Exhibit 10.06
Form of Sonic Industries Inc. License Agreement
(the Number 5.2 License Agreement)
SONIC INDUSTRIES INC.
NUMBER 5.2 LICENSE AGREEMENT
BY AND BETWEEN SONIC INDUSTRIES INC., LICENSOR, AND
_____________________________________
_____________________________________
___________________________, LICENSEE
SONIC DRIVE-IN OF _______________________________________,
LOCATED AT ____________________________________________
____________________________________________________.
DATED: JANUARY 1, 1999
STORE NO. _________
CIF NO. __________
Store No. _________
CIF No. __________
NUMBER 5.2 LICENSE AGREEMENT
THIS AGREEMENT made this 1st day of January, 1999 (this "Agreement") by
and between SONIC INDUSTRIES INC., an Oklahoma corporation ("SONIC"), and
__________________________ ("Principal")
__________________________
__________________________
(all of whom shall be jointly referred to herein as the "Licensee").
RECITALS
SONIC is the developer and the sole and exclusive owner of the right to
license the distinctive and proprietary drive-in, food service system under
which food is sold to the public from drive-in restaurants operated under the
trade name and federally registered trademark and service xxxx "Sonic". The
Sonic System so developed now includes, among other things, the following
elements, all or some of which may be deleted, changed, improved or further
developed by SONIC from time to time:
A. Methods and procedures for the preparation and serving of food and
beverage products.
B. Confidential recipes for food products and distinctive service
accessories (including, but not limited to, uniforms, menus, packages,
containers and additional paper or plastic items).
C. Plans and specifications for distinctive standardized premises
featuring characteristic exterior style, colors, and design (including angled
parking stalls equipped with menu housings, speakers and tray supports),
interior furnishings, equipment layout, exterior signage, and marketing
techniques and materials.
D. A uniform method of operating which is described in the SONIC
OPERATIONS MANUAL.
E. Distinctive and characteristic trade names, trade dress,
trademarks and service marks, including, but not limited to: "Sonic," "Sonic
Happy Eating," "America's Favorite Drive-In Sonic," signs, menu housings,
designs, color schemes, standardized premises featuring characteristic exterior
style, canopies, colors, and design (including angled parking stalls equipped
with menu housings, speakers and tray supports), interior furnishings and
equipment layout, and emblems as SONIC
designates in the SONIC OPERATIONS MANUAL or otherwise in writing or through
usage as prescribed for use with the Sonic System and as may from time to time
be developed.
F. Such exclusive and trade secrets as have been and may from time to
time be developed, which are owned by SONIC and which are disclosed to its
licensees in confidence in connection with the construction and operation of a
Sonic drive-in restaurant.
Licensee wishes to obtain a license from SONIC to operate a Sonic
drive-in restaurant pursuant to the Sonic System and to be afforded the
assistance provided by SONIC in connection therewith, and understands and
accepts the terms, conditions and covenants set forth herein as those which are
reasonably necessary to maintain SONIC's high and uniform standards of quality
and service designed to protect the goodwill and enhance the public image of the
Proprietary Marks and the Sonic System, and recognizes the necessity of
operating the licensed Sonic drive-in restaurant in faithful compliance
therewith, and with SONIC's standards and specifications.
1. DEFINITIONS.
Unless the context of their use in this Agreement requires otherwise, the
following words and phrases shall have the following meanings when used in
initially-capitalized form in this Agreement.
1.01. AFFILIATE. The word "Affiliate" shall mean (a) any stockholder,
director or officer of a specified Person (if the specified Person is a
corporation), (b) any partner of a specified Person (if the specified Person is
a partnership), (c) any member of a specified Person (if the specified Person is
a limited liability company), (d) any employee of a specified Person, and (e)
any Person which directly or indirectly through one or more intermediaries
Controls the specified Person, the specified Person Controls, or shares a common
Control with the specified Person.
1.02. CONTROL. The word "Control" means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a Person or entity, whether through the ownership of voting
securities, by contract, or otherwise.
1.03. DMA. The term "DMA" shall mean a Designated Market Area as
defined by X.X. Xxxxxxx Company from time to time.
1.04. GROSS SALES. The phrase "Gross Sales" shall mean all revenues
from sales resulting from all business conducted upon or from the Sonic
Restaurant, whether evidenced by check, cash, credit, charge account, exchange
or otherwise, and shall include (without limitation) the amounts received from
the sale of goods, wares and merchandise, including sales of food, beverages and
tangible property of every kind and nature, promotional or otherwise (excluding
restaurant equipment) and for services performed from or at the Sonic
Restaurant, whether Licensee fills the orders from the Sonic Restaurant or
elsewhere. Each charge or sale upon credit shall constitute a sale for the full
price in the month during which the charge or sale occurs, regardless of the
time when Licensee receives payment (in whole or in part) for the charge or
sale. The phrase "Gross Sales" shall not include (a) sales of merchandise for
which Licensee makes a cash refund, if
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previously included in Gross Sales; (b) the price of merchandise returned by
customers for exchange, if Licensee previously included the sales price of the
merchandise returned by the customer in Gross Sales and includes the sales price
of merchandise delivered to the customer in exchange in Gross Sales; (c) amounts
received from the sale of tobacco products; (d) the amount of any sales tax
imposed by any governmental authority directly on sales and collected from
customers, if Licensee adds the amount of the tax to the sales price or absorbs
the amount of the sales tax in the sales price and Licensee actually pays the
tax to the governmental authority; and (e) amounts not received for menu items
because of discounts or coupons, if properly documented. The phrase "Gross
Sales" also shall not include any proceeds received by Licensee pursuant to an
assignment made in accordance with the provisions of Section 13.
1.05. LICENSE. The word "License" shall mean the rights granted
Licensee pursuant to Section 2 of this Agreement.
1.06. MSA. The term "MSA" shall mean a Metropolitan Statistical Area as
defined by the United States Census Bureau from time to time. An MSA shall not
include any city or town otherwise falling within the MSA which has at least 10
miles of continuous undeveloped and sparsely populated rural land between every
portion of its boundary and the boundary of the city which serves as the primary
metropolitan area for the MSA.
1.07. PERSON. The word "Person" shall mean any individual or business
entity, including (without limitation) corporation, joint venture, general
partnership, limited partnership, limited liability company, or trust.
1.08. PROPRIETARY MARKS. The phrase "Proprietary Marks" shall mean the
distinctive and characteristic trade names, trademarks, service marks, and trade
dress which SONIC designates in writing or through usage from time to time as
prescribed for use with the Sonic System, including (without limitation) the
terms "Sonic," "Happy Eating," and "America's Favorite Drive-In"; signs;
emblems; menu housings; designs; color schemes; standardized premises featuring
characteristic exterior style, canopies, colors and design (including angled
parking stalls equipped with menu housings, speakers and tray supports);
interior furnishings; and equipment layout.
1.09. PROTECTED AREA. The phrase "Protected Area" shall mean the area
defined by Sections 2.02 and 2.03 of this Agreement.
1.10. SONIC RESTAURANT. The phrase "Sonic Restaurant" shall mean the
Sonic drive-in restaurant licensed by this Agreement.
1.11. SONIC SYSTEM. The phrase "Sonic System" shall mean the unique,
proprietary and confidential information of SONIC, including (without
limitation) the SONIC OPERATIONS MANUAL and consisting of (a) methods and
procedures for the preparation of food and beverage products; (b) confidential
recipes for food products; (c) distinctive service and accessories; (d) plans
and specifications for interior and exterior signs, designs, layouts and color
schemes (whether copyrighted or not); (e) methods, techniques, formats, systems,
specifications, procedures,
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information, trade secrets, sales and marketing programs; (f) methods of
business operations and management; and (g) knowledge and experience regarding
the operation and franchising of Sonic drive-in restaurants.
1.12. ORIGINAL EXPIRATION DATE. The phrase "Original Expiration Date"
shall mean the original expiration date of the license agreement renewing to
this Agreement, as set forth on the Signature Page of this Agreement.
2. LICENSE GRANT.
2.01 SONIC grants to Licensee for the following stated term the right,
license and privilege to adopt and use the Sonic System at the Sonic Restaurant
located at __________________________, _____________________,
______________________.
2.02. SONIC shall not own or operate a Sonic drive-in restaurant and
shall not franchise any other Person to own or operate a Sonic drive-in
restaurant (other than a Sonic drive-in restaurant licensed prior to the date of
this Agreement) within the area determined by the following provisions:
(a) (i) An area defined by a radius extending one and
one-half miles from the front door of the Sonic Restaurant if
located within a city, town or MSA having a population of 75,000
or more.
(ii) An area defined by a radius extending two miles from
the front door of the Sonic Restaurant if located within a city,
town or MSA having a population of less than 75,000 but more than
25,000.
(iii) An area defined by a radius extending three miles
from the front door of the Sonic Restaurant if located within a
city, town or MSA having a population of 25,000 or less.
(iv) An area defined by a radius extending three miles
from the front door of the Sonic Restaurant if located outside a
city, town or MSA.
(b) The foregoing radius shall not extend into the
contractually-granted protected radius of any Sonic drive-in restaurant
in existence as of the date of this Agreement and shall not extend into
the franchised area of any developer under an existing area development
agreement with SONIC. SONIC shall determine the population of an MSA
from time to time after the date of this Agreement according to the
latest published federal census.
2.03. EFFICIENT MARKET DEVELOPMENT AND SALES DILUTION. The following
additional provisions shall apply to the Sonic Restaurant:
(a) In utilizing its best efforts to reduce the dilution of
sales and profitability, in the event SONIC develops or licenses another
Person to develop a Sonic drive-in restaurant
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on the same street as the Sonic Restaurant (according to the Sonic
Restaurant's designated street address) and no traffic barrier or break
(such as a river or other waterway, interceding roadway, unpaved
landmass, or other similar structure blocking through traffic) exists
between the Sonic Restaurant and the proposed new site, notwithstanding
the provisions of Section 2.02, above, the Protected Area provided by
Section 2.02 shall equal two and one-half miles (each way) on that street
and an additional 500 feet (each way from the center of the intersection)
on any street crossing that street within the foregoing 2 1/2-mile
distance.
(b) In order to achieve efficient market development and in
utilizing its best efforts to reduce the dilution of sales and
profitability, in the event SONIC develops or licenses another Person to
develop a Sonic drive-in restaurant within two miles of the Sonic
Restaurant (if permitted under Section 2.02, above), SONIC shall apply at
least the level of demographic analysis, market impact analysis, and site
and market review used by SONIC as of the date of this Agreement in
considering the additional site for the development of a Sonic drive-in
restaurant.
2.04. To advertise to the public as a Licensee of SONIC.
2.05. To adopt and use, but only in connection with the sale of those
food and beverage products which have been designated in the Sonic menu as
specified in the SONIC OPERATIONS MANUAL, the trade names, trademarks and
service marks which SONIC shall designate from time to time to be part of the
Sonic System.
2.06. If Licensee relocates the Sonic Restaurant during the term of this
Agreement with the written consent of SONIC (which consent SONIC shall not
withhold unreasonably), this Agreement shall continue to apply to the Sonic
Restaurant in accordance with the terms contained in this Agreement, except that
SONIC and Licensee shall enter into an amendment to this Agreement to change the
address of the Sonic Restaurant accordingly.
3. TERM.
3.01. INITIAL TERM. Unless sooner terminated as hereafter provided, the
term of this License shall end on December 31, 2018.
3.02. OPTION. At the end of the term, if Licensee desires, Licensee may
renew the License to adopt and use the Sonic System at the Sonic Restaurant for
an additional 10-year term, provided that prior to the expiration of the initial
term:
(a) Licensee gives SONIC written notice of Licensee's election
to renew not less than six months nor more than 12 months prior to the
end of the initial term.
(b) Licensee is not, when notice is given, in material default
of any provision of this Agreement or any amendment hereof or successor
agreement hereto or in material default of any other agreement between
Licensee and SONIC or SONIC's Affiliates
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involving any other license agreement and has substantially complied with
the terms and conditions of this Agreement and all other such agreements,
during the term thereof.
(c) All monetary obligations owed by Licensee to SONIC or
SONIC's Affiliates from any source whatsoever (whether under this
Agreement or otherwise) have been satisfied prior to renewal.
(d) The Licensee executes a license agreement containing the
same terms and conditions as this Agreement, except that the license
agreement shall provide for a term of 10 years and shall contain the then
current royalty rate and the then current national and local advertising
expenditure requirements; provided, however, that in lieu of an initial
license fee, a renewal fee shall be paid to SONIC in the amount of: (i)
$3,000.00, or (ii) 20% of the then current initial license fee, whichever
is greater. However, the renewal fee shall not exceed $6,000 as adjusted
for inflation on September 1 of each year in accordance with the consumer
price index and using August of 1994 as the base amount.
(e) Licensee performs such remodeling, repairs, replacements
and redecorations as SONIC may reasonably require to cause the restaurant
equipment and fixtures to conform to the plans and specifications being
used for new or remodeled Sonic drive-in restaurants on the renewal date,
provided SONIC notifies Licensee of such requirements within 30 days
after receipt of Licensee's notice of renewal.
(f) SONIC and Licensee execute a general release of each other,
in a form satisfactory to SONIC, of any and all claims Licensee may have
against SONIC and its Affiliates, including (without limitation) all
claims arising under any federal, state or local law, rule or ordinance,
but excluding (as to SONIC) any claims against Licensee for (a) unpaid
moneys due SONIC or its Affiliates, (b) a material breach of the
provisions of this Agreement regarding the Proprietary Marks, or (c) the
violation of SONIC's legal rights regarding the Proprietary Marks. SONIC
may waive the requirements of this paragraph (f) at SONIC's election.
(g) Licensee principal and/or manager at their expense attend
and satisfactorily complete such retraining program as SONIC may require
at its sole discretion.
(h) Licensee meets the remodeling requirements set forth in
Section 6.02(d) herein.
4. DUTIES OF SONIC.
SONIC agrees to regularly advise and consult with Licensee in connection
with the operation of the Sonic Restaurant and to provide to Licensee:
4.01. PLANS. Standard Sonic Plans and Specifications for a free
standing building, equipment layout and signs (See Subsection 6.03), together
with advice and consultation. Any
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modifications for nonstandard buildings, whether required by local zoning or
building laws or otherwise, must be approved in writing by SONIC and are to be
paid by Licensee.
4.02. OPERATIONS MANUAL. The SONIC OPERATIONS MANUAL containing the
standards, specifications, procedures and methods for operating a Sonic drive-in
restaurant, a copy of which will be loaned to Licensee for the term of this
Agreement.
4.03. MARKETING ASSISTANCE. Certain marketing materials and such
merchandising, marketing and advertising research data and advice as may be
developed from time to time by SONIC and deemed to be helpful in the operation
of a Sonic drive-in restaurant.
4.04. COMMUNICATION. Certain management development and motivational
seminars and periodic newsletters which communicate to Licensee available
advertising materials and new developments, techniques and improvements in areas
of restaurant equipment, management, food preparation and service which are
pertinent to the operation of a restaurant using the Sonic System.
