JRECK SUBS GROUP, INC.
FRANCHISE AGREEMENT
THIS FRANCHISE AGREEMENT (the "Agreement") is made and entered into
this ____ day of _____________, 199__, by and between JRECK SUBS GROUP, INC., a
Colorado corporation, with its principal business address at 0000 Xxxx Xxxxx
Xxxx 000, Xxxxx 000, Xxxxxxxx, Xxxxxxx 00000 (referred to in this Agreement as
"we," "us" or "our"), and __________________________,
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(referred to in this Agreement as "you," "your" or "Owner").
1. PREAMBLES, ACKNOWLEDGMENTS AND GRANT OF FRANCHISE
A. PREAMBLES
We and our predecessors have expended considerable time and
effort in developing and operating a sub Restaurant concept offering
delicatessen and submarine-type sandwiches, of other deli style sandwiches,
salads, soups, soft drinks, and other specialty food products and services.
These restaurants operate under "XXXXX'X SUBS(R)" trade name ("the 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.
We use, promote and license certain trademarks, service marks
and other commercial symbols in operating the Restaurants, including the trade
and service xxxx XXXXX'X SUBS(R) which has gained and continues to gain public
acceptance and goodwill, and may continue to create, use and license additional
trademarks, service marks and commercial symbols in operating the Restaurants
(collectively, the "Marks").
We have chosen franchising as our business strategy for
creating and keeping customers for XXXXX'X SUBS(R) restaurants. We grant to
persons who meet our qualifications and are willing to undertake the investment
and effort a franchise to own and operate a XXXXX'X SUBS(R) 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").
As a franchise owner of a XXXXX'X SUBS(R) Restaurant, you will
work with us to create and keep customers for XXXXX'X SUBS(R) Restaurants.
You have applied for a franchise to own and operate a XXXXX'X
SUBS(R) Restaurant.
B. ACKNOWLEDGMENTS
You acknowledge:
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(1) That you have conducted an independent investigation of this
XXXXX'X SUBS franchise opportunity and recognize that, like any other business,
the nature of the business conducted by a XXXXX'X SUBS Restaurant may, and
probably will, evolve and change over time.
(2) That an investment in a XXXXX'X SUBS Restaurant involves business
risks.
(3) That your business abilities and efforts are vital to the success
of your SOBICK'S SUBS Restaurant.
(4) That creating customers for your XXXXX'X SUBS Restaurant will
require that you make consistent marketing efforts to your community through a
variety of mediums, including media advertising, direct mail advertising and
couponing, display and use of in-store promotional materials, participating in
community groups and making presentations to community organizations and
businesses.
(5) That keeping customers for your XXXXX'X SUBS Restaurant will
require you to execute a high level of customer service through strict adherence
to the System and our System Standards (defined below).
(6) That you are committed to maintaining XXXXX'X SUBS Restaurant
System Standards for product quality and service, employee hiring and training
and restaurant and employee cleanliness.
(7) That any information you have acquired from other XXXXX'X SUBS
Restaurant franchise owners relating to their sales, 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.
(8) 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.
(9) 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 in purchasing the
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franchise are accurate and complete and that you have made no misrepresentations
or material omissions in obtaining the franchise.
(10) 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, as well as the uniformity of
those standards at each XXXXX'X SUBS Restaurant, and consequently protect and
preserve the goodwill of the Marks.
C. CORPORATION, LIMITED LIABILITY COMPANY OR PARTNERSHIP.
If you are at any time a corporation, limited liability company or
partnership, you agree and represent that:
(1) You will have the authority to execute, deliver and
perform your obligations under this Agreement, having obtained all
required board of directors or other consents, and are duly organized
or formed and validly existing in good standing under the laws of the
state of your incorporation or formation;
(2) Your organizational documents, operating agreement or
partnership agreement will recite that the issuance and transfer of any
ownership interests in you are restricted by the terms of this
Agreement, and all certificates and other documents representing
ownership interests in you will bear a legend referring to the
restrictions of this Agreement;
(3) Exhibit A to this Agreement will completely and accurately
describe all of your owners and their interests in you;
(4) Each of your owners at any time during the term of this
Agreement, including after an approved transfer under Section 12, will
execute an agreement in the form that we prescribe undertaking to be
bound jointly and severally by all provisions of this Agreement and any
ancillary agreements between you and us that bind you. You and your
owners agree to execute and deliver to us such revised Exhibits A as
may be necessary to reflect any changes in the information it contains
and to furnish such other information about your organization or
formation as we may request; and
(5) The RESTAURANT (as defined in Paragraph D below), and
other XXXXX'X SUBS Restaurants, will be the only businesses you
operate.
