Franchise Agreement

Download PDF: Carvel Franchise Agreement

The original documents were scanned as an image. The original file can be downloaded at the link above.

Sample Franchise Agreement

Carvel® Franchise Agreement Between �: _\ ' Carvel Corporation V .l>^...i^ \Ji;;

And

<<Z1_FlRST_NAME>><<Z1_LAST_NAME>><<Z2_FlRST^NAME>>«Z2_LASt^

Z3_First_Name»<<Z3_Last_Name>><<Z4_Firs^^

5 First Name»«Z5 Last Name>> ''�"^-^�4'^i'---

License Number: «License_Number»

Store Number:«Store_Number»

Facility Type:

«Brand Name»

Carvel-U FOC-040106-v1

UFOC Page 80

Section

3.^:

5..

6.'

8,^!

9.'

10.

12:*

13,

14.

15,

16.

17,.

18.

19.

20.

21.

22.

23.

24.

25^!.

Carvel® Franchise Agreement Table of Contents

Page No.

DEFINITIONS............................................................................................................J....1

GRANT OF FRANCHISE......................................................................!.................L.L.1

TERM AND RELICENSING....................................................................................L.I...2

FEES.....................................................................................................................LJ....2

FACILITY LOCATION; TERRITORY.......................................................................U....3

SITE SELECTION REQUIREMENTS.....................................................................L..L.4

LEASEHOLD IMPROVEMENTS...........................................................................-..Li...5

PROPRIETARY PRODUCTS AND NON-PROPRIETARY PRODUCTS.................U....6

COMPLIANCE WITH STANDARDS.........................................................................[...'....8

STANDARD OPERATING PROCEDURES MANUALS............................................L....8

PROPRIETARY MARKS........................................................................................L......9

ADVERTISING AND PROMOTION......... ..-.*......:.:..:....t.......-:..:..........-att...............[.L..-9

TRAINING.....L:.L..:.:....:............:'.;..'......^:....................L........'.*:.........LU..U.L...LL1.0

OUR OBLIGATIONS..,....................'....'......................"...;...:.>.................'..'..................

YOUR OBLIGATIONS.

INDEMNIFICATION; INSURANCE........................ ..........�>....A.............. .........

RIGHT TO ACCESS; RECORDS; REPORTING:......U...........U/..........L:;..':.:...l.

CONFIDENTIAtlNFORMATIONLRESTRICTIVE; COVENANTS..................'.Z..:

TRANSFER OF FRANCHISE.....:;...:..........i.....L..1J.I..a:,L.........L.>.:,,L

DEFAULT AND TERMINATION..!...:........;..aL;...L.L.1... .:;.kL,......i>fL..i,:.;_:.

OBLIGATIONS ON TERMINATION.....................................................................

DISPUTE RESOLUTION.....................................................................................

MISCELLANEOUS..........................................................................'........................J...L.23

ACKNOWLEDGEMENTS........................................................................................J...1.24

CONSTRUCTION..........................................................................:........................"...i.24

12 14 15 15 18 19 21 23

Schedule A Schedule B -Schedule C -Schedule D -Schedule E -

Schedule of Events

Rider to Lease

Personal Covenants

Guaranty of Payment and Performance

State Law Addendum (If Required)

Carvel-UFOC-040106-v1

UFOC Page 81

Carvel® Franchise Agreement

THIS FRANCHISE AGREEMENT (the "Agreement") is made as of______________, 200___

(the "Effective Date"), between Carvel Corporation, a Delaware corporation ("we," "us," or "our"), and «Z1_-First_Name»«Z1_Last_Name», a «Z1_State_of_Formation» «Z1_Entity_Type»«Z2_First_Name»«Z2_Last_Name»«Z3_First_Name»«Z3_Last__Name»«Z 4_First_Name»«Z4_Last_Name»«Z5__First_Name»«Z5_Last_Name» ("you" or "your").

You and we agree as follows:

1. DEFINITIONS

In addition to the terms that are defined in other parts of this Agreement, the following terms have the indicated meanings:

1.1 Accepted Location means «Store_Street_Address», «Store_City», «Store_State» «Store_Zip».

1.2 Manuals means our library of Standard Operating Procedures Manuals. We may add to, delete from, or modify the Manuals from time to time.

1.3 Marks means the trademarks and trade names Carvel® together withithe relatecl ;lpgo(s), including designs, stylized letters- and colors that we permit you to use at the Accepted. Location and in advertising for the Accepted Location, and any other additional or substituted trademarks, trade names, service marks 'or logos that we later adopt and authorize you in writing to use. You agree to'operate theAccepted.Location only under the Mark andtrade name Carvel® and the designated logo or any other registered trademark as we require from time to time.

1.4 Opening Date means the date oh which¹ wefapprpve..you to begin sellingLProducts from your Franchised Business.

1.5 Products mean ice cream, frozen desserts, and other products and services. When used alone, Products includes Proprietary Products and Non-Proprietary Products.

1.6 Standards means the guidelines, standards, specifications, rules, requirements, and directives we establish, including without limitation our standards and specifications as to recipes, ingredients, food preparation, food storage, interior and exterior design and decor, sanitation, maintenance, and equipment. We may add to, delete from, or modify the Standards from time to time.

1.7 System means our special techniques for packaging, displaying, merchandising, and marketing of food products; our methods of operating a retail business; our advertising and marketing programs and materials; our operations and administrative systems; our training programs; and the Marks. We may add to, delete from, or modify the System from time to time.

2. GRANT OF FRANCHISE

2.1 Grant of Franchise. Subject to the terms of this Agreement, we grant to you, and you accept, a non-exclusive franchise to operate one «Brand_Name» facility (the "Facility") only at the Accepted Location using the Marks, under the System (collectively, your "Franchised Business").

Carvel-UFOC-040106-v1

UFOC Page 82

3. TERM AND RENEWAL

3.1 Initial Term. This Agreement will begin on the Effective Date and will end 20 years after the Opening Date (the "Term"), subject to earlier termination as stated in this Agreement.

3-2 Renewal. We may grant you one additional 20-year term (the "Renewal Termj').¹ To obtain the Renewal Term, you must request, in writing, that we grant you a Renewal Term.' We must receive your request no earlier than 12 months but no later than 6 months before the expiration of the Term. We will then provide you with an Application for Relicensing, whichjyou must complete and return to us within 10 days after we deliver it to you.

i A. We will evaluate your Application for Relicensing under substantially the same standards as we evaluate an application for a franchise submitted by a then-nijw franchisee. In addition, you must: (i) at all times during the Term have been in substantial compliance withi this Agreement; (ii) agree in writing that, before the Renewal Term begins, you will make! the significant capital expenditures necessary to materially remodel, refurbish, and renovate (collectively, "Remodel") the Facility, including without limitation the Facility's internal ;and external construction, design, furniture, fixtures, equipment, and decor, so! that the Facility reflects our then-current Standards; and (iii) sign up for our Carvel Savings Plan to pay for future renovations.

B. If we grant your Application forjRelicensing, you must:"

j (1) Sign and.return our then-current form of franchise: agreement (the

"Relicense Agreement") .within 30 days after we deliver it to you and pay the then-current initial

franchise fee. You agree that the Relicense Agreement may contain terms thcit differ ma from this Agreement.^ �-." ,-^: "^U.'. .: -i -V ■-: ■*'

erially

(2) Sign a general release in a-form we!prepare, releasing us and our directors, officers, shareholders, employees, agents, a^tf attomeys.^ahd'our Effiliates and their directors, officers, shareholders, partners, members, employees, agents, and attorneys, and|our successors and assigns and the successors and assigns of any of them i (collectively, | the "FOCUS Brands Parties"), from all claims you may have against the FOCUS Eirands Parties as of the date of the Relicense Agreement. FOCUS Brands Parties is not intended to include suppliers or distributors to you that are not affiliated with us and are not acting �is our agent. ,

I i ! C. If you do not timely deliver all of the notices and documents this Section requires, you may not renew your franchise, and the renewal provisions in this Sisction will expire automatically and without further notice to you. You agree that this Agreement does not grant you any automatic renewal rights, and that the sole basis for any extension of your franchise beyond the Term is in this Section.

4. FEES

4.1j Initial Franchise Fee. When you sign this Agreement, you will pay us an initial franchise fee of $«lnitial_Franchise_Fee» (the "Initial Franchise Fee"). When we sign thin Agreement,Jthe Initial Franchise Fee is fully earned and nonrefundable.