4.05. EVALUATION PROGRAM. A field evaluation program for the mutual
benefit of both SONIC and Licensee to promote uniform standards of operation and
quality control.
5. FEES.
5.01. LICENSE FEE. The Licensee acknowledges that: (a) the initial
grant of this License constitutes the sole consideration for the payment of a
renewal license fee of $1,000 paid by Licensee to SONIC concurrently with the
execution hereof; and (b) the fee has been earned by SONIC.
5.02. ROYALTY FEES. On or before the 20th day of each calendar month,
Licensee shall pay a royalty fee determined by the following provisions:
(a) NUMBER 1 LICENSE AGREEMENTS, NUMBER 4 LICENSE AGREEMENTS
AND NUMBER 4.1 LICENSE AGREEMENTS. For all Number 1 License Agreements,
Number 4 License Agreements and Number 4.1 License Agreements renewing
with this Agreement, the Licensee shall choose either the royalty rate
under Option 1 or Option 2, below. The Licensee shall make his selection
on the signature page of this Agreement. If the Licensee does not
indicate a preference, SONIC shall deem the Licensee to have chosen
Option 2.
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OPTION 1
Prior to the Original Expiration Date, the Licensee shall
pay a royalty fee determined by the following scale based on Gross
Sales:
Gross Sales But Not Royalty
Greater Than More Than Rate
------------ --------- -------
$ 0.00 $ 5,000.00 1.00%
$ 5,000.00 $10,000.00 1.50%
$10,000.00 $15,000.00 2.00%
$15,000.00 $20,000.00 2.50%
$20,000.00 $30,000.00 3.00%
$30,000.00 $40,000.00 3.50%
$40,000.00 N/A 4.00%
Commencing upon the Original Expiration Date and thereafter, Licensee
shall pay a royalty fee determined by the following scale based on Gross
Sales:
Gross Sales But Not Royalty
Greater Than More Than Rate
------------ --------- -------
$ 0.00 $ 5,000.00 1.00%
$ 5,000.00 $10,000.00 2.00%
$10,000.00 $15,000.00 3.00%
$15,000.00 $30,000.00 4.00%
$30,000.00 $40,000.00 4.25%
$40,000.00 $50,000.00 4.50%
$50,000.00 $60,000.00 4.75%
$60,000.00 N/A 5.00%
OPTION 2
During the term of this Agreement, the Licensee shall pay a
royalty fee determined by the following scale based on Gross Sales:
Gross Sales But Not Royalty
Greater Than More Than Rate
------------ --------- -------
$ 0.00 $ 5,000.00 1.00%
$ 5,000.00 $10,000.00 2.00%
$10,000.00 $15,000.00 3.00%
$15,000.00 $30,000.00 4.00%
$30,000.00 $40,000.00 4.25%
$40,000.00 $50,000.00 4.50%
$50,000.00 $60,000.00 4.75%
$60,000.00 N/A 5.00%
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(b) NUMBER 5 LICENSE AGREEMENTS. For all Number 5 License Agreements
renewing with this Agreement, the Licensee shall pay a royalty fee
determined by the following scale based on Gross Sales:
Gross Sales But Not Royalty
Greater Than More Than Rate
------------ --------- -------
$ 0.00 $ 5,000.00 1.00%
$ 5,000.00 $10,000.00 2.00%
$10,000.00 $15,000.00 3.00%
$15,000.00 $30,000.00 4.00%
$30,000.00 $40,000.00 4.25%
$40,000.00 $50,000.00 4.50%
$50,000.00 $60,000.00 4.75%
$60,000.00 N/A 5.00%
(c) The calculation of Gross Sales and the corresponding royalty fees
shall take place on a cumulative basis. For example, the following formula
results in the calculation of the royalty fee under Option 2 above on
$50,000 of Gross Sales: Royalty Fee = ($5,000 x .01) + ($5,000 x .02) +
($5,000 x .03) + ($15,000 x .4) + ($10,000 x .0425) + ($10,000 x .0450).
ADVERTISING FEE.
On or before the 20th day of each calendar month throughout the term
of this Agreement, Licensee shall pay to the Sonic Advertising Fund, which
is administered by SONIC, an advertising contribution fee (the "SAF
Contribution") in an amount equal to .75% of the Gross Sales received by
Licensee from the operation of the Sonic Restaurant during the calendar
month next preceding the date of such payment. Such payment shall be
forwarded with the profit and loss statement required to be provided
pursuant to Section 10.01 herein.
(b) The amount due to Licensor by Licensee pursuant to this Section
5.03, shall be in addition to and separate from that which Licensee is
obligated to spend pursuant to Section 11.01 of this Agreement.
5.04. TRANSFER FEE.
(a) A transfer fee in the amount of $500 shall be paid by Licensee in
the event of a transfer or assignment of this Agreement (resulting in a
change in Control of the License) to a licensee then-currently qualified as
a licensee, excluding assignments under Subsections 13.02 and 13.03.
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(b) A transfer fee in the amount of $1,500.00 shall be paid by
Licensee in the event of a transfer or assignment of this Agreement
(resulting in a change in Control of this license) to a new licensee not
then-currently qualified as a licensee, excluding assignments under
Subsections 13.02 and 13.03.
5.05. LATE CHARGES. In the event any payments required by Sections
5.02, 5.03 or 5.04, above, are not paid on or before the date on which they are
due, a late charge in an amount equal to 1.75% per month shall be levied against
such amounts due and shall be owing to SONIC by Licensee from the date on which
such obligations were due until any such obligations are paid in full. In the
event the interest rate set out in this Section 5.05 exceeds that amount
permitted by Oklahoma law, then the maximum interest rate permitted by Oklahoma
law shall be charged.
6. DUTIES OF LICENSEE.
6.01. SONIC RESTAURANT SITE.
(a) The site at which Licensee shall operate the Sonic Restaurant is
more fully described in Section 2.01. During the term of this Agreement,
the site shall be used exclusively for the purpose of operating a
franchised Sonic drive-in restaurant.
(b) In the event the Sonic Restaurant premises suffers some physical
casualty, the minimum acceptable quality and appearance for the restored
restaurant will be that which existed just prior to the casualty, unless
the Sonic Restaurant was below minimum acceptable standards for SONIC at
the time of casualty in which event the Sonic Restaurant will be restored
to a condition which meets the minimum acceptable standard according to
SONIC. However, Licensee agrees to make all reasonable effort to have the
restored Sonic Restaurant reflect the then current image, design and
specifications of Sonic drive-in restaurants. If the Sonic Restaurant is
substantially destroyed by fire or other casualty, Licensee may, with the
written consent of SONIC elect to terminate this Agreement in lieu of
Licensee reconstructing the restaurant, provided that for a period of 18
months after said election, Licensee shall not enter into, become landlord
of or loan money to any restaurant business within a three mile radius of
the drive-in site which is similar in nature to, or competitive with a
Sonic drive-in restaurant or considered a fast food establishment.
6.02. CONSTRUCTION.
(a) If Licensee is remodeling the existing restaurant, SONIC shall
have the right to inspect and approve all plans and specifications prior to
the commencement of any work. The Licensee shall submit the final
remodeling plans and specifications for the Sonic Restaurant to SONIC for
its written approval. Nothing in this section shall be construed as an
endorsement or guarantee of the
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conformity of such plans to applicable local, state or federal building or
safety codes, or a guarantee that construction will be done in conformity
with such approved plans. In any event, Licensee shall obtain written
approval of such plans or written notice of SONIC's waiver of the rights
reserved hereunder prior to the commencement of construction.
(b) Licensee shall not deviate from the approved plans and
specifications in any manner in the construction or remodeling of the
restaurant without the prior written approval of SONIC. If at any time
SONIC determines (prior to opening date) that Licensee has not constructed
or remodeled the Sonic Restaurant in accordance with the plans and
specifications approved by SONIC, SONIC shall, in addition to any other
remedies, have the right to obtain an injunction from a court of competent
authority against the continued construction and opening of the Sonic
Restaurant, and Licensee hereby consents to any such injunction.
(c) SONIC may require Licensee to undertake extensive remodeling and
renovation and substantial modifications to existing buildings necessary
for Licensee's restaurant to conform with SONIC's then existing system
image. SONIC may exercise the foregoing right at any time during the term
of this Agreement, but may not require (1) the remodeling of the restaurant
more than once every seven years or (2) the remodeling of a restaurant
built within the preceding three years, unless the required remodeling will
not exceed 15% of the original cost of the building, equipment and land
improvements (as adjusted for increases in the consumer price index after
the construction date of the restaurant). Notwithstanding the foregoing,
SONIC shall have the right to require Licensee to modify or replace the
large Sonic sign for the restaurant at any time during the term of this
Agreement. If SONIC exercises its right to require Licensee to undertake
extensive remodeling or renovation or substantial modification within five
years of the end of the term of this Agreement, Licensee may exercise any
right to renew the term of this Agreement at that point in time in
accordance with the applicable provisions of this Agreement, which renewal
then shall take effect as of the expiration the then current term of this
Agreement.
6.03. EQUIPMENT AND SIGN.
(a) Licensee shall only install in and about the Sonic Restaurant
such equipment, fixtures, furnishings and other personal property as are
required and which strictly conform to the appearance, uniform standards
and specifications of SONIC existing from time to time, which shall be
communicated to Licensee in the SONIC OPERATIONS MANUAL or otherwise in
writing. Licensee may purchase the equipment from SONIC if SONIC at that
time is offering such equipment for sale on a regular basis, but is not
required by this or any other agreement to do so.
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(b) In order to provide maximum exposure of the Sonic name and marks,
Licensee shall prominently display and maintain at Licensee's own expense
at least one Sonic drive-in sign ("Sign") which complies with the
specifications required by SONIC from time to time and in such location as
SONIC may approve. Licensee shall not display any other sign or
advertising at the Sonic Restaurant without SONIC's prior written
approval.
(c) Licensee may lease the required Sign from SONIC or may acquire or
lease the Sign from any other source approved by SONIC. Licensee agrees to
require in any lease agreement with SONIC or other suppliers a clause
giving SONIC the right to remove the Sign from the Sonic Restaurant upon
termination of this Agreement.
(d) Licensee hereby agrees that it shall, upon SONIC's request,
obtain from the landlord of the property at which the Sonic Restaurant is
located, a landlord's lien and waiver releasing all claims against any
equipment or sign which belongs to SONIC.
(e) If Licensee is or becomes a lessee of the Sonic Restaurant
premises, he shall provide SONIC with a true and correct, complete copy of
any such lease, and shall have included therein provisions, in form
satisfactory to SONIC, expressly permitting both Licensee and SONIC to take
all actions and make all alterations referred to under subsection 15.01(c).
Any such lease shall also require the lessor thereunder to give SONIC
reasonable notice of any contemplated termination and a reasonable time in
which to take and make the above actions and alterations and provide that
Licensee has the unrestricted right to assign such lease to SONIC.
6.04. TRAINING.
(a) Licensee acknowledges the importance of the quality of business
operations among all restaurants in the Sonic System and, agrees that it
will not allow any of its licensed establishments to be opened or operated
without having at least one individual working full time at the Sonic
Restaurant who has completed the Sonic Management Development Program. If
the trained individual ceases to work full time at the Sonic Restaurant for
whatever reason, Licensee shall have 120 days in which to replace the
individual with a person who has completed the Sonic Management Development
Program.
(b) Licensee shall pay all traveling expenses, living expenses, and
any other personal expenses for themselves and managers while enrolled in
the training program. As part of the initial franchise fee paid pursuant
to Section 5.01 herein, Licensee shall have the right to have one principal
and one manager of the Sonic Restaurant attend the Sonic Management
Development Program for no cost other than those set out in the preceding
sentence. Any additional parties attending the
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Sonic Management Development Program shall bear the cost, including any
fees and tuition due for such training program.
6.05. COMPLIANCE WITH ENTIRE SYSTEM.
(a) Licensee acknowledges that every component of the Sonic System is
important to SONIC and to the operation of the Sonic Restaurant as a Sonic
drive-in restaurant, including a designated menu of food and beverage
products; uniformity of food specifications, preparation methods, quality
and appearance; and uniformity of facilities and service.
(b) SONIC shall have the right to inspect the Sonic Restaurant at all
reasonable times to ensure that Licensee's operation thereof is in
compliance with the standards and policies of the Sonic System. In the
event that such inspection reveals any deficiency or unsatisfactory
condition with respect to any aspect of the drive-in operation, Licensee
shall, within 72 hours of Licensee's receipt of notice of such condition or
such other time as SONIC in its sole discretion may provide, correct or
repair such deficiency or unsatisfactory condition if it is correctable or
repairable within such time period, and, if not, shall within such time
commence such correction or repair and thereafter diligently pursue same to
completion. The preceding sentence notwithstanding, Licensee shall take
immediate action to correct or repair any deficiency or unsatisfactory
condition which poses a risk to public health or safety. In the event
Licensee fails to comply with the foregoing obligations to correct and
repair, SONIC, upon 24 hours' notice to Licensee, shall have the right,
without being guilty of trespass or tort, to forthwith make or cause to be
made such corrections or repairs, and the expense thereof, including board,
wages, lodging and transportation of SONIC personnel, if utilized, shall be
paid by Licensee upon billing by SONIC. The foregoing shall be in addition
to any other right or remedies SONIC may have.
(c) Licensee shall comply with the entire Sonic System as described
herein and in the SONIC OPERATIONS MANUAL, including but not limited to the
following:
(i) Operate the Sonic Restaurant in a clean, wholesome manner in
compliance with prescribed standards of quality, service and
cleanliness; comply with all business policies, practices and
procedures imposed by SONIC; and maintain the building, equipment and
parking area in a good, clean, wholesome condition and repair, well
lighted and in compliance with designated standards as may be
prescribed from time to time by SONIC.
(ii) Purchase and install kitchen fixtures, lighting and other
equipment and signs in accordance with the equipment specifications
and layout initially designated by SONIC.
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(iii) Licensee shall not, without prior written consent of
SONIC: (a) make any building design conversion or (b) make any
alterations, conversions or additions to the building or parking
area.
(iv) Make repairs or replacements required because of damage,
wear and tear or in order to maintain the Sonic Restaurant building
and parking area in good condition and in conformity with blueprints
and plans.
(v) Maintain the parking stalls, as required in the standard
Sonic Plans and Specifications, for the exclusive use of Sonic
Restaurant customers.
(vi) Operate the Sonic Restaurant everyday of the year (except
Easter, Thanksgiving and Christmas), and at least 10 hours per day or
such other hours as may from time to time be reasonably prescribed by
SONIC (except when the Sonic Restaurant is untenantable as a result of
fire or other casualty), maintain sufficient supplies of food and
paper products and employ adequate personnel so as to operate the
Sonic Restaurant at its maximum capacity and efficiency.