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X. XXXXX OF FRANCHISE
You have applied for a franchise to own and operate a XXXXX'X SUBS
Restaurant at __________________________________________________________________
(the "Premises"). Subject to the terms of and upon the conditions contained in
this Agreement, we hereby grant you a franchise (the "Franchise") to operate a
XXXXX'X SUBS Restaurant (the "RESTAURANT") at the Premises, and to use the
System in its operation, for a term commencing on the date of this Agreement and
expiring ten (10) years from that date or at an earlier date co-terminous with
your lease for the Restaurant premises, unless sooner terminated in accordance
with Section 14 hereof. Except as otherwise provided in Paragraph E of this
Section, we (and our affiliates) will not establish, or grant to a franchise
owner the right to establish, another XXXXX'X SUBS Restaurant to be located
within the geographical area set forth in Exhibit B attached hereto (the
"Exclusive Area").
You agree that you will at all times faithfully, honestly and
diligently perform your obligations hereunder, continuously exert your best
efforts to promote and enhance the RESTAURANT and not engage in any other
business or activity that conflicts with your obligations to operate the
RESTAURANT in compliance with this Agreement. You may not operate the RESTAURANT
from any site other than the Premises without our prior written consent.
E. RIGHTS WE RESERVE
We (and our affiliates) retain the right in our sole discretion:
(6) to establish, and allow other franchise owners to
establish, XXXXX'X SUBS Restaurants at any location outside the
Exclusive Area (including at the boundary of the Exclusive Area) and on
any terms and conditions as we deem appropriate;
(7) to sell and deliver, and allow other franchise owners to
sell and deliver, products and services identified by the Marks to
customers located within the Exclusive Area from XXXXX'X SUBS
Restaurants located outside the Exclusive Area; and
(8) to sell products identified by the Marks, or other
trademarks or service marks, within or outside the Exclusive Area
through distribution channels other than XXXXX'X SUBS Restaurants
(including, but not limited to, mail order and grocery stores).
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2. SITE SELECTION, LEASE OF PREMISES AND DEVELOPMENT AND OPENING OF
RESTAURANT.
A. SITE SELECTION
You acknowledge that, before signing this Agreement, you (with or
without our assistance) located and we approved the site for the Premises. You
acknowledge and agree that our recommendation or approval of the Premises, and
any information regarding the Premises communicated to you, do not constitute a
representation or warranty of any kind, express or implied, as to the
suitability of the Premises for a XXXXX'X SUBS Restaurant or for any other
purpose. Our recommendation or approval of the Premises indicates only that we
believe that the Premises fall within the acceptable criteria for sites and
premises that we have established as of the time of our recommendation or
approval of the Premises. Application of criteria that have appeared effective
with respect to other sites and premises may not accurately reflect the
potential for all sites and premises, and, after our approval of a site,
demographic and/or other factors included in or excluded from our criteria could
change, thereby altering the potential of a site and premises. The uncertainty
and instability of these criteria are beyond our control, and we will not be
responsible for the failure of a site and premises we have recommended or
approved to meet expectations as to potential revenue or operational criteria.
You acknowledge and agree that your acceptance of the Franchise is based on your
own independent investigation of the suitability of the Premises.
B. LEASE OF PREMISES
You acknowledge that we and you have approved the lease or sublease for
the Premises (the "Lease") before signing this Agreement. You represent that a
copy of the signed Lease already has been delivered to us or will be delivered
to us within fifteen (15) days after its execution. At our request, you agree
that you will collaterally assign the Lease to us as security for your timely
performance of all obligations under this Agreement and secure the lessor's or
sublessor's consent to the collateral assignment. You acknowledge that our
approval of the Lease does not constitute a guarantee or warranty, express or
implied, of the successful operation or profitability of a XXXXX'X SUBS
Restaurant operated at the Premises. This approval indicates only that we
believe that the Premises and the terms of the Lease fall within the acceptable
criteria we have established as of the time of our approval.