4.2 Royalties; Advertising Contributions.

A. You must pay a recurring, non-refundable royalty fee of 6.0% of Gross Sales i(as defined below) (the "Royalty") during the term of this Agreement, payable on or before the 10th day of each of our 12 periods per year that we designate ("Period") on the Gross Sales of jthe Franchised Business for the preceding Period (or on any other basis stated in the Manuals or in

Carvel-U FOC-040106-v1

UFOC Page 83

our written notice to you). Concurrent with these payments, you must submit to us any reports or statements required under Section 17.

B. You must pay a recurring, non-refundable advertising contribution in an amount we determine, in our sole discretion, not to exceed 3% of the Gross Sales of the Franchised Business (the "Advertising Contribution"), payable on or before the 10^th day of each Period, for the preceding Period (or on any other basis stated in the Manual or in our written notice to you).

C. For the purposes of this Agreement, the term "Gross Sales" means all revenues generated by your Franchised Business conducted from or with respect to the Franchised Business, whether sales are evidenced by cash, check, credit, charge, account, barter or exchange. Gross Sales includes, without limitation, monies or credit received from the sale of food and merchandise, from tangible property of every kind and nature, promotional or otherwise, and for services performed from or at the Franchised Business, including without limitation off-premises services such as catering and delivery. Gross Sales will not include the sale of food or merchandise for which refunds have been made in good faith to customers, the sale of equipment used in the operation of the Franchised Business, nor will it include sales, meals, use or excise tax imposed by a governmental authority directly on sales and collected from customers; provided that the amount for the tax is added to the selling price or absorbed therein, and is actually paid by you to a governmental authority.

4.3 Additional Payments. You also must pay us or our; affiliates within.yiOTdays after demand: (i) all sales taxes,, corporate taxes, trademark license taxes, arid any. like taxes imposed on; required toibe,collected by, or paid by us on account of products or services we furnish to you, through _;sale, lease, or otherwise, or on account of. pur collection of any fee related to this Agreement; (ii) all franchise or like taxes, Whether based.on gross receipts, gross revenues, Royalties, -Advertising -Contributions, or otherwise^impdsed on, required to be collected by, or paid by us; and (in) all other amqunts'\we'ipaY^vor;Crnust pay^:for^:you for any reason. :-"^s~: *v. f\\ .' "'\^l \[ jAjV-,- = V^^;t.y^;.:'

4.4 Means of Payment. Until we notify you otherwise, you must pay all amounts you owe us by check transmitted to our headquarters address or as we otherwise direct. We reserve the right to require you to deliver these payments to another party or location, or through any other means of delivery we specify, including without limitation, by surcharge on your purchases of Mix, by electronic bank draft, wire transfer or other forms of electronic funds transfer. We also reserve'the right to change the frequency of the due dates (including weekly payments) of the amounts that you owe to us under this Agreement. We will notify you when we change the location for payments or the required payment delivery method or the frequency of the due dates for payments. You must comply with any new or additional procedures as we may specify in the Manuals or otherwise, in writing, and/or perform any acts and sign and deliver any documents we designate as necessary to assist in accomplishing payment by the method provided for in this Section within 30 days of our notice to you. If there are insufficient funds in your account to cover our draft, we will charge you return costs and an administrative fee. The written authorizations and documents that we may require you to sign as provided under this Section may give us the right to initiate debit entries and/or credit corrections entries. We may make bank drafts based on the reports required under Section 17 and/or the data of the point-of-sale system and other equipment provided for in Section 15.10. If you fail to report the Gross Sales of the Franchised Business to us for any reporting period as required in this Agreement, we have the right to make bank drafts from you in an amount equal to the Royalty and Advertising Contribution we drafted for the last reporting period for which a report of the Gross Sales of the Franchised Business was provided to us in an amount based on the reports required under Section 17 and/or the data of the point-of-sale system and other equipment provided for in Section 15.10.

Carvel-U FOC-040106-v1

UFOC Page 84

4.5 Interest. You will pay us interest on amounts not paid on time at the rate of 1.0% per month or portion of a month, but not more than the maximum interest rate permitted by applicable laws. At our option, we may permit you to pay by adding a surcharge on each gallon of Mix you purchase, payable when you purchase the Mix. If we permit] you to pay by a surcharge, the surcharge will be calculated so as to liquidate the past due amount¹ and applicable late charges within 120 days. !

4.6 Application of Funds; Withholding of Payments. If you are late in paying any ob igation you owe us or our affiliates, we or our affiliates may apply any payment jyou make jto, any obligation you owe us or our affiliates, whether or not you make any designation to the contrary. You will not withhold or set off payment of any amount you owe us or our affiliates on grounds of alleged non-performance of any obligation we or they owe you.

¹ 5. FACILITY LOCATION ]

5 j No Marketing Exclusivity. You agree that: (i) nothing in this Agreement grants you!any marketing exclusivity as to particular customers; and (ii) we and other Carvel franchisees may solicit customers in, and service customers who are from, any geographic location we or they

desire, including close to your Franchised Business. I :

i i i '

5.2 �Limitations. This Agreement does not grant you any,area_rmarket, territorial, franchise, or other rights except as,stated in this Agreement. We reserve all rights relatedto the System that we'do, not expressly grant you in this Agreement. We; may produce and'sell Products, or any other,products or services, and authorize others to produce and sell Products or any other products or services, to any party, in any location, through|a facility of a typej described in Ithis Agreement arid/or through any channel of distribution, including withoutlimitation to and through supermarkets, convenience stores, club^: stores, and -other-retail stores not dedjcated to the sale of the Products, or any other channel including mail/order aridUhe internet, including mail order and the linternet, using the Marks, the System ;ahd any other marks^arid/or systems, we desire, without providing any rights or compensation fo you. We may acquire or be acquired by another business, and the other business may open and operate, and franchise others to open and operate, businesses similar to the Franchised Business; (i) at any location, including near your Accepted Location, using the Marks, through facilities that are the same as or similar to facilities of the type described in Section 2.1 of this Agreement, without providing any rights' or compensation to you; and (ii) using marks other than the Marks, through facilities that are ithe. same as or similar to facilities of the type described in Section 2.1 of this Agreement, without providing any rights or compensation to you. The essence of this Section 5 is that we and our affiliates may, and may authorize others to, engage in any business activity whatsoever, including near your Accepted Location.

6. SITE SELECTION REQUIREMENTS

6.1^: Accepted Location. You must establish and operate the Facility only at the Accepted Location: You will not conduct, and you will not permit the conduct of, any business from the Facility other than the Franchised Business. You must obtain our prior written consent jf you wish to co-brand the Franchised Business with another business. You must comply with all Standards for the type of Facility franchised under this Agreement, as stated' in the Manuals described in Section 10 of this Agreement or otherwise. ;

6.2 Our Assistance. We may assist you in selecting a proposed site for your Faci ityj (a "Proposed Site"), but we are not obligated to do so. Our acceptance of any Proposed Site is our agreement that the Proposed Site satisfies our minimum site selection criteria only, and will not be construed as a representation or warranty that the Facility located at the Proposed Site will be successful.

Carvel-U FOC-040106-v 1

UFOC Page 85

6.3 Location Not Accepted at Time of Signing. If you and we have not agreed on an Accepted Location at the time we sign this Agreement, you will select a proposed location ("Proposed Location") that complies with our site selection criteria. You will provide us with all material we request to evaluate the suitability of the Proposed Location for your facility along with a site plan for the Proposed Location. We will provide you with our acceptance or non-acceptance of the Proposed Location within 15 days after you deliver the last item of material we request, and our determination will be final. You must sign the lease, sublease, or other rental agreement for the location (the "Lease"). You will have 120 days following the Effective Date to identify the Accepted Location, obtain our acceptance of the Accepted Location, and to obtain a fully executed Lease and Rider to Lease for the Accepted Location. For a timeline stating these deadlines, see Schedule A, Schedule of Events. If you do not secure an Accepted Location within the time limits and as stated in this Section, we may terminate this Agreement.

6.4 Accepted Location Lease. If you lease the Accepted Location, we will have the right to approve your Lease, which approval will not be unreasonably withheld. You must deliver to us a copy of the Lease in signing form, with all material terms shown, and any other documents you propose to sign with the Lease, either: (i) immediately after we sign this Agreement (if we have accepted the location before we sign this Agreement); or (ii) before our acceptance of the location (if we accepted the location following the signing of this Agreement). Our acceptance of any Lease will not be construed as a representation or warranty that the Lease is reasonable or on favorable terms, , - , _;- - - - - ,-_r ri

A. _x If you lease, or sublease the'Accepted'Location: (i) you may^Jhot "create "any obligations; on our behalf, grant any rights'against us, or agree to any other-term that is inconsistent with any term of this Agreement; (ii) you will duly and timely perform all terms under the Lease; and\(iii) except as otherwise provided in this Agreement, you will-not assign, encumber, or transfer the Lease; or sublet all or any part of the Accepted Location, without our prior written approval. ^ ""., / \; > '« '■,"""■ C '""~"~^,V \' ■ �'■ '■

B. All Leases or other agreements you enter into to secure the Accepted Location must contain the Rider to Lease attached as Schedule B.