(vii) Cause all employees of Licensee, while working in the
Sonic Restaurant, to: (a) wear uniforms of such color, design and
other specifications as SONIC may designate from time to time, (b)
present a neat and clean appearance and (c) render competent and
courteous service to Sonic Restaurant customers.
(viii) All menu items which SONIC may deem appropriate to take
fullest advantage of the potential market and achieve standardization
in the Sonic System will be served, and no items which are not set
forth in the SONIC OPERATIONS MANUAL or otherwise authorized and
approved in writing by SONIC will be served.
(ix) In the dispensing and sale of food products: (a) use only
containers, cartons, bags, napkins and other paper goods and packaging
bearing the approved trademarks and which meet the Sonic System
specifications and quality standards, (b) use only those flavorings,
garnishments and food and beverage ingredients which meet the Sonic
System specifications and quality standards, which SONIC may designate
from time to time and (c) employ only those methods of food handling,
preparation, and serving which SONIC may designate from time to time.
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(x) Make prompt payment in accordance with the terms of
invoices rendered to Licensee including but not limited to, his
purchase of fixtures, equipment and food and paper supplies.
(xi) At his own expense, comply with all federal, state, and
local laws, ordinances and regulations affecting the operation of the
Sonic Restaurant.
(xii) Licensee shall not install any electronic games or
other games of chance at the Sonic Restaurant without the express
prior written consent of SONIC.
(xiii) Furnish SONIC with current changes in home addresses
and phone number of its owners and manager and, upon SONIC's
reasonable request, provide updates of personal financial statements
or other credit information.
(xiv) The Licensee shall notify SONIC's Director of Corporate
Communications or, if not available, the most senior executive officer
of SONIC as soon as possible and, in any event, within 12 hours after
the occurrence at the Sonic Restaurant of any event which could have
an adverse impact on the Sonic Restaurant and/or the Sonic System,
including (without limitation) the death or serious bodily injury of
any employee or customer for any reason or the risk of infection by a
contagious disease.
6.06. APPROVED SUPPLIERS AND ADVERTISING AGENCIES.
(a) SONIC may require Licensee (i) to purchase food, beverages, signs
and equipment which meet the specifications established by SONIC, (ii) to
participate in SONIC's approved purchasing cooperative for the area in
which the Sonic Restaurant is located, and (iii) to retain and utilize
exclusively the marketing and advertising services of SONIC approved
advertising agency of record. In addition, Licensee immediately shall use
Licensee's vote or votes in all advertising cooperatives in which Licensee
participates to support the use of the advertising agency of record for the
Sonic drive-in restaurant chain.
(b) SONIC may require Licensee to support the use of and to use the
products and programs of the cola syrup supplier approved by SONIC and used
by a majority of all Sonic drive-in restaurants, to the exclusion of any
other supplier of cola syrup.
(c) SONIC may require Licensee to comply with the foregoing
provisions not only for the Sonic Restaurant, but also (to the extent
Licensee exercises Control) for all other Sonic drive-in restaurants for
which Licensee serves as a licensee. With
15
regard to such existing Sonic drive-in restaurants, Licensee shall use
Licensee's best efforts to accomplish the foregoing, including (in the
event of any contracts in place prior to August 1, 1994) negotiating in
good faith and assisting and supporting the agency of record or new
supplier with the assumption, purchase or mutual termination of the
contract.
(d) SONIC hereby explicitly retains the exclusive right to consider,
review or approve any and all distributors which may hold, sell or
distribute Sonic-labeled goods or products, except that SONIC shall not
withhold unreasonably its approval of a supplier approved for use by a duly
constituted purchasing cooperative.
(e) The terms of this Section 6.06 shall continue in effect for as
long as Licensee serves as a licensee for a Sonic drive-in restaurant and
shall survive the expiration or termination of this Agreement.
(f) If at least 95% of all Sonic drive-in restaurants are in
compliance with paragraphs (a) and (b) of Section 6.06, SONIC periodically
shall submit the approved advertising agency or cola syrup supplier to
competitive bid or review, but shall not be obligated to do so more often
than once every three years.
6.07. BEST EFFORTS. Licensee shall diligently and fully exploit his
rights in this License by personally devoting his best efforts and, in case more
than one (1) individual has executed this License as Licensee, at least one (1)
individual Licensee shall devote his full time and best efforts to the operation
of the Sonic Restaurant. Licensee shall keep free from any activities which
would be detrimental to or interfere with the business of the Sonic Restaurant,
the Sonic System, or SONIC.
6.08. INTERFERENCE WITH EMPLOYMENT RELATIONS OF OTHERS. During the
term of this License, Licensee shall not employ or seek to employ any person who
is at the time employed by SONIC or any of its subsidiaries in a management
level position. In addition, during the term of this License, SONIC agrees not
to employ or seek to employ any person who is at the time employed by Licensee
in a management level position. This Subsection 6.08 shall not be violated if
such person has left the employ of any of the foregoing parties for a period in
excess of six months.
6.09. SONIC'S STANDARDS. Licensee shall operate the Sonic Restaurant
specified in this License in conformity with the Sonic System and the
obligations set forth in this Agreement and shall strictly adhere to SONIC's
standards and policies as they exist now and as they may be from time to time
modified.
6.10. MAJORITY INTEREST OWNER. Licensee represents, warrants and
agrees that Licensee actually owns the majority interest in the legal and equity
ownership and Control of the operation of the Sonic Restaurant, and that
Licensee shall maintain such interest during the term of this License except
only as otherwise permitted pursuant to the terms and
16
conditions of this License. Licensee shall furnish SONIC with such evidence as
SONIC may request from time to time for the purpose of assuring SONIC that
Licensee's interest remains as represented herein.
7. PROPRIETARY MARKS.
7.01. SONIC'S REPRESENTATIONS. SONIC represents with respect to the
Proprietary Marks that SONIC will use and permit Licensee and other licensees to
use the Proprietary Marks only in accordance with the Sonic System and the
standards and specifications attendant thereto which underlie the goodwill
associated with and symbolized by the Proprietary Marks.
7.02. USE OF MARKS. With respect to Licensee's licensed use of the
Proprietary Marks pursuant to this Agreement, Licensee agrees that:
(a) Licensee shall use only the Proprietary Marks designated by SONIC
and shall use them only in the manner authorized and permitted by SONIC.
(b) Licensee shall use the Proprietary Marks only for the operation
of the Sonic Restaurant.
(c) During the term of this Agreement and any renewal hereof,
Licensee shall identify itself as the owner of the Sonic Restaurant in
conjunction with any use of the Proprietary Marks, including, but not
limited to, invoices, order forms, receipts, and contracts, as well as at
such conspicuous locations on the premises of the Sonic Restaurant as SONIC
shall designate in writing. The identification shall be in the form which
specifies Licensee's name, followed by the term "Licensed Proprietor," or
such other identification as shall be approved by SONIC.
(d) Licensee's rights to use the Proprietary Marks is limited to such
uses as are authorized under this Agreement, and any unauthorized use
thereof shall constitute an infringement of SONIC's rights.
(e) Licensee shall not use the Proprietary Marks to incur any
obligation or indebtedness on behalf of SONIC.
(f) Licensee shall not use the Proprietary Marks as part of its
corporate or other legal name if not already in existence prior to the
effective date of this Agreement.
(g) Licensee shall comply with SONIC's instructions in filing and
maintaining the requisite trade name or fictitious name registrations, and
shall execute any documents deemed necessary by SONIC or its counsel to
obtain
17
protection for the Proprietary Marks or to maintain their continued
validity and enforceability.
(h) In the event that litigation involving the Proprietary Marks is
instituted or threatened against Licensee, Licensee shall promptly notify
SONIC and shall cooperate fully in defending or settling such litigation.
7.03. LICENSEE'S UNDERSTANDING. Licensee expressly understands and
acknowledges that:
(a) As between the parties hereto, SONIC has the exclusive right and
interest in and to the Proprietary Marks and the goodwill associated with
and symbolized by them, and any and all use thereof by Licensee inures to
the benefit of SONIC.
(b) The Proprietary Marks are valid and serve to identify the Sonic
System and those who are licensed under the Sonic System.
(c) Licensee shall not directly or indirectly contest the validity or
the ownership of the Proprietary Marks.
(d) Licensee's use of the Proprietary Marks pursuant to this
Agreement does not give Licensee any ownership interest or other interest
in or to the Proprietary Marks, except the nonexclusive license granted
herein.
(e) Any and all goodwill arising from Licensee's use of the
Proprietary Marks in its licensed operations under the Sonic System shall
inure solely and exclusively to SONIC's benefit, and upon expiration or
termination of this Agreement and the License herein granted, no monetary
amount shall be assigned as attributable to any goodwill associated with
Licensee's use of the Sonic System or the Proprietary Marks.
(f) The right and license of the Proprietary Marks granted hereunder
to Licensee is nonexclusive except as provided in section 2.01 of this
Agreement, and SONIC thus has and retains the right among others:
(i) To grant other licenses for the Proprietary Marks, in
addition to those licenses already granted to existing licensees.
(ii) To use the Proprietary Marks in connection with selling
products and services.
(iii) To develop and establish other systems for the
same or similar Proprietary Marks, or any other Proprietary
Marks, and
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grant licenses or franchises thereto without providing any rights
therein to Licensee.
(g) SONIC reserves the right to substitute different Proprietary
Marks for use in identifying the Sonic System and the businesses operating
thereunder if SONIC's currently owned Proprietary Marks no longer can be
used.
8. MANUAL. SONIC shall loan to Licensee for use at the Sonic Restaurant
the SONIC OPERATIONS MANUAL prepared by SONIC for use by licensees of Sonic
drive-in restaurants similar to the Sonic Restaurant to be operated by
Licensee. Licensee recognizes that the SONIC OPERATIONS MANUAL contains
detailed information relating to operation of the Sonic Restaurant including:
(a) food formulas and specifications for designated food and beverage
products; (b) methods of inventory control; (c) bookkeeping and accounting
procedures; (d) business practices and policies; and (e) other management,
advertising, and personnel policies. Licensee agrees to promptly adopt and
use exclusively the formulas, methods and policies contained in the SONIC
OPERATIONS MANUAL, now and as they may be modified by SONIC from time to time
and to return said manual to SONIC at the expiration or earlier termination
of this License.
9. CONFIDENTIAL INFORMATION.
9.01. SONIC possesses certain unique, proprietary and confidential
information, consisting of methods and procedures for preparation of food and
beverage products, confidential recipes for food products, distinctive
service and accessories, plans and specifications for interior and exterior
signs, designs, layouts and color schemes, and methods, techniques, formats,
systems, specifications, procedures, information, trade secrets, sales and
marketing programs, methods of business operations and management, and
knowledge of and experience in the operation and franchising of Sonic
drive-in restaurants and the Sonic System (collectively, the "Confidential
Information"). SONIC will disclose the Confidential Information to Licensee
in furnishing Licensee the Sonic Plans and Specifications for a Sonic
drive-in restaurant, the training program, and the SONIC OPERATIONS MANUAL,
and in providing guidance and assistance to Licensee during the term of this
Agreement. The SONIC OPERATIONS MANUAL, as modified by SONIC from time to
time, and the policies contained therein, are incorporated in this Agreement
by reference.
9.02. Licensee acknowledges and agrees that Licensee shall not
acquire any interest in the Confidential Information, other than the right to
utilize it in the development and operation of the Sonic Restaurant (and
other Sonic drive-in restaurants under license agreements with SONIC) during
the term of this Agreement, and that the use or duplication of the
Confidential Information in any other business would constitute an unfair
method of competition. Licensee acknowledges and agrees that the
Confidential Information is proprietary to SONIC, may constitute trade
secrets of SONIC and is disclosed to Licensee solely on the condition that
Licensee agrees, and Licensee does hereby agree, that Licensee:
19
(i) shall not use the Confidential Information in any other
business or capacity, or for the benefit of any other Person or
entity;
(ii) shall maintain the absolute confidentiality of the
Confidential Information, and shall not disclose or divulge the
Confidential Information to any unauthorized Person or entity,
during and after the term of the License;
(iii) shall not make unauthorized copies of any portion
of the Confidential Information disclosed in printed, audio, or
video form (except in connection with instruction of employees in
the operation of the Sonic Restaurant); and
(iv) shall adopt and implement all procedures prescribed
from time to time by SONIC to prevent unauthorized use or
disclosure of the Confidential Information, including, without
limitation, restrictions on disclosure thereof to employees of
the Sonic Restaurant and the use of nondisclosure and
non-competition clauses in employment agreements with employees
(including all owners, shareholders and partners of Licensee) who
have access to the Confidential Information.
9.03. Licensee may not at any time, in any manner, directly or
indirectly, and whether or not intentionally, copy any part of the SONIC
OPERATIONS MANUAL, permit any part of it to be copied, disclose any part of it
except to employees or other having a need to know its contents for purposes of
operating the Sonic Restaurant, or permit its removal from the Sonic Restaurant
without prior written consent from SONIC. Notwithstanding anything to the
contrary contained in this Agreement and provided Licensee shall have obtained
SONIC's prior written consent, the restrictions on Licensee's disclosure and use
of the Confidential Information shall not apply to the following:
(a) information, processes or techniques which are or become generally
known in the food service industry, other than through disclosure (whether
deliberate or inadvertent) by Licensee; and
(b) disclosure of the Confidential Information in judicial or
administrative proceedings to the extent that Licensee is legally compelled
to disclose such information, provided Licensee shall have used its best
efforts, and shall have afforded SONIC the opportunity, to obtain an
appropriate protective order or other assurance satisfactory to SONIC of
confidential treatment for the information required to be so disclosed.
10. ACCOUNTING AND RECORDS.
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10.01. On or before the 20th day of each month, Licensee shall submit to
SONIC a complete profit and loss statement in a form prescribed by SONIC and
such statistical reports in such form as SONIC shall reasonably require from
time to time, for the previous month immediately ended.
10.02. Licensee shall keep and preserve full and complete records of the
Sonic Restaurant business for at least three years in a manner and form
satisfactory to SONIC and shall also deliver such additional financial,
operating and other information and reports as SONIC may reasonably request on
the forms and in the manner prescribed by SONIC; provided, however, that
Licensee shall maintain, at a minimum, those books and records required to be
kept by the Internal Revenue Service under the Internal Revenue Code for
purposes of its regulation of Licensee's business and make the same books
available to SONIC.
10.03. In meeting the requirements set forth in Sections 10.01 and 10.02
above, Licensee shall keep records substantiating and enter as a line item on
its financial statements amounts representing the valuation for goods (whether
food, paper or otherwise) which constitute charitable contributions to third
parties from the same goods out of the Sonic Restaurant. Likewise, Licensee
shall maintain records and enter on its financial statements (particularly a
line item on its profit and loss statement) information representing the value
or amount of sales represented by coupons traded with and discounts granted by
Licensee at the Sonic Restaurant.
10.04. Licensee further agrees to submit, within 90 days following the
close of each fiscal year of the Sonic Restaurant's operation, a profit and loss
statement covering operations during such fiscal year and the balance sheet
taken as of the close of such fiscal year.
10.05. SONIC shall have the right to inspect and audit Licensee's
accounts, books, records and tax returns at all times during and after the term
of this Agreement. If such inspection discloses that Gross Sales actually
exceeded the amount reported by Licensee or that Licensee failed to make
advertising expenditures required by Sections 11.01(a) or 11.01(b), Licensee
shall immediately pay SONIC: (i) the additional royalty fee, advertising fee
and advertising expenditures; (ii) interest on all unpaid amounts (from the
original due date) at a rate equal to that provided by Section 5.05 herein; and
(iii) a 10% surcharge on all unpaid amounts. If such inspection discloses that
Gross Sales actually exceeded the amount reported by Licensee as Licensee's
Gross Sales by an amount equal to three percent or more of the Gross Sales
originally reported to SONIC or, in the case of failing to make required
advertising expenditures, that such unpaid expenditures exceeded three percent
of the amount required to be expended, Licensee shall bear the cost of such
inspection and audit at rates and fees customarily charged by SONIC for such
auditing and inspecting services and duties. Unpaid advertising expenditures,
including interest and surcharges collected by SONIC pursuant to this section,
shall be used in accordance with the expenditures authorized by Section 5.03;
nevertheless, SONIC may, on a case by case basis, at SONIC's sole discretion,
21
use such collected amounts in accordance with the expenditures authorized by
Sections 11.01(a) and 11.01(b). SONIC shall have the right to bring an action
in its own name to collect unpaid advertising expenditures required by Section
11 herein.
10.06. If SONIC has reason to believe that Licensee may not have
reported all of its Gross Sales, SONIC may require Licensee to have its profit
and loss statement and balance sheet certified by an independent public
accountant. Licensee shall at his expense cause a Certified Public Accountant
to consult with SONIC concerning such statement and balance sheet. The original
of each such reports required by this Section 10.06 shall be mailed to SONIC's
business office at the address designated in Section 19 below.
10.07. If Licensee fails to timely provide SONIC with complete profit
and loss statements, accounts, books, records and tax returns pertaining to the
Sonic Restaurant business, or fails to fully cooperate with SONIC's audit of the
Sonic Restaurant business, SONIC shall have the right to estimate Licensee's
Gross Sales for the Sonic Restaurant using information available on the Sonic
Restaurant or other Sonic drive-in restaurants. Licensee agrees to accept
SONIC's estimates as conclusively correct until Licensee fully complies with
SONIC's accounting and disclosure requirements under this Agreement. However,
if Licensee's subsequent accounting and disclosures reveal that Licensee
under-reported Gross Sales or underpaid fees due under this Agreement, SONIC may
recover all deficiencies and may litigate claims of fraud even though SONIC may
have already obtained a judgment using SONIC's estimates. Furthermore, nothing
in this Agreement or any judgment using estimates shall prevent or hinder
SONIC's further efforts and rights to obtain the accounting and disclosures
which Licensee is required to give to SONIC under this Agreement.
10.08. SONIC shall have the right to assemble and disseminate to third
parties financial and other information regarding Licensee and other licensees
of SONIC to the extent required by law or to the extent necessary or appropriate
to further the interests of the Sonic System as a whole. SONIC shall have the
right to disclose the business name, address and telephone number of Licensee as
they appear in SONIC's records to any Person making inquiry as to the ownership
of the Sonic Restaurant. SONIC shall not disclose specific financial
information regarding Licensee or the Sonic Restaurant to any Person without (a)
Licensee's prior, written consent or (b) being directed to disclose the
information pursuant to the order of a court or other governmental agency.
11. ADVERTISING EXPENDITURES.
11.01. STANDARD PROGRAM. Recognizing the value of advertising and the
importance of the standardization of advertising programs to the furtherance of
the goodwill and public image of the System, the parties agree as follows:
(a) NUMBER 1 LICENSE AGREEMENTS, NUMBER 4 LICENSE AGREEMENTS AND
NUMBER 4.1 LICENSE AGREEMENTS. For all Number 1 License Agreements, Number
4 License Agreements and Number 4.1 License Agreements renewing with this
22
Agreement, the Licensee shall choose either the advertising rate under
Option 1 or Option 2, below. The Licensee shall make his selection on the
signature page of this Agreement. If the Licensee does not indicate a
preference, SONIC shall deem the Licensee to have chosen Option 2.
23
OPTION 1
Prior to the Original Expiration Date, the following provisions shall
apply:
(i) In the event the Sonic Restaurant lies within a DMA for
which a SONIC-approved advertising cooperative has been formed,
Licensee shall contribute to such advertising cooperative an amount
required by such advertising cooperative on a schedule required by
such advertising cooperative, provided that such contributions shall
occur no less often than each calendar quarter and shall be of an
amount not less than 2.25% of Licensee's Gross Sales from the
operation of the Sonic Restaurant during each partial or full calendar
month.
(ii) In the event there exists no SONIC-approved advertising
cooperative in the DMA in which the Sonic Restaurant is located,
during each calendar quarter of the term of this Agreement, Licensee
shall spend for approved advertising and promotion of the Sonic
Restaurant (including, but not limited to, television time, radio
time, newspaper display space, distributed promotional materials, but
not including any amount spent on sign rent, paper products, candy or
other foods which evidence SONIC's trademarks or color patterns and
the like) an amount equal to but not less than 2.25% of Licensee's
Gross Sales from the operation of the Sonic Restaurant during each
partial or full calendar month.
Commencing with the Original Expiration Date and thereafter, the
following provisions shall apply:
(iii) In the event the Sonic Restaurant lies within a DMA for
which a SONIC-approved advertising cooperative has been formed,
Licensee shall contribute to such advertising cooperative an amount
required by such advertising cooperative on a schedule required by
such advertising cooperative, provided that such contributions shall
occur no less often than each calendar quarter and shall be of an
amount not less than 3.25% of Licensee's Gross Sales from the
operation of the Sonic Restaurant during each partial or full calendar
month.
(iv) In the event there exists no SONIC-approved advertising
cooperative in the DMA in which the Sonic Restaurant is located,
during each calendar quarter of the term of this Agreement, Licensee
shall spend for approved advertising and promotion of the Sonic
Restaurant (including, but not limited to, television time, radio
time, newspaper display space, distributed promotional materials, but
not including any amount spent on sign rent, paper products, candy or
other foods which evidence SONIC's trademarks or color patterns and
the like) an amount equal to but not less than 3.25% of Licensee's
Gross Sales from the operation of the Sonic Restaurant during each
partial or full calendar month.
24
OPTION 2
Commencing with the Original Expiration Date and thereafter, the
following provisions shall apply:
(i) In the event the Sonic Restaurant lies within a DMA for
which a SONIC-approved advertising cooperative has been formed,
Licensee shall contribute to such advertising cooperative an amount
required by such advertising cooperative on a schedule required by
such advertising cooperative, provided that such contributions shall
occur no less often than each calendar quarter and shall be of an
amount not less than 3.25% of Licensee's Gross Sales from the
operation of the Sonic Restaurant during each partial or full calendar
month.
(ii) In the event there exists no SONIC-approved advertising
cooperative in the DMA in which the Sonic Restaurant is located,
during each calendar quarter of the term of this Agreement, Licensee
shall spend for approved advertising and promotion of the Sonic
Restaurant (including, but not limited to, television time, radio
time, newspaper display space, distributed promotional materials, but
not including any amount spent on sign rent, paper products, candy or
other foods which evidence SONIC's trademarks or color patterns and
the like) an amount equal to but not less than 3.25% of Licensee's
Gross Sales from the operation of the Sonic Restaurant during each
partial or full calendar month.
(b) NUMBER 5 LICENSE AGREEMENTS. For all Number 5 License Agreements
renewing with this Agreement, the following provisions shall apply:
(i) In the event the Sonic Restaurant lies within a DMA for
which a SONIC-approved advertising cooperative has been formed,
Licensee shall contribute to such advertising cooperative an amount
required by such advertising cooperative on a schedule required by
such advertising cooperative, provided that such contributions shall
occur no less often than each calendar quarter and shall be of an
amount not less than 3.25% of Licensee's Gross Sales from the
operation of the Sonic Restaurant during each partial or full calendar
month.
(ii) In the event there exists no SONIC-approved advertising
cooperative in the DMA in which the Sonic Restaurant is located,
during each calendar quarter of the term of this Agreement, Licensee
shall spend for approved advertising and promotion of the Sonic
Restaurant (including, but not limited to, television time, radio
time, newspaper display space, distributed promotional materials, but
not including any amount spent on sign rent, paper products, candy or
other foods which evidence SONIC's trademarks or color patterns and
the like) an amount equal to but not less than 3.25% of Licensee's
Gross Sales from the operation of the Sonic Restaurant during each
partial or full calendar month.
25
(c) For purposes of determining the amount which Licensee is required
to spend pursuant to Sections 11.01(a), 11.01(b) and 5.03, above, for each
calendar quarter which is the subject of review, the parties hereto agree
that the first two months of such calendar quarter and last month of the
preceding calendar quarter shall be used in determining the Gross Sales of
the Sonic Restaurant to determine the expenditures required hereunder. For
example, to determine the expenditures required for January, February and
March, the parties hereto agree that they will look to December, January,
and February's sales in order to determine the Gross Sales to determine the
amount which must be expended by Licensee under these Sections 11.01(a),
11.01(b) and 5.03. In the event the amounts required by Section 11.01(a)
or 11.01(b) are not spent in a timely fashion, Licensee shall pay SONIC in
accordance with Section 10.05.
(d) All advertising by Licensee in any medium which utilizes the
Proprietary Marks or refers in any way to the Sonic Restaurant shall be
conducted in a dignified manner and shall conform to such standards and
requirements as SONIC may specify from time to time in writing. Licensee
shall submit to SONIC (in accordance with the notice provisions contained
herein), for SONIC's prior approval (except with respect to prices to be
charged), samples of all advertising and promotional plans and materials
that Licensee desires to use, that use the Proprietary Marks or refer to
the Sonic Restaurant and that have not been prepared or previously approved
by SONIC. If written disapproval thereof is not received by Licensee
within 15 days from the date of receipt by SONIC of such materials, SONIC
shall be deemed to have given the required approval. Upon notice from
SONIC, Licensee shall discontinue and/or remove any objectionable
advertising material, whether or not same was previously approved by
Sonic. If said materials are not discontinued and/or removed within five
days after notice, Sonic or its authorized agents, may, at any time, enter
upon Licensee's premises, or elsewhere, and remove any objectionable signs
or advertising media and may keep or destroy such signs or other media
without paying therefore, and without being guilty of trespass or other
tort.
(e) SONIC may offer from time to time to provide, upon terms subject
to the discretion of SONIC, approved local advertising and promotional
plans and materials, including, without limitation, newspaper display
space, distributed promotional materials.
(f) SONIC or its designee shall maintain and administer an
advertising fund for the System as follows:
(i) As provided in Subsection 5.03 hereof, Licensee shall pay an
advertising contribution fee to Sonic Advertising Fund, which shall be
administered by SONIC, and shall be deposited in a separate bank
account denoted as the Sonic Advertising Fund (the "Fund").
(ii) SONIC shall direct all advertising programs with sole
discretion over the creative concepts, materials, and media used in
such programs. The Fund is
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intended to maximize general public recognition and acceptance of the
Proprietary Marks for the benefit of the System and Licensee
acknowledges that SONIC and its designees undertake no obligation in
administering the Fund to make expenditures for Licensee which are
equivalent or proportionate to Licensee's contribution, and nothing in
this Subsection shall contravene the intent in Subparagraph (iv) of
Paragraph (f) of this Subsection 11.01.
(iii) The Fund and all earnings thereof shall be used
exclusively to meet any and all costs of maintaining, administering,
directing and preparing advertising (including, without limitation,
the cost of preparing and conducting television, radio, magazine and
newspaper advertising campaigns and other public relations activities;
employing advertising agencies to assist therein; and providing
promotional brochures and other marketing materials to licensees in
the Sonic System). All sums paid by licensees to the Fund shall be
maintained in a separate account from the other funds of SONIC. The
Fund shall pay SONIC monthly an amount equal to 15% of the Fund's
receipts during the preceding month, but not to exceed SONIC's actual
administrative costs and overhead, if any, as SONIC may incur in
activities reasonably related to the administration or direction of
the Fund and advertising programs for the licensees and the Sonic
System, including without limitation, conducting market research,
preparing marketing and advertising materials, and collecting and
accounting for assessments for the Fund. The Fund and its earnings
shall not inure to the benefit of SONIC.
(iv) All materials produced by the Fund shall be made available
to all licensees without cost on a regular basis, excluding
distribution costs. This Subparagraph (iv) shall not preclude SONIC
from offering other materials not produced by the Fund upon terms
subject to the discretion of SONIC. (See Paragraph (e) of this
Subsection 11.01.)
(v) The Fund is not an asset of SONIC, and an independent
certified public accountant designated by SONIC shall review the
operation of the Fund annually, and the report shall be made available
to Licensee upon request. Notwithstanding the foregoing, the body
approved and designated by SONIC as the body to consult with regarding
SONIC's maintenance and administration of the Fund (such as the
current Franchise Advisory Council or its successor) may designate the
independent public accountant to conduct the required review of the
operation of the Fund, if requested in writing at least 30 but not
more than 60 days prior to the end of each fiscal year.
(vi) It is anticipated that most contributions to the Fund
shall be expended for advertising and/or promotional purposes during
the year within which the contributions are made. If, however, excess
amounts remain in the Fund at the end of such year, all expenditures
in the following year(s) shall be made first out of accumulated
earnings, next out of current earnings, and finally from
contributions.
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(vii) Although SONIC intends the Fund to be of perpetual
duration, SONIC maintains the right to terminate the Fund. Such Fund
shall not be terminated, however, until all monies in the Fund have
been expended for advertising and promotional purposes as aforesaid.
(g) On at least a quarterly basis, SONIC shall consult with the body
approved and designated by Sonic (such as the current Franchise Advisory
Council or its successor) regarding SONIC's maintenance and administration
of the Fund and shall report to that body on the Fund's operation.
11.02. PUBLICITY. SONIC shall have the right to photograph the Sonic
Restaurant's exterior and/or interior, and the various foods served, and to use
any such photographs in any of its publicity or advertising, and Licensee shall
cooperate in securing such photographs and consent of Persons pictured.
12. INSURANCE.
12.01. INSURANCE AMOUNTS. Prior to opening or taking possession of the
Sonic Restaurant, Licensee shall acquire and thereafter maintain insurance from
insurance companies acceptable to SONIC. The Licensee shall determine the
appropriate limits of liability insurance but SONIC shall require the following
minimum amounts and policy forms of insurance:
(a) The Licensee shall maintain statutory worker's compensation
insurance and employer's liability insurance having a minimum limit of
liability of the greater of $500,000 or the minimum amount otherwise
required by applicable state law. SONIC shall accept participation in the
Texas Sonic Employers Trade Association, Inc. ("TSETA") or in the
non-subscriber program for Sonic drive-in restaurants located in Texas as
long as Texas law does not require statutory worker's compensation
insurance.
