HARDEE’S RESTAURANT FRANCHISE AGREEMENT

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TABLE OF CONTENTS
 
 
1
GRANT OF FRANCHISE
2
TERM
3
FEES
4
RECORDKEEPING AND REPORTS
5
ADVERTISING AND PROMOTION
6
MANUAL
7
MODIFICATIONS OF THE SYSTEM
8
TRAINING
9
ADDITIONAL SERVICES BY HFS
10
PERFORMANCE STANDARDS AND UNIFORMITY OF OPERATION
11
PROPRIETARY MARKS
12
INSURANCE
13
ORGANIZATION OF FRANCHISEE
14
TRANSFERS BY HFS
15
TRANSFERS BY FRANCHISEE
16
GENERAL RELEASE
17
COVENANTS
18
TERMINATION
19
OBLIGATIONS ON TERMINATION OR EXPIRATION
20
OPTION TO PURCHASE
21
RELATIONSHIP OF THE PARTIES
22
INDEMNIFICATION
23
CONSENTS, APPROVALS AND WAIVERS
24
NOTICES
25
ENTIRE AGREEMENT
26
SEVERABILITY AND CONSTRUCTION
27
GOVERNING LAW, FORUM AND LIMITATIONS
28
MISCELLANEOUS
29
REPRESENTATIONS
 
 
 
GUARANTEE AND ASSUMPTION OF FRANCHISEE’S OBLIGATIONS
 
APPENDIX A - FRANCHISE INFORMATION
 
APPENDIX B - WEEKLY ROYALTY FEE
 
APPENDIX C - FRANCHISEE’S ADVERTISING AND PROMOTION OBLIGATION
 
APPENDIX D - OWNERSHIP INTERESTS

    

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HARDEE’S RESTAURANT FRANCHISE AGREEMENT
THIS AGREEMENT is made as of _____________________________ by and between
Hardee’s Food Systems, Inc. (“HFS”), a North Carolina corporation, and
______________________________________

_______________________________________________________________________
(“Franchisee”).
RECITALS:
As a result of the expenditure of time, skill, effort and money, HFS has
developed and owns a unique and distinctive system (“System”) relating to the
development, establishment and operation of fast service restaurants (“Hardee’s
Restaurants”).
Pursuant to a Master License Agreement with Carl Karcher Enterprises, Inc.
(“CKE”), an affiliate of HFS, HFS has the right to use and permit its
franchisees and licensees to utilize certain elements and menu items of CKE’s
Carl’s Jr. Restaurant System in the establishment and operation of Hardee’s
Restaurants.
HFS has incorporated certain of those elements and menu items of the Carl’s Jr.
Restaurant System into the operation of Hardee’s Restaurants (“Star Hardee’s
Program”).
The distinguishing characteristics of the System include, without limitation,
uniform and distinctive building designs, interior and exterior layout and trade
dress; standards and specifications for equipment, equipment layouts, supplies
and menus (including food and beverage designations, special recipes and quality
and quantity standards); operating procedures for sanitation, maintenance, and
food and beverage storage, preparation and service; and methods and techniques
for inventory and cost controls, recordkeeping and reporting, personnel
management, purchasing, sales, promotion, and advertising. The System and its
components may be changed, improved, and further developed by HFS from time to
time.
HFS identifies the System by means of certain names, marks, logos, insignias,
slogans, emblems, symbols and designs (collectively “Proprietary Marks”) which
HFS has designated or may in the future designate for use with the System. The
Proprietary Marks used to identify the System, including the principal
Proprietary Marks, may be modified by HFS and/or its affiliates from time to
time.
HFS continues to develop, use and control the use of these Proprietary Marks in
order to identify for the public the source of services and products marketed
under the Proprietary Marks and the System, and to represent the System’s high
standards of quality, appearance and service.
Franchisee desires to obtain a license to use the System and to continuously
operate one Hardee’s Restaurant (“Franchised Restaurant”) at the location
specified in attached Appendix A (“Franchised Location”), subject to the terms
and conditions of this Agreement and in strict compliance with the standards and
specifications established by HFS.
Franchisee understands and acknowledges the importance of HFS’ high and uniform
standards of quality, operations and service and the necessity of developing and
operating the Franchised Restaurant in strict conformity with this Agreement and
the Confidential Operating Manual (“Manual”).
HFS is willing to grant Franchisee a license to operate the Franchised
Restaurant at the Franchised Location, subject to the terms and conditions of
this Agreement.

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NOW THEREFORE, in consideration of HFS’ grant to Franchisee of the right to
operate a Franchised Restaurant at the Franchised Location during the term of
this Agreement, as well as the mutual covenants, agreements and obligations set
forth below, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1.    GRANT OF FRANCHISE
A.    Grant
Subject to the provisions of this Agreement, HFS hereby grants to Franchisee the
nonexclusive right (“Franchise”) to continuously operate the Franchised
Restaurant at the Franchised Location and to use the Proprietary Marks in the
operation of the Franchised Restaurant. Franchisee may not operate the
Franchised Restaurant at any site other than the Franchised Location and may not
relocate the Franchised Restaurant without HFS’ prior written consent, which may
be withheld by HFS in its sole discretion. If HFS approves a relocation of the
Franchised Restaurant, it shall have the right to charge Franchisee for all
reasonable expenses actually incurred in connection with consideration of the
relocation request.
Franchisee agrees that it will at all times faithfully, honestly and diligently
perform its obligations under this Agreement, that it will continuously exert
its best efforts to promote and enhance the business of the Franchised
Restaurant and that it will not engage in any other business or activity that
may conflict with its obligations under this Agreement, except the operation of
other Hardee’s Restaurants or other restaurants operated by Franchisee that are
franchised by HFS or its affiliates.
B.    No Exclusivity
This Agreement does not give Franchisee any exclusive rights to use the System
or the Proprietary Marks in any geographic area. Nothing in this Agreement
prohibits HFS from, among other things: (1) operating or licensing others to
operate at any location, during or after the term of this Agreement, any type of
restaurant other than Hardee’s Restaurants; (2) operating or licensing others to
operate, during the term of this Agreement, Hardee’s Restaurants at any location
other than the Franchised Location; (3) operating or licensing others to
operate, after this Agreement terminates or expires, Hardee’s Restaurants at any
location, including the Franchised Location; and (4) merchandising and
distributing goods and services identified by the Proprietary Marks at any
location through any other method or channel of distribution. HFS reserves to
itself all rights to use and license the System and the Proprietary Marks other
than those expressly granted under this Agreement.
C.    Forms of Agreement
Franchisee acknowledges that, over time, HFS has entered, and will continue to
enter, into agreements with other franchisees that may contain provisions,
conditions and obligations that differ from those contained in this Agreement.
The existence of different forms of agreement and the fact that HFS and other
franchisees may have different rights and obligations does not affect the duties
of the parties to this Agreement to comply with the terms of this Agreement.
2.    TERM
A.    Initial Term
The Initial Term of this Agreement and the Franchise granted by this Agreement
shall begin on the date of this Agreement and terminate at midnight on the day
preceding the 20th anniversary of the date the Franchised Restaurant first
opened for business, unless this Agreement is terminated at an earlier date
pursuant to Section 18. HFS shall complete and forward to Franchisee a notice to
memorialize the date the Franchised Restaurant first opened for business.

    

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Notwithstanding the foregoing, if, during the term of this Agreement,
Franchisee, through no act or failure to act on its part (except the failure to
extend the lease for the Franchised Location through the Initial Term of this
Agreement), loses the right to possession of the Franchised Location, the
Initial Term shall expire as of the date of the loss of the right to possession.
However, if the right to possession is lost through no act or failure to act on
Franchisee’s part, Franchisee may relocate the Franchised Restaurant (without
paying any additional initial franchise fee or transfer fee) at its expense and
the Initial Term shall not expire if: (1) HFS approves the new location;
(2) Franchisee constructs and equips a Franchised Restaurant at the new location
in accordance with the then-current System standards and specifications; (3) a
Franchised Restaurant at the new location is open to the public for business
within 6 months after the loss of possession of the Franchised Location; and
(4) Franchisee reimburses HFS for all reasonable expenses actually incurred by
HFS in connection with the approval of the new location.
B.    Renewal Term
(1)    At the expiration of the Initial Term, Franchisee shall have an option to
remain a franchisee at the Franchised Location for a Renewal Term of 10 years
or, at Franchisee’s option, 5 years. Franchisee must give HFS written notice of
whether or not it intends to exercise its renewal option and the length of the
proposed Renewal Term not less than 12 months, nor more than 24 months, before
the expiration of the Initial Term. Notwithstanding the foregoing, if Franchisee
subleases the Franchised Location from HFS, Franchisee must give HFS the notice
described in the preceding sentence not less than 6 months, nor more than 12
months, before notice of renewal is required to be provided to the landlord
under the master lease. Failure by Franchisee to timely provide HFS the required
notice constitutes a waiver by Franchisee of its option to remain a franchisee
beyond the expiration of the Initial Term.
(2)    If Franchisee desires to continue as a franchisee for the Renewal Term,
Franchisee must comply with all of the following conditions prior to and at the
end of the Initial Term:
(a)    Franchisee shall not be in default under this Agreement or any other
agreements between Franchisee and HFS or its affiliates; Franchisee shall not be
in default beyond the applicable cure period under any real estate lease,
equipment lease or financing instrument relating to the Franchised Restaurant;
Franchisee shall not be in default beyond the applicable cure period with any
vendor or supplier to the Franchised Restaurant; and, for the 12 months before
the date of Franchisee’s notice and the 12 months before the expiration of the
Initial Term, Franchisee shall not have been in default beyond the applicable
cure period under this Agreement or any other agreements between Franchisee and
HFS or its affiliates.
(b)    Franchisee shall make the capital expenditures required to renovate and
modernize the Franchised Restaurant to conform to the interior and exterior
designs, decor, color schemes, furnishings and equipment and presentation of the
Proprietary Marks consistent with the image of the System for new Hardee’s
Restaurants at the time Franchisee provides HFS the renewal notice, including
such structural changes, remodeling, redecoration and modifications to existing
improvements as may be necessary to do so.
(c)    Franchisee and its employees at the Franchised Restaurant shall be in
compliance with HFS’ then-current training requirements.
(d)    Franchisee shall have the right to remain in possession of the Franchised
Location, or other premises acceptable to HFS, for the Renewal Term and all
monetary obligations owed to Franchisee’s landlord, if any, must be current.
(e)    Franchisee, all individuals who executed this Agreement and all
guarantors of Franchisee’s obligations shall have executed a general release and
a covenant not to sue, in a form satisfactory to HFS, of any and all claims
against HFS and its affiliates and their respective past and present officers,
directors, shareholders, agents and employees, in their corporate and individual
capacities, including, without limitation, claims arising under federal, state
and local laws, rules and ordinances, and claims arising out of, or relating to,

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this Agreement, any other agreements between Franchisee and HFS or its
affiliates and Franchisee’s operation of the Franchised Restaurant, other
Hardee’s Restaurants operated by Franchisee and all other restaurants operated
by Franchisee that are franchised by HFS or its affiliates.
(f)    As determined by HFS in its sole discretion, Franchisee has operated the
Franchised Restaurant and all of its other franchised Hardee’s Restaurants in
accordance with the applicable franchise agreements and with the System (as set
forth in the Manual or otherwise and as revised from time to time by HFS) and
has operated each of its other restaurants that are franchised by HFS or its
affiliates in accordance with the applicable franchise agreement.
(3)    Within 4 months after HFS’ receipt of Franchisee’s written notice of its
desire to renew, HFS shall advise Franchisee whether or not Franchisee is
entitled to remain a franchisee for the Renewal Term. If HFS intends to permit
Franchisee to remain a franchisee for the Renewal Term, HFS’ notice will contain
preliminary information regarding actions Franchisee must take to satisfy
Sections 2.B.(2)(b) and (c). If HFS does not intend to permit Franchisee to
remain a franchisee for the Renewal Term, HFS’ notice shall specify the reasons
for non-renewal. If HFS chooses not to permit Franchisee to remain a franchisee
for the Renewal Term, it shall have the right to unilaterally extend the Initial
Term of this Agreement as necessary to comply with any applicable laws.
(4)    If Franchisee will remain a franchisee for the Renewal Term, HFS shall
forward to Franchisee a new franchise agreement for the Renewal Term for
Franchisee’s signature at least 4 months prior to the expiration of the Initial
Term. The form of renewal franchise agreement shall be the form then in general
use by HFS for Hardee’s Restaurants (or, if HFS is not then granting franchises
for Hardee’s Restaurants, that form of agreement as specified by HFS) and likely
will differ from this Agreement, including, but not limited to, provisions
relating to the royalty fee and advertising obligations.
(5)    Franchisee shall pay HFS a renewal fee in the amount of $5,000 for a
Renewal Term of 5 years or less or $10,000 for a Renewal Term greater than 5
years, but no more than 10 years.
(6)    Franchisee shall execute the renewal franchise agreement for the Renewal
Term and return the signed agreement to HFS, along with the renewal fee, at
least one month prior to the expiration of the Initial Term. Failure by
Franchisee to sign the renewal franchise agreement and return it to HFS (along
with the renewal fee) within this time shall be deemed an election by Franchisee
not to renew the Franchise and shall result in termination of this Agreement and
the Franchise granted by this Agreement at the expiration of the Initial Term.
Provided Franchisee has timely complied with all of the conditions set forth in
this Section 2.B., HFS shall execute the renewal franchise agreement and
promptly return a fully-executed copy to Franchisee.
3.    FEES
A.    Initial Franchise Fee
Franchisee has paid HFS an Initial Franchise Fee in the amount specified in
Appendix A. Any Commitment Fee previously paid by Franchisee to HFS with respect
to the Franchised Restaurant shall be credited against the Initial Franchise
Fee. Franchisee acknowledges and agrees that the Initial Franchise Fee was paid
in consideration of HFS initially granting this Franchise, it was fully earned
at the time paid, and it is not refundable for any reason whatsoever.
B.    Royalty Fee
In addition to all other amounts to be paid by Franchisee to HFS, Franchisee
shall pay HFS a nonrefundable and continuing royalty fee in an amount set forth
in attached Appendix B, which shall not exceed 4% of the Gross Sales of the
Franchised Restaurant, for the right to use the System, the Star Hardee’s
Program and the Proprietary Marks at the Franchised Location. If any taxes, fees
or assessments are imposed on HFS by reason of its acting as franchisor or
licensing the Proprietary Marks under this Agreement, Franchisee shall reimburse
HFS the amount

    

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of those taxes, fees or assessments within 30 days after receipt of an invoice
from HFS.
Gross Sales shall include all sales or other income arising at or from the
Franchised Restaurant, less sales tax actually collected and paid to the taxing
authority and any amounts received from sales of non-food items approved for use
in connection with such promotional campaigns, if any, as approved from time to
time by HFS in its discretion.
C.    Advertising Fees
Franchisee also shall spend and/or contribute for advertising approved by HFS or
its designee a minimum of 5% of the Gross Sales of the Franchised Restaurant.
The exact amount of the advertising fees to be spent and/or contributed by
Franchisee, and the allocation of the advertising fees, as of the date of this
Agreement, is set forth in Section 5 and attached Appendix C.
D.    Remittance Reports
Within 5 business days after the end of each fiscal week (as defined by HFS from
time to time), Franchisee shall submit to HFS in writing (or by electronic mail,
polling by computer or such other form or method as HFS may designate) the
amount of Gross Sales from the Franchised Restaurant during the preceding fiscal
week and such other data or information as HFS may require.
E.    Payment of Fees
Within 10 calendar days after the end of each fiscal week, Franchisee shall pay
HFS (by check or by such other form or method as HFS may designate) the royalty
fee, and the advertising fees required by Section 3.C., applicable to the Gross
Sales for the fiscal week. In the alternative, upon receipt of written notice
from HFS, Franchisee shall pay HFS the royalty fee applicable to the Gross Sales
and other amounts under this Agreement, including advertising fees and interest
charges, by electronic funds transfer. In connection with payment of these fees
by electronic funds transfer, HFS may designate a day for payment (“Due Date”)
different than that provided in the preceding paragraph. On each Due Date, HFS
will transfer from the Franchised Restaurant’s bank operating account
(“Account”) the amount reported to HFS in Franchisee’s remittance report or
determined by HFS by the records contained in the cash registers/computer
terminals of the Franchised Restaurant. If Franchisee has not reported Gross
Sales to HFS for any fiscal period, HFS will transfer from the Account an amount
calculated in accordance with its estimate of the Gross Sales during the fiscal
period. If, at any time, HFS determines that Franchisee has underreported the
Gross Sales of the Franchised Restaurant, or underpaid the royalty fee or other
amounts due to HFS under this Agreement, or any other agreement, HFS shall
initiate an immediate transfer from the Account in the appropriate amount in
accordance with the foregoing procedure, including interest as provided in this
Agreement. Any overpayment will be credited to the Account effective as of the
first reporting date after HFS and Franchisee determine that such credit is due.
In connection with payment of the royalty fee by electronic funds transfer,
Franchisee shall: (1) comply with procedures specified by HFS in the Manual or
otherwise in writing; (2) perform those acts and sign and deliver those
documents as may be necessary to accomplish payment by electronic funds transfer
as described in this Section 3.E.; (3) give HFS an authorization in the form
designated by HFS to initiate debit entries and/or credit correction entries to
the Account for payments of the royalty fee and other amounts payable under this
Agreement, including any interest charges; and (4) make sufficient funds
available in the Account for withdrawal by electronic funds transfer no later
than the Due Date for payment thereof.
Failure by Franchisee to have sufficient funds in the Account shall constitute a
default of this Agreement pursuant to Section 18.B.(2). Franchisee shall not be
entitled to set off, deduct or otherwise withhold any royalty fees, advertising
contributions, interest charges or any other monies payable by Franchisee under
this Agreement on grounds of any alleged non-performance by HFS of any of its
obligations or for any other reason.