C. RESTAURANT DEVELOPMENT.
You are responsible for developing the RESTAURANT. We will furnish you
with mandatory and suggested specifications and layouts for a XXXXX'X SUBS
Restaurant, including requirements for dimensions, design, image, interior
layout. decor. fixtures, equipment, signs,
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furnishings and color scheme. You are obligated to prepare all required
construction plans and specifications to suit the shape and dimensions of the
Premises and to insure that these plans and specifications comply with
applicable ordinances, building codes and permit requirements and with lease
requirements and restrictions. You are obligated to submit construction plans
and specifications to us for approval before construction of the RESTAURANT is
commenced and all revised or "as built" plans and specifications during the
course of construction. Our review is limited to your compliance with our design
requirements. We can periodically inspect the Premises during the RESTAURANT's
development.
You agree, at your own expense, to do the following to develop the
RESTAURANT at the Premises:
(1) secure all financing required to develop and operate the
RESTAURANT;
(2) obtain all building, utility, sign, health, sanitation,
business, liquor and other permits and licenses required to construct
and operate the RESTAURANT;
(3) construct all required improvements to the Premises and
decorate the RESTAURANT in compliance with plans and specifications we
have approved;
(4) purchase or lease and install all required fixtures,
furniture, equipment, furnishings and signs ("Operating Assets")
required for the RESTAURANT:
(5) purchase an opening inventory of authorized and approved
products, materials and supplies ("Supplies"); and
(6) give us copies of the documents that we periodically
require.
D. OPERATING ASSETS.
You agree to use in developing and operating the RESTAURANT only those
Operating Assets that we have approved for XXXXX'X SUBS Restaurants as meeting
our specifications and standards for quality, design, appearance, function and
performance. You agree to place or display at the Premises (interior and
exterior) only such signs, emblems, lettering, logos and display materials that
we approve from time to time. You agree to purchase or lease approved brands,
types or models of Operating Assets only from suppliers we have designated or
approved (which may include us and/or our affiliates).
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E. COMPUTER SYSTEM.
You agree to use in developing and operating the RESTAURANT the
computer equipment and operating software ("Computer System") that we specify
from time to time. We may require you to obtain specified computer hardware
(including a dedicated telephone modem) and/or software and may modify
specifications for and components of the Computer System from time to time. Our
modification of specifications for the components of the Computer System may
require you to incur costs to purchase, lease and/or license new or modified
computer hardware and/or software and to obtain service and support for the
Computer System during the term of this Agreement. You acknowledge that we
cannot estimate the future costs of the Computer System and that your cost of
obtaining the Computer System may not be fully amortizable over the remaining
term of this Agreement. Nonetheless, you agree to incur these costs in obtaining
the computer hardware and software comprising the Computer System (or additions
or modifications thereto). Within sixty (60) days after you receive notice from
us, you agree to obtain the components of the Computer System that we designate
and require. We also can charge you a reasonable systems fee for modifications
of and enhancements made to proprietary software that we license to you and
other maintenance and support services that we or our affiliates furnish to you
related to the Computer System.
F. RESTAURANT OPENING.
You agree not to open the RESTAURANT for business until:
(1) the RESTAURANT has been developed according to our
specifications and standards and we notify you in writing that the
RESTAURANT is acceptable:
(2) pre-opening training has been completed to our
satisfaction;
(3) the initial franchise fee and all other amounts then due
to us have been paid; and
(4) we have been furnished with copies of all insurance
policies required by this Agreement, or other evidence of insurance
coverage and payment of premiums that we request or accept.
Subject to your compliance with these conditions, you agree to open the
RESTAURANT for business within one hundred eighty (180) days after you sign this
Agreement or on or before the date specified in the Lease, whichever is earlier.
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3. FEES
A. INITIAL FRANCHISE FEE.
You agree to pay us a non-recurring and non-refundable initial
franchise fee in the amount of Twelve Thousand Dollars ($12,500.00), which we
will fully earn upon the execution of this Agreement. For additional franchises
offered to qualified franchise owners, we may reduce the initial franchise fee
to Five Thousand Dollars ($5,000.00).
B.. ROYALTY.
You agree to pay us a weekly royalty ("Royalty") in the amount of six
percent (5 %) of the RESTAURANT's gross sales (as defined in Paragraph C of this
Section). You must sign and deliver to us, before the RESTAURANT opens, the
documents we require to authorize us to debit your business checking account
automatically for the Royalty. Payments of Royalties shall be based on a Sunday
through Saturday work week, and is due and payable on each Monday for the
preceeding week.. On each Monday, you must report to us by telephone or
electronic means or in written form, as we direct, the RESTAURANT's true and
correct Gross Sales for the week ending on the immediately preceding Saturday.
We will debit your account on Monday for the Royalty that is due on account of
these Gross Sales. You agree to make the necessary funds available in your
account for withdrawal before each Monday.
If you fail to report the RESTAURANT's Gross Sales on a weekly basis as
required, we can debit your account each Monday for the same Royalty that we
debited during the previous week. If the Royalty we debit from your account is
less than the Royalty you actually owe us (once we have determined the
RESTAURANT's true and correct Gross Sales for the week), we will debit your
account for the balance of the Royalty due on the following Monday. If the
Royalty we debit from your account is greater than the Royalty you actually owe
us for the week, we will credit the excess against the amount we otherwise would
debit from your account on the following Monday.
We can require you to pay the Royalty by means other than automatic
debit (e.g., by check) whenever we deem appropriate, and you agree to comply
with our payment instructions.
C. DEFINITION OF "GROSS SALES"
As used in this Agreement, the term "Gross Sales" means all revenue you
derive from operating the RESTAURANT, including, but not limited to, all revenue
from jukeboxes, games and other vending machines and all amounts you receive at
or away from the Premises, and whether from cash, check, credit and debit card,
trade credit or credit transactions, but excluding (1) all federal, state or
municipal sales, use or service taxes collected from customers and paid to
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the appropriate taxing authority and (2) customer refunds, adjustments, credits
and allowances actually made by the RESTAURANT.
D. INTEREST ON LATE PAYMENTS
All amounts which you owe us, if more than seven (7) days late, will
bear interest beginning after their original due date at the rate of one and
one-half percent (1.5 %) per month or the highest contract rate of interest
permitted by law, whichever is lower. In addition, you agree to pay us a service
charge of either (1) ten percent (10%) of the past due amount, or (2) Fifty
Dollars ($50.00), whichever is higher, for each Royalty payment not made on or
before its original due date. This service charge is not interest or a penalty.
It is solely to compensate us for increased administrative and management costs
due to your late payment. We can debit your account for these amounts. You
acknowledge that this Paragraph does not constitute our agreement to accept any
payments after they are due or our commitment to extend credit to, or otherwise
finance your operation of, the RESTAURANT. Your failure to pay all amounts when
due constitutes grounds for termination of this Agreement, as provided in
Section 14 hereof, notwithstanding the provisions of this Paragraph.
E. APPLICATION OF PAYMENTS
Notwithstanding any designation you might make, we have sole discretion
to apply any of your payments to any of your past due indebtedness to us. You
acknowledge and agree that we can set off any amounts you or your owners owe us
against any amounts we might owe you or your owners. You cannot withhold payment
of any amounts owed to us due to our alleged nonperformance of any of our
obligations under this Agreement.
4. TRAINING AND ASSISTANCE.
A. TRAINING.
Before the RESTAURANT begins operating, we will furnish initial
training on the operation of a XXXXX'X SUBS Restaurant to you (or, if you are a
corporation, limited liability company or partnership, your managing
shareholder, partner or member ("Managing Owner")) and two (2) employees who
actually will manage the RESTAURANT on-site. Up to fifteen (15) days of training
for you (or your Managing Owner) and your managerial employee will be furnished
at our designated training facility and/or at an operating XXXXX'X SUBS
Restaurant. You (or your Managing Owner) and your managerial employee are
required to complete the initial training to our satisfaction and to participate
in all other activities required to operate the RESTAURANT. Although we will
furnish initial training to you (or your Managing Owner) and two (2) managerial
employee at no additional fee or other charge, you will be responsible for all
travel and living
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expenses which you (or your Managing Owner) or your employee incur while
training. We will provide up to ten (10) days (at our discretion) of additional
training at the RESTAURANT to all RESTAURANT personnel. This training will be
provided before and after the RESTAURANT begins operations. You agree to replace
the RESTAURANT's manager if we determine that he or she is not qualified to
serve in this capacity. If we determine that you (or your Managing Owner) are
unable to complete initial training to our satisfaction, we can terminate this
Agreement under Section 14 hereof.
We may require you (or your Managing Owner) and/or previously trained
and experienced managers to attend periodic refresher training courses at the
times and locations that we designate, for which we may charge fees. We also may
require you to pay us fees for training new managers hired after the
RESTAURANT's opening. You agree to give us reasonable assistance in training
other XXXXX'X SUBS Restaurant franchise owners. We will reimburse you for
providing this assistance.
B. GENERAL GUIDANCE.
We will advise you from time to time regarding the RESTAURANT's
operation based on reports you submit to us or inspections we make. In addition,
we will furnish guidance to you on:
(5) standards, specifications and operating procedures and methods
utilized by XXXXX'X SUBS Restaurants;
(6) purchasing required Operating Assets and Supplies:
(7) advertising and marketing programs;
(8) employee training; and
(9) administrative, bookkeeping and accounting procedures.
This guidance will, at our discretion, be furnished in our operating manual
("Operations Manual"), bulletins or other written materials and/or during
telephone consultations and/or consultations at our office or the RESTAURANT.
If you request or we require additional or special guidance, assistance
or training, all of the expenses that we incur, including per diem charges and
travel and living expenses for our personnel, will be your responsibility.
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C. OPERATIONS MANUAL.
We will loan you during the term of this Agreement one (1) copy of our
Operations Manual, consisting of the materials (including, as applicable, audio
tapes, videotapes, magnetic media, computer software and written materials) that
we generally furnish to franchise owners from time to time for use in operating
a XXXXX'X SUBS Restaurant. The Operations Manual contains mandatory and
suggested specifications, standards, operating procedures and rules ("System
Standards") that we prescribe from time to time for the operation of a XXXXX'X
SUBS Restaurant and information on your other obligations under this Agreement
and related agreements. We may modify the Operations Manual from time to time to
reflect changes in System Standards. You agree to keep your copy of the
Operations Manual current and in a secure location at the RESTAURANT. In the
event of a dispute over its contents, the master copy of the Operations Manual
we maintain at our principal office will be controlling. You may not at any time
copy, duplicate, record or otherwise reproduce any part of the Operations
Manual. If your copy of the Operations Manual is lost, destroyed or
significantly damaged, you agree to obtain a replacement copy at our then
applicable charge.
D. DELEGATION OF PERFORMANCE.
You agree that we have the right to delegate the performance of any
portion or all of our obligations and duties under this Agreement to designees,
whether these designees are our agents or independent contractors with whom we
have contracted to perform these obligations.
5. MARKS.
A. OWNERSHIP AND GOODWILL OF MARKS.
Your right to use the Marks is derived solely from this Agreement and
limited to your operation of the RESTAURANT pursuant to and in compliance with
this Agreement and all System 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 operate the
RESTAURANT 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 agree to use the Marks as the sole identification of the
RESTAURANT, except that
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you agree to identify yourself as the independent owner in the manner we
prescribe. 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 selling any unauthorized services or products or in any
other manner we have not expressly authorized in writing. No Xxxx xxx be used in
any advertising concerning the transfer, sale or other disposition of the
RESTAURANT or an ownership interest in you. You agree to display the Marks
prominently in the manner we prescribe at the RESTAURANT and 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 have
sole discretion to take the action we deem appropriate and the right to 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 reimburse
you for your reasonable direct expenses of changing the RESTAURANT's signs.
However, we will not be obligated to reimburse you 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 proceeding in which you are
named as a party, provided that you have timely notified us of the
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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.
6. CONFIDENTIAL INFORMATION.
We possess (and will continue to develop and acquire) certain
confidential information (the "Confidential Information") relating to the
development and operation of XXXXX'X SUBS 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 XXXXX'X SUBS Restaurants;
(4) marketing and advertising programs for XXXXX'X SUBS
Restaurants;
(5) knowledge of specifications for and suppliers of certain
Operating Assets and Supplies; and
(6) knowledge of the operating results and financial
performance of XXXXX'X SUBS Restaurants other than the RESTAURANT.
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 operating the RESTAURANT 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
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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 disclosure thereof to RESTAURANT personnel and others.
You agree that we (and our affiliates) will have the perpetual right to
use and authorize other XXXXX'X SUBS 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 XXXXX'X SUBS 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
the 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.
7. 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 XXXXX'X SUBS Restaurants if
franchise owners of XXXXX'X SUBS Restaurