Exhibit 10.05
Form of Sonic Industries Inc. License Agreement
(the Number 6A License Agreement)
SONIC INDUSTRIES INC.
NUMBER 6A LICENSE AGREEMENT
BY AND BETWEEN SONIC INDUSTRIES INC., LICENSOR, AND
_____________________________________
_____________________________________
_____________________________, LICENSEE
SONIC DRIVE-IN OF _______________________________________,
LOCATED AT ____________________________________________
____________________________________________________.
DATED: _______________________, 19_______.
STORE NO. _________
CIF NO. __________
Store No._________
CIF No. __________
LICENSE AGREEMENT
THIS AGREEMENT made this ____ day of _________________, 19___, by and
between SONIC INDUSTRIES INC., an Oklahoma corporation ("Licensor"), and
__________________________ ("Principal")
__________________________
__________________________
(all of whom shall be jointly referred to herein as the "Licensee").
RECITALS
Licensor 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 Licensor 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 Licensor
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 Licensor 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 Licensor to operate a Sonic
drive-in restaurant pursuant to the Sonic System and to be afforded the
assistance provided by Licensor in connection therewith, and understands and
accepts the terms, conditions and covenants set forth herein as those which are
reasonably necessary to maintain Licensor'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 Licensor'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 the 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 the 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 the 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 the 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 the Licensee adds the amount of the tax to the sales price or
absorbs the amount of the sales tax in the sales price and the 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 the 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 the
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 the Licensor 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 the Licensor, 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. NON-TRADITIONAL LOCATIONS. The phrase "Non-traditional Locations"
shall mean permanent or temporary food service facilities operating under one or
more of the Proprietary Marks at locations featuring facilities other than
free-standing buildings with canopies devoted solely to the operation of a Sonic
drive-in restaurant and accessible to the general public by automobile from
public thoroughfares. Non-traditional Locations shall include (without
limitation) (a) military bases and other governmental facilities; (b)
universities and schools; (c) airports and other transportation facilities; (d)
stadiums, arenas and other sports and entertainment venues; (e) amusement and
theme parks; (f) cafeterias and food courts in shopping centers, shopping malls,
office buildings, and industrial buildings; (g) hotels and convention centers;
(h) hospitals and nursing facilities; (i) museums, zoos and other public
facilities; and (j) highway travel plazas, convenience stores, and gasoline
filling stations.
2. LICENSE GRANT.
Licensor grants to Licensee for the following stated term the right,
license and privilege:
2.01. (a) To adopt and use the Sonic System at the Sonic Restaurant
located at __________________________, ______________________, ________________.
(b) To have the exclusive rights to adopt and use the Sonic
System for a Sonic drive-in restaurant to be constructed within the current
boundaries of the town or city of __________, __________, for a period of six
months from the date hereof, with the obligation of selecting and having such
site approved within such six month period and completing Section 2.01(a),
above, within such six month period.
2.02. Subject to the provisions of paragraphs (c) and (d), below, the
Licensor 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.
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(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 the Licensor. The Licensor shall determine the population of an MSA from
time to time after the date of this Agreement according to the latest published
federal census.
(c) The Licensor shall not own, operate or license any other
Person to own or operate a Non-traditional Location (other than a
Non-traditional Location owned, operated or licensed prior to the date of this
Agreement) within the Protected Area without the Licensee's prior written
consent. Simultaneously with the request for that written consent, the Licensor
shall offer the Licensee a right of first refusal to develop the Non-traditional
Location. The Licensee must notify the Licensor in writing of its decision
regarding the right of first refusal to license and operate the Non-traditional
Location within 30 days after the Licensor notifies the Licensee of the
Licensor's request for the Licensee's written consent to own, operate and/or
license the Non-traditional Location. If the Licensee chooses to exercise its
right of first refusal, the Licensee must sign the Licensor's then current form
of license agreement for a Non-traditional Location for the applicable
jurisdiction within 30 days after the Licensee notifies the Licensor of its
decision. The Licensee then must open the Non-traditional Location within the
time period specified in the license agreement (if specified) or within 12
months after the date of the license agreement (if not specified). If the
Licensee does not execute that agreement within the foregoing 30-day period or
does not exercise its right of first refusal within the foregoing 30-day period,
the Licensor shall have the right to proceed with the ownership, operation
and/or licensing of the Non-traditional Location as disclosed to the Licensee
only if the Licensee has given its written consent to the Licensor. If the
Licensee elects, in its sole and absolute discretion, not to give its written
consent, the Licensor shall not own, operate or license any other Person to own
or operate the Non-traditional Location.