6.5 Governmental Approvals and Licenses. You must promptly seek and obtain all governmental approvals and licenses required to open and operate the Facility.

6.6 Relocation of the Facility.

A. You may relocate the Facility, if you first obtain our written acceptance for the new location. If you relocate the Facility in compliance with this Section, the new location will be the "Accepted Location" as used in this Agreement. You will reimburse us for all costs we incur related to the relocation. All Leases and other agreements you enter into to secure the substitute location must comply with Section 6.4 of this Agreement.

B. If we request that you relocate the Facility and you relocate to a site we accept, you will sign our then-current form of franchise agreement and this Agreement will then terminate. You are not obligated to relocate your Facility if we request you to. The new franchise agreement will expire on the expiration date of your lease for the new location. If that date falls within the Term of this Agreement, you will not pay another initial franchise fee and the Royalty and Advertising Contribution will remain the same as in your present Franchise Agreement, unless the relocated facility is in a different type of location (i.e., change from a mall location to a street-side location, in which case the Advertising Contribution will be that then charged for the type of venue of the relocated facility. If the expiration date of your new lease falls after the expiration date of your present Franchise Agreement, then you must pay an Initial Franchise Fee of $1,000 multiplied by the number of years between the expiration date of the

Carvel-U FOC-040106-v 1

UFOC Page 86

present term and the expiration date of the new term; and after the expiraiion date of your present Franchise Agreement, the Royalty and Advertising Contribution will be changed to that stated in our then-current Franchise Agreement for the type of venue in whish the Facility is

located. I

6.7 Our Right to Master Lease. We reserve the right, directly or through an affiliate! to master lease any Accepted Location and then sublet the Accepted Location tolyou. We willlnot do so unless we and you agree as to the fees, rents, and deposits we will charge. Our exercise of our right to master lease the Location, sublease it to you, and derive profit from doing so will not be construed as our express or implied warranty with regard to the viability of the Accepted Location. '

7. LEASEHOLD IMPROVEMENTS

7.1 Leasehold Improvements. You must hire a general contractor that we approve in writing to complete the build-out of your Carvel Facility. Our approval of your general contractor will |not in any way be our endorsement of your general contractor or render us liable¹ for your general contractor's performance. You will, at your expense, make all leasehold impiovements to the Accepted Location, and will install all furniture, fixtures, equipment, and decor] that we require. With the exception of certain equipment that you must purchase from suppliers we designate or approve,; you may purchase the required items from any~source,_Litthe itemsj.comply with pur Standards.; You must purchase certain items of machinery and equipment frtim cohsplidators that we have approved in writing or as we otherwise direct. ;The consolidator wiircbordiriate Ithe ordering:and delivery of your machinery and equipment., ! "\ !

7.2 Architectural Plans. We will provide you with a sampleJayout for the inferior of a typical facility and specifications for furniture, fixtures,.equipment.^andrdecor. You must,^; at your expense; employ architects (that we apprbveln^Nwriting)rdesigners, and others^:as necessar^ to prepare your plans, modify or complete the.layouts/reh^erings.iplans.'and specifications, which must include interior and exterior elevations of the Accepted Location "(the "Architectural Planb"). Our approval of your architect will not in any way be our endorsement of your architect or render us liable for your architect's performance.

A. You will submit to us, within 120 days after the Effective Date, e complete set of final Architectural Plans. We will promptly review the Architectural Plans and will either approve the Architectural Plans or provide comments to you on changes we require. You will not b^gin

construction of the Facility until we have approved the final Architectural Plans in writing.

B. You will, before we approve the Architectural Plans, have your architect or |ou certify to us that the Architectural Plans comply with the Americans with Disabilities Act (the "ADA"), the architectural guidelines under the ADA, and ail other federal, :state, and ideal statutes, rules, regulations, ordinances, and codes that apply to the Facility. ]

7.3; Construction, Inspection, and Opening. You must begin the construction and equipping of the Facility ("Construction Start") within 240 days after the Effective Date. |You must use a licensed general contractor that we have approved in writing to perform construction work at the Facility, and you must furnish us with all documents we request related to construction¹. Our approval of your general contractor will not in any way be our endorsement; of your general contractor or render us liable for your general contractor's performance. You must obtain our written approval of any changes to the Architectural Plans before you implement the changes. We will have access to the Facility while work is in progress and on its iiompletionJ On completion of construction and before the Opening Date, any architect and general contractor you employ or you will provide us with a certificate stating that the as-built plans for the Facility

comply with the ADA, the architectural guidelines under the ADA, and all othor federal, state,

Carvel-U FOC-040106-v1

UFOC Page 87

and local statutes, rules, regulations, ordinances, and codes that apply to the Facility. We may require you to make any modifications we deem necessary to bring the Facility into compliance with the Architectural Plans, and you will promptly make these modifications. We will not allow the Facility to open if it does not conform to the final Architectural Plans and changes we approved.

7.4 Signage. All exterior and interior signage you use for the Facility must conform to our Standards, including our Standards as to type, color, size, design, and location. You must obtain our written approval before you install or display any signage: You must use a signage vendor that we approve in writing.

8. PROPRIETARY PRODUCTS AND NON-PROPRIETARY PRODUCTS

8.1 Proprietary Products and Non-Proprietary Products. The "Proprietary Products" are all Products and other products, services, and equipment that now comprise, or that in the future may comprise, a part of our System that we developed, are proprietary to us, or we keep secret, including the Mix. The "Non-Proprietary Products" includes all non-Proprietary toppings, flavorings, other ingredients, components, cones, and other edible items sold as part of the end products we offer for consumption to the retail purchaser. A list of the Proprietary Products and Non-Proprietary Products is included in the Manuals.

! A. ' You will purchase from us or our designated? supplier, your entire'requirement of the Proprietary Products and Non-Proprietary Products. If we sell the Propriet'aryProducts or Non-Proprietary Products to you, we will do so at the same price as we charge similarly-situated franchisees,'exclusive of freight. If we arrange for manufacturers to sell the Proprietary Products or Non-Proprietary Products directly to our designated suppliers who then sell them to you,, then we will'have the right to receive compensation.or;other consideration from the manufacturers for these sales. ; .", _; ^r^\ J r""\\ iC"> '

B. If you are in default under this Agreement, then all obligations we and our designated suppliers may have to sell you Proprietary Products, Non-Proprietary Products, or other products, services, or equipment will abate; and you will not, as a result, have a defense at law or equity based on impossibility of your performance or any claim against us or our designated suppliers.

C. If we or our designated suppliers are unable to supply you with the quantity and type of Proprietary Products or Non-Proprietary Products you request, we will exert reasonable commercial efforts to allocate, or to cause our designated suppliers to allocate, the Proprietary Products and Non-Proprietary Products available on an equitable basis among the businesses that seek to purchase Proprietary Products or Non-Proprietary Products.

8.2 Requirements Concerning Proprietary Products and Non-Proprietary Products.

A. You will purchase the Proprietary Products and Non-Proprietary Products, and certain other products, services, and equipment for the operation of the Franchised Business we specify, only from us; from suppliers we designate in writing; from suppliers you select and we approve; or in accordance with our Standards.

B. We will exercise our approval of suppliers reasonably, in accordance with the following procedures: (i) you must submit a written request to us for approval of the supplier; (ii) the supplier must demonstrate that it is able to supply the item to you in accordance with our Standards including our standards as to the artwork and text on the items; (iii) if the supplier is to receive access to any of our confidential information, trade secrets or logos, the supplier must sign a confidentiality agreement or our standard form license agreement we prepare; (iv) the supplier pays our then-current supplier evaluation fee; and (v) the supplier must demonstrate

Carvel-UFOC-040106-v1

UFOC Page 88

that it is in good standing in the business community with respect to its financial soundness and the reliability of its products or services. We reserve the right to test, analyze, inspect, or sample the product, service, or equipment of any supplier you propose using: at your expense, whether we approve or reject the supplier. We will give you notice of our approval or disapproval within a reasonable time. If we revoke approval of any supplier, we will give' you written notice.

8.3 Non-Proprietary Products. ]

A. We may designate certain products, services, or equipment thiit you may obtain from suppliers other than us, our affiliates, or our designated suppliers (the "Non-Proprietary Products"). We may establish Standards governing the minimum specifications of these Non-Proprietary Products. II

B. You may purchase certain paper and plastic products bearing the Marks, such as dishes, cartons, bags, napkins, and packaging supplies, from us or a supplier we authorize, or from another supplier, if we have approved the supplier as stated in SJsction 8.2 of: this Agreement.