(b) The Licensee shall maintain commercial general liability
insurance, including bodily injury, property damage, products, personal and
advertising injury coverage on an occurrence policy form having a minimum
per occurrence and general aggregate limits of at least $1,000,000 per
location.
(c) The Licensee shall maintain non-owned automobile liability
insurance having a minimum limit of $1,000,000. The automobile policy also
shall provide coverage for owned automobiles if owned or leased in the name
of Licensee.
(d) SONIC shall have the right to require Licensee to increase the
insurance specified above by giving Licensee 60 days' written notice in
accordance with the notice provisions of this Agreement, and Licensee shall
comply no later than the first policy renewal date after that 60-day
period.
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12.02. SONIC AS ADDITIONAL INSURED. The Licensee shall name SONIC and
SONIC's subsidiaries and Affiliates as additional insureds under the insurance
policies specified in paragraphs (a), (b) and (c) of Section 12.01, above. The
Licensee's policies shall constitute primary policies of insurance with regard
to other insurance, shall contain a waiver of subrogation provision in favor of
SONIC as it relates to the operation of the Sonic Restaurant, and shall provide
for at least 30 days' written notice to SONIC prior to their cancellation or
amendment.
12.03. GENERAL CONDITIONS. Prior to opening or taking possession of the
Sonic Restaurant, Licensee shall furnish SONIC with certificates of insurance
evidencing that Licensee has obtained the required insurance in the form and
amounts as specified above. In addition, Licensee shall deliver evidence of the
continuation of the required insurance policies at least 30 days prior to the
expiration dates of each existing insurance policy. If Licensee at any time
fails to acquire and maintain the required insurance coverage, SONIC shall have
the right, at Licensee's expense, to acquire and administer the required minimum
insurance coverage on behalf of Licensee. However, SONIC shall not have any
obligation to assume the premium expense and nothing in this Agreement shall
constitute a guaranty by SONIC against any losses sustained by Licensee. SONIC
may relieve itself of all duties with respect to the administration of any
required insurance policies by giving 10 days' written notice to Licensee.
13. TRANSFER OF INTEREST.
13.01. ASSIGNMENT. The rights and duties created by this Agreement are
personal to Licensee and SONIC has granted the License in reliance on the
collective character, skill, aptitude and business and financial capacity of
Licensee and Licensee's principals. Accordingly, except as may be otherwise
permitted by this Section 13, neither Licensee nor any Person or entity with an
interest in Licensee shall directly or indirectly, through one or more
intermediaries, without SONIC's prior written consent, sell, assign, transfer,
convey, give away, pledge, mortgage or otherwise encumber any direct or indirect
interest in the License; any interest in Licensee, if Licensee is a partnership,
joint venture or closely held corporation; or any interest which, together with
other related previous simultaneous or proposed transfers, constitutes a
transfer of Control of Licensee where Licensee is registered under the
Securities Exchange Act of 1934. Any such purported assignment occurring by
operation of law or without SONIC's prior written consent and pursuant to the
terms of this Section 13, shall constitute a default of this Agreement by
Licensee and such purported assignment shall be null and void.
13.02. DEATH OR PERMANENT INCAPACITY OF LICENSEE. Upon the death or
permanent incapacity of Licensee, the interest of Licensee in the License may be
assigned either pursuant to the terms of Subsection 13.04 herein or to one or
more of the following Persons: Licensee's spouse, heirs or nearest relatives by
blood or marriage, subject to the following conditions: (1) If, in the sole
discretion of SONIC, such persons shall be capable of conducting the Sonic
Restaurant business in accordance with the terms and conditions of the License,
and (2) if such persons shall also execute an agreement by which they personally
assume full and unconditional liability for and agree to perform all the terms
and conditions of the License to the same extent as the original Licensee. In
the event that Licensee's heirs do not obtain the consent of SONIC as assignees
of the License, the
29
personal representative of Licensee shall have the greater of 120 days or the
completion of the probate of Licensee's estate to dispose of Licensee's
interest hereunder, which disposition shall be subject to all the terms and
conditions for assignments under Subsection 13.04.
13.03. ASSIGNMENT TO LICENSEE'S CORPORATION. SONIC may, upon Licensee's
compliance with the following requirements, consent to an assignment of the
License to a corporation whose shares are owned and Controlled by Licensee.
Such written materials shall be supplied to SONIC within 15 days after the
request by SONIC.
(a) Licensee's corporation shall be newly organized, and its charter
shall provide that its activities are confined exclusively to operating the
Sonic Restaurant.
(b) Licensee and Licensee's corporation shall maintain stop transfer
instructions against the transfer on Licensee's corporation's records of
any securities with any voting rights subject to the restrictions of
Section 13 hereof, and shall issue no securities upon the face of which the
following printed legend does not legibly and conspicuously appear.
The transfer of this stock is subject to terms and conditions of
one or more license agreements with Sonic Industries Inc.
Reference is made to said license agreement(s) and the
restrictive provisions of the Articles and By-Laws of this
corporation. By agreeing to receive these securities, the
transferee hereby agrees to be bound by the terms of such
agreements, articles and by-laws.
(c) At any time upon SONIC's request, Licensee and Licensee's
corporation shall furnish company with a list of all shareholders having an
interest in Licensee's corporation, the percentage interest of such
shareholder and a list of all officers and directors in such form as SONIC
may require.
(d) The corporate name of Licensee's corporation shall not include
any of the Proprietary Marks granted by the License. Licensee and
Licensee's corporation shall not use any xxxx nor any name deceptively
similar thereto in a public or private offering of its securities, except
to reflect Licensee's corporation's franchise relationship with SONIC. Any
prospectus or registration Licensee or Licensee's corporation would propose
to use in such a public or private offering shall be submitted to SONIC
within a reasonable time prior to the effective date thereof for the
purpose of permitting SONIC to verify compliance with this requirement by
Licensee and Licensee's corporation.
(e) Articles of Incorporation, By-Laws and all other documents
governing Licensee's corporation shall be forwarded to SONIC for approval.
The Articles of Incorporation, By-Laws and other organization and governing
documents shall recite that the issuance and transfer of any interest in
Licensee's corporation are restricted by the terms of Section 13 of this
Agreement.
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(f) Each shareholder of Licensee's corporation shall personally
guarantee performance under this Agreement and shall be personally bound by
the terms thereof.
(g) Any breach of this Agreement by Licensee's corporation shall be
deemed a breach of this Agreement by each shareholder of Licensee's
corporation and each shareholder shall be personally and fully liable and
obligated by any and all such breaches.
(h) Licensee and Licensee's corporation shall submit to SONIC, prior
to any assignment hereunder, a shareholders agreement executed by the Board
of Directors and ratified by all shareholders, which states that, except as
may be permitted by Section 13 of this Agreement, no shares of stock or
other interest in Licensee's corporation shall be issued, transferred, or
assigned to any Person or entity without SONIC's prior written consent.
(i) Each and every shareholder of Licensee's corporation or any party
owning a security issued by, or owning any legal or equitable interest in
Licensee's corporation or in any security convertible to a legal or
equitable interest in Licensee's corporation shall meet those same
standards of approval as an individual licensee shall be required to meet
prior to being included as a licensee on a standard license agreement with
SONIC.
13.04. OTHER ASSIGNMENT.
(a) In addition to any assignments or contingent assignments
contemplated by the terms of Subsections 13.02 and 13.03 of this Section
13, Licensee shall not sell, transfer or assign the License to any Person
or Persons without SONIC's prior written consent. Such consent shall not
be unreasonably withheld.
(b) In determining whether to grant or to withhold such consent, the
following requirements must be met by Licensee:
(i) All of Licensee's accrued monetary obligations shall have
been satisfied whether due under this Agreement or otherwise.
(ii) SONIC and Licensee execute a general release of each
other, in a form satisfactory to SONIC, of any and all claims Licensee
may have against SONIC and its Affiliates, including (without
limitation) all claims arising under any federal, state or local law,
rule or ordinance, but excluding (as to SONIC) any claims against
Licensee for (a) unpaid moneys due SONIC or its Affiliates, (b) a
material breach of the provisions of this Agreement regarding the
Proprietary Marks, or (c) the violation of SONIC's legal rights
regarding the Proprietary Marks. SONIC may waive the requirements of
this subparagraph (ii) at SONIC's election.
(iii) Licensee shall not be in material breach of this
Agreement or any other agreement between SONIC and Licensee.
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(iv) Assignee (or the assignee's management, as the case may be)
shall at SONIC's sole discretion, enroll in and successfully complete
such training programs as SONIC shall at that time designate according
to Section 6.04 hereof.
(v) SONIC shall consider of each prospective transferee, by way
of illustration, the following: (a) work experience and aptitude, (b)
financial background, (c) character, (d) ability to personally devote
full time and best efforts to managing the Sonic Restaurant, (e)
residence in the locality of the Sonic Restaurant, (f) equity interest
in the Sonic Restaurant, (g) conflicting interests and (h) such other
criteria and conditions as SONIC shall apply in the case of an
application for a new license to operate a Sonic drive-in restaurant.
SONIC's consent shall also be conditioned each upon such transferee's
execution of an agreement by which transferee personally assumes full
and unconditional liability for and agrees to perform from the date of
such transfer all obligations, covenants and agreements contained in
the License to the same extent as if transferee had been an original
party to the License.
13.05. SONIC'S RIGHT OF FIRST REFUSAL.
(a) If Licensee or any Person or entity with an interest in Licensee
has received and desires to accept any bona fide offer to purchase all or
any part of Licensee's interest in this Agreement or in Licensee and the
transfer of such interest would: (1) result in a change of Control of
Licensee of this Agreement or (2) constitute a transfer of interest held
by a Controlling Person of Licensee or of the License, Licensee or such
Person shall notify SONIC in writing of each such offer, with such notice
including the name and address of the proposed purchaser, the amount and
terms of the proposed purchase price, a copy of the proposed purchase
contract (signed by the parties, but expressly subject to SONIC's right of
first refusal), and all other terms and conditions of such offer. SONIC
shall have the right and option, exercisable within 20 days after SONIC's
receipt of such written notification, to send written notice to Licensee or
such Person or entity that SONIC or its designee intends to purchase the
interest which is proposed to be transferred on the same terms and
conditions offered by the third party. Any material change in the terms of
an offer prior to closing shall cause it to be deemed a new offer, subject
to the same right of first refusal by SONIC or its designee as in the
initial offer. SONIC's failure to exercise such option shall not
constitute a waiver of any other provision of this Agreement, including any
of the requirements of this Section with respect to the proposed transfer.
Silence on the part of SONIC shall constitute rejection. If the proposed
sale includes assets of Licensee not related to the operation of a licensed
Sonic drive-in restaurant, SONIC may purchase not only the assets related
to the operation of a licensed Sonic drive-in restaurant, but may also
purchase the other assets. An equitable purchase price shall be allocated
to each asset included in the proposed sale.
(b) The election by SONIC 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.
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(c) Any sale or attempted sale effected without first giving SONIC
the right of first refusal described above shall be void and of no force
and effect.
(d) If SONIC does not accept the offer to purchase the Sonic
Restaurant, Licensee may conclude the sale to the purchaser who made the
offer so long as the terms and conditions of such sale are identical to
those originally offered to SONIC; provided, however, that SONIC's approval
of the assignee be first obtained, which consent shall not be unreasonably
withheld upon compliance with the conditions on assignment imposed by this
Agreement.
(e) The provisions of this Section 13.05 shall not apply to any
proposed transfers to members of Licensee's immediate family. For the
purposes of this Section 13.05, a member of Licensee's immediate family
shall mean Licensee's spouse and children (by birth or adoption). In
addition, the provisions of this Section 13.05 shall not apply to any
proposed transfers to Person who already own an interest (directly or
indirectly) in this Agreement or the License as long as the transfer will
not result in a change in Control of Licensee or the License.
13.06. CONSENT TO ASSIGNMENTS. With regard to any transfer, assignment
or pledge of any interest in this Agreement or in Licensee pursuant to the
foregoing provisions of this Section 13, SONIC shall not withhold its consent
unreasonably as long as the proposed transfer, assignment or pledge otherwise
complies with the other requirements set forth in this Section 13.
14. DEFAULT AND TERMINATION.
14.01. AUTOMATIC TERMINATION. Licensee shall be deemed to be in breach
of this Agreement and all rights granted herein shall automatically terminate
with notice from SONIC if any of the following events occur:
(a) Licensee shall become insolvent.
(b) Licensee, either personally, through an equity owner, or through
Licensee's attorney, shall give oral or written notice to SONIC of
Licensee's intent to file a voluntary petition under any bankruptcy law.
(c) A final judgment aggregating in excess of $5,000 against the
Sonic Restaurant or property connected with the Sonic Restaurant which
remains unpaid for thirty days.
(d) Suit to foreclose any lien against any assets of the Sonic
Restaurant is instituted against Licensee and (i) is not dismissed within
30 days, (ii) such lien is not contested and challenged through the
applicable administrative agencies or courts, or (iii) a bond is not posted
(if such remedy is available) to delay any such foreclosure and guarantee
performance.
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(e) The assets of the Sonic Restaurant are sold after being levied
thereupon by sheriff, marshal or a constable.
(f) Transfer of this Agreement, in whole or in part, is effected in
any manner inconsistent with Section 13 hereof.
14.02. OPTIONAL TERMINATION. Licensee shall be deemed to be in breach
of this Agreement and SONIC may, at its option, terminate this Agreement and all
rights granted herein at any time during the term hereof without affording
Licensee any opportunity to cure the breach, effective immediately upon
Licensee's receipt of a notice of termination, upon the occurrence of any of the
following events:
(a) If Licensee ceases to operate the Sonic Restaurant or otherwise
abandons the Sonic Restaurant (other than closure permitted pursuant to
Section 6.05(c)(vi) herein) or forfeits the legal right to do or transact
business at the location licensed herein.
(b) If Licensee is convicted of a felony, a crime involving moral
turpitude, or any other crime or offense that is reasonably likely, in the
sole opinion of SONIC, to adversely affect the Sonic System, the
Proprietary Marks, the goodwill associated therewith or SONIC's rights
therein.
(c) If Licensee misuses or makes any unauthorized use of any of the
Proprietary Marks or any other identifying characteristic of the Sonic
System or otherwise materially impairs the goodwill associated therewith or
SONIC's rights therein and Licensee cannot cure the default within 30 days.
(d) If Licensee improperly discloses trade secrets or confidential
information and Licensee cannot cure the default within 30 days.
(e) If continued operation of the Sonic Restaurant might endanger
public health or safety.
(f) If Licensee knowingly or through gross negligence maintains false
books or records or knowingly or through gross negligence submits any false
report to SONIC.