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F.    Interest
If any payments by Franchisee due to HFS are not received by HFS by the date
due, Franchisee, in addition to paying the amount owed, shall pay HFS interest
on the amount owed from the date due until paid at the maximum rate permitted
for indebtedness of this nature in the state in which the Franchised Restaurant
is located, not to exceed 1.5% per fiscal period (as defined by HFS from time to
time) or a portion of a fiscal period. Payment of interest by Franchisee on past
due obligations is in addition to all other remedies and rights available to HFS
pursuant to this Agreement or under applicable law.
G.    Partial Payments
No payment by Franchisee or acceptance by HFS of any monies under this Agreement
for a lesser amount than due shall be treated as anything other than a partial
payment on account. Franchisee’s payment of a lesser amount than due with an
endorsement, statement or accompanying letter to the effect that payment of the
lesser amount constitutes full payment shall be given no effect and HFS may
accept the partial payment without prejudice to any rights or remedies it may
have against Franchisee. Acceptance of payments by HFS other than as set forth
in this Agreement shall not constitute a waiver of HFS’ right to demand payment
in accordance with the requirements of this Agreement or a waiver by HFS of any
other remedies or rights available to it pursuant to this Agreement or under
applicable law. Notwithstanding any designation by Franchisee, HFS shall have
sole discretion to apply any payments by Franchisee to any of its past due
indebtedness for royalty fees, advertising contributions, purchases from HFS or
its affiliates, interest or any other indebtedness. HFS has the right to accept
payment from any other entity as payment by Franchisee. Acceptance of that
payment by HFS will not result in that other entity being substituted for
Franchisee.
H.    Collection Costs and Expenses
Franchisee agrees to pay to HFS on demand any and all costs and expenses
incurred by HFS in enforcing the terms of this Agreement, including, without
limitation, collecting any monies owed by Franchisee to HFS. These costs and
expenses include, but are not limited to, costs and commissions due a collection
agency, reasonable attorneys’ fees (including attorneys’ fees for in-house
counsel employed by HFS or its affiliates and any attorneys’ fees incurred by
HFS in bankruptcy proceedings), costs incurred in creating or replicating
reports demonstrating Gross Sales of the Franchised Restaurant, court costs,
expert witness fees, discovery costs and reasonable attorneys’ fees and costs on
appeal, together with interest charges on all of the foregoing.
4.    RECORDKEEPING AND REPORTS
A.    Recordkeeping
Franchisee agrees to use computerized cash and data capture and retrieval
systems that meet HFS’ specifications and to record sales of the Franchised
Restaurant electronically or on tape for all sales at or from the Franchised
Location. Franchisee shall keep and maintain, in accordance with any procedures
set forth in the Manual, complete and accurate books and records pertaining to
the Franchised Restaurant sufficient to fully report to HFS. Franchisee’s books
and records shall be kept and maintained using generally accepted accounting
principles (“GAAP”), if Franchisee uses GAAP in any of its other operations, or
using other recognized accounting principles applied on a consistent basis which
accurately and completely reflect the financial condition of Franchisee.
Franchisee will preserve all of its books, records and state and federal tax
returns for at least 5 years after the later of preparation or filing (or such
longer period as may be required by any governmental entity) and make them
available and provide duplicate copies to HFS within 5 days after HFS’ written
request.
B.    Periodic Reports
Franchisee shall, at Franchisee’s expense, submit to HFS, in the form prescribed
by HFS, a quarterly profit and loss statement and balance sheet (both of which
may be unaudited) within 30 days after the end of each fiscal

    

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quarter (as defined by HFS from time to time) during each fiscal year (as
defined by HFS from time to time). HFS shall have the right, to be exercised in
its sole discretion, to require that Franchisee provide HFS profit and loss
statements and balance sheets at other times requested by HFS. Each statement
and balance sheet shall be signed by Franchisee or by Franchisee’s treasurer or
chief financial officer attesting that it is true, correct and complete and uses
accounting principles applied on a consistent basis which accurately and
completely reflect the financial condition of Franchisee.
C.    Annual Reports
At HFS’ request, Franchisee shall, at its expense, provide to HFS either a
reviewed or audited profit and loss statement and balance sheet for the
Franchised Restaurant within 60 days after the end of each fiscal year to be
signed by Franchisee or by Franchisee’s treasurer or chief financial officer
attesting that the financial statements present fairly the financial position of
Franchisee and the results of operations of the Franchised Restaurant during the
period covered. HFS shall have the right, in its reasonable discretion, to
require that Franchisee, at Franchisee’s expense, submit audited financial
statements prepared by a certified public accounting firm acceptable to HFS for
any fiscal year or any period or periods of a fiscal year.
D.    Other Reports
Franchisee shall submit to HFS, for review or auditing, such other forms,
reports, records, information and data as HFS may reasonably designate, in the
form and at the times and places reasonably required by HFS, upon request and as
specified from time to time in the Manual or otherwise in writing.
E.    Public Filings
If Franchisee is or becomes a publicly-held entity in accordance with other
provisions of this Agreement, Franchisee shall send to HFS copies of all reports
(including responses to comment letters) or schedules Franchisee may file with
the U.S. Securities and Exchange Commission (certified by Franchisee’s chief
executive officer to be true, correct, complete and accurate) and copies of any
press releases it may issue, within 3 days of the filing of those reports or
schedules or the issuance of those releases.
F.    Audit Rights
HFS or its designee shall have the right at all reasonable times, both during
and after the term of this Agreement, to inspect, copy and audit Franchisee’s
books, records, federal, state and local tax returns, and such other forms,
reports, information and data as HFS reasonably may designate, applicable to the
operation of the Franchised Restaurant. If an inspection or audit discloses an
understatement of Gross Sales, Franchisee shall pay HFS, within 10 days after
receipt of the inspection or audit report, the deficiency in the royalty fees
and advertising contributions plus interest (at the rate and on the terms
provided in Section 3.F.) from the date originally due until the date of
payment. If an inspection or audit is made necessary by Franchisee’s failure to
furnish reports or supporting records as required under this Agreement, or to
furnish such reports, records or information on a timely basis, or if an
understatement of Gross Sales for the period of any audit is determined by any
audit or inspection to be greater than 2%, Franchisee also shall reimburse HFS
for the reasonable cost of the audit or inspection including, without
limitation, the charges of attorneys and independent accountants, and the travel
expenses, room, board and compensation of HFS’ employees or designees involved
in the audit or inspection. The foregoing remedies shall be in addition to all
other remedies and rights available to HFS under this Agreement or applicable
law.
If Franchisee fails to provide HFS on a timely basis with the records, reports
and other information required by this Agreement or, upon request of HFS, with
copies of same, HFS or its designee shall have access at all reasonable times
(and as often as necessary) to Franchisee’s books and records for the purpose,
among other things, of preparing the required records, reports and other
information. Franchisee promptly shall reimburse HFS or its

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designee for all costs and expenses associated with HFS obtaining such records,
reports or other information.
5.    ADVERTISING AND PROMOTION
A.    Contributions/Expenditures by Franchisee
During the term of this Agreement, Franchisee shall have a weekly advertising
and promotion obligation (“APO”) in the amount set forth in Section 3.C. and
Appendix C. Following written notice to Franchisee, HFS may modify the amount
and allocation of the APO subject to the provisions of Section 5.E. Franchisee
shall pay that portion of the APO as HFS may direct to the Hardee’s National
Advertising Fund (“HNAF”) in accordance with Section 5.B. The remainder of the
APO shall be paid, as directed by HFS, at the same time and in the same manner
as the royalty fee, to a Regional Co-op in accordance with Section 5.C., and/or
spent by Franchisee for local store marketing (“LSM”) in accordance with
Section 5.D.
B.    Hardee’s National Advertising Fund
HFS has established, and will maintain and administer HNAF for the creation and
development of advertising, marketing and public relations, research and related
programs, activities and materials that HFS, in its sole discretion, deems
appropriate. Franchisee shall contribute to HNAF the amount set forth in
Appendix C, as may subsequently be modified pursuant to Section 5.E. Hardee’s
Restaurants operated by HFS and its affiliates shall contribute to HNAF on the
same basis as comparable franchisees. Unless modified in writing by HFS, HNAF
contributions are due on the first day of each month.
HFS or its designee shall direct all advertising, marketing, and public
relations programs and activities financed by HNAF, with sole discretion over
the creative concepts, materials and endorsements used in those programs and
activities, and the geographic, market and media placement and allocation of
advertising and marketing materials. Franchisee agrees that HNAF may be used,
among other things, to pay the costs of preparing and producing such associated
materials and programs as HFS or its designee may determine, including video,
audio and written advertising materials; employing advertising agencies;
sponsorship of sporting, charitable or similar events; administering regional
and multi-regional advertising programs, including, without limitation,
purchasing direct mail and other media advertising and employing advertising
agencies to assist with these efforts; and supporting public relations, market
research and other advertising, promotional and marketing activities. Franchisee
agrees to participate in all advertising, marketing, promotions, research and
public relations programs instituted by HNAF. From time to time, HFS or its
designee may furnish Franchisee with marketing, advertising and promotional
materials at the cost of producing them, plus any related shipping, handling and
storage charges.
HFS shall separately account for payments to HNAF but it shall not be required
to segregate HNAF funds from its other monies. HFS shall not use HNAF funds to
defray any of its general operating expenses. HNAF may hire employees, either
full-time or part-time, for its administration. HFS and its affiliates may be
reimbursed by HNAF for expenses related to its marketing programs including,
without limitation, conducting market research, preparing advertising and
marketing materials, and collecting and accounting for contributions. HFS may
spend in any fiscal year an amount greater or less than the aggregate
contribution of all Hardee’s Restaurants to HNAF during that year or cause HNAF
to invest any surplus for its future use. A statement of monies collected and
costs incurred by HNAF shall be prepared annually and shall be furnished to
Franchisee within a reasonable period of time following a written request. HFS
or its designee will have the right to cause HNAF to be incorporated or operated
through an entity separate from HFS at such time as HFS or its designee deems
appropriate, and such successor entity shall have all rights and duties of HFS
pursuant to this Section 5.
Franchisee understands and acknowledges that HNAF is intended to enhance
recognition of the Proprietary Marks and patronage of Hardee’s Restaurants. HFS
will endeavor to utilize HNAF to develop advertising and marketing materials and
programs, and to place advertising that will benefit the System and all Hardee’s
Restaurants contributing to HNAF. However, Franchisee agrees that HFS is not
liable to

    

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Franchisee and Franchisee forever covenants not to sue and holds HFS harmless of
any liability or obligation to ensure that expenditures by HNAF in or affecting
any geographic area (including the Franchised Location) are proportionate or
equivalent to the contributions to HNAF by Hardee’s Restaurants operating in
that geographic area, or that any Hardee’s Restaurant will benefit directly or
in proportion to its contribution to HNAF from the development of advertising
and marketing materials or the placement of advertising. Except as expressly
provided in this Section 5, neither HFS nor its designee assumes any direct or
indirect liability to Franchisee with respect to the maintenance, direction or
administration of HNAF.
HFS reserves the right, in its sole discretion, to: (1) suspend contributions to
and operations of HNAF for one or more periods that it determines to be
appropriate; (2) terminate HNAF upon 30 days’ written notice to Franchisee and
establish, if HFS so elects, a different advertising fund; and (3) upon the
written request of any franchised or company restaurants, defer or waive, in
whole or in part, any advertising fees required by this Section if, in HFS’ sole
judgment, there has been demonstrated unique, objective circumstances justifying
any such waiver or deferral. On termination, all monies in HNAF shall be spent
for advertising and/or promotional purposes. HFS has the right to reinstate HNAF
upon the same terms and conditions set forth in this Agreement upon 30 days’
prior written notice to Franchisee.
C.    Regional Co-op
HFS, in its sole discretion, may establish a regional advertising and sales
promotion cooperative (“Regional Co-op”) in the regional area in which the
Franchised Restaurant is located (“Designated Market Area” or “DMA”). Franchisee
shall be a member of and contribute to the Regional Co-op such amount as is
determined from time to time by HFS and/or the Regional Co-op, which, as of the
date of this Agreement, is the amount specified in Appendix C. The Regional
Co-op may be incorporated by HFS and will be operated in accordance with its
charter, which HFS shall have the right to modify from time to time in its sole
discretion.
HFS or its designee shall have the right to terminate (and subsequently restart)
the Regional Co-op. Upon termination, all monies in the Regional Co-op shall be
spent for advertising and/or promotional purposes. HFS or its designee shall
have the sole right, but not the obligation, to enforce the obligations of
franchisees who are members of the Regional Co-op to contribute to the Regional
Co-op and neither Franchisee nor any other franchisees who contribute to the
Regional Co-op shall be deemed a third party beneficiary with respect to the
Regional Co-op obligations of other franchisees or have any right to enforce the
obligation of any franchisee to contribute to the Regional Co-op.
D.    Local Store Marketing
Franchisee shall spend for approved LSM, on a monthly basis, the difference
between Franchisee’s APO and the amount Franchisee contributes to HNAF, a
Regional Co-op or some other advertising fund as HFS may direct Franchisee to
pay. As of the date of this Agreement, that amount is specified in Appendix C.
HFS or its designee periodically shall advise Franchisee of the advertising and
sales promotions authorized by HFS. Within 30 days after the end of each fiscal
quarter, Franchisee shall provide HFS or its designee copies of all
documentation demonstrating the amount and types of LSM expenditures made by
Franchisee in the prior fiscal quarter.
Franchisee’s LSM expenditures shall not include payments for items that HFS, in
its sole discretion, deems inappropriate to meet the minimum advertising
requirements. As of the date of this Agreement, inappropriate expenditures for
which Franchisee cannot spend LSM monies include, without limitation, free or
discounted food, employee incentive programs, charitable contributions, payments
in connection with permanent on-premises menu boards, lighting, yellow pages,
entertainment discount books, the purchase or maintenance of vehicles, and other
similar payments.
Local advertising and promotion materials may be purchased from any approved
source. If purchased from a source other than HFS or its affiliates, these
materials shall comply with federal and local laws and regulations

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and with the guidelines for advertising and promotions promulgated from time to
time by HFS or its designee and shall be submitted to HFS or its designee prior
to first use for its approval. In no event shall Franchisee’s advertising
contain any statement or material which, in the sole discretion of HFS, may be
considered: (1) in bad taste or offensive to the public or to any group of
persons; (2) defamatory of any person or an attack on any competitor; (3) to
infringe upon the use, without permission, of any other persons’ trade name,
trademark, service mark or identification; or (4) inconsistent with the public
image of HFS or the System.
If, in any fiscal year, Franchisee spends less than the required amount for the
Franchised Restaurant for authorized LSM advertising and sales promotions
expenditures, the difference between the required amount and the amount actually
spent in that fiscal year shall be paid to HNAF within 10 days after demand for
payment is sent to Franchisee. In determining whether Franchisee has spent the
required amount for the Franchised Restaurant for these purposes in any fiscal
year, only expenditures made in that fiscal year will be counted and there will
be no carryover from a previous fiscal year of any expenditures.
E.    Changes in the APO
HFS has the right, following written notice to Franchisee, to reallocate the APO
and to increase the APO; however, HFS will not increase the APO by more than ½%
of Gross Sales in any 12 month period. In addition, HFS may not increase the APO
above 6% of Gross Sales; however, this limitation on HFS does not prevent the
Franchised Restaurant’s Regional Co-op from requiring a contribution, that when
added to Franchisee’s HNAF contribution, results in a total APO in excess of 6%
of Gross Sales.
6.    MANUAL
HFS shall loan to Franchisee during the term of this Agreement one copy of, or
electronic access to, HFS’ confidential and proprietary Manual which contains
information and knowledge that is unique, necessary and material to the System.
(As used in this Agreement, the term “Manual” also includes all written
correspondence from HFS regarding the System, other publications, materials,
drawings, memoranda, videotapes, audio tapes, CDs, DVDs and electronic media
that HFS from time to time may provide to Franchisee.) The Manual may be
supplemented or amended from time to time by letter, electronic mail, bulletin,
videotapes, CDs, DVDs, audio tapes, software or other communications concerning
the System to reflect changes in the image, specifications and standards
relating to developing, equipping, furnishing and operating a Hardee’s
Restaurant. HFS reserves the right to furnish all or part of the Manual to
Franchisee in electronic form or online (including by Intranet) and establish
terms of use for access to any restricted portion of HFS’ web site. Franchisee
shall keep its copy of the Manual current and up-to-date with all additions and
deletions provided by or on behalf of HFS and shall purchase whatever equipment
and related services (including, without limitation, a video cassette recorder,
DVD player, computer system, Internet service, dedicated phone line, facsimile
machine, etc.) as may be necessary to receive these communications. If a dispute
relating to the contents of the Manual develops, the master copy maintained by
HFS at its principal offices shall control.
The Manual contains detailed standards, specifications, instructions,
requirements, methods and procedures for management and operation of the
Franchised Restaurant. The Manual also may relate to the selection, purchase,
storage, preparation, packaging, ingredients, recipes, service and sale of all
products and beverages sold at the Franchised Restaurant; management and
employee training; marketing, advertising and sales promotions; maintenance and
repair of the Franchised Restaurant building, grounds, equipment, graphics,
signs, interior and exterior decor items, fixtures and furnishings; employee
dress attire and appearance standards; menu concept and graphics; and
accounting, bookkeeping, records retention and other business systems,
procedures and operations. Franchisee agrees at all times to operate the
Franchised Restaurant in strict conformity with the Manual; to maintain the
Manual at the Franchised Restaurant; to not reproduce the Manual or any part of
it; and to treat the Manual as confidential and proprietary, and, to disclose
the contents of the Manual only to those employees of Franchisee who have a need
to know.

    

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7.    MODIFICATIONS OF THE SYSTEM
A.    HFS, in its sole discretion, shall be entitled from time to time to change
or modify the System, including modifications to the Manual, the menu and menu
formats, the required equipment, the signage, the building and premises of the
Franchised Restaurant (including the trade dress, decor and color schemes), the
presentation of the Proprietary Marks, the adoption of new administrative forms
and methods of reporting and of payment of any monies owed to HFS (including
electronic means of reporting and payment) and the adoption and use of new or
modified Proprietary Marks or copyrighted materials. Franchisee shall accept and
use or display in the Franchised Restaurant any such changes or modifications in
the System as if they were a part of the System at the time this Agreement was
executed, and Franchisee will make such expenditures as the changes or
modifications in the System may reasonably require.
B.    Within 30 days after receipt of written notice from HFS, Franchisee shall
begin selling any newly authorized menu items and cease selling any menu items
that are no longer authorized. All food, beverage and merchandise items
authorized for sale at the Franchised Restaurant shall be offered for sale under
the specific name designated by HFS. HFS, in its sole discretion, may restrict
sales of menu items to certain time periods during the day. Franchisee shall
establish menu prices in its sole and absolute discretion. If Franchisee has a
suggestion for a new menu item or for a change to an authorized menu item or
Franchisee desires to participate in a test market program, Franchisee shall
provide HFS written notice prior to implementation. Franchisee shall not add or
modify any menu item or participate in a test market program without first
having obtained HFS’ prior written approval. Franchisee shall purchase any
additional equipment and smallwares as HFS deems reasonably necessary in
connection with new menu items. If HFS requires Franchisee to begin offering a
new menu item which requires the purchase of additional equipment, a reasonable
period of time, as determined in the sole discretion of HFS, shall be provided
for the financing, purchase and installation of any such equipment before such
new menu items must be offered for sale at the Franchised Restaurant.
C.    Extensive structural changes, major remodeling and renovations, and
substantial modifications to existing equipment and improvements to modernize
and conform the Franchised Restaurant to the image of the System for new
franchised and company restaurants shall be required at HFS’ request (but not
more often than every 5 years). Capital expenses necessary for the repair and
maintenance of the Franchised Location are not subject to the time limitations
described in the preceding sentence. Within 60 days after receipt of HFS’
written notice regarding the required modernization, Franchisee shall prepare
and complete drawings and plans for the required modernization. These drawings
and plans must be submitted to, and their use approved by, HFS prior to the
commencement of work. Franchisee shall complete the required modernization
within the time reasonably specified by HFS in its written notice.
D.    HFS has the right, in its sole discretion, to waive, defer or permit
variations from the standards of the System or the applicable agreement to any
franchisee or prospective franchisee based on the peculiarities of a particular
site, existing building configuration or circumstance, density of population,
business potential, trade area population or any other condition or
circumstance. HFS shall have the right, in its sole discretion, to deny any such
request HFS believes would not be in the best interests of the System.
E.    If Franchisee develops any new concepts, processes or improvements
relating to the System, whether or not pursuant to an HFS authorized test,
Franchisee promptly shall notify HFS and provide HFS with all information
regarding the new concept, process or improvement, all of which shall become the
property of HFS and its affiliates and which may be incorporated into the System
without any payment to Franchisee. Franchisee, at its expense, promptly shall
take all actions deemed necessary or desirable by HFS to vest in HFS ownership
of such concepts, processes or improvements.
8.    TRAINING
A.    Franchise Management Training Program

