QUALITY FRANCHISE SYSTEMS, INC.
DEVELOPMENT AGENT AGREEMENT
MJK Holdings LLC
DEVELOPMENT AGENT
June 30th 1996
DATE OF AGREEMENT
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION.
TABLE OF CONTENTS
Page
1. PREAMBLES AND GRANT OF RIGHTS...........................................1
A. PREAMBLES....................................................1
X. XXXXX OF RIGHTS..............................................2
2. YOUR OBLIGATIONS........................................................2
A. RECRUITING AND SERVICING.....................................2
B. MANAGEMENT OF YOUR BUSINESS..................................4
C. INSURANCE....................................................4
D. ADVERTISING..................................................4
E. ACCOUNTING, BOOKKEEPING AND REPORTING........................4
F. AGENT'S INSPECTIONS..........................................4
G. DEVELOPMENT AND PERFORMANCE OBLIGATIONS......................5
3. FEES .............................................................5
A. YOUR INITIAL FEE TO US.......................................5
B. OUR PAYMENTS TO YOU..........................................5
C. PAYMENTS ON OUR RESTAURANTS WITHIN THE TERRITORY.............6
D. REDUCTION OF FEES PAYABLE....................................6
4. MARKS .............................................................6
A. OWNERSHIP AND GOODWILL OF MARKS..............................6
B. LIMITATIONS ON YOUR USE OF MARKS.............................7
C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS.....................7
D. DISCONTINUANCE OF USE OF MARKS...............................7
E. INDEMNIFICATION FOR USE OF MARKS.............................8
5. CONFIDENTIAL INFORMATION................................................8
6. EXCLUSIVE RELATIONSHIP..................................................9
7. TRANSFER...............................................................10
A. BY US.......................................................10
B. BY YOU......................................................10
C. YOUR DEATH OR DISABILITY....................................11
8. TERMINATION OF AGREEMENT...............................................11
A. BY YOU......................................................11
BY US.......................................................11
9. OUR AND YOUR RIGHTS AND OBLIGATIONS UPON
TERMINATION OR EXPIRATION OF THIS AGREEMENT............................12
Page
A. PAYMENT OF AMOUNTS OWED TO YOU..............................12
X. XXXXX.......................................................12
C. CONFIDENTIAL INFORMATION....................................13
D. COVENANT NOT TO COMPETE.....................................13
E. CONTINUING OBLIGATIONS......................................14
10. RELATIONSHIP OF THE PARTIES/INDEMNIFICATION............................14
A. INDEPENDENT CONTRACTORS.....................................14
B. NO LIABILITY FOR ACTS OF OTHER PARTY........................14
C. INDEMNIFICATION.............................................14
11. ENFORCEMENT............................................................15
A. SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS...........15
B. WAIVER OF OBLIGATIONS.......................................16
C. COSTS AND ATTORNEYS' FEES...................................17
D. RIGHTS OF PARTIES ARE CUMULATIVE............................17
E. ARBITRATION.................................................17
F. GOVERNING LAW...............................................19
G. CONSENT TO JURISDICTION.....................................19
H. WAIVER OF PUNITIVE DAMAGES AND JURY TRIAL...................20
I. BINDING EFFECT..............................................20
J. LIMITATIONS OF CLAIMS.......................................20
K. CONSTRUCTION................................................20
12. NOTICES AND PAYMENTS...................................................21
13. ACKNOWLEDGMENTS........................................................21
EXHIBITS
EXHIBIT A - TERRITORY
EXHIBIT B - DEVELOPMENT SCHEDULE
GUARANTY AND ASSUMPTION OF OBLIGATIONS
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QUALITY FRANCHISE SYSTEMS, INC.
DEVELOPMENT AGENT AGREEMENT
THIS DEVELOPMENT AGENT AGREEMENT (the "Agreement") is made and entered
into this 30th day of June , 1996 , by and between QUALITY FRANCHISE SYSTEMS,
INC., a Delaware corporation, with its principal business address at 0000 Xxxxx
Xxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxxxx 00000 (referred to in this
Agreement as "we," "us" or "our"), and MKJ Holdings LLC, whose principal
business address is 000 Xxxxxxxxxx Xxxxxxx Xxxxxx, XX 00000 (referred to in this
Agreement as "you" or "your").
1. PREAMBLES AND GRANT OF RIGHTS.
A. PREAMBLES.
(1) We and our predecessors have, since 1978, expended considerable
time and effort in developing and operating a pizza restaurant concept offering
pizza, sandwiches, salads and other food products and services. These
restaurants operate under the "Mountain Mike's Pizza" name ("Mountain Mike's
Pizza Restaurants") and have distinctive business formats, methods, procedures,
designs, layouts, standards and specifications, all of which have been, or may
be, improved, further developed or otherwise modified from time to time.
(2) We use, promote and license certain trademarks, service marks and
other commercial symbols in operating Mountain Mike's Pizza Restaurants,
including the trade and service xxxx "Mountain Mike's Pizza(R)," which have
gained and continue to gain public acceptance and goodwill, and may continue to
create, use and license additional trademarks, service marks and commercial
symbols in operating Mountain Mike's Pizza Restaurants (collectively, the
"Marks").
(3) We have chosen franchising as our business strategy for creating
and keeping customers for Mountain Mike's Pizza. We grant to persons who meet
our qualifications and are willing to undertake the investment and effort a
franchise to own and operate a Mountain Mike's Pizza Restaurant offering the
products and services we authorize and approve while utilizing our business
formats, methods, procedures, signs, designs, layouts, equipment, standards,
specifications and Marks (the "System").
(4) You have applied for the right to represent us as a development
agent within a certain territory.
(5) We grant to certain franchise owners who meet our qualifications
the right to represent us as development agents, within defined geographic
markets with which they are familiar, in recruiting and assisting us in
providing certain services to other franchise owners.
X. XXXXX OF RIGHTS.
(1) Initial Term. Subject to the terms of and upon the conditions
contained in this Agreement, we hereby appoint you to represent us as our
exclusive development agent during the term of this Agreement within the
territory described on Exhibit A (the "Territory"). You agree to perform your
obligations according to this Agreement and the standards and guidelines we
issue from time. The term of this Agreement is fifteen (15) years from the date
it is signed, unless sooner terminated under Section 8. Subject to Section 3.C.,
we (and our affiliates) can in our sole discretion (1) own and operate, and
recruit and grant prospective franchise owners the right to own and operate,
Mountain Mike's Pizza Restaurants at any locations within and outside the
Territory and on any terms and conditions we deem appropriate; and (2) engage in
any other distribution activities that we choose within and outside the
Territory. Except for our agreement not to allow another franchise owner to
represent us as a development agent within the Territory during the term of this
Agreement, your rights under this Agreement are non-exclusive.
(2) Successor Term. If you (and your owners) have complied with this
Agreement and all other agreements between you (or your owners) and us (and our
affiliates), then, when this Agreement expires, we will allow you to represent
us as a development agent within the Territory for an additional ten (10) year
term on the condition that you (and your owners) sign our then current form of
development agent agreement and you and we agree on the minimum number of new
Mountain Mike's Pizza Restaurants to be opened within the Territory during the
additional term.
(3) Your Operation Of Restaurant. You (or your owners) must at all
times during the term of this Agreement own and operate at least one (1)
franchised Mountain Mike's Pizza Restaurant within the Territory. You must open
your first Restaurant within the Territory within one hundred eighty (180) days
after the date of this Agreement. The initial franchise fee for that Restaurant
is included in the amount you must pay us under Section 3.A.
2. YOUR OBLIGATIONS.
A. RECRUITING AND SERVICING.
(1) General. You agree to develop and service Mountain Mike's Pizza
Restaurant franchises in the Territory. This responsibility includes, but is not
limited to, advertising for franchise prospects; providing prospects with
information about us on a timely basis according to our policies and federal,
state and local laws and regulations; screening and qualifying prospective
franchise owners; providing site selection, lease negotiation and construction
advice; assisting with Restaurant openings; inspecting Restaurants; conducting
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training; developing marketing; assisting in administering (as we direct)
cooperative advertising funds and programs operating in your Territory; and
providing business advice to franchise owners.
(2) Recruiting. You agree to submit to us for our review individuals
who are of good character, have adequate financial resources and meet our then
current criteria for franchise owners. You agree to have each prospective
franchise owner complete our then current application form for a Mountain Mike's
Pizza Restaurant franchise. These applications must be submitted to us with all
other information we then customarily require for franchise applicants,
including, without limitation, information concerning the site at which the
applicant proposes to operate its Restaurant.
We will approve or disapprove in writing applicants and/or sites you
propose for Restaurants. We will use our best efforts to notify you within
fifteen (15) calendar days after the later of our personal interview of the
applicant, if any, and our receipt of the complete application, site report,
financial statements and other required materials regarding the applicant. If we
determine, in our sole discretion, that the applicant possesses sufficient
financial and managerial capability and meets the other criteria we then utilize
in granting franchises, and that the proposed site is suitable, we agree to
offer a franchise to the applicant for a Mountain Mike's Pizza Restaurant. The
franchise will be evidenced by our and the applicant's execution of our then
current form of franchise agreement. You will not be a party to those franchise
agreements (unless you are the franchise owner under a particular agreement).
You acknowledge that we may, at our sole discretion, modify in any respect the
franchise agreement and related documents we customarily use in granting
Mountain Mike's Pizza Restaurant franchises. If an applicant fails to execute
the franchise agreement and related documents, deliver payment of the initial
franchise fee and obtain lawful possession of an approved site, we may withdraw
our offer of the franchise to the applicant.
(3) Legal Requirements. You acknowledge that we have advised you that
many jurisdictions have enacted laws concerning the sale, renewal and
termination of franchises and the continuing relationship between parties to a
franchise. We will explain these laws to you and advise you how to comply with
them in performing your obligations under this Agreement. You agree to comply
with all of these laws and legal requirements in force in the Territory and to
utilize only offering circulars that we have approved for use in the applicable
jurisdiction. Neither you, your owners nor any employees can solicit prospective
franchise owners: (a) until we have registered our franchise offering in all
applicable jurisdictions and/or have provided you with an offering circular
prepared in compliance with state and federal law; or (b) at any time if we
notify you that a registration is not then in effect or our documents are not
then in compliance with applicable law. If your activities under this Agreement
require the preparation, amendment, registration or filing of information or any
disclosure or other documents, only we can prepare and file all required
offering circulars, ancillary documents and registration applications. All
registrations must be secured before you may solicit prospective franchise
owners. You agree to provide all information and execute all documents we
reasonably require in order to prepare and file these documents. You agree to
review all materials that we prepare for you and that we will not be liable for
any errors or omissions which you have not brought to our attention.
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B. MANAGEMENT OF YOUR BUSINESS.
The business you operate under this Agreement must at all times be
under your (or, if you are a corporation, limited liability company or
partnership, your managing shareholder's, member's or partner's ("Managing
Owner")) direct, day-to-day, full-time supervision.
C. INSURANCE.
You must at all times during the term of this Agreement maintain in
force, at your own expense, the insurance coverage we require. This insurance
must cover the risks and entities, and be in the amounts, we specify from time
to time.
D. ADVERTISING.
You agree to use reasonable efforts and spend reasonable amounts to
advertise and promote the offer and sale of Mountain Mike's Pizza Restaurant
franchises. Before you use them, samples of all advertising and promotional
materials that we have not prepared or previously approved must be submitted to
us for approval, which we will not unreasonably withhold. If you do not receive
written disapproval within fifteen (15) days after we receive the materials, the
materials will be considered approved. You cannot use any advertising or
promotional materials that we have disapproved.
E. ACCOUNTING, BOOKKEEPING, RECORDS AND REPORTING.
Within fifteen (15) days after the end of each month during the term of
this Agreement, you agree to deliver to us a report of your business activities
during that month in the form and detail we specify, including information about
your efforts to solicit prospective franchise owners and find sites in the
Territory.
F. AGENT'S INSPECTIONS.
You agree to determine through field audits, reviews and inspections of
each franchise owner in the Territory whether that franchise owner has complied
satisfactorily with its Franchise Agreement and our Operations Manual and
promptly notify the franchise owner in writing, with a copy (and evaluation
report) to us, of any deficiencies. You understand and acknowledge that your
inspections and reports are advisory only and that we have: (1) all of the
rights to inspect and ascertain compliance as if this Agreement were not in
effect; (2) the exclusive right to send notices of default to the franchise
owner; (3) the exclusive right to terminate a Franchise Agreement; and (4) the
exclusive right to take any legal action as a result of any violation of a
Franchise Agreement. If you believe that any franchise owner in the Territory
has breached its Franchise Agreement, you agree to document in writing all of
the relevant facts and request us to investigate the breach. If, as a result of
our investigation, we determine that there is a breach, we can take any action
we deem appropriate.
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G. DEVELOPMENT AND PERFORMANCE OBLIGATIONS.
You agree to develop Mountain Mike's Pizza Restaurants in the Territory
to meet or exceed the development schedule identified on Exhibit B (the
"Development Schedule"). (Each yearly period described in the Development
Schedule is referred to as a "Development Period.") A Mountain Mike's Pizza
Restaurant will be included in the cumulative number of Restaurants required to
be opened and operating only if it actually is operating within the Territory
and complying with the terms of its Franchise Agreement; provided, however, that
a Restaurant which is, with our approval, permanently closed during the last
three (3) months of a Development Period after having been in operation will be
included in the cumulative number of Restaurants required to be opened and
operating during that particular Development Period (but not after). Any
Restaurants you (or your owners) own and operate within the Territory will be
included in the cumulative number of Restaurants required to be opened and
operating. If you fail to comply with the Development Schedule, we can (but need
not):
(a) terminate this Agreement under Section 8;
(b) reduce the size of the Territory to a lesser area that we
determine; or
(c) eliminate your exclusive right to solicit and service franchise
owners in the Territory.
3. FEES.
A. YOUR INITIAL FEE TO US.
You agree to pay us a nonrecurring and nonrefundable initial fee in the
amount of One Hundred Thousand Dollars ($ 100,000.00 ), which we will fully earn
when this Agreement is signed.
B. OUR PAYMENTS TO YOU.
We will pay you the following amounts during the term of this
Agreement:
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(1) Initial Fees. Fifty percent (50%) of the initial franchise fees we
actually collect (not accrued) during the term of this Agreement from selling
franchises in the Territory. We will pay you this amount within thirty (30) days
after each franchised Restaurant opens.
(2) Royalties. Forty percent (40%) of the Royalties, as defined in the
Franchise Agreement (not including marketing or advertising fees), we actually
collect (not accrued) during the term of this Agreement from Mountain Mike's
Pizza Restaurants opened in the Territory during the term of this Agreement. We
will pay you these amounts by the fifteenth (15th) day of each month following
the month during which we actually collect the Royalties.
(3) Transfer Fees. Fifty percent (50%) of any transfer fees we actually
collect (not accrued) due to any "transfers," as defined in the Franchise
Agreement, occurring during the term of this Agreement with respect to
franchises we have sold within the Territory during the term of this Agreement.
We will pay you these amounts within thirty (30) days after we actually collect
the transfer fees.
(4) Renewal or Successor Franchise Fees. Fifty percent (50%) of any
renewal or successor franchise fees we actually collect (not accrued) during the
term of this Agreement with respect to renewal or successor franchises that we
grant within the Territory during the term of this Agreement. We will pay you
these amounts within thirty (30) days after we actually collect the renewal or
successor franchise fees.
C. PAYMENTS ON OUR RESTAURANTS WITHIN THE TERRITORY.
If we (or our affiliates) establish and operate any Mountain Mike's
Pizza Restaurants within the Territory, we (or our affiliates) will pay you the
same fees that you would have been entitled to receive under Paragraph B above
had these Restaurants been operated as franchises. We will pay you these amounts
on the same due dates specified in Paragraph B.
D. REDUCTION OF FEES PAYABLE.
You acknowledge and agree that we (and our affiliates) can reduce any
amounts that we must pay you under this Agreement by (1) any amounts that you
(or your owners) owe us (or our affiliates) under Franchise Agreements or
otherwise and (2) your proportionate share of any expenses we incur with third
parties to collect amounts due from franchise owners.
4. MARKS.
A. OWNERSHIP AND GOODWILL OF MARKS.
Your right to use the Marks is derived solely from this Agreement and
limited to your representing us as a development agent pursuant to and in
compliance with this Agreement and all operating standards we prescribe from
time to time during its term. Your unauthorized use of the Marks will be a
breach of this Agreement and an infringement of our rights in and to the Marks.