14.03. PERIOD TO CURE. Except as provided in Subsections 14.01 and
14.02, Licensee shall have 30 days after receipt from SONIC of a written notice
of breach of this Agreement or such notice period as is required by the law of
the state where the Sonic Restaurant is located, within which to remedy any
breach hereunder. However, this period to cure will not be available to
Licensee, and SONIC will not be required to delay termination of this Agreement,
where the breach involved is one which Licensee cannot cure within the
prescribed cure period or is one which is impossible to cure. SONIC shall have
the right to terminate this Agreement and the License upon written notice to
Licensee and without any opportunity to cure after three willful and material
breaches of the same provision of this Agreement within any 12-month period for
which Licensee has received written
34
notice and an opportunity to cure. If any such breach is not cured within that
time, SONIC may, at its option, terminate this Agreement and all rights granted
hereunder effective immediately on the date of receipt by Licensee of written
notice of termination. Licensee shall be in breach hereunder for any failure to
comply with any of the terms of this Agreement or to carry out the terms of this
Agreement in good faith. Such breach shall include, but shall not be limited
to, the occurrence of any of the following illustrative events:
(a) If Licensee fails to pay any past due amounts owed to SONIC after
SONIC has mailed Licensee two or more statements at least 20 days apart.
(b) If Licensee fails to promptly pay, or repeatedly delays the
prompt payment of undisputed invoices from his suppliers or in the
remittance of rent and property tax as required in Licensee's lease.
(c) If Licensee fails to maintain and operate the Sonic Restaurant in
a good, clean, and wholesome manner or otherwise is not in compliance with
the standards prescribed by the Sonic System.
(d) If Licensee attempts to assign or transfer any interest in this
Agreement in violation of Section 13 herein.
(e) If Licensee denies SONIC the right to inspect the Sonic
Restaurant at reasonable times, which includes the right to photograph the
interior and exterior of the Sonic Restaurant in its entirety.
(f) If Licensee fails, refuses, or neglects to obtain SONIC's prior
written approval or consent as required by this Agreement.
(g) If Licensee acquires any interest in another business in
violation of Section 16.
(h) If Licensee fails, refuses or neglects to provide SONIC with
Licensee's home address and home telephone number.
(i) If Licensee breaches any other requirement set forth in this
Agreement.
(j) If Licensee, upon the destruction of the Sonic Restaurant, fails
to rebuild the franchise premises and resume operation within a reasonable
time (cessation of the business from a franchise premises shall not
constitute default of this Agreement if caused by condemnation, expiration
of a location lease pursuant to its terms at execution or when failure to
rebuild following destruction of the franchised premises is prohibited by
law or the location lease).
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14.04. RESOLUTION OF DISPUTES. The following provisions shall apply to
any controversy between Licensee and SONIC (including an Affiliate of SONIC) and
relating (a) to this Agreement (including any claim that any part of this
Agreement is invalid, illegal or otherwise void or voidable), (b) to the
parties' business activities conducted as a result of this Agreement, or (c) the
parties' relationship or business dealings with one another generally, including
all disputes and litigation pending or in existence as of the date of this
Agreement.
(a) NEGOTIATION. The parties first shall use their best efforts to
discuss and negotiate a resolution of the controversy.
(b) MEDIATION. If the efforts to negotiate a resolution do not
succeed, the parties shall submit the controversy to mediation by a
mediation firm agreeable to the parties or by the American Arbitration
Association, if the parties cannot agree.
(c) ARBITRATION. If the efforts to negotiate and mediate a
resolution do not succeed, the parties shall resolve the controversy by
final and binding arbitration in accordance with the Rules for Commercial
Arbitration (the "Rules") of the American Arbitration Association in effect
at the time of the execution of this Agreement and pursuant to the
following additional provisions:
(i) APPLICABLE LAW. The Federal Arbitration Act (the "Federal
Act"), as supplemented by the Oklahoma Arbitration Act (to the extent
not inconsistent with the Federal Act), shall apply to the
arbitration.
(ii) SELECTION OF ARBITRATORS. The parties shall select three
arbitrators within 10 days after the filing of a demand and submission
in accordance with the Rules. If the parties fail to agree on three
arbitrators within that 10-day period or fail to agree to an extension
of that period, the arbitration shall take place before three
arbitrators selected in accordance the Rules. At least one of the
arbitrators shall constitute an individual selected by Sonic (or its
Affiliate) who has experience with franchise law or franchise
relations. A decision or award by a majority of the arbitrators shall
constitute the decision or award of the arbitrators.
(iii) LOCATION OF ARBITRATION. The arbitration shall take
place in Oklahoma City, Oklahoma, and the arbitrators shall issue any
award at the place of arbitration. The arbitrators may conduct
hearings and meetings at any other place agreeable to the parties or,
upon the motion of a party, determined by the arbitrators as necessary
to obtain significant testimony or evidence.
(iv) DISCOVERY. The arbitrators shall have the power to
authorize all forms of discovery (including depositions,
interrogatories and document production) upon the showing of (a) a
specific need for the discovery, (b) that the discovery likely will
lead to material evidence needed to resolve the controversy, and (c)
that the scope, timing and cost of the discovery is not excessive.
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(v) AUTHORITY OF ARBITRATORS. The arbitrators shall not have
the power (a) to alter, modify, amend, add to, or subtract from any
term or provision of this Agreement; (b) to rule upon or grant any
extension, renewal or continuance of this Agreement; (c) to award
damages or other remedies expressly prohibited by this Agreement; or
(d) to grant interim injunctive relief prior to the award.
(vi) SCOPE OF PROCEEDING. The parties shall conduct any
arbitration proceeding and resolve any controversy on an individual
basis only and not on a class-wide, multiple-party, or similar basis.
(vii) ENFORCEMENT OF AWARD. The prevailing party shall have
the right to enter the award of the arbitrators in any court having
jurisdiction over one or more of the parties or their assets. The
parties specifically waive any right they may have to apply to any
court for relief from the provisions of this Agreement or from any
decision of the arbitrators made prior to the award. The award of the
arbitrators shall not have any precedential or collateral estoppel
effect on any other controversy involving SONIC or its Affiliates.
(d) EXCLUDED CONTROVERSIES. At the election of SONIC or its
Affiliate, the provisions of this Section 14.04 shall not apply to any
controversies relating to any fee due SONIC or its Affiliate; any
promissory note payments due SONIC or its Affiliate; or any trade payables
due SONIC or its Affiliate as a result of the purchase of equipment, goods
or supplies. The provisions of this Section 14.04 also shall not apply to
any controversies relating to the use and protection of the Proprietary
Marks or the Sonic System, including (without limitation) SONIC's right to
apply to any court of competent jurisdiction for appropriate injunctive
relief for the infringement of the Proprietary Marks or the Sonic System.
(e) ATTORNEYS' FEES AND COSTS. The prevailing party to the
arbitration shall have the right to an award of its reasonable attorneys'
fees and costs incurred after the filing of the demand and submission,
including a portion of the direct costs of any in-house legal staff
reasonably allocable to the time devoted to the arbitration.
15. OBLIGATIONS UPON TERMINATION.
15.01. EFFECT OF TERMINATION, CANCELLATION OR EXPIRATION OF THIS
AGREEMENT. Except as otherwise authorized pursuant to the terms of any other
license agreement between SONIC and Licensee, Licensee shall comply with the
following provisions after the expiration or termination of this Agreement and
the License:
(a) Licensee, upon any termination, cancellation or expiration of
this Agreement, shall promptly pay to SONIC and SONIC's subsidiaries any
and all sums owed to them. In the event of termination for any breach by
Licensee, such sums shall include all damages,
37
costs and expenses, including reasonable attorneys' fees, incurred by SONIC
as a result of the breach, which obligation shall give rise to and remain,
until paid in full, a lien in favor of SONIC against any and all of the
assets of the Sonic Restaurant owned by Licensee at the time of default.
(b) Upon termination, cancellation or expiration hereof for any
reason, all Licensee's rights hereunder shall terminate. Licensee shall not
thereafter use or adopt any trade secrets disclosed to Licensee hereunder
or any paper goods, emblems, signs, displays, menu housings or other
property on which SONIC's name or Proprietary Marks are imprinted or
otherwise form a part thereof or any confusing simulations thereof.
Licensee shall not otherwise use or duplicate the Sonic System or any
portion thereof or assist others to do so. Licensee shall remove from the
premises all signs, emblems and displays identifying it as associated with
SONIC or the Sonic System. Licensee shall cease to use and shall return to
SONIC all copies of the SONIC OPERATIONS MANUAL, instructions or
materials delivered to Licensee hereunder.
(c) Upon termination, cancellation or expiration of this Agreement,
unless otherwise directed in writing by SONIC, Licensee shall change the
exterior and interior design and the decor of said premises, including, but
not limited to, changing the color scheme, and shall make or cause to be
made such changes in signs, buildings and structures (excluding major
structural changes) as SONIC shall reasonably direct so as to effectively
distinguish the same from its former appearance and from any other Sonic
drive-in restaurant unit, and if Licensee fails or refuses to comply
herewith, then SONIC shall have the right to enter upon the premises where
said business is being conducted without being guilty of trespass or any
other tort for the purpose of making or causing to be made such changes at
the expense of Licensee which expense Licensee agrees to pay on demand.
(d) Upon termination, cancellation or expiration of this Agreement,
in the event Licensee is the owner of the Sign, SONIC shall have an
irrevocable option to purchase the Sign for its fair market value. In any
event, Licensee shall not thereafter use any sign panels displaying SONIC's
name or Proprietary Marks or which primarily display the colors used in any
other such sign at any other Sonic drive-in restaurant unit (See Subsection
15.04 for determining fair market value). Any agent, servant or employee
of SONIC may remove the Sign or any objectionable signs or advertising from
the Sonic Restaurant without being guilty of trespass or other tort, and
Licensee shall be liable for SONIC's costs plus attorneys' fees for any
interference therewith.
(e) Upon termination, cancellation or expiration of this Agreement,
Licensee shall cease to hold Licensee out in any way as a licensee of SONIC
or to do anything which would indicate any relationship between Licensee
and SONIC.
(f) The covenants set forth in Paragraphs (a), (b), (c), (d) and (e)
of this Subsection 15.01 shall survive the termination, cancellation or
expiration of this Agreement.
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(g) All rights, claims and indebtedness which may accrue to SONIC
prior to termination, cancellation or expiration of this Agreement shall
survive termination, cancellation or expiration and be enforceable by
SONIC.
(h) Licensee shall complete all such modifications within 30 days
after this Agreement has been terminated or canceled or has expired.
Licensee and SONIC agree that SONIC's damages resulting from a breach of
the provisions of this Subsection are difficult to estimate or determine
accurately. In the event of a breach by Licensee of the provisions of this
Subsection, Licensee, in addition to any and all other remedies available
to SONIC herein and elsewhere, will pay SONIC double the royalty and
advertising fees prescribed in this Agreement until Licensee satisfactorily
de-identifies the restaurant premises in the manner prescribed by this
Section. This payment shall constitute liquidated damages and shall not be
construed as a penalty since such payment has been agreed to by Licensee
and SONIC as reasonably representative of the actual damage sustained by
SONIC in the event of such a breach. The liquidated damages shall start on
the 31st day after this Agreement has been terminated or canceled or has
expired. These liquidated damages shall not constitute either a waiver of
Licensee's obligation to de-identify or a license to use the Sonic System.
These remedies will be in addition to any other remedies SONIC may have
hereunder or under federal or state law.
15.02. SONIC'S OPTION TO PURCHASE.
(a) Upon termination, cancellation or expiration hereof, SONIC shall
have the right and option to purchase all or any patented, special or
unique Sonic restaurant equipment, menu housings, signs, menus and supplies
of Licensee at their fair market value (See Subsection 15.04 for
determining fair market value). Such right or option of SONIC shall be
exercised as provided in Paragraph (b) of this Subsection 15.02. If SONIC
elects to exercise any option to purchase herein provided, it shall have
the right to set off all amounts due from Licensee to SONIC and one-half of
the cost of any appraisals against any payment therefor.
(b) In the case of termination by expiration, SONIC shall exercise
SONIC's option contained in this Subsection 15.02 by giving Licensee
written notice at least 30 days prior to expiration. In the case of
termination for any other reason, SONIC shall exercise its option by giving
Licensee written notice within 30 days after termination.
(c) SONIC's option hereunder is without prejudice to SONIC's rights
under any security agreement held by SONIC or with respect to which SONIC
may have a guarantor's or surety's subrogation interest. If SONIC
exercises this option, SONIC may pay any debt which Licensee owes to SONIC
and shall remit any balance of the purchase price to Licensee. There shall
be no allowance for goodwill.
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15.03. SONIC'S OBLIGATION TO PURCHASE.
(a) Upon termination, cancellation or expiration of this Agreement,
if Licensee desires to sell Licensee's unbroken inventory packages of
approved imprinted items and supplies with Proprietary Marks to SONIC,
excluding all food items, SONIC shall have the obligation to repurchase
such items at Licensee's cost.
(b) If Licensee desires to sell such items to SONIC, Licensee shall,
not later than 10 days after termination, cancellation or expiration of
this Agreement, give SONIC 10 days written notice of Licensee's election
and, at the expiration of the 10 days notice period, deliver such items at
Licensee's expense with an itemized inventory to the nearest Sonic drive-in
restaurant owned by SONIC or other unit designated by SONIC. SONIC agrees
to pay Licensee or credit Licensee's account within seven days after said
delivery.
15.04. FAIR MARKET VALUE DETERMINATION. If the parties cannot agree on
the fair market value of any item subject to an option to purchase in this
Agreement within a reasonable time, one appraiser shall be designated by SONIC,
one by Licensee and the two appraisers shall designate an independent appraiser,
and the valuation of such third appraiser alone shall be binding. SONIC and
Licensee each shall pay one-half of the cost of any appraisals required pursuant
to this Section 15.04.
16. COVENANTS.
16.01. RESTRICTIONS ON LICENSEE. Licensee agrees and covenants as
follows:
(a) During the term of this License, Licensee shall not directly or
indirectly through one or more intermediaries (i) engage in, (ii) acquire
any financial or beneficial interest (including interests in corporations,
partnerships, trusts, unincorporated associations or joint ventures) in,
(iii) loan money to or (iv) become landlord of any restaurant business
which has a menu similar to that of a Sonic drive-in restaurant (such as
hamburgers, hot dogs, onion rings, and similar items customarily sold by
Sonic drive-in restaurants) or which has an appearance similar to that of a
Sonic drive-in restaurant (such as color pattern, use of canopies, use of
speakers and menu housings for ordering food, or other items that are
customarily used by a Sonic drive-in restaurant).