(d) The Licensor has and hereby further reserves the right, in
its sole discretion, to acquire the assets or controlling ownership of an
existing restaurant within the Protected Area. However, prior to converting an
acquired restaurant to a Sonic drive-in restaurant or a Non-traditional Location
within the Protected Area, the Licensor shall offer the Licensee a right of
first refusal to acquire the restaurant at a price equal to the Licensor's cost
of acquiring the restaurant. If the restaurant represents a part of an
acquisition of multiple restaurants, the Licensor shall make a reasonable
allocation of its cost to acquire the restaurant. The Licensee must notify the
Licensor of its decision regarding the right of first refusal within 30 days
after the Licensor gives the Licensee written notice of its intention to convert
the restaurant to a Sonic drive-in restaurant or Non-
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traditional Location. If the Licensee chooses to exercise its right of first
refusal, the Licensee must sign the Licensor's then current form of license
agreement for a Sonic drive-in restaurant or Non-traditional Location, and pay
the required license fee, as applicable, within 20 days after the Licensee
notifies the Licensor of its decision. In the event the Licensee fails to
convert the restaurant to a Sonic drive-in restaurant or Non-traditional
Location pursuant to the terms of the applicable license agreement, the Licensor
shall have the right to repurchase the restaurant from the Licensee at the same
purchase price. If the Licensee does not exercise its right of first refusal,
the Licensor shall have the right to own, operate and/or license other Persons
to operate the restaurant in any manner which does not violate the provisions of
this Agreement or the Licensor may sell or otherwise dispose of the restaurant
to any person or entity under any terms or conditions the Licensor deems
appropriate. The Licensor shall not own, operate or license any Person to
operate the restaurant if the ownership or operation of the restaurant otherwise
would violate the non-compete provisions of 16.01 of this Agreement if owned or
operated by a Sonic licensee.
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 the Licensor develops or licenses another
Person to develop a Sonic drive-in restaurant 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 the Licensor 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), the Licensor shall apply at least the level of demographic
analysis, market impact analysis, and site and market review used by the
Licensor 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 Licensor.
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 the Licensor shall designate from time to time to be part of
the Sonic System.
2.06. In the event the Licensee receives this license pursuant to
Section 2.01(b), above, the selection of a site by Licensee shall be subject to
the approval of Licensor in accordance with the standard site approval
procedures required by this Agreement and the standard practices of Licensor.
In the event a site for the Sonic Restaurant has not been approved by Licensor
before the expiration
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of the six month period provided for by Section 2.01(b), above, then this
Agreement shall expire and be of no further force or effect.
2.07. If the Licensee relocates the Sonic Restaurant during the term of
this Agreement with the written consent of the Licensor (which consent the
Licensor 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 the Licensor and the 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 20 years from the effective date of this
Agreement as set forth on the cover page to this Agreement.
3.02. OPENING OF RESTAURANT. Licensee expressly acknowledges and agrees
that a pre-condition to opening the Sonic Restaurant shall be Licensor's written
authorization to open, which authorization shall be given only upon Licensee's
completing, to Licensor's satisfaction, (i) construction of the Sonic
Restaurant, (ii) preparation of the Sonic Restaurant for commencement of
operations, and (iii) training as required by Section 6.04 of this Agreement.
3.03. 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 Licensor written notice of Licensee's
election to renew not less than six (6) months nor more than twelve (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 Licensor or Licensor's Affiliates 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 Licensor or
Licensor'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 Licensor 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
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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 Licensor 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
Licensor notifies Licensee of such requirements within 30 days after receipt of
Licensee's notice of renewal.
(f) The Licensor and the Licensee execute a general release of
each other, in a form satisfactory to the Licensor, of any and all claims the
Licensee may have against the Licensor and its Affiliates, including (without
limitation) all claims arising under any federal, state or local law, rule or
ordinance, but excluding (as to the Licensor) any claims against the Licensee
for (a) unpaid moneys due the Licensor or its Affiliates, (b) a material breach
of the provisions of this Agreement regarding the Proprietary Marks, or (c) the
violation of the Licensor's legal rights regarding the Proprietary Marks. The
Licensor may waive the requirements of this paragraph (f) at the Licensor's
election.
(g) Licensee principal and/or manager at their expense attend
and satisfactorily complete such retraining program as Licensor may require at
its sole discretion.
(h) Licensee meets the remodeling requirements set forth in
Section 6.02(d) herein.
4. DUTIES OF LICENSOR.
Licensor 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 modifications for nonstandard buildings,
whether required by local zoning or building laws or otherwise, must be approved
in writing by Licensor 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 Licensor 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
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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 Licensor 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
license fee of $30,000 paid by Licensee to Licensor concurrently with the
execution hereof; and (b) the fee has been earned by Licensor (except where the
construction of the Restaurant has not been completed within one year from the
date of this License). Licensor reserves the right, in case construction of the
Restaurant should be abandoned, the lease assigned, or other interest in the
premises be relinquished, and Licensee shall have the right, if Licensee does
not consummate a lease for the Restaurant within one year from the date of this
Agreement, to terminate this License upon written request to Licensor, after
which Licensor will immediately refund to Licensee the license fee less the sum
of $10,000 which shall be fully earned by Licensor upon execution and delivery
of this contract. At such time as the Restaurant is completed and ready for
occupancy, the license fee shall be deemed to be earned.
5.02. ROYALTY FEES. On or before the 20th day of each calendar month,
the Licensee shall pay a royalty fee determined by the following scale based on
the 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%
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 on $50,000 of
gross sales: Royalty Fee = ($5,000 x .01) + ($5,000 x .02) + ($5,000
x .03) + ($15,000 x .04) + ($10,000 x .0425) + ($10,000 x .0450).
