SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
____________
Date of Report (Date of earliest event reported) March 14, 1997
-------------------------------
INTERNATIONAL FAST FOOD CORPORATION, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 0-20203 65-0302338
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission File (IRS Employer
or incorporation) Number) Identification No.)
1000 Lincoln Road, Suite 200, Miami Beach, Florida 33139
------------------------------------------------------------
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code (305) 531-5800
-----------------------------
-------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events
------------
On March 14, 1997, International Fast Food Corporation, Inc. ("IFFC"),
International Fast Food Polska, SP.Z.o.o ("IFFP"), Burger King Corporation
("BKC"), Litigation Funding, Inc. ("LFI"), and Mitchell Rubinson, individually,
closed the settlement of litigation filed by IFFC and IFFP against BKC styled
International Fast Food Corporation and INTERNATIONAL FAST FOOD POLSKA SP.Z.O.O
V. BURGER KING CORPORATION, which was pending in the Circuit Court of the 11th
Judicial Circuit in and for Dade County, Florida ("the litigation"). Trial by
jury in the litigation began in January 1997.
Under the terms of the Settlement Agreement, BKC paid IFFC for the benefit
of IFFC and IFFP $5,000,000 (the "Settlement Amount") (less $21,865 of royalties
owed by IFFP to BKC for February 1997) for a net amount of $4,978,135. The
Settlement Agreement provides that no more than $2,000,000 cash of the
Settlement Amount may be utilized to pay legal fees and costs of IFFC and IFFP,
including the obligations of IFFC and IFFP to LFI under the agreement to assign
litigation proceeds entered into in July 1996, as amended. The remaining
$3,000,000 must be used by IFFC in the development of Burger King restaurants in
Poland.
In addition, BKC forgave $499,796, representing all monies owed BKC by
IFFP and IFFC through and including January 31, 1997.
The Settlement Agreement provided for IFFC and BKC to enter into an
agreement to cancel the existing Development Agreement between BKC and IFFC
dated on or about September 24, 1991, which expired on September 24, 1996 and
enter into a new Development Agreement. The new Development Agreement provides
that IFFC shall be granted the exclusive right to develop Burger King
restaurants in Poland, except for certain exceptions for military bases,
institutional locations and hotel chains. The Development Agreement has a ten
(10) year term expiring September 30, 2007. IFFC under the Development Agreement
is obligated to open a minimum of 45 new restaurants in accordance with the
development schedule which provides for three (3) units to be opened through
September 30, 1998, four (4) units to be opened in each development year
beginning October 1, 1998 and ending September 30, 2001, and five (5) units to
be opened up in each development year beginning October 1, 2001 and ending
September 30, 2007. The new Development Agreement calls for certain cash
contributions from BKC to IFFC over the term of the Development Agreement and
additional sums based on an incentive arrangement when earned to be retained by
IFFC out of BKC's future royalties.
Under the Development Agreement, IFFC is obligated to pay BKC a $1,000,000
Development Fee. However, IFFC shall not be obligated to pay the Development Fee
if IFFC is in compliance with the development schedule thirty (30) months from
the date of the Development Agreement and achieves gross sales of $11,000,000
for the twelve (12) months preceding the thirty (30) month target date or
reduced to $250,000 if the development schedule has been complied with but gross
sales are less than $11,000,000 but greater than $9,000,000.
2
<PAGE>
If IFFC is obligated to pay the Development Fee, IFFC may, at its option,
pay BKC the $1,000,000 or $250,000, as the case may be, for the Development Fee
or deliver the binding obligation of Mitchell Rubinson that the "Rubinson Group"
shall within six (6) months of the date such payment is due divest itself of any
indirect or direct interest IFFC and the BKC restaurants open in Poland. The
Rubinson Group shall include any entity that he or they directly or indirectly
own an aggregate interest of ten percent (10%) or more of the legal or
beneficial equity interest and any parent, subsidiary or affiliate of a Rubinson
entity. In the event that the divesture is completed within such six (6) month
period, then IFFC shall have no obligation to pay the Development Fee. Mr.
Rubinson has personally guaranteed payment of the Development Fee.
IFFC and BKC have terminated the eight (8) existing Franchise Agreements
between the parties and have entered into eight (8) new franchise agreements.
IFFC must pay to BKC a franchise fee of $40,000 for each new franchise agreement
with a term of twenty (20) years, and $25,000 for each new franchise agreement
with a term of ten (10) years. The royalty rate shall be 5% and the advertising
contribution shall be 6%.
The Development Agreement has been signed by IFFC to IFFP, however, IFFC
remains liable for the obligations contained in the Development Agreement.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
------------------------------------------------------------------
(c) Exhibits:
99.1 Restaurant Development Agreement dated March 14, 1997 between
BKC and IFFC (IFFC has requested of the Securities and Exchange Commission that
certain portions of the Development Agreement receive confidential treatment).
99.2 Form of Franchise between BKC and IFFC (IFFC has requested of
the Securities and Exchange Commission that certain portions of the Development
Agreement receive confidential treatment).
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTERNATIONAL FAST FOOD CORPORATION
By: /s/ Mitchell Rubinson
-----------------------------------------
MITCHELL RUBINSON, President
DATED: April 3, 1997
4
RESTAURANT DEVELOPMENT AGREEMENT
TABLE OF CONTENTS
INTRODUCTION
ARTICLE 1 - GRANT
1.1 Exclusive Rights
1.1 Exceptions
1.2.1 U.S. Military Establishments
1.2.2 Institutional Locations
1.2.3 Hotel Chains
1.3 Definition of Development Area
1.4 Preservation of Exclusivity
ARTICLE II - TERM
2.1 Initial Term
2.2 No Other Rights
ARTICLE III - DEVELOPMENT SCHEDULE
3.1 Development Obligations
3.1.1 Development Schedule
3.1.2 Development Units
3.1.3 Rate of Development
3.1.4 Strict Adherence
3.2 Force Majeure
ARTICLE IV - DEVELOPMENT PROCEDURE
4.1 The Nature of Agreement
4.2 Franchise Approval
4.2.1 Franchise Approval Criteria
4.2.2 Disapproval
4.2.3 Target Area
4.3 Site Approvals; Plans and Specifications
4.3.1 Real Estate Interests
4.3.2 Building, Plan Approval / Construction
4.3.3 No Franchise Without Site and Building Plan Approvals
4.3.4 No Representation Regarding Site
<PAGE>
ARTICLE V - FEES AND FRANCHISE AGREEMENTS
5.1 Development Fee
5.2 Franchise Fee
5.3 Royalty and Ad Contribution
5.3.1 Standard Fees
5.3.2 (SUBJECT TO A PENDING REQUEST FOR CONFIDENTIAL TREATMENT)
5.4 Duration of Franchise Agreement
5.5 Other Terms
5.6 Execution of Franchise Agreement
5.7 Change in Laws
ARTICLE VI - TRAINING, DIRECTOR OF OPERATIONS, SOURCES OF SUPPLY
6.1 Director of Operations
6.2 Substitute Director of Operations
6.3 Training Requirement
6.4 Cost of Training
6.5 Managing Director
6.6 Covenants
6.6.1 Confidentiality
6.6.2 Stock Ledger
6.7 Sources of Supply
6.7.1 Authorized Suppliers
6.7.2 Proprietary Limits
6.7.3 Self-Supply
6.7.4 Limits on BKC Responsibility
6.7.5 Developer's Responsibilities
6.7.6 Developer's Supply Manager
6.7.7 Additional Representations
ARTICLE VII - DEFAULT
7.1.1 Events of default by Developer
7.1.2 Event of BKC Default
7.2 BKC Remedies
7.3 Developer Remedies
ARTICLE VIII - TERMINATION
8.1 Effect of Termination
8.2 Rights Upon Termination
ii
<PAGE>
ARTICLE IX - DISPUTE RESOLUTION
9.1 Dispute Resolution
(a) Termination; Limited Remedy
(b) Enforcement
(c) Non-Termination Disputes
(d) Site of Arbitration
(e) Arbiters
(f) Language
(g) Costs
(h) Proceedings
(i) Binding Nature
(j) Other Relief
ARTICLE X - SECRECY OF PROPERTY
ARTICLE Xl - ASSIGNMENT AND TRANSFER
11.1 Transfer of Interest by Developer
11.2 Transfer of Interest by Principal
ARTICLE XII - SEVERABILITY
ARTICLE XIII - ENTIRE AGREEMENT
ARTICLE XIV - NOTICES
ARTICLE XV - NON-WAIVER
ARTICLE XVI - HEADINGS AND ARTICLE TITLES
ARTICLE XVII - RELATIONSHIP OF PARTIES
ARTICLE XVIII - INTERPRETATION
ARTICLE XIX - BROKER
ARTICLE XX - GOVERNING LAW/JURISDICTION
iii
<PAGE>
ARTICLE XXI - TRADEMARKS AND TRADE NAMES
21.1 Disclaimer of Interest
21.2 Notice of Challenge
21.3 Registered User Agreement
21.4 No Unauthorized Use
21.5 Trademark Applications
21.6 Assistance to BKC
ARTICLE XXII - COMPETITION
ARTICLE XXIII - TAXES
ARTICLE XXIV - GOVERNMENTAL APPROVAL
ARTICLE XXV - SURVIVAL
ARTICLE XXVI - THE PRINCIPAL(S)
26.1 Stock Ownership
26.2 Guaranty
ARTICLE XXVII - INDEPENDENT ADVICE
ARTICLE XXIII - FORCE MAJEURE
ARTICLE XXIX - CONTROLLING LANGUAGE
ARTICLE XXX - DEFINITIONS
EXHIBIT A - PRINCIPALS OF THE DEVELOPER
EXHIBIT B - DEVELOPMENT UNITS
EXHIBIT C - INTERNATIONAL BURGER KING RESTAURANT FRANCHISE
AGREEMENT
EXHIBIT D - APPLICATIONS FOR BURGER KING MARKS IN POLAND
SCHEDULE 1 - DEVELOPMENT SCHEDULE
SCHEDULE 2 - TERMS FOR SECTION 5.3.1(a)
SCHEDULE 3 - TERMS FOR SECTION 5.3.1(b)
iv
<PAGE>
RESTAURANT DEVELOPMENT AGREEMENT
THIS AGREEMENT is made and entered into in Miami, Florida as of the 14th
day of March, 1997 by and among BURGER KING CORPORATION, a company organized
under the laws of Florida having its principal place of business at 17777 Old
Cutler Road, Miami, Florida, U.S.A. ("BKC") of the first part, and INTERNATIONAL
FAST FOOD CORPORATION, a company organized under the laws of Florida, having its
principal place of business at 1000 Lincoln Road, Suite 200, Miami Beach,
Florida 33139 (the "Developer").