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HFS shall provide Franchisee and certain designated employees the Franchise
Management Training Program (“FMTP”) in the operation of a Hardee’s Restaurant
at those times and those places designated by HFS. The FMTP will include
classroom instruction and training at HFS’ designated training facilities and at
a Hardee’s Restaurant designated by HFS. Franchisee (or, if Franchisee is owned
by more than one individual, Franchisee’s Operating Principal, defined in
Section 13.G.), Franchisee’s Restaurant Manager and any other person designated
by HFS shall attend and satisfactorily complete each element of the FMTP
specified by HFS. If the Operating Principal elects not to attend the full
training program, he shall attend a modified FMTP and Franchisee’s Multi-Unit
Manager (defined in Section 13.H.) shall attend and successfully complete the
FMTP.
Franchisee shall pay HFS for each person attending the FMTP a tuition fee as
established by HFS from time to time. Franchisee will be required to pay all
travel, living and other expenses incurred by Franchisee’s employees while
attending the training. HFS reserves the right to dismiss from the training
program any person whom HFS does not believe will perform acceptably in the
position for which he has been hired by Franchisee and Franchisee shall provide
a suitable replacement within one month of such dismissal.
B.    Additional Training
HFS shall have the right (which may be exercised at any time and in HFS’ sole
discretion) to require that Franchisee, the Operating Principal, the Multi-Unit
Manager, Franchisee’s Restaurant Manager and any other employees designated by
HFS take and successfully complete other training courses. HFS reserves the
right to require Franchisee to pay a tuition fee for these additional training
programs as established by HFS from time to time. Franchisee will be required to
pay all travel, living and other expenses incurred by Franchisee’s employees
while attending the training.
C.    Training by Franchisee
Franchisee shall conduct such initial and continuing training programs for its
employees as HFS may require from time to time.
9.    ADDITIONAL SERVICES BY HFS
In addition to the services described elsewhere in this Agreement, during the
term of this Agreement, HFS shall make the following services available to
Franchisee at no additional cost:
A.    Pre‑Opening Assistance
HFS shall provide consultation and advice to Franchisee as HFS deems appropriate
with regard to construction or renovation and operation of the Franchised
Restaurant, building layout, furnishings, fixtures and equipment plans and
specifications, employee selection and training, purchasing and inventory
control and those other matters as HFS deems appropriate.
B.    Opening of the Franchised Restaurant
Upon Franchisee’s reasonable request, or at HFS’ discretion, HFS shall provide
assistance in opening the Franchised Restaurant and in training Franchisee’s
employees as HFS deems appropriate in light of Franchisee’s needs and the
availability of HFS personnel.
C.    Post‑Opening Assistance
HFS periodically, as it deems appropriate, shall advise and consult with
Franchisee in connection with the operation of the Franchised Restaurant. HFS,
as it deems appropriate, shall provide to Franchisee its knowledge and expertise
regarding the System and pertinent new developments, techniques and improvements
in the areas of restaurant design, management, food and beverage preparation,
sales promotion, service concepts and other areas.

    

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HFS may provide these services through visits by HFS’ representatives to the
Franchised Restaurant or Franchisee’s offices, the distribution of printed or
filmed material or electronic information, meetings or seminars, telephone
communications, email communications or other communications.
D.    HFS’ Right to Inspect the Franchised Restaurant
To determine whether Franchisee and the Franchised Restaurant are in compliance
with this Agreement and with all specifications, quality standards and operating
procedures prescribed by HFS for the operation of Hardee’s Restaurants, HFS or
its designees shall have the right at any reasonable time and without prior
notice to Franchisee to: (1) inspect the Franchised Location; (2) observe,
photograph and videotape the operations of the Franchised Restaurant for such
consecutive or intermittent periods as HFS deems necessary; (3) remove samples
of any food and beverage product, material or other products for testing and
analysis (without paying for the samples); (4) interview personnel of the
Franchised Restaurant; (5) interview customers of the Franchised Restaurant; and
(6) inspect and copy any books, records and documents relating to the operation
of the Franchised Restaurant or, upon the request of HFS or its designee,
require Franchisee to send copies thereof to HFS or its designee. Franchisee
agrees to cooperate fully with HFS or its designee in connection with any such
inspections, observations, videotaping, product removal and interviews.
Franchisee shall take all necessary steps to immediately correct any
deficiencies detected during these inspections, including, without limitation,
ceasing further sale of unauthorized menu items and ceasing further use of any
equipment, advertising materials or supplies that do not conform with the
standards and requirements promulgated by HFS from time to time. Franchisee
shall present to its customers such evaluation forms as are periodically
prescribed by HFS and shall participate and/or request its customers to
participate in any surveys performed by or on behalf of HFS as HFS may direct.
E.    Delegation
HFS has the right, from time to time, to delegate the performance of any portion
or all of its obligations and duties under this Agreement to designees, whether
affiliates or agents of HFS or independent contractors with which HFS has
contracted to provide this service.
10.    PERFORMANCE STANDARDS AND UNIFORMITY OF OPERATION
Products sold and services performed under the Proprietary Marks have a
reputation for quality. This reputation has been developed and maintained by
HFS, and it is of the utmost importance to HFS, Franchisee and all other
franchisees of HFS that this reputation be maintained. In recognition of the
mutual benefits that come from maintaining the reputation for quality enjoyed by
the System, Franchisee covenants and agrees, with respect to the operation of
the Franchised Restaurant, that Franchisee and its employees shall comply with
all of the requirements of the System as set forth in the Manual or otherwise,
and Franchisee additionally shall comply with the following:
A.    Standards, Specifications and Procedures
Franchisee acknowledges that each and every detail of the appearance, layout,
decor, services and operation of the Franchised Restaurant is important to HFS
and other Hardee’s Restaurants. Franchisee agrees to cooperate with HFS by
maintaining these high standards in the operation of the Franchised Restaurant.
Franchisee further agrees to comply with all System specifications, recipes,
standards and operating procedures (whether contained in the Manual or any other
written communication to Franchisee) relating to the appearance, function,
cleanliness and operation of a Hardee’s Restaurant, including, but not limited
to: (1) type, quality, taste, weight, dimensions, ingredients, uniformity,
manner of preparation, and sale of all food products and beverages sold at the
Franchised Restaurant and all other products used in the packaging and sale of
those products and beverages; (2) sales and marketing procedures and customer
service; (3) advertising and promotional programs; (4) layout, decor and color
scheme of the Franchised Restaurant; (5) appearance and dress of employees;
(6) safety, maintenance, appearance, cleanliness, sanitation, standards of
service, and operation of the Franchised Restaurant; (7) submission of requests

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for approval of brands of products, supplies and suppliers; (8) use and
illumination of signs, posters, displays, standard formats and similar items;
(9) identification of Franchisee as the owner of the Franchised Restaurant;
(10) types of fixtures, furnishings, equipment, smallwares and packaging; and
(11) the make, type, location and decibel level of any game, entertainment or
vending machine. Mandatory specifications, standards and operating procedures,
including upgraded or additional equipment, that HFS prescribes from time to
time in the Manual, or otherwise communicates to Franchisee in writing, shall
constitute provisions of this Agreement as if fully set forth in this Agreement.
B.    Approved Products, Distributors and Suppliers
Franchisee acknowledges that the reputation and goodwill of Hardee’s Restaurants
are based upon, and can only be maintained by, the sale of distinctive, high
quality food products and beverages, and the presentation, packaging and service
of such products and beverages in an efficient and appealing manner. HFS may
develop certain proprietary food products that will be prepared by or for HFS
according to HFS’ proprietary special recipes and formulas. HFS also has
developed standards and specifications for other food products, ingredients,
seasonings, mixes, beverages, materials and supplies incorporated or used in the
preparation, cooking, serving, packaging and delivery of prepared food products
authorized for sale at Hardee’s Restaurants. Franchisee agrees that the
Franchised Restaurant will: (1) purchase those food products developed by HFS
pursuant to a special recipe or formula only from HFS, an affiliate of HFS or a
third party designated and licensed by HFS to prepare and sell such products;
and (2) purchase from manufacturers, distributors, vendors and suppliers
(collectively “suppliers”) approved by HFS all other goods, food products,
ingredients, spices, seasonings, mixes, beverages, materials and supplies used
in the preparation of products (collectively “goods”), as well as advertising
materials, furniture, fixtures, equipment, smallwares, menus, forms, paper and
plastic products, packaging or other materials (collectively “materials”) that
meet the standards and specifications promulgated by HFS from time to time. HFS
has the right to require that Franchisee use only certain brands and to prohibit
Franchisee from using other brands. HFS may from time to time modify the list of
approved brands and/or suppliers, and Franchisee shall not, after receipt of
such modification in writing, reorder any brand from any supplier that is no
longer approved.
HFS may approve one or more suppliers for any goods or materials and may approve
a supplier only as to certain goods or materials. HFS may concentrate purchases
with one or more suppliers to obtain lower prices and/or the best advertising
support and/or services for any group of Hardee’s Restaurants or any other group
of restaurants franchised or operated by HFS or its affiliates. Approval of a
supplier may be conditioned on requirements relating to the frequency of
delivery, reporting capabilities, standards of service, including prompt
attention to complaints, or other criteria, and concentration of purchases, as
set forth above, and may be temporary pending a further evaluation of such
supplier by HFS. HFS may establish commissaries and distribution facilities
owned and operated by HFS or an affiliate that HFS shall designate as an
approved supplier.
If Franchisee proposes to purchase any goods or materials (that Franchisee is
not required to purchase from HFS, an affiliate of HFS or a designated supplier)
from a supplier that HFS has not previously approved, Franchisee shall submit to
HFS a written request for such approval, or shall request the supplier to do so
itself. HFS has the right to require, as a condition of its approval, that its
representatives be permitted to inspect the supplier’s facilities, and that such
information, specifications and samples as HFS reasonably designates be
delivered to HFS and/or to an independent, certified laboratory designated by
HFS for testing prior to granting approval. A charge not to exceed the
reasonable cost of the inspection and the actual cost of the test shall be paid
by Franchisee. HFS reserves the right, at its option, to re-inspect the
facilities and products of any such approved supplier and to revoke its approval
upon the suppliers’ failure to continue to meet any of the foregoing criteria.
Franchisee shall at all times maintain an inventory of approved goods and
materials sufficient in quality and variety to realize the full potential of the
Franchised Restaurant. HFS may, from time to time, conduct market research and
testing to determine consumer trends and the salability of new food products and
services. Franchisee agrees to cooperate in these efforts by participating in
HFS’ customer surveys and market research programs if requested by HFS. All
customer surveys and market research programs will be at HFS’ sole cost and
expense,

    

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unless such survey or program has been approved by Franchisee and Franchisee has
approved its proportionate cost. Franchisee shall not be allowed to test
anything without first being requested to by HFS and signing a test letter
agreement in a form satisfactory to HFS.
HFS and its affiliates disclaim all express or implied warranties concerning any
approved goods, materials or services, including, without limitation, any
warranties as to merchantability, fitness for a particular purpose,
availability, quality, pricing or profitability. Franchisee acknowledges that
HFS and its affiliates may, under appropriate circumstances, receive fees,
commissions, field-of-use license royalties, or other consideration from
approved suppliers based on sales to franchisees, and that HFS may charge
non-approved suppliers reasonable testing or inspection fees.
C.    Menu Boards and Formats
HFS shall have the right to prescribe, and subsequently vary, one or more menu
boards and formats to be utilized in the Franchised Restaurant. The menu boards
and formats may include requirements concerning organization, graphics, product
descriptions, illustrations and other matters (except prices) related to the
menu. Prescribed menu boards and formats may vary depending on region, market
size or other factors deemed relevant by HFS. If any menu board and format
utilized by Franchisee ceases to be an authorized menu board and format,
Franchisee shall have a reasonable period of time (not to exceed 6 months) to
discontinue use of the old menu board and format and begin using an authorized
menu board and format.
D.    Hardware and Software
Franchisee agrees to procure and install such data processing equipment,
computer hardware and software, required dedicated telephone, DSL and power
lines, high speed Internet connections, modems, printers and other
computer-related accessory or peripheral equipment as HFS specifies in the
Manual or otherwise. All of the foregoing must be able to provide HFS that
information, in that format/medium, as HFS reasonably may specify from time to
time. Franchisee shall provide all assistance required by HFS to bring
Franchisee’s computer system on-line with the computer system designated by HFS
and maintained by HFS or its affiliates at the earliest possible time.
Franchisee agrees that HFS shall have the free and unfettered right to retrieve
any data and information from Franchisee’s computers as HFS, in its sole
discretion, deems appropriate, including electronically polling the daily sales,
menu mix and other data of the Franchised Restaurant. All of the hardware and
software specified to be installed or purchased, or activities Franchisee is to
accomplish, and the delivery cost of all hardware and software, shall be at
Franchisee’s expense.
Franchisee shall: (1) use the proprietary software program, system documentation
manuals and other proprietary materials now and hereafter required by HFS in
connection with the operation of the Franchised Restaurant; (2) if requested by
HFS, execute HFS’ software license or similar Agreement; (3) input and maintain
in Franchisee’s computer such data and information as HFS prescribes in the
Manual, software programs, documentation or otherwise; and (4) purchase new or
upgraded software programs, system documentation manuals and other proprietary
materials at then-current prices whenever adopted system-wide by HFS.
Franchisee acknowledges that computer systems are designed to accommodate a
finite amount of data and terminals, and that, as these limits are reached, or
as technology or software is developed in the future, HFS may, in its sole
discretion, mandate that Franchisee: (A) add memory, ports and other accessories
or peripheral equipment or additional, new or substitute software to the
original computer system purchased by Franchisee; and (B) replace or upgrade the
entire computer system with a larger system capable of assuming and discharging
the computer-related tasks and functions specified by HFS. Franchisee also
acknowledges that computer designs and functions change periodically and that
HFS may desire to make substantial modifications to its computer specifications
or to require installation of entirely different systems during the term of this
Agreement or upon renewal of this Agreement.

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To ensure full operational efficiency and communication capability between HFS’
computers and those of all Hardee’s Restaurants, Franchisee agrees, at its
expense, to keep its computer system in good maintenance and repair and to make
additions, changes, modifications, substitutions and replacements to its
computer hardware, software, telephone and power lines and other
computer-related facilities as directed by HFS, and on the dates and within the
times specified by HFS in its sole discretion. Upon termination or expiration of
this Agreement, all computer software, disks, tapes and other magnetic storage
media shall be returned to HFS in good operating condition, excepting normal
wear and tear.
E.    Upkeep of the Franchised Restaurant
Franchisee shall constantly maintain and continuously operate the Franchised
Restaurant and all furniture, fixtures, equipment, furnishings, floor coverings,
interior and exterior signage, the building interior and exterior, interior and
exterior lighting, landscaping and parking lot surfaces in first-class condition
and repair in accordance with the requirements of the System, including all
ongoing necessary remodeling, redecorating, refurbishing and repairs. In
addition, Franchisee shall promptly and diligently perform all necessary
maintenance, repairs and replacements to the Franchised Restaurant as HFS may
prescribe from time to time including periodic interior and exterior painting;
resurfacing of the parking lot; roof repairs; and replacement of obsolete or
worn out signage, floor coverings, furnishings, equipment and decor.
Franchisee shall not make any material alterations to the Franchised Restaurant
that affect operations or the image of the System without HFS’ prior written
approval. Franchisee acknowledges and agrees that the requirements of this
Section are both reasonable and necessary to ensure continued public acceptance
and patronage of Hardee’s Restaurants, to assist the Franchised Restaurant to
compete effectively in the marketplace and to avoid deterioration or
obsolescence of the operation of the Franchised Restaurant.
F.    Maximum Operation of the Franchised Restaurant
During the term of this Agreement, Franchisee shall use the Franchised Location
solely for the operation of the Franchised Restaurant and shall maintain
sufficient inventories, adequately staff each shift with qualified employees and
continuously operate the Franchised Restaurant at its maximum capacity and
efficiency for the minimum number of days and hours set forth in the Manual or
as HFS otherwise prescribes in writing (subject to the requirements of local
laws and licensing requirements).
Franchisee shall immediately resolve any customer complaints regarding the
quality of food or beverages, service and/or cleanliness of the Franchised
Restaurant or any similar complaints. When any customer complaints cannot be
immediately resolved, Franchisee shall use best efforts to resolve the customer
complaints as soon as practical and shall, whenever feasible, give the customer
the benefit of the doubt. If HFS, in its sole discretion, determines that its
intervention is necessary or desirable to protect the System or the goodwill
associated with the System, or if HFS, in its sole discretion, believes that
Franchisee has failed adequately to address or resolve any customer complaints,
HFS may, without Franchisee’s consent, resolve any complaints and charge
Franchisee an amount sufficient to cover HFS’ reasonable costs and expenses in
resolving the customer complaints, which amount Franchisee shall pay HFS
immediately on demand.
G.    Franchised Restaurant Management and Personnel
The Franchised Restaurant shall at all times be under the on-site supervision of
one of the following designated individuals, who must meet, to the satisfaction
of HFS, HFS’ applicable training qualifications for their designated position
title: a Restaurant Manager, a Multi-Unit Manager, or, for specific, limited
periods of time as authorized by HFS, a Shift Leader. Franchisee must, at all
times, employ at least 2 management personnel for the Franchised Restaurant who
have successfully completed the FMTP. If at any time Franchisee ceases to employ
2 management personnel as described above, Franchisee has 30 days (from the date
on which Franchisee has less than 2 specified management personnel) to hire and
enroll replacement personnel in the FMTP. At Franchisee’s

    