5.03. ADVERTISING FEE.
(a) On or before the 20th day of each calendar month throughout
the term of this Agreement, Licensee shall pay to Sonic Advertising Fund, which
is administered by Licensor, an advertising contribution fee in an amount equal
to .75% of the Gross Sales received by Licensee
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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 Section 5.03,
above, shall be in addition to and separate from that which Licensee is
obligated to spend pursuant to Section 11.01(a) of this agreement.
5.04. TRANSFER FEE.
(a) A transfer fee in the amount of Five Hundred Dollars ($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.
(b) A transfer fee in the amount of One Thousand Five Hundred
Dollars ($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 Licensor by the 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 paragraph (a) of 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 Licensor
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 the
Licensor. 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 Licensor elect to terminate this agreement in lieu of
Licensee reconstructing the restaurant, provided that for a period
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of 18 months after said election, Licensee shall not enter into, become landlord
of or loan money to any restaurant business within a three (3) 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) Licensee agrees to complete the construction of the Sonic
Restaurant within a minimum of 365 days from the effective date of this
agreement. Unless Licensee is remodeling an existing building, Licensee shall
construct the Sonic Restaurant in accordance with the site plan approved by
Licensor for such site and with Licensor's standard construction plans and
specifications ("Sonic Plans and Specifications") and layout subject, however,
to any alterations thereto that may be required by any applicable law,
regulation or ordinance. If alterations of any kind are required to be made to
the site plan, as approved by Licensor, or to the Sonic Plans and Specifications
or layouts for any reason, such alterations must be approved by Licensor in
writing before any work is begun on the Sonic Restaurant. The Licensee shall
submit the final site layout and construction plans for the Sonic Restaurant to
the Licensor for its written approval. Any costs including engineering and
architectural fees incurred in obtaining approvals by the appropriate
governmental authorities of the construction plans, specifications and layouts
shall be paid by Licensee.
(b) If Licensee is remodeling the existing restaurant, Licensor
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 the Licensor for its
written approval. Nothing in this section shall be construed as an endorsement
or guarantee of the 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 Licensor's waiver of the
rights reserved hereunder prior to the commencement of construction.
(c) 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 Licensor. If at any time Licensor
determines (prior to opening date) that Licensee has not constructed or
remodeled the Sonic Restaurant in accordance with the plans and specifications
approved by Licensor, Licensor 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.
(d) The Licensor may require the Licensee to undertake
extensive remodeling and renovation and substantial modifications to existing
buildings necessary for the Licensee's restaurant to conform with Licensor's
then existing system image. The Licensor 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
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after the construction date of the restaurant). Notwithstanding the foregoing,
the Licensor shall have the right to require the Licensee to modify or replace
the large Sonic sign for the restaurant at any time during the term of this
Agreement. If the Licensor exercises its right to require the Licensee to
undertake extensive remodeling or renovation or substantial modification within
five years of the end of the term of this Agreement, the 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 Licensor 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 Licensor if Licensor 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.
(b) In order to provide maximum exposure of the Sonic name and
marks, Licensee shall prominently display and maintain at Licensee's own expense
one (1) Sonic drive-in sign ("Sign") which complies with the specifications
required by Licensor from time to time and in such location as Licensor may
approve. Licensee shall not display any other sign or advertising at the Sonic
Restaurant without Licensor's prior written approval.
(c) Licensee may lease the required Sign from Licensor or may
acquire or lease the Sign from any other source approved by Licensor. Licensee
agrees to require in any lease agreement with Licensor or other suppliers a
clause giving Licensor the right to remove the Sign from the Sonic Restaurant
upon termination of this agreement.
(d) Licensee hereby agrees that it shall, upon Licensor'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 Licensor.
(e) If Licensee is or becomes a lessee of the Sonic Restaurant
premises, he shall provide Licensor with a true and correct, complete copy of
any such lease, and shall have included therein provisions, in form satisfactory
to Licensor, expressly permitting both the Licensee and Licensor 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 Licensor reasonable
notice of any contemplated termination and a reasonable time in which to take
and make the above actions and alterations and provide that the Licensee has the
unrestricted right to assign such lease to Licensor.
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
12
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, the 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 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 Licensor 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) Licensor 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
Licensor 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, the 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, Licensor, 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 Licensor personnel, if utilized,
shall be paid by Licensee upon billing by Licensor. The foregoing shall be in
addition to any other right or remedies the Licensor 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 Licensor; and
maintain the building, equipment and parking area in a good,
13
clean, wholesome condition and repair, well lighted and in
compliance with designated standards as may be prescribed from
time to time by Licensor.
(ii) Purchase and install kitchen fixtures, lighting
and other equipment and signs in accordance with the
equipment specifications and layout initially designated by
Licensor.
(iii) Licensee shall not, without prior written
consent of Licensor: (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 ten (10) hours per day or such other hours as may from
time to time be reasonably prescribed by Licensor (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 Licensor 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 Licensor 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 Licensor 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
14
System specifications and quality standards, which Licensor may
designate from time to time and (c) employ only those methods of
food handling, preparation, and serving which Licensor may
designate from time to time.
(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 Licensor.
(xiii) Furnish Licensor with current changes in home
addresses and phone number of its owners and manager and,
upon the Licensor's reasonable request, provide updates of
personal financial statements or other credit information.
