and of no force and effect, and shall constitute an Event of Default under
Paragraph 17.1(k).
15.4.4 SALE; BKC CONSENT. If BKC does not exercise its option under
Subparagraph 15.4.1, Franchisee may conclude the sale to the purchaser who made
the offer provided BKC's consent to the assignment or sale be first obtained as
provided below.
15.5 BKC CONSENT TO TRANSACTION. BKC may impose reasonable conditions on
its consent to the transfers contemplated in Subparagraphs 15.1 and 15.2 above.
BKC is under no obligation to consent to the encumbrances contemplated in
Subparagraphs 15.1 and 15.2 above, and may deny its consent to such encumbrances
in its sole discretion.
15.5.1 TRANSFER OF SUBSTANTIALLY ALL ASSETS OR TRANSFER OF STOCK BY
PRINCIPAL. Reasonable conditions in connection with (i) a transfer of the
Franchisee's rights under this Agreement, the transfer of substantially all of
the Franchisee's assets, or the delivery or grant of any additional equity
securities, all pursuant to Subparagraph 15.1 above, or (ii) the transfer of the
shares of the Franchisee pursuant to Subparagraph 15.2 above, shall include,
without limitation, each of the following:
(a) All of the Franchisee's accrued monetary
obligations to BKC and its Affiliates must be paid at the time of the transfer;
(b) The Franchisee must not be in default under this
Agreement or any other agreement with BKC or its Affiliates at the time of
transfer;
(c) The transferee (and, if applicable, all owners of
the transferee), must complete BKC's then current franchisee application
procedures and meet all of BKC's then current criteria for approval as a BKC
franchisee, including financial, character, managerial, credit, operational, and
legal standards;
(d) The transferee (and, if applicable, all owners of
the transferee) must at BKC's option enter into (i) a written agreement, in a
form acceptable to BKC, assuming (or guaranteeing) full performance of all
obligations of the Franchisee under this Agreement, (ii) a substitute Franchise
Agreement, for a term ending on the expiration date of this Agreement, in BKC's
22
then current form, except that royalty and advertising contribution or
expenditure rates shall be the same as are provided for in this Agreement, and
(iii) such ancillary agreements as BKC may require;
(e) The Franchisee (and, if applicable, each owner of
the Franchisee) must execute a general release, in a form acceptable to BKC, of
any and all claims against BKC, its Affiliates, and their respective officers,
directors, agents, and employees;
(f) The transferee, its Director of Operations, and
its Restaurant Manager must complete, at the transferee's expense, any
applicable orientation and training programs required by BKC at the time of
transfer;
(g) BKC shall approve the terms and conditions of the
sale which affect the sufficiency of cash flow from the business after payment
of debt service necessary for reinvestment in the business for refurnishing,
maintaining, and remodeling the Location;
(h) The transferor must pay the transfer fee set forth
on SCHEDULE 1 in consideration of BKC's expenses in reviewing the proposed
transfer;
(i) The transferee must meet with representatives of
BKC in Miami, Dade County, Florida, U.S.A., or such other location as may be
designated by BKC;
(j) The Franchisee shall execute all documents
necessary to cancel the entries of the Franchisee as a registered user and shall
cooperate with BKC in effecting the cancellation of entries with the relevant
registry of the Franchisee as a registered user.
(k) The transferee shall, if BKC requests, enter into
one or more registered user agreements authorizing and permitting the use of the
Burger King Marks referred to in the agreements.
(l) The transferor shall be jointly and severally
liable with the transferee (and, if applicable, each owner of the transferee) to
BKC for future royalty and advertising payments due under this Agreement if and
so long as any part of the purchase money consideration remains owing from the
transferee to the transferor.
15.5.2 SECURITIES OFFERINGS. Franchisee represents and agrees that:
15.5.2.1 COMPLIANCE WITH BKC REQUIREMENTS. In connection with
any future offerings of debt or equity securities, Franchisee will comply with
all of BKC's then current requirements with respect to such offerings. Without
limiting the foregoing, in addition to BKC's then-current requirements
23
applicable to BKC's franchisees and their principals (or owners) generally, the
requirements applicable to Franchisee will include the following: immediate
written notice to BKC of any proposed securities offering (which notice in any
event shall be no later than the time when a proposed letter of intent,
memorandum of understanding or similar document is exchanged with any person
respecting the underwriting or placement of securities of the Franchisee);
submission, before or simultaneously with submission to the U.S. Securities and
Exchange Commission ("SEC"), (or similar governmental agency of any other
jurisdiction in which securities are offered), of registration statements and/or
prospectuses to BKC for review in connection with trademark usage, inclusion of
disclaimers, and otherwise; the execution by the principals and by underwriters,
if any, of certificates required by BKC, and the execution of the Franchisees
and the Principals of an indemnity of BKC, its affiliates, agents, attorneys and
employees against any liability arising from or in connection with the offering.