INTRODUCTION
A. BKC has developed and acquired specialized knowledge, techniques,
skill and experience in the development and operation of limited menu
restaurants (the "Burger King System") known as "Burger King Restaurants"
throughout the United States and other countries.
B. The Developer possesses knowledge and market information concerning
the operation and development of Burger King Restaurants in the Republic of
Poland and the Developer recognizes the benefits to be derived from being
identified with and franchised to operate limited menu restaurants utilizing the
Burger King System within the development area described in this Agreement and
utilize the name Burger King(R) and such other marks as may be authorized from
time to time for use in connection with Burger King Restaurants (the "Burger
King Marks").
C. The Developer 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 Developer represents that BKC has not made, and that the Developer is not
relying upon, any representation as to the profits and/or sales volumes which
Developer might be expected to realize, or costs or levels of costs which the
Developer might be expected to incur, or the prospects of success for the
Developer 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 as to 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
Developer further represents and agrees that BKC and persons acting on its
behalf have not made, and the Developer is not relying upon, any representations
or promises that are not contained in this Agreement.
D. Those persons with a substantial direct or indirect legal or
beneficial ownership interest in the Developer who are undertaking certain
1
<PAGE>
obligations under this Agreement as a principal of the Developer (each of whom
is a "Principal") are set forth on Exhibit "A" to this Agreement, together with
a description of their ownership interest in the Developer.
E. The Developer and BKC wish to set forth the terms of their agreement
for the development of new Burger King Restaurants in the Republic of Poland
(meaning the area comprised within the present de facto boundaries of the
Republic of Poland) hereinafter referred to as the "Development Area."
F. BKC and the Developer recognize that at the time of execution of
this Agreement by International Fast Food Corporation as the Developer, no party
or parties are entering into this Agreement as Principals. However, in the event
of an assignment by the Developer with BKC's prior written consent, the
provisions of this Agreement applying to Principals would apply to the extent
that the assignee, Developer or another party expressly assume the obligations
of Principals under this Agreement.
In consideration of the mutual undertakings and covenants contained in
this Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows.
ARTICLE I
GRANT
1.1 Exclusive Rights. The Developer is hereby granted the exclusive
right to develop and, subject to the full satisfaction of the terms and
conditions of this Agreement, to be franchised to operate all forms of Burger
King Restaurants (as more fully defined below) within the Development Area upon
the terms and conditions of this Agreement and the franchise agreements which
shall be entered into for each Burger King Restaurant. For purposes of this
Section 1.1 and this Agreement generally, the terms Burger King Restaurant and
"Restaurants" shall include kiosks, in-line mall units, double drive-
thru/limited seating units, mobile units, traditional freestanding Burger King
Restaurants, and all other fast food hamburger concepts offered to franchisees
from time to time by BKC. Provided, however, that only those Burger King
Restaurants described in Section 3.1.2 shall count against the Developer's
development obligations under Article III of this Agreement.
1.2 Exceptions.
1.2.1 U.S. Military Establishments. Specifically excluded from this
grant are any existing or hereafter established U.S. military establishments.
including their adjacent housing areas and support areas. Developer acknowledges
that BKC has no control over or ability to stop development of new Burger King
Restaurants on such U.S. military establishments and hereby releases BKC and its
2
<PAGE>
directors, officers, parent, subsidiaries, affiliates, employees, successors and
assigns from all claims or liability relating to the existence or opening of a
Burger King Restaurant on such a U.S. military establishment, including without
limitation any claim or encroachment or breach of existing or future franchise
agreements, from the date of this Agreement forward.
1.2.2 Institutional Locations. In the event that an opportunity
arises for the development of one or more Burger King Restaurants in airports,
train stations, hotels, hospitals, stadiums, public buildings, schools,
factories, turnpikes, toll roads, universities, corporate headquarters and
branch offices, BKC shall notify the Developer of such opportunity and allow the
Developer 60 days from the date of such notification or such earlier time period
as is reasonably dictated by commercial circumstances (e.g., public bid or
concession award) in which to enter into a concession or other arrangement with
the owner of such outlet(s). In the event that Developer either notifies BKC
that it is not interested in pursuing the opportunity or is unable or unwilling
to obtain such a concession or make such an arrangement with the owner of the
outlet(s) within the time period set forth above, BKC or its affiliates shall be
free to negotiate for and open Burger King Restaurants in such outlet(s) or to
license third parties to do so.
1.2.3 Hotel Chain. Notwithstanding, the foregoing, BKC shall be free
to develop Burger King, within hotels operation, under a uniform brand within an
international chin without first offering the Developer the opportunity to
negotiate with the hotel as provided in Paragraph 1.2.2 above. Instead, where
BKC negotiates or wishes to negotiate with the brand or chain owners or members,
BKC shall merely inform the Developer that such negotiations are in progress
and/or such deal has been entered into.
1.3 Definition of Development Area. In the event of conflict or
confusion as to the exact boundaries of the Development Area, BKC's sole
decision shall control.
1.4 Preservation of Exclusivity, Subject to the above, BKC agrees that
so long as this Agreement is in effect, BKC shall not grant development rights
or franchise agreements to any other franchisees or any other persons within the
Development Area nor shall BKC directly or indirectly develop company owned
Burger King Restaurants within the Development Area during the term hereof.
ARTICLE II
TERM
2.1 Term. Unless terminated earlier pursuant to the terms of Article 7
hereof, the term of this Agreement shall expire on September 30, 2007 (the
"Term").
2.2 No Other Rights. The developer has no right to any other extension
or renewal beyond the Term.
3
<PAGE>
ARTICLE III
DEVELOPMENT SCHEDULE
3.1 Development Obligations.
3.1.1 Development Schedule. The Developer agrees to develop and open
for business a minimum of Forth-Five (45) Development Units (as defined below)
during the Term and within the Development Area in strict accordance with the
development schedule set forth on Schedule 1 hereto (the "Development
Schedule").
3.1.2 Development Units. The term "Development Unit" is defined on
Exhibit B to this Agreement. Moreover, only the opening of a new Burger King
restaurant in one of the forms set forth on Exhibit B hereto will be applied
against the Developer's obligations under this Article III. No more than four
(4) Burger King Kiosk Restaurants (as that term is defined in Exhibit B hereto)
can be developed and opened for business during any single Development year of
the Development Schedule for purposes of meeting Developers development
obligations under this Article III.
3.1.3 Rate of Development. The Developer is free to develop Burger
King Restaurants at a faster rate than that outlined above, provided that each
Burger King Restaurant is developed in accordance with the franchise and
location procedures described in this Agreement. If in any one or more periods,
the total of Development Units opened falls short of the number required for
such period or periods but the total number of Development Units opened prior to
and during that period and operating at the end of that period is equal to or
exceeds the required total for the period from the start of the Development
Schedule, to the end of that period, the Developer shall have complied with its
obligation.
3.1.4 Strict Adherence. Strict adherence to each and every one of
the above requirements is the essence of this Agreement. Failure to adhere to
any of the above requirements of Article III shall result in the automatic
termination of this Agreement pursuant to Paragraph 7.1(b).
3.2 Force Majeure. Notwithstanding the foregoing, if delay in meeting
the Development Schedule is caused by acts of God, labor strikes, civil unrest,
or other causes beyond Developer's reasonable control, then Developer shall
notify BKC accordingly and BKC after an examination of the facts shall allow a
reasonably necessary extension to the required opening date for the Burger King
Restaurant in question, provided, however, that in the event that the reasonably
necessary extension exceeds one hundred eighty (180) days, BKC shall have the
right to terminate this Agreement, whereupon all rights granted to Developer
under this Agreement shall terminate, without liability to BKC.
4
<PAGE>
ARTICLE IV
DEVELOPMENT PROCEDURE
4.1 The Nature of Agreement. The Developer understands and agrees that
this Agreement is not a franchise for the operation of Burger King Restaurants,
but is intended by the parties to set forth the terms and conditions which, if
fully satisfied, would entitle the Developer to apply for and receive individual
franchises for each Restaurant to be developed under this Agreement. Upon
Developer's compliance with each of the requirements set forth in this
Agreement, including, without limitation, Sections 4.2 and 4.3.2 below, BKC
shall offer to Developer (or, at Developer's request, and with BKC's prior
written approval, to a controlled subsidiary or affiliate of Developer) a
Franchise Agreement in the form attached hereto as Exhibit "C".
4.2 Franchise Approval.
4.2.l Franchise Approval Criteria. With respect to each Restaurant
to be established pursuant to this Agreement, the Developer must first apply for
and obtain franchise approval ("Franchise Approval") from BKC through BKC's
standard franchise approval procedures, including without limitation, submitting
the then current form of Multiple Franchise Application, Management Commitment
Form, Capitalization Plan, and Preliminary Agreement. Notwithstanding any
provision in this Agreement to the contrary, the Developer understands and
agrees that, as a condition to the granting of a Franchise Approval, the
Developer must have met all of BKC's then current operational, financial, legal,
and other approval criteria at the time of application for a franchise (the
"Expansion Criteria"). BKC may, in its sole and absolute discretion, waive
Developer's non-compliance with any one or all of the Expansion Criteria with
regard to any Restaurants developed under this Agreement. Franchise Approval
shall not be unreasonably withheld. If Franchise Approval is not den fed by BKC
by no later shall twenty (20) business days from the date on which BKC receives
a written application from Developer which complies in all respects to the
requirements in this Section 4.2.1, then Franchise Approval shall be deemed to
have been given to Developer. The terms "operational," "financial" and "legal"
as used in this Agreement shall include without limitation the following:
(a) Operational. The Developer must conduct each and every one of
its Burger King Restaurant businesses presently existing and hereafter
constructed in accordance with the terms and conditions of this Agreement, the
provisions of the respective franchise agreements and the standards,
specifications and procedures set forth and described in the Manual of Operating
Data, as amended, including, the maintenance of the interior and exterior of the
Restaurants to reflect an acceptable Burger King image in the time period
required under the applicable Franchise Agreement. The Developer understands
that changes in said standards, specifications and procedures may become
necessary from time to time. The Developer agrees to accept, as reasonable, said
changes and the Developer further agrees that it is within the sole discretion
of BKC to make said changes.
5
<PAGE>
(b) Financial. The Developer must satisfy all BKC's financial
requirements for a franchise which will normally include the submission of a
certified financial statement (balance sheet and profit and loss statement) for
the Developer's latest fiscal year, a current financial statement on the
Developer and an acceptable capitalization plan showing that the Developer will
meet BKC's then current financial ratio requirements. Developer shall also be
current in all monetary obligations owed to BKC and its affiliates.
(c) Legal. The Developer has submitted to BKC, in a timely manner as
requested, all BKC standard form information and documents reasonably requested
by BKC prior to and as a basis for the issuance and consummation of individual
franchises, has taken such additional action as may be requested from time to
time consistent with this Development Agreement, the franchise agreements and
the legal relationships contemplated therein, and is in compliance with all
obligations under all agreements with BKC and its affiliates.
4.2.2 Disapproval. The Developer's failure to meet operational,
financial and/or legal standards shall constitute grounds for BKC refusing to
grant a Franchise Approval or withdrawing a Franchise Approval and shall not
extend, modify or reduce the development requirements and schedules in Article
III. BKC agrees to give the Developer written notice of its failure to receive
Franchise Approval, and such notice shall provide the Developer with reasonable
detail regarding the relevant deficiencies and the manner in which they may be
remedied (a "Disapproval Notice"). BKC will not unreasonably delay its decision
on whither to grant or deny Franchise Approval after receiving all documents and
information required by BKC. A Disapproval Notice shall not be a notice of
default under Section 7.1 above unless BKC specifically so states.
4.2.3 Target Area. If granted, Franchise Approval may be for a
specific address or a specific geographic area, at BKC's sole discretion, and
shall constitute the Developer's authorization to attempt to locate a site for a
Burger King Restaurant at that address or in that area.
4.3 Site Approvals; Plans and Specifications. After obtaining Franchise
Approval, the Developer shall submit to BKC a completed site approval
application package in the form then prescribed by BKC. The Developer
acknowledges receipt of BKC's current site approval application package forms.
Approval of the proposed site by BKC ("Site Approval") is a prerequisite to the
Developer's authorization to construct a Burger King Restaurant at a particular
location. BKC shall not unreasonably withhold Site Approval. IF BKC does not
deny Site Approval of a proposed site within twenty (20) business days from the
date on which BKC receives a completed site approval application package from
Developer for such site, Site Approval shall be deemed to have been given to the
Developer. The Developer shall not, except at the Developer's own risk, enter
into any legal binding commitments with vendors or lessors of potential site
property until the Developer has received Site Approval. After obtaining Site
Approval, the following requirements relating to site acquisition and
construction shall apply.
6
<PAGE>
4.3.1 Real Estate Interests. The Developer assumes all cost,
liability, expense and responsibility in locating, acquiring and developing the
real estate sites and of construction of the Restaurants to be developed.
4.3.2 Building Plan Approval Construction. All Restaurants shall be
constructed, equipped and furnished in accordance with plans and specifications
approved by BKC, which approval shall not be unreasonably withheld or delayed.
Developer acknowledges that BKC does not have standard architectural plans and
specifications for in-line restaurants (i.e., restaurants constructed in
existing structures or buildings. On written request of Franchisee, BKC will
make available to the Developer for its information in its standard plans and
specifications for freestanding Burger King Restaurants in whatever form or
language those plans and specifications are maintained. If, and to the extent
that, the Developer requires architectural and engineering services, it will
contract for those services independently at its own expense. The Developer
shall, as a condition precedent to the development of each restaurant, obtain
from BKC written architectural and design approval of the Developer's plans by
BKC ("Building Plan Approval"), which approval shall not he unreasonably
withheld. The building design, style, size and interior decor, as well as the
type of equipment, service format and e equipment arrangement for any future
Restaurant may be changed, amended or modified by BKC from time to time. Any
Building Plan Approval shall be for BKC's own benefit. If BKC does not deny
Building Plan Approval within twenty (20) business days after receiving
Developer's completed plans and all information reasonably requested by BKC in
connection with the Developer's building plans, Building Plan Approval shall be
deemed to have been given by BKC.
4.3.3 No Franchise Without Site and Building Plan Approvals. Nothing
in this Agreement shall be construed as obligating BKC to grant a franchise
agreement for any site which has not received Site Approval and Building Plan
Approval from BKC.
4.3.4 No Representation Regarding Site. The Developer agrees that the
approval of any site by or on behalf of BKC or the approval of any
specifications or of any other matter relating to the development by or on
behalf of BKC does not amount to a representation or warranty relating directly
or indirectly to the success or viability of the Restaurant and no reliance
shall be placed on any warranty, representation or advice that may be given by
any person by or on behalf of BKC directly or indirectly relating to the success
or viability of the Restaurant, unless such representation, warranty or advice
is given in writing by a board director of BKC. Developer further agrees that
BKC may, in its sole discretion not make a physical, on-site inspection and
evaluation of any proposed new Restaurant location in deciding whether to grant
Site Approval for any such location, it being understood and agreed that BKC's
review and approval of a new location is for BKC's own benefit only.
7
<PAGE>
ARTICLE V
FEES AND FRANCHISE AGREEMENTS
5.1 Development Fee. Subject to the conditions set forth below, the
Developer shall pay to BKC in the U.S.A. a total of One Million U.S. Dollars
(U.S. $1,000,000.00) (the "Development Fee").
(a) Developer shall not be obligated to pay the Development Fee if
Developer satisfies each of the following conditions:
(i) Developer complies with the Development Schedule
obligation through a date which is thirty (30) months from the date of this
Agreement set forth above ("Due Date"); and
(ii) Developer achieves actual Gross Sales (as defined in the
form of Franchise Agreement attached as Exhibit "C" hereto) at its properly
licensed Burger King Restaurants totalling an amount which is the equivalent
(using the conversion rate in effect at the time of each monthly report to BKC
under the relevant Franchise Agreement) of U.S. Eleven Million Dollars (U.S.
$11,000,000) during the twelve months immediately preceding the Due Date.