(b) Licensee shall not, for a period of 18 months after termination
of this License for any reason, directly or indirectly through one or more
intermediaries (i) engage in, (ii) acquire any financial or beneficial
interest (including interests in corporations, partnerships, trusts,
unincorporated associations or joint ventures) in, (iii) loan money to or
(iv) become a landlord of any restaurant business which has a menu similar
to that of a Sonic drive-in restaurant (such as hamburgers, hot dogs, onion
rings, and similar items customarily sold by Sonic drive-in restaurants) or
which has an appearance similar to that of a Sonic drive-in restaurants
(such as color pattern, use of canopies, use of speakers and menu housings
for ordering food, or other items that are customarily used by a Sonic
drive-in restaurants), and which (i) is within a three mile radius of the
Sonic Restaurant formerly licensed by this
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Agreement, (ii) is within a 20 mile radius of a Sonic drive-in restaurant
in operation or under construction, or (iii) is located within the MSA of
the Sonic Restaurant.
(c) Licensee shall not appropriate, use or duplicate the Sonic
System, or any portion thereof, for use at any other restaurant business.
(d) During the term of this Agreement, Licensee shall (i) use
Licensee's best efforts to promote the business of the Sonic Restaurant,
(ii) devote Licensee's full time, energies and attention to the operation
and management of the Sonic Restaurant, and (iii) not engage in any other
business or activity that might detract from, interfere with or be
detrimental to the Sonic System or Licensee's full and timely performance
under this Agreement (except the ownership and operation of other Sonic
drive-in restaurants under license agreements with SONIC).
(e) During the term of this Agreement, Licensee shall not perform or
provide services as a director, officer, employee, agent, representative,
consultant or in any other capacity for any other restaurant business which
has a menu or appearance similar to that of a Sonic drive-in restaurant.
(f) During the term of this Agreement, Licensee shall not directly or
indirectly through one or more intermediaries (i) engage in, (ii) acquire
any financial or beneficial interest in, (iii) loan money, or (iv) become
landlord of any operation which has granted or is granting franchises or
licenses (except for those granted by SONIC) to others to operate any other
restaurant business which has a menu or appearance similar to that of a
Sonic drive-in restaurant.
(g) Paragraphs (a), (b) and (f) of this Subsection 16.01 shall not
apply to ownership by Licensee of less than two percent beneficial
interest in the outstanding equity securities of any corporation which is
registered under the Securities Exchange Act of 1934; however, this
Subsection 16.01(g) shall apply to all shareholders or partners of Licensee
(in the event Licensee is a corporation or partnership) and all members of
Licensees' and their immediate families, and all Persons or entities
guaranteeing this Agreement.
(h) The parties agree that each of the foregoing covenants shall be
construed as independent of any covenant or provision of this Agreement.
If all or any portion of a covenant in this Section 16 is held unreasonable
or unenforceable by a court or agency having valid jurisdiction in an
unappealed final decision to which SONIC is a party, Licensee expressly
agrees to be bound by any lesser covenant subsumed with the terms of such
covenant that imposes the maximum duty permitted by law, as if the
resulting covenant were separately stated in and made a part of this
Section 16.
(i) Licensee understands and acknowledges that SONIC shall have the
right, in SONIC's sole discretion, to reduce the scope of any covenant set
forth in Paragraphs (a), (b) and (f) of this Subsection 16.01, or any
portion thereof, without Licensee's consent effective
41
immediately upon receipt by Licensee of written notice thereof, and
Licensee agrees that it shall comply forthwith with any covenant as so
modified, which shall be fully enforceable notwithstanding the provisions
of Paragraph (k) of this Subsection 16.01.
(j) Licensee expressly agrees that the existence of any claims
Licensee may have against SONIC, whether or not arising from this
Agreement, shall not constitute a defense to the enforcement by SONIC of
the covenants in this Section 16.
(k) Licensee acknowledges that Licensee's violation of the terms of
this Section 16 would result in irreparable injury to SONIC for which no
adequate remedy at law is available, and Licensee accordingly consents to
the ex parte issuance of restraining orders, temporary and permanent
injunctions and cease and desist orders prohibiting any conduct by Licensee
in violation of the terms of this Section 16.
(l) Licensee shall utilize at the Sonic Restaurant a cash register
previously approved by SONIC, which such cash register shall at all times
during the term of this Agreement have a non-alterable grand total function
so that each item entered in such register and each day's totals may not be
altered once entered.
16.02. COVENANTS BY OTHERS. At the time of execution of this Agreement,
Licensee shall provide SONIC with covenants similar in substance to those set
forth in this Section 16 (including covenants applicable upon the termination of
a Person's relationship with Licensee) from the following persons: (1) all
persons employed by Licensee; and (2) all officers, directors, and holders of a
direct or indirect beneficial ownership interest Licensee. With respect to each
Person who becomes associated with Licensee in one of the capacities enumerated
above subsequent to execution of this Agreement, Licensee shall require and
obtain such covenants and promptly provide SONIC with executed copies of such
covenants. In no event shall any Person enumerated be granted access to any
confidential aspect of the Sonic System or the Sonic Restaurant prior to
execution of such a covenant. All covenants required by this Section 16 shall
be furnished by SONIC to Licensee and shall include, without limitation,
specific identification of SONIC as a third party beneficiary of such covenants
with the independent right to enforce them. Failure by Licensee to obtain
execution of a covenant required by this Section 16 shall constitute a breach of
this Agreement.
17. INDEPENDENT CONTRACTOR & INDEMNIFICATION.
17.01. LICENSEE NOT AN AGENT OF SONIC. It is understood and agreed that
this Agreement does not create a fiduciary relationship between SONIC and
Licensee, and that nothing herein contained shall constitute Licensee as the
agent, legal representative, partner, joint venturer or employee of SONIC.
Licensee is, and shall remain, an independent contractor responsible for all
obligations and liabilities of, and for all loss or damage to, the Sonic
Restaurant and its business, including any personal property, equipment,
fixtures or real property connected therewith and for all claims or demands
based on damage or destruction of property or based on injury, illness or death
of any person or persons, directly or indirectly, resulting from the operation
of the Sonic Restaurant.
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17.02. COST OF ENFORCEMENT. If SONIC or SONIC's subsidiaries becomes
involved in any action at law or in equity or in any proceeding opposing
Licensee to secure, enforce, protect, or defend SONIC's rights and remedies
under this License, in addition to any judgment entered in SONIC's favor, SONIC
shall be entitled to demand of and (in the event SONIC prevails in such actions
or proceedings) recover from Licensee the reasonable costs, expenses and
attorneys' fees incurred by SONIC. If, in such applicable final judgment SONIC
does not prevail, Licensee shall be entitled to recover from SONIC in any such
action or proceeding the reasonable costs, expenses and attorneys' fees incurred
by Licensee.
17.03. INDEMNIFICATION. If SONIC or SONIC's subsidiaries shall be
subject to any claim, demand or penalty or become a party to any suit or other
judicial or administrative proceeding by reason of any claimed act or omission
by Licensee, Licensee's employees or agents, or by reason of any act occurring
on the Sonic Restaurant premises, or by reason of any act or omission with
respect to the business or operation of the Sonic Restaurant, Licensee shall
indemnify and hold SONIC and SONIC's subsidiaries harmless against all
judgments, settlements, penalties and expenses, including attorneys' fees, court
costs and other expenses of litigation or administrative proceeding, incurred by
or imposed on SONIC in connection with the investigation or defense relating to
such claim or litigation or administrative proceeding and, at the election of
SONIC, Licensee shall also defend SONIC and SONIC's subsidiaries. The Licensee
shall not have any obligation to indemnify, defend or hold harmless SONIC or any
other Person pursuant to the provisions of this Section 17.03 to extent the
obligation arises predominantly as a proximate result of SONIC's act or failure
to act when under a duty to act.
18. EFFECT OF WAIVERS.
No waiver by SONIC or any breach or series of breaches of this Agreement
shall constitute a waiver of any subsequent breach or waiver of the terms of
this Agreement.
19. NOTICES.
19.01. Any notice required hereunder, if not specified, shall be in
writing and shall be delivered by (i) personal service, (ii) by overnight,
receipted delivery service, or (iii) by United States certified or registered
mail, with postage prepaid, addressed to Licensee at the Sonic Restaurant or at
such other address of Licensee then appearing on the records of SONIC or to
SONIC at 000 Xxxx Xxxxxx, Xxxxxxxx Xxxx, Xxxxxxxx 00000, or at the subsequent
address of SONIC's corporate headquarters. Either party, by a similar written
notice, may change the address to which notices shall be sent.
19.02. If SONIC is unable to give actual notice of any breach or
termination of this Agreement because Licensee has failed to provide SONIC with
a current address, because Licensee fails to accept or pick up this mailed
notice, or due to any reason which is not the fault of SONIC, then such notice
shall be deemed as given when SONIC sends such notice by overnight receipted
delivery service or registered or certified mail, postage prepaid.
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19.03. Licensee has designated on the first page of this Agreement a
Principal to serve as the party receiving primary notice on behalf of the
parties hereto. Each Licensee hereby agrees that SONIC may send its notices and
communications under this Agreement to the Principal provided for herein, that
each SONIC may use the Principal as its primary contact for purposes of
communications and notices permitted or required hereunder, and that all
communications and notices given by SONIC to the Principal will be just as
effective on each Licensee as though the same had been given to each Licensee.
20. ENTIRE AGREEMENT.
20.01. NO ORAL AGREEMENTS. This Agreement and all addenda, appendices
and amendments hereto constitute the entire agreement between the parties and
supersede all prior and contemporaneous, oral or written agreements or
understandings of the parties.
20.02. SCOPE AND MODIFICATION OF LICENSE. No interpretation, change,
termination or waiver of any of the provisions hereof shall be binding upon
SONIC unless in writing signed by an officer of SONIC. No modification, waiver,
termination, rescission, discharge or cancellation of this Agreement shall
affect the right of any party hereto to enforce any claim or right hereunder,
whether or not liquidated, which occurred prior to the date of such
modification, waiver, termination, rescission, discharge or cancellation.
21. CONSTRUCTION AND SEVERABILITY.
21.01. INTERPRETATION. The recitals shall be considered a part of this
Agreement. Section and Subsection captions are used only for convenience and
are in no way to be construed as part of this Agreement or as a limitation of
the scope of the particular Sections, Subsections, Paragraphs and Subparagraphs
to which they refer. Words of any gender used in this Agreement shall include
any other gender, and words in the singular shall include the plural where the
context requires.
21.02. SCOPE OF PROTECTED AREA. Neither party to this Agreement intends
to expand the scope of any covenants or commitments contained in Section 2
beyond the terms and provisions expressly stated in Section 2, and the parties
to this Agreement agree that no Person, court or arbitrator may interpret any of
the foregoing covenants or commitments in Section 2 in that manner.
21.03. INVALIDITY. If any part of this Agreement for any reason shall
be declared invalid, such decision shall not affect the validity of any
remaining portion, which shall remain in full force and effect. In the event
any material provision of this Agreement shall be stricken or declared invalid,
SONIC reserves the right to terminate this Agreement.
21.04. BINDING EFFECT. This Agreement shall be binding upon the
parties, their heirs, executors, personal representatives, successors or
assigns.
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21.05. 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 be binding on the parties.
21.06. LIABILITY OF MULTIPLE LICENSEES. If Licensee consists of more
than one Person or entity, each such Person and entity, and each proprietor,
partner or shareholder of each such entity shall be jointly and severally
liable for any and all of Licensee's obligations and prohibitions under this
Agreement. Consequently, if and when a Person or entity as Licensee is in
breach of this Agreement and fails or is unable to cure such breach in a
timely manner, SONIC may terminate the rights of the so-affected Person or
entity under this Agreement whereby this Agreement is terminated as to only
such Person or entity while remaining fully effective as to all other Persons
and entities remaining as Licensee on this Agreement. This Person or entity
removed as Licensee shall remain jointly and severally obligated with the
Persons and entities remaining as Licensee for any and all obligations and
liabilities of Licensee which occurred or accrued through the date of removal
of said Person or entity.
22. BUSINESS ENTITY LICENSEES
22.01. CORPORATE LICENSEE. If Licensee is a corporation, Licensee shall
comply with the following provisions:
(a) PURPOSE. The certificate of incorporation of Licensee, if
incorporated after August 31, 1994, shall provide that the purpose of the
corporation shall consist only in the development, ownership, operation and
maintenance of Sonic drive-in restaurants.
(b) TRANSFER RESTRICTIONS. The certificate of incorporation of
Licensee shall provide that Licensee shall not issue any additional capital
stock of Licensee and that no stockholder may transfer, assign or pledge
any issued capital stock of Licensee without the prior, written consent of
SONIC, and each stock certificate issued to evidence the capital stock of
Licensee shall contain a legend disclosing the foregoing restriction.
SONIC shall not withhold its consent to the issuance of additional capital
stock or a transfer, assignment or pledge without a reasonable basis. In
giving its consent, SONIC shall have the right (but not the obligation) to
impose one or more reasonable conditions, including (without limitation)
the requirement that the recipient of the capital stock execute an
agreement substantially similar to the Guaranty and Restriction Agreement
attached as Attachment I to this Agreement.
(c) STOCKHOLDER GUARANTY. Each stockholder of Licensee shall execute
the Guaranty and Restriction Agreement attached as Attachment I to this
Agreement.
(d) DOCUMENTS. Prior to SONIC's execution of this Agreement,
Licensee shall deliver to SONIC photocopies of its certificate of
incorporation and issued stock certificates reflecting compliance with the
provisions of this Section 22.01.
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22.02. PARTNERSHIP LICENSEE. If Licensee is a partnership, Licensee
shall comply with the following provisions:
(a) PURPOSE. The partnership agreement and certificate of limited
partnership (if applicable) of Licensee, if formed after August 31, 1994,
shall provide that the purpose of the partnership shall consist only in the
development, ownership, operation and maintenance of Sonic drive-in
restaurants.
(b) TRANSFER RESTRICTIONS. The partnership agreement and certificate
of limited partnership (if applicable) of Licensee shall provide that
Licensee shall not issue any additional partnership interests in Licensee
and that no partner may transfer, assign or pledge a partnership interest
in Licensee without the prior, written consent of SONIC. SONIC shall not
withhold its consent to the issuance of additional partnership interests or
a transfer, assignment or pledge without a reasonable basis. In giving its
consent, SONIC shall have the right (but not the obligation) to impose one
or more reasonable conditions, including (without limitation) the
requirement that the recipient of the partnership interest execute an
agreement substantially similar to the Guaranty and Restriction Agreement
attached as Attachment I to this Agreement.
(c) PARTNER GUARANTY. Each partner of Licensee shall execute the
Guaranty and Restriction Agreement appearing as Attachment I to this
Agreement.
(d) DOCUMENTS. Prior to SONIC's execution of this Agreement,
Licensee shall deliver to SONIC photocopies of its partnership agreement
and certificate of limited partnership (if applicable) reflecting
compliance with the provisions of this Section 22.02.
22.03. LIMITED LIABILITY COMPANY LICENSEE. If Licensee is a limited
liability company, Licensee shall comply with the following provisions:
(a) PURPOSE. The articles of organization and operating agreement of
Licensee, if organized after August 31, 1994, shall provide that the
purpose of the limited liability company shall consist only in the
development, ownership, operation and maintenance of Sonic drive-in
restaurants.
(b) TRANSFER RESTRICTIONS. The articles of organization and
operating agreement of Licensee shall provide that Licensee shall not issue
any additional membership interests in Licensee and that no member may
transfer, assign or pledge any membership interests in Licensee without the
prior, written consent of SONIC. SONIC shall not withhold its consent to
the issuance of additional membership interests or a transfer, assignment
or pledge without a reasonable basis. In giving its consent, SONIC shall
have the right (but not the obligation) to impose one or more reasonable
conditions, including (without limitation) the requirement that the
recipient of the membership interest execute an agreement substantially
similar to the Guaranty and Restriction Agreement attached as Attachment I
to this Agreement.
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(c) MEMBER GUARANTY. Each member of Licensee shall execute the
Guaranty and Restriction Agreement appearing as Attachment I to this
Agreement.
(d) DOCUMENTS. Prior to SONIC's execution of this Agreement,
Licensee shall deliver to SONIC photocopies of its articles of organization
and operating agreement reflecting compliance with the provisions of this
Section 22.03.
22.04. OTHER ENTITY LICENSEE. If Licensee is any other form of business
entity, Licensee shall deliver to SONIC photocopies of its organizational
documents containing provisions substantially similar to those required by
Sections 22.01 through 22.03.
22.05. EMPLOYEE STOCK PURCHASE PLANS. The Licensee shall have the right
to transfer up to 49% of its outstanding capital stock or other equity interests
to an employee stock purchase plan as long as one individual who qualifies as a
licensee of SONIC continues to own and Control, directly or indirectly, at least
51% of Licensee's outstanding capital stock or other equity interests.
23. APPLICABLE LAWS.
The terms and provisions of this Agreement shall be interpreted in
accordance with and governed by the laws of the State of Oklahoma, provided that
if the laws of the State of Oklahoma would not permit full enforcement of
Section 16 of this Agreement, then the laws of the state in which the Sonic
Restaurant is located or Licensee is domiciled shall apply to the extent that
any or all of such laws more fully permit enforcement of Section 16 of this
Agreement. Notwithstanding the foregoing, the franchise laws or regulations of
the state in which the Sonic Restaurant is located, in effect on the original
date of this Agreement, shall apply to this Agreement. Licensee agrees that
jurisdiction over Licensee and venue exist and are proper within the same
federal judicial district where the corporate headquarters of SONIC are located
and within any and all other courts, whether federal, state, or local, located
within that district. Licensee waives any and all defenses and objections, and
Licensee agrees not to assert any defense or objection to jurisdiction over
Licensee and to venue as described hereinabove regarding any action, proceeding
or litigation instituted by SONIC against Licensee. SONIC and Licensee agree
that any and all breaches of this Agreement, including breaches occurring after
termination, cancellation, or expiration of this Agreement, shall be deemed to
have occurred where the corporate headquarters of SONIC are located.
24. ACKNOWLEDGEMENT.
Licensee acknowledges that:
24.01. INITIAL TERM. The term of this Agreement is for a single 20-year
term with no promise or representation as to the renewal of this Agreement or
the grant of a new license except as provided herein.
24.02. CONSULTATION WITH COUNSEL. Licensee hereby represents that
Licensee has received a copy of this Agreement and has had an opportunity to
consult with Licensee's attorney with respect thereto at least 10 days prior to
Licensee's execution hereof. Licensee further represents that
47
Licensee has had this Agreement in hand for review at least five business days
prior to Licensee's execution hereof.
24.03. PROFITABILITY. No representation has been made by SONIC as to
the future profitability of the Sonic Restaurant.
24.04. LICENSEE'S INVESTIGATION. Prior to the execution of this
Agreement, Licensee has had ample opportunity to contact existing licensees of
SONIC and to investigate all representations made by SONIC relating to the Sonic
System. The Licensee has conducted an independent investigation of the business
contemplated by this Agreement and recognizes that it involves substantial
business risks making the success of the venture largely dependent on the
business abilities of Licensee. SONIC disclaims and Licensee has not received
from SONIC or its Affiliates any express or implied warranty or guaranty from
Sonic or its Affiliates regarding the potential volume, profits or success of
the business venture contemplated by this Agreement. The Licensee has not
relied on any express or implied warranty or guaranty from SONIC or its
Affiliates regarding the potential volume, profits or success of the business
venture contemplated by this Agreement.
24.05. CONTRARY REPRESENTATIONS. The Licensee knows of no
representations by SONIC or its Affiliates about the business contemplated by
this Agreement which contradict the terms of this Agreement. The Licensee has
not relied on any representations from SONIC or its Affiliates about the
business contemplated by this Agreement which contradict the terms of this
Agreement or the disclosures set forth in the Franchise Offering Circular
delivered to Licensee in connection with the issuance of this Agreement.
24.06. VARIANCES TO OTHER LICENSEES. The Licensee understands that
other developers and licensees may operate under different forms of agreements
and, consequently, that SONIC's rights and obligations with regard to its
various licensees may differ materially in certain circumstances.
24.07. COMPLETE AGREEMENT. This Agreement supersedes any and all other
agreements or representations respecting the Sonic Restaurant and contains all
the terms, conditions and obligations of the parties with respect to the grant
of this Agreement.
25. INPUT AND ADVICE FROM LICENSEES.
In connection with the implementation of or significant changes in the
programs or policies referred to in Sections 6.04, 6.05(c), 6.06, 8, and
11.01(f) of this Agreement, SONIC shall solicit input and advice from a group of
licensees gathered together for such purpose (whether established ongoing for
such purpose or gathered on an ad hoc basis from time-to-time). SONIC further
shall use its best efforts to ensure that such groups are balanced in terms of
geographic base, size of operating group, and period of tenure within the Sonic
system. Notwithstanding the foregoing, this Section 25 shall not have any
effect unless the license agreements in effect for at least one-third of all
Sonic drive-in restaurants contain this provision or a substantially similar
provision.
26. INJUNCTIVE RELIEF.
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The Licensee acknowledges that SONIC's remedy at law for any breach of any
of Licensee's covenants under this Agreement (other than involving only the
payment of money) would not constitute an adequate remedy at law and, therefore,
SONIC shall have the right to obtain temporary and permanent injunctive relief
in any proceeding brought to enforce any of those provisions, without the
necessity of proof of actual damages. However, nothing in this Section 26 shall
prevent SONIC from pursuing separately or concurrently one or more of any other
remedies available at law, subject to the provisions of Section 14.04 of this
Agreement.
27. GENERAL RELEASE AND COVENANT NOT TO XXX.
The Licensee hereby releases Sonic Corp., its subsidiaries, and the
officers, directors, employees and agents of Sonic Corp. and its subsidiaries
from any and all claims and causes of action, known or unknown, which may exist
in favor of Licensee as of the date of this Agreement. In addition, Licensee
covenants that Licensee shall not file or pursue any legal action or complaint
against any of the foregoing entities or Persons with regard to any of the
foregoing claims or causes of action released pursuant to this Section 27.
SONIC hereby releases Licensee and its officers, directors, employees and agents
from any and all claims and causes of action, known or unknown, which may exist
in favor of SONIC as of the date of this Agreement, except for any claims for
(a) unpaid moneys due SONIC or its Affiliates, (b) a material breach of the
provisions of this Agreement regarding the Proprietary Marks, or (c) the
violation of SONIC's legal rights regarding the Proprietary Marks. In addition,
SONIC covenants that SONIC shall not file or pursue any legal action or
complaint against any of the foregoing entities or Persons with regard to any of
the claims or causes of action released by SONIC pursuant to this Section 27.
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SIGNATURE PAGE
Executed on the dates set forth below, to have effect as of January 1,
1999.
The Sonic drive-in restaurant licensed to operate under this Agreement is
located at ____________________________________________________________________
_______________________________________________________________________________.
If the license agreement renewing to this Agreement is a Number 1 License
Agreement, Number 4 License Agreement or Number 4.1 License Agreement, the
Licensee hereby makes the following selection regarding the royalty rate and
advertising rate for this Agreement as set forth on pages 7 to 9 and 21 to 24 of
this Agreement:
Option 1 ___________.
Option 2 ___________.
The Licensee understand that if the Licensee does not make any election,
SONIC will apply Option 2 to calculate the Licensee's royalty fees and
advertising fees.
The Original Expiration Date of the license agreement renewing to this
Number 5.2 License Agreement was ________________________, 19___.
SONIC: Sonic Industries Inc.
By: _____________________________
(Vice) President
Attest: Date: ___________________, 1998
_________________________________
(Assistant) Secretary
Licensee: ____________________________________
Name:
Date: ___________________, 1998
____________________________________
Name:
Date: ___________________, 1998
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SCHEDULE I
GUARANTY AND RESTRICTION AGREEMENT
GUARANTY AND RESTRICTION AGREEMENT
The undersigned (the "Guarantor"), Sonic Industries Inc. ("SONIC"), and
__________ (the "Licensee") enter into this Guaranty and Restriction Agreement
(this "Agreement") as of the 1st day of January, 1999.
W I T N E S S E T H:
Whereas, Sonic is entering into a Number 5.2 License Agreement (the
"License Agreement") dated the same date as this Agreement with Licensee for the
Sonic drive-in located at ____________________________; and
Whereas, as a condition to entering into the License Agreement, SONIC has
asked that the Guarantor provide a personal guaranty of certain of the
obligations of Licensee set forth in the License Agreement; and
Whereas, SONIC also has asked that the Guarantor and Licensee agree to a
restriction on the transfer of the equity interests in Licensee; and
Whereas, the Guarantor and Licensee are willing to enter into those
agreements in accordance with the terms and conditions of this Agreement.
Now, therefore, in consideration of the mutual covenants set forth below
and other good and valuable consideration, the receipt and sufficiency of which
the parties hereby acknowledge, the parties agree as follows:
1. PERSONAL GUARANTY OF PAYMENTS. The Guarantor hereby guarantees the
prompt and full payment of the following obligations under the License
Agreement:
(a) All royalties due SONIC pursuant to the License Agreement.
(b) All advertising contribution fees to the Sonic Advertising Fund
pursuant to the License Agreement.
(c) All contributions to approved advertising cooperatives pursuant to the
License Agreement.
(d) Any other miscellaneous obligations owing to SONIC or its Affiliates
relating to the Sonic drive-in restaurant covered by the License Agreement,
including any sign lease agreements.
2. NATURE OF GUARANTY. This guaranty shall constitute an absolute,
unconditional, irrevocable and continuing guaranty. SONIC shall not have any
obligation to take any action against any other person or entity for collection
of any payments prior to making any demand for payment or bringing any action
against the Guarantor.
3. PERMITTED ACTIONS. From time to time, SONIC shall have the right to
take, permit or suffer to occur any "Permitted Action," as defined below,
without modifying, reducing, waiving, releasing, impairing or otherwise
affecting the obligations of the Guarantor under this Agreement, without giving
notice to the Guarantor or obtaining the Guarantor's consent, without the
necessity of any reservations of rights against the Guarantor, and without
liability on the part of SONIC. As used in this Section 3, the phrase
"Permitted Action" shall mean (a) an agreed extension of time for payment of any
sum due under the License Agreement, (b) an agreed change in the manner or place
of payment of any sums due under the License Agreement, (c) any waiver by SONIC
of any defaults under the provisions of the License Agreement, (d) any delay or
failure by SONIC to exercise any right or remedy SONIC may have under the
License Agreement, (e) the granting by SONIC of any leniencies, waivers,
extensions and indulgences under the License Agreement, and (f) any agreed
amendments to the License Agreement.
4. WAIVER OF NOTICE OF ACCEPTANCE. The Guarantor acknowledges and waives
notice of SONIC's acceptance of the Guarantor's guaranty pursuant to the terms
of this Agreement.
5. RESTRICTIONS ON TRANSFER. The Licensee shall not issue any additional
shares of capital stock without the prior, written consent of SONIC. The
Guarantor shall not transfer, assign or pledge any of its shares of capital
stock in Licensee to any person without the prior, written consent of SONIC.
6. DISPUTES. If SONIC files suit to enforce the provisions of this
Agreement, the federal and state courts in Oklahoma shall have personal
jurisdiction over the Guarantor. The Guarantor expressly waives any and all
objections as to venue in any of those courts and agrees that SONIC may serve
process by mailing a copy of the summons by certified mail, return receipt
requested, with sufficient postage prepaid, to the address of the Guarantor as
specified in this Agreement.
7. ATTORNEYS' FEES, COSTS AND EXPENSES. In any action brought by SONIC
to enforce the obligations of the Guarantor, SONIC also shall have the right to
collect its reasonable attorneys' fees, court costs, and expenses incurred in
the action.
8. HEADINGS. The headings used in this Agreement appear strictly for the
parties' convenience in identifying the provisions of this Agreement and shall
not affect the construction or interpretation of the provisions of this
Agreement.
9. BINDING EFFECT. This Agreement binds and inures to the benefit of the
parties and their respective successors, legal representatives, heirs and
permitted assigns.
10. WAIVER. The failure of a party to insist in any one or more instances
on the performance of any term or condition of this Agreement shall not operate
as a waiver of any future performance of that term or condition.
11. GOVERNING LAW. Notwithstanding the place where the parties execute
this Agreement, the internal laws of Oklahoma shall govern the construction of
the terms and the application of the provisions of this Agreement.
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12. AMENDMENTS. No amendments to this Agreement shall become effective or
binding on the parties, unless agreed to in writing by all of the parties.
13. TIME. Time constitutes an essential part of each and every part of
this Agreement.
14. NOTICE. Except as otherwise provided in this Agreement, when this
Agreement makes provision for notice or concurrence of any kind, the sending
party shall deliver or address the notice to the other party by certified mail,
telecopy, or nationally-recognized overnight delivery service to the following
address or telecopy number:
SONIC: 000 Xxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
(000) 000-0000
Guarantor: ____________________________________
____________________________________
(_____) _____-________
Licensee: ____________________________________
____________________________________
(_____) _____-________
All notices pursuant to the provisions of this Agreement shall run from the
date that the other party receives the notice or three business days after the
party places the notice in the United States mail. Each party may change the
party's address by giving written notice to the other parties.
15. RELEASE AND COVENANT NOT TO XXX. The Guarantor and Licensee each
hereby release all claims and causes of action which the Guarantor or Licensee,
or both of them, may have against Sonic Corp., its subsidiaries, and the
stockholders, directors, officers, employees and agents of Sonic Corp. and its
subsidiaries. The Guarantor and Licensee, and each of them, further covenant
not to xxx any of the foregoing persons or entities on account of any of the
foregoing claims or causes of action.
Executed and delivered as of the day and year first set forth above.
SONIC: Sonic Industries Inc.
By:________________________________
Attest: (Vice) President
______________________________
(Assistant) Secretary
3
Guarantor: ___________________________________
Licensee:
___________________________________
By: _____________________________
Attest: Its: _____________________
______________________________
Its: __________________________
4