Within ten (10) business days after BKC's receipt of a copy of a registration
statement filed with the SEC and which BKC wishes to review, BKC shall furnish
the Franchisee with its comments, if any, on the prospectus, provided that
failure of BKC to comment shall not relieve the Franchisee of its obligations to
include in every prospectus such disclaimers as are required by BKC. BKC's
then-current general requirements for offerings of equity securities shall also
apply to offerings of debt securities by the Franchisee unless and until
separate requirements are articulated by BKC for debt and equity securities
offerings.
15.5.2.2 SUBMISSION TO BKC. Franchisee shall
simultaneously file with BKC all reports and other documents that Franchisee may
be required to file with the SEC pursuant to the Securities Exchange Act of 1934
and the rules and regulations promulgated thereunder, or with, any governmental
agency pursuant to the laws and regulations of any other jurisdiction in which
securities are offered, as and when due.
15.5.2.3 REGISTRATION RIGHTS: SECONDARY OFFERINGS.
Franchisee agrees that it will not grant additional registration rights or
modify any registration rights previously granted without prior written notice
to BKC. The Franchisee further agrees that if it is required to effect a
registration pursuant to any registration rights previously granted, then, in
connection with any secondary offering of securities pursuant to such
registration, it shall comply with BKC's then-current requirements, policies and
procedures in connection with such offering and, without limiting the foregoing,
shall indemnify BKC from liability arising from or in connection with the
Offering, in the same manner as would be required in connection with an offering
of securities by the Franchisee.
15.5.2.4 BKC EXPENSES. The Franchisee must, in
connection with any proposed offering of securities requiring the review or
consent of BKC, agree to pay BKC for certain of BKC's internal and external
costs in connection with its review of the proposed securities offering.
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15.5.3 CERTAIN EXCEPTIONS. Notwithstanding any other provision of
this agreement, the Franchisee shall not be required to submit to BKC for its
review and comment any "S-3" or "S-8" filing by the Franchisee with the SEC, and
the Franchisee shall not be required to obtain the prior written consent of BKC
in connection with an issuance of securities pursuant to an S-8 filing with the
SEC so long as the securities issued pursuant to such filing represent, per
offering: (i) through December 31, 1998, less than three (3%) percent of the
securities of that class issued and outstanding, and (ii) after December 31,
1998, less than one percent (1%) of the securities of that class issued and
outstanding.
15.6 NO WAIVER. BKC's consent to a transfer shall not constitute a waiver
of any claims it may have against the transferring party, nor shall it be deemed
a waiver of BKC's right to demand exact compliance with any of the terms of this
Agreement by the transferor or transferee.
15.7 DEATH OR MENTAL INCAPACITY OF PRINCIPAL. If the Principal is a
natural person, upon the death or mental incapacity of a Principal, the
executor, administrator, or personal representative of such Principal shall
transfer the Principal's interest in Franchisee to a third party approved by BKC
within a reasonable time after the Principal's death or mental incapacity.
Transfers by devise or inheritance shall not be subject to BKC's right of first
refusal under Paragraph 15.4 above, but shall be subject to the same conditions
imposed on any INTER VIVOS transfer under Paragraph 15.5 above. All other
transfers shall be subject to BKC's right of first refusal under Paragraph 15.4
above, or if such right is not exercised, the same conditions as may be imposed
on any INTER VIVOS transfer under Paragraph 15.5 above. In the case of transfer
by devise or inheritance, if the heir is not approved or there is no heir, the
executor shall use best efforts to transfer the Principal's interest to another
party approved by BKC within twelve (12) months from the date of the Principal's
death. If the conveyance of the Principal's interest to a party acceptable to
BKC has not taken place within the twelve (12) month period, BKC shall have the
option, to purchase the Principal's interest at fair market value.
15.8 CORPORATE DOCUMENTS. The articles of incorporation, the bylaws and
each stock certificate of the Franchisee must at all times provide that the
issuance and transfer of shares in the Franchisee are restricted as provided
above and may be done only in accordance with the terms and conditions of this
Agreement.
15.9 ASSIGNMENT BY BKC. BKC may assign this Agreement to any person or
company which acquires its Burger King business in the territory in which the
Franchised Restaurant is located or a substantial part thereof, whether by
outright acquisition or by way of a master franchise agreement.
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16. THE PRINCIPALS.
16.1 STOCK OWNERSHIP. The Principals represent and warrant to BKC that
SCHEDULE 2 contains a complete list of their respective shareholdings in the
Franchisee on the date of this Agreement and that, unless otherwise stated, the
Principals are the beneficial owners of their respective shares.
16.2 COMPLIANCE BY PRINCIPALS. Each Principal shall comply with the
covenants, terms, conditions and acknowledgments contained in the following
sections as if it were the party named therein in place of the Franchisee:
Section 11 (Limitations of Franchise); Section 12 (Unfair Competition); Section
15 (Disposal); and Section 18 (Restrictive Covenant).
Notwithstanding any other provision of this Agreement, including
without Imitation Sections 15.1 and 15.5, so long as international Fast Food
Corporation, ("IFFC") is a Principal of the Franchisee, BKC will not
unreasonably withhold its consent to the sale or issuance of additional equity
securities in IFFC provided that IFFC has complied with all reasonable
conditions then established by BKC in connection with the proposed sale or
issuance of equity securities by IFFC.
16.3 GUARANTY. Each Principal hereby agrees to jointly, severally, and
unconditionally guaranty the payment and performance of all debts, obligations
and liabilities of the Franchisee to BKC arising pursuant to this Agreement, or
any other agreement with BKC relating directly or indirectly to the Franchised
Restaurant (the "BKC Agreements"), together with all costs of collection,
compromise or enforcement, including reasonable attorneys' fees, incurred with
respect to any such debts, obligations or liabilities or with respect to this or
any other guaranty thereof or any bankruptcy proceeding or other similar action
affecting the rights of the Franchisee's creditors generally (all of the
foregoing being referred to collectively as the "Obligations"). This guaranty by
the Principals shall continue in full force and effect until the Franchisee has
fully paid and performed all of the Obligations. In connection with the
guaranties set forth above (collectively, the "Guaranties"), each of the parties
to this Agreement hereby agrees as follows:
(a) The Guaranties shall not be impaired by any modification,
supplement, extension or amendment of the BKC Agreements or any of the
Obligations, nor by any modification, release or other alteration of any of the
Obligations hereby guaranteed, nor by any agreements or arrangements whatever
with the Franchisee or any one else;
(b) The liability of each Principal is primary, direct and
unconditional and may be enforced without requiring BKC first to resort to any
other right, remedy or security;
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(c) No Principal shall have any right of subrogation, repayment,
reimbursement or indemnity whatsoever, unless and until the Obligations are paid
or performed in full and all debts owed by the Franchisee to any Principal are
hereby subordinated to the Obligations;
(d) If any Principal should at any time die, become incapacitated,
become insolvent or make a composition, trust mortgage or general assignment for
the benefit of creditors, or if a bankruptcy proceeding or any action under a
similar law affecting the rights of creditors generally shall be filed or
commenced by, against o r in respect of any Principal, any and all obligations
of that Principal shall, at BKC's option, immediately become due and payable
without notice,
(e) If any payment or transfer to BKC which has been credited
against any Obligation, is voided or rescinded or required to be returned by
BKC, whether or not in connection with any event or proceeding described in
Section 16.3(d), the Guaranties shall continue in effect or be reinstated as
though such payment, transfer or recovery had not been made;
(f) Except as otherwise provided in this Agreement, each of the
Guaranties shall be construed as an absolute, unconditional, continuing and
unlimited obligation of each Principal without regard to the regularity,
validity or enforceability of any of the Obligations, and without regard to
whether any Obligation is limited, modified, voided, released or discharged in
any proceeding under any law affecting the rights of creditors generally;
(g) Any termination of the Guaranties shall be applicable only to
Obligations accruing after the termination or having their inception after the
effective date of such termination and shall not affect Obligations having their
inception prior to such date;
(h) The death or incapacity of any Principal hereunder shall not
result in the termination of the Guaranties;
(i) Any and all present and future debts and obligations of the
Franchisee to any Principal hereunder are hereby waived an id postponed in favor
of and subordinated to the full payment and performance of the Obligations; and
(j) Each Principal waives to the greatest extent permitted by law:
notice of acceptance hereof; presentment and protest of any instrument, and
notice thereof; notice of default; notice of foreclosure; notice of any
modification, release or other alteration of any of the Obligations or of any
security therefor and all other notices to which any Principal might otherwise
be entitled.
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17. DEFAULT AND EFFECTS OF TERMINATION.
17.1.1 EVENTS OF DEFAULT BY FRANCHISEE. Franchisee shall be in default
under this Agreement upon the occurrence of any of the following events or
conditions (individually, an "Event of Default" and collectively, the "Events of
Default"):
(a) If the Franchisee fails to pay when due any amount owed to
BKC under this Agreement, and does not cure such failure within ten (10) days of
delivery of written notice of such failure.
(b) If the Franchisee fails to operate the Franchised
Restaurant in full compliance with the terms of this Agreement and the MOD
Manual (including without limitation the provisions regarding product
specifications, cleanliness, health, sanitation and the use of the Burger King
Marks), and does not cure such failure wh thin ten (10) days of delivery of
written notice of such failure.
(c) If the Franchisee fails to maintain the Franchised
Restaurant in conformance with the Current Image as required by Sections 5.3.1
and 5.3.2 hereof, or to remodel, improve and alter the Franchised Restaurant as
required in Section 5.3.3 hereof, and does not cure such failure within ninety
(90) days of delivery of written notice of such failure.
(d) If the Franchisee challenges the validity or ownership of
the Burger King Marks or BKC's ownership rights to the Burger King System.
(e) If the Franchisee fails to continuously operate the
Franchised Restaurant as required by Section 2.4 of this Agreement.
(f) If the Franchisee fails to continuously occupy the
Location throughout the term of this Agreement, unless such failure is
attributable to a proper exercise of governmental authority.
(g) If the Franchisee should at any time become insolvent or
make a composition, trust mortgage or general assignment for the benefit of
creditors, or if a bankruptcy proceeding, receivership or any action under any
similar law affecting the rights of creditors generally shall be filed or
commenced by, against or in respect of the Franchisee or any portion of its
property.
(h) If the Franchisee makes any materially false statement in
connection with any report of Gross Sales or in any other financial statement
required hereby, other than an obvious and unintentional error.
(i) If the Franchisee commits "persistent breaches" of the
terms of this Agreement (whether or not material in isolation) after written
28
notice of such breaches has been delivered by BKC, any three breaches occurring
within a period of six months shall be deemed to constitute "persistent
breaches."
(j) If the Franchisee for any reason other than an improper
act or breach by BKC ceases to be entitled to remain registered as a registered
user of any of the Burger King Marks.
(k) If any events occur which are contrary to Section 15
hereof.
(l) If the Franchisee engages in activities prohibited by
Section 12 (Unfair Competition) or Section 18 (Restrictive Covenant), or
discloses any trade secrets of BKC in violation of Section 11 (Limitations of
Franchise).
(m) If the Franchisee or any of its affiliates is in breach of
any other obligation owed to BKC or any of its Affiliates whether under this or
any other agreement.
(n) If the Franchisee has knowingly made false or misleading
statements in order to obtain execution of this Agreement by BKC.
(o) If the Franchisee or any of its officers or directors is
convicted of a criminal offense punishable by a term of imprisonment in excess
of two (2) years.
(p) The Franchisee fails to perform any obligation under this
Agreement which is not capable of cure.
(q) If the Franchisee fails to perform any other obligation
under this Agreement and does not cure such failure within thirty (30) days of
written notice of such failure.
(r) If any of the above occurs in relation to any Principal.
17.2.1 EVENT OF BKC DEFAULT. BKC shall be in default under this
Agreement if BKC fails to perform any of its obligations under this Agreement
and does not cure such failure within sixty (60) days of written notice of such
failure (an "Event of BKC Default").
17.2 TERMINATION. Upon the occurrence of an Event of Default, this
Agreement shall automatically terminate without any further notice or
opportunity to cure under Section 17.1.1 above and BKC shall, subject to the
provisions of Subsection 17.6 below, have the right to claim lost royalties and
advertising contributions, and shall also have all other rights and remedies
available under applicable law. Upon the occurrence of an Event of BKC Default
under Section 17.1.2., this Agreement shall automatically terminate without
further notice or opportunity to cure and the Franchisee shall have all other
29
rights and remedies available under applicable law. Subject to the provisions of
Section 17.6 below, the rights of the parties set forth in this Section 17.2
shall be in addition to any other rights the parties may have under applicable
law.
17.3 EFFECT OF TERMINATION. Upon expiration or termination for any reason
of this Agreement, the Franchisee's right to use the Burger King Marks and the
Burger King System shall terminate. The Franchisee shall not thereafter identify
itself as a Burger King franchisee or former Burger King franchisee or use, any
of BKC's trade secrets, operating procedures, promotional materials, Burger King
Marks or any marks confusingly similar. The Franchisee will immediately return
to BKC the MOD Manual loaned to the Franchisee including any translations
thereof, together with all other materials containing trade secrets, restaurant
operating instructions or business practices of BKC. Where applicable, BKC shall
be entitled to take all steps necessary for the cancellation of the entries of
the Franchisee with the Registrar of Trademarks, or its equivalent authority, as
a registered user without opposition or hindrance of the Franchisee. The
Franchisee will, at the request and cost of BKC, cooperate in any such steps.
17.4 POST-TERMINATION OPTION. The Franchisee grants to BKC or its
designee upon termination or expiration of this Agreement, the option to
purchase all usable paper goods, containers and printed menus bearing any of the
Burger King Marks or trade names at the price paid by the Franchisee and to
purchase the Franchisee's restaurant equipment, furniture, fixtures and signs at
fair market value.
17.5 POST-TERMINATION OBLIGATIONS OF FRANCHISEE.
17.5.1 OPTIONS TO PURCHASE LOCATION. Upon termination or expiration
of this Agreement, if the parties do not enter into a successor Franchise
Agreement whereby the Franchisee shall continue to be a franchisee and operate
the Franchised Restaurant at the Location, BKC or its designee shall have the
option subject to obtaining any necessary governmental consent:
(a) To purchase the Location and/or any related
equipment at fair market value, if the Franchisee, any of the Principals or an
affiliate of the Franchisee owns the Location and/or related equipment.
(b) If the Location is leased by the Franchisee, any of
the Principals or an affiliate of the Franchisee, subject to obtaining any
necessary landlord's consent, to obtain an assignment of the leasehold interest
at a price equal to the fair market value of the leasehold interest.
17.5.2 DEIDENTIFICATION. If BKC or its designee do not exercise this
option the Franchisee agrees to immediately make such removals or changes in
30
signs and the building as BKC shall request so as to effectively distinguish the
Location from its former appearance and from any other Burger King Restaurant.
17.5.3 BKC LIEN. To secure payment of any damages in the event of
termination as a result of the Franchisee's default, BKC shall have a lien, on
the personal property, machinery, fixtures and equipment owned by the Franchisee
at the Location at the time of such default.
17.5.4 ACCELERATION OF PAYMENTS. All monies owed by Franchisee to
BKC shall be immediately due and payable upon term nation.
17.6 DISPUTE RESOLUTION.
(a) Subject to subparagraph (b) below, all controversies, disputes
or claims arising between the Franchisee, the Principals, and their respective
shareholders, officers, directors, agents and employees (in their respective
capacity) (collectively, the "Franchisee Parties") and BKC arising out of or
related to the relationship of the parties hereto, this Agreement or any
provision hereof, any related agreement (including any development agreement),
the validity of this Agreement or any provision hereof or the operation of the
Franchised Restaurant shall be submitted to and settled by arbitration in the
City of New York in accordance with the Commercial Arbitration Rules of the
American Arbitration Association ("AAA") then obtaining. Such arbitration
proceedings shall be conducted before a panel of three (3) arbitrators. The
Franchisee Parties shall l appoint one arbitrator, between them, BKC shall each
appoint one arbitrator and the two arbitrators so appointed shall appoint a
third arbitrator to act as Chair. If said two arbitrators fail to nominate the
Chair within thirty (30) days from the date of appointment of the second
arbitrator to be appointed, the Chair shall be appointed by the AAA. Unless
otherwise provided in this Paragraph, all matters within the scope of the
Federal Arbitration Act of the United States of America (9 U.S.C. ss.ss.1 et
seq.) shall be governed by it. The arbitrators shall have the right to award or
include in their award any relief which they deem proper in the circumstances,
including with out limitation, money damages (with interest on unpaid amounts
from date due), specific performance, injunctive relief, legal fees and costs,
provided that the arbitrators shall not award exemplary or punitive damages. The
award and decision of the arbitrators shall be conclusive and binding upon the
Franchisee Parties and BKC and judgment upon the award may be entered in any
court of competent jurisdiction. The Franchisee Parties and BKC further
expressly agree and consent to the jurisdiction of the courts of the State of
New York for the purpose of entering judgment upon any such award of the
arbitrators. The Franchisee Parties and BKC further agree to be bound by the
provisions of any applicable limitation on the period of time in which claims
must be brought under applicable law or this Agreement, whichever is less. The
parties further agree that in connection with any such arbitration proceeding,
they shall submit or file any claim which would constitute a compulsory
counterclaim (as defined by Rule 13 of the United States Federal Rules of Civil
31
Procedure) within the same proceeding as the claim to which it relates. Any such
claim which is not submitted or filed as described above shall be barred. This
provision shall continue in full force and effect subsequent to and
notwithstanding expiration or termination of this Agreement.
(b) Notwithstanding subparagraph (a) above, BKC shall be entitled to
seek the entry of temporary or preliminary injunctions, restraining orders and
orders of specific performance enforcing the provisions of this Agreement or any
development agreement relating to the use of BKC's Marks or proprietary in
"formation by the Franchisee or any Principal upon the termination or expiration
of this Agreement or any development agreement. The Franchisee's (or the
Principal's) only remedy if an injunction is so entered will be the dissolution
of that injunction, if warranted, upon due hearing, all other claims being
subject to arbitration under subparagraph (a) above.
18. RESTRICTIVE COVENANT. Neither the Principals nor the Franchisee shall
directly or indirectly (through stock ownership, partnership, trust, joint
venture, management contract, or otherwise) (a) have any interest in another
"Fast Food Hamburger Restaurant" during the term of this Agreement, or (b) for a
period of one ye ar after termination or expiration of this Agreement, have any
interest in another Fast Food Hamburger Restaurant business at or within such
distance of the Location as is stated SCHEDULE 1. For purposes of this Section,
"Fast Food Hamburger Restaurant" shall mean any restaurant which (a) has
hamburgers or hamburger based products which account for 50(degree)/o or more of
total menu items or total Gross Sales, and (b) does not offer table service as
the principal method of ordering or food delivery
19. MISCELLANEOUS: GENERAL CONDITION.
19.1 INTERPRETATION. The Introduction shall be considered a part of this
Agreement. Paragraph headings are used only for convenience and do not form part
of this Agreement. A covenant on the part of the Franchisee not to do something
includes a covenant not to permit others to do it; any right given to BKC
includes the right to do it through servants or agents or third party
contractors or to do it in conjunction with its servants, agents or third party
contractors and includes any necessary rights of access. To the extent of any
inconsistency, this Agreement prevails over the MOD Manual. References to the
parties shall include their heirs, successors in title and assigns.
19.2 NON-WAIVER. The failure of BKC to exercise any right or option given
to it hereunder, or to insist upon strict compliance by the Franchisee or the
Principals or any person comprising the Franchisee or the Principals with the
terms of this Agreement, shall not constitute a waiver of any terms or
conditions of this Agreement with respect to any other or subsequent breach, nor
a waiver by BKC of its right at any time thereafter to require exact and strict
compliance with all the terms of this Agreement. The rights or remedies set
forth in this Agreement are in addition to any other rights or remedies which
may be granted by law.
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19.3 GOVERNING LAW/JURISDICTION. This Agreement shall become valid when
executed and accepted by BKC in Miami, Florida; it shall be governed and
construed under and in accordance with the laws of the State of Florida; U.S.A.;
provided, however, that since the Franchisee is a corporation formed under the
laws of the Republic of Poland which is not doing business in the State of
Florida, the Florida Franchise Act, Florida Statutes Section 817.416(1971) shall
not apply to this Agreement. The parties hereto acknowledge and agree that all
disputes arising in connection with this Agreement shall be finally settled
pursuant to the provisions set forth in Section 17.6 of this Agreement. However,
in the event that Section 17.6(b) of this Agreement applies, then the United
States District Court for the Southern District of New York or, if such court
lacks jurisdiction, the Supreme Court for the State of New York, County of New
York, shall be the venue and exclusive forum in which to adjudicate any case or
controversy arising under said Section 17.6(b), and the parties further agree
that in the event of any such litigation in these courts, they will not contest
or challenge the jurisdiction or venue of these courts.
19.4 LICENSES, PERMITS, ETC. The Franchisee shall obtain and maintain all
licenses and other permits required by the law of the governing bodies where the
Franchised Restaurant is located and shall comply with all local governmental
requirements relating to the construction, equipping and operation of the
building and the preparation and sale of items in the Franchised Restaurant.
19.5 COMPLIANCE WITH LAWS. Notwithstanding anything herein to the
contrary, the Franchisee shall operate the Franchised Restaurant in a lawful
manner and faithfully comply with the applicable laws, regulations or legitimate
administrative requirements of national, regional, and municipal governing
bodies or other political subdivisions in which the Franchised Restaurant is
located.
19.6 REMEDIES. If the Franchisee breaches this Agreement, BKC shall be
entitled to injunctive relief in addition to all other rights and remedies
available under Section 17.2 of this Agreement.
19.7 SEVERABILITY. The parties agree that if any provisions of this
Agreement may be construed in two ways, one of which would render the provision
illegal or otherwise voidable or unenforceable, and the other of which would
render the provision valid and enforceable, such provision shall have the
meaning which renders it valid and enforceable. The language of all provisions
of this Agreement shall be construed according to its fair meaning and not
strictly against any party. It is the intent of the parties that the provisions
of this Agreement be enforced to the fullest extent and should any court or
other public agency determine that any provision herein is not enforceable as
written in this Agreement, the provision shall be amended so that it is
enforceable to the fullest extent permissible under the laws and public policies
of the jurisdiction in which the enforcement is sought. The provisions of this
Agreement are severable and this Agreement shall be interpreted and enforced as
33
if all completely invalid or unenforceable provisions were not contained in the
Agreement, and partially valid and enforceable provisions shall be enforced to
the extent that they are valid and enforceable.
19.8 NOTICES.
19.8.1 NOTICE TO BKC. All notices to BKC shall be written in English
and shall be sent by facsimile and hand delivered in person or by courier or
sent by registered airmail, postage fully prepaid, addressed to BKC at 00000 Xxx
Xxxxxx Xxxx, Xxxxx, Xxxxxxx 00000, U.S.A., Attention: General Counsel, Facsimile
number (000) 000-0000, or at such other address as BKC shall from time to time
designate in writing.
19.8.2 NOTICE TO FRANCHISEE/PRINCIPALS. All notices to the
Franchisee or the Principals shall be written in English and shall be sent by
facsimile and hand delivered in person or by courier, or sent by airmail,
postage fully prepaid, and shall be addressed to the Franchisee and/or the
Principals at the Franchised Restaurant premises, or the Franchisee's last known
mailing address if the Franchised Restaurant has ceased operations, with a copy
delivered to the Principal's address (but only so long as International Fast
Food Corporation is the sole Principal).
19.8.3 DELIVERY. Notices which are sent by mail shall be deemed
delivered on the earlier of actual receipt or the tenth (10th) day after being
deposited in the mail. Notices sent by hand shall be deemed delivered upon
actual receipt.
19.9 LANGUAGE. This Agreement is in the English language only, which
language shall be controlling in all respects.
19.10 MODIFICATION. This Agreement may only be modified or amended by a
written document signed by the parties.
19.11 BINDING EFFECT. This Agreement shall be binding upon the parties,
their heirs, executors, personal representatives, successors or assigns.
19.12 CURRENCY. Unless otherwise provided all payments required under this
Agreement shall be made in United States currency in the U.S.A.
19.13 SURVIVAL. Any provisions of this Agreement which impose an
obligation after termination or expiration of this Agreement shall survive the
termination or expiration of this Agreement and remain binding on the parties.
19.14 AGENCY. BKC shall be entitled to entrust the performance of any of
its obligations under this Agreement to an Affiliate, and any notice required to
be given by BKC shall be validly given if given by an Affiliate.
34
20. ENTIRE AGREEMENT. This Agreement together with any formal Development or
Target Reservation Agreement constitutes the entire agreement of the parties and
supersedes all prior negotiations, commitments, representations, warranties, and
undertaking of the parties (if any) with respect to the subject matter of this
Agreement and to the Franchised Restaurant. No term or condition shall be
implied into this Agreement in derogation of, or in a manner which is
inconsistent with or alters, the express terms set forth in this Agreement.
21. INDEPENDENT ADVICE. THE FRANCHISEE AND EACH PRINCIPAL ACKNOWLEDGE THAT THEY
HAVE BEEN ADVISED BY BKC OR ITS AGENTS TO TAKE INDEPENDENT PROFESSIONAL ADVICE
ON ALL ASPECTS OF THIS AGREEMENT AND THE BURGER KING BUSINESS AND THAT THEY HAVE
TAKEN SUCH INDEPENDENT ADVICE AS THEY DEEM NECESSARY AND HAVE INDEPENDENTLY
SATISFIED THEMSELVES ON ALL RELEVANT MATTERS RELATING TO THIS AGREEMENT AND THE
OPERATION OF BURGER KING RESTAURANTS BEFORE ENTERING INTO THIS AGREEMENT.
The parties have executed this Agreement as of the date indicated on page
one.
BURGER KING CORPORATION
By: /S/ Xxxx Xxxxxx
----------------------------------
Vice President
Attest:
/S/ Xxx X. Xxxxxxxx
----------------------------------
Assistant Secretary
(Corporate Seal)
INTERNATIONAL FAST FOOD
POLSKA SP ZO.O (the "Franchisee")
By: /S/ Xxxxxxxx Xxxxxxxx
----------------------------------
Name: Xxxxxxxx Xxxxxxxx
--------------------------------
Position: President
----------------------------
35
THE PRINCIPAL:
INTERNATIONAL FAST FOOD
CORPORATION
By: /S/ Xxxxxxxx Xxxxxxxx
----------------------------------
Name: Xxxxxxxx Xxxxxxxx
--------------------------------
Position: President
----------------------------
36
SCHEDULE 1 TO FRANCHISE AGREEMENT
---------------------------------
The Franchisee: INTERNATIONAL FAST FOOD POLSKA SP ZO.0
The Principals: INTERNATIONAL FAST FOOD CORPORATION
"The Location": means all the land, and any buildings
from time to time thereon, known as
--------------------------------------
__________________________ and more
particularly delineated in the plan
attached to the Franchisee's real
estate package as finally approved
by BKC.
Director of Operations (name): ______________________________________
Managing Director (name): ______________________________________
Initial Franchise Fee: U.S. $______________________
Royalty percentage: 5%
-------
Advertising percentage: 6%
-------
Term: __________ (____) years
Hours of Operation: 11:00 a.m. to 11:00 p.m. daily
Transfer payment fee: U.S. $10,000
----------------
Radius of restrictive covenant: Two Kilometers
----------------
Governing Law: State of New York, U.S.A.
--------------------------
37
SCHEDULE 2 TO FRANCHISE AGREEMENT
Shares of the Franchisee owned by the Principals:
================================================================================
| Number of | Class of | % of Class of | % of Total
Principal | Shares | Shares | Shares | Shares
-----------------|--------------|-----------|-----------------|-----------------
International | | | |
Fast Food | | | | 80%
Corporation | | | |
-----------------|--------------|-----------|-----------------|-----------------
| | | |
| | | |
-----------------|--------------|-----------|-----------------|-----------------
| | | |
| | | |
================================================================================
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EXHIBIT "A" TO FRANCHISE AGREEMENT
POLAND TRADEMARKS
-----------------
Marks registered in Poland:
Date of
Classes Reg. No. Registration
------- -------- ------------
Burger King Logo 16,29,30,32,42 7441 18 Feb., 1994
Whopper 16,29,30,32,42 7441 18 Feb., 1994
Burger King Wordmark 16,29,30,42 7442 18 Feb., 1994
39