(xiv) The Licensee shall notify the Licensor's
Director of Corporate Communications or, if not available,
the most senior executive officer of the Licensor 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) The Licensor may require the Licensee (i) to purchase food,
beverages, signs and equipment which meet the specifications established by the
Licensor, (ii) to participate in the Licensor'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 the Licensor
approved advertising agency of record. In addition, the Licensee immediately
shall use the Licensee's vote or votes in all advertising cooperatives in which
the Licensee participates to support the use of the advertising agency of record
for the Sonic drive-in restaurant chain.
(b) The Licensor may require the Licensee to support the use of
and to use the products and programs of the cola syrup supplier approved by the
Licensor and used by a majority of all Sonic drive-in restaurants, to the
exclusion of any other supplier of cola syrup.
15
(c) The Licensor may require the Licensee to comply with the
foregoing provisions not only for the Sonic Restaurant, but also (to the extent
the Licensee exercises Control) for all other Sonic drive-in restaurants for
which the Licensee serves as a licensee. With regard to such existing Sonic
drive-in restaurants, the Licensee shall use the 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) The Licensor 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 the Licensor 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 the 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, the Licensor
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 (3) 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 the 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 Licensor.
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 Licensor or any of its subsidiaries in a
management level position. In addition, during the term of this License,
Licensor 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 (6) months.
6.09. LICENSOR'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
Licensor'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
16
License except only as otherwise permitted pursuant to the terms and
conditions of this License. Licensee shall furnish Licensor with such
evidence as Licensor may request from time to time for the purpose of
assuring Licensor that Licensee's interest remains as represented herein.
7. PROPRIETARY MARKS.
7.01. LICENSOR'S REPRESENTATIONS. Licensor represents with respect to
the Proprietary Marks that Licensor 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
Licensor and shall use them only in the manner authorized and permitted by
Licensor.
(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 Licensor 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 Licensor.
(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 Licensor's rights.
(e) Licensee shall not use the Proprietary Marks to incur any
obligation or indebtedness on behalf of Licensor.
(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 Licensor's instructions in
filing and maintaining the requisite trade name or fictitious name
registrations, and shall execute any documents deemed necessary by Licensor or
its counsel to obtain protection for the Proprietary Marks or to maintain their
continued validity and enforceability.
17
(h) In the event that litigation involving the Proprietary
Marks is instituted or threatened against Licensee, Licensee shall promptly
notify Licensor 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, Licensor 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 Licensor.
(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 Licensor'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 subsection 2.01(a)
of this agreement, and Licensor 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 grant licenses or franchises thereto without
providing any rights therein to Licensee.
(g) Licensor reserves the right to substitute different
Proprietary Marks for use in identifying the Sonic System and the businesses
operating thereunder if Licensor's currently owned Proprietary Marks no longer
can be used.
18
8. MANUAL.
Licensor shall loan to Licensee for use at the Sonic Restaurant the SONIC
OPERATIONS MANUAL prepared by Licensor 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 Licensor from time to time and to return said manual
to Licensor at the expiration or earlier termination of this License.
9. CONFIDENTIAL INFORMATION.
9.01. Licensor 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"). Licensor 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 Licensor 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 Licensor) 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 Licensor, may constitute trade secrets of Licensor and is
disclosed to Licensee solely on the condition that Licensee agrees, and Licensee
does hereby agree, that Licensee:
(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;
19
(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 Licensor 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 Licensor. Notwithstanding anything to the
contrary contained in this agreement and provided Licensee shall have obtained
Licensor'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 Licensor the opportunity, to obtain an appropriate
protective order or other assurance satisfactory to Licensor of confidential
treatment for the information required to be so disclosed.
10. ACCOUNTING AND RECORDS.
10.01. On or before the 20th day of each month, Licensee shall submit to
Licensor a complete profit and loss statement in a form prescribed by Licensor
and such statistical reports in such form as Licensor 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 (3) years in a manner and form
satisfactory to Licensor and shall also deliver such additional financial,
operating and other information and reports as Licensor may reasonably request
on the forms and in the manner prescribed by Licensor; provided, however, that
Licensee shall maintain, at a minimum, those books and records required to be
kept by the Internal
20
Revenue Service under the Internal Revenue Code for purposes of its regulation
of Licensee's business and make the same books available to Licensor.
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, the 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
the 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. Licensor 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 Licensor: (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 ten percent (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 (3%) or more of the
Gross Sales originally reported to Licensor or, in the case of failing to make
required advertising expenditures, that such unpaid expenditures exceeded three
percent (3%) of the amount required to be expended, Licensee shall bear the cost
of such inspection and audit at rates and fees customarily charged by Licensor
for such auditing and inspecting services and duties. Unpaid advertising
expenditures, including interest and surcharges collected by Licensor pursuant
to this section, shall be used in accordance with the expenditures authorized by
Section 5.03; nevertheless, Licensor may, on a case by case basis, at Licensor's
sole discretion, use such collected amounts in accordance with the expenditures
authorized by Sections 11.01(a) and 11.01(b). Licensor 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 the Licensor has reason to believe that the Licensee may not
have reported all of its Gross Sales, the Licensor may require the 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 Licensor concerning such statement and balance
sheet. The original of each such reports required by this Section 10.06 shall
be mailed to Licensor's business office at the address designated in Section 19
below.