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option, one person may hold more than one of the above positions.
Franchisee (or, if Franchisee is owned by more than one individual, the
Operating Principal or Multi-Unit Manager) shall remain active in overseeing the
operations of the Franchised Restaurant, including without limitation, regular,
periodic visits to the Franchised Restaurant and sufficient communications with
HFS to ensure that the Franchised Restaurant’s operations comply with the
operating standards as promulgated by HFS from time to time in the Manual or
otherwise in written or oral communications.
Franchisee shall hire all employees of the Franchised Restaurant and be
exclusively responsible for the terms of their employment and compensation, and
for the proper training of such employees in the operation of the Franchised
Restaurant, in human resources and customer relations. Franchisee shall
establish at the Franchised Restaurant a training program for all employees that
meets the standards prescribed by HFS.
Franchisee shall employ only suitable persons of good character and reputation
who will at all times conduct themselves in a competent and courteous manner in
accordance with the image and reputation of HFS and the System and, while on
duty, comply with the dress attire, personal appearance and hygiene standards
set forth in the Manual. Franchisee shall use its best efforts to ensure that
Franchisee’s employees maintain a neat and clean appearance and render competent
and courteous service to all customers and fellow employees of the Franchised
Restaurant.
H.    Signs and Logos
Subject to local ordinances, Franchisee shall prominently display in and upon
the land and buildings of the Franchised Restaurant interior and exterior signs
and logos using the name “Hardee’s”, without any prefix or suffix, and those
other names, marks, advertising signs and logos, of such nature, form, color,
number, location and size, and containing that material as HFS may from time to
time direct. Franchisee shall not display in or upon the Franchised Location any
sign, logo or advertising media of any kind to which HFS objects.
I.    Coin Operated Equipment
Franchisee shall not permit at the Franchised Restaurant any juke box, vending
or game machine, gum machine, game, ride, gambling or lottery device, coin or
token operated machine, or any other music, film or video device not authorized
by HFS.
J.    Compliance with Laws and Good Business Practices
Franchisee shall secure and maintain in force in its name all required licenses,
permits and certificates relating to the operation of the Franchised Restaurant.
Franchisee shall operate the Franchised Restaurant in full compliance with all
applicable laws, ordinances and regulations including, without limitation, all
laws or regulations governing or relating to the handling of food products,
immigration and discrimination, occupational hazards and health insurance,
employment laws, including, without limitation, workers’ compensation insurance,
unemployment insurance, and the withholding and payment of federal and state
income taxes, social security taxes and sales taxes. Franchisee shall timely pay
all obligations relating to the Franchised Restaurant. All advertising and
promotion by Franchisee shall be completely factual and shall conform to the
highest standards of ethical advertising. Franchisee shall, in all dealings with
Franchisee’s customers, suppliers and the public, adhere to the highest
standards of honesty, integrity, fair dealing and ethical conduct. Franchisee
agrees to refrain from any business or advertising practice that may be
injurious to the goodwill associated with the Proprietary Marks or the business
of HFS, its affiliates, the System or other restaurants operated or franchised
by HFS or its affiliates.
Franchisee shall notify HFS in writing within 5 days after the commencement of:
(1) any action, suit or proceeding, or the issuance of any order, writ,
injunction, award or decree of any court, agency or other governmental
instrumentality, which may adversely affect the operation or financial condition
of Franchisee or the Franchised Restaurant; or (2) of any notice of violation of
any law, ordinance or regulation relating to health or sanitation at

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the Franchised Restaurant.
K.    Non-Cash Payment Systems

Franchisee shall accept debit cards, credit cards, stored value gift cards or
other non-cash payment systems specified by HFS to enable customers to purchase
authorized products and shall obtain all necessary hardware and/or software used
in connection with these non-cash payment systems. Franchisee shall reimburse
HFS for all costs associated with such non-cash payment systems as they pertain
to the Franchised Restaurant.
L.    800 Number, Secret Shoppers

In order to (among other things) maintain and enhance the goodwill associated
with the Proprietary Marks, the System and each Hardee’s Restaurant, Franchisee
agrees to participate in programs initiated to verify customer satisfaction
and/or Franchisee’s compliance with all operational and other aspects of the
System, including (but not limited to) an 800 number, secret shoppers or other
programs as HFS may require. HFS will share the results of these programs, as
they pertain to the Franchised Restaurant, with Franchisee. Franchisee will
reimburse HFS for all costs related to the Franchised Restaurant associated with
any and all of these programs.
11.    PROPRIETARY MARKS
The term “Proprietary Marks” as used in this Agreement refers to all words,
symbols, insignia, devices, designs, trade names, service marks or combinations
thereof designated by HFS as identifying the System and the products sold and
services provided in connection with the System. HFS shall, from time to time,
advise Franchisee as to any additions or deletions to the Proprietary Marks and
Franchisee’s right to use the Proprietary Marks shall be deemed modified by
those additions or deletions.
Franchisee’s right to use the Proprietary Marks is limited to its use of the
Proprietary Marks in the operation of the Franchised Restaurant at the
Franchised Location and as expressly provided in this Agreement and the Manual.
Franchisee shall not use the Proprietary Marks on any vehicles without HFS’
prior written approval. Franchisee shall not use the Proprietary Marks or any
variations of the Proprietary Marks or marks or names confusingly similar to the
Proprietary Marks in any manner not authorized by HFS or in any corporate,
limited liability company, partnership or other business entity name and shall
not use any other trade names, service marks or trademarks in conjunction with
the Franchised Restaurant. If local laws or ordinances require that Franchisee
file an affidavit of doing business under an assumed name or otherwise make a
filing indicating that the Proprietary Marks are being used as a fictitious or
assumed name, Franchisee shall include in such filing or application an
indication that the filing is made “as a franchisee of Hardee’s Food Systems,
Inc.” Franchisee shall use the symbol ® with all registered marks and the symbol
™ with all pending registrations or other marks.
Franchisee shall not use the Proprietary Marks in any Internet domain name or
e-mail address, in the operation of any Internet web site or on a social
networking site or other future technological avenue without HFS’ prior written
consent. HFS may grant or withhold its consent in its sole discretion and may
condition its consent on such requirements as HFS deems appropriate, including,
among other things, that Franchisee obtain HFS’ written approval of: (A) any and
all Internet domain names and home page addresses related to the Franchised
Restaurant; (B) the proposed form and content of any web site related to the
Franchised Restaurant; (C) Franchisee’s use of any hyperlinks or other links;
(D) Franchisee’s use of any materials (including text, video clips, photographs,
images and sound bites) in which any third party has an ownership interest; and
(E) any proposed modification of Franchisee’s web site. HFS may designate the
form and content of Franchisee’s web site and/or require that any such web site
be hosted by HFS or a third party who HFS designates, using one or more web
sites that HFS owns and/or controls. HFS may charge Franchisee a fee for
developing, reviewing and approving Franchisee’s web site and/or for hosting the
web site.
If HFS should elect to use a principal name other than “Hardee’s” to identify
the System, HFS may select

    

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another name and notify Franchisee to change all or some items bearing the
Proprietary Marks to the new name within a reasonable period of time as
determined by HFS without any liability to Franchisee, and Franchisee promptly
shall adopt that name. Franchisee agrees that nothing in this Agreement gives it
any right, title or interest in the Proprietary Marks (except the right to use
the Proprietary Marks in accordance with the terms of this Agreement), that the
Proprietary Marks are the sole property of HFS and its affiliates, that
Franchisee shall not directly or indirectly contest the validity or ownership of
the Proprietary Marks or HFS’ right to license the Proprietary Marks, and that
any and all uses by Franchisee of the Proprietary Marks and the goodwill arising
therefrom shall inure exclusively to the benefit of HFS and its affiliates.
Franchisee will not seek to register, reregister, assert claim to ownership of,
license or allow others to use, or otherwise appropriate to itself any of the
Proprietary Marks or any mark or name confusingly similar thereto, or the
goodwill symbolized by any of the foregoing except to the extent this action
inures to the benefit of, and has the prior written approval of, HFS. Any
unauthorized use of the Proprietary Marks by Franchisee or attempt by
Franchisee, directly or indirectly, to register the Proprietary Marks in any
jurisdiction shall constitute a breach of this Agreement and an infringement of
HFS’ rights in and to the Proprietary Marks.
Franchisee promptly shall inform HFS in writing as to any infringement of the
Proprietary Marks of which it has knowledge. Franchisee shall not make any
demand or serve any notice, orally or in writing, or institute any legal action
or negotiate, compromise or settle any controversy with respect to any such
infringement without first obtaining HFS’ written approval. HFS shall have the
right, but not the obligation, to bring such action or take such steps as it may
deem advisable to prevent any such infringement and to join Franchisee as a
party to any action in which HFS is or may be a party and as to which Franchisee
is or would be a necessary or proper party. Franchisee also shall promptly
notify HFS of any litigation (including administrative or arbitration
proceedings) of which Franchisee is aware instituted against HFS, its affiliates
or Franchisee relating to the Proprietary Marks. Franchisee shall execute any
and all instruments and documents, render such other assistance and do any acts
and things as may, in the opinion of HFS’ counsel, be necessary or advisable to
protect and maintain HFS’ interests in the Proprietary Marks, including, without
limitation, HFS’ interests in litigation or proceedings before the U.S. Patent
and Trademark Office or other tribunal relating to the Proprietary Marks.
12.    INSURANCE
A.    Franchisee shall be responsible for all loss or damage arising from or
related to Franchisee’s development and operation of the Franchised Restaurant,
and for all demands or claims with respect to any loss, liability, personal
injury, death, property damage, or expense whatsoever occurring upon the
premises of, or in connection with the development or operation of, the
Franchised Restaurant. Franchisee shall maintain in full force and effect
throughout the term of this Agreement that insurance which Franchisee determines
is necessary or appropriate for liabilities caused by or occurring in connection
with the development or operation of the Franchised Restaurant which shall
include, at a minimum, insurance policies of the kinds, and in the amounts,
required by Section 12.B. HFS, and any entity with an insurable interest
designated by HFS, shall be an additional insured in such policies to the extent
each has an insurable interest.
B.    All insurance policies shall be written by an insurance company or
companies satisfactory to HFS, in compliance with the standards, specifications,
coverages and limits set forth in the Manual or otherwise provided to Franchisee
in writing. These policies shall include, at a minimum, the following:
(1)    Comprehensive general liability insurance including coverage for bodily
injury, personal injury, products liability, blanket contractual liability,
broad form property damage, non-owned automobiles, completed operations and
property damage on an occurrence basis with policy limits of not less than
$1,000,000 per occurrence and $2,000,000 in the aggregate.
(2)    Property Insurance written on an “All Risks” policy for fire and related
peril (including floods and earthquakes where applicable) with limits of
insurance of not less than the full replacement value of the Franchised
Restaurant, and its furniture, fixtures, equipment, inventory and other tangible
property.

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(3)    Business Interruption and Extra Expense coverage to include rental
payment continuation for a minimum of 12 months, loss of profits and other extra
expenses experienced during the recovery from property loss.
(4)    Plate glass coverage for replacement of glass from breakage.
(5)    Employer’s Liability coverage in the amount of $500,000.
(6)    Workers’ compensation and such other insurance as may be required by
statute or rule of the state or locality in which the Franchised Restaurant is
located. This coverage shall also be in effect for all of Franchisee’s employees
who participate in any of the training programs described in Section 8.
(7)    In connection with any construction, renovation, refurbishment or
remodeling of the Franchised Restaurant, Franchisee shall maintain Builder’s All
Risks insurance and in connection with new construction or substantial
renovation, refurbishment or remodeling of the Franchised Restaurant, Franchisee
shall maintain performance and completion bonds in forms and amounts, and
written by carrier(s), reasonably satisfactory to HFS.
HFS may reasonably increase the minimum coverage required and require different
or additional kinds of insurance to reflect inflation, changes in standards of
liability, higher damage awards or other relevant changes in circumstances.
Franchisee shall receive written notice of such modifications and shall take
prompt action to secure the additional coverage or higher policy limits.
C.    The following general requirements shall apply to each insurance policy
that Franchisee is required to maintain under this Agreement:
(1)    Each insurance policy shall be specifically endorsed to provide that the
coverages shall be primary and that any insurance carried by any additional
insured shall be excess and non-contributory.
(2)    No insurance policy shall contain a provision that in any way limits or
reduces coverage for Franchisee in the event of a claim by HFS or its
affiliates.
(3)    Each insurance policy shall extend to, and provide indemnity for, all
obligations and liabilities of Franchisee to third parties and all other items
for which Franchisee is required to indemnify HFS under this Agreement.
(4)    Each insurance policy shall be written by an insurance company that has
received and maintains an “A+” or better rating by the latest edition of Best’s
Insurance Rating Service.
(5)    No insurance policy shall provide for a deductible amount that exceeds
$5,000, unless otherwise approved in writing by HFS, and Franchisee’s
co-insurance under any insurance policy shall be 80% or greater.
D.    All required insurance policies shall be in full force and effect and
Franchisee shall submit to HFS evidence of satisfactory insurance and proof of
payment therefore no later than the date the first of the following occurs: (1)
30 days’ prior to the scheduled opening date of the Franchised Restaurant; (2)
the date Franchisee takes possession of the Franchised Location, or (3) the date
construction commences at the Franchised Location, if Franchisee is
contractually obligated for the construction. On each policy renewal date
thereafter, Franchisee shall again submit evidence of satisfactory insurance and
proof of payment therefor to HFS. The evidence of insurance shall include a
statement by the insurer that the policy or policies will not be canceled or
materially altered without at least 30 days’ prior written notice to HFS. Upon
request, Franchisee also shall provide to HFS copies of all or any policies, and
policy amendments and riders.

    

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E.    Franchisee acknowledges that no requirement for insurance contained in
this Agreement constitutes advice or a representation by HFS that only such
policies, in such amounts, are necessary to protect Franchisee from losses in
connection with its business under this Agreement. Maintenance of this
insurance, and the performance by Franchisee of its obligations under this
Section, shall not relieve Franchisee of liability under the indemnification
provisions of this Agreement.
F.    Should Franchisee, for any reason, fail to procure or maintain at least
the insurance required by this Section 12, as revised from time to time pursuant
to the Manual or otherwise in writing, HFS shall have the immediate right and
authority, but not the obligation, to procure such insurance and charge its cost
to Franchisee. All out-of-pocket costs incurred by HFS in obtaining such
insurance on behalf of Franchisee shall be reimbursed to HFS by Franchisee
immediately upon Franchisee’s receipt of an invoice therefore.
13.    ORGANIZATION OF FRANCHISEE
A.    Representations
If Franchisee is a corporation, a limited liability company, a partnership or
any other type of organization (collectively, “business entity”), Franchisee
makes the following representations and warranties: (1) it is duly organized and
validly existing under the laws of the state of its formation; (2) it is
qualified to do business in the state or states in which the Franchised
Restaurant is located; (3) execution of this Agreement and the development and
operation of the Franchised Restaurant is permitted by its governing documents;
and (4) unless waived in writing by HFS, Franchisee’s Articles of Incorporation,
Articles of Organization, written partnership agreement or other organizational
or governing documents shall at all times provide that the activities of
Franchisee are limited exclusively to the development and operation of Hardee’s
Restaurants and other restaurants operated by Franchisee that are franchised by
HFS or its affiliates.
If Franchisee is an individual, or a partnership comprised solely of
individuals, Franchisee makes the following additional representations and
warranties: (A) each individual has executed this Agreement; (B) each individual
shall be jointly and severally bound by, and personally liable for the timely
and complete performance and a breach of, each and every provision of this
Agreement; and (C) notwithstanding any transfer for convenience of ownership,
pursuant to Section 15.D., each individual shall continue to be jointly and
severally bound by, and personally liable for the timely and complete
performance and a breach of, each and every provision of this Agreement.
B.    Governing Documents
If Franchisee is a corporation, copies of Franchisee’s Articles of
Incorporation, bylaws, other governing documents and any amendments, including
the resolution of the Board of Directors authorizing entry into and performance
of this Agreement, and all shareholder agreements, including buy/sell
agreements, have been furnished to HFS. If Franchisee is a limited liability
company, copies of Franchisee’s Articles of Organization, Management Agreement,
other governing documents and any amendments, including the resolution of the
Managers authorizing entry into and performance of this Agreement, and all
agreements, including buy/sell agreements, among the members have been furnished
to HFS. If Franchisee is a partnership, copies of Franchisee’s written
partnership agreement, other governing documents and any amendments, as well as
all agreements, including buy/sell agreements, among the partners have been
furnished to HFS, in addition to evidence of consent or approval of the entry
into and performance of this Agreement by the requisite number or percentage of
partners, if that approval or consent is required by Franchisee’s written
partnership agreement. When any of these governing documents are modified or
changed, Franchisee promptly shall provide copies to HFS. If Franchisee is any
other type of business entity, copies of its organizational and governing
documents have been furnished to HFS
C.    Ownership Interests

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If Franchisee is a business entity, all interests in Franchisee are owned as set
forth in attached Appendix D. In addition, if Franchisee is a corporation,
Franchisee shall maintain a current list of all owners of record and all
beneficial owners of any class of voting securities of the corporation (and the
number of shares owned by each). If Franchisee is a limited liability company,
Franchisee shall maintain a current list of all members (and the percentage
membership interest of each member). If Franchisee is a partnership, Franchisee
shall maintain a current list of all owners of an interest in the partnership
(and the percentage ownership of each owner). Franchisee shall comply with
Section 15 prior to any change in ownership interests and shall execute addenda
to Appendix D as changes occur in order to ensure the information contained in
Appendix D is true, accurate and complete at all times.
The requirements of this Section 13.C. shall apply only to Franchisee’s
Continuity Group (defined in Section 13.E.) if, as of the date of the first
franchise-related agreement between Franchisee and HFS or one of its affiliates,
Franchisee was a publicly-held entity (i.e., an entity that has a class of
securities traded on a recognized securities exchange or quoted on the
inter-dealer quotation sheets known as the “pink sheets”). If Franchisee becomes
a publicly-held entity after that date, it shall thereafter be required to
execute addenda to Appendix D only with respect to changes in ownership
interests of members of the Continuity Group.
D.    Restrictive Legend
If Franchisee is a corporation, Franchisee shall maintain stop‑transfer
instructions against the transfer on its records of any voting securities, and
each stock certificate of the corporation shall have conspicuously endorsed upon
its face the following statement: “Any assignment or transfer of this stock is
subject to the restrictions imposed on assignment by the Hardee’s Restaurant
Franchise Agreement(s) to which the corporation is a party.” If Franchisee is a
publicly-held corporation these requirements shall apply only to the stock owned
by Franchisee’s Continuity Group. If Franchisee is a limited liability company,
each membership or management certificate or other evidence of interest in
Franchisee shall have conspicuously endorsed upon its face the following
statement: “Any assignment or transfer of an interest in this limited liability
company is subject to the restrictions imposed on assignment by the Hardee’s
Restaurant Franchise Agreement(s) to which the limited liability company is a
party.” If Franchisee is a partnership, its written partnership agreement shall
provide that ownership of an interest in the partnership is held subject to, and
that further assignment or transfer is subject to, all restrictions imposed on
assignment by this Agreement. If Franchisee is any other type of business
entity, its organizational documents shall provide that an ownership interest in
the business entity is held subject to, and further assignment or transfer is
subject to, all restrictions imposed on assignment by this Agreement.
E.    Continuity Group
If Franchisee is a business entity, Appendix D lists those persons who comprise
Franchisee’s “Continuity Group.” HFS and Franchisee acknowledge and agree that
it is their intent that the members of the Continuity Group include the
Operating Principal (as defined in Section 13.G.) and (1) all holders of a legal
or beneficial interest of 10% or more (“10% Owners”) in Franchisee; (2) if
Franchisee is a limited partnership, all 10% Owners of Franchisee’s general
partner; and (3) all 10% Owners of a corporation or limited liability company
that owns a controlling interest in Franchisee. In the event of any change in
the Continuity Group or in the ownership interests of any member of the
Continuity Group, Franchisee shall execute addenda to Appendix D to reflect the
change. If Franchisee is a corporation, the Continuity Group shall at all times
own at least 51% of the voting securities of Franchisee; if Franchisee is a
limited liability company, the Continuity Group shall at all times own at least
51% of the membership interests in Franchisee; and if Franchisee is any other
type of business entity, the Continuity Group shall at all times have at least a
51% interest in the operating profits and losses and at least a 51% ownership
interest in Franchisee.
F.    Guarantees
All members of the Continuity Group and their spouses, if applicable, shall
jointly and severally guarantee

    

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Franchisee’s payment and performance under this Agreement and shall bind
themselves to the terms of this Agreement pursuant to the attached Guarantee and
Assumption of Franchisee’s Obligations (“Guarantee”). Unless Franchisee is a
publicly-held entity, all of Franchisee’s officers and directors and their
spouses, if applicable, shall jointly and severally guarantee Franchisee’s
payment and performance under this Agreement and also shall bind themselves to
the terms of this Agreement pursuant to the attached Guarantee. Notwithstanding
the foregoing, HFS reserves the right, in its sole discretion, to waive the
requirement that some or all of the previously described individuals execute the
attached Guarantee and/or to limit the scope of the Guarantee. HFS reserves the
right to require any guarantor to provide personal financial statements to HFS
from time to time.
With respect to 10% Owners, Franchisee acknowledges that, unless otherwise
agreed to in writing by HFS, it is HFS’ intent to have individuals (and not
corporations, limited liability companies or other entities) execute the
Guarantee. Accordingly, if any 10% Owner is not an individual, HFS shall have
the right to have the Guarantee executed by individuals who have only an
indirect ownership interest in Franchisee and their spouses, if applicable. (By
way of example, if a 10% Owner of Franchisee is a corporation, HFS has the right
to require that the Guarantee be executed by individuals who have an ownership
interest in that corporation and their spouses, if applicable.)
If Franchisee, any guarantor or any parent, subsidiary or affiliate of
Franchisee holds any interest in other restaurants that are franchised by HFS or
its affiliates, the party who owns that interest shall execute, concurrently
with this Agreement, a form of cross-guarantee to HFS and its affiliates for the
payment of all obligations for such restaurants, unless waived in writing by HFS
in its sole discretion. For purposes of this Agreement, an affiliate of
Franchisee is any company controlled, directly or indirectly, by Franchisee or
Franchisee’s parent or subsidiary.
G.    Operating Principal
If Franchisee is owned by more than one individual, Franchisee shall designate
and retain an individual to serve as the Operating Principal. The Operating
Principal as of the date of this Agreement is identified in Appendix D. The
Operating Principal shall meet all of the following qualifications:
(1)    The Operating Principal shall have at least a 10% equity ownership
interest in Franchisee or, if Franchisee is a limited partnership, in
Franchisee’s general partner, unless this requirement is modified by HFS in its
sole discretion. This Section 13.G.(1) shall not apply if Franchisee was a
publicly-held entity or a wholly-owned subsidiary of a publicly-held entity as
of the date of the first franchise-related agreement between Franchisee and HFS.
(2)    The Operating Principal, at all times, shall be a member of the
Continuity Group and, at a minimum, have full control over the day-to-day
activities, including control over the standards of operations and financial
performance, of the Franchised Restaurant and those other restaurants (that are
franchised by HFS or its affiliates) operated by Franchisee in the same
geographic area as the Franchised Restaurant.
(3)    Unless Franchisee has named, and HFS has approved, a Multi-Unit Manager,
the Operating Principal shall devote full-time and best efforts to supervising
the operation of the Franchised Restaurant and other restaurants operated by
Franchisee in the same geographic area that are franchised by HFS or its
affiliates and shall not engage in any other business or activity, directly or
indirectly, that requires substantial management responsibility.
(4)    Unless waived in writing by HFS, the Operating Principal shall maintain
his primary residence within a reasonable driving distance of the Franchised
Restaurant.
(5)    The Operating Principal shall successfully complete the FMTP (either the
full program or a modified version of the FMTP to meet the specific needs of the
candidate, as deemed appropriate by HFS in its sole discretion) and any
additional training required by HFS.
(6)    HFS shall have approved the Operating Principal, and not have later
withdrawn that approval.

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If the Operating Principal no longer meets these qualifications, Franchisee must
provide HFS written notice designating a qualified person to act as Operating
Principal within 30 days after the date the prior Operating Principal ceases to
be qualified. HFS shall advise Franchisee whether it has approved the new
Operating Principal within a reasonable time after receipt of Franchisee’s
notice. If HFS does not approve the proposed Operating Principal, Franchisee
will have 15 days from its receipt of notice of the decision to advise HFS in
writing of another person to act as Operating Principal who satisfies the
preceding qualifications.
H.    Multi-Unit Manager
If the Operating Principal devotes less than full time to supervising the
operation of Franchisee’s Franchised Restaurants and the other restaurants
operated by Franchisee that are franchised by HFS or its affiliates in a
particular geographic area, Franchisee also shall designate and retain one
individual to serve as Multi-Unit Manager of Franchisee’s Franchised Restaurants
in the same geographic area under the supervision of the Operating Principal.
The Multi-Unit Manager shall meet all of the following qualifications:
(1)    The Multi-Unit Manager shall devote full time and best efforts to
supervising the operation of the Franchised Restaurant, Franchisee’s other
Franchised Restaurants and other restaurants operated by Franchisee that are
franchised by HFS or its affiliates in the same geographic area and shall not
engage in any other business or activity, directly or indirectly, that requires
substantial management responsibility.
(2)    The Multi-Unit Manager shall successfully complete the FMTP and any
additional training required by HFS.
(3)    Unless waived in writing by HFS, the Multi-Unit Manager shall maintain
his primary residence within a reasonable driving distance of the Franchised
Restaurants he is supervising.
(4)    HFS shall have approved the Multi-Unit Manager, and not have later
withdrawn that approval.
If the Multi-Unit Manager no longer qualifies as such, Franchisee shall
designate another qualified person to act as Multi-Unit Manager within 30 days
after the date the prior Multi-Unit Manager ceases to be qualified. Franchisee’s
designee to become the Multi-Unit Manager must successfully complete the FMTP
and any additional training required by HFS.
14.    TRANSFERS BY HFS
HFS shall have the absolute, unrestricted right, exercisable at any time, to
transfer and assign all or any part of its rights and obligations under this
Agreement to any person or legal entity without the consent of Franchisee.
15.    TRANSFERS BY FRANCHISEE
A.    Franchisee understands and acknowledges that the rights and duties set
forth in this Agreement are personal to Franchisee and that HFS has entered into
this Agreement in reliance on Franchisee’s business skill, financial capacity,
personal character, experience and demonstrated or purported ability in
developing and operating high quality foodservice operations. Accordingly,
neither Franchisee nor any immediate or remote successor to any part of
Franchisee’s interest in this Agreement, nor any individual, partnership,
corporation or other legal entity which directly or indirectly has an interest
in Franchisee shall sell, assign, transfer, convey, give away, pledge, mortgage,
or otherwise encumber any interest in Franchisee, this Agreement, the Franchise,
the Franchised Restaurant, the assets of the Franchised Restaurant, the
Franchised Location or any other assets pertaining to Franchisee’s operations
under this Agreement (collectively “Transfer”) without the prior written consent
of HFS, unless otherwise permitted by this Section.

Except as otherwise provided in this Agreement, any purported Transfer, by
operation of law or otherwise,

    

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not having the prior written consent of HFS shall be null and void and shall
constitute a material breach of this Agreement, for which HFS may terminate this
Agreement without providing Franchisee an opportunity to cure the breach.
B.    Franchisee shall advise HFS in writing of any proposed Transfer, submit
(or cause the proposed transferee to submit) a franchise application for the
proposed transferee, submit a copy of all contracts and all other agreements or
proposals and submit all other information requested by HFS relating to the
proposed Transfer. If HFS does not exercise its right of first refusal, the
decision as to whether or not to approve a proposed Transfer shall be made by
HFS in its sole discretion and shall include numerous factors deemed relevant by
HFS. These factors may include, but will not be limited to, the following:
(1)    The proposed transferee (and if the proposed transferee is not a natural
person, all persons that have any direct or indirect interest in the transferee
as HFS may require) must demonstrate to HFS’ satisfaction extensive experience
in high quality restaurant operations of a character and complexity similar to
Hardee’s Restaurants; must meet the managerial, operational, experience,
quality, character and business standards for a franchisee promulgated by HFS
from time to time; must possess a good character, business reputation and credit
rating; must have an organization whose management culture is compatible with
HFS’ management culture; and must have adequate financial resources and working
capital to meet Franchisee’s obligations under this Agreement.
(2)    If the Transfer is a sale, the sales price shall not be so high, in HFS’
reasonable judgment, as to jeopardize the ability of the transferee to develop,
maintain, operate and promote the Franchised Restaurant and meet financial
obligations to HFS, third party suppliers and creditors. HFS’ decision with
respect to a proposed Transfer shall not create any liability on the part of
HFS: (a) to the transferee, if HFS approves the Transfer and the transferee
experiences financial difficulties; or (b) to Franchisee or the proposed
transferee, if HFS disapproves the Transfer. HFS, without any liability to
Franchisee or the proposed transferee, has the right, in its sole discretion, to
communicate and counsel with Franchisee and the proposed transferee regarding
any aspect of the proposed Transfer.

(3)    All of Franchisee’s accrued monetary obligations to HFS and its
affiliates (whether arising under this Agreement or otherwise) and all other
outstanding obligations related to the Franchised Restaurant (including, but not
limited to, bills from suppliers, taxes, judgments and any required governmental
reports, returns, affidavits or bonds) have been satisfied or, in the reasonable
judgment of HFS, adequately provided for. HFS reserves the right to require that
a reasonable sum of money be placed in escrow to ensure that all of these
obligations are satisfied.

(4)    Franchisee is not then in material default of any provision of this
Agreement or any other agreement between Franchisee and HFS or its affiliates,
is in good standing as a franchisee with HFS and its affiliates, is not in
default beyond the applicable cure period under any real estate lease, equipment
lease or financing instrument relating to the Franchised Restaurant and is not
in default beyond the applicable cure period with any vendor or supplier to the
Franchised Restaurant.

(5)    Franchisee, all individuals who executed this Agreement and all
guarantors of Franchisee’s obligations must execute a general release and a
covenant not to sue, in a form satisfactory to HFS, of any and all claims
against HFS and its affiliates and their respective past and present officers,
directors, shareholders, agents and employees, in their corporate and individual
capacities, including, without limitation, claims arising under federal, state
and local laws, rules and ordinances, and claims arising out of, or relating to,
this Agreement, any other agreements between Franchisee and HFS or its
affiliates and Franchisee’s operation of the Franchised Restaurant and all other
restaurants operated by Franchisee that are franchised by HFS or its affiliates.

(6)    Unless waived by HFS in its sole discretion, the transferee and those
employees of the transferee designated by HFS shall complete the training
provided in Sections 8.A.-B.

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C.    If HFS approves a proposed Transfer, prior to the Transfer becoming
effective:

(1)    The transferor shall pay HFS a nonrefundable Transfer fee in an amount
not to exceed $2,500 in connection with HFS’ review of the Transfer application.

(2)    Franchisee and the proposed transferee shall execute, at HFS’ election,
an assignment agreement and any amendments to this Agreement deemed necessary or
desirable by HFS to reflect the Transfer and/or HFS’ then-current standard form
of franchise agreement for an initial term ending on the expiration date of the
Initial Term of this Agreement. In either event, a guarantee of the type
required by Section 13.F. shall be executed by those individuals identified in
Section 13.F. In addition, Franchisee, the proposed transferor and the proposed
transferee shall sign all other documents and take such actions as HFS may
require to protect HFS’ rights under this Agreement.

(3)    The transferor shall remain liable for all obligations to HFS incurred
before the date of the Transfer and shall execute any and all instruments
reasonably requested by HFS to evidence that liability.

D.    If Franchisee is an individual or a partnership and desires to Transfer
this Agreement to a corporation (or limited liability company) formed for the
convenience of ownership, the requirements of Section 15.B. shall apply to such
a Transfer; however, Franchisee will not be required to pay a Transfer fee. HFS’
approval also will be conditioned on the following: (1) the corporation (or
limited liability company) must be newly organized; (2) prior to the Transfer,
HFS must receive a copy of the documents specified in Section 13.B. and the
transferee shall comply with the remaining provisions of Section 13; and
(3) Franchisee must own all voting securities of the corporation (or membership
interests of the limited liability company) or, if Franchisee is owned by more
than one individual, each person shall have the same proportionate ownership
interest in the corporation (or the limited liability company) as prior to the
Transfer.

E.    Notwithstanding the provisions of Sections 15.A.and B., the issuance of
options or the exercise of options pursuant to a qualified stock option plan or
a qualified employee stock ownership plan shall not be considered a Transfer and
shall not require the prior written approval of HFS; provided no more than a
total of 49% of Franchisee’s outstanding voting securities are subject to the
qualified stock option plan or qualified employee stock ownership plan.

F.    If Franchisee was a publicly‑held entity as of the date of the first
franchise-related agreement between Franchisee and HFS or its affiliates,
Section 15.B. shall be applicable to transfers of ownership interests in
Franchisee only if the proposed Transfer would result in: (1) 50% or more of
Franchisee’s voting securities being held by different shareholders than as of
the date of the first franchise-related agreement between Franchisee and HFS or
its affiliates; or (2) any change in ownership of Franchisee’s voting securities
whereby any existing shareholder of Franchisee acquires an additional 10% or
more of Franchisee’s voting securities; or (3) any change in the membership of
the Continuity Group (unless such change is a permitted Transfer pursuant to
Section 15.G.).

G.    Notwithstanding the provisions of Sections 15.A. and B., HFS agrees that
certain Transfers shall be permitted without HFS’ prior written approval,
provided all of the following conditions are satisfied:

(1)    The Transfer is a transfer of:

(a)    An ownership interest in Franchisee of 20% or less, provided that after
the Transfer the Continuity Group owns at least 66% of all ownership interests
in Franchisee; or

(b)    Ownership interests in Franchisee following the death or permanent
incapacity of a person with an ownership interest in Franchisee, provided that
the Transfer is to the parent, sibling, spouse or children of that person or to
a member of the Continuity Group.

    

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(2)    Franchisee provides HFS written notice of its intent to undertake the
Transfer at least 30 days prior to the effective date of the Transfer, together
with documents demonstrating that the Transfer meets this Section.

(3)    At the time of Franchisee’s notice to HFS, Franchisee is not in default
of this Agreement or any other agreements between Franchisee and HFS or its
affiliates.

(4)    In connection with the Transfer, Franchisee and all persons who will have
an ownership interest in Franchisee after the Transfer fully comply with the
requirements of Section 13.

H.    Franchisee shall not grant any security interest in its business, the
Franchised Restaurant, the Franchised Location or the assets used in the
operation of the Franchised Restaurant without HFS’ prior written approval,
which will not be unreasonably withheld. HFS’ approval may be conditioned, in
its sole discretion, on the written agreement by the secured party that, in the
event of a default by Franchisee under any agreement related to the security
interest, HFS shall have the right and option (but not the obligation) to
purchase the rights of the secured party upon payment of all sums then due to
the secured party. If Franchisee (or any person with a direct or indirect
interest in Franchisee) finances any part of the price paid in connection with
the Transfer, the person or entity providing the financing must agree that all
obligations of the proposed transferee and any security interests retained in
the assets being transferred, will be subordinate to the proposed transferee’s
obligations to: (1) pay all amounts due to HFS and its affiliates; and (2)
otherwise comply with this Agreement and all other agreements with HFS or its
affiliates.

I.    Securities or partnership interests in Franchisee may be sold, by private
or public offering, only with HFS’ prior written consent (whether or not HFS’
consent is required under any other provision of this Section). In addition to
the requirements of Section 15.B., prior to the time that any public offering or
private placement of securities or partnership interests in Franchisee is made
available to potential investors, Franchisee, at its expense, shall deliver to
HFS a copy of the offering documents. Franchisee, at its expense, also shall
deliver to HFS an opinion of Franchisee’s legal counsel and an opinion of one
other legal counsel selected by HFS (both of which shall be addressed to HFS and
in a form acceptable to HFS) that the offering documents properly use the
Proprietary Marks and accurately describe Franchisee’s relationship with HFS
and/or its affiliates. The indemnification provisions of Section 22 shall also
include any losses or expenses incurred by HFS and/or its affiliates in
connection with any statements made by or on behalf of Franchisee in any public
offering or private placement of Franchisee’s securities.

J.    If any party holding any interest in Franchisee or in this Agreement
receives a bona fide offer (as determined by HFS in its reasonable discretion)
from a third party or otherwise desires to undertake any Transfer that would
require HFS’ approval (other than a Transfer for convenience of ownership
pursuant to Section 15.D. or a Transfer of ownership interests to a parent,
sibling, spouse or child), it shall notify HFS in writing of the terms of the
proposed Transfer, and shall provide such information and documentation relating
to the proposed Transfer as HFS may reasonably require. HFS or its designee may
elect to purchase the interest that the seller proposes to Transfer any time
within 30 days after receipt of written notification, and all documents and
other information required by Section 15.B., by sending written notice to the
seller that HFS or its designee intends to purchase the seller’s interest on the
same financial terms and conditions offered by the third party (except that HFS
or its designee shall not be obligated to pay any finder’s or broker’s fees). In
purchasing the interest, HFS or its designee shall be entitled to set off any
monies owed to HFS or its affiliates by Franchisee and HFS or its designee shall
be entitled to all customary representations and warranties that the assets are
free and clear (or, if not, accurate and complete disclosure) as to: (1)
ownership, condition and title; (2) liens and encumbrances; (3) environmental
and hazardous substances; and (4) validity of contracts inuring to the purchaser
or affecting the assets, whether contingent or otherwise.

If the offer to Franchisee involves assets in addition to this Agreement, the
Franchised Location, the Franchised Restaurant and other restaurants operated by
Franchisee that are franchised by HFS or its affiliates,

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Franchisee’s notice to HFS shall state the cash value of that portion of the
offer received by Franchisee relating to this Agreement, the Franchised
Location, the Franchised Restaurant and those other restaurants. If the proposed
Transfer provides for payment of consideration other than cash or it involves
intangible benefits, HFS or its designee may elect to purchase the interest
proposed to be sold for the reasonable equivalent in cash. If the parties are
unable to agree within 30 days on the reasonable equivalent in cash of the
non-cash part of the offer received by Franchisee or the cash value of that
portion of the offer received by Franchisee relating to this Agreement, the
Franchised Location, the Franchised Restaurant and those other restaurants, the
amount shall be determined by two professionally certified appraisers,
Franchisee selecting one and HFS or its designee selecting one. If the higher
appraisal is more than 10% greater than the other appraisal, the two appraisers
shall select a third professionally certified appraiser who also shall determine
the amount. The average value set by the appraisers (whether two or three
appraisers as the case may be) shall be conclusive and HFS or its designee may
exercise its right of first refusal within 30 days after being advised in
writing of the decision of the appraisers. The cost of the appraisers shall be
shared equally by the parties.
HFS’ failure to exercise its right of first refusal shall not constitute
approval of the proposed Transfer nor a waiver of any other provision of this
Section 15 with respect to a proposed Transfer. If HFS does not exercise its
right of first refusal, Franchisee may not thereafter Transfer the interest at a
lower price or on more favorable terms than those that have been offered to HFS.
HFS shall again be given a right of first refusal if a transaction does not
close within 6 months after HFS elected not to exercise its right of first
refusal. In no event shall Franchisee offer the interest for sale or transfer at
public auction, nor at any time shall an offer be made to the public to sell,
transfer or assign, through any advertisement, either in the newspapers or
otherwise, without first having obtained the written approval of HFS to the
auction or advertisement.
K.    HFS’ consent to any Transfer shall not constitute a waiver of any claims
HFS may have against the transferring party, nor shall it be deemed a waiver of
HFS’ right to demand exact compliance with any of the terms of this Agreement by
the transferee, nor will it be deemed a waiver of HFS’ right to give or withhold
approval to future Transfers.

16.    GENERAL RELEASE
Franchisee (on behalf of itself and its subsidiaries and affiliates), all
individuals who execute this Agreement and all guarantors of Franchisee’s
obligations under this Agreement freely and without any influence forever
release and covenant not to sue HFS, its parent, subsidiaries and affiliates and
their respective past and present officers, directors, shareholders, agents and
employees, in their corporate and individual capacities, from any and all
claims, demands, liabilities and causes of action of whatever kind or nature,
whether known or unknown, vested or contingent, suspected or unsuspected
(collectively “claims”), which Franchisee or any guarantor now own or hold or
may in the future own or hold based on, arising out of or relating to, in whole
or in part, any fact, event, conduct or omission occurring on or before the date
of this Agreement, including, without limitation, claims arising under federal,
state and local laws, rules and ordinances, claims for contribution, indemnity
and/or subrogation and claims arising out of, or relating to this Agreement and
all other agreements between Franchisee and/or any guarantor and HFS or its
parent, subsidiaries or affiliates, the sale of a franchise to Franchisee, the
development and operation of the Franchised Restaurant and the development and
operation of all other restaurants operated by Franchisee or any guarantor that
are franchised by HFS or its parent, subsidiaries or affiliates. Franchisee and
all guarantors agree that fair consideration has been given by HFS for this
release and they fully understand that this is a negotiated, complete and final
release of all claims. This release does not include a release of claims arising
from representations in the Hardee’s Franchise Disclosure Document provided to
Franchisee.
17.    COVENANTS
A.    Best Efforts
During the term of this Agreement, Franchisee and the Operating Principal shall
devote their best efforts

    

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to the development, management and operation of the Franchised Restaurant.
B.    Confidentiality
Franchisee acknowledges and agrees that: (1) HFS owns all right, title and
interest in and to the System; (2) the System includes trade secrets and
confidential and proprietary information and know-how that gives HFS a
competitive advantage; (3) HFS has taken all measures appropriate to protect the
trade secrets and the confidentiality of the proprietary information and
know-how of the System; (4) all material or other information now or hereafter
provided or disclosed to Franchisee regarding the System is disclosed in
confidence; (5) Franchisee has no right to disclose any part of the System to
anyone who is not an employee of Franchisee; (6) Franchisee will disclose to its
employees only those parts of the System that an employee needs to know;
(7) Franchisee will have a system in place to ensure that its employees keep
confidential HFS’ trade secrets and confidential and proprietary information,
and, if requested by HFS, Franchisee shall obtain from those of its employees
designated by HFS an executed Confidential Disclosure Agreement in the form
prescribed by HFS; (8) by entering into this Agreement, Franchisee does not
acquire any ownership interest in the System; and (9) Franchisee’s use or
duplication of the System or any part of the System in any other business, or
disclosure of any part of the System to others for use or duplication in any
other business, would constitute an unfair method of competition, for which HFS
would be entitled to all legal and equitable remedies, including injunctive
relief, without posting a bond.
Franchisee shall not, during the term of this Agreement or at any time
thereafter, communicate or disclose any trade secrets or confidential or
proprietary information or know-how of the System to any unauthorized person, or
do or perform, directly or indirectly, any other acts injurious or prejudicial
to any of the Proprietary Marks or the System. Any and all information,
knowledge, know‑how and techniques, including all drawings, materials,
equipment, specifications, recipes, techniques and other data that HFS or its
affiliates designate as confidential shall be deemed confidential for purposes
of this Agreement.
C.    Restrictions
(1)    Franchisee acknowledges and agrees that: (a) pursuant to this Agreement,
Franchisee will have access to valuable trade secrets, specialized training and
other confidential information from HFS and/or its affiliates regarding the
development, operation, product preparation and sales, market and operations
research, advertising and marketing plans and strategies, purchasing, sales and
marketing methods and techniques of HFS and its affiliates and the System;
(b) the know-how regarding the System and the opportunities, associations and
experience acquired by Franchisee pursuant to this Agreement are of substantial
value; (c) in developing the System, HFS and its affiliates have made
substantial investments of time, effort, and money; (d) HFS would be unable
adequately to protect the System and its trade secrets and confidential and
proprietary information against unauthorized use or disclosure and would be
unable adequately to encourage a free exchange of ideas and information among
operators of Hardee’s Restaurants if franchisees or developers were permitted to
engage in the activities described in Sections 17.C.(2)(a) and (b) or to hold
interests in the businesses described in Sections 17.C.(2)(c) and (3); (e) all
restaurants operating in a quick-service format are substantial and direct
competitors of the System; and (f) the restrictions on Franchisee’s right to
hold interests in, or perform services for, the businesses described in
Sections 17.C.(2)(c) and (3) will not unduly limit its activities.

(2)    Accordingly, Franchisee covenants and agrees that, except with HFS’ prior
written consent, during the term of this Agreement, and for a period of 2 years
following its expiration, transfer, or termination, Franchisee shall not, either
directly or indirectly, for itself, or through, on behalf of, or in conjunction
with, any person, firm, partnership, corporation, or other entity:

(a)    Divert or attempt to divert any business or customer, or potential
business or customer, of any Hardee’s Restaurant to any competitor, by direct or
indirect inducement or otherwise.

(b)    Knowingly employ or seek to employ any person then employed by HFS or any

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franchisee of HFS as a shift leader or higher, or otherwise directly or
indirectly induce such person to leave his or her employment.

(c)    Own, maintain, operate, engage in, grant a franchise to, advise, help,
make loans to, lease property to or have any interest in, either directly or
indirectly, any restaurant business: (i) whose sales of Designated Entrée Items
(as defined below) during any daypart are reasonably likely to account
collectively for 20% or more of the restaurant’s sales of all entrée items
during that daypart; (ii) that features or promotes any Designated Entrée Item
in its advertising; or (iii) that operates in a quick-service format (with or
without table service). For purposes of the previous sentence, the term
“Designated Entrée Items” means any hamburger sandwich, chicken sandwich,
breakfast sandwich and any other entrée item of a type designated by HFS as part
of the System at any time during the term of this Agreement. During the term of
this Agreement, there is no geographical limitation on this restriction.
Following the expiration, transfer or termination of this Agreement, this
restriction shall apply to any restaurant business located within a 2-mile
radius of the Franchised Location or within a 2-mile radius of any then-existing
Hardee’s Restaurant. This restriction shall not apply to Franchisee’s existing
restaurant or foodservice operations, if any, which are identified in Appendix
A, nor shall it apply to other restaurants operated by Franchisee that are
franchised by HFS or its affiliates.
If any part of these restrictions is found to be unreasonable in time or
distance, each month of time or mile of distance may be deemed a separate unit
so that the time or distance may be reduced by appropriate order of the court to
that deemed reasonable. If, at any time during the 2-year period following the
expiration or earlier termination of this Agreement, Franchisee fails to comply
with its obligations under this Section, that period of noncompliance will not
be credited toward Franchisee’s satisfaction of the 2-year obligation.
(3)    Franchisee acknowledges that the Franchised Location will itself acquire
goodwill associated with the System and that it would be difficult for HFS to
ascertain that Franchisee has no interest in the operation by a third party of a
restaurant concept at that location that would, if operated by Franchisee,
violate the restrictions of this Section 17. Accordingly, Franchisee further
covenants and agrees that, during the term of this Agreement and for a period of
2 years following the expiration or earlier termination of this Agreement,
Franchisee shall not, either directly or indirectly, for itself, or through, on
behalf of, or in conjunction with any person, firm, partnership, corporation, or
other entity, sell, assign, lease or transfer the Franchised Location to any
person, firm, partnership, corporation, or other entity which Franchisee knows,
or has reason to know, intends to operate a restaurant business at the
Franchised Location that would violate Section 17.C.(2)(c) if operated by
Franchisee. Franchisee, by the terms of any conveyance selling, assigning,
leasing or transferring its interest in the Franchised Location, shall include
such restrictive covenants as are necessary to ensure that a restaurant business
that would violate Section 17.C.(2)(c) if operated by Franchisee is not operated
at the Franchised Location for this 2 year period, and Franchisee shall take all
steps necessary to ensure that these restrictive covenants become a matter of
public record.

D.    Modification

HFS shall have the right, in its sole discretion, to reduce the scope of any
covenant in this Section 17 effective immediately upon Franchisee’s receipt of
written notice, and Franchisee agrees that it shall comply forthwith with any
covenant as so modified, which shall be fully enforceable notwithstanding the
provisions of Section 25.
E.    Applicability

The restrictions contained in this Section 17 shall apply to Franchisee and all
guarantors of Franchisee’s obligations. With respect to each guarantor, these
restrictions shall apply until 2 years after the earlier of: (i) the expiration,
transfer, or termination of this Agreement; or (ii) the date the guarantor
ceases to be the Operating Principal or an officer, stockholder, director,
member of the Continuity Group or a 10% Owner (or, if a guarantor is the spouse
of a person holding one or more of these positions, the date the person ceases
to hold the applicable

    

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positions). The restrictions contained in this Section 17 shall not apply to
ownership of less than a 5% legal or beneficial ownership in the outstanding
equity securities of any publicly held corporation. The existence of any claim
Franchisee or any guarantor of Franchisee’s obligations may have against HFS or
its affiliates, whether or not arising from this Agreement, shall not constitute
a defense to the enforcement by HFS of the covenants in this Section 17.
At HFS’ request, unless otherwise prohibited by law, Franchisee will obtain
covenants similar in substance to those set forth in this Section 17 from any of
its stockholders, directors, officers, or restaurant managers and from family
members of guarantors.
F.    Injunctive Relief

Franchisee acknowledges and agrees that violation of the covenants contained in
this Section 17 will result in immediate and irreparable injury to HFS for which
money damages are not an adequate remedy. Therefore, in addition to being
responsible for any damages caused to HFS arising from Franchisee’s violation of
this Section 17, HFS shall be entitled to seek the entry of an injunction
prohibiting any conduct by Franchisee in violation of this Section 17.

18.    TERMINATION
A.    Termination Without Cure Period
In addition to the grounds for termination that may be stated elsewhere in this
Agreement, HFS may terminate this Agreement, and the rights granted by this
Agreement, upon written notice to Franchisee without an opportunity to cure upon
the occurrence of any of the following events:
(1)    Franchisee ceases to continuously operate the Franchised Restaurant for a
period in excess of 5 consecutive days, unless the closing is due to an act of
God, fire or other natural disaster or is approved in writing in advance by HFS.
(2)    Franchisee is insolvent or is unable to pay its creditors (including
HFS); files a petition in bankruptcy, an arrangement for the benefit of
creditors or a petition for reorganization; there is filed against Franchisee a
petition in bankruptcy, an arrangement for the benefit of creditors or petition
for reorganization, which is not dismissed within 60 days of the filing;
Franchisee makes an assignment for the benefit of creditors; or a receiver or
trustee is appointed for Franchisee and not dismissed within 60 days of the
appointment.
(3)    Execution is levied against Franchisee’s business or property; suit to
foreclose any lien or mortgage against the premises or equipment of the
Franchised Restaurant is instituted against Franchisee and is not dismissed
within 60 days; or the real or personal property of the Franchised Restaurant
shall be sold after levy thereupon by any sheriff, marshal or constable.
(4)    There is a material breach by Franchisee of any obligation under
Section 17.
(5)    Any Transfer that requires HFS’ prior written approval occurs without
Franchisee having obtained that prior written approval.
(6)    HFS discovers that Franchisee made a material misrepresentation or
omitted a material fact in the information that was furnished to HFS in
connection with its decision to enter into this Agreement.
(7)    Franchisee knowingly falsifies any report required to be furnished HFS or
makes any material misrepresentation in its dealings with HFS or fails to
disclose any material facts to HFS.
(8)    Franchisee fails to open the Franchised Restaurant for business within 60
days after HFS

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first authorizes the opening of the Franchised Restaurant.
(9)    HFS makes a reasonable determination that continued operation of the
Franchised Restaurant by Franchisee will result in an imminent danger to public
health or safety.
(10)    Franchisee loses possession of the Franchised Location through its own
fault or its failure to extend the lease for the Franchised Location through the
Initial Term of this Agreement.
(11)    Franchisee, the Operating Principal, any stockholder, member, partner,
director or officer of Franchisee, any member of the Continuity Group or any 10%
Owner is convicted of, or pleads no contest to, a felony charge; a crime
involving moral turpitude; or any other crime or offense that is reasonably
likely, in the sole opinion of HFS, to adversely affect HFS, its affiliates or
the System.
(12)    There is a material breach of any representation or warranty set forth
in Section 29.G.‑H.
(13)    Franchisee, the Operating Principal, any member of the Continuity Group
or any 10% Owner remains in default beyond the applicable cure period under any
other agreement with HFS or its affiliates (provided that, if the default is not
by Franchisee, Franchisee is given written notice of the default and a 30 day
period to cure the default), or Franchisee remains in default beyond the
applicable cure period under any real estate lease, equipment lease, or
financing instrument relating to the Franchised Restaurant, or Franchisee
remains in default beyond the applicable cure period with any vendor or supplier
to the Franchised Restaurant, or Franchisee fails to pay when due any taxes or
assessments relating to the Franchised Restaurant or its employees, unless
Franchisee is actively prosecuting or defending the claim or suit in a court of
competent jurisdiction or by appropriate government administrative procedure or
by arbitration or mediation conducted by a recognized alternative dispute
resolution organization.
B.    Termination Following Expiration of Cure Period
(1)    Except for those items listed in preceding Section 18.A., Franchisee
shall have 30 days after written notice of default from HFS within which to
remedy the default and provide evidence of that remedy to HFS. If any such
default is not cured within that time, this Agreement shall terminate without
further notice to Franchisee effective immediately upon expiration of that time,
unless HFS notifies Franchisee otherwise in writing. Notwithstanding the
foregoing, if the default cannot be corrected within 30 days, Franchisee shall
have such additional time to correct the default as reasonably required (not to
exceed 90 days) provided that Franchisee begins taking the actions necessary to
correct the default during the 30 day cure period and diligently and in good
faith pursues those actions to completion. Franchisee will be in default under
this Section 18.B.(1) for any failure to materially comply with any of the
requirements imposed by this Agreement, the Manual or otherwise in writing, or
to carry out the terms of this Agreement in good faith.
(2)    Notwithstanding the provisions of preceding Section 18.B.(1), if
Franchisee defaults in the payment of any monies owed to HFS or its affiliates
when such monies become due and payable and Franchisee fails to pay such monies
within 10 days after receiving written notice of default, then this Agreement
will terminate effective immediately upon expiration of that time, unless HFS
notifies Franchisee otherwise in writing.
(3)    If Franchisee has received 2 or more notices of default within the
previous 12 months, HFS shall be entitled to send Franchisee a notice of
termination upon Franchisee’s next default within that 12 month period under
this Section 18.B. without providing Franchisee an opportunity to remedy the
default.
(4)    In addition to the other provisions of this Section 18.B, if HFS
reasonably determines that Franchisee becomes or will become unable to meet its
obligations to HFS or its affiliates under this Agreement, HFS may provide
Franchisee written notice to that effect and demand that Franchisee provide
those assurances reasonably designated by HFS, which may include security or
letters of credit for the payment of Franchisee’s obligations to HFS and its
affiliates. If Franchisee fails to provide the assurances demanded by HFS within
30

    

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days after its receipt of written notice from HFS, this Agreement shall
terminate without further notice to Franchisee effective immediately upon
expiration of that time, unless HFS notifies Franchisee otherwise in writing.
C.    Termination Following Inspection
HFS shall have the right to periodically conduct inspections of the Franchised
Restaurant to evaluate Franchisee’s compliance with the System and this
Agreement. Following each inspection, HFS will provide Franchisee an inspection
report listing Franchisee’s score on the inspection and those conditions at the
Franchised Restaurant that must be rectified. If Franchisee fails to achieve a
passing score on an inspection, the inspection report shall constitute a notice
of default. If Franchisee fails to achieve a passing score on the next
inspection (which shall be conducted at least 30 days after Franchisee’s receipt
of the inspection report for the prior inspection), HFS may terminate this
Agreement, without opportunity to cure, by providing Franchisee written notice
of termination along with the inspection report.
D.    Statutory Limitations
If any valid, applicable law or regulation of a competent governmental authority
with jurisdiction over this Agreement requires a notice or cure period prior to
termination longer than set forth in this Section, this Agreement will be deemed
amended to conform to the minimum notice or cure period required by the
applicable law or regulation.
19.    OBLIGATIONS ON TERMINATION OR EXPIRATION
Upon termination or expiration of this Agreement:
A.    Franchisee shall immediately cease operating the Franchised Restaurant.
B.    Franchisee immediately shall: (1) pay HFS and its affiliates all sums due
and owing HFS or its affiliates related to the Franchised Restaurant; and (2) if
this Agreement is terminated following Franchisee’s default, pay HFS the net
present value of the royalty fee that Franchisee would have paid during the
balance of the Initial Term but for the termination (calculated based on the
average weekly royalty fee owed by Franchisee for the past 52 weeks multiplied
by the number of weeks remaining in the Initial Term), unless waived by HFS in
its sole discretion. The obligation to pay this royalty fee survives termination
of this Agreement and is in addition to, and not in lieu of, Franchisee’s
obligation to fully comply with its obligations under Section 17.C. following
termination of this Agreement.
C.    Franchisee promptly shall return to HFS the Manual, any copies of the
Manual and all other materials and information furnished by HFS and Franchisee
promptly shall return to HFS, in good condition and repair excepting normal wear
and tear, all computer software, disks, tapes and other magnetic storage media.
D.    Franchisee and all persons and entities subject to the covenants contained
in Section 17 shall continue to abide by those covenants and shall not, directly
or indirectly, take any action that violates those covenants.
E.    Franchisee immediately shall discontinue all use of the Proprietary Marks
in connection with the Franchised Restaurant and of any and all items bearing
the Proprietary Marks; remove the Proprietary Marks from the Franchised
Restaurant and from clothing, signs, materials, motor vehicles and other items
owned or used by Franchisee in the operation of the Franchised Restaurant;
cancel all advertising for the Franchised Restaurant that contains the
Proprietary Marks (including telephone directory listings); and take such action
as may be necessary to cancel any filings or registrations for the Franchised
Restaurant that contain any Proprietary Marks.
F.    Franchisee promptly shall make such alterations and modifications to the
Franchised Location as may be necessary to clearly distinguish to the public the
Franchised Location from its former appearance and also make those specific
additional changes as HFS may request for that purpose. If Franchisee fails to
promptly make

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these alterations and modifications, HFS shall have the right (at Franchisee’s
expense, to be paid upon Franchisee’s receipt of an invoice from HFS) to do so
without being guilty of trespass or other tort.
G.    Franchisee shall furnish HFS, within 30 days after the effective date of
termination or expiration, evidence (certified to be true, complete, accurate
and correct by the chief executive officer of Franchisee, if Franchisee is a
corporation; by a manager of Franchisee, if Franchisee is a limited liability
company; or by a general partner of Franchisee, if Franchisee is a partnership;
or by a person authorized in Franchisee’s organizational documents, if
Franchisee is any other type of business entity) satisfactory to HFS of
Franchisee’s compliance with Sections 19.A. through 19.F.
H.    Franchisee shall not, except with respect to a restaurant franchised by
HFS or its affiliates which is then open and operating pursuant to an effective
franchise agreement or a restaurant franchised by HFS or its affiliates for
which there is an effective commitment agreement: (1) operate or do business
under any name or in any manner that might tend to give the public the
impression that Franchisee is connected in any way with HFS or its affiliates or
has any right to use the System or the Proprietary Marks; (2) make, use or avail
itself of any of the materials or information furnished or disclosed by HFS or
its affiliates under this Agreement or disclose or reveal any such materials or
information or any portion thereof to anyone else; or (3) assist anyone not
licensed by HFS or its affiliates to construct or equip a foodservice outlet
substantially similar to a Hardee’s Restaurant.
20.    OPTION TO PURCHASE
A.    Upon the expiration or termination of this Agreement for any reason, HFS
will have the option to purchase from Franchisee some or all of the assets used
in the Franchised Restaurant (“Assets”). HFS may exercise its option by giving
written notice to Franchisee at any time following such expiration or
termination up until 30 days after the later of: (1) the effective date of
termination or expiration; or (2) the date Franchisee ceases to operate the
Franchised Restaurant. As used in this Section 20, “Assets” shall mean and
include, without limitation, leasehold improvements, equipment, vehicles,
furnishings, fixtures, signs and inventory (non-perishable products, materials
and supplies) used in the Franchised Restaurant, and the real estate fee simple
or the lease or sublease for the Franchised Location. HFS shall be entitled to
the entry of interlocutory and permanent orders of specific performance by a
court of competent jurisdiction if Franchisee fails or refuses to timely meet
its obligations under this Section 20.

B.    HFS shall have the unrestricted right to assign this option to purchase
the Assets. HFS or its assignee shall be entitled to all customary
representations and warranties that the Assets are free and clear (or, if not,
accurate and complete disclosure) as to: (1) ownership, condition and title;
(2) liens and encumbrances; (3) environmental and hazardous substances; and
(4) validity of contracts and liabilities inuring to HFS or affecting the
Assets, whether contingent or otherwise.

C.    The purchase price for the Assets (“Purchase Price”) shall be their fair
market value, (or, for leased assets, the fair market value of Franchisee’s
lease) determined as of the effective date of purchase in a manner that accounts
for reasonable depreciation and condition of the Assets; provided, however, that
the Purchase Price shall take into account the termination of this Agreement.
Further, the Purchase Price for the Assets shall not contain any factor or
increment for any trademark, service mark or other commercial symbol used in
connection with the operation of the Franchised Restaurant nor any goodwill or
“going concern” value for the Franchised Restaurant. HFS may exclude from the
Assets purchased in accordance with this Section any equipment, vehicles,
furnishings, fixtures, signs, and inventory that are not approved as meeting
then-current standards for a Hardee’s Restaurant or for which Franchisee cannot
deliver a Bill of Sale in a form satisfactory to HFS.

D.    If HFS and Franchisee are unable to agree on the fair market value of the
Assets within 30 days after Franchisee’s receipt of HFS’ notice of its intent to
exercise its option to purchase the Assets, the fair market value shall be
determined by two professionally certified appraisers, Franchisee selecting one
and HFS selecting one. If the higher appraisal is more than 10% greater than the
other appraisal, the two appraisers shall select a third

    

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professionally certified appraiser who also shall appraise the fair market value
of the Assets. The average value set by the appraisers (whether two or three
appraisers as the case may be) shall be conclusive and shall be the Purchase
Price.

E.    The appraisers shall be given full access to the Franchised Restaurant,
the Franchised Location and Franchisee’s books and records during customary
business hours to conduct the appraisal and shall value the leasehold
improvements, equipment, furnishings, fixtures, signs and inventory in
accordance with the standards of this Section 20. The appraisers’ fees and costs
shall be borne equally by HFS and Franchisee.

F.    Within 10 days after the Purchase Price has been determined, HFS may
exercise its option to purchase the Assets by so notifying Franchisee in writing
(“HFS’ Purchase Notice”). The Purchase Price shall be paid in cash or cash
equivalents at the closing of the purchase (“Closing”), which shall take place
no later than 60 days after the date of HFS’ Purchase Notice. From the date of
HFS’ Purchase Notice until Closing:

(1) Franchisee shall operate the Franchised Restaurant and maintain the Assets
in the usual and ordinary course of business and maintain in full force all
insurance policies required under this Agreement; and

(2)     HFS shall have the right to appoint a manager, at HFS’ expense, to
control the day-to-day operations of the Franchised Restaurant and Franchisee
shall cooperate, and instruct its employees to cooperate, with the manager
appointed by HFS. Alternatively, HFS may require Franchisee to close the
Franchised Restaurant during such time period without removing any Assets from
the Franchised Restaurant.

G.    For a period of 30 days after the date of HFS’ Purchase Notice (“Due
Diligence Period”), HFS shall have the right to conduct such investigations as
it deems necessary and appropriate to determine: (1) the ownership, condition
and title of the Assets; (2) liens and encumbrances on the Assets;
(3) environmental and hazardous substances at or upon the Franchised Location;
and (4) the validity of contracts and liabilities inuring to HFS or affecting
the Assets, whether contingent or otherwise. Franchisee will afford HFS and its
representatives access to the Franchised Restaurant and the Franchised Location
at all reasonable times for the purpose of conducting inspections of the Assets;
provided that such access does not unreasonably interfere with Franchisee’s
operation of the Franchised Restaurant.

H.    During the Due Diligence Period, at its sole option and expense, HFS may
(1) cause the title to the Assets that consist of real estate interests (“Real
Estate Assets”) to be examined by a nationally recognized title company and
conduct lien searches as to the other Assets; (2) procure “AS BUILT” surveys of
the Real Estate Assets; (3) procure environmental assessments and testing with
respect to the Real Estate Assets; and/or (4) inspect the Assets that consist of
leasehold improvements, equipment, vehicles, furnishings, fixtures, signs and
inventory (“Fixed Assets”) to determine if the Fixed Assets are in satisfactory
working condition. Prior to the end of the Due Diligence Period, HFS shall
notify Franchisee in writing of any objections that HFS has to any finding
disclosed in any title or lien search, survey, environmental assessment or
inspection. If Franchisee cannot or elects not to correct any such title defect,
environmental objection or defect in the working condition of the Fixed Assets,
HFS will have the option to either accept the condition of the Assets as they
exist or rescind its option to purchase on or before the Closing.

I.     Prior to the Closing, Franchisee and HFS shall comply with all applicable
legal requirements, including the bulk sales provisions of the Uniform
Commercial Code of the state in which the Franchised Restaurant is located and
the bulk sales provisions of any applicable tax laws and regulations. Franchisee
shall, prior to or simultaneously with the Closing, pay all tax liabilities
incurred in connection with the operation of the Franchised Restaurant prior to
Closing. HFS shall have the right to set off against and reduce the Purchase
Price by any and all amounts owed by Franchisee to HFS, and the amount of any
encumbrances or liens against the Assets or any obligations assumed by HFS.

J.    If the Franchised Location is leased, HFS agrees to use reasonable efforts
to effect a termination

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of the existing lease for the Franchised Location. If the lease for the
Franchised Location is assigned to HFS or HFS subleases the Franchised Location
from Franchisee, HFS will indemnify and hold Franchisee harmless from any
ongoing liability under the lease from the date HFS assumes possession of the
Franchised Location, and Franchisee will indemnify and hold HFS harmless from
any liability under the lease prior to and including that date.

K.    If Franchisee owns the Franchised Location, HFS, at its option, will
either purchase the fee simple interest or, upon purchase of the other Assets,
enter into a standard lease with Franchisee on terms comparable to those for
which similar commercial properties in the area are then being leased. The
initial term of this lease with Franchisee shall be at least 10 years with 4
options to renew of 5 years each and the rent shall be the fair market rental
value of the Franchised Location. If Franchisee and HFS cannot agree on the fair
market rental value of the Franchised Location, then appraisers (selected in the
manner described in Section 20.D.) shall determine the rental value.

L.     At the Closing, Franchisee shall deliver instruments transferring to HFS
or its assignee: (1) good and merchantable title to the Assets purchased, free
and clear of all liens and encumbrances (other than liens and security interests
acceptable to HFS or its assignee), with all sales and other transfer taxes paid
by the Franchisee; (2) all licenses and permits for the Franchised Restaurant
that may be assigned or transferred, with appropriate consents, if required; and
(3) the lease or sublease for the Franchised Location, with appropriate
consents, if required. If Franchisee cannot deliver clear title to all of the
purchased Assets as indicated in this Section, or if there are other unresolved
issues, the Closing shall be accomplished through an escrow.

21.    RELATIONSHIP OF THE PARTIES
This Agreement does not create a fiduciary or other special relationship between
the parties. No agency, employment, or partnership is created or implied by the
terms of this Agreement, and Franchisee is not and shall not hold itself out as
agent, legal representative, partner, subsidiary, joint venturer or employee of
HFS or its affiliates. Franchisee shall have no right or power to, and shall
not, bind or obligate HFS or its affiliates in any way or manner, nor represent
that Franchisee has any right to do so. Franchisee shall not issue any press
releases without the prior written approval of HFS.
Franchisee is an independent contractor and is solely responsible for all
aspects of the development and operation of the Franchised Restaurant, subject
only to the conditions and covenants established by this Agreement. Without
limiting the generality of the foregoing, Franchisee acknowledges that HFS has
no responsibility to ensure that the Franchised Restaurant is developed and
operated in compliance with all applicable laws, ordinances and regulations and
that HFS shall have no liability in the event the development or operation of
the Franchised Restaurant violates any law, ordinance or regulation.
The sole relationship between Franchisee and HFS is a commercial, arms’ length
business relationship and, except as provided in Section 22, there are no third
party beneficiaries to this Agreement. Franchisee’s business is, and shall be
kept, totally separate and apart from any that may be operated by HFS. In all
public records, in relationships with other persons, and on letterheads and
business forms, Franchisee shall indicate its independent ownership of the
Franchised Restaurant and that Franchisee is solely a franchisee of HFS.
Franchisee shall post a sign in a conspicuous location in the Franchised
Restaurant which will contain Franchisee’s name and state that the Franchised
Restaurant is independently owned and operated by Franchisee under a franchise
agreement with HFS.
22.    INDEMNIFICATION
A.    Franchisee and all guarantors of Franchisee’s obligations under this
Agreement shall, at all times, indemnify, defend (with counsel reasonably
acceptable to HFS), and hold harmless (to the fullest extent permitted by law)
HFS and its affiliates, and their respective successors, assigns, past and
present stockholders, directors,

    

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officers, employees, agents and representatives (collectively “Indemnitees”)
from and against all “losses and expenses” (as defined below) incurred in
connection with any action, suit, proceeding, claim, demand, investigation,
inquiry (formal or informal), judgment or appeal thereof by or against
Indemnitees or any settlement thereof (whether or not a formal proceeding or
action had been instituted), arising out of or resulting from or connected with
Franchisee’s activities under this Agreement. Franchisee promptly shall give HFS
written notice of any such action, suit, proceeding, claim, demand, inquiry or
investigation filed or instituted against Franchisee and, upon request, shall
furnish HFS with copies of any documents from such matters as HFS may request.
At Franchisee’s expense and risk, HFS may elect to assume (but under no
circumstances will HFS be obligated to undertake), the defense and/or settlement
of any action, suit, proceeding, claim, demand, investigation, inquiry, judgment
or appeal thereof subject to this indemnification. Such an undertaking shall, in
no manner or form, diminish Franchisee’s obligation to indemnify and hold
harmless HFS and Indemnitees. HFS shall not be obligated to seek recoveries from
third parties or otherwise mitigate losses.
B.    As used in this Section, the phrase “losses and expenses” shall include,
but not be limited to, all losses; compensatory, exemplary and punitive damages;
fines; charges; costs; expenses; lost profits; reasonable attorneys’ fees;
expert witness fees; court costs; settlement amounts; judgments; compensation
for damages to HFS’ reputation and goodwill; costs of or resulting from delays;
financing; costs of advertising material and media time/space and the costs of
changing, substituting or replacing the same; and any and all expenses of
recall, refunds, compensation, public notices and other such amounts incurred in
connection with the matters described.
23.    CONSENTS, APPROVALS AND WAIVERS
A.    Whenever this Agreement requires the prior approval or consent of HFS,
Franchisee shall make a timely written request to HFS therefor; and any approval
or consent received, in order to be effective and binding upon HFS, must be
obtained in writing and be signed by an authorized officer of HFS.
B.    HFS makes no warranties or guarantees upon which Franchisee may rely by
providing any waiver, approval, consent or suggestion to Franchisee in
connection with this Agreement, and assumes no liability or obligation to
Franchisee therefor, or by reason of any neglect, delay, or denial of any
request therefor. HFS shall not, by virtue of any approvals, advice or services
provided to Franchisee, assume responsibility or liability to Franchisee or to
any third parties to which HFS would not otherwise be subject.
C.    No failure of HFS to exercise any power reserved to it by this Agreement
or to insist upon strict compliance by Franchisee with any obligation or
condition hereunder, and no custom or practice of the parties at variance with
the terms of this Agreement, shall constitute a waiver of HFS’ right to demand
exact compliance with any of the terms of this Agreement. A waiver by HFS of any
particular default by Franchisee shall not affect or impair HFS’ rights with
respect to any subsequent default of the same, similar or different nature, nor
shall any delay, forbearance or omission of HFS to exercise any power or right
arising out of any breach or default by Franchisee of any of the terms,
provisions or covenants of this Agreement affect or impair HFS’ right to
exercise the same, nor shall such constitute a waiver by HFS of any right
hereunder, or the right to declare any subsequent breach or default and to
terminate this Agreement prior to the expiration of its term. Subsequent
acceptance by HFS of any payments due to it hereunder shall not be deemed to be
a waiver by HFS of any preceding breach by Franchisee of any terms, covenants or
conditions of this Agreement.
24.    NOTICES
No notice, demand, request or other communication to the parties shall be
binding upon the parties unless the notice is in writing, refers specifically to
this Agreement and is addressed to: (A) if to Franchisee, addressed to
Franchisee at the notice address set forth in Appendix A; and (B) if to HFS,
addressed to HFS at its principal offices, current address: 100 N. Broadway,
Suite 1200, St. Louis, Missouri 63102 (marked Attn: General Counsel) (Facsimile:
(314) 621-3715). Any party may designate a new address for notices by giving
written notice of the

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new address pursuant to this Section. Notices shall be effective upon receipt
(or first rejection) and may be: (1) delivered personally; (2) transmitted by
facsimile or electronic mail to the number(s) set forth above (or in Appendix A)
with electronic confirmation of receipt; (3) mailed in the United States mail,
postage prepaid, certified mail, return receipt requested; or (4) mailed via
overnight courier.
25.    ENTIRE AGREEMENT
HFS and Franchisee acknowledge that each element of this Agreement is essential
and material and that, except as otherwise provided in this Agreement, the
parties shall deal with each other in good faith. This Agreement, the Manual,
the documents referred to herein, and the attachments hereto, constitute the
entire, full and complete agreement between the parties concerning Franchisee’s
rights, and supersede any and all prior or contemporaneous negotiations,
discussions, understandings or agreements. There are no other representations,
inducements, promises, agreements, arrangements, or undertakings, oral or
written, between the parties relating to the matters covered by this Agreement
other than those set forth in this Agreement and in the attachments. No
obligations or duties that contradict or are inconsistent with the express terms
of this Agreement may be implied into this Agreement. Except as expressly set
forth herein, no amendment, change or variance from this Agreement shall be
binding on either party unless mutually agreed to by the parties and executed in
writing. Notwithstanding the foregoing, nothing in this Agreement is intended to
disclaim any representation made in the Hardee’s Franchise Disclosure Document
provided to Franchisee.
26.    SEVERABILITY AND CONSTRUCTION
A.    Each article, paragraph, subparagraph, term and condition of this
Agreement, and any portions thereof, will be considered severable. If, for any
reason, any portion of this Agreement is determined to be invalid, contrary to,
or in conflict with, any applicable present or future law, rule or regulation in
a final, unappealable ruling issued by any court, agency or tribunal with valid
jurisdiction in a proceeding to which HFS is a party, that ruling will not
impair the operation of, or have any other effect upon, any other portions of
this Agreement; all of which will remain binding on the parties and continue to
be given full force and effect.
B.    Except as otherwise provided in Section 22, nothing in this Agreement is
intended, nor shall be deemed, to confer upon any person or legal entity other
than Franchisee and HFS and its affiliates and such of their heirs, successors
and assigns, any rights or remedies under or by reason of this Agreement.
C.    Franchisee expressly agrees to be bound by any promise or covenant
imposing the maximum duty permitted by law that is subsumed within the terms of
any provision of this Agreement, as though it were separately articulated in and
made a part of this Agreement, that may result from striking from any of the
provisions of this Agreement any portion or portions which a court may hold to
be unreasonable and unenforceable in a final decision to which HFS is a party,
or from reducing the scope of any promise or covenant to the extent required to
comply with such a court order.
D.    No provision of this Agreement shall be interpreted in favor of, or
against, any party because of the party that drafted this Agreement.
E.    Whenever HFS has expressly reserved in this Agreement a right and/or
discretion to take or withhold an action, or to grant or decline to grant
Franchisee a right to take or withhold an action, except as otherwise expressly
and specifically provided in this Agreement, HFS may make such decision or
exercise its right and/or discretion on the basis of its judgment of what is in
its best interests. This also applies if HFS is deemed to have a right and/or
discretion. HFS’ judgment of what is in the best interests of the System, at the
time its decision is made or its right or discretion is exercised, can be made
without regard to whether: (1) other reasonable alternative decisions or
actions, or even arguably preferable alternative decisions or actions, could
have been made by HFS; (2) HFS’ decision or the action taken promotes its
financial or other individual interest; (3) HFS’ decision or the action taken
applies differently to Franchisee and one or more other franchisees or HFS
company-operated or

    

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affiliate-operated operations; or (4) HFS’ decision or the action taken is
adverse to Franchisee’s interests. HFS will have no liability to Franchisee for
any such decision or action. HFS and Franchisee intend that the exercise of HFS’
right or discretion will not be subject to limitation or review. If applicable
law implies a covenant of good faith and fair dealing in this Agreement, HFS and
Franchisee agree that such covenant will not imply any rights or obligations
that are inconsistent with a fair construction of the terms of this Agreement
and that this Agreement grants HFS the right to make decisions, take actions
and/or refrain from taking actions not inconsistent with Franchisee’s rights and
obligations under this Agreement.

27.    GOVERNING LAW, FORUM AND LIMITATIONS
A.    This Agreement and any claim or controversy arising out of, or relating
to, rights and obligations of the parties under this Agreement and any other
claim or controversy between the parties shall be governed by and construed in
accordance with the laws of the State of Missouri without regard to conflicts of
laws principles. Nothing in this Section is intended, or shall be deemed, to
make any Missouri law regulating the offer or sale of franchises or the
franchise relationship applicable to this Agreement if such law would not
otherwise be applicable.
B.    The parties agree that, to the extent any disputes cannot be resolved
directly between them, Franchisee shall file any suit against HFS only in the
federal or state court having jurisdiction where HFS’ principal offices are
located at the time suit is filed. HFS may file suit in the federal or state
court located in the jurisdiction where its principal offices are located at the
time suit is filed or in the jurisdiction where Franchisee resides or does
business or where the Franchised Restaurant is or was located or where the claim
arose. Franchisee consents to the personal jurisdiction of those courts over
Franchisee and venue in those courts.
C.    Except for payments owed by one party to the other, and unless prohibited
by applicable law, any legal action or proceeding (including the offer and sale
of a franchise to Franchisee) brought or instituted with respect to any dispute
arising from or related to this Agreement or with respect to any breach of the
terms of this Agreement must be brought or instituted within a period of 2 years
after the initial occurrence of any act or omission that is the basis of the
legal action or proceeding, whenever discovered.
D.    Franchisee and HFS waive, to the fullest extent permitted by law, any
right or claim of any consequential, punitive or exemplary damages against each
other and agree that, in the event of a dispute between them, each shall be
limited to the recovery of actual damages sustained by it. Franchisee and HFS
waive, to the fullest extent permitted by law, the right to bring, or be a class
member in, any class action suits and the right to trial by jury.
E.    If either party brings an action to enforce this Agreement in a judicial
proceeding, the party prevailing in that proceeding shall be entitled to
reimbursement of costs and expenses, including, but not limited to, reasonable
accountants’, attorneys’, attorneys’ assistants’ and expert witness fees, the
cost of investigation and proof of facts, court costs, other litigation
expenses, and travel and living expenses, whether incurred prior to, in
preparation for, or in contemplation of the filing of, the proceeding. If HFS
utilizes legal counsel (including in-house counsel employed by HFS) in
connection with any failure by Franchisee to comply with this Agreement,
Franchisee shall reimburse HFS for any of the above-listed costs and expenses
incurred by HFS. In any judicial proceeding, the amount of these costs and
expenses will be determined by the court and not by a jury.
F.    No right or remedy conferred upon or reserved to HFS or Franchisee by this
Agreement is intended to be, nor shall be deemed, exclusive of any other right
or remedy herein or by law or equity provided or permitted, but each shall be
cumulative of every other right or remedy. The provisions of this Section 27
shall survive the expiration or earlier termination of this Agreement.
28.    MISCELLANEOUS
A.    Gender and Number

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All references to gender and number shall be construed to include such other
gender and number as the context may require.
B.    Captions
All captions in this Agreement are intended solely for the convenience of the
parties and none shall be deemed to affect the meaning or construction of any
provision of this Agreement.
C.    Counterparts
This Agreement may be executed in counterparts, and each copy so executed and
delivered shall be deemed an original.
D.    Time
Time is of the essence of this Agreement for each provision in which time is a
factor. Whenever this Agreement refers to a period of days or months, the first
day or month to be counted shall be the day or month of the designated action,
event or notice. Days shall be measured by calendar days, except that if the
last day of a period is a Saturday, Sunday or national holiday, the period
automatically shall be extended to the next day that is not a Saturday, Sunday
or national holiday.
E.    Injunctive Relief
Franchisee recognizes that its failure to comply with the terms of this
Agreement, including, but not limited to, the failure to fully comply with all
post-termination obligations, is likely to cause irreparable harm to HFS, its
affiliates and the System. Therefore, Franchisee agrees that, in the event of a
breach or threatened breach of any of the terms of this Agreement by Franchisee,
HFS shall be entitled to injunctive relief (both preliminary and permanent)
restraining that breach and/or to specific performance without showing or
proving actual damages and without posting any bond or security. Any equitable
remedies sought by HFS shall be in addition to, and not in lieu of, all remedies
and rights that HFS otherwise may have arising under applicable law or by virtue
of any breach of this Agreement.
F.    Control During Crisis Situation
If an event occurs at the Franchised Restaurant that has or reasonably may cause
harm or injury to customers, guests or employees (i.e., food spoilage/poisoning,
food tampering/sabotage, slip and fall injuries, natural disasters, robberies,
shootings, etc.) or may damage the Proprietary Marks, the System or the
reputation of HFS (collectively “Crisis Situation”), Franchisee shall:
(1) immediately contact appropriate emergency care providers to assist it in
curing the harm or injury; and (2) immediately inform HFS by telephone of the
Crisis Situation. Franchisee shall refrain from making any internal or external
announcements (i.e., no communication with the news media) regarding the Crisis
Situation (unless otherwise directed by HFS or public health officials).
To the extent HFS deems appropriate, in its sole and absolute discretion, HFS or
its designee may control the manner in which the Crisis Situation is handled by
the parties, including, without limitation, conducting all communication with
the news media, providing care for injured persons and/or temporarily closing
the Franchised Restaurant. The parties acknowledge that, in directing the
management of any Crisis Situation, HFS or its designee may engage the services
of attorneys, experts, doctors, testing laboratories, public relations firms and
those other professionals as it deems appropriate. Franchisee and its employees
shall cooperate fully with HFS or its designee in its efforts and activities in
this regard and shall be bound by all further Crisis Situation procedures
developed by HFS from to time hereafter. The indemnification under Section 22
shall include all losses and expenses that may result from the exercise by HFS
or its designee of the management rights granted in this Section 28.F.
G.    Compliance with U.S. Laws

    

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Franchisee acknowledges that under applicable U.S. law, including, without
limitation, Executive Order 13224, signed on September 23, 2001 (“Order”), HFS
is prohibited from engaging in any transaction with any person engaged in, or
with a person aiding any person engaged in, acts of terrorism, as defined in the
Order. Accordingly, Franchisee represents and warrants to HFS that as of the
date of this Agreement, neither Franchisee nor any person holding any ownership
interest in Franchisee, controlled by Franchisee, or under common control with
Franchisee is designated under the Order as a person with whom business may not
be transacted by HFS, and that Franchisee: (1) does not, and hereafter shall
not, engage in any terrorist activity; (2) is not affiliated with and does not
support any individual or entity engaged in, contemplating, or supporting
terrorist activity; and (3) is not acquiring the rights granted under this
Franchise Agreement with the intent to generate funds to channel to any
individual or entity engaged in, contemplating, or supporting terrorist
activity, or to otherwise support or further any terrorist activity.
29.    REPRESENTATIONS
Franchisee represents, acknowledges and warrants to HFS (and Franchisee agrees
that these representations, acknowledgments and warranties shall survive
termination of this Agreement) that:
A.    This Agreement involves significant legal and business rights and risks.
HFS does not guarantee Franchisee’s success. Franchisee has read this Agreement
in its entirety, conducted an independent investigation of the business
contemplated by this Agreement, has been thoroughly advised with regard to the
terms and conditions of this Agreement by legal counsel or other advisors of
Franchisee’s choosing, recognizes that the nature of the business conducted by
Hardee’s Restaurants may change over time, has had ample opportunity to
investigate all representations made by or on behalf of HFS, and has had ample
opportunity to consult with current and former franchisees of HFS. The prospect
for success of the business undertaken by Franchisee is speculative and depends
to a material extent upon Franchisee’s personal commitment, capability and
direct involvement in the day-to-day management of the business.
B.    HFS makes no express or implied warranties or representations that
Franchisee will achieve any degree of success in the development or operation of
the Franchised Restaurant and that success in the development and operation of
the Franchised Restaurant depends ultimately on Franchisee’s efforts and
abilities and on other factors, including, but not limited to, market and other
economic conditions, Franchisee’s financial condition and competition.
C.    HFS has entered, and will continue to enter, into agreements with other
franchisees. The manner in which HFS enforces its rights and the franchisees’
obligations under any of those other agreements shall not affect the ability of
HFS to enforce its rights or Franchisee’s obligations under this Agreement.
D.    The Initial Franchise Fee is not refundable for any reason.
E.    HFS may change or modify the System, from time to time, including the
Manual, and Franchisee will be required to make such expenditures as such
changes or modifications in the System may require.
F.    Nothing in this Agreement prohibits HFS or its affiliates from: (1)
operating or licensing others to operate Hardee’s Restaurants at any location
other than the Franchised Location; (2) operating or licensing others to operate
restaurants, other than Hardee’s Restaurants, at any location; (3) utilizing the
System or any part of the System in any manner other than operation by HFS or
its affiliates of a Hardee’s Restaurant at the Franchised Location; and (4)
merchandising and distributing goods and services identified by the Proprietary
Marks at any location through any other method or channel of distribution.
G.    All information Franchisee provided to HFS in connection with Franchisee’s
franchise

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application and HFS’ grant of this Franchise is truthful, complete and accurate.
H.    The persons signing this Agreement on behalf of Franchisee have full
authority to enter into this Agreement and the other agreements contemplated by
the parties. Execution of this Agreement or such other agreements by Franchisee
does not and will not conflict with or interfere with, directly or indirectly,
intentionally or otherwise, with the terms of any other agreement with any other
third party to which Franchisee or any person with an ownership interest in
Franchisee is a party.
I.    Franchisee has not received from HFS or its affiliates or anyone acting on
their behalf, any representation of Franchisee’s potential sales, expenses,
income, profit or loss.
J.    Franchisee has not received from HFS or its affiliates or anyone acting on
their behalf, any representations other than those contained in the Hardee’s
Franchise Disclosure Document provided to Franchisee as inducements to enter
this Agreement.
K.    Even though this Agreement contains provisions requiring Franchisee to
operate the Franchised Restaurant in compliance with the System: (1) HFS and its
affiliates do not have actual or apparent authority to control the day-to-day
conduct and operation of Franchisee’s business or employment decisions; and
(2) Franchisee and HFS do not intend for HFS or its affiliates to incur any
liability in connection with or arising from any aspect of the System or
Franchisee’s use of the System, whether or not in accordance with the
requirements of the Manual.
L.    In the event of a dispute between HFS and Franchisee, the parties have
waived their right to a jury trial.
IN WITNESS WHEREOF, the parties have duly executed, sealed and delivered this
Agreement as of the day and year first above written.
ATTEST:                        HFS:
HARDEE’S FOOD SYSTEMS, INC.
By:                             By:                         
Print Name:                         Print Name:                     
Title:                             Title:                         
Date:                         
[Corporate Seal]
ATTEST/WITNESS:                    FRANCHISEE:
                                                    
                                                    
                                                    
                                                    

    

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Date:                         

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GUARANTEE AND ASSUMPTION OF FRANCHISEE’S OBLIGATIONS
In consideration of, and as an inducement to, the execution of the Hardee’s
Restaurant Franchise Agreement dated as of ___________________________________
(“Agreement”) by Hardee’s Food Systems, Inc. (“HFS”), entered into with
__________________________________________________ (“Franchisee”), the
undersigned (“Guarantors”), each of whom is an officer, director, member of
Franchisee’s Continuity Group or a 10% Owner, or the spouse thereof, hereby
personally and unconditionally agree as follows:
1.    Guarantee To Be Bound by Certain Obligations. Guarantors hereby personally
and unconditionally guarantee to HFS and its successors and assigns, for the
term of the Agreement and thereafter as provided in the Agreement or at law or
in equity, that each will be personally bound by the restrictions contained in
Section 17 of the Agreement.
2.    Guarantee and Assumption of Franchisee’s Obligations. Guarantors hereby:
(A) guarantee to HFS and its successors and assigns, for the term of the
Agreement and thereafter as provided in the Agreement or at law or in equity,
that Franchisee and any assignee of Franchisee’s interest under the Agreement
shall: (1) punctually pay and perform each and every undertaking, agreement and
covenant set forth in the Agreement and (2) punctually pay all other monies owed
to HFS and/or its affiliates; (B) agree to be personally bound by each and every
provision in the Agreement, including, without limitation, the provisions of
Sections 16 and 22; and (C) agree to be personally liable for the breach of each
and every provision in the Agreement.
3.    General Terms and Conditions. The following general terms and conditions
shall apply to this Guarantee:
A.    Each of the undersigned waives: (1) acceptance and notice of acceptance by
HFS of the foregoing undertakings; (2) notice of demand for payment of any
indebtedness or nonperformance of any obligations hereby guaranteed; (3) protest
and notice of default to any party with respect to the indebtedness or
nonperformance of any obligations hereby guaranteed; (4) any right he may have
to require that an action be brought against Franchisee or any other person as a
condition of liability; (5) all rights to payments and claims for reimbursement
or subrogation which any of the undersigned may have against Franchisee arising
as a result of the execution of and performance under this Guarantee by the
undersigned; (6) any law or statute which requires that HFS make demand upon,
assert claims against or collect from Franchisee or any others, foreclose any
security interest, sell collateral, exhaust any remedies or take any other
action against Franchisee or any others prior to making any demand upon,
collecting from or taking any action against the undersigned with respect to
this Guarantee; (7) any and all other notices and legal or equitable defenses to
which he may be entitled; and (8) any and all right to have any legal action
under this Guarantee decided by a jury.
B.    Each of the undersigned consents and agrees that: (1) his direct and
immediate liability under this Guarantee shall be joint and several; (2) he
shall render any payment or performance required under the Agreement upon demand
if Franchisee fails or refuses punctually to do so; (3) such liability shall not
be contingent or conditioned upon pursuit by HFS of any remedies against
Franchisee or any other person; (4) such liability shall not be diminished,
relieved or otherwise affected by any amendment of the Agreement, any extension
of time, credit or other indulgence which HFS may from time to time grant to
Franchisee or to any other person including, without limitation, the acceptance
of any partial payment or performance or the compromise or release of any
claims, none of which shall in any way modify or amend this Guarantee, which
shall be continuing and irrevocable during the term of the Agreement and for so
long thereafter as there are monies or obligations owing from Franchisee to HFS
or its affiliates under the Agreement; and (5) monies received from any source
by HFS for application toward payment of the obligations under the Agreement and
under this Guarantee may be applied in any manner or order deemed appropriate by
HFS. In addition, if any of the undersigned ceases to be a member of the
Continuity Group, a 10% Owner, an officer or director of Franchisee or own any
interest in Franchisee or the Franchised Restaurant, that person (and his
spouse, if the spouse is also a guarantor) agrees that the obligations under
this Guarantee shall continue to remain in force and effect unless HFS in its
sole discretion, in writing, releases those person(s) from this Guarantee.

    

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Notwithstanding the provisions of the previous sentence, unless prohibited by
applicable law, the obligations contained in Section 17.C. of the Agreement
shall remain in force and effect for a period of 2 years after any such release
by HFS. A release by HFS of any of the undersigned shall not affect the
obligations of any other Guarantor.
C.    If HFS brings an action to enforce this Guarantee in a judicial proceeding
or arbitration, the prevailing party in such proceeding shall be entitled to
reimbursement of its costs and expenses, including, but not limited to,
reasonable accountants’, attorneys’, attorneys’ assistants’ and expert witness
fees, cost of investigation and proof of facts, court costs, other litigation
expenses and travel and living expenses, whether incurred prior to, in
preparation for or in contemplation of the filing of any such proceeding. In any
judicial proceeding, these costs and expenses shall be determined by the court
and not by a jury.
D.    If HFS utilizes legal counsel (including in-house counsel employed by HFS
or its affiliates) in connection with any failure by the undersigned to comply
with this Guarantee, the undersigned shall reimburse HFS for any of the
above-listed costs and expenses incurred by it.
E.    If any of the following events occur, a default (“Default”) under this
Guarantee shall exist: (1) failure of timely payment or performance of the
obligations under this Guarantee; (2) breach of any agreement or representation
contained or referred to in this Guarantee; (3) the dissolution of, termination
of, existence of, loss of good standing status by, appointment of a receiver
for, assignment for the benefit of creditors of, or the commencement of any
insolvency or bankruptcy proceeding by or against, any of the undersigned;
and/or (4) the entry of any monetary judgment or the assessment against, the
filing of any tax lien against, or the issuance of any writ of garnishment or
attachment against any property of or debts due any of the undersigned. If a
Default occurs, the obligations of the undersigned shall be due immediately and
payable without notice. Upon the death of one of the undersigned, the estate
shall be bound by this Guarantee for all obligations existing at the time of
death. The obligations of the surviving Guarantors shall continue in full force
and effect.
F.    This Guarantee shall inure to the benefit of and be binding upon the
parties and their respective heirs, legal representatives, successors and
assigns. HFS’ interests in and rights under this Guarantee are freely
assignable, in whole or in part, by HFS. Any assignment shall not release the
undersigned from this Guarantee.

G.    Sections 27.A. through 27.F. of the Agreement are incorporated by
reference into this Guarantee and all capitalized terms that are not defined in
this Guarantee shall have the meaning given them in the Agreement.
IN WITNESS WHEREOF, each of the undersigned has hereunto affixed his signature,
under seal.
GUARANTORS:
Date:                                                     
Print Name:                             
Address:                             

Date:                                                     
Print Name:                             
Address:                             

Date:                                                     

    

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Print Name:                             
Address:                             

Date:                                                     
Print Name:                             
Address:                             

    

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APPENDIX A
FRANCHISE INFORMATION

1.    Franchised Location (Recitals):                                 

2.    Initial Franchise Fee (Section 3.A.):                                 

3.    Interests in Other Restaurants (Section 17.C.(2)(c)):
                        

4.    Franchisee’s Notice Address (Section 24):                             

    

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APPENDIX B
WEEKLY ROYALTY FEE
The weekly royalty fee as provided for in Section 3.B. of the Franchise
Agreement is as follows:

Year of Operation
of the Franchised Restaurant
 

 
Percentage of Gross Sales
 
 
 
 
 
 
 
 
 
 
 
 

    

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APPENDIX C
FRANCHISEE’S ADVERTISING AND PROMOTION OBLIGATION
Franchisee’s APO under Sections 5.B. through 5.D. of the Franchise Agreement and
its allocation shall be as set forth below, unless and until modified by HFS as
provided in Section 5:
1.    HNAF                      0.8 % of Gross Sales
(Section 5.B.)
2.    Regional Co-op             ____% of Gross Sales
(Section 5.C.)
3.    LSM allocation                ____% of Gross Sales
(Section 5.D.)
TOTAL APO:        ____% of Gross Sales
The Franchised Restaurant is located in the following Designated Market Area:
    
NOTES:
(a)    While the HNAF payment rate is 0.8% of Gross Sales, the minimum monthly
payment for the Franchised Restaurant is $475 and the maximum monthly payment
for the Franchised Restaurant is $850. Accordingly, the percentage rate of HNAF
contributions may be higher or lower than 0.8% of Gross Sales in which event,
the actual APO may be more or less than what is listed above.

(b)    As noted in Section 5.E, Franchisee’s actual APO may be more than what is
listed above if the Franchised Restaurant’s Regional Co-op increases the
regional Co-op contribution.
(c)    HFS has the right to eliminate the LSM allocation.

    

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APPENDIX D
OWNERSHIP INTERESTS
CORPORATE FRANCHISEE
If Franchisee is a corporation, the number of authorized shares of Franchisee
that have been issued is _____________ and the name, address, number of shares
owned (legally or beneficially) and office held by each shareholder is as
follows:

Name
Address
No. of Shares
Office Held
 
 
 
 
 
 
 
 
 
 
 
 

LIMITED LIABILITY COMPANY FRANCHISEE
If Franchisee is a limited liability company, the name, address and percentage
interest of each member is as follows:

Name
Address
Percentage Interest
 
 
 
 
 
 
 
 
 

OTHER BUSINESS ENTITY FRANCHISEE
If Franchisee is some other business entity, the type of business entity and the
name, address and ownership interest (including for a limited partnership,
whether a general or limited partner), is as follows:

Type of Business Entity:                

Name
Address
Ownership Interest
 
 
 
 
 
 
 
 
 

CONTINUITY GROUP, OPERATING PRINCIPAL AND MULTI-UNIT MANAGER
Franchisee’s Continuity Group shall be comprised of the following persons:
                                                    
Franchisee’s Operating Principal and Multi-Unit Manager (if applicable) are:
                                                    
FRANCHISEE:
By:                             
Title:                                 Date