6
You acknowledge and agree that your usage of the Marks and any goodwill
established by this use will be exclusively for our benefit and that this
Agreement does not confer any goodwill or other interests in the Marks upon you
(other than the right to represent us as a development agent under this
Agreement). All provisions of this Agreement applicable to the Marks apply to
any additional proprietary trade and service marks and commercial symbols we
authorize you to use.
B. LIMITATIONS ON YOUR USE OF MARKS.
You may not use any Xxxx as part of any corporate or legal business
name or with any prefix, suffix or other modifying words, terms, designs or
symbols (other than logos we have licensed to you), or in any modified form, nor
may you use any Xxxx in any manner we have not expressly authorized in writing.
You agree to display the Marks prominently in the manner we prescribe on forms,
advertising and marketing materials, supplies and other materials we designate.
You agree to give the notices of trade and service xxxx registrations that we
specify and to obtain any fictitious or assumed name registrations required
under applicable law.
C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS.
You agree to notify us immediately of any apparent infringement or
challenge to your use of any Xxxx, or of any claim by any person of any rights
in any Xxxx, and not to communicate with any person other than us and our
attorneys, and your attorneys, in any infringement, challenge or claim. We can
take the action we deem appropriate and control exclusively any litigation, U.S.
Patent and Trademark Office proceeding or any other administrative proceeding
arising out of any infringement, challenge or claim or otherwise relating to any
Xxxx. You agree to sign any and all instruments and documents, render the
assistance and do the acts and things that, in the opinion of our attorneys, may
be necessary or advisable to protect and maintain our interests in any
litigation or Patent and Trademark Office or other proceeding or otherwise to
protect and maintain our interests in the Marks.
D. DISCONTINUANCE OF USE OF MARKS.
If it becomes advisable at any time in our sole discretion for us
and/or you to modify or discontinue the use of any Xxxx and/or use one or more
additional or substitute trade or service marks, you agree to comply with our
directions within a reasonable time after receiving notice. We will not be
obligated to reimburse you for any expenses you incur in doing so, for any loss
of revenue attributable to any modified or discontinued Xxxx or for any
expenditures you make to promote a modified or substitute trademark or service
xxxx.
E. INDEMNIFICATION FOR USE OF MARKS.
We agree to indemnify you against and to reimburse you for all damages
for which you are held liable in any proceeding arising out of your authorized
use of any Xxxx under this Agreement and for all costs you reasonably incur in
defending any such claim brought against you or any such proceeding in which you
are named as a party, provided that you have timely notified us of the claim or
7
proceeding and otherwise have complied with this Agreement. At our option, we
can defend and control the defense of any proceeding arising out of your use of
any Xxxx under this Agreement.
5. CONFIDENTIAL INFORMATION.
We possess (and will continue to develop and acquire) certain
confidential information (the "Confidential Information") relating to the
development and operation of Mountain Mike's Pizza Restaurants, which includes
(without limitation):
(1) recipes;
(2) site selection criteria;
(3) methods, formats, specifications, standards, systems, procedures,
sales and marketing techniques, knowledge and experience used in developing
and operating Mountain Mike's Pizza Restaurants;
(4) marketing and advertising programs for Mountain Mike's Pizza
Restaurants;
(5) knowledge of specifications for and suppliers of certain equipment,
products, materials and supplies; and
(6) knowledge of the operating results and financial performance of
Mountain Mike's Pizza Restaurants.
You acknowledge and agree that you will not acquire any interest in
Confidential Information, other than the right to utilize Confidential
Information disclosed to you in representing us as a development agent during
the term of this Agreement, and that the use or duplication of any Confidential
Information in any other business would constitute an unfair method of
competition. You further acknowledge and agree that Confidential Information is
proprietary, includes our trade secrets and is disclosed to you solely on the
condition that you agree, and you do hereby agree, that you:
(a) will not use Confidential Information in any other
business or capacity;
(b) will maintain the absolute confidentiality of Confidential
Information during and after the term of this Agreement;
(c) will not make unauthorized copies of any portion of
Confidential Information disclosed via electronic medium or in
written or other tangible form; and
(d) will adopt and implement all reasonable procedures that we
prescribe from time to time to prevent unauthorized use or
8
disclosure of Confidential Information, including, without
limitation, restrictions on its disclosure to your personnel and
others.
You agree that we (and our affiliates) will have the perpetual right to
use and authorize other Mountain Mike's Pizza Restaurant franchise owners to
use, and you agree fully and promptly to disclose to us, all ideas, concepts,
formulas, recipes, techniques or materials relating to a Mountain Mike's Pizza
Restaurant that you and/or your employees conceive or develop during the term of
this Agreement.
Despite the foregoing, Confidential Information does not include
information, knowledge or know-how which a person can prove he or she knew
before becoming aware of it as a result of anything we or a franchise owner
provided directly or indirectly or before his or her operation of or presence at
a Mountain Mike's Pizza Restaurant. If we include any matter in Confidential
Information, anyone who claims that it is not Confidential Information has the
burden of proving that the exclusion provided in this paragraph is fulfilled.
6. EXCLUSIVE RELATIONSHIP.
You acknowledge and agree that we would be unable to protect
Confidential Information against unauthorized use or disclosure or to encourage
a free exchange of ideas and information among Mountain Mike's Pizza Restaurants
if franchise owners of Mountain Mike's Pizza Restaurants and our development
agents were permitted to hold interests in or perform services for a Competitive
Business (defined below). You also acknowledge that we have granted these rights
to you in consideration of and reliance upon your agreement to deal exclusively
with us. You therefore agree that, during the term of this Agreement, neither
you nor any of your owners (nor any of your or your owners' spouses) will:
(1) have any direct or indirect controlling interest as a disclosed or
beneficial owner in a Competitive Business, wherever located;
(2) have any direct or indirect interest as a disclosed or beneficial
owner in a Competitive Business operating within the Territory;
(3) have any direct or indirect interest as a disclosed or beneficial
owner in a Competitive Business operating within ten (10) miles of any Mountain
Mike's Pizza Restaurant;
(4) perform services as a director, officer, manager, employee,
consultant, representative, agent or otherwise for a Competitive Business,
wherever located;
(5) recruit or hire any person who is our employee or the employee of
any Mountain Mike's Pizza Restaurant without obtaining the prior written
permission of that person's employer;
(6) divert or attempt to divert any actual or potential business or
customer of a Mountain Mike's Pizza Restaurant to another business; or
9
(7) engage in any other activity which may injure the goodwill of the
Marks and System.
The term "Competitive Business," as used in this Agreement, means any business
operating, or granting franchises or licenses to others to operate, any
restaurant or food service business featuring pizza as its primary product
(other than a Mountain Mike's Pizza Restaurant operated under a franchise
agreement with us). You agree to obtain similar covenants from the personnel we
specify.
7. TRANSFER.
A. BY US.
This Agreement is fully transferable by us and will inure to the
benefit of any transferee or other legal successor to our interests in this
Agreement.
B. BY YOU.
You understand and acknowledge that the rights and duties created by
this Agreement are personal to you (or, if you are a corporation, limited
liability company or partnership, to your owners) and that we have granted these
rights to you in reliance upon our perceptions of your (or your owners')
individual or collective character, skill, aptitude, attitude, business ability
and financial capacity. Accordingly, neither this Agreement (or any interest
herein) nor any ownership or other interest in you may be transferred without
our prior written approval, which we can withhold for any or no reason. Any
transfer without this approval constitutes a breach of this Agreement and is
void and of no effect. As used in this Agreement, the term "transfer" includes
your (or your owners') voluntary, involuntary, direct or indirect assignment,
sale, gift or other disposition of any interest in this Agreement or you.
10
C. YOUR DEATH OR DISABILITY.
Upon your or your Managing Owner's death or disability, we will allow
this Agreement or the Managing Owner's interest in you to be transferred to an
immediate family member if the transferee has sufficient business experience,
aptitude and financial resources to represent us as a development agent and
agrees to comply with this Agreement. This transfer must take place within six
(6) months after death or disability. The term "disability" means a mental or
physical disability, impairment or condition that is reasonably expected to
prevent or actually does prevent you or your Managing Owner from supervising the
development and servicing of Mountain Mike's Pizza Restaurants within the
Territory.
8. TERMINATION OF AGREEMENT.
A. BY YOU.
You can terminate this Agreement at any time by giving us at least
ninety (90) days' prior written notice of termination.
B. BY US.
We can terminate this Agreement, effective upon delivery of written
notice of termination to you, if:
(1) you (or any of your owners) have made or make any material
misrepresentation or omission in acquiring the rights granted under this
Agreement or while representing us as a development agent;
(2) you fail actively to perform your obligations under this Agreement;
(3) you (or any of your owners) are or have been convicted by a trial
court of, or plead or have pleaded no contest to, a felony;
(4) you (or any of your owners) engage in any dishonest or unethical
conduct which may adversely affect the reputation of Mountain Mike's Pizza
Restaurants or the goodwill associated with the Marks;
(5) you (or any of your owners) make an unauthorized assignment of this
Agreement or of an ownership interest in you;
(6) this Agreement or the Managing Owner's interest in you is not
assigned as required upon your or the Managing Owner's death or disability;
(7) you fail to meet the Development Schedule during any Development
Period;
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(8) we have sent a notice of termination under any Franchise Agreement
for a Mountain Mike's Pizza Restaurant between you (or any of your owners) and
us or you fail to own and operate at least one (1) Mountain Mike's Pizza
Restaurant within the Territory, as required under Section 1.B.;
(9) you (or any of your owners) make any unauthorized use or disclosure
of any Confidential Information in violation of this Agreement;
(10) you (or any of your owners) fail on three (3) or more separate
occasions within any period of twelve (12) consecutive months to comply with
this Agreement, whether or not the failures are corrected after written notice
of the failures is delivered to you;
(11) you make an assignment for the benefit of creditors or admit in
writing your insolvency or inability to pay your debts generally as they become
due; or
(12) you (or any of your owners) fail to comply with any other
provision of this Agreement or any of our operating standards and do not correct
the failure within thirty (30) days after written notice of the failure to
comply is delivered to you.
9. OUR AND YOUR RIGHTS AND OBLIGATIONS UPON TERMINATION OR EXPIRATION OF
THIS AGREEMENT.
A. PAYMENT OF AMOUNTS OWED TO YOU.
We agree to pay you within fifteen (15) days after the effective date
of termination or expiration of this Agreement, or on any later date that the
amounts due to you are determined, all amounts owed to you which then are unpaid
(subject to our rights under Section 3.D.). We are not obligated to pay you any
amounts that accrue after the effective date of termination or expiration.
X. XXXXX.
Upon the termination or expiration of this Agreement:
(1) you may not directly or indirectly at any time or in any manner
(except with Mountain Mike's Pizza Restaurants you own and operate) identify
yourself or any business as a current or former development agent of Mountain
Mike's Pizza Restaurants, use any Xxxx, any colorable imitation thereof or other
indicia of a Mountain Mike's Pizza Restaurant in any manner or for any purpose
or utilize for any purpose any trade name, trade or service xxxx or other
commercial symbol that indicates or suggests a connection or association with
us;
(2) you agree to take the action required to cancel all fictitious or
assumed name or equivalent registrations relating to your use of any Xxxx; and
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(3) you agree to deliver to us within thirty (30) days all signs,
marketing materials, forms and other materials containing any Xxxx or otherwise
identifying or relating to a Mountain Mike's Pizza Restaurant and allow us,
without liability to you or third parties, to remove all of these items from
wherever they are located.
C. CONFIDENTIAL INFORMATION.
You agree that, upon termination or expiration of this Agreement, you
will immediately cease to use any of our Confidential Information in any
business or otherwise (except in operating Mountain Mike's Pizza Restaurants
under Franchise Agreements with us) and return to us all copies of any
confidential materials that we have loaned to you.
D. COVENANT NOT TO COMPETE.
Upon
(1) our termination of this Agreement according to its terms and
conditions,
(2) your termination of this Agreement, or
(3) expiration of this Agreement (without renewal),
you and your owners agree that, for a period of two (2) years commencing on the
effective date of termination or expiration or the date on which all persons
restricted by this Paragraph begin to comply with this Paragraph, whichever is
later, neither you nor any of your owners will have any direct or indirect
interest (e.g., through a spouse) as a disclosed or beneficial owner, investor,
partner, director, officer, employee, consultant, representative or agent or in
any other capacity in any Competitive Business (as defined in Section 6 above)
operating:
(a) within the Territory; or
(b) within one (1) mile of any Mountain Mike's Pizza
Restaurant in operation or under construction on the later of the
effective date of the termination or expiration or the date on
which all persons restricted by this Paragraph begin to comply
with this Paragraph.
If any person restricted by this Paragraph refuses voluntarily to
comply with these obligations, the two (2) year period will commence with the
entry of a court order enforcing this provision. You and your owners expressly
acknowledge that you possess skills and abilities of a general nature and have
other opportunities for exploiting these skills. Consequently, enforcement of
the covenants made in this Paragraph will not deprive you of your personal
goodwill or ability to earn a living.
13
E. CONTINUING OBLIGATIONS.
All of our and your (and your owners') obligations which expressly or
by their nature survive the expiration or termination of this Agreement will
continue in full force and effect subsequent to and notwithstanding its
expiration or termination and until they are satisfied in full or by their
nature expire.
10. RELATIONSHIP OF THE PARTIES/INDEMNIFICATION.
A. INDEPENDENT CONTRACTORS.
You and we understand and agree that this Agreement does not create a
fiduciary relationship between you and us, that you and we are and will be
independent contractors, that we have appointed you as our special agent for a
particular purpose and that nothing in this Agreement is intended to make either
you or us a general agent, joint venturer, partner or employee of the other for
any purpose. You agree to identify yourself conspicuously in all dealings with
existing and prospective franchise owners, lessors, suppliers, public officials
and others as the owner of a business under a development agent agreement we
have granted and to place notices of independent ownership on the forms,
business cards, stationery and advertising and other materials we require from
time to time.
B. NO LIABILITY FOR ACTS OF OTHER PARTY.
You agree not to employ any of the Marks in signing any contract or
applying for any license or permit, or in a manner that may result in our
liability for any of your indebtedness or obligations, and that you will not use
the Marks in any way we have not expressly authorized. Neither we nor you will
make any express or implied agreements, warranties, guarantees or
representations or incur any debt in the name or on behalf of the other,
represent that our respective relationship is other than franchisor and
development agent or be obligated by or have any liability under any agreements
or representations made by the other that are not expressly authorized in
writing. We will not be obligated for any damages to any person or property
directly or indirectly arising out of the business you conduct under this
Agreement.
C. INDEMNIFICATION.
(i) You agree to indemnify, defend and hold harmless us, our affiliates
and our respective shareholders, directors, officers, employees, agents,
successors and assignees (the "Indemnified Parties") against and to reimburse
any one or more of the Indemnified Parties for all claims, obligations and
damages described in this Paragraph and any and all claims and liabilities
directly or indirectly arising out of your activities under this Agreement or
your breach of this Agreement. For purposes of this indemnification, "claims"
include all obligations, damages (actual, consequential or otherwise) and costs
reasonably incurred in defending any claim against any of the Indemnified
Parties, including, without limitation, reasonable accountants', arbitrators',
attorneys' and expert witness fees, costs of investigation and proof of facts,
court costs, other expenses of litigation, arbitration or alternative dispute
14
resolution and travel and living expenses. We and each of the other Indemnified
Parties can defend any claim against us and them and agree to settlements or
take any other remedial, corrective or other actions we and/or they deem
expedient. This indemnity will continue in full force and effect subsequent to
and notwithstanding the expiration or termination of this Agreement.
Under no circumstances will we or any other Indemnified Party be
required to seek recovery from any insurer or other third party, or otherwise to
mitigate our, their or your losses and expenses, in order to maintain and
recover fully a claim against you. You agree that a failure to pursue this
recovery or mitigate a loss will in no way reduce or alter the amounts we or
another Indemnified Party may recover from you.
(ii) We agree to indemnify, defend and hold harmless you and your
shareholders, directors, officers, employees, agents, successors and assignees
(the "Development Agent Indemnified Parties") against and to reimburse you for
all claims, obligations and damages (as defined in subparagraph (i) above) for
which you are held liable in an action or proceeding asserted by a third party
as a result of our defaults, negligence or intentional misconduct toward that
third party.
Under no circumstances will you or any other Development Agent
Indemnified Party be required to seek recovery from any insurer or other third
party, or otherwise to mitigate your, their or our losses and expenses, in order
to maintain and recover fully a claim against us. We agree that a failure to
pursue this recovery or mitigate a loss will in no way reduce or alter the
amounts you or another Development Agent Indemnified Party may recover from us.
11. ENFORCEMENT.
A. SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS.
Except as expressly provided to the contrary in this Agreement, each
section, paragraph, term and provision of this Agreement will be considered
severable, and if, for any reason, any provision is held to be invalid or
contrary to or in conflict with any applicable present or future law or
regulation in a final, unappealable ruling issued by any court, agency or
tribunal with competent jurisdiction in a proceeding to which we are a party,
that ruling will not impair the operation of, or have any other effect upon, the
other portions of this Agreement that may remain otherwise intelligible, which
will continue to be given full force and effect and bind the parties, although
any portion held to be invalid will be deemed not to be a part of this Agreement
from the date the time for appeal expires, if you are a party to the proceeding,
otherwise upon your receipt from us of a notice of non-enforcement.
If any covenant in this Agreement which restricts competitive activity
is deemed unenforceable by virtue of its scope in terms of area, business
activity prohibited and/or length of time, but would be enforceable by reducing
any part or all of it, you and we agree that the covenant will be enforced to
15
the fullest extent permissible under the laws and public policies applied in the
jurisdiction whose law is applicable to the validity of the covenant.
If any applicable and binding law or rule of any jurisdiction requires
a greater prior notice than is required under this Agreement of the termination
of this Agreement or of our refusal to enter into a successor development agent
agreement, or the taking of some other action not required under this Agreement,
or if, under any applicable and binding law or rule of any jurisdiction, any
provision of this Agreement or any operating standard is invalid or
unenforceable, the prior notice and/or other action required by the law or rule
will be substituted for the comparable provisions of this Agreement, and we will
have the right, in our sole discretion, to modify the invalid or unenforceable
provision or operating standard to the extent required to be valid and
enforceable. You agree to be bound by any promise or covenant imposing the
maximum duty permitted by law which 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, or any operating standard, any portion or portions
which a court or arbitrator may hold to be unenforceable in a final decision to
which we are a party, or from reducing the scope of any promise or covenant to
the extent required to comply with a court order or arbitration award. These
modifications to this Agreement will be effective only in that jurisdiction,
unless we elect to give them greater applicability, and will be enforced as
originally made and entered into in all other jurisdictions.
B. WAIVER OF OBLIGATIONS.
We and you may by written instrument unilaterally waive or reduce any
obligation of or restriction upon the other under this Agreement, effective upon
delivery of written notice to the other or another effective date stated in the
notice of waiver. Any waiver we grant will be without prejudice to any other
rights we may have, will be subject to our continuing review and may be revoked,
in our sole discretion, at any time and for any reason, effective upon delivery
to you of ten (10) days' prior written notice.
We and you will not be deemed to have waived or impaired any right,
power or option reserved by this Agreement (including, without limitation, our
right to demand exact compliance with every term, condition and covenant in this
Agreement or to declare any breach to be a default and to terminate this
Agreement before the expiration of its term) by virtue of any custom or practice
at variance with the terms of this Agreement; our or your failure, refusal or
neglect to exercise any right under this Agreement or to insist upon exact
compliance by the other with our and your obligations under this Agreement; our
waiver, forbearance, delay, failure or omission to exercise any right, power or
option, whether of the same, similar or different nature, with other Mountain
Mike's Pizza Restaurant development agents; or the existence of other
development agent agreements for Mountain Mike's Pizza Restaurants which contain
different provisions from those contained in this Agreement.
C. COSTS AND ATTORNEYS' FEES.
If we incur expenses due to your failure to comply with this Agreement,
you agree to reimburse us for any of the costs and expenses which we incur,
16
including, without limitation, reasonable accounting, attorneys', arbitrators'
and related fees.
D. RIGHTS OF PARTIES ARE CUMULATIVE.
Our and your rights under this Agreement are cumulative, and no
exercise or enforcement by us or you of any right or remedy under this Agreement
will preclude our or your exercise or enforcement of any other right or remedy
under this Agreement which we or you are entitled by law to enforce.
E. ARBITRATION.
EXCEPT FOR CONTROVERSIES, DISPUTES OR CLAIMS RELATED TO OR BASED ON
YOUR USE OF THE MARKS AFTER THE EXPIRATION OR TERMINATION OF THIS AGREEMENT, ALL
CONTROVERSIES, DISPUTES OR CLAIMS BETWEEN US AND OUR SHAREHOLDERS, OFFICERS,
DIRECTORS, AGENTS AND EMPLOYEES AND YOU (YOUR OWNERS, GUARANTORS, AFFILIATES AND
EMPLOYEES, IF APPLICABLE) ARISING OUT OF OR RELATED TO:
(1) THIS AGREEMENT OR ANY OTHER AGREEMENT BETWEEN YOU AND US OR ANY
PROVISION OF ANY OF THESE AGREEMENTS;
(2) OUR RELATIONSHIP WITH YOU;
(3) THE VALIDITY OF THIS AGREEMENT OR ANY OTHER AGREEMENT BETWEEN YOU
AND US OR ANY PROVISION OF ANY OF THESE AGREEMENTS; OR
(4) ANY OPERATING STANDARD RELATING TO THE DEVELOPMENT AND SERVICING OF
MOUNTAIN MIKE'S PIZZA RESTAURANTS;
WILL BE SUBMITTED FOR ARBITRATION, ON DEMAND OF EITHER PARTY, TO THE OFFICE OF
THE AMERICAN ARBITRATION ASSOCIATION CLOSEST TO OUR THEN EXISTING PRINCIPAL
BUSINESS ADDRESS. THE ARBITRATION PROCEEDINGS WILL BE CONDUCTED AT THAT AMERICAN
ARBITRATION ASSOCIATION OFFICE AND, EXCEPT AS OTHERWISE PROVIDED IN THIS
AGREEMENT, WILL BE HEARD BY ONE ARBITRATOR IN ACCORDANCE WITH THE THEN CURRENT
COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION. ALL
MATTERS RELATING TO ARBITRATION WILL BE GOVERNED BY THE FEDERAL ARBITRATION ACT
(9 U.S.C. SS. 1 ET SEQ.) AND NOT BY ANY STATE ARBITRATION LAW.
THE ARBITRATOR WILL HAVE THE RIGHT TO AWARD OR INCLUDE IN HIS AWARD ANY
RELIEF WHICH DEEMS PROPER IN THE CIRCUMSTANCES, INCLUDING, WITHOUT LIMITATION,
MONEY DAMAGES (WITH INTEREST ON UNPAID AMOUNTS FROM THE DATE DUE), SPECIFIC
17
PERFORMANCE, INJUNCTIVE RELIEF AND ATTORNEYS' FEES AND COSTS, PROVIDED THAT THE
ARBITRATOR WILL NOT HAVE THE RIGHT TO DECLARE ANY XXXX GENERIC OR OTHERWISE
INVALID OR, EXCEPT AS OTHERWISE PROVIDED IN PARAGRAPH H OF THIS SECTION, TO
AWARD EXEMPLARY OR PUNITIVE DAMAGES. THE AWARD AND DECISION OF THE ARBITRATOR
WILL BE CONCLUSIVE AND BINDING UPON ALL PARTIES HERETO, AND JUDGMENT UPON THE
AWARD MAY BE ENTERED IN ANY COURT OF COMPETENT JURISDICTION.
WE AND YOU AGREE TO BE BOUND BY THE PROVISIONS OF ANY LIMITATION ON THE
PERIOD OF TIME IN WHICH CLAIMS MUST BE BROUGHT UNDER APPLICABLE LAW OR THIS
AGREEMENT, WHICHEVER EXPIRES EARLIER. WE AND YOU FURTHER AGREE THAT, IN
CONNECTION WITH ANY ARBITRATION PROCEEDINGS, EACH MUST SUBMIT OR FILE ANY CLAIM
WHICH WOULD CONSTITUTE A COMPULSORY COUNTERCLAIM (AS DEFINED BY RULE 13 OF THE
FEDERAL RULES OF CIVIL PROCEDURE) WITHIN THE SAME PROCEEDING AS THE CLAIM TO
WHICH IT RELATES. ANY CLAIM WHICH IS NOT SUBMITTED OR FILED AS DESCRIBED ABOVE
WILL BE FOREVER BARRED.
WE AND YOU AGREE THAT ARBITRATION WILL BE CONDUCTED ON AN INDIVIDUAL,
NOT A CLASS-WIDE, BASIS, AND THAT AN ARBITRATION PROCEEDING BETWEEN US AND OUR
SHAREHOLDERS, OFFICERS, DIRECTORS, AGENTS AND EMPLOYEES AND YOU (AND/OR YOUR
OWNERS, GUARANTORS, AFFILIATES AND EMPLOYEES, IF APPLICABLE) MAY NOT BE
CONSOLIDATED WITH ANY OTHER ARBITRATION PROCEEDING BETWEEN US AND ANY OTHER
PERSON, CORPORATION OR PARTNERSHIP.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS PARAGRAPH,
WE AND YOU EACH HAVE THE RIGHT IN A PROPER CASE TO SEEK TEMPORARY RESTRAINING
ORDERS AND TEMPORARY OR PRELIMINARY INJUNCTIVE RELIEF FROM A COURT OF COMPETENT
JURISDICTION: PROVIDED, HOWEVER, THAT WE AND YOU MUST CONTEMPORANEOUSLY SUBMIT
OUR DISPUTE FOR ARBITRATION ON THE MERITS AS PROVIDED IN THIS SECTION.
THE PROVISIONS OF THIS PARAGRAPH ARE INTENDED TO BENEFIT AND BIND
CERTAIN THIRD PARTY NON-SIGNATORIES AND WILL CONTINUE IN FULL FORCE AND EFFECT
SUBSEQUENT TO AND NOTWITHSTANDING THE EXPIRATION OR TERMINATION OF THIS
AGREEMENT.
F. GOVERNING LAW.
ALL MATTERS RELATING TO ARBITRATION WILL BE GOVERNED BY THE FEDERAL
ARBITRATION ACT (9 U.S.C. xx.xx. 1 ET SEQ.). EXCEPT TO THE EXTENT GOVERNED BY
THE FEDERAL ARBITRATION ACT, THE UNITED STATES TRADEMARK ACT OF 1946 (XXXXXX
ACT, 15
18
U.S.C. SECTIONS 1051 ET SEQ.) OR OTHER FEDERAL LAW, THIS AGREEMENT AND ALL
CLAIMS ARISING FROM THE RELATIONSHIP BETWEEN YOU AND US WILL BE GOVERNED BY THE
LAWS OF THE STATE IN WHICH THE TERRITORY IS LOCATED, EXCEPT THAT ANY STATE LAW
REGULATING THE SALE OF FRANCHISES (OR DEVELOPMENT AGENT RIGHTS) OR GOVERNING THE
RELATIONSHIP OF A FRANCHISOR AND ITS FRANCHISEE (OR DEVELOPMENT AGENT) WILL NOT
APPLY UNLESS ITS JURISDICTIONAL REQUIREMENTS ARE MET INDEPENDENTLY WITHOUT
REFERENCE TO THIS PARAGRAPH.
G. CONSENT TO JURISDICTION.
SUBJECT TO SECTION 11.E. AND THE PROVISIONS BELOW, YOU AND YOUR OWNERS
AGREE THAT ALL ACTIONS ARISING UNDER THIS AGREEMENT OR OTHERWISE AS A RESULT OF
THE RELATIONSHIP BETWEEN YOU AND US SHALL BE COMMENCED IN THE STATE, AND IN THE
STATE OR FEDERAL COURT OF GENERAL JURISDICTION CLOSEST TO, WHERE OUR PRINCIPAL
BUSINESS ADDRESS THEN IS LOCATED, AND YOU (AND EACH OWNER) IRREVOCABLY SUBMIT TO
THE JURISDICTION OF SUCH COURTS AND WAIVE ANY OBJECTION YOU (AND EACH OWNER) MAY
HAVE TO EITHER THE JURISDICTION OF OR VENUE IN SUCH COURTS. NOTWITHSTANDING THE
FOREGOING, YOU AND YOUR OWNERS AGREE THAT WE MAY ENFORCE THIS AGREEMENT AND ANY
ARBITRATION ORDERS IN THE COURTS OF THE STATE OR STATES IN WHICH YOU ARE
DOMICILED OR THE TERRITORY IS LOCATED.
H. WAIVER OF PUNITIVE DAMAGES AND JURY TRIAL.
EXCEPT FOR YOUR OBLIGATION TO INDEMNIFY US UNDER SECTION 10.C. AND
CLAIMS WE BRING AGAINST YOU FOR YOUR UNAUTHORIZED USE OF THE MARKS OR
UNAUTHORIZED USE OR DISCLOSURE OF ANY CONFIDENTIAL INFORMATION, WE AND YOU AND
YOUR RESPECTIVE OWNERS WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHT TO
OR CLAIM FOR ANY PUNITIVE OR EXEMPLARY DAMAGES AGAINST THE OTHER AND AGREE THAT,
IN THE EVENT OF A DISPUTE BETWEEN US, THE PARTY MAKING A CLAIM WILL BE LIMITED
TO EQUITABLE RELIEF AND TO RECOVERY OF ANY ACTUAL DAMAGES IT SUSTAINS.
WE AND YOU IRREVOCABLY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM, WHETHER AT LAW OR IN EQUITY, BROUGHT BY EITHER OF US.
I. BINDING EFFECT.
This Agreement is binding upon us and you and our respective executors,
19
administrators, heirs, beneficiaries, assigns and successors in interest and may
not be modified except by a written agreement signed by you and us.
J. LIMITATIONS OF CLAIMS.
Any and all claims arising out of or relating to this Agreement or our
relationship with you will be barred unless a judicial or arbitration proceeding
is commenced within one (1) year from the date on which the party asserting the
claim knew or should have known of the facts giving rise to the claims.
K. CONSTRUCTION
The preambles and exhibits are a part of this Agreement which, together
with our written policies, constitutes our and your entire agreement, and there
are no other oral or written understandings or agreements between us and you
relating to the subject matter of this Agreement. Except as contemplated by the
arbitration provisions of Section 11.E., nothing in this Agreement is intended,
nor is deemed, to confer any rights or remedies upon any person or legal entity
not a party hereto.
Except where this Agreement expressly obligates us reasonably to
approve or not unreasonably to withhold our approval of any of your actions or
requests, we have the absolute right to refuse any request you make or to
withhold our approval of any of your proposed, initiated or effected actions
that require our approval. The headings of the several sections and paragraphs
hereof are for convenience only and do not define, limit or construe the
contents of these sections or paragraphs.
References in this Agreement to "we," "us" and "our," with respect to
all of our rights and all of your obligations to us under this Agreement, will
be deemed to include any of our affiliates with whom you deal. The term
"affiliate," as used herein with respect to you or us, means any person or
entity directly or indirectly owned or controlled by, under common control with
or owning or controlling you or us. For purposes of this definition, "control"
means the power to direct or cause the direction of management and policies.
If two or more persons are at any time the Development Agent under this
Agreement, whether as partners or joint venturers, their obligations and
liabilities to us will be joint and several. References to "owner" mean any
person holding a direct or indirect, legal or beneficial ownership interest or
voting rights in you, including, without limitation, any person who has a direct
or indirect interest in you or this Agreement and any person who has any other
legal or equitable interest, or the power to vest in himself or herself any
legal or equitable interest, in its revenue, profits, rights or assets. "Person"
means any natural person, corporation, limited liability company, general or
limited partnership, unincorporated association, cooperative or other legal or
functional entity.
20
This Agreement may be executed in multiple copies, each of which will
be deemed an original.
12. NOTICES AND PAYMENTS.
All written notices, reports and payments permitted or required to be
delivered by the provisions of this Agreement will be deemed so delivered:
(1) at the time delivered by hand;
(2) at the time delivered via computer transmission;
(3) one (1) business day after transmission by telecopy, facsimile or
other electronic system;
(4) one (1) business day after being placed in the hands of a
commercial courier service for next business day delivery; or
(5) three (3) business days after placement in the United States Mail
by Registered or Certified Mail, Return Receipt Requested, postage prepaid;
and must be addressed to the party to be notified at its most current principal
business address of which the notifying party has been notified.
13. ACKNOWLEDGMENTS.
You acknowledge:
(1) That you have conducted an independent investigation of this
business opportunity and recognize that, like any other business, it involves
business risks.
(2) That your business abilities and efforts are vital to the success
of your business.
(3) That you are committed to maintaining the standards we prescribe
for development agents.
(4) That any information you have acquired from other Mountain Mike's
Pizza Restaurant development agents relating to their profits or cash flows does
not constitute information obtained from us, nor do we make any representation
as to the accuracy of any such information.
(5) That in all of their dealings with you, our officers, directors,
employees and agents have acted only in a representative, and not in an
individual, capacity and that business dealings between you and them as a result
of this Agreement are solely between you and us.
21
(6) That you have represented to us, as an inducement to our entry into
this Agreement, that all statements you have made and all materials you have
submitted to us are accurate and complete and that you have made no
misrepresentations or material omissions in obtaining the rights granted by this
Agreement.
(7) That you have read this Agreement and our Franchise Offering
Circular and understand and accept that the terms, conditions and covenants
which are contained in this Agreement are reasonably necessary for us to
maintain our high standards of quality and service and consequently to protect
and preserve the goodwill of the Marks.
22
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement effective on the date stated on the first page.
QUALITY FRANCHISE DEVELOPMENT AGENT
SYSTEMS, INC., a Delaware corporation
(IF CORPORATION, LIMITED LIABILITY
COMPANY OR PARTNERSHIP):
MKJ Holdings LLC
----------------------------------
[Name]
Members of MKJ Holdings LLC
----------------------------------
/s/ Xxxxxxx Xxxxxx
------------------------------------- ----------------------------------
By: Xxxxxxx Xxxxxx By: Xxxxxxx X. Xxxxxxxxx
------------------------------------- ----------------------------------
Title: President & CEO
/s/ Xxxxxxxxx X. Xxxxxxxxx
----------------------------------
By: Xxxxxxxxx X. Xxxxxxxxx
----------------------------------
/s/ X.X. Xxxx
----------------------------------
By: X. X. Xxxx
----------------------------------
23
EXHIBIT A
EXCLUSIVE AREA
1. The Territory referred to in Section 1.B. of the Development Agent
Agreement will be as follows:
San Diego County
--------------------------------------------------------------------------------
Imperial County
--------------------------------------------------------------------------------
Riverside County
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
If the Territory is identified by counties or other political
subdivisions, political boundaries will be considered fixed as of the date of
this Agreement and will not change, notwithstanding a political reorganization
or change to the boundaries or regions. All street boundaries will be deemed to
end at the street center line unless otherwise specified above.
QUALITY FRANCHISE DEVELOPMENT AGENT
SYSTEMS, INC., a Delaware
corporation (IF CORPORATION, LIMITED LIABILITY
COMPANY OR PARTNERSHIP):
/s/ Xxxxxxx Xxxxxx
---------------------------------------
By: Xxxxxxx Xxxxxx
--------------------------------------- -----------------------------------
Title: President & CEO (Name)
Members of MKJ Holdings LLC
-----------------------------------
/s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------------
By: Xxxxxxx X. Xxxxxxxxx
-----------------------------------
(Name) For MKJ LLC
/s/ Xxxxxxxxx X. Xxxxxxxxx
-----------------------------------
By: Xxxxxxxxx X. Xxxxxxxxx
-----------------------------------
(Name) For MKJ LLC
/s/ X.X. Xxxx
-----------------------------------
By: X. X. Xxxx
-----------------------------------
(Name) For MKJ LLC
EXHIBIT B
DEVELOPMENT SCHEDULE
The Development Schedule referred to in Section 2.G. of the Development
Agent Agreement will be as follows:
Cumulative Number of
Number of New Restaurants to be
Restaurants to be Opened Operating Within
Within the Territory the Territory
Date Required~ By Specified Date~ By Specified Date~
6/1/97 3 3
6/1/98 3 6
6/1/99 3 9
6/1/00 3 12
6/1/01 3 15
----/----/-----
----/----/-----
----/----/-----
----/----/-----
----/----/-----
----/----/-----
----/----/-----
----/----/-----
QUALITY FRANCHISE DEVELOPMENT AGENT
SYSTEMS, INC., a Delaware
corporation (IF CORPORATION, LIMITED LIABILITY
COMPANY OR PARTNERSHIP):
By: /s/ Xxxxxxx Xxxxxx MKJ Holdings LLC
---------------------------- -----------------------------------
Title: President & CEO [Name]
By: /s/ X.X. Xxxx
-----------------------------------
Title: Member
Members of MKJ Holdings LLC
-----------------------------------
By: /s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------------
(Name) For MKJ LLC
/s/ Xxxxxxxxx X. Xxxxxxxxx
-----------------------------------
By: Xxxxxxxxx X. Xxxxxxxxx
-----------------------------------
(Name) For MKJ LLC
/s/ X.X. Xxxx
-----------------------------------
By: X.X. Xxxx
-----------------------------------
(Name) For MKJ LLC
2
GUARANTY AND ASSUMPTION OF OBLIGATIONS
THIS GUARANTY AND ASSUMPTION OF OBLIGATIONS is given this June 30th day
of 1996, by MKJ Holdings, LLC
In consideration of, and as an inducement to, the execution of that certain
Development Agent Agreement of even date herewith (the "Agreement") by Quality
Franchise Systems, Inc. ("us," "we" or "our"), each of the undersigned hereby
personally and unconditionally (a) guarantees to us and our successors and
assigns, for the term of the Agreement and thereafter as provided in the
Agreement, that ______________________ ("Development Agent") will punctually pay
and perform each and every undertaking, agreement and covenant set forth in the
Agreement and (b) agrees to be personally bound by, and personally liable for
the breach of, each and every provision in the Agreement, both monetary
obligations and obligations to take or refrain from taking specific actions or
to engage or refrain from engaging in specific activities.
Each of the undersigned consents and agrees that: (1) his or her direct and
immediate liability under this guaranty will be joint and several; (2) he or she
will render any payment or performance required under the Agreement upon demand
if Development Agent fails or refuses punctually to do so; (3) such liability
will not be contingent or conditioned upon our pursuit of any remedies against
Development Agent or any other person; and (4) such liability will not be
diminished, relieved or otherwise affected by any extension of time, credit or
other indulgence which we may from time to time grant to Development Agent or to
any other person, including, without limitation, the compromise or release of
any claims, none of which will in any way modify or amend this guaranty, which
will be continuing and irrevocable during the term of the Agreement.
Each of the undersigned waives all rights to payments and claims for
reimbursement or subrogation which any of the undersigned may have against
Development Agent arising as a result of the undersigned's execution of and
performance under this guaranty.
IN WITNESS WHEREOF, each of the undersigned has affixed his or her signature on
the same day and year as the Agreement was executed.
GUARANTOR(S)
/s/ Xxxxxxx X. Xxxxxxxxx /s/ X.X. Xxxx
----------------------------- -------------------------------
/s/ Xxxxxxxxx X. Xxxxxxxxx
-----------------------------
QUALITY FRANCHISE SYSTEMS, INC.
DEVELOPMENT AGENT AGREEMENT
DEVELOPMENT AGENT
May 1, 1996
DATE OF AGREEMENT
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION.
TABLE OF CONTENTS
Page
1. PREAMBLES AND GRANT OF RIGHTS....................................... 1
A. PREAMBLES.................................................. 1
X. XXXXX OF RIGHTS............................................ 2
2. YOUR OBLIGATIONS.................................................... 2
A. RECRUITING AND SERVICING................................... 2
B. MANAGEMENT OF YOUR BUSINESS................................ 4
C. INSURANCE.................................................. 4
D. ADVERTISING................................................ 4
E. ACCOUNTING, BOOKKEEPING, RECORDS AND REPORTING............. 4
F. AGENT'S INSPECTIONS........................................ 4
G. DEVELOPMENT AND PERFORMANCE OBLIGATIONS.................... 5
3. FEES................................................................ 5
A. YOUR INITIAL FEE TO US..................................... 5
B. OUR PAYMENTS TO YOU........................................ 5
C. PAYMENTS ON OUR RESTAURANTS WITHIN THE TERRITORY........... 6
D. REDUCTION OF FEES PAYABLE.................................. 6
4. MARKS............................................................... 6
A. OWNERSHIP AND GOODWILL OF MARKS............................ 6
B. LIMITATIONS ON YOUR USE OF MARKS........................... 7
C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS................... 7
D. DISCONTINUANCE OF USE OF MARKS............................. 7
E. INDEMNIFICATION FOR USE OF MARKS........................... 8
5. CONFIDENTIAL INFORMATION............................................ 8
6. EXCLUSIVE RELATIONSHIP.............................................. 9
7. TRANSFER............................................................ 10
A. BY US...................................................... 10
B. BY YOU..................................................... 10
C. YOUR DEATH OR DISABILITY................................... 11
8. TERMINATION OF AGREEMENT............................................ 11
A. BY YOU..................................................... 11
B. BY US...................................................... 11
9. OUR AND YOUR RIGHTS AND OBLIGATIONS UPON
TERMINATION OR EXPIRATION OF THIS AGREEMENT......................... 12
A. PAYMENT OF AMOUNTS OWED TO YOU............................. 12
X. XXXXX...................................................... 12
C. CONFIDENTIAL INFORMATION................................... 13
D. COVENANT NOT TO COMPETE.................................... 13
E. CONTINUING OBLIGATIONS..................................... 14
10. RELATIONSHIP OF THE PARTIES/INDEMNIFICATION......................... 14
A. INDEPENDENT CONTRACTORS.................................... 14
B. NO LIABILITY FOR ACTS OF OTHER PARTY....................... 14
C. INDEMNIFICATION............................................ 14
11. ENFORCEMENT......................................................... 15
A. SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS.......... 15
B. WAIVER OF OBLIGATIONS...................................... 16
C. COSTS AND ATTORNEYS' FEES.................................. 17
D. RIGHTS OF PARTIES ARE CUMULATIVE........................... 17
E. ARBITRATION................................................ 17
F. GOVERNING LAW.............................................. 19
G. CONSENT TO JURISDICTION.................................... 19
H. WAIVER OF PUNITIVE DAMAGES AND JURY TRIAL.................. 20
I. BINDING EFFECT............................................. 20
J. LIMITATIONS OF CLAIMS...................................... 20
K. CONSTRUCTION............................................... 20
12. NOTICES AND PAYMENTS................................................ 21
13. ACKNOWLEDGMENTS..................................................... 22
EXHIBITS
EXHIBIT A - TERRITORY
EXHIBIT B - DEVELOPMENT SCHEDULE
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QUALITY FRANCHISE SYSTEMS, INC.
DEVELOPMENT AGENT AGREEMENT
THIS DEVELOPMENT AGENT AGREEMENT (the "Agreement") is made and entered
into this __1__ day of May__________, 199_6_, by and between QUALITY FRANCHISE
SYSTEMS, INC., a Delaware corporation, with its principal business address at
0000 Xxxxx Xxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxxxx 00000 (referred
to in this Agreement as "we," "us" or "our"), and Master Franchising and
Development Systems, Inc., a Michigan corporation, whose principal business
address is 0000 Xxxxxxxxxx, Xxxxxxx, XX 00000 (referred to in this Agreement as
"you" or "your").
1. PREAMBLES AND GRANT OF RIGHTS.
A. PREAMBLES.
(1) We and our predecessors have, since 1978, expended considerable
time and effort in developing and operating a pizza restaurant concept offering
pizza, sandwiches, salads and other food products and services. These
restaurants operate under the "Mountain Mike's Pizza" name ("Mountain Mike's
Pizza Restaurants") and have distinctive business formats, methods, procedures,
designs, layouts, standards and specifications, all of which have been, or may
be, improved, further developed or otherwise modified from time to time.
(2) We use, promote and license certain trademarks, service marks and
other commercial symbols in operating Mountain Mike's Pizza Restaurants,
including the trade and service xxxx "Mountain Mike's Pizza7," which have gained
and continue to gain public acceptance and goodwill, and may continue to create,
use and license additional trademarks, service marks and commercial symbols in
operating Mountain Mike's Pizza Restaurants (collectively, the "Marks").
(3) We have chosen franchising as our business strategy for creating
and keeping customers for Mountain Mike's Pizza. We grant to persons who meet
our qualifications and are willing to undertake the investment and effort a
franchise to own and operate a Mountain Mike's Pizza Restaurant offering the
products and services we authorize and approve while utilizing our business
formats, methods, procedures, signs, designs, layouts, equipment, standards,
specifications and Marks (the "System").
(4) We grant to certain franchise owners who meet our qualifications
the right to represent us as development agents, within defined geographic
markets with which they are familiar, in recruiting and assisting us in
providing certain services to other franchise owners.
(5) You have applied for the right to represent us as a development
agent within a certain territory.
X. XXXXX OF RIGHTS.
(1) Initial Term. Subject to the terms of and upon the conditions
contained in this Agreement, we hereby appoint you to represent us as our
exclusive development agent during the term of this Agreement within the
territory described on Exhibit A (the "Territory"). You agree to perform your
obligations according to this Agreement and the standards and guidelines we
issue from time. The term of this Agreement is fifteen (15) years from the date
it is signed, unless sooner terminated under Section 8. Subject to Section 3.C.,
we (and our affiliates) can in our sole discretion (1) own and operate, and
recruit and grant prospective franchise owners the right to own and operate,
Mountain Mike's Pizza Restaurants at any locations within and outside the
Territory and on any terms and conditions we deem appropriate; and (2) engage in
any other distribution activities that we choose within and outside the
Territory. Except for our agreement not to allow another franchise owner to
represent us as a development agent within the Territory during the term of this
Agreement, your rights under this Agreement are non-exclusive.
(2) Successor Term. If you (and your owners) have complied with this
Agreement and all other agreements between you (or your owners) and us (and our
affiliates), then, when this Agreement expires, we will allow you to represent
us as a development agent within the Territory for an additional ten (10) year
term on the condition that you (and your owners) sign our then current form of
development agent agreement and you and we agree on the minimum number of new
Mountain Mike's Pizza Restaurants to be opened within the Territory during the
additional term.
(3) Your Operation Of Restaurant. You (or your owners) must at all
times during the term of this Agreement own and operate at least one (1)
franchised Mountain Mike's Pizza Restaurant within the Territory. You must open
your first Restaurant within the Territory within one hundred eighty (180) days
after the date of this Agreement. The initial franchise fee for that Restaurant
is included in the amount you must pay us under Section 3.A.
2. YOUR OBLIGATIONS.
A. RECRUITING AND SERVICING.
(1) General. You agree to develop and service Mountain Mike's Pizza
Restaurant franchises in the Territory. This responsibility includes, but is not
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limited to, advertising for franchise prospects; providing prospects with
information about us on a timely basis according to our policies and federal,
state and local laws and regulations; screening and qualifying prospective
franchise owners; providing site selection, lease negotiation and construction
advice; assisting with Restaurant openings; inspecting Restaurants; conducting
training; developing marketing; assisting in administering (as we direct)
cooperative advertising funds and programs operating in your Territory; and
providing business advice to franchise owners.
(2) Recruiting. You agree to submit to us for our review individuals
who are of good character, have adequate financial resources and meet our then
current criteria for franchise owners. You agree to have each prospective
franchise owner complete our then current application form for a Mountain Mike's
Pizza Restaurant franchise. These applications must be submitted to us with all
other information we then customarily require for franchise applicants,
including, without limitation, information concerning the site at which the
applicant proposes to operate its Restaurant.
We will approve or disapprove in writing applicants and/or sites you
propose for Restaurants. We will use our best efforts to notify you within
fifteen (15) calendar days after the later of our personal interview of the
applicant, if any, and our receipt of the complete application, site report,
financial statements and other required materials regarding the applicant. If we
determine, in our sole discretion, that the applicant possesses sufficient
financial and managerial capability and meets the other criteria we then utilize
in granting franchises, and that the proposed site is suitable, we agree to
offer a franchise to the applicant for a Mountain Mike's Pizza Restaurant. The
franchise will be evidenced by our and the applicant's execution of our then
current form of franchise agreement. You will not be a party to those franchise
agreements (unless you are the franchise owner under a particular agreement).
You acknowledge that we may, at our sole discretion, modify in any respect the
franchise agreement and related documents we customarily use in granting
Mountain Mike's Pizza Restaurant franchises. If an applicant fails to execute
the franchise agreement and related documents, deliver payment of the initial
franchise fee and obtain lawful possession of an approved site, we may withdraw
our offer of the franchise to the applicant.
(3) Legal Requirements. You acknowledge that we have advised you that
many jurisdictions have enacted laws concerning the sale, renewal and
termination of franchises and the continuing relationship between parties to a
franchise. We will explain these laws to you and advise you how to comply with
them in performing your obligations under this Agreement. You agree to comply
with all of these laws and legal requirements in force in the Territory and to
utilize only offering circulars that we have approved for use in the applicable
jurisdiction. Neither you, your owners nor any employees can solicit prospective
franchise owners: (a) until we have registered our franchise offering in all
applicable jurisdictions and/or have provided you with an offering circular
prepared in compliance with state and federal law; or (b) at any time if we
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notify you that a registration is not then in effect or our documents are not
then in compliance with applicable law. If your activities under this Agreement
require the preparation, amendment, registration or filing of information or any
disclosure or other documents, only we can prepare and file all required
offering circulars, ancillary documents and registration applications. All
registrations must be secured before you may solicit prospective franchise
owners. You agree to provide all information and execute all documents we
reasonably require in order to prepare and file these documents. You agree to
review all materials that we prepare for you and that we will not be liable for
any errors or omissions which you have not brought to our attention.
B. MANAGEMENT OF YOUR BUSINESS.
The business you operate under this Agreement must at all times be
under your (or, if you are a corporation, limited liability company or
partnership, your managing shareholder's, member's or partner's ("Managing
Owner")) direct, day-to-day, full-time supervision.
C. INSURANCE.
You must at all times during the term of this Agreement maintain in
force, at your own expense, the insurance coverage we require. This insurance
must cover the risks and entities, and be in the amounts, we specify from time
to time.
D. ADVERTISING.
You agree to use reasonable efforts and spend reasonable amounts to
advertise and promote the offer and sale of Mountain Mike's Pizza Restaurant
franchises. Before you use them, samples of all advertising and promotional
materials that we have not prepared or previously approved must be submitted to
us for approval, which we will not unreasonably withhold. If you do not receive
written disapproval within fifteen (15) days after we receive the materials, the
materials will be considered approved. You cannot use any advertising or
promotional materials that we have disapproved.
E. ACCOUNTING, BOOKKEEPING, RECORDS AND REPORTING.
Within fifteen (15) days after the end of each month during the term of
this Agreement, you agree to deliver to us a report of your business activities
during that month in the form and detail we specify, including information about
your efforts to solicit prospective franchise owners and find sites in the
Territory.
F. AGENT'S INSPECTIONS.
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You agree to determine through field audits, reviews and inspections of
each franchise owner in the Territory whether that franchise owner has complied
satisfactorily with its Franchise Agreement and our Operations Manual and
promptly notify the franchise owner in writing, with a copy (and evaluation
report) to us, of any deficiencies. You understand and acknowledge that your
inspections and reports are advisory only and that we have: (1) all of the
rights to inspect and ascertain compliance as if this Agreement were not in
effect; (2) the exclusive right to send notices of default to the franchise
owner; (3) the exclusive right to terminate a Franchise Agreement; and (4) the
exclusive right to take any legal action as a result of any violation of a
Franchise Agreement.
If you believe that any franchise owner in the Territory has breached
its Franchise Agreement, you agree to document in writing all of the relevant
facts and request us to investigate the breach. If, as a result of our
investigation, we determine that there is a breach, we can take any action we
deem appropriate.
G. DEVELOPMENT AND PERFORMANCE OBLIGATIONS.
You agree to develop Mountain Mike's Pizza Restaurants in the Territory
to meet or exceed the development schedule identified on Exhibit B (the
"Development Schedule"). (Each yearly period described in the Development
Schedule is referred to as a "Development Period.") A Mountain Mike's Pizza
Restaurant will be included in the cumulative number of Restaurants required to
be opened and operating only if it actually is operating within the Territory
and complying with the terms of its Franchise Agreement; provided, however, that
a Restaurant which is, with our approval, permanently closed during the last
three (3) months of a Development Period after having been in operation will be
included in the cumulative number of Restaurants required to be opened and
operating during that particular Development Period (but not after). Any
Restaurants you (or your owners) own and operate within the Territory will be
included in the cumulative number of Restaurants required to be opened and
operating. If you fail to comply with the Development Schedule, we can (but need
not):
(a) terminate this Agreement under Section 8;
(b) reduce the size of the Territory to a lesser area that we
determine; or
(c) eliminate your exclusive right to solicit and service franchise
owners in the Territory.
3. FEES.
A. YOUR INITIAL FEE TO US.
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You agree to pay us a nonrecurring and nonrefundable initial fee in the
amount of _____________________________ Dollars ($_____________________), which
we will fully earn when this Agreement is signed.
B. OUR PAYMENTS TO YOU.
We will pay you the following amounts during the term of this
Agreement:
(1) Initial Fees. Fifty percent (50%) of the initial franchise fees we
actually collect (not accrued) during the term of this Agreement from selling
franchises in the Territory. We will pay you this amount within thirty (30) days
after each franchised Restaurant opens.
(2) Royalties. Forty percent (40%) of the Royalties, as defined in the
Franchise Agreement (not including marketing or advertising fees), we actually
collect (not accrued) during the term of this Agreement from Mountain Mike's
Pizza Restaurants opened in the Territory during the term of this Agreement. We
will pay you these amounts by the fifteenth (15th) day of each month following
the month during which we actually collect the Royalties.
(3) Transfer Fees. Fifty percent (50%) of any transfer fees we actually
collect (not accrued) due to any "transfers," as defined in the Franchise
Agreement, occurring during the term of this Agreement with respect to
franchises we have sold within the Territory during the term of this Agreement.
We will pay you these amounts within thirty (30) days after we actually collect
the transfer fees.
(4) Renewal or Successor Franchise Fees. Fifty percent (50%) of any
renewal or successor franchise fees we actually collect (not accrued) during the
term of this Agreement with respect to renewal or successor franchises that we
grant within the Territory during the term of this Agreement. We will pay you
these amounts within thirty (30) days after we actually collect the renewal or
successor franchise fees.
C. PAYMENTS ON OUR RESTAURANTS WITHIN THE TERRITORY.
If we (or our affiliates) establish and operate any Mountain Mike's
Pizza Restaurants within the Territory, we (or our affiliates) will pay you the
same fees that you would have been entitled to receive under Paragraph B above
had these Restaurants been operated as franchises. We will pay you these amounts
on the same due dates specified in Paragraph B.
6
D. REDUCTION OF FEES PAYABLE.
You acknowledge and agree that we (and our affiliates) can reduce any
amounts that we must pay you under this Agreement by (1) any amounts that you
(or your owners) owe us (or our affiliates) under Franchise Agreements or
otherwise and (2) your proportionate share of any expenses we incur with third
parties to collect amounts due from franchise owners.
4. MARKS.
A. OWNERSHIP AND GOODWILL OF MARKS.
Your right to use the Marks is derived solely from this Agreement and
limited to your representing us as a development agent pursuant to and in
compliance with this Agreement and all operating standards we prescribe from
time to time during its term. Your unauthorized use of the Marks will be a
breach of this Agreement and an infringement of our rights in and to the Marks.
You acknowledge and agree that your usage of the Marks and any goodwill
established by this use will be exclusively for our benefit and that this
Agreement does not confer any goodwill or other interests in the Marks upon you
(other than the right to represent us as a development agent under this
Agreement). All provisions of this Agreement applicable to the Marks apply to
any additional proprietary trade and service marks and commercial symbols we
authorize you to use.
B. LIMITATIONS ON YOUR USE OF MARKS.
You may not use any Xxxx as part of any corporate or legal business
name or with any prefix, suffix or other modifying words, terms, designs or
symbols (other than logos we have licensed to you), or in any modified form, nor
may you use any Xxxx in any manner we have not expressly authorized in writing.
You agree to display the Marks prominently in the manner we prescribe on forms,
advertising and marketing materials, supplies and other materials we designate.
You agree to give the notices of trade and service xxxx registrations that we
specify and to obtain any fictitious or assumed name registrations required
under applicable law.
C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS.
You agree to notify us immediately of any apparent infringement or
challenge to your use of any Xxxx, or of any claim by any person of any rights
in any Xxxx, and not to communicate with any person other than us and our
attorneys, and your attorneys, in any infringement, challenge or claim. We can
take the action we deem appropriate and control exclusively any litigation, U.S.
Patent and Trademark Office proceeding or any other administrative proceeding
arising out of any infringement, challenge or claim or otherwise relating to any
Xxxx. You agree to sign any and all instruments and documents, render the
assistance and do the acts and things that, in the opinion of our attorneys, may
be necessary or advisable to protect and maintain our interests in any
litigation or Patent and Trademark Office or other proceeding or otherwise to
protect and maintain our interests in the Marks.
7
D. DISCONTINUANCE OF USE OF MARKS.
If it becomes advisable at any time in our sole discretion for us
and/or you to modify or discontinue the use of any Xxxx and/or use one or more
additional or substitute trade or service marks, you agree to comply with our
directions within a reasonable time after receiving notice. We will not be
obligated to reimburse you for any expenses you incur in doing so, for any loss
of revenue attributable to any modified or discontinued Xxxx or for any
expenditures you make to promote a modified or substitute trademark or service
xxxx.
E. INDEMNIFICATION FOR USE OF MARKS.
We agree to indemnify you against and to reimburse you for all damages
for which you are held liable in any proceeding arising out of your authorized
use of any Xxxx under this Agreement and for all costs you reasonably incur in
defending any such claim brought against you or any such proceeding in which you
are named as a party, provided that you have timely notified us of the claim or
proceeding and otherwise have complied with this Agreement. At our option, we
can defend and control the defense of any proceeding arising out of your use of
any Xxxx under this Agreement.
5. CONFIDENTIAL INFORMATION.
We possess (and will continue to develop and acquire) certain
confidential information (the "Confidential Information") relating to the
development and operation of Mountain Mike's Pizza Restaurants, which includes
(without limitation):
(1) recipes;
(2) site selection criteria;
(3) methods, formats, specifications, standards, systems, procedures,
sales and marketing techniques, knowledge and experience used in developing and
operating Mountain Mike's Pizza Restaurants;
(4) marketing and advertising programs for Mountain Mike's Pizza
Restaurants;
(5) knowledge of specifications for and suppliers of certain equipment,
products, materials and supplies; and
(6) knowledge of the operating results and financial performance of
Mountain Mike's Pizza Restaurants.
You acknowledge and agree that you will not acquire any interest in
Confidential Information, other than the right to utilize Confidential
8
Information disclosed to you in representing us as a development agent during
the term of this Agreement, and that the use or duplication of any Confidential
Information in any other business would constitute an unfair method of
competition. You further acknowledge and agree that Confidential Information is
proprietary, includes our trade secrets and is disclosed to you solely on the
condition that you agree, and you do hereby agree, that you:
(a) will not use Confidential Information in any other business or
capacity;
(b) will maintain the absolute confidentiality of Confidential
Information during and after the term of this Agreement;
(c) will not make unauthorized copies of any portion of Confidential
Information disclosed via electronic medium or in written or other tangible
form; and (d) will adopt and implement all reasonable procedures that we
prescribe from time to time to prevent unauthorized use or disclosure of
Confidential Information, including, without limitation, restrictions on its
disclosure to your personnel and others.
You agree that we (and our affiliates) will have the perpetual right to
use and authorize other Mountain Mike's Pizza Restaurant franchise owners to
use, and you agree fully and promptly to disclose to us, all ideas, concepts,
formulas, recipes, techniques or materials relating to a Mountain Mike's Pizza
Restaurant that you and/or your employees conceive or develop during the term of
this Agreement.
Despite the foregoing, Confidential Information does not include
information, knowledge or know-how which a person can prove he or she knew
before becoming aware of it as a result of anything we or a franchise owner
provided directly or indirectly or before his or her operation of or presence at
a Mountain Mike's Pizza Restaurant. If we include any matter in Confidential
Information, anyone who claims that it is not Confidential Information has the
burden of proving that the exclusion provided in this paragraph is fulfilled.
6. EXCLUSIVE RELATIONSHIP.
You acknowledge and agree that we would be unable to protect
Confidential Information against unauthorized use or disclosure or to encourage
a free exchange of ideas and information among Mountain Mike's Pizza Restaurants
if franchise owners of Mountain Mike's Pizza Restaurants and our development
agents were permitted to hold interests in or perform services for a Competitive
9
Business (defined below). You also acknowledge that we have granted these rights
to you in consideration of and reliance upon your agreement to deal exclusively
with us. You therefore agree that, during the term of this Agreement, neither
you nor any of your owners (nor any of your or your owners' spouses) will:
(1) have any direct or indirect controlling interest as a disclosed or
beneficial owner in a Competitive Business, wherever located;
(2) have any direct or indirect interest as a disclosed or beneficial
owner in a Competitive Business operating within the Territory;
(3) have any direct or indirect interest as a disclosed or beneficial
owner in a Competitive Business operating within ten (10) miles of any Mountain
Mike's Pizza Restaurant;
(4) perform services as a director, officer, manager, employee,
consultant, representative, agent or otherwise for a Competitive Business,
wherever located;
(5) recruit or hire any person who is our employee or the employee of
any Mountain Mike's Pizza Restaurant without obtaining the prior written
permission of that person's employer; (6) divert or attempt to divert any actual
or potential business or customer of a Mountain Mike's Pizza Restaurant to
another business; or
(7) engage in any other activity which may injure the goodwill of the
Marks and System.
The term "Competitive Business," as used in this Agreement, means any business
operating, or granting franchises or licenses to others to operate, any
restaurant or food service business featuring pizza as its primary product
(other than a Mountain Mike's Pizza Restaurant operated under a franchise
agreement with us). You agree to obtain similar covenants from the personnel we
specify.
7. TRANSFER.
A. BY US.
This Agreement is fully transferable by us and will inure to the
benefit of any transferee or other legal successor to our interests in this
Agreement.
B. BY YOU.
You understand and acknowledge that the rights and duties created by
this Agreement are personal to you (or, if you are a corporation, limited
liability company or partnership, to your owners) and that we have granted these
10
rights to you in reliance upon our perceptions of your (or your owners')
individual or collective character, skill, aptitude, attitude, business ability
and financial capacity. Accordingly, neither this Agreement (or any interest
herein) nor any ownership or other interest in you may be transferred without
our prior written approval, which we can withhold for any or no reason. Any
transfer without this approval constitutes a breach of this Agreement and is
void and of no effect. As used in this Agreement, the term "transfer" includes
your (or your owners') voluntary, involuntary, direct or indirect assignment,
sale, gift or other disposition of any interest in this Agreement or you.
C. YOUR DEATH OR DISABILITY.
Upon your or your Managing Owner's death or disability, we will allow
this Agreement or the Managing Owner's interest in you to be transferred to an
immediate family member if the transferee has sufficient business experience,
aptitude and financial resources to represent us as a development agent and
agrees to comply with this Agreement. This transfer must take place within six
(6) months after death or disability. The term "disability" means a mental or
physical disability, impairment or condition that is reasonably expected to
prevent or actually does prevent you or your Managing Owner from supervising the
development and servicing of Mountain Mike's Pizza Restaurants within the
Territory.
8. TERMINATION OF AGREEMENT.
A. BY YOU.
You can terminate this Agreement at any time by giving us at least
ninety (90) days' prior written notice of termination.
B. BY US.
We can terminate this Agreement, effective upon delivery of written
notice of termination to you, if:
(1) you (or any of your owners) have made or make any material
misrepresentation or omission in acquiring the rights granted under this
Agreement or while representing us as a development agent;
(2) you fail actively to perform your obligations under this Agreement;
(3) you (or any of your owners) are or have been convicted by a trial
court of, or plead or have pleaded no contest to, a felony;
11
(4) you (or any of your owners) engage in any dishonest or unethical
conduct which may adversely affect the reputation of Mountain Mike's Pizza
Restaurants or the goodwill associated with the Marks;
(5) you (or any of your owners) make an unauthorized assignment of this
Agreement or of an ownership interest in you;
(6) this Agreement or the Managing Owner's interest in you is not
assigned as required upon your or the Managing Owner's death or disability;
(7) you fail to meet the Development Schedule during any Development
Period;
(8) we have sent a notice of termination under any Franchise Agreement
for a Mountain Mike's Pizza Restaurant between you (or any of your owners) and
us or you fail to own and operate at least one (1) Mountain Mike's Pizza
Restaurant within the Territory, as required under Section 1.B.;
(9) you (or any of your owners) make any unauthorized use or disclosure
of any Confidential Information in violation of this Agreement;
(10) you (or any of your owners) fail on three (3) or more separate
occasions within any period of twelve (12) consecutive months to comply with
this Agreement, whether or not the failures are corrected after written notice
of the failures is delivered to you;
(11) you make an assignment for the benefit of creditors or admit in
writing your insolvency or inability to pay your debts generally as they become
due; or
(12) you (or any of your owners) fail to comply with any other
provision of this Agreement or any of our operating standards and do not correct
the failure within thirty (30) days after written notice of the failure to
comply is delivered to you.
9. OUR AND YOUR RIGHTS AND OBLIGATIONS UPON TERMINATION OR EXPIRATION OF
THIS AGREEMENT.
A. PAYMENT OF AMOUNTS OWED TO YOU.
We agree to pay you within fifteen (15) days after the effective date
of termination or expiration of this Agreement, or on any later date that the
amounts due to you are determined, all amounts owed to you which then are unpaid
(subject to our rights under Section 3.D.). We are not obligated to pay you any
amounts that accrue after the effective date of termination or expiration.
X. XXXXX.
Upon the termination or expiration of this Agreement:
12
(1) you may not directly or indirectly at any time or in any manner
(except with Mountain Mike's Pizza Restaurants you own and operate) identify
yourself or any business as a current or former development agent of Mountain
Mike's Pizza Restaurants, use any Xxxx, any colorable imitation thereof or other
indicia of a Mountain Mike's Pizza Restaurant in any manner or for any purpose
or utilize for any purpose any trade name, trade or service xxxx or other
commercial symbol that indicates or suggests a connection or association with
us;
(2) you agree to take the action required to cancel all fictitious or
assumed name or equivalent registrations relating to your use of any Xxxx; and
(3) you agree to deliver to us within thirty (30) days all signs,
marketing materials, forms and other materials containing any Xxxx or otherwise
identifying or relating to a Mountain Mike's Pizza Restaurant and allow us,
without liability to you or third parties, to remove all of these items from
wherever they are located.
C. CONFIDENTIAL INFORMATION.
You agree that, upon termination or expiration of this Agreement, you
will immediately cease to use any of our Confidential Information in any
business or otherwise (except in operating Mountain Mike's Pizza Restaurants
under Franchise Agreements with us) and return to us all copies of any
confidential materials that we have loaned to you.
D. COVENANT NOT TO COMPETE.
Upon
(1) our termination of this Agreement according to its terms and
conditions,
(2) your termination of this Agreement, or
(3) expiration of this Agreement (without renewal),
you and your owners agree that, for a period of two (2) years commencing on the
effective date of termination or expiration or the date on which all persons
restricted by this Paragraph begin to comply with this Paragraph, whichever is
later, neither you nor any of your owners will have any direct or indirect
interest (e.g., through a spouse) as a disclosed or beneficial owner, investor,
partner, director, officer, employee, consultant, representative or agent or in
any other capacity in any Competitive Business (as defined in Section 6 above)
operating:
13
(a) within the Territory; or
(b) within one (1) mile of any Mountain Mike's Pizza
Restaurant in operation or under construction on the later of the
effective date of the termination or expiration or the date on
which all persons restricted by this Paragraph begin to comply
with this Paragraph.
If any person restricted by this Paragraph refuses voluntarily to
comply with these obligations, the two (2) year period will commence with the
entry of a court order enforcing this provision. You and your owners expressly
acknowledge that you possess skills and abilities of a general nature and have
other opportunities for exploiting these skills. Consequently, enforcement of
the covenants made in this Paragraph will not deprive you of your personal
goodwill or ability to earn a living.
E. CONTINUING OBLIGATIONS.
All of our and your (and your owners') obligations which expressly or
by their nature survive the expiration or termination of this Agreement will
continue in full force and effect subsequent to and notwithstanding its
expiration or termination and until they are satisfied in full or by their
nature expire.
10. RELATIONSHIP OF THE PARTIES/INDEMNIFICATION.
A. INDEPENDENT CONTRACTORS.
You and we understand and agree that this Agreement does not create a
fiduciary relationship between you and us, that you and we are and will be
independent contractors, that we have appointed you as our special agent for a
particular purpose and that nothing in this Agreement is intended to make either
you or us a general agent, joint venturer, partner or employee of the other for
any purpose. You agree to identify yourself conspicuously in all dealings with
existing and prospective franchise owners, lessors, suppliers, public officials
and others as the owner of a business under a development agent agreement we
have granted and to place notices of independent ownership on the forms,
business cards, stationery and advertising and other materials we require from
time to time.
B. NO LIABILITY FOR ACTS OF OTHER PARTY.
You agree not to employ any of the Marks in signing any contract or
applying for any license or permit, or in a manner that may result in our
liability for any of your indebtedness or obligations, and that you will not use
the Marks in any way we have not expressly authorized. Neither we nor you will
make any express or implied agreements, warranties, guarantees or
representations or incur any debt in the name or on behalf of the other,
14
represent that our respective relationship is other than franchisor and
development agent or be obligated by or have any liability under any agreements
or representations made by the other that are not expressly authorized in
writing. We will not be obligated for any damages to any person or property
directly or indirectly arising out of the business you conduct under this
Agreement.
C. INDEMNIFICATION.
(i) You agree to indemnify, defend and hold harmless us, our affiliates
and our respective shareholders, directors, officers, employees, agents,
successors and assignees (the "Indemnified Parties") against and to reimburse
any one or more of the Indemnified Parties for all claims, obligations and
damages described in this Paragraph and any and all claims and liabilities
directly or indirectly arising out of your activities under this Agreement or
your breach of this Agreement. For purposes of this indemnification, "claims"
include all obligations, damages (actual, consequential or otherwise) and costs
reasonably incurred in defending any claim against any of the Indemnified
Parties, including, without limitation, reasonable accountants', arbitrators',
attorneys' and expert witness fees, costs of investigation and proof of facts,
court costs, other expenses of litigation, arbitration or alternative dispute
resolution and travel and living expenses. We and each of the other Indemnified
Parties can defend any claim against us and them and agree to settlements or
take any other remedial, corrective or other actions we and/or they deem
expedient. This indemnity will continue in full force and effect subsequent to
and notwithstanding the expiration or termination of this Agreement.
Under no circumstances will we or any other Indemnified Party be
required to seek recovery from any insurer or other third party, or otherwise to
mitigate our, their or your losses and expenses, in order to maintain and
recover fully a claim against you. You agree that a failure to pursue this
recovery or mitigate a loss will in no way reduce or alter the amounts we or
another Indemnified Party may recover from you.
(ii) We agree to indemnify, defend and hold harmless you and your
shareholders, directors, officers, employees, agents, successors and assignees
(the "Development Agent Indemnified Parties") against and to reimburse you for
all claims, obligations and damages (as defined in subparagraph (i) above) for
which you are held liable in an action or proceeding asserted by a third party
as a result of our defaults, negligence or intentional misconduct toward that
third party.
Under no circumstances will you or any other Development Agent
Indemnified Party be required to seek recovery from any insurer or other third
party, or otherwise to mitigate your, their or our losses and expenses, in order
15
to maintain and recover fully a claim against us. We agree that a failure to
pursue this recovery or mitigate a loss will in no way reduce or alter the
amounts you or another Development Agent Indemnified Party may recover from us.
11. ENFORCEMENT.
A. SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS.
Except as expressly provided to the contrary in this Agreement, each
section, paragraph, term and provision of this Agreement will be considered
severable, and if, for any reason, any provision is held to be invalid or
contrary to or in conflict with any applicable present or future law or
regulation in a final, unappealable ruling issued by any court, agency or
tribunal with competent jurisdiction in a proceeding to which we are a party,
that ruling will not impair the operation of, or have any other effect upon, the
other portions of this Agreement that may remain otherwise intelligible, which
will continue to be given full force and effect and bind the parties, although
any portion held to be invalid will be deemed not to be a part of this Agreement
from the date the time for appeal expires, if you are a party to the proceeding,
otherwise upon your receipt from us of a notice of non-enforcement.
If any covenant in this Agreement which restricts competitive activity
is deemed unenforceable by virtue of its scope in terms of area, business
activity prohibited and/or length of time, but would be enforceable by reducing
any part or all of it, you and we agree that the covenant will be enforced to
the fullest extent permissible under the laws and public policies applied in the
jurisdiction whose law is applicable to the validity of the covenant.
If any applicable and binding law or rule of any jurisdiction requires
a greater prior notice than is required under this Agreement of the termination
of this Agreement or of our refusal to enter into a successor development agent
agreement, or the taking of some other action not required under this Agreement,
or if, under any applicable and binding law or rule of any jurisdiction, any
provision of this Agreement or any operating standard is invalid or
unenforceable, the prior notice and/or other action required by the law or rule
will be substituted for the comparable provisions of this Agreement, and we will
have the right, in our sole discretion, to modify the invalid or unenforceable
provision or operating standard to the extent required to be valid and
enforceable. You agree to be bound by any promise or covenant imposing the
maximum duty permitted by law which 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, or any operating standard, any portion or portions
which a court or arbitrator may hold to be unenforceable in a final decision to
which we are a party, or from reducing the scope of any promise or covenant to
the extent required to comply with a court order or arbitration award. These
16
modifications to this Agreement will be effective only in that jurisdiction,
unless we elect to give them greater applicability, and will be enforced as
originally made and entered into in all other jurisdictions.
B. WAIVER OF OBLIGATIONS.
We and you may by written instrument unilaterally waive or reduce any
obligation of or restriction upon the other under this Agreement, effective upon
delivery of written notice to the other or another effective date stated in the
notice of waiver. Any waiver we grant will be without prejudice to any other
rights we may have, will be subject to our continuing review and may be revoked,
in our sole discretion, at any time and for any reason, effective upon delivery
to you of ten (10) days' prior written notice.
We and you will not be deemed to have waived or impaired any right,
power or option reserved by this Agreement (including, without limitation, our
right to demand exact compliance with every term, condition and covenant in this
Agreement or to declare any breach to be a default and to terminate this
Agreement before the expiration of its term) by virtue of any custom or practice
at variance with the terms of this Agreement; our or your failure, refusal or
neglect to exercise any right under this Agreement or to insist upon exact
compliance by the other with our and your obligations under this Agreement; our
waiver, forbearance, delay, failure or omission to exercise any right, power or
option, whether of the same, similar or different nature, with other Mountain
Mike's Pizza Restaurant development agents; or the existence of other
development agent agreements for Mountain Mike's Pizza Restaurants which contain
different provisions from those contained in this Agreement.
C. COSTS AND ATTORNEYS' FEES.
If we incur expenses due to your failure to comply with this Agreement,
you agree to reimburse us for any of the costs and expenses which we incur,
including, without limitation, reasonable accounting, attorneys', arbitrators'
and related fees.
D. RIGHTS OF PARTIES ARE CUMULATIVE.
Our and your rights under this Agreement are cumulative, and no
exercise or enforcement by us or you of any right or remedy under this Agreement
will preclude our or your exercise or enforcement of any other right or remedy
under this Agreement which we or you are entitled by law to enforce.
E. ARBITRATION.
EXCEPT FOR CONTROVERSIES, DISPUTES OR CLAIMS RELATED TO OR BASED ON
YOUR USE OF THE MARKS AFTER THE EXPIRATION OR TERMINATION OF THIS AGREEMENT, ALL
CONTROVERSIES, DISPUTES OR CLAIMS BETWEEN US AND OUR SHAREHOLDERS, OFFICERS,
17
DIRECTORS, AGENTS AND EMPLOYEES AND YOU (YOUR OWNERS, GUARANTORS, AFFILIATES AND
EMPLOYEES, IF APPLICABLE) ARISING OUT OF OR RELATED TO:
(1) THIS AGREEMENT OR ANY OTHER AGREEMENT BETWEEN YOU AND US OR ANY
PROVISION OF ANY OF THESE AGREEMENTS;
(2) OUR RELATIONSHIP WITH YOU;
(3) THE VALIDITY OF THIS AGREEMENT OR ANY OTHER AGREEMENT BETWEEN YOU
AND US OR ANY PROVISION OF ANY OF THESE AGREEMENTS; OR
(4) ANY OPERATING STANDARD RELATING TO THE DEVELOPMENT AND SERVICING OF
MOUNTAIN MIKE'S PIZZA RESTAURANTS;
WILL BE SUBMITTED FOR ARBITRATION, ON DEMAND OF EITHER PARTY, TO THE OFFICE OF
THE AMERICAN ARBITRATION ASSOCIATION CLOSEST TO OUR THEN EXISTING PRINCIPAL
BUSINESS ADDRESS. THE ARBITRATION PROCEEDINGS WILL BE CONDUCTED AT THAT AMERICAN
ARBITRATION ASSOCIATION OFFICE AND, EXCEPT AS OTHERWISE PROVIDED IN THIS
AGREEMENT, WILL BE HEARD BY ONE ARBITRATOR IN ACCORDANCE WITH THE THEN CURRENT
COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION. ALL
MATTERS RELATING TO ARBITRATION WILL BE GOVERNED BY THE FEDERAL ARBITRATION ACT
(9 U.S.C. xx.xx. 1 ET SEQ.) AND NOT BY ANY STATE ARBITRATION LAW.
THE ARBITRATOR WILL HAVE THE RIGHT TO AWARD OR INCLUDE IN HIS AWARD ANY
RELIEF WHICH DEEMS PROPER IN THE CIRCUMSTANCES, INCLUDING, WITHOUT LIMITATION,
MONEY DAMAGES (WITH INTEREST ON UNPAID AMOUNTS FROM THE DATE DUE), SPECIFIC
PERFORMANCE, INJUNCTIVE RELIEF AND ATTORNEYS' FEES AND COSTS, PROVIDED THAT THE
ARBITRATOR WILL NOT HAVE THE RIGHT TO DECLARE ANY XXXX GENERIC OR OTHERWISE
INVALID OR, EXCEPT AS OTHERWISE PROVIDED IN PARAGRAPH H OF THIS SECTION, TO
AWARD EXEMPLARY OR PUNITIVE DAMAGES. THE AWARD AND DECISION OF THE ARBITRATOR
WILL BE CONCLUSIVE AND BINDING UPON ALL PARTIES HERETO, AND JUDGMENT UPON THE
AWARD MAY BE ENTERED IN ANY COURT OF COMPETENT JURISDICTION.
WE AND YOU AGREE TO BE BOUND BY THE PROVISIONS OF ANY LIMITATION ON THE
PERIOD OF TIME IN WHICH CLAIMS MUST BE BROUGHT UNDER APPLICABLE LAW OR THIS
AGREEMENT, WHICHEVER EXPIRES EARLIER. WE AND YOU FURTHER AGREE THAT, IN
CONNECTION WITH ANY ARBITRATION PROCEEDINGS, EACH MUST SUBMIT OR FILE ANY CLAIM
WHICH WOULD CONSTITUTE A COMPULSORY COUNTERCLAIM (AS DEFINED BY RULE 13 OF THE
FEDERAL RULES OF CIVIL PROCEDURE) WITHIN THE SAME PROCEEDING AS THE CLAIM TO
WHICH IT RELATES. ANY CLAIM WHICH IS NOT SUBMITTED OR FILED AS DESCRIBED ABOVE
WILL BE FOREVER BARRED.
WE AND YOU AGREE THAT ARBITRATION WILL BE CONDUCTED ON AN INDIVIDUAL,
NOT A CLASS-WIDE, BASIS, AND THAT AN ARBITRATION PROCEEDING BETWEEN US AND OUR
SHAREHOLDERS, OFFICERS, DIRECTORS, AGENTS AND EMPLOYEES AND YOU (AND/OR YOUR
18
OWNERS, GUARANTORS, AFFILIATES AND EMPLOYEES, IF APPLICABLE) MAY NOT BE
CONSOLIDATED WITH ANY OTHER ARBITRATION PROCEEDING BETWEEN US AND ANY OTHER
PERSON, CORPORATION OR PARTNERSHIP.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS PARAGRAPH,
WE AND YOU EACH HAVE THE RIGHT IN A PROPER CASE TO SEEK TEMPORARY RESTRAINING
ORDERS AND TEMPORARY OR PRELIMINARY INJUNCTIVE RELIEF FROM A COURT OF COMPETENT
JURISDICTION: PROVIDED, HOWEVER, THAT WE AND YOU MUST CONTEMPORANEOUSLY SUBMIT
OUR DISPUTE FOR ARBITRATION ON THE MERITS AS PROVIDED IN THIS SECTION. THE
PROVISIONS OF THIS PARAGRAPH ARE INTENDED TO BENEFIT AND BIND CERTAIN THIRD
PARTY NON-SIGNATORIES AND WILL CONTINUE IN FULL FORCE AND EFFECT SUBSEQUENT TO
AND NOTWITHSTANDING THE EXPIRATION OR TERMINATION OF THIS AGREEMENT.
F. GOVERNING LAW.
ALL MATTERS RELATING TO ARBITRATION WILL BE GOVERNED BY THE FEDERAL
ARBITRATION ACT (9 U.S.C. xx.xx. 1 ET SEQ.). EXCEPT TO THE EXTENT GOVERNED BY
THE FEDERAL ARBITRATION ACT, THE UNITED STATES TRADEMARK ACT OF 1946 (XXXXXX
ACT, 15 U.S.C. SECTIONS 1051 ET SEQ.) OR OTHER FEDERAL LAW, THIS AGREEMENT AND
ALL CLAIMS ARISING FROM THE RELATIONSHIP BETWEEN YOU AND US WILL BE GOVERNED BY
THE LAWS OF THE STATE IN WHICH THE TERRITORY IS LOCATED, EXCEPT THAT ANY STATE
LAW REGULATING THE SALE OF FRANCHISES (OR DEVELOPMENT AGENT RIGHTS) OR GOVERNING
THE RELATIONSHIP OF A FRANCHISOR AND ITS FRANCHISEE (OR DEVELOPMENT AGENT) WILL
NOT APPLY UNLESS ITS JURISDICTIONAL REQUIREMENTS ARE MET INDEPENDENTLY WITHOUT
REFERENCE TO THIS PARAGRAPH.
G. CONSENT TO JURISDICTION.
SUBJECT TO SECTION 11.E. AND THE PROVISIONS BELOW, YOU AND YOUR OWNERS
AGREE THAT ALL ACTIONS ARISING UNDER THIS AGREEMENT OR OTHERWISE AS A RESULT OF
THE RELATIONSHIP BETWEEN YOU AND US SHALL BE COMMENCED IN THE STATE, AND IN THE
STATE OR FEDERAL COURT OF GENERAL JURISDICTION CLOSEST TO, WHERE OUR PRINCIPAL
BUSINESS ADDRESS THEN IS LOCATED, AND YOU (AND EACH OWNER) IRREVOCABLY SUBMIT TO
THE JURISDICTION OF SUCH COURTS AND WAIVE ANY OBJECTION YOU (AND EACH OWNER) MAY
HAVE TO EITHER THE JURISDICTION OF OR VENUE IN SUCH COURTS. NOTWITHSTANDING THE
FOREGOING, YOU AND YOUR OWNERS AGREE THAT WE MAY ENFORCE THIS AGREEMENT AND ANY
ARBITRATION ORDERS IN THE COURTS OF THE STATE OR STATES IN WHICH YOU ARE
DOMICILED OR THE TERRITORY IS LOCATED.
H. WAIVER OF PUNITIVE DAMAGES AND JURY TRIAL.
EXCEPT FOR YOUR OBLIGATION TO INDEMNIFY US UNDER SECTION 10.C. AND
CLAIMS WE BRING AGAINST YOU FOR YOUR UNAUTHORIZED USE OF THE MARKS OR
UNAUTHORIZED USE OR DISCLOSURE OF ANY CONFIDENTIAL INFORMATION, WE AND YOU AND
YOUR RESPECTIVE OWNERS WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHT TO
OR CLAIM FOR ANY PUNITIVE OR EXEMPLARY DAMAGES AGAINST THE OTHER AND AGREE THAT,
19
IN THE EVENT OF A DISPUTE BETWEEN US, THE PARTY MAKING A CLAIM WILL BE LIMITED
TO EQUITABLE RELIEF AND TO RECOVERY OF ANY ACTUAL DAMAGES IT SUSTAINS.
WE AND YOU IRREVOCABLY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM, WHETHER AT LAW OR IN EQUITY, BROUGHT BY EITHER OF US.
I. BINDING EFFECT.
This Agreement is binding upon us and you and our respective executors,
administrators, heirs, beneficiaries, assigns and successors in interest and may
not be modified except by a written agreement signed by you and us.
J. LIMITATIONS OF CLAIMS.
Any and all claims arising out of or relating to this Agreement or our
relationship with you will be barred unless a judicial or arbitration proceeding
is commenced within one (1) year from the date on which the party asserting the
claim knew or should have known of the facts giving rise to the claims.
K. CONSTRUCTION
The preambles and exhibits are a part of this Agreement which, together
with our written policies, constitutes our and your entire agreement, and there
are no other oral or written understandings or agreements between us and you
relating to the subject matter of this Agreement. Except as contemplated by the
arbitration provisions of Section 11.E., nothing in this Agreement is intended,
nor is deemed, to confer any rights or remedies upon any person or legal entity
not a party hereto.
Except where this Agreement expressly obligates us reasonably to
approve or not unreasonably to withhold our approval of any of your actions or
requests, we have the absolute right to refuse any request you make or to
withhold our approval of any of your proposed, initiated or effected actions
that require our approval.
The headings of the several sections and paragraphs hereof are for
convenience only and do not define, limit or construe the contents of these
sections or paragraphs.
References in this Agreement to "we," "us" and "our," with respect to
all of our rights and all of your obligations to us under this Agreement, will
be deemed to include any of our affiliates with whom you deal. The term
"affiliate," as used herein with respect to you or us, means any person or
entity directly or indirectly owned or controlled by, under common control with
or owning or controlling you or us. For purposes of this definition, "control"
means the power to direct or cause the direction of management and policies.
20
If two or more persons are at any time the Development Agent under this
Agreement, whether as partners or joint venturers, their obligations and
liabilities to us will be joint and several. References to "owner" mean any
person holding a direct or indirect, legal or beneficial ownership interest or
voting rights in you, including, without limitation, any person who has a direct
or indirect interest in you or this Agreement and any person who has any other
legal or equitable interest, or the power to vest in himself or herself any
legal or equitable interest, in its revenue, profits, rights or assets. "Person"
means any natural person, corporation, limited liability company, general or
limited partnership, unincorporated association, cooperative or other legal or
functional entity.
This Agreement may be executed in multiple copies, each of which will
be deemed an original.
12. NOTICES AND PAYMENTS.
All written notices, reports and payments permitted or required to be
delivered by the provisions of this Agreement will be deemed so delivered:
(1) at the time delivered by hand;
(2) at the time delivered via computer transmission;
(3) one (1) business day after transmission by telecopy, facsimile or
other electronic system;
(4) one (1) business day after being placed in the hands of a
commercial courier service for next business day delivery; or
(5) three (3) business days after placement in the United States Mail
by Registered or Certified Mail, Return Receipt Requested, postage prepaid;
and must be addressed to the party to be notified at its most current principal
business address of which the notifying party has been notified.
13. ACKNOWLEDGMENTS.
You acknowledge:
(1) That you have conducted an independent investigation of this
business opportunity and recognize that, like any other business, it involves
business risks. (2) That your business abilities and efforts are vital to the
success of your business.
(3) That you are committed to maintaining the standards we prescribe
for development agents.
21
(4) That any information you have acquired from other Mountain Mike's
Pizza Restaurant development agents relating to their profits or cash flows does
not constitute information obtained from us, nor do we make any representation
as to the accuracy of any such information.
(5) That in all of their dealings with you, our officers, directors,
employees and agents have acted only in a representative, and not in an
individual, capacity and that business dealings between you and them as a result
of this Agreement are solely between you and us.
(6) That you have represented to us, as an inducement to our entry into
this Agreement, that all statements you have made and all materials you have
submitted to us are accurate and complete and that you have made no
misrepresentations or material omissions in obtaining the rights granted by this
Agreement.
(7) That you have read this Agreement and our Franchise Offering
Circular and understand and accept that the terms, conditions and covenants
which are contained in this Agreement are reasonably necessary for us to
maintain our high standards of quality and service and consequently to protect
and preserve the goodwill of the Marks. (4) That any information you have
acquired from other Mountain Mike's Pizza Restaurant development agents relating
to their profits or cash flows does not constitute information obtained from us,
nor do we make any representation as to the accuracy of any such information.
(5) That in all of their dealings with you, our officers, directors,
employees and agents have acted only in a representative, and not in an
individual, capacity and that business dealings between you and them as a result
of this Agreement are solely between you and us.
(6) That you have represented to us, as an inducement to our entry into
this Agreement, that all statements you have made and all materials you have
submitted to us are accurate and complete and that you have made no
misrepresentations or material omissions in obtaining the rights granted by this
Agreement.
(7) That you have read this Agreement and our Franchise Offering
Circular and understand and accept that the terms, conditions and covenants
which are contained in this Agreement are reasonably necessary for us to
maintain our high standards of quality and service and consequently to protect
and preserve the goodwill of the Marks.
22
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement effective on the date stated on the first page.
QUALITY FRANCHISE MASTER FRANCHISING AND
SYSTEMS, INC., a Delaware corporation DEVELOPMENTAL SYSTEMS, INC.,
a Michigan corporation
By:/s/ Xxxxxxx Xxxxxx By:/s/ Xxxxxxx X. Xxxxxxx
------------------------------------- -------------------------------
Title: President Title::President
------------------------------------- -------------------------------
DATED: 6/12/96 DATED: 5/1/96
------------------------------------- -------------------------------
23
EXHIBIT A
EXCLUSIVE AREA
1. The Territory referred to in Section 1.B. of the Development Agent
Agreement will be as follows: the Michigan counties of Ingham, Jackson,
Hillsdale, Xxxxx and Xxxxxxx.
If the Territory is identified by counties or other political
subdivisions, political boundaries will be considered fixed as of the date of
this Agreement and will not change, notwithstanding a political reorganization
or change to the boundaries or regions. All street boundaries will be deemed to
end at the street center line unless otherwise specified above.
QUALITY FRANCHISE MASTER FRANCHISING AND
SYSTEMS, INC., a Delaware DEVELOPMENTAL SYSTEMS, INC.
corporation a Michigan corporation
By:/s/ Xxxxxxx Xxxxxx By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------- -------------------------------
Title: President Title: President
-------------------------------- -------------------------------
24
EXHIBIT B
DEVELOPMENT SCHEDULE
The Development Schedule referred to in Section 2.G. of the Development
Agent Agreement will be as follows:
Cumulative Number of
Number of New Restaurants to be
Restaurants to be Opened Operating Within
Within the Territory the Territory
Date Required By Specified Date By Specified Date
----------------- ------------------------ ---------------------
8/31/97 2 2
8/31/98 2 4
8/31/97 2 6
QUALITY FRANCHISE MASTER FRANCHISING AND
SYSTEMS, INC., a Delaware DEVELOPMENTAL SYSTEMS, INC.
corporation a Michigan corporation
By:/s/ Xxxxxxx Xxxxxx By:/s/ Xxxxxxx X. Xxxxxxx
-------------------------- ------------------------------
Title:President Title: President
25
EXHIBIT C
ADDENDUM TO A DEVELOPMENT AGENT AGREEMENT
BETWEEN QUALITY FRANCHISE SYSTEMS, INC.
AND MASTER FRANCHISING AND DEVELOPMENTAL
SYSTEMS, INC. DATED 5/1/96
This addendum ("Addendum") is made and entered into this 1 day of May, 1996, by
and between Quality Franchise Systems, Inc., a Delaware corporation, (referred
to in this Addendum as "we," "us" or "our") and., Master Franchising
Developmental Systems, Inc. a Michigan corporation, referred to in this Addendum
as "you," "your" or "agent").
We and you are parties to that certain Development Agent Agreement (the
"Agreement") being executed concurrently with this Addendum. The terms of this
Addendum augment and modify the Agreement and, except as otherwise provided in
this Addendum, the Agreement will remain in full force and effect as originally
written.
Paragraph 1 In reference to Section 7(B), we will agree to waive our
rights to withhold approval of any transfer of this Agreement
provided that the following conditions are met:
(1) the transferee has sufficient business experience, aptitude and
financial resources to fulfill your obligations as included in this Agreement;
(2) the transferee and its owners and affiliates are not engaged in a
Competitive Business;
(3) the transferee (or its managing owner) has agreed to
complete our standard training program;
(5) the transferee has agreed to be bound by the terms and conditions
of the Agreement;
(6) you (and your transferring owners) have executed a general release,
in a form satisfactory to us, of any and all claims against us and our
shareholders, officers, directors, employees and agents;
(7) we have approved the material terms and conditions of the transfer
and determined that the price and terms of payment will not adversely affect the
transferee's ability to meet the obligations as they are contained in the
Agreement;
26
(8) you and your transferring owners (and your owners' spouses) have
executed a non-competition covenant in favor of us and the transferee, agreeing
to be bound, commencing on the effective date of the transfer, by the
restrictions contained in Section 6 of the Agreement, for a period of 3 years
from the date of the transfer.
Paragraph 2 The Development Agent fee includes the initial franchise
fees for the first 2 franchised Restaurants opened by you
within the Territory.
Paragraph 3 We shall remit 70% of all marketing funds we actually collect
from Mountain Mike's Pizza franchises in your Territory to you
for the purpose of expending these funds under our direction
in the Territory. We shall retain final approval over all of
the programs and expenditures financed by these marketing
funds in your Territory. You agree to account for the funds
separately, to not co-mingle these funds with any other funds,
and to not use the funds for any other purpose.
Paragraph 4 Through April 30, 1997, you shall have the right, upon written
notice to us, to cancel the Agreement. Should you exercise
this right, we shall cancel the Agreement and credit of
$45,000 to your royalty account with us for the franchised
restaurant(s) of your choice. In the event you sell any
franchised restaurant which has a credit balance, said credit
balance may be transferred to the transferee's account with
us.
Paragraph 5 Upon payment in full of The Development Agent Agreement,
executed with this Exhibit, and for a period of 3 years, you
shall have the right of first refusal on the remainder of
those Designated Market Areas ("DMAs" as determined by the
Xxxxxxx Station Index), which are primarily located in
Michigan's lower peninsula. This right of first refusal shall
commence upon our written notification to you that we have a
qualified candidate for any territory(ies) within the
described DMAs, and will run for a period of 30 days. In the
event that you do not exercise your right, and a
territory(ies) is purchased by said candidate, this right of
first refusal shall be canceled. If you exercise your right
and subsequently sell to the same candidate, or to an entity
in which the candidate is a shareholder, you will remit to us
an amount equal to 40% of the purchase price in compensation
for our efforts.
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If you choose to exercise your right of first refusal, the
following conditions will apply:
1. You will provide us with written notice exercising your
right within 30 days of your receipt of our notification;
2. The price shall be $200,000 and shall include the
remainder of the counties within Michigan's lower
peninsula DMAs as described above;
3. Within 5 days of our receipt of your notice, you shall
execute an Addendum to Exhibit A (Exclusive Area) of your
Agreement. You shall also execute an Addendum to Exhibit
B which shall include a Development Schedule for the
Territory (exclusive of the Lansing DMA) as listed below:
Year 1 1 stores
Year 2 2 stores
Year 3 3 stores
Year 4 4 stores
Year 5 5 stores
Year 6 5 stores;
4. The Development Schedule for the Lansing DMA as listed on
Exhibit B of this Agreement shall remain in force;
5. You shall issue us a promissory note for $200,000 at 10%
interest amortized over a period of 5 years per a payment
schedule to be issued at the time of execution of the
Addendum. There will be no pre-payment penalty and you
may choose to credit your portion of any and all
franchise fees to the balance owed.
Paragraph 6 In the event that Michigan's economy (as determined by the Z
Michigan Department of Commerce) is declared to be in a depression, we shall
suspend both our rights to terminate for non-performance as listed in Section
2(G) and the Development Schedule as listed in Exhibit B and this Addendum. Said
Schedule and rights will be re-initiated at the point at which Michigan's
economy emerges from said depression.
Paragraph 7 We hereby acknowledge that you and Xxxxxxx X. And Xxxxx X. Xxxxxxx
are owners and principals in Subway restaurants and that said ownership does not
violate any non-compete clauses in the Agreement.
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Paragraph 8 We hereby acknowledge that it is your intent to cross promote your
Mountain Mike's Pizza restaurants with Subway restaurants and that said
cross-promotion does not violate any non-compete clauses in the Agreement.
Quality Franchise Systems, Inc. Master Franchising and Developmental
Systems, Inc.
By:/s/ Xxxxxxx Xxxxxx By:/s/ Xxxxxxx X. Xxxxxxx
-------------------------------- -------------------------------------
Xxxxxxx Xxxxxx Xxxxxxx X. Xxxxxxx
President President
29
AGREEMENT
This agreement ("Agreement"),dated this 28 day of August, 1993, is by and
between Q & S Management, a California corporation (hereinafter"Grantor","Q &
S") and Xxxx Xxxxxxxxxx, an individual (hereinafter "Grantee", "Golshanara").
Recitals
A. Q & S, as the franchisor of the "Mountain Mike's Pizza restaurant chain,
seeks to establish additional franchised locations in the geographical area
described in the exclusive territory as herein defined.
X. Xxxxxxxxxx, having experience in the restaurant and franchise industries and
a familiarity with the markets of said Exclusive Territory, desires to develop
franchised locations in the Exclusive Territory for Q&S in exchange for sharing
in the initial and continuing income generated by the locations.
C. The parties hereby enter this Agreement to formalize the terms and conditions
of their arrangement to jointly develop and establish Mountain Mike's Pizza
franchised locations in the exclusive Territory.
Terms
1. Grant of Exclusive Territory. Q&S grants to Golshanara the exclusive right to
establish Mountain Mike's Pizza restaurants in the area described in Exhibit `A"
attached hereto and incorporated by reference. This area is referred to herein
as "Exclusive Territory."
2. Consideration. In consideration for receiving the rights granted in this
Agreement,Golshanara shall pay Q&S Fifty thousand Dollars ($50,000.00).
3. Term:Minimum Units. The rights granted herein shall be for a period of five
(5) years from the date of this Agreement, provided that during the five (5)
year period there shall be established and put into operation in the Exclusive
Territory a minimum of six (6) additional Mountain Mike's Pizza restaurants. Any
PAGE 1
restaurants established in the territory by Q&S during the term hereof, as
hereinafter provided, shall be counted in determining said minimum number.
4. Extension. Provided that the minimum units outlined in paragraph 3 are
established during the first five year term of this Agreement, the rights shall
be extended to Grantee for additional successive five (5) year periods, on the
same terms and conditions as described in this Agreement, with the exclusion of
Paragraph 2 (no additional fee required), provided that six (6) Mountain Mike's
Pizza restaurants are established during each five year period, any restaurants
established by Q&S being counted in determining the minimum number.
5. Granting Franchises. For each of the Mountain Mike's Pizza restaurants
established in the Exclusive Territory hereunder, a separate franchise agreement
and other related agreements shall be entered into between Q&S and the
franchisee. The terms of each franchise shall be those contained in the then
current version of the franchise agreement ("Franchise Agreement").
6. Grantee not Subfranchisor. Grantee is not a subfranchisor of Q&S and (unless
specifically granted or assigned rights or responsibilities of the Franchisor in
the future) is not a party to the Franchise Agreements entered into and shall
not be responsible or liable for the Franchisor's obligations under the
Franchise Agreements in Grantee's Exclusive Territory. Grantee may be a party to
the Franchise Agreements as franchisee, which status shall not alter his rights
under this agreement.
7. Existing Franchised Units. The parties acknowledge that thirteen (13)
Mountain Mike's locations have been established in the Exclusive Territory prior
to the date of this Agreement and that the rights granted to Grantee by this
Agreement specifically do not apply to these previously established locations
listed in Exhibit "A" . In the event any of the existing units close.Grantor
shall retain the exclusive right for six (6) months to secure a franchisee for
said closed location;should a Franchise Agreement be executed and the restaurant
is re-opened within the six-month period the re-opened location shall be
considered an existing franchised unit for the purpose of this Agreement.
however, should any of the existing units closed and re-open or is sub-franchise
by the Grantee, the same shall be subject to all the terms and conditions of
this agreement.
PAGE 2
7.a. Exclusive Areas-Franchisees. For all new units established in the
Exclusive Territory, the exclusive area granted under the franchise agreement
shall not exceed a 1.5 mile radius. This 1.5 mile limitation applies also to
existing franchised units which close and subsequently reopen or which franchise
agreement expires and subsequently renew.
8. Payments to Grantee-Fees. Grantee shall be entitled to Fifty percent (50%) of
the initial franchise fee,renewal fee, and transfer fee collected by Q&S in
connection with the granting of a franchise in the Exclusive Territory exclusive
of the existing franchised units. Grantor shall distribute these funds to
Grantee within thirty (30) days from the date of opening of each franchised
location.
9. Payments to Grantee - Royalties. Grantee shall be entitled to a percentage of
collected royalties (Collected Royalty Proceeds"), as detailed in 9.b below,
received by Q&S from all franchised units established in the Exclusive Territory
during the term of this Agreement. Grantor shall rebate to Grantee Collected
Royalty Proceeds within thirty (30) days of receipt by Grantor.
9.a. Collected Royalty Proceeds. For the purpose of this Agreement,
"Collected Royalty Proceeds" shall refer to the entire royalty fees received by
Q&S from all franchised locations established hereunder, less any extraordinary
expenses incurred by Q&S in their collection,provided that these expenses are
specifically defined and documented by Grantor and approved by Grantee. Grantor
and Grantee shall share these extraordinary collection expenses in direct
proportion to the Fraction of Collected Royalty Proceeds payable to Grantor and
Grantee. Grantor shall not reduce or waive any Royalty Fee without Grantee
consent.
9.b. Royalty Payments to Grantee- Franchised Locations Operated by
Third Parties. Grantee shall received a portion of the Collected Royalty
Proceeds according to the following schedule for each individual location that
is established under this Agreement:
PAGE 3
Fraction of Collected
Royalty Proceeds Payable
MONTHS AFTER OPENING DATE to Grantee
One(1) to twelve(12) One Fifth (1/5th)
Thirteen (13) to twenty-four (24) Three Tenths (3/10ths)
Twenty-Five (25) thereafter Two Fifths (2/5ths)
9.c. Royalty Payments for Grantee-operated locations. For those
locations opened and operated by Grantee in the Exclusive Territory under this
Agreement shall not required Initial Franchise fee or any Transfer Fee. Grantee
shall pay 2.5% (Two and one-half percent) of gross sales as a royalty for the
period Grantee owns the locations,regardless of the provisions in the Franchise
agreement for such location. The schedule in paragraph 9.b above shall apply in
the event of sale of a location by Grantee.
9.d. Royalty Payments Continue Beyond This Agreement. Regardless of the
continued existence of the Exclusive Territory rights under this agreement, the
Grantee shall receive the Royalty Payments for the life of any location
established hereunder, and any extension of the relevant franchise, whether the
franchise remain in operation at the original location or be moved.
10. Payments to Grantee - Performance Payments. Grantor shall pay Grantee
$25,000.00 (Twenty Five Thousand Dollars) upon the opening of the sixth (6th)
unit under this Agreement in the Exclusive Territory and Grantee's other
exclusive territories . Additionally, Grantor shall pay Grantee $25,000.00
(Twenty Five Thousand Dollars) upon the opening of the eleventh (11th) location
within the Exclusive Territory and grantee's other exclusive territories. For
the purpose of these performance payments, locations opened by Grantor in
Grantee's exclusive territories shall apply.
11. Description of Right. Grantee shall have the exclusive right to sell or
transfer through sale Mountain Mike's Pizza franchises within the Exclusive
Territory as detailed in Exhibit "A", subject to the following terms and
conditions:
11.a. Each franchisee shall submit complete financial data to Q&S for
its review and approval.
11.b. Each franchise shall execute the then current Q&S Franchise
Agreement and agree to be bound by the terms and conditions of said agreement.
PAGE 4
11.c. A full initial franchisee fee or transfer fee as appropriate
shall be required for each franchised location under the then-existing Franchise
Agreement.
11.d. Q&S shall be solely responsible for the supervision of and
enforcement of the Franchise Agreements granted in the Exclusive Territory. The
parties agree that Grantor may delegate training responsibility on a
case-by-case basis. (For those locations that Golshanara opens and subsequently
sells, Golshanara shall be responsible for providing initial training only. All
subsequent training shall be by Grantor. In the event a location is established
within the Exclusive Territory that is not opened by Golshanara, then only the
Grantor shall be responsible for providing training.)
12. Grantor's Right to Establish Locations. Grantor retains the rights to
establish Mountain Mike's Pizza restaurants in Grantee's Exclusive
Territory;provided,however,that Grantee shall be entitled to receive from
Grantor the fees outlined in this Agreement on any and all franchises
established by Grantor in the Exclusive Territory during the term of this
Agreement and any extension thereof. This specifically does not apply to those
locations established prior to the date of this Agreement. Grantor and Grantee
shall mutually approve of the location of new franchised locations within the
Exclusive Territory, and neither party shall unreasonably withhold its approval.
13. Breach;Termination. The failure of Grantee to perform any of the terms and
conditions of this Agreement,or any breach hereof,including but not limited to
the failure to pay amounts due to Grantor within thirty (30) days of written
notice to do so,shall be deemed a breach of this Agreement. In the event of a
breach of this Agreement,this Agreement shall terminate unless arbitration is
requested by Grantee. Any arbitration regarding a breach by Grantee of this
Agreement shall be conducted under the rules of the American Arbitration
Association.However,Golshanara shall remain entitled to received royalty
payments describes in paragraph 9 for the life of the Franchise Agreements
granted in the exclusive Territory hereunder which are open and operating prior
to the date this Agreement terminates.
14. Assignment. This Agreement may not be assigned,sold or transferred without
the prior written consent of Grantor,which consent shall not be unreasonably
withheld. The consent of the Grantor is not required for assignment and transfer
of this Agreement by Golshanara to a corporation so long as Golshanara retains
PAGE 5
fifty-one percent (51%) of the controlling shares of said corporation, nor is
such consent required upon transfer or assignment to a partnership where Grantee
is and remains a general partner holding fifty percent (50%) or more of the
controlling interest.The parties agree that the interest of Grantee under this
agreement may be transferred inter vivos to the heirs of said Grantee or to a
trust and held thereby, or may pass by will or applicable laws of intestate
succession. Any attempt to assign this Agreement other than that outlined in
this paragraph 14, or the rights hereunder without the prior written consent of
Grantor shall be null and void.
15. Continuation of Payments to Grantee. If for whatever reason this Exclusive
territory Agreement expires, is not renewed,or is otherwise canceled, Grantee
shall continue to received royalty payments as described hereinabove for all
locations open and operating at the time this Agreement expires, Payments shall
continue for the life of the Franchise Agreements established
hereunder,including any and all renewals and any moved locations.
16. No Maximum Number of Franchised locations. Notwithstanding the minimum
performance requirements described in paragraph 3 above, there is no limit as to
the number of franchised locations which may be established in Grantee's
Exclusive Territory.
17. Grantor's Retained Authority. While Grantor may rely on or defer to the
judgment of Grantee from time to time in various matters, the parties agree that
Grantor retains the ultimate authority to approve or disapprove of items
regarding the Mountain Mike's name, concept and Franchise Agreement in the
Exclusive Territory. These items include but are not limited to site
registration,plan approval, equipment approval, franchise sales materials and
advertising,restaurant advertising,products and product specifications,and
distribution and distribution sources. Grantor shall use its reasonable
discretion in exercising its authority.
18. Notices. All notices shall be sent to the parties hereto at their respective
addresses set for the below:
GRANTOR: GRANTEE:
Q & S Management Xxxx Xxxxxxxxxx 0000 0xx Xxxxxx, 0xx Xxxxx X.X.Xxx
0000 Old Sacramento, CA 95814 Xxxxxxxxxxx, XX 00000
Attn:Xxxxxxx Xxxxxx
PAGE 6
19. Severability. Should any one or more parts of this Agreement be declared
invalid by any court of competent jurisdiction for any reason, such decision
shall not effect the validity of any remaining portions which shall remain in
full force and effect
20. Mutual Indemnification. Each party agrees to hold the other party harmless
from all bills,debts,obligations and liabilities incurred in the operation of
their respective businesses. Furthermore,Grantor shall indemnify Grantee from
any liability that may arise from the Franchise Agreements executed hereunder
and from Grantor's activities in the Exclusive Territory,and Grantee shall
indemnify Grantor from any liability that may arise from Grantee's sales and
development efforts in the Exclusive Territory.
21. Covenant Not to Compete. Grantee agrees that neither Grantee nor its
principal officers or shareholders shall undertake any activities,during the
term of this Agreement, in direct competition to the Mountain Mike's Pizza
restaurants in the Exclusive Territory. Grantee's operation of a Mountain Mike's
Pizza restaurant under franchise shall not be considered as being in
competition.
22. Definitions. The Exclusive territory Rights include, but are not limited to,
the right to own, be franchised,develop, open,operate,and/or sell or resell a
restaurant, and also the right to discover and furnish to Q&S third parties
ready,willing and able to purchase a Mountain Xxxx franchise and operate a
restaurant within the said exclusive territory. The term "operator" shall mean
the Grantee if he be the owner and operator of a restaurant, or a third party or
parties who are successors of the Grantee or who were obtained as franchisees
under the provisions of this Agreement.
23. First Right of Refusal-Closed Units. In the event any Mountain Mike's
restaurant within Santa Xxxxx County should close,including any existing
franchised unit Grantee shall have the first right of refusal to take over the
closed location, without payment of additional Franchise Fees, Service fees
after takeover shall be as provided by the Franchise agreement subject to the
terms hereof.
24. [TEXT MISSING]
PAGE 7
25. Registration Provisions. To comply with California laws regarding the sale
of Franchises, Q&S agrees to register Grantee with the State, and any other
governmental authority where required, as its representative for the Exclusive
Territory. This does not impose upon Q&S any employer obligations except as may
be specifically set forth herein. Grantee is an independent contractor,not an
employee. Grantee may elect to register independently with the State, and other
governmental authorities,whether or not required. Should the Grantee so elect
Q&S will use its best efforts to assist in said independent registration and
will furnish to Grantee all records and other documents which the government
entity may require,at no cost to Grantee except that Grantee will be responsible
for payment of all costs of such registration. Neither party may cancel this
agreement because of governmental registration requirements. In the event any
provision of this agreement is contrary to law or governmental regulations, the
same shall be amended in such fashion as to bring the agreement into compliance
without altering the rights of the Grantee.
26. Transfer by Q&S. Should Q&S transfer its rights to franchise Mountain Mike's
Restaurants, in whole or in part,voluntarily or involuntarily, or should Q&S be
merged with another corporation or entity, this agreement shall survive such
transfer or merger, and the rights herein shall remain in full force and effect
as to the subsequent person or entity obtaining said Franchising rights.
27. Sole Agreement. This is the only agreement between the parties in respect to
the exclusive rights for Santa Xxxxx County. There are no oral agreements. This
agreement does not modify in any respect other agreements between the parties
relative to other Counties.
28. Attorney Fees and Costs. In Arbitration or Litigation in respect to this
agreement the prevailing party shall be entitled to judgment or award of
attorney fees and costs.
29. Time of Essence. Time is the essence of this Agreement.
PAGE 8
IN WITNESS WHEREOF, the parties have entered into this Agreement this 28 day of
August, 1993. Executed in duplicated original.
Q & S MANAGEMENT XXXX XXXXXXXXXX
/s/ Xxxxxxx X. Xxxxxx /s/ Xxxx Xxxxxxxxxx
-------------------------- ---------------------------
Xxxxxxx Xxxxxx Xxxx Xxxxxxxxxx
Chief Executive Officer
PAGE 9
EXHIBIT A
EXCLUSIVE TERRITORY
The Exclusive Territory as defined in the Agreement between Q & S Management and
Xxxx Xxxxxxxxxx is the entire County of Santa Clara,California, except for those
areas in Santa Xxxxx County
listed below:
(NOTE: Specific descriptions of each of the exclusive areas for the locations
below shall be provided with the final draft of this Agreement)
Xxxxxx Xxxx
Xxxxxxxx
Camden/Almaden
Los Gatos
Gilroy
Branham/Pearl
Mountain View # 1
Santa Xxxxxx/Xxxxxx
Blossom Hill
Capitol/XxXxx
Mountain View # 2
Sunnyvale # 2
Xxxxx/Xxxxxx
In the event any of the Franchise Agreements protecting the above-referenced
areas expire or terminate the area shall become part of Grantee's Exclusive
Territory.
PAGE 10