10.07. If Licensee fails to timely provide Licensor with complete profit
and loss statements, accounts, books, records and tax returns pertaining to the
Sonic Restaurant business, or fails to fully cooperate with Licensor's audit of
the Sonic Restaurant business, Licensor shall have the right to
21
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 Licensor's estimates as conclusively correct until Licensee
fully complies with Licensor's accounting and disclosure requirements under this
agreement. However, if the Licensee's subsequent accounting and disclosures
reveal that Licensee under-reported Gross Sales or underpaid fees due under this
agreement, Licensor may recover all deficiencies and may litigate claims of
fraud even though Licensor may have already obtained a judgment using Licensor's
estimates. Furthermore, nothing in this agreement or any judgment using
estimates shall prevent or hinder Licensor's further efforts and rights to
obtain the accounting and disclosures which Licensee is required to give to
Licensor under this agreement.
10.08. The Licensor shall have the right to assemble and disseminate to
third parties financial and other information regarding the Licensee and other
licensees of the Licensor to the extent required by law or to the extent
necessary or appropriate to further the interests of the Sonic System as a
whole. The Licensor shall have the right to disclose the business name, address
and telephone number of the Licensee as they appear in the Licensor's records to
any Person making inquiry as to the ownership of the Sonic Restaurant. The
Licensor shall not disclose specific financial information regarding the
Licensee or the Sonic Restaurant to any Person without (a) the 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) In the event the Sonic Restaurant lies within a DMA for
which a Licensor-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.
(b) In the event there exists no Licensor-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 the Licensor'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.
22
(c) For purposes of determining the amount which the 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 the 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 Licensor 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 Licensor may specify from time to time in writing. Licensee
shall submit to Licensor (in accordance with the notice provisions contained
herein), for Licensor'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 Licensor.
If written disapproval thereof is not received by Licensee within fifteen (15)
days from the date of receipt by Licensor of such materials, Licensor shall be
deemed to have given the required approval. Upon notice from Licensor, Licensee
shall discontinue and/or remove any objectionable advertising material, whether
or not same was previously approved by Franchisor. If said materials are not
discontinued and/or removed within five (5) days after notice, Franchisor or its
authorized agents, may, at any time, enter upon Franchisor'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) Licensor may offer from time to time to provide, upon terms
subject to the discretion of Licensor, approved local advertising and
promotional plans and materials, including, without limitation, newspaper
display space, distributed promotional materials.
(f) Licensor 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 Licensor,
and shall be deposited in a separate bank account denoted as
the Sonic Advertising Fund (the "Fund").
(ii) Licensor shall direct all advertising programs
with sole discretion over the creative concepts, materials,
and media used in such programs. The Fund is intended to
maximize general public recognition and acceptance of the
Proprietary Marks for the benefit of the System and the
Licensee acknowledges that Licensor and its designees
undertake no
23
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 Licensor. The Fund shall pay
the Licensor monthly an amount equal to 15% of the Fund's
receipts during the preceding month, but not to exceed the
Licensor's actual administrative costs and overhead, if any,
as Licensor 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 Licensor.
(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)
of Paragraph (f) of Subsection 11.01 shall not preclude
Licensor from offering other materials not produced by the
Fund upon terms subject to the discretion of Licensor. (See
Paragraph (e) of this Subsection 11.01.)
(v) The Fund is not an asset of Licensor, and an
independent certified public accountant designated by
Licensor 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 the Licensor as the body to consult with
regarding the Licensor'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
24
be made first out of accumulated earnings, next out of current
earnings, and finally from contributions.
(vii) Although Licensor intends the Fund to be of
perpetual duration, Licensor 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, the Licensor shall consult
with the body approved and designated by Sonic (such as the current Franchise
Advisory Council or its successor) regarding the Licensor's maintenance and
administration of the Fund and shall report to that body on the Fund's
operation.
11.02. PUBLICITY. Licensor 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, the Licensee shall acquire and thereafter maintain insurance
from insurance companies acceptable to the Licensor. The Licensee shall
determine the appropriate limits of liability insurance but the Licensor 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. The Licensor shall accept participation in the Texas
Sonic Employee Accident Program ("TSEAP") 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
the Licensee.
(d) The Licensor shall have the right to require the Licensee
to increase the insurance specified above by giving the Licensee 60 days'
written notice in accordance with the
25
notice provisions of this Agreement, and the Licensee shall comply no later than
the first policy renewal date after that 60-day period.
12.02. LICENSOR AS ADDITIONAL INSURED. The Licensee shall name the
Licensor and the Licensor'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 the Licensor as it relates to the operation of the Sonic
Restaurant, and shall provide for at least 30 days' written notice to the
Licensor prior to their cancellation or amendment.
12.03. GENERAL CONDITIONS. Prior to opening or taking possession of the
Sonic Restaurant, the Licensee shall furnish the Licensor with certificates of
insurance evidencing that the Licensee has obtained the required insurance in
the form and amounts as specified above. In addition, the 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 the
Licensee at any time fails to acquire and maintain the required insurance
coverage, the Licensor shall have the right, at the Licensee's expense, to
acquire and administer the required minimum insurance coverage on behalf of the
Licensee. However, the Licensor shall not have any obligation to assume the
premium expense and nothing in this Agreement shall constitute a guaranty by the
Licensor against any losses sustained by the Licensee. The Licensor may relieve
itself of all duties with respect to the administration of any required
insurance policies by giving 10 days' written notice to the Licensee.
13. TRANSFER OF INTEREST.
13.01. ASSIGNMENT. The rights and duties created by this agreement are
personal to Licensee and Licensor 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 Licensor'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 Licensor'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 Licensor, 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
26
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 Licensor as assignees of the License, the personal
representative of Licensee shall have the greater of 120 days or the completion
of the probate of the 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. Licensor 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 Licensor within 15 days
after the request by Licensor.
(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 the Licensor'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 Licensor
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 Licensor. Any prospectus
or registration Licensee or Licensee's corporation would propose to use in such
a public or private offering shall be submitted to Licensor within a reasonable
time prior to the effective date thereof for the purpose of permitting Licensor
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 Licensor for approval.
The Articles of Incorporation,
27
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.
(f) Each shareholder of the 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
Licensor, 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 Licensor'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 Licensor.
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 Licensor'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) The Licensor and the Licensee execute a general
release of each other, in a form satisfactory to the
Licensor, of any and all claims the Licensee may have against
the Licensor and its Affiliates, including (without
limitation) all claims arising under any federal, state or
local law, rule or ordinance, but excluding (as to the
Licensor) any claims against the Licensee for (a) unpaid
moneys due the Licensor or its Affiliates, (b) a material
breach of the provisions of this Agreement regarding the
Proprietary Marks, or (c) the violation of the Licensor's
legal rights regarding the Proprietary Marks.
28
The Licensor may waive the requirements of this subparagraph (ii)
at the Licensor's election.
(iii) Licensee shall not be in material breach of
this agreement or any other agreement between Licensor and
Licensee.
(iv) Assignee (or the assignee's management, as the
case may be) shall at Licensor's sole discretion, enroll in
and successfully complete such training programs as Licensor
shall at that time designate according to Section 6.04
hereof.
(v) Licensor 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 Licensor shall apply in
the case of an application for a new license to operate a
Sonic drive-in restaurant. Licensor'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. LICENSOR'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
Licensor 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 the Licensor's right of first refusal), and all other terms
and conditions of such offer. Licensor shall have the right and option,
exercisable within twenty (20) days after Licensor's receipt of such written
notification, to send written notice to Licensee or such Person or entity that
Licensor 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 Licensor or
its designee as in the initial offer. Licensor'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 Licensor shall constitute rejection. If the
proposed sale includes assets of Licensee not related to the
29
operation of a licensed Sonic drive-in restaurant, Licensor 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 Licensor 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.
(c) Any sale or attempted sale effected without first giving
Licensor the right of first refusal described above shall be void and of no
force and effect.
(d) If Licensor 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 Licensor; provided, however, that Licensor'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 the Licensee's immediate family. For the
purposes of this Section 13.05, a member of the Licensee's immediate family
shall mean the 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 the 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 the Licensee pursuant to the
foregoing provisions of this Section 13, the Licensor 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 Licensor 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 Licensor 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
30
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.
(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 Licensor 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 Licensor, to adversely affect the Sonic System, the Proprietary
Marks, the goodwill associated therewith or Licensor'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
Licensor's rights therein and the Licensee cannot cure the default within 30
days.
(d) If Licensee improperly discloses trade secrets or
confidential information and the 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 Licensor.
14.03. PERIOD TO CURE. Except as provided in Subsections 14.01 and
14.02, Licensee shall have thirty (30) days after receipt from Licensor 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 Licensor 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
31
impossible to cure. The Licensor shall have the right to terminate this
Agreement and the License upon written notice to the 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 the Licensee
has received written notice and an opportunity to cure. If any such breach is
not cured within that time, Licensor 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 the Licensee fails to pay any past due amounts owed to
the Licensor after the Licensor has mailed the 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 Licensor 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
Licensor'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 Licensor
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).
32
14.04. RESOLUTION OF DISPUTES. The following provisions shall apply to
any controversy between the Licensee and the Licensor (including an Affiliate of
the Licensor) 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
33
controversy, and (c) that the scope, timing and cost of the
discovery is not excessive.
(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 the
Licensor or its Affiliates.
(d) EXCLUDED CONTROVERSIES. At the election of the Licensor or
its Affiliate, the provisions of this Section 14.04 shall not apply to any
controversies relating to any fee due the Licensor or its Affiliate; any
promissory note payments due the Licensor or its Affiliate; or any trade
payables due the Licensor 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) the
Licensor'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 the Licensor and the Licensee, the Licensee shall
comply with the following provisions after the expiration or termination of this
Agreement and the License:
34
(a) Licensee, upon any termination, cancellation or expiration
of this agreement, shall promptly pay to Licensor and Licensor'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, costs and expenses, including
reasonable attorneys' fees, incurred by Licensor as a result of the breach,
which obligation shall give rise to and remain, until paid in full, a lien in
favor of Licensor 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
Licensor'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 Licensor or the Sonic System. Licensee shall
cease to use and shall return to Licensor 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 Licensor, 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 Licensor 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 Licensor 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, Licensor 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 Licensor'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
Licensor 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 Licensor'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
Licensor or to do anything which would indicate any relationship between
Licensee and Licensor.
(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
Licensor prior to termination, cancellation or expiration of this agreement
shall survive termination, cancellation or expiration and be enforceable by
Licensor.
(h) Licensee shall complete all such modifications within
thirty (30) days after this agreement has been terminated or canceled or has
expired. Licensee and Licensor agree that Licensor'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 Licensor herein and elsewhere, will pay Licensor 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 Licensor as
reasonably representative of the actual damage sustained by Licensor 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 Licensor may have hereunder or under federal or
state law.
15.02. LICENSOR'S OPTION TO PURCHASE.
(a) Upon termination, cancellation or expiration hereof,
Licensor 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 Licensor shall be
exercised as provided in Paragraph (b) of this Subsection 15.02. If Licensor
elects to exercise any option to purchase herein provided, it shall have the
right to set off all amounts due from Licensee to Licensor and one-half of the
cost of any appraisals against any payment therefor.
(b) In the case of termination by expiration, Licensor shall
exercise Licensor's option contained in this Subsection 15.02 by giving Licensee
written notice at least thirty (30) days prior to expiration. In the case of
termination for any other reason, Licensor shall exercise its option by giving
Licensee written notice within thirty (30) days after termination.
(c) Licensor's option hereunder is without prejudice to
Licensor's rights under any security agreement held by Licensor or with respect
to which Licensor may have a guarantor's or surety's subrogation interest. If
Licensor exercises this option, Licensor may pay any debt which Licensee owes to
Licensor and shall remit any balance of the purchase price to Licensee. There
shall be no allowance for goodwill.
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15.03. LICENSOR'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 Licensor,
excluding all food items, Licensor shall have the obligation to repurchase such
items at Licensee's cost.
(b) If Licensee desires to sell such items to Licensor,
Licensee shall, not later than ten (10) days after termination, cancellation or
expiration of this agreement, give Licensor ten (10) days written notice of
Licensee's election and, at the expiration of the ten (10) days notice period,
deliver such items at Licensee's expense with an itemized inventory to the
nearest Sonic drive-in restaurant owned by Licensor or other unit designated by
Licensor. Licensor agrees to pay Licensee or credit Licensee's account within
seven (7) 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
Licensor, one by Licensee and the two appraisers shall designate an independent
appraiser, and the valuation of such third appraiser alone shall be binding.
The Licensor and the 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 eighteen (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 (3) mile radius of the Sonic Restaurant formerly
licensed by this agreement, (ii) is within a twenty (20) mile radius of a Sonic
37
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 Licensor).
(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 Licensor) 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 (2%) 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 Licensor 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 Licensor shall
have the right, in Licensor'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 immediately upon
receipt by Licensee of written notice thereof, and Licensee agrees that it shall
comply forthwith
38
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 Licensor, whether or not arising from this agreement,
shall not constitute a defense to the enforcement by Licensor 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 Licensor 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 Licensor, 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 Licensor 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 Licensor 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 Licensor to Licensee and shall include, without limitation,
specific identification of Licensor 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 LICENSOR. It is understood and agreed
that this agreement does not create a fiduciary relationship between Licensor
and Licensee, and that nothing herein contained shall constitute Licensee as the
agent, legal representative, partner, joint venturer or employee of Licensor.
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.
39
17.02. COST OF ENFORCEMENT. If Licensor or Licensor's subsidiaries
becomes involved in any action at law or in equity or in any proceeding opposing
Licensee to secure, enforce, protect, or defend Licensor's rights and remedies
under this License, in addition to any judgment entered in Licensor's favor,
Licensor shall be entitled to demand of and (in the event Licensor prevails in
such actions or proceedings) recover from Licensee the reasonable costs,
expenses and attorneys' fees incurred by Licensor. If, in such applicable final
judgment Licensor does not prevail, Licensee shall be entitled to recover from
Licensor in any such action or proceeding the reasonable costs, expenses and
attorneys' fees incurred by Licensee.
17.03. INDEMNIFICATION. If Licensor or Licensor'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 Licensor and Licensor'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 Licensor in connection with the investigation or defense relating
to such claim or litigation or administrative proceeding and, at the election of
Licensor, Licensee shall also defend Licensor and Licensor's subsidiaries. The
Licensee shall not have any obligation to indemnify, defend or hold harmless the
Licensor or any other Person pursuant to the provisions of this Section 17.03 to
extent the obligation arises predominantly as a proximate result of the
Licensor's act or failure to act when under a duty to act.
18. EFFECT OF WAIVERS.
No waiver by Licensor 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 Licensor or to
Licensor at The Sonic Center, 000 Xxxx Xxxxxx, Xxxxxxxx Xxxx, Xxxxxxxx 00000, or
at the subsequent address of Licensor's corporate headquarters. Either party,
by a similar written notice, may change the address to which notices shall be
sent.