8.4 Products You Sell. You will produce and sell all Products we specify, including without limitation all menu items and otherproducts and. services that.we require you to sell, as stked in the Manuals or otherwise, and .that are part]of the System.. �Y6u will not produce(.."or sell [any Products or other products^or services: (i) that we do not authorize you to p^:oduce or sell; or (ii) that we direct you not to produce or sell._; You must prepare all Products you produce 'and sell in compliance with our Standards, using only those Non-Proprietary Products that meet'our Standards. This means.'that you may .use only those | Product) compononts, ingredients, flavoring, and garnishes that meet our then-current Standards.- : .-.-">^/

8.5 Limitations. You will only engage In the,sale of) Products* under the^System from) the Facility to the ultimate consumer. You will hot offer for saleTsell, or delivej' any Proprietary Product, Non-Proprietary Product, or supply, or any constituent part of any Proprietary Product, Non-Proprietary Product, or supply, including without limitation the Mix, to,a third party: for resale, retail sale, or further distribution, without our prior written consent. You may not sell Products thru the Internet or using any channel of distribution other than your Facility.

8.6 Items You Develop. You license to us, permanently and irrevocably, for incorporation into the System and for any other use we desire, full rights to all of the following if developed by you or for you during the Term, without payment of any compensation to you: (i) ice cream, frozen dessert, and other food and non-food products; (ii) equipment related to clause (ii); and (iii) sales, marketing, and promotional programs and campaigns related to clause (i). | :

8.7 Disclaimer of Warranties. WE EXPRESSLY EXCLUDE AND DISCLAIM ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO ALL PROPRIETARY PRODUCTS, NON-PROPRIETARY PRODUCTS, AND OTHER PRODUCTS, SUPPLIES, SERVICES, AND EQUIPMENT WE OFFER, SELL, OR REQUIRE FOR YOUR FRANCHISED BUSINESS. YOUR EXCLUSIVE REMEDYl AND OUR EXCLUSIVE LIABILITY FOR ALL CLAIMS AS TO ANY PROPRIETARY PRODUCTS, NON-PROPRIETARY PRODUCTS, AND OTHER PRODUCTS, SUPPLIES, SERVICES,¹ AND EQUIPMENT IS LIMITED TO THE PURCHASE PRICE THEREFOR, PLUS SHIPPING COSTS, IF ANY, YOU PAID; OR, AT OUR OPTION, THE REPLACEMENT THEREOF! WE WILL NOT BE LIABLE FOR SPECIAL, INCIDENTAL, INDIRECT, CONSEQUENTIAL, MULTIPLIED, EXEMPLARY, OR PUNITIVE DAMAGES, WHETHER OR NOT CAUSED JBY OR RESULTING FROM OUR NEGLIGENCE, FOR ANY MATTER STATED IN THIS SECTION. !

Carvel-UFOC-040106-v1

I UFOC Page 89

9. COMPLIANCE WITH STANDARDS

9.1 Compliance with Standards. You must comply with our Standards. All references herein to the Agreement and the System include the Standards.

9.2 Changes to the Standards. We will communicate changes in the Standards in writing or electronically to you, as we deem appropriate. Changes in the Standards may obligate you to invest additional capital in the Franchised Business and incur higher operating costs; provided, however, they will not: (i) materially and unreasonably increase your investment under this Agreement; or (ii) materially alter your fundamental rights under this Agreement.

9.3 Variances. You agree that complete uniformity under many varying geographic and other conditions, and over extended spans of time, is not practical and may be detrimental to the System, and that as a result: (i) we may vary the Standards for any franchisee as we deem necessary; (ii) we may grant franchises using the System under terms that may differ materially from the terms of this Agreement; and (iii) our obligations and rights with respect to our various franchisees may differ materially from our obligations and rights with respect to you, without in any way affecting our rights with respect to you. You will have no right to require that we disclose any variation to you or that we grant you the same or a similar variation.

- . . 10. STANDARD OPERATING PROCEDURES MANUALS,.. , ,

10.1 Manuals. We own the. Manuals for the System. We will loan you one copy-bf the Manuals during our Initial training Program, which Manuals you may keep on loan during the Term. We*may provide the Manuals, and any Supplements to the Manuals {defined below), to you in hard copy or electronically via diskette, CD ROM, electronic mail, the internet or other electronic format. '-

10.2 Supplements to the Manuals, \ We,"may make additions to, deletions from, and modifications to the Manuals from time to time {the "Supplements to the Manuals"). All Supplements to the Manuals are binding on you. All references in this Agreement or otherwise to the Manuals will include Supplements to the Manuals.

10.3 Operation. You will operate the Facility in compliance with the Manuals, including without limitation all operational systems, procedures, policies, methods, and requirements in the Manuals from time to time applicable to the type of Facility franchised under this Agreement. You will immediately adopt and use any Supplements to the Manuals. The Manuals and Supplements to the Manuals will not materially alter your fundamental rights and obligations under this Agreement.

10.4 Master Copy. You will ensure at all times that your copy of the Manuals is current and up-to-date. If there is any dispute as to your compliance with the Manuals, the master copy of the Manuals we maintain will control.

10.5 Ownership. You agree that we own all proprietary rights in and to the System and the Manuals. The Manuals will at all times remain our property and you and all your directors, officers, shareholders, partners, members, employees, agents, independent contractors, and others who gain access to the Manuals and the information contained in the Manuals will treat the Manuals and the information in the Manuals as our confidential information.

11. PROPRIETARY MARKS

11.1 Non-Ownership. You will not contest our rights to the current or future System and Marks, nor our right to grant to others use of the Marks or of any other marks that we own. You understand that the Marks are and will remain our property, and that your use of the Marks

Carvel-UFOC-040106-v1

UFOCPage90

inures to our benefit. You will immediately assign to us on our request any rights to the Marks that you may gain through your use of the Marks. | ;

I i

11.2 Use of Marks. You will use the Marks as the sole identification of the Franchised

Business. You will not use the Marks in connection with any business j other than the Franchised Business. You will not use any Mark as part of your business ns.me or with any prefix, suffix, or other modifying words, terms, designs, or symbols, or in any modified form, nor will you use any Mark in connection with any product or service, or in any place, or in any manner, that we have not authorized in writing. You will give notices of traderrjark and service mark registrations related to the Marks as we specify. You will conspicuously identify yours|elf and the Facility, in all dealings with your customers, contractors, suppliers, public officials] and others, as an independent franchisee, in the fashion that we specify. We may enter the Facility, at any reasonable time and without causing any undue business disruption, to correct jor terminate any unauthorized use of the Marks.

11.3 Defense of Marks. You must promptly notify us of any suit filed or demand made

against you challenging the validity of any of the Marks ("Mark Claim"). Using our attorneys', we agree to protect and defend you against a Mark Claim, and to defend and indemnify you against your loss, cost or expense related to the Mark Claim, except where the Mark Claim arose because you used the Marks in violation of this Agreement. You may not settle o:; compromise a Mark Claim without pur, prior written consent, and»you-agree to cooperate with |js in defending against a Mark Claim. \';, ��-/■ \ }' f .. ^f ''.'-*"'

11.4! Internet Use. You will not establish a web site on the Internet using any domain name containing the Marks or anything similar to these words without our prior written consent. We retain the right to pre-approve your use of Jinking and framing between your web pages and a other web sites. ^ ■■ -'-""' ^v -- ~. l-'.^^r *^v-- .---�' '. - *-.-..:■ ..--

12. ADVEF^INOA^^ ,;---]r '

12.1! Advertising Standards. You will use only advertising and promotional materials tha have furnished or approved in writing in advance. You will conform all advertising to Standards.

we our

12.2 Submission of Proposed Materials. Except for advertising or promotional materials we furnish to you, you must submit to us for our approval, before use, copies of all proposed advertising and promotional materials, including without limitation business¹ cards, signs,

displays, press releases, leaflets, and mailouts. | i

12.3! Grand Opening Advertising. You must spend at least $5,000 in grand opening advertising promoting the opening of your Facility (the "Grand Opening Obligation") within 30 days before or 60 days after the date you open the Facility. In addition, you also Jnust spend an additional $15,000 in local store marketing for your Facility during the first 12 months after trie Opening Date. All materials you use for this Grand Opening Obligation, and the media in which you use them, are subject to our approval.

12.4 Computer Network Advertising. You will use only materials that we have approved. If

we grant you approval for an Internet Site: (i) you will not use any Mark on the Internet Site except as we expressly permit; and (ii) you will list on the Internet Site any internet site I we maintain and any other information we require. If you wish to modify your approved Internet

Site, you must submit all proposed modifications to us for our prior written approval. I

i i

12.5 Telephones; Yellow and White Page Advertising. You will, at your expense, install the number and type of telephone lines and answering or voicemail systems we require. You may, at your expense, list your Facility in alphabetic directories ("White Pages") and 'advertise your

Carvel-UFOC-040106-v1

UFOC Page 91

Facility in classified directories ("Yellow Pages"). You must obtain our approval of all Yellow Page advertising before you place it.

12.6 Our Advertising. You will pay the Advertising Contributions to us to contribute to our cost of advertising and promoting the System.

A. You agree that: (i) we undertake no obligation to make expenditures on your behalf that are equivalent or proportionate to your contributions, to ensure that any particular franchisee benefits directly or pro rata from the placement of advertising, or to ensure that any advertising impacts or penetrates your area; (ii)we need not maintain the Advertising Contributions you pay or the income earned from the Advertising Contributions in a separate account from our other funds; (iii)we are not a fiduciary with respect to your Advertising Contributions; and (iv) the aggregate of your Advertising Contributions is not a trust or an "advertising fund."

B. We reserve the right to use any media, create any programs, and allocate advertising and promotional expenditures to any regions or locales we deem appropriate. We have sole authority to direct all advertising programs and promotions with sole control over the creative concepts, materials, and media used in the programs, and the placement and allocation of advertising. We may use your Advertising Contributions to meet the costs of administering, preparing, and conducting advertising...programs, including without limitation the cost of preparing and conducting television, radio, magazine, and newspaper advertisihgTcampaigns and other public relations activities, and employing public, relations firms and advertising agencies to assist in these activities. We may use your Advertising Contributions to compensate us for the reasonable administrative costs and overhead we incur in activities related to advertising and promotional programs, including, without limitation new product development, market research/preparing advertising ^yand promotional materials,"working with public relations firms and advertising agencies^and/^cdmpensatingUhird parties for preparing and maintaining our internet sites. . v.; _N / r. [ V> \! ^y - _n\. .^r * _:

13. TRAINING

13.1 New Franchisee Orientation Program. You, a partner if you are a partnership, a principal shareholder if you are a corporation, or the managing member if you are a limited liability company, must complete, to our satisfaction, the New Franchisee Orientation Program ("NFOP") within 90 days of the Effective Date and before you open your first Facility.

13.2 Initial Training Program. If you are an individual and will act as the full-time manager of your Facility (the "Facility Manager") or if this will be your first Facility, you and any other persons we designate must attend and successfully complete the initial training program for a «Brand_Name» Facility (the "Initial Training Program"). We will provide the Initial Training Program at no additional charge, but you must pay each attendee's travel expenses (including airfare, car expense, lodging, meals, etc). If you are an individual but will not act as Facility Manager and you have previously successfully completed our Initial Training Program, or if you are a corporation, partnership, limited liability company, or other entity, your Facility Manager and any other persons we designate must attend and successfully complete the Initial Training Program. All training attendees must be over the age of 18 years. We will provide you with a list of our scheduled dates for the Initial Training Program that occur within 90 days before your scheduled Opening Date and you must choose which Program you will attend. You must attend and successfully complete the Initial Training Program before the Opening Date. If, within the last 2 years, you, your Facility Manager or any attendees we designate (collectively, the "Participants") have previously attended and completed our Initial Training Program for another «Brand_Name» facility and have not defaulted under any other franchise agreement with us, then we will not require the person so trained to attend the Initial Training Program.

Carvel-UFOC-040106-v1

UFOC Page 92

A. If we reasonably conclude that any Participant has failejj to successfully complete the Initial Training Program, that person must re-enroll in our next scheduled applicable Initial Training Program at no additional charge. We will have the right to terminate this Agreement if, following the Initial Training Program and re-enrollment training, if any, no Participant from the Facility has successfully completed the Initial Training Program.

i B. Any Facility Managers you hire or appoint after the opening of the Facili y,| and any other persons we designate, must attend and successfully complete our next scheduled Initial Training Program. We will provide this Initial Training Program at no additional charge, but you must pay each attendee's travel expenses (including airfare, car expense, lodging, meals, etc). i j

13.3 On-Site Training. You may request that we provide you with on-site training or consultation (the "On-Site Training"). We may agree to provide On-Site Training, but will not be obligated to do so. We may charge you a reasonable fee for On-Site Training.

13.4 Conventions. We may from time to time conduct conferences, conventions, or training sessions on any matters related to the System. You will cause your Facility Manager and other personnel we designate to attend each meeting or session. We may charge you a reasonable fee to attend.

13.5 Expenses; Compensation; Content.¹ You will pay. all expenses your ^pbrsonhel incur for training, including without limitation thein travel, food, lodging, compensation, and benefit expenses. We.will not payany compensation for any services youfxpersonnal perform in |any training program. ,' ' ■ \ '^l ''�. . . _s \ j .;

--'■�■�' - 14. OUR OBLIGATIONS _v ^!

The following obligations are in addition to punother/obligations stated ini this ■[Agreement:.

14.1 Loan of Manuals. Loan to you one copy of the current Manuals.

14.2 Inspections. Periodically visit the Facility, evaluate your compliance with this Agreement and the Standards, and advise you on changes necessary to bring the Facility into System compliance i

¹ i

14^3 Additional Services. After you open your Facility, we may furnish you with field support

services as we deem appropriate. We may also offer you on-site services that are greater in

scope than our standard field support services, and may charge you a reasonable fee for services. On-site services are subject to availability.

these

14.4 Prices. We may from time to time offer you advice on the price of Products you sell. You will not be obligated to accept this advice; you will have the sole right ;o determine 'the prices you charge.

¹ i

14.5 Test Marketing. We may from time to time conduct test marketiiig to determine

consumer trends and the salability of new food or non-food products and services.

Carvet-UFOC-040106-v1

UFOC Page 93

15. YOUR OBLIGATIONS

The following obligations are in addition to your other obligations in this Agreement:

15.1 Compliance with System. You agree that: (i) every component of the System is vital to us, to your Facility and Franchised Business, and to the facilities and franchised businesses our other franchisees operate; and (ii) your compliance with the System is of the essence to this Agreement. You therefore agree that you will conduct all activities and operations of your Facility and Franchised Business in strict compliance with the System, including without limitation the Standards and the Manuals, as though specifically stated in this Agreement.

15.2 Fictitious Name. You will file for and maintain a Certificate of Fictitious Name that includes the Mark "Carvel®" if required by the jurisdiction where the Facility is located, and will operate your Franchised Business using this name as the principal name of the Franchised Business.

15.3 Opening Date. Your Opening Date must occur within 360 days after the Effective Date. You must notify us of your proposed beginning date at least 30 days in advance. We have the right to inspect your Facility and take other measures we deem appropriate to determine whether you are ready to begin operations. You will not begin operations until we authorize you to, do so.in:writing. ... ... . _;--.~- -v�- -

15.4 Compliance with'Laws. You wi|l operate the Facility and the Franchised Business in strict compliance with all applicable federal, state, and local statutes, regulations, ordinances, codes, and case law (collectively, the "Laws"), including without limitation all Laws related to health and safety. You will promptly furnish to us copies of all fire, health, or other inspection reports,, warnings, certificates, and ratings issued by any government agency that assert any failure to comply strictly with any Law. , ■"- '..": - .v

15.5 Inspections and Audits. We or any of our authorized agents may at any time during normal business hours enter the Facility or any other place where the Franchised Business is operated and: (i) conduct an operational audit to determine your compliance with this Agreement; (ii) examine, analyze, and inspect the Facility, the Proprietary Products and Non-Proprietary Products at the Facility, and the Proprietary Products and Non-Proprietary Products produced and sold at or from the Facility; (iii) take reasonable samples of any Proprietary Products and Non-Proprietary Products and the Proprietary Products and Non-Proprietary Products produced and sold at or from the Facility, without charge or liability therefor; (iv) inspect your employees; (v) confer with your employees and customers; and (vi) audit, review and examine by any means, including electronically through the use of telecommunications devices or otherwise, at our expense, your books, records, accounts, and tax returns related to the Franchised Business. You will provide us with full cooperation in the course of any inspection or audit we conduct under this Section. If any inspection, audit, review or examination reveals that Gross Sales have been understated in any report to us, you must immediately pay to us the Royalty and Advertising Contribution due with respect to the amount understated on demand, in addition to interest provided for under this Agreement. If any understatement exceeds 2.0% of Gross Sales as stated in the report, you must, in addition, on demand, reimburse us for all expenses connected with the audit, review or examination (including, without limitation, reasonable accounting and attorneys' fees). These remedies are in addition to any other rights and remedies we have.

15.6 Adulterated Product. If: (i) any Product you produce or sell evidences dilution or adulteration from the Standards; (ii) any Product you produce or sell is contaminated or is otherwise in violation of applicable Law; or (iii) you fail to maintain the Facility in compliance with applicable Law, you must immediately cease operations, search out and destroy any

Carve1-UFOC-040106-v1

UFOC Page 94

adulterated, diluted, or contaminated Products, eliminate their source, and remedy all unsanitary conditions present. You will not resume operation of the Facility until our laboratory analysis of your Products or inspection of your Facility, as applicable, demonstrates compliance with all applicable Laws and our Standards. Your obligations under this Section do not alter our right to terminate this Agreement under Section 20.2.B., if we instead choose to terminate j this Agreement.

If: (i) we determine that a violation of this Agreement has occurred and that you have committed a similar violation within the one-year period before the date of the inspection ^and audit; (ii)|you fail or refuse to comply with any or all of the remedial measures in this Section; (iii) you fail to provide us with full cooperation in the course of any inspection or audit we conduct; or (iv) we determine that there has been any repetition during the Term of any occurrence under; this Section, then you will pay us a fee for the inspection' or audit in the amount o; $5,000; plus the travel expenses of the inspector, the cost of any analyses we make, and any o;":her expenses we incur in connection with this Section. The remedies stated in this Section are in addition ito'and not in substitution of any other remedies stated elsewhere in this Agreement, including our right to terminate this Agreement under Section 20.2.B, if we instead choose !to termina e | this Agreement.

15.7 Continuing Maintenance. You will continuously maintain and repair the interior'and exterior_; of-the Facility,.and all furniture,.fixtures, equipment, decor, and signage in orlatthe Facility. You will not make any.-ifiaterial alteration to the interior or exterior of the Facility without our prior writteaconsent; "> > '�■ t '" 't

15.8 '. Facility Remodeling.⁸ \ You will, at least twice during the Term, remodel the Facility, including without limitation the Facility's jnternaKand external construction, ^design, furniture, fixtures, equipment, and decor.'so that the Facility reflects our then-current Standards as to image and quality. You will perform all remodeling in compliance'with the Standards, using a general contractor we reasonably approyijtn writing.^ Our approval of your geneVal/contractor will not in any way be our endorsement of your general contractor or renderjus liable for your general contractor's performance. All replacement designs, furniture, fixtures, equipment, 'and decor must be approved by us in writing; must conform to our then-current. Standards; and, where we so require, must be purchased from suppliers we designate or approve in writing. You must begin one remodeling after the 5^th anniversary of the Opening Date, but before the 7^thanniversary of the Opening Date. You must begin another remodeling 5 years after the earlier of the actual or required completion date for the first remodeling. You riiust complete all remodeling within a reasonable time after its beginning, but in no event longer than 6 months after beginning. The requirements of this Section are in addition to the requirements for

ongoing maintenance^ I

15.9 Your Participation; Facility Manager. You will devote your best efforts ,10 the proper jand effective operation of the Facility. In addition, your Facility will have at Isast one Facility Manager. If you are an individual, you may serve as Facility Manager or you may designate a Facility Manager. If you are a corporation, partnership, limited liability company, or otherjentity, you will designate a Facility Manager. You will inform us in writing of the identity of the Facility Manager and any successor Facility Manager. If you operate more than onis facility, youj will employ at least one Facility Manager for each facility. You will notify us immediately pni the death, disability, or termination of employment of any of your Facility Managers arid' will designate a successor or acting Facility Manager within 30 days after the doath, disability, or termination of the predecessor Facility Manager. Each Facility Manager must be approved by us¹, possess the credentials we require, successfully complete the Initial Train:ng Program, |and complete Additional Training and On-Site Training as we may specify.

Carvel-UFOC-040106-v1

' UF0CPage95

15.10 Computerized Point of Sale System. You will promptly install at the Facility the computerized point of sale system, software, associated computer hardware, telephone lines, and other equipment that we require from time to time, all of which you will keep in good repair. We can also require you to purchase a computer system including hardware, software, communications equipment, telephone lines and other equipment. We have the right to retrieve all data from your computerized point of sale and/or computer system that we deem appropriate; provided, however, we will bear the telephone cost of this retrieval.

15.11 Test Marketing. You will participate in any test marketing we perform by providing us with timely reports and other relevant information as we may request. In connection with test marketing, you will purchase for the Facility the reasonable quantity of test products we specify and will use your best efforts to promote and sell test products.

15.12 Hours of Operation. You will continuously operate the Facility on the days and during the minimum hours we specify. You may establish days and hours of operation in excess of the required minimum days and hours.

16. INDEMNIFICATION; INSURANCE

16.1 Indemnification. You will defend, indemnify, and hold harmless the FOCUS Brands Parties, (see Section^ 3.2.B(2) for definition) from and .against. alUoss, expense, liability, or damage, including attorneys' fees, related to the Frahchised Business, the; Facility,; or Ithis Agreement, within 5 days after.demand for defense or indemnification. Notwithstanding the foregoing, you will not be required to indemnify a FOCUS: Brands Party for any liability arising out of the intentionally wrongful conduct of the FOCUS Brands Party, except to the.extent that you are jointly, responsible for the conduct, in which event the indemnification provided by this Section-will nof extend to the percentage of the FOCUS Brands'Party's responsibility, as a court of competent jurisdiction determines. Ybu)will notify us^immediately when you learn of/any demand, suit, or proceeding related to the^FranchisedBusiness, the Facility, or this Agreement (a "Claim"). We may, at your expense "and" risk: (ifassumeThe defense of any Claim; or (ii) settle or take any other action we deem appropriate with respect to the Claim if, in our sole judgment, there are reasonable grounds to believe that any of the acts or omissions on which the Claim is based in fact occurred. We will seek your advice and will keep you informed with regard to any proposed or contemplated settlement. Any failure to pursue recovery from third parties or to mitigate any losses will in no way reduce the amounts the FOCUS Brands Parties may recover from you.

16.2 Required Insurance. You will obtain and maintain during the Term, at your expense, insurance calculated initially as follows:

A. Broad form comprehensive general liability coverage of at least $1,000,000 per person or event, with a deductible of less than $5,000.

B. Fire and Extended Coverage Insurance on your Facility and property in an amount adequate to replace them in case of a loss.

C. If any vehicle is operated for the Franchised Business, automobile liability coverage on all owned, non-owned, and hired vehicles, with minimum limits of liability in the greater of: (i) the amount required by Law; or (ii) $1,000,000 for each person killed or injured; and a total minimum liability of $2,000,000 for any number of persons killed or injured in one accident, and a minimum limit of $300,000 for injury, destruction, or loss of use of property of third persons as the result of any one accident.

D. Business interruption insurance in an amount sufficient to cover your average profit margins and your fixed expenses for six months.

Carvel-U FOC-040106-v1

UFOC Page 96

E. Workers' compensation insurance, employer's liability insurance, unemployment compensation insurance, and state disability insurance, as required by Law. !

16.3 Carrier; Proof of Insurance. All insurance policies required under of this Agreement will: (i)|be issued by an insurance carrier rated "A" or better by Alfred M. Best and Company, Inci, or its, successor; (ii) insure you and name us, our affiliates and subsidiaries and the officers, directors, agents and employees of us, our affiliates and our subsidiaries as additional insureds; and (iii) stipulate that the insurer will deliver 30 days' written notice to us before any cancellation or modification. Your obligation to maintain this insurance will not be limited in any way by reason of any insurance that we may maintain, nor will it relieve you ol your indemnity obligations stated in Section 16.1. You will deliver proof of your compliance wjth this Section to us! so that we receive proof: (a) before you begin operations at the Facility; (b)on each renewal or replacement of each policy; and (c) within 10 days after we make any demand therefor. |We may from time to time increase, decrease, add to, delete from, or modify the mandatory insurance coverages we require.

17. RIGHT TO ACCESS; RECORDS; REPORTING

17.1 Right to Access. We have the right, at any time during regular business hours, without notice, to enter the Facility or any other place where the Franchised Business is conducted to inspect.^audit, and make copies otall your.books, records, and.files related to the Franchised Business. You will immediately on our request: (i) make all these materials available to-us;- and (ii) provide us with full cooperation for the inspection, audit, or copying.

17J.2 Systems and Reports. \You will: (i) comply with' all our Standard;;, on accounting systems, procedures, and formats, if any; ⁵(ii) timely submit to us;complete and accurate financial, operational, and other repdrts-we require (including weekly reports dotailing the Gross Sales during the preceding week); and (iii);;use all fbrms;we specify.^ We m*iy require,you to submit any report by mail, telephone, electronic means, or any btherrneans weimay.desighate:,.

' I !

17.3 Financial Statements. On our request, you must furnish to us a statement of the profit and loss of the Franchised Business for the last fiscal year and a balance sheet as of the end of the last fiscal year, prepared in accordance with generally accepted accounting principles, including all disclosures required under those principles, on a compilation basils and certified by you to be true and correct. We may incorporate information derived from your financial statements in our franchise offering circular and promotional materials, but not so as to individually identify you or your Facility. !

17'.4 Tax Returns. No later than 30 days following our request, you will furnish to us exact copies of all tax returns, including federal, state, and any local income tax returns, you were

required to file.

17L5 Financial Records. You will accurately and completely record all revenues 'the Franchised Business receives or is entitled to receive. You will keep and maintain accurate and complete records of revenues, and will maintain and preserve accurate and'complete books, records, and tax returns, including related supporting material, such as cash receipts and credit and charge records, for the Franchised Business for at least 3 years. You will keep and preserve for 3 years the types and classes of records that we require, and all business, personnel, financial, and operating records related to the Franchised Business.,

17|.6 Research. You will inform us from time to time on our request of:! (i) all prices you charge for Products you sell; and (ii) the prices your competitors charge in the area.

Carvel-UFOC-040106-v1

UF0CPage97

18. CONFIDENTIAL INFORMATION; RESTRICTIVE COVENANTS

18.1 Definitions. As used in this Agreement:

A. "Confidential Information" means any information related to the System that we disclose to you that we designate as confidential; or that, by its nature, would reasonably be expected to be held in confidence or kept secret. Without limiting the definition of "Confidential Information," all the following will be conclusively presumed to be Confidential Information whether or not we designate them as such: (i) the Standards and Manuals; (ii) pricing information; (iii) materials describing our franchise network; (iv) our methods of preparing and serving Products, including recipes; (v) our training materials; (vi) our marketing plans; (vii) other information we give to you in confidence, except where such information is a Trade Secret; and (viii) this Agreement.

B. "Trade Secret" means information that derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use. Without limiting the definition of "Trade Secrets," all the 'following will be conclusively presumed to be Trade Secrets whether or not we designate them as such: (i) the composition of our Proprietary Products, Mix, and Non-Proprietary Products; (ii) our advertising, marketing, and public relations strategies; and (iii).our_rmarketing analyses,-_: _B ... ,* _r? ^

. C. , The terms "Confidential Information" and) "Trade Secret" ~do~ not include: (i) information generally known to the public at the time we disclose it to you; (ii) information that becomes known to the public after we disclose it to you, unless it becomes known due to your breach of this Agreement or someone else's breach of a⁸ duty to maintain confidentiality; or (iii) information you can prove was-already known to you at the time .we disclosed it to you.

18.2 Protection of Confidential Information'ano* Trade' Secrete;¹ You- agreet'that^the Confidential Information and Trade Secrets are hot, by definition, generally known in the trade, that they are beyond your present skill and experience, and that for you to develop the Confidential Information and Trade Secrets on your own would be expensive, time-consuming, and difficult. You agree that the Confidential Information and Trade Secrets provide you with a competitive advantage, that they will be economically valuable to you in the development of your Franchised Business, and that gaining access to Confidential Information and Trade Secrets is therefore a primary reason why you are entering into this Agreement. Accordingly, in consideration of our disclosure of the Confidential Information and Trade Secrets, you agree that:

A. You will not, during the Term: (i) appropriate or use any Confidential Information or any Trade Secret for any purpose other than in accordance with this Agreement; (ii) disclose or reveal any portion of the Confidential Information or any Trade Secret to any person, other than to your directors, officers, Principal Owners, management employees, or others who have a legitimate business need to know of it to operate your Franchised Business; or (iii) divulge or use any Confidential Information or any Trade Secret for the benefit of any other person or entity except as we expressly authorize.

B. You will not, for 2 years after the termination or expiration of this Agreement for any reason: (i) use any Confidential Information for any purpose; or (ii) divulge or use any Confidential Information for the benefit of any other person or entity.

C. You will not at any time after the termination or expiration of this Agreement: (i) use any Trade Secret for any purpose; or (ii) divulge or use any Trade Secret for the benefit of any other person or entity.

Carvel-UFOC-040106-v1

UFOCPage98

D. You will not copy, duplicate, record, or otherwise reproduce any of the Confidential Information or Trade Secrets, in whole or in part; store Confidential Information or Trade Secrets in a computer retrieval or data base; or otherwise make Confidential Information or Trade Secrets available to any third party, except as we authorize in this Agreement.

E. You will make all reasonable efforts and take all appropriate precautions to prevent unauthorized copying or disclosure of any Confidential Information or Trade Sjecrets; which precautions will include, but not be limited to, restricting access to Confdential Information and Trade Secrets on a "need to know" basis.

18.3 Unfair Competition. Your breach of this Section will constitute unfair competition. You agree that Sections 18.1 and 18.2 are a reasonable effort under the circumstances to maintain the confidentiality of our Confidential Information and the secrecy of our Trade Secrets.

18.4 Restrictive Covenant. For the purposes of this Agreement, "Covenanting Personnel" means your Principal Owners and your directors and officers, as added to| deleted from, or replaced from time to time. You agree that you will require all Covenanting Personnel to 'sign the Personal Covenants in Schedule C. You agree that you will comply with the following restrictions, which you agree are reasonable and necessary to protect our legitimate interests, the interests of our other franchisees, and integrity of the System:

i A. \ During the /Term; neither'you nor any of your Covenanting Porsonhe}, nbrlany person or entity controlling, ^controlled by< or under common control with* you or them,! will individually or jointly withothers^ directly or indirectly, by, through, on behalf oft or. ^conjunction with, any person or entity: (i)own, maintain,i operate, engage in, or have any interest in, [any business that is engaged in the production ;or sale of products or services thai: are the same as or| similar to any-of^he-Products or. that is similar in any-material respect to any Can/el facility that offers or sells any other product or^Tservice that now;c6mprises7^or thatrmay in theIfuture comprise, a part of the System, or any; product or service confusinglysiimilar ;tJ]ereto (a "Competing Activity"), other than the Franchised Business or another business you or they operate under an agreement with us, without our prior written consent; (ii) <ict as a director, officer, partner, member, employee, independent contractor, consultant, principal, 'agent, landlord or proprietor, or participate or assist in the control of, any business engaged jn a Competing Activity; or (iii) divert or attempt to divert any business from the Franchised Business.

B. Beginning at the expiration or termination of this Agreement] and for 2 years

thereafter or 2 years after a court of competent jurisdiction enters an order enforcing ,this Section of this Agreement, whichever occurs last, within 3 miles of any Carvel facility (including the Accepted Location), neither you nor any of your Covenanting Personnel, nor any person or entity controlling, controlled by, or under common control with you or them, will individually or jointly with others, directly or indirectly, by, through, on behalf of, or in conjunction with, iany person or entity: (i)own, maintain, operate, engage in, or have any interest! in, any business engaged in a Competing Activity, without our prior written consent, except under another agreement with us; (ii) act as a director, officer, partner, member, employee, independent contractor, consultant, principal, agent, landlord or proprietor, or participate in the control of, lany business engaged in a Competing Activity; or (iii) divert or attempt to divert ;jny purchaser or prospective purchaser of any Product.

18:5 Remedies. This Section is a primary inducement to us to enter into this; Agreement, and on any breach of this Section you agree that we would be irreparably injured and without adequate remedy at law. Therefore, on a breach or a threatened or attempted breach of this

Section, you agree that we are entitled, in addition to any other remedies we| may have this Agreement or at law or in equity (including the right to terminate this Agreement

Carvel-U FOC-040106-v 1

UFOC Page 99

under , to a

preliminary and permanent injunction and a decree for specific performance of the terms of this Section without the necessity of showing actual or threatened damage and without being required to furnish a bond or other security. You agree that it is conclusively presumed that any violation of Section 18.4 was accompanied by the misappropriation and inevitable disclosure of our Confidential Information, Trade Secrets, and other methods and procedures.

18.6 Modification. If any term in this Section must be interpreted by a court or an arbitrator of competent jurisdiction, you expressly agree that: (i) the terms of this Section are made freely and voluntarily by you and us, as two independent businesses, together with your Covenanting Personnel to whom we delivered due consideration, in an arms-length commercial transaction between experienced business operators; (ii) in no event should the terms be construed in the same manner or under the same body of law as analogous terms in a contract of employment; (iii) if a court or arbitrator finds that any term in this Section is invalid or unenforceable for any reason, that term will automatically be modified to the minimum extent necessary to make it valid and enforceable, and the modification will be deemed to have been a part of this Agreement as of the Effective Date; and (iv) the court or arbitrator should strictly construe these terms in favor of enforcement. Any dispute between you and us arising out of or related to Section 18.4, regardless of the forum in which the dispute is litigated, arbitrated, or otherwise addressed for purposes of resolving the dispute, will be governed by and construed and enforced in accordance of the laws of the state in which your Accepted Location is located, which.laws-will prevail in the event of-any-conflict of law. You.specifically-agree that these restrictions must be enforced even before you open the facility, since; you will receive valuable information and' training about the System and the operation of the Facility before you begin operations. Accordingly, you agree that we may enforce these restrictions even if you do not open the Facility as this Agreement requires.

..'-:■- ^x :: X. _ - ₁₉ TRANSFER "''"�^;:-

19.1 General. This Agreement is personal to you and you: wilt not, .nor wilhyou attempt to, sell, assign, delegate, transfer, or encumber ("transfer") any of your rights or obligations under this Agreement, without our prior written consent. We may void any purported Transfer in violation of this Section. If you are a corporation, partnership, limited liability company, or other entity: (i) you will give us prompt notice of any additions to, deletions from, or changes to equityholders or interests; and (ii) the terms of this Section will be deemed violated on any purported Transfer of more than 25% in the aggregate of the equity in you or a share of the equity in you sufficient to cause a change in control over you. In addition, if you are a partnership, the terms of this Section will be deemed violated on any removal or addition of any general partner.

19.2 Death or Disability. On the death, disability, or permanent incapacity of a shareholder, partner, or member of yours that results in a change in control over you or the Franchised Business, all of the interest of the deceased, disabled or incapacitated person must be transferred to a buyer we approve within 1 year after the date that person dies or becomes disabled, provided that each person obtaining the interest: (i) is capable of conducting the Franchised Business in accordance with this Agreement; (ii) signs the form of Personal Covenants attached as Schedule C to this Agreement; and (iii) signs the form of Guaranty of Payment and Performance attached as Schedule D to this Agreement; without all of which we may terminate this Agreement.

19.3 Conditions for Your Transfer. You agree that the restrictions on transfer in this Agreement are reasonable and necessary to protect the System and our reputation and goodwill. We will not unreasonably withhold our consent to your sale, assignment, or transfer of the Franchised Business; provided, however, that we may refuse to consent to the transfer unless:

Carvel-UFOC-040106-v1

UFOC Page 100

A. All sums you owe us and our affiliates are paid. ]

B. You are not, and have not been during the Term, in default in any material respect under this Agreement or any other agreement with us, any of our affiliates, or any of our designated suppliers. i

C. The transferee and its proposed directors, officers, shareholders, partners,, and members, as applicable, and its Facility Manager and any other personnel we designate, 'who will be responsible for operating and managing the Facility, satisfactorily complete before the date of transfer our then-current training required of new franchisees. r

D. The transferee and its directors, officers, shareholders, partners, and members,

as applicable, meet our requirements for new franchisees. I i

i i

E; The transferee agrees in writing that it will, at its expense, upgrade the Facility to conform to our then-current Standards for quality and appearance, within the timei we reasonably specify. !

i |

F. The transferee signs our then-current form of franchise agreement and al other

then-current related agreements as we require of new franchisees generally; provided, however,

the.transferee will not be required, to pay.thejnitia! franchise fee stated]Jn the franchise

agreement and the term of the new franchise agreement will expire on;the explrationrdate Term of this Agreement.

oil the

the

will

; G. ' \ You, all your individual owners, the transferee, and allindividi-al owners transferee, deliver to us a written and duly signed: (i) general release, in a ;6rm:that we prepare at our sole, expense, of all claims against the FOCUS. Brands Parties; and'(ii) indemnity protecting the FOCUS Brands Parties againstany .statementsrrepresentations,; o r warranties that you may have made or given to the proposed transferee. :�: sJS) '-J- LX-VV. -I

H. We receive a fully-signed copy of all transfer documents.

I I.' You pay us a transfer fee of $7,500.00.

19.4 Right of First Refusal. If you receive and want to accept a bona fide written offer from a third party to purchase the Franchised Business or substantially all the interests in you (collectively, the "Interest"), you must give us: (i) prompt written notice of the offer, stating the name and address of the prospective purchaser and the price and terms of the offer; and (ii) copies of all written documents and other information related to the offer provided byj or to the prospective purchaser. For 30 days after we receive the information 'required by this Section (the "Option Period"), we will have the option to purchase the Interest on the same terms as the third party offers; provided, however, if any portion of the consideration the third party offers is other than cash, we will have the option of substituting the equivjilent cash value. If we cannot agree within a reasonable time on the equivalent cash value, wo will appoint an independent appraiser, whose determination will be binding on the parties. You and we will equally split all the appraiser's expenses. In order for us to have enough infonnation to decide whether to exercise our option, you must promptly deliver to us, at our request, any information about the Franchised Business that we request not otherwise called for by thijs Agreement.! If you comply with this Section and we do not exercise our right of first refusal vi/ithin the Option Period, you may, within 30 days after the expiration of the Option Period, sell, assign] and transfer the Interest to the third party specified in your notice, provided th_re conditions I of Section 19.3 are met. Any material change in the terms of the offer before closing of the sale to the jthird party will constitute a new offer, subject to the same rights of first refuseil by us as in the

case of an initial offer. If we purchase the Interest under this Section, you will not owe us any

Carvel-UFOC-040106-v1

; UFOC Page 101

liquidated damages under Section 21.2. Our failure to exercise our option under this Section will not be waiver of any other provision of this Agreement.

19.5 Our Transfer. We may Transfer all of our rights and obligations under this Agreement, provided that: (i)we determine that the transferee under the Transfer is able to perform our obligations under this Agreement; and (ii)the transferee agrees, in writing, to perform our obligations under this Agreement. We are not required to obtain your consent for our Transfer. Following the effective date of the Transfer, you will look solely to the transferee, and not to us, for the performance of all obligations in this Agreement.

20. DEFAULT AND TERMINATION

20.1 Your Termination and Notice of Our Breach. You will have no right to terminate this Agreement. If we breach this Agreement, your sole remedy will be an arbitration proceeding under this Agreement.

20.2 Our Termination: No Opportunity to Cure. We have the right to terminate this Agreement without affording you any opportunity to cure the default, effective on our sending of notice of termination to you (or the earliest date permitted by applicable law) if:

A.. The operation of your Franchised Business or Facility�poses a threat or danger to public health or safety. ' � ,! ■ \ ,;.'". ~Z7V;~^r >-

B. '; there is any dilution or adulteration of Proprietary Products or Non-Proprietary Products, or any misrepresentation, substitution, or palming off of non-Carvel products from,the Facility. \ _:- *. , '..■"-'

C. You sell, barter, or exchange, or attempt to; sell,, barter, ,or exchange, any Proprietary Product or supply, including without limitation! the Mix,/atwho!esalet or retail;;except as contemplated by this Agreement. '"""" ''"' """"' """"" "* ^A ^J ^l ^--~

D. You: (i)do not comply with the restrictive covenant in Section 18 of this Agreement during the Term; (ii) violate the restrictions related to the use of Confidential Information or Trade Secrets in Section 18 of this Agreement; or (iii) do not obtain the signing of the Personal Covenants required in Section 18.4 of this Agreement.

E. You copy or permit others to copy any portion of the Manuals, except for forms and similar items included in it for the express purpose of copying, or fail to take all necessary precautions to ensure that the Manuals is kept free from theft, unauthorized copying, unauthorized access, fire, or other acts that may jeopardize the confidentiality of its contents.

F. You or any of your Covenanting Personnel: (i) are convicted of or plead no contest to a felony or a crime involving fraud or moral turpitude; (ii) are convicted of or plead no contest to any other offense or crime or engage in other conduct that we deem likely to reflect materially and unfavorably on the goodwill or reputation of the System; (iii) commit fraud in relation to the Franchised Business or its customers, or otherwise engage in conduct that, in our determination, materially impairs the goodwill related to the System; (iv) fail to comply fully with all Laws, unless there is a bona fide dispute as to the violation or legality of a Law and you promptly resort to a court or other appropriate forum having jurisdiction to contest the violation or illegality; (v) make, or have made, any material misrepresentation to us related to the Franchised Business or this Agreement, or (vi) knowingly maintain false books or records, or submit any false reports to us related to the Franchised Business.

G. You fail to maintain accurate books of account and business and accounting records as required by this Agreement.

Carvel-U FOC-040106-v1

UFOC Page 102

H. You fail to grant us immediate access to your Facility or any other place where the Franchised Business is conducted

The Free Franchise Resource Center

Franchise Agreement

Sample Franchise Agreement