Provided, however, that if as of the Due Date the Developer has satisfied the
conditions set forth in (i) of this Section 5.1(a) but has failed to satisfy the
conditions set forth in (ii) of this Section 5.1(a) in that the Developer has
achieved actual Gross Sales of less than U.S. Eleven Million Dollars (U.S.
$11,000,000) during the twelve months immediately preceding the Due Date, and
further provided that Developer has achieved actual Gross Sales of greater than
U.S. Nine Million Dollars (U.S. $9,000,000) during the twelve months immediately
preceding the Due Date, then the Developer, at its election, may pay to BKC on
the Due Date the sum of U.S. Two Hundred and Fifty Thousand Dollars (U.S.
$250,000) in immediately available funds as a "Reduced Development Fee." If the
Developer is entitled to, but fails to pay said Reduced Development Fee, then
the Development Fee shall remain due and owing.
(b) If the Developer is obligated to pay the Development Fee
pursuant to Section 5.1 (a) above, and BKC has elected not to terminate this
Agreement pursuant to the terms of Article VII below, then the Developer shall,
at its election by delivery of written notice to BKC on or before the Due Date,
either;
(i) pay the Development Fee to BKC on the Due Date in
immediately available funds; or
8
<PAGE>
(ii) deliver with the notice referenced above, the written
binding undertaking of Mitchell Rubinson (in a form reasonably acceptable to
BKC) that the "Rubinson Group" (as defined below) shall, within six (6) months
of the Due Date, forever divest itself of all direct or indirect (through
Principal or otherwise) legal or beneficial interest in the Developer and the
Burger King Restaurants opened or operated by the Developer or its successors
and/or assigns and of the rights under this Agreement or any of the Franchise
Agreements to a party not related to Rubinson, including any of his family
members or any entity controlled by any such family members. For purposes of
this Section 5.1, the "Rubinson Group" shall mean Rubinson, and any trust,
partnership limited liability company), corporation or other legal entity
wherein he or they directly or indirectly own on the aggregate an interest of
ten percent (10%) or more of the legal or beneficial equity interests (a
"Rubinson Entity"), and any parent, subsidiary or affiliate of a Rubinson
Entity. Nothing in this Agreement is intended to constitute an admission by
Mitchell Rubinson that members of his family are controlled by or affiliated
with him.
(c) If the Developer proceeds under - Section 5.1(b)(ii) above and:
(i) The divestiture contemplated in Section 5.1(b)(ii) is
closed within such six (6) month period, then the Developer shall have no
obligation to pay the Development Fee; or
(ii) Some or all of the conditions and undertakings in Section
5.1(b)(ii) are not met within such six (6) month period, then the Developer
shall pay the Development Fee to the first (1st) day after the expiration of
such six (6) month period in immediately available funds.
(d) In the event that this Agreement is terminated by the Developer
pursuant to Section 7.3 below, the Developer shall have no further obligation to
pay the Development Fee and such non-payment shall not limit or otherwise affect
such termination or the Developer's other rights under Article VII and Article
VIII of this Agreement.
(e) In the event that this Agreement is terminated by the Developer
or its representatives for any reason other than pursuant to Section 7.3 below
and failure to divest, the Development Fee shall become immediately due and
payable in immediately available funds without limiting, or otherwise affecting
such termination or BKC's other rights under Article VII and Article VIII of
this Agreement.
(f) Payment of the Development Fee by the Developer has been
guaranteed by Rubinson pursuant to that certain Guaranty dated March 14, 1997.
5.2 Franchise Fee. Upon the execution of each franchise agreement
covering a Burger King Restaurant to be opened during the Term of this
9
<PAGE>
being understood and agreed that BKC's review and approval of a new location is
for BKC's own benefit only. also pay to BKC in the U.S.A. a Franchise Fee of
Forty Thousand U.S. Dollars ($40,000 U.S.D.) for franchise agreements with a
term of 20 years and a Franchise Fee of Twenty-Five Thousand U.S. Dollars
($25,000 U.S.D.) for franchise agreements with a term of 10 years (the
"Franchise Fee"). In the event that such payment in U.S. Dollars is prohibited
by law, Developer shall pay to BKC the amount of Zlotys necessary to convert at
the free market rate in effect at the time of payment, to the U.S. Dollar
Franchise Fee.
5.3 Royalty and Ad Contribution.
5.3.1 Standard Fees. Each franchise agreement for a Burger King
Restaurant to be opened during, the Term of this Agreement shall provide for
payment of a royalty equal to five percent (5%) of "Gross Sales" (as defined in
the form of Franchise Agreement attached as Exhibit C) and for payment of an
advertising contribution equal to six percent (6%) of "Gross Sales".
5.3.2 (SUBJECT TO A PENDING REQUEST FOR CONFIDENTIAL TREATMENT)
10
<PAGE>
5.4 Duration of Franchise Agreement. The term of each franchise
agreement issued hereunder shall commence on the date the Restaurant opens for
business and shall expire at midnight on the date preceding the twentieth
anniversary (or tenth anniversary, if BKC has granted a 10 year franchise
agreement) of such opening.
5.5 Other Terms. All other terms and conditions of the franchise
agreements to be entered into under this Agreement shall be the terms and
conditions of the form of franchise agreement attached hereto as Exhibit (the
"Franchise Agreement"). BKC may change the form of Franchise Agreement at its
sole discretion without liability to BKC and upon prior notice to Developer for
purposes of complying with local law, as BKC deems reasonably necessary.
5.6 Execution of Franchise Agreement. No less than twenty (20) days
prior to the opening of each Restaurant, the Developer shall execute the form of
Franchise Agreement and deliver it to BKC together with the Franchise Fee.
5.7 Change in Laws. BKC shall not be under any obligation to grant any
franchise agreement under this Development Agreement in the event that there
exists any exchange control or governmental regulation or practice or any law
which prohibits or restricts the payment to BKC of the amounts due to BKC under
the proposed or existing franchise agreements or the repatriation of those
amounts to the U.S., or if such a restriction is in BKC's reasonable opinion
about to be imposed or likely to be imposed within 12 months.
ARTICLE Vl
TRAINING, DIRECTOR OF OPERATIONS, SOURCES OF SUPPLY
6.1 Managing Director. The Developer shall designate, subject to BKC's
approval, an individual as the "Managing Director" who shall be responsible for
the overall management of the Developer. The Managing Director and the Director
11
<PAGE>
of Operations may be the same individual. BKC hereby approves Mr. Leon
Blumenthal ("Blumenthal") as the Managing Director provided that Blumenthal
during a time period of six (6) months from the date of this Agreement,
completely divests himself of all managerial responsibility and active
participation in any non-Burger King business so that Blumenthal's full time and
best efforts will be devoted to the operation and management of the Restaurants.
Notwithstanding, the foregoing, Blumenthal shall be allowed to retain nominal or
ministerial responsibilities for businesses not related to the operation and
management of the Restaurants so long as those responsibilities do not impair
his ability to act as Managing Director and are not otherwise prohibited under
this Agreement or the Franchise Agreements.
6.2 Director of Operations. The Developer shall designate, with the
approval of BKC, a "Director of Operations" who shall devote his or her full
time and best efforts to the running of the Burger King Restaurants contemplated
to be developed herein. The Developer will designate a Director of Operations
acceptable to BKC. The Developer agrees to evidence a Managerial Employment
Agreement indicating such Director of Operations' level of authority to control
the Burger King Restaurants as contemplated therein. BKC hereby approves Joanna
Makowska as the Director of Operations.
6.3 Substitute Managing Director and Director of Operations. Should the
positions of Managing Director and/or Director of Operations subsequently become
vacant the Developer shall with the minimum delay but in any event within six
(6) months of such vacancy designate a replacement who shall be submitted to BKC
for its approval who shall be required to complete the training requirements as
outlined below.
6.4 Training Requirements. As a condition precedent to the opening of
the Developer's restaurants under this Agreement, the Developer's Director of
Operations and all senior restaurant managers as designated for restaurants as
and when developed under this Agreement shall undertake and successfully
complete BKC's then current required training program for such positions which
training program shall be conducted at BKC's training school and Burger King
Restaurants located in Miami Dade County Florida U.S.A. or in such other place
as BKC may designate. ln addition to the training requirements set forth above
within six (6) months after the date of this Agreement the Director Of
Operations and the Managing Director must have successfully completed the
following two (2) training courses conducted by BKC at BKC's training facilities
and Burger King Restaurants located in Miami Dade County Florida USA: (1)
Business Management Training and (2) Advanced Restaurant Operations. BKC will
offer these two courses at no charge to the Director of Operations and the
Managing Director during said six (6) month period, however, Developer shall be
responsible for all related and incidental costs and expenses as provided in
Section 6.5 below.
6.5 Cost of Training. The Developer must be financially prepared to meet
support requirements for restaurant managers during all phases of training.
12
<PAGE>
Personal expenses for travel, food, lodging and other costs incurred during any
phase of training are the responsibility of the Developer. Each Restaurant
operated by the Developer shall utilize the services of at least one full time
restaurant manager who has completed BKC's then current basic operations
training course.
6.6 Covenants. The Developer hereby covenants and agrees with BKC as
follows:
6.6.1 Confidentiality. The Developer shall use its best efforts to
ensure that any present Director of Operations Managing Director and Developer's
Supply Manager or any individuals who may hold those or similar positions in the
future or any other employees involved in the operation of Burger King
Restaurants by virtue of their position shall be bound by an obligation of
confidentiality to BKC.
6.6.2 Stock Ledger. The Developer covenants in this regard to
furnish to BKC annually a certified copy of its stock ledger showing the
complete ante accurate list of shareholders.
6.7 Sources of Supply.
6.7.1 Authorized Suppliers. BKC may require that any item required
for or used in the operation of any Restaurant shall be previously approved by
BKC in its sole and absolute discretion and that the supplier and the
distributor of such items also be previously approved by BKC in its sole and
absolute discretion. The Developer shall in such case purchase only from
BKC-authorized suppliers and distributors. Should the Developer propose an
alternative supplier and/or distributor BKC shall evaluate such supplier and/or
distributor against its then current approval criteria and either approve or
disapprove such supplier and/or distributor. BKC shall disclose its confidential
and proprietary product specifications to suppliers and/or distributors proposed
by the Developer provided that such suppliers or distributors sign a suitable
confidentiality undertaking before BKC's confidential and proprietary product
specifications are disclosed. In approving or disapproving suppliers and
distributors, the Developer 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 Developer. If BKC denies
Developer's request for approval of a supplier or distributor BKC shall advise
the Developer of the reasons for its decision. If BKC does not deny Developer's
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 supplier
or distributor by BKC is subject to revocation in its sole discretion. Any such
revocation shall be in writing, and shall specify the reasons for such
revocation.
13
<PAGE>
6.7.2 Self-Supply. Developer may, upon prior written notice to BKC
invest in BKC-approved suppliers and/or distributors to the Restaurants or
request approval from BKC to become an approved supplier, andlor distributor to
the Restaurants. BKC shall not unreasonably withhold its approval of Developer
as a supplier or distributor to the Restaurants. Developer expressly
acknowledges and agrees, however, that Developer must meet BKC's then current
conditions for supplier and/or distribution agreements.
6.7.3 Limits on BKC Responsibility. BKC shall not be responsible for
the following:
(a) 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 Restaurants.
(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 Restaurants at a
reasonable or at any particular cost (whether stated as a percentage of sales or
otherwise) to the Restaurants or to the Developer.
6.7.4 Developer's Responsibilities. Developer shall be responsible
for locating, and submitting to BKC for approval pursuant to Section 6.7.1
above, suppliers and distributors capable of manufacturing and/or delivering all
BKC-required goods and services to the restaurants on a consistent and reliable
basis.
6.7.5 Developer's Supply Manager. On a one-time basis only, BKC'
shall, at its cost and expense, provide training in the area of supply and
quality assurance, to an individual ("Developer's Supply Manager") mutually
acceptable to BKC and Developer. Such training shall be for a period of no
longer than three (3) months and shall be at such locations as are reasonably
acceptable to BKC and Developer. The training will focus on the identification
and development of local suppliers and on auditing of ' the suppliers'
compliance with BKC standards and specifications. Upon completion of such
training program, Developer shall hire or retain Developer's Supply Manager for
the purpose of developing local suppliers and conducting quality audits of such
suppliers on behalf of the Developer. It is understood and agreed that the
Developer Supply Manager shall not have authority o approve suppliers and shall
comply with the terms set forth in Section 6.7.1 above. BKC shall provide, at
Developer's request and expense, similar training to a replacement to
Developer's Supply Manager. Developer may, at its discretion and risk, eliminate
the position of Developer's Supply Manager.
6.7.6 Additional Representations. Developer acknowledges that there
currently are no suppliers in Poland for variety of menu items served generally
in Burger King Restaurants and that the specification of the ingredients in all
Burger King menu items is subject to the approval of the local governmental
heath and other authorities. Developer agrees that:
14
<PAGE>
(a) BKC shall have no responsibility to obtain governmental
approvals for menu items;
(b) BKC may in it sole discretion permit a supplier to the
Restaurants to manufacture and sell menu items that do not meet BKC's
specifications provided that such supplier provides documentary evidence to BKC
that such item(s) comply with local governmental requirements;
(c) BKC may in its sole discretion approve a supplier or
distributor to the Restaurants even if such sup plier or distributor does not
meet all of BKC's standard approval criteria; and
(d) A request by Developer to BKC for approval of any product
supplier or distributor for or to the Restaurants shall constitute Developer's
consent to the use of such product, supplier or distributor but shall not bind
BKC to approve such product supplier or distributor for use at the Restaurants.
6.7.7 Product Specifications. BKC shall provide Developer with a
copy of BKC's confidential and propriety product specifications for such
products as BKC has approved for sale in Poland. Developer shall use such
specifications for the sole purpose of Developer identifying and developing
local sources of supply in Poland. Developer shall keep and maintain BKC's
product specifications strictly confidential a nd shall not disclose same to any
third party including any suppliers without BKC's prior written consent nor
without first obtaining a suitable confidentiality undertaking from such third
party a form of which shall be supplied by BKC.
ARTICLE VII
DEFAULT
7.1.1 Events of DeFault by Developer. Developer 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) The Developer fails to obtain Site Approval or any other
approval required from BKC prior to the commencement of construction.
(b) The Developer fails to adhere to the agreed development
schedules in accordance with Article II of this Agreement.
15
<PAGE>
(c) The Developer consistently fails over a period of nine (9)
months to meet and satisfy fully the operational financial and legal
requirements set forth in Article IV, whether for the purpose of seeking
franchise approval or in the day to day operation of a licensed Burger King
Restaurant, and does not cure such failure within thirty days of receipt of
written notice from BKC.
(d) The Developer fails to pay any amount when due under this
Agreement and does not cure such failure within ten (10) days of written notice
from BKC.
(e) Dissolution, termination of existence, or insolvency of either
the Developer or any of the Principals, or the appointment of a custodian or
receiver of any part of the property of the Developer or any of the Principals,
or a trust mortgage or an assignment for the benefit of creditors by either the
Developer or any of the Principals; or the recording or existence of any lien
for past due taxes, or the commencement by or against either the Developer or
any of the Principals of any proceeding under any bankruptcy or insolvency laws;
or service on BKC or any writ, summons or process designed to affect any account
or property of either the Developer or any of the Principals, any of which is
not released, dismissed, discharged, bonded or otherwise adequately reserved
against within thirty (30) days.
(f) The Developer fails to obtain or renew any licenses or permits
necessary for the performance of the Developer's obligations under this
Agreement and does not cure such failure within thirty days of written notice
from BKC.
(g) The Developer opens a Burger King Restaurant without franchise
approval, site approval, payment of all franchise fees and other fees, and/or
execution of all required agreements and documents.
(h) The Developer or any Principal challenges the validity of any of
the trademarks or names, copyrights or other industrial property right of Burger
King Corporation.
(i) The Developer defaults under any franchise or other agreement
with BKC or its Affiliates, fails to cure such default within any applicable
cure period, and BKC terminates any such franchise or other agreement in
accordance with its terms.
(j) The occurrence of a change in laws or regulations as set forth
in Article V, Paragraph 5.7.
(k) The occurrence of any event which is contrary to the provisions
of Article X hereof.
16
<PAGE>
(l) The Developer or any Principal fails to comply with any of the
other terms, provisions or conditions of this Agreement and does not cure such
failure within thirty (30) days of receipt of written notice from BKC.
(m) The Developer fails to maintain a Net Worth of at least Seven
and One-Half Million U.S. Dollars ($7,500,000) at all times beginning on June 1,
1999, and continuing until the expiration or earlier termination of this
Agreement "Net Worth" shall mean on a consolidated basis the amount by which the
Developer's assets exceed the Developer's liabilities determined in accordance
with generally accepted accounting principles in the United States consistently
applied.
(n) In the event that thirty-five percent (35%) or more of the
voting Stock of the Developer or any Principal is owned by a party that is
either a franchisee, franchisor or owner of a Fast Food Hamburger Restaurant as
that term is defined Article XXII.
7.1.2 Event of BKC Default. BKC shall be in default under this
Agreement if BKC fails to comply with any of its obligations under this
Agreement and does not cure such failure within thirty (30) days of receipt of
written notice from the Developer.
7.2 BKC Remedies. Subject to the provisions of Article IX herein BKC's
sole and exclusive remedy upon the occurrence of an Event of Default under
Section 7.1.1 shall be to deliver written notice to the Developer that this
Agreement is thereby immediately terminated.
7.3 Developer Remedies. Subject to the provisions of Article IX herein
Developer's sole and exclusive remedy upon the occurrence of an Event of BKC
Default under Section 7.1.2 shall be to deliver written notice to BKC that this
Agreement is thereby immediately terminated.
ARTICLE VIII
TERMINATION
8.1 Effect of Termination. Upon termination of this Agreement due to the
expiration of the term of this Agreement or pursuant to Section 7.3 all rights
granted to the Developer under this Agreement with the exception of Franchise
Approvals for Restaurants not yet opened shall terminate. Upon termination of
this Agreement pursuant to Section 7.2 above all rights granted to the Developer
under this Agreement and all Franchise Approvals for Restaurants not yet opened
shall terminate.
8.2 Rights Upon Termination. Upon termination of this Agreement, whether
resulting from an Event of Default under Section 7.1.1 or from expiration of the
term of this Agreement, BKC shall have the unrestricted right to license others
to develop and operate Burger King Restaurants in the Development Area, or to do
17
<PAGE>
so itself. Developer agrees to cooperate with BKC in obtaining any government
approvals necessary to this end. Upon termination of this Agreement pursuant to
Section 7.2 above BKC shall, subject to the provisions of Article IX below, have
the right to claim lost franchise fees royalties and advertising contributions
and shall also have all other rights and remedies available under applicable
law. Subject to the provisions of Article IX below the rights of the parties set
forth in this Section 8.2 shall be in addition to any other rights the parties
may have under applicable law.
ARTICLE IX
DISPUTE RESOLUTION
9.1 Dispute Resolution.
(a) Subject to subparagraph (b) below, all controversies disputes or
claims arising between the Developer, any Principal, the Guarantor, any of their
permitted assignees any of their respective subsidiaries and their respective
shareholders, officers, directors, agents and employees (in their respective
capacity) (collectively the "Developer 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 Franchise Agreement) the
validity of this Agreement or any provision hereof or the operation of the
Burger King Restaurants 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 it. Such arbitration
proceedings shall be conducted before a panel of three (3) arbitrators. The
Developer parties shall appoint one arbitrator between them, BKC shall appoint
one arbitrator, and the two arbitrators so appointed shall appoint a third
arbitrator to act as Chairman. If said two arbitrators fail to nominate the
Chairman within thirty (30) days from the date of appointment of the second
arbitrator to be appointed, the Chairman 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 without 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, and
provided further, the arbitrators shall not under any circumstances, award
damages for any failure by Developer to meet the Development Schedule. The award
and decision of the arbitrators shall be conclusive and binding upon the
Developer Parties and BKC and judgment upon the award may be entered in any
court of competent jurisdiction. The Developer Parties and BKC further expressly
agree and consent to the jurisdiction of the courts of the State of New York or
the parties hereto for the purpose of entering judgment upon any such award of
the arbitrators. The Developer 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
18
<PAGE>
Developer Parties and BKC further agree that in connection with any such
arbitration proceeding, each 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 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
Franchise Agreement relating to BKC's Marks or proprietary information by any of
the Developer Parties upon the termination or expiration of this Agreement or
any Franchise Agreement. The only remedy of any of the Developer Parties if an
injunction is so entered will be the dissolution of that injunction if warranted
upon due hearing all other claim s being subject to arbitration under
subparagraph (a) above.
ARTICLE X
SECRECY OF PROPERTY
The Developer and each Principal shall at all times both during the term
of this Agreement and following the termination of this Agreement, maintain in
strict confidence BKC's operational manuals, marketing information and methods,
and all information and knowledge relating to the methods of operating and the
functional know-how relating to Burger King Restaurants revealed by BKC to the
Developer. The Developer and the Principals shall not disclose this proprietary
information of BKC to any third party nor shall the Developer use or permit any
third party to use this proprietary information or any part thereof for any
purpose whatsoever, except that during the term of this Agreement or any Burger
King Franchise Agreement executed pursuant to this Agreement, the Developer may
disclose to the Developer's employees such of BKC's proprietary information as
may be necessary for carrying out the Developer's obligations under this
Agreement or the Burger King Franchise Agreement and for the operation of
licensed Burger King Restaurants. The restrictions contained in this Article X
shall cease to apply to any information which is or comes with the public domain
except where this results from a breach by the Developer or the Principal of
this Article. The oblige ions of the Developer and the Principals under this
Article shall survive the termination of this Agreement.
ARTICLE XI
ASSIGNMENT AND TRANSFER
11.1 Transfer of Interest by Developer. The Developer shall not (a)
directly or indirectly sell, assign, convey, give away, mortgage, pledge,
hypothecate, or otherwise transfer or encumber its rights or obligations under
this Agreement, or (b) sell, transfer, convey, give away, offer, issue or
otherwise grant or deliver additional equity interests in the Developer, without
the prior written consent of BKC, which consent may not be unreasonably withheld
by BKC.
19
<PAGE>
11.2 Transfer of Interest by Principal. No Principal shall directly or
indirectly sell, assign, convey, give away, mortgage, pledge, hypothecate, or
otherwise transfer or encumber any legal or beneficial equity interest in the
Developer without the prior written consent of BKC, which consent may not be
unreasonably withheld by BKC.
11.3 Exception to Applicability. The provisions of Subsection 11.1(b)
above shall not apply to International Fast Food Corporation so long as it is
the Developer under this Agreement; provided, however, that in the event of an
assignment (with BKC's consent) of this Agreement by International Fast Food
Corporation as the Developer to its controlled subsidiary International Fast
Food Polska SP Z0.0, the assignee shall, as the new Developer, be bound by the
provisions of Subsection 11.1(b) above.
ARTICLE XII
SEVERABILITY
If any of the provisions of this Agreement may be construed in more than
one way, one of which would render the provision illegal or otherwise voidable
or unenforceable, 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. In
the event any court or other government authority shall determine any provision
in this Agreement is not enforceable as written, the parties agree that 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
enforcement is sought and affords the parties the same basic rights and
obligations and has the same economic effect. If any provision in this Agreement
is held invalid or otherwise unenforceable by any court or other government
authority, such findings shall not invalidate the remainder of the agreement
unless in the reasonable opinion of the affected party the effect of such
determination has the effect of frustrating the purpose of this Agreement,
whereupon such party shall have the right by notice in writing to the other
party to immediately terminate this Agreement.
ARTICLE XIII
ENTIRE AGREEMENT
This Agreement embodies the entire agreement and understanding between the
parties with respect to the development and franchising of Burger King
Restaurants and cancels and supersedes all prior negotiations, understandings
and agreements written or oral, relating to the development and franchising of
Burger King restaurants. The parties acknowledge that they are not relying upon
any representation, warranty, condition, agreement or understanding, written or
20
<PAGE>
oral, except as herein specified. Neither this Agreement nor any term or
provision of it may be changed, waived, discharged or modified orally. The only
changes waivers discharges or modifications that will be effective will be those
which are in writing signed by all of the parties to this Agreement.
ARTICLE XIV
NOTICES
Any notice demand request consent approval designation specification or
other communication given or made or requires to be given or made hereunder
shall be in writing and shall bc hand-delivered by courier or sent by registered
airmail postage fully prepaid addressed as follows:
If to BKC: BURGER KING CORPORATION
P.O. Box 020783
General Mail Facility
Miami, Florida 33102-0783
Attn: General Counsel
If to the Developer:
INTERNATIONAL FAST FOOD CORPORATION
1000 Lincoln Road Suite 200
Miami, Florida 33139
Attn: Mr. Mitchell Rubinson
with a copy to:
Joel Hirschhorn, P.A.
Douglas Center, 2600 Douglas Road
Penthouse One
Coral Gables, Florida 33134
Attn: Joel Hirschhorn, Esq.
Or to such other address or person Is either party may hereafter designate in
writing. All such notices shall be effective upon actual receipt.
ARTICLE XV
NON-WAIVER
Failure of any party hereto to insist upon strict performance of any of
the terms or provisions of this Agreement shall not be deemed a waiver of any
subsequent breach or default of the terms or provisions of this Agreement, nor
21
<PAGE>
shall acceptance by BKC of any money paid on behalf of the Developer under this
Agreement or under any Burger King franchise agreement after any breach or any
Burger King franchise agreement, whether before or after notice to or knowledge
of the breach or default by BKC, constitute a waiver by BKC of such breach or
default.
No full or partial waiver of any standard or requirement by BKC, and no
approval by BKC, whether express, impled or occurring by the passage of time,
shall be construed as a breach or derogation of any duty of BKC to the
Developer.
ARTICLE XVI
HEADINGS AND ARTICLE TITLES
The headings as to contents of particular articles are inserted only for
convenience and reference and are in no way to be construed a part of this
Agreement or as a limitation on the scope of any of the terms or provisions of
this Agreement.
ARTICLE
RELATIONSHIP OF PARTIES
Nothing in this Agreement shall be construed to make the parties to this
Agreement partners or joint venturers. The Developer is not in any way the agent
of BKC and must not hold themselves out as such
ARTICLE XVVIII
INTERPRETATION
18.1 Currency. Unless otherwise indicated, all references to monies shall
be considered to be in U.S. currency.
18.2 Grammar. Unless repugnant to or inconsistent with the context,
wherever the singular is used in this Agreement it shall include the plural and
vice versa; the masculine shall include the feminine and neuter, and the neuter
the masculine and feminine; reference to persons shall include corporations and
vice versa.
18.3 Successors and Assigns. The expressions "BKC" and "the Developer"
shall include their successors in title and assigns.
18.4 Good Faith. 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.
18.5 Use of Developer Information. All information, reports, applications
and documents to be provided by Developer to BKC under this Agreement are being
22
<PAGE>
provided solely for BKC's own benefit, information and use. BKC shall have no
responsibility to use or to analyze such information for the benefit of the
Developer or to communicate to the Developer any options, beliefs or ideas BKC
may develop using information provided by the Developer. BKC shall use
reasonable efforts to keep such non-public information of Developer
confidential.
ARTICLE XIX
BROKER
The Principals and the Developer warrant that they have not appointed and
do not contemplate appointing any broker, agent or other person who would be
entitled to a fee or commission upon the execution of' this Agreement or the
completion of any transactions contemplated by this Agreement. Each Principal
and the Developer agree to hold BKC safe and harmless from any fee or commission
claimed by any person purporting to act for or on this behalf. Nothing in this
Agreement shall be construed as prohibiting either party from employing
attorneys, accountants or patent or trademark agents to advise and carry out
professional services on its behalf.
ARTICLE XX
GOVERNING LAW/JURISDICTION
This Agreement shall be governed by and construed in accordance with the
laws of the State of Florida, U.S.A.; provided however, that it is understood
and agreed that since this Agreement is not a franchise for the operation of
Burger King Restaurants, but is intended by the parties to set forth the terms
and conditions which, if fully satisfied, would entitle the Developer to apply
for and receive individual franchises for each restaurant, if any, developed
under this Agreement, the Florida Franchise Act, Florida Statutes, Section 81
7.416 (1')71). 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 Article IX of this
Agreement. However, in the event that Section 9.1(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 proper forum in which to
adjudicate any case or controversy arising under said Section, 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.
23
<PAGE>
ARTICLE XXI
TRADEMARKS AND TRADE NAMES
21.1 Disclaimer of Interest. The Developer and the Principals acknowledge
that they have no part in the creation or development of the Burger King Marks,
BKC trademarks or trade names (whether registered or not) therefrom.
21.2 Notice of Challenge. The Developer shall immediately refer any
challenge to the validity, right or usage of the Burger King trademarks, trade
names, patents or copyrights to Burger King Corporation, which shall have the
sole right to defend same.
21.3 Registered User Agreement. The Developer shall at such times as BKC
may require enter into Registered User Agreements in the form prescribed by BKC
authorizing and permitting the use of the Burger King Marks referred to in such
agreement and which Registered User Agreements shall not impose additional
obligation on the Developer. The Developer agrees to comply with all the terms
and conditions and provisions contained in such Registered User Agreements and
to sign and execute any document and/or do such things as may be necessary to
constitute or appoint BKC's designee to make application on the Developer's
behalf for registration of all necessary Registered User Agreements and to
record the cancellation of any Registered User Agreements and to stipulate the
principal place of business of such firm as the place for service of all
communications and notices with respect to such registrations. BKC shall pay its
own costs for the preparation and execution of any Registered User Agreement and
any filing or similar costs associated therewith. Should the Developer choose to
take independent advice in relation to such documents, or incur other costs in
relation to the execution of such documents, such costs shall be borne by the
Developer as the case may be.
21.4 No Unauthorized Use. The Developer shall not use any names,
trademarks or tradenames of BKC or any variations or abbreviations thereof in
any manner without prior written authorization from BKC.
21.5 Registered Marks. Exhibit D lists trademarks registered in Poland;
however, BKC makes no expressed or implied warranty with respect to the validity
of any of the Burger King Marks. The Developer acknowledges the Developers
understanding that the Developer may be conducting business utilizing Burger
King Marks which have not been registered and that registration may not be
granted for unregistered marks and that some of the Burger King Marks may be
subject to use by third parties unauthorized by BKC. Except for the
representation that the trademarks listed on Exhibit D have been registered, no
other warranty as to validity, subsistence or otherwise is made in respect of
said trademarks or any other trademark which may be authorized for use by the
Developer.
21.6 Assistance to BKC. The Developer agrees to join and assist in the
defense of any action relating to the right to use or the validity of the Burger
King marks and BKC agrees to indemnify the Developer for reasonable costs and
expenses reasonably incurred in assisting BKC in defense of such action provided
that BKC shall have the right to select the attorney who will represent tile
24
<PAGE>
Developer in the action. The Developer shall not institute any legal action or
other kind of proceeding based upon the trademarks which the Developer is
licensed to use under this Agreement without the prior written approval of BKC.
ARTICLE XII
COMPETITION
The Developer and the Principals acknowledge and agree that they have had
arid will continue to have access to information that is not generally available
to those outside the Burger King Restaurant system. The Developer and each
Principal warrant that they have no interest directly or indirectly in any "Fast
Food Hamburger Restaurant" in the Development Area and will not, during the term
of this Agreement, acquire such an interest in any such restaurant in a
territory where it would compete with a restaurant operating under the Burger
King System; provided, that this shall not prevent the Developer and the
Principals from having an interest in an undertaking which competes with the
Burger King System if such interest is not such as to enable them to influence
the affairs of such undertaking. Fur purposes of this Article, "Fast Food
Hamburger Restaurant" shall mean any restaurant which (a) has hamburgers or
hamburger based products which account for 50% 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. For purposes of this Article, "a direct or
indirect interest" shall include without limitation an interest held by the
Developer a Principal or any of their subsidiaries or affiliates or immediate
family members.
ARTICLE XXIII
TAXES
It is understood and agreed by the parties that the Developer shall be
responsible for any value added tax and that any and all other tax liabilities
arising out of this Agreement will be paid by the party owing such taxes.
Notwithstanding the foregoing, the parties expressly agree that in the event BKC
incurs withholding tax liability in the country in which the Restaurants will be
located, it shall be the responsibility of the Developer to withhold such
withholding taxes as are required by law, pay them on BKC's behalf, and provide
BKC with corresponding receipts from the relevant taxing authorities to evidence
the amounts withheld.
ARTICLE XXIV
GOVERNMENTAL APPROVAL
The Developer shall seek to secure any and all governmental approvals
required for any matter relating to the validity of the relationship
contemplated by this Agreement or any franchise agreements issued pursuant to
the relationship herein established including without limitation all
governmental approvals with regard to the importation and sale of products sold
25
<PAGE>
in the Restaurants. The Developer shall seek to secure any Central Bank or other
approval required for the payment of any amounts due under any Agreements with
BKC as contemplated herein.
ARTICLE XXV
SURVIVAL
Except as expressly provided in this Agreement the Termination of this
Agreement shall be without prejudice to any rights which shall have accrued to
the parties prior to the date of such termination, shall not affect or diminish
the binding force or effect of any provision of this Agreement which expressly
or by implication shall come into force or continue in force after termination,
shall not release the Developer or Principals from obligations to pay any sums
owed under this Agreement or to pay any franchise fees, royalties or other sums
owed to BKC under franchise agreements or other agreements, and shall not
terminate any franchise agreements entered into pursuant to this Agreement
ARTICLE XXVI
THE PRINCIPAL(S)
26.1 Stock Ownership. If and when applicable the Principals represent and
warrant to BKC that Exhibit A contains a complete list of the shareholders of
the Developer and their respective shareholdings on the date of this Agreement
and that unless otherwise stated the Principals are the beneficial owners of
their respective share.
26.2 Guaranty. If and when applicable, each of the Principals hereby
agrees to jointly, severally, and unconditionally guaranty the payment and
performance of all debts, obligations and liabilities of the Developer to BKC
arising pursuant to this Agreement, or any other agreement with BKC relating
directly or indirectly to the Restaurants (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
Developer's creditors generally (all of the foregoing being referred to
collectively as the "Obligations"). This guaranty by each of the Principals
shall continue in full force and effect until the Developer 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:
The Guaranties shall not be impaired by any modification,
supplement, extension or amendment of the BKC Agreements or any of the
Obligations, nor by an! modification, release or other alteration of any of the
Obligations hereby guaranteed, nor by any agreements or arrangements whatever
with the Developer or any one else;
The liability of each of the Principals is primary, direct and
unconditional and may be enforced without requiring BKC first to resort to any
other right, remedy or security;
26
<PAGE>
No Principal shall have any right of subrogation,
reimbursement or indemnity whatsoever, unless and until the Obligations are paid
or performed in full;
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 or in respect of any Principal, any and all obligations of
that Principal shall, at BKC's option, immediately become due and payable
without notice;
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 il connection with any event or proceeding described in
Section 25.2(d), the Guaranties shall continue in effect or be reinstated as
though such payment, transfer or recovery had not been made;
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 an, Obligation is limited, modified, voided, released or discharged in
any proceeding uncle any law affecting the rights of creditors generally;
Any termination of the Guaranties shall be applicable only to
Obligations accruing prior to termination or having their inception after the
effective date of such termination and shall not affect Obligations having their
inception prior to such date;
The death or incapacity of any Principal hereunder shall not
result in the termination of the Guaranties;
Any and all present and future debts and obligations of the
Developer to any Principal hereunder are hereby waived and postponed in favor of
and subordinated to the full payment and performance of the Obligations; and
Each of the Principals 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.
27
<PAGE>
ARTICLE XXVII
INDEPENDENT ADVICE
THE DEVELOPER AND THE PRINCIPAL AND EACH PARTY COMPRISING THE PRINCIPAL
ACKNOWLEDGE THAT THEY HAVE BEEN ADVISED BY BKC 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 DEVELOPMENT AND OPERATION OF BURGER KING RESTAURANTS BEFORE
ENTERING INTO THIS AGREEMENT.
ARTICLE XXVIII
FORCE MAJEURE
Neither party shall be deemed in de fault as a result of its delay or
failure to perform which arises from force majeure or other causes reasonably
beyond the control of such party including without limitation acts of God, acts
of war, strikes, laws and regulations. If the event of force majeure of other
similar cause lasts more than one (1) year, the party adversely affected by such
cause shall have the right to terminate this Agreement, effective upon notice
thereof to the other.
ARTICLE XXIX
CONTROLLING LANGUAGE
This Agreement is in the English language only, which language shall be
controlling in all respects. No translation if any of this Agreement into any
other language shall be of any force or effect in the interpretation of this
Agreement or in the determination of the intent of either of the parties hereto.
ARTICLE XXX
DEFINITIONS
Each reference in this Agreement to the following terms shall be deemed to
have the following meanings:
<TABLE>
<CAPTION>
<S> <C>
Agreement: This agreement, as the same may be modified and/or amended
from time to time or any substitutions or replacements hereof.
Building Plan
Approval: The meaning designated in Section 4.3.2 of this Agreement.
BKC: The meaning designated in the preamble of this Agreement.
28
<PAGE>
Burger King Marks: The meaning designated in the preamble of this Agreement.
Burger King Restaurants:The meaning designated in Paragraph A
of the Introduction to this Agreement.
Burger King System: The meaning designated in Paragraph A of the Introduction to
this Agreement.
Developer: The meaning designated in the preamble of this Agreement.
Development Area: The meaning designated in Paragraph E of the Introduction to
this Agreement.
Development Schedule: the schedule for the development and opening of Development
Units set forth on Schedule 1 of this Agreement.
Development Units: The meaning designated on Exhibit B of this Agreement.
Director of Operations: The meaning designated in Section 6.2 to this Agreement.
Events of Default: The meaning designated in Section 7.1 of this Agreement.
Expansion Criteria: The meaning designated in Section 4.2.1 of this Agreement.
Extended Development
Schedule: The extended development schedule attached as Schedule 2
to this Agreement.
Franchise Agreement: The meaning designated in Section 5.5 of this Agreement.
Franchise Approval: The meaning designated in Section 4.2 of this Agreement.
Franchise Fee: The meaning designated in Section 5.2 of this Agreement.
Gross Sales: The meaning designated in Section 3.1 of this Agreement and
in the Franchise Agreement(s).
Term: The meaning designated in Section 2.1 of this Agreement.
Institutional
Locations: The meaning designated in Section 1.2.2 of this Agreement.
Managing Director: The meaning designated in Section 6.1 of this Agreement.
29
<PAGE>
Principal(s): The meaning designated in the introduction to this Agreement.
Restaurants: Burger King Restaurants.
Site Approval: The meaning designated in Section 4.3 of this Agreement.
</TABLE>
30
<PAGE>
This Agreement is executed by the parties as of the day and year indicated
on the first page of this Agreement.
BURGER KING CORPORATION
By: /s/ Mark Gerasi
-----------------------------------
Senior Vice President
(Corporate Seal)
INTERNATIONAL FAST FOOD
POLSKA SP Z0.0
By: /s/ Mitchell Rubinson
-----------------------------------
Name: Mitchell Rubinson
Its: President
(Corporate Seal)
INTERNATIONAL FAST FOOD
CORPORATION
By: /s/ Mitchell Rubinson
-----------------------------------
Name: Mitchell Rubinson
Its: President
(Corporate Seal)
31
<PAGE>
EXHIBIT A
TO THE DEVELOPMENT AGREEMENT
PRINCIPALS OF THE DEVELOPER
32
<PAGE>
EXHIBIT B
DEVELOPMENT UNITS
DEVELOPMENT UNITS
The Development Units credited to the Developer pursuant to the terms and
conditions set forth in Paragraph 3.1 shall be as follows:
1 If the Restaurant is a Traditional Burger
King Restaurant (as defined below): 1 Unit
2 If the Restaurant is an In-Line Burger
King Restaurant (as defined below): 1 Unit
3 If the Restaurant is a Burger King
Kiosk Restaurant (as defined below): 1/4 Unit
4 If the Restaurant is a Drive-Thru Burger
King Restaurant (as defined below): 1 Unit
DEFINITIONS
1 The term "Traditional Burger King Restaurant" means a freestanding
building, or retail space within a building, with an area of more than 300
square meters or more.
2 The term "In-Line Burger King Restaurant" for purposes of this Exhibit,
means a freestanding building, or retail space within a building, with an
area of 150 to 299 square meters.
3 The term "Burger King Kiosk Restaurant" means a freestanding kiosk, or
retail space within a larger building, with an area of less than 150
square meters.
4 The term "Drive-Thru Burger King Restaurant" means a freestanding building
which has seating capacity of less than 30 customers and two drive-thru
windows.
33
<PAGE>
EXHIBIT C
BURGER KING
RESTAURANT FRANCHISE AGREEMENT
34
<PAGE>
EXHIBIT D
TO DEVELOPMENT 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
35
<PAGE>
SCHEDULE 1
"DEVELOPMENT SCHEDULE"
Timer Periods Development Units to be opened
during Time Period
Development Year 1 (March 14, 1997 through Sept. 30, 1998) 3
Development Year 2 (Oct. 1, 1998 through Sept. 30, 1999) 4
Development Year 3 (Oct. 1, 1999 through Sept. 30, 2000) 4
Development Year 4 (Oct. 1, 2000 through Sept. 30, 2001) 4
Development Year 5 (Oct. 1, 2001 through Sept. 30, 2002) 5
Development Year 6 (Oct. 1, 2002 through Sept. 30, 2003) 5
Development Year 7 (Oct. 1, 2003 through Sept. 30, 2004) 5
Development Year 8 (Oct. 1, 2004 through Sept. 30, 2005) 5
Development Year 9 (Oct. 1, 2005 through Sept. 30, 2006) 5
Development Year 10 (Oct. 1, 2006 through Sept. 30, 2007) 5
Total 45
36
<PAGE>
SCHEDULE 2
Section 5.3.1(a)
(SUBJECT TO A PENDING REQUEST FOR CONFIDENTIAL TREATMENT)
37
<PAGE>
SCHEDULE 3
Section 5.3.1(b)
(SUBJECT TO A PENDING REQUEST FOR CONFIDENTIAL TREATMENT)
38
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.
<PAGE>
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
ii
<PAGE>
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
iii
<PAGE>
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
iv
<PAGE>
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
v
<PAGE>
FRANCHISE AGREEMENT
-------------------
Corporate
---------
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 17777 Old Cutler Road, Miami, Florida, United
States 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
1
<PAGE>
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.
2
<PAGE>
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
3
<PAGE>
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 .
4
<PAGE>
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
5
<PAGE>
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
6
<PAGE>
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
7
<PAGE>
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
8
<PAGE>
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.
9
<PAGE>
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.
10
<PAGE>
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
11
<PAGE>
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
12
<PAGE>
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.
13
<PAGE>
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.
14
<PAGE>
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
15
<PAGE>
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.
16
<PAGE>
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.
17
<PAGE>
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
18
<PAGE>
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
<PAGE>
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
20
<PAGE>
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.
21
<PAGE>
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
<PAGE>
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
<PAGE>
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.
24
<PAGE>
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.
25
<PAGE>
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;
26
<PAGE>
(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.
27
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
32
<PAGE>
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
<PAGE>
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 17777 Old
Cutler Road, Miami, Florida 33157, U.S.A., Attention: General Counsel, Facsimile
number (305) 378-7230, 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
<PAGE>
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/ Mark Gerasi
----------------------------------
Vice President
Attest:
/S/ Kim A. Goodhard
----------------------------------
Assistant Secretary
(Corporate Seal)
INTERNATIONAL FAST FOOD
POLSKA SP ZO.O (the "Franchisee")
By: /S/ Mitchell Rubinson
----------------------------------
Name: Mitchell Rubinson
--------------------------------
Position: President
----------------------------
35
<PAGE>
THE PRINCIPAL:
INTERNATIONAL FAST FOOD
CORPORATION
By: /S/ Mitchell Rubinson
----------------------------------
Name: Mitchell Rubinson
--------------------------------
Position: President
----------------------------
36
<PAGE>
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
<PAGE>
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 | | | |
- -----------------|--------------|-----------|-----------------|-----------------
| | | |
| | | |
- -----------------|--------------|-----------|-----------------|-----------------
| | | |
| | | |
================================================================================
38
<PAGE>
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