19.02. If Licensor is unable to give actual notice of any breach or
termination of this agreement because Licensee has failed to provide Licensor
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 Licensor, then such
notice shall be deemed as given when Licensor sends such notice by overnight
receipted delivery service or registered or certified mail, postage prepaid.
40
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 Licensor may send its notices
and communications under this agreement to the Principal provided for herein,
that each Licensor 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 Licensor 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
Licensor unless in writing signed by an officer of Licensor. 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, Licensor
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.
41
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,
Licensor 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 the Licensee is a corporation, the
Licensee shall comply with the following provisions:
(a) PURPOSE. The certificate of incorporation of the 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
the Licensee shall provide that the Licensee shall not issue any additional
capital stock of the Licensee and that no stockholder may transfer, assign or
pledge any issued capital stock of the Licensee without the prior, written
consent of the Licensor, and each stock certificate issued to evidence the
capital stock of the Licensee shall contain a legend disclosing the foregoing
restriction. The Licensor 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, The Licensor 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 the Licensee
shall execute the Guaranty and Restriction Agreement attached as Attachment I to
this Agreement.
(d) DOCUMENTS. Prior to the Licensor's execution of this
Agreement, the Licensee shall deliver to the Licensor photocopies of its
certificate of incorporation and issued stock certificates reflecting compliance
with the provisions of this Section 22.01.
42
22.02. PARTNERSHIP LICENSEE. If the Licensee is a partnership, the
Licensee shall comply with the following provisions:
(a) PURPOSE. The partnership agreement and certificate of
limited partnership (if applicable) of the 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 the Licensee shall provide
that the Licensee shall not issue any additional partnership interests in the
Licensee and that no partner may transfer, assign or pledge a partnership
interest in the Licensee without the prior, written consent of the Licensor.
The Licensor 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, the Licensor 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 the Licensee shall
execute the Guaranty and Restriction Agreement appearing as Attachment I to this
Agreement.
(d) DOCUMENTS. Prior to the Licensor's execution of this
Agreement, the Licensee shall deliver to the Licensor 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 the Licensee is a limited
liability company, the Licensee shall comply with the following provisions:
(a) PURPOSE. The articles of organization and operating
agreement of the 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 the Licensee shall provide that the Licensee shall not
issue any additional membership interests in the Licensee and that no member may
transfer, assign or pledge any membership interests in the Licensee without the
prior, written consent of the Licensor. The Licensor 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, the
Licensor 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.
43
(c) MEMBER GUARANTY. Each member of the Licensee shall execute
the Guaranty and Restriction Agreement appearing as Attachment I to this
Agreement.
(d) DOCUMENTS. Prior to the Licensor's execution of this
Agreement, the Licensee shall deliver to the Licensor 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 the Licensee is any other form of
business entity, the Licensee shall deliver to the Licensor 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 the Licensor continues to own and Control, directly or indirectly,
at least 51% of the 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 Licensor 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 Licensor against Licensee.
Licensor 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 Licensor 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.
44
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 Licensee has had
this agreement in hand for review at least five (5) business days prior to
Licensee's execution hereof.
24.03. PROFITABILITY. No representation has been made by Licensor 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
Licensor and to investigate all representations made by Licensor 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 the Licensee. The Licensor disclaims and the
Licensee has not received from the Licensor or its Affiliates any express or
implied warranty or guaranty from 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 the Licensor
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 the Licensor 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 the Licensor 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 the 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 the Licensor'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, the Licensor 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). The
Licensor further shall use its best efforts to ensure that such groups are
balanced in terms of
45
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.
The Licensee acknowledges that the Licensor's remedy at law for any breach
of any of the Licensee's covenants under this Agreement (other than involving
only the payment of money) would not constitute an adequate remedy at law and,
therefore, the Licensor 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 the Licensor 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 the Licensee as of the date of this Agreement. In addition, the
Licensee covenants that the 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. The Licensor hereby releases the 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 the Licensor as of the date of this
Agreement, except for any claims for (a) unpaid moneys due the Licensor or its
Affiliates, (b) a material breach of the provisions of this Agreement regarding
the Proprietary Marks, or (c) the violation of the Licensor's legal rights
regarding the Proprietary Marks. In addition, the Licensor covenants that the
Licensor 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 the Licensor pursuant to this Section 27.
Executed on the dates set forth below, to have effect as of ______, 1998.
Licensor: 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 "Guaranty") as of the ____ day of __________, 199_.
W I T N E S S E T H:
Whereas, Sonic is entering into a License Agreement (the "License
Agreement") dated the same date as this Agreement with the 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 the Licensee set forth in the License Agreement; and
Whereas, Sonic also has asked that the Guarantor and the Licensee agree
to a restriction on the transfer of the equity interests in the 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 the 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.
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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.
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 the Licensee
each hereby release all claims and causes of action which the Guarantor or the
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 the 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.
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Executed and delivered as of the day and year first set forth above.
Sonic: Sonic Industries Inc.
By: ________________________
Attest: (Vice) President
______________________________
(Assistant) Secretary
Guarantor: _______________________________
Licensee:
______________________________
By: _______________________
Attest: Its: ________________
______________________________
Its: ________________________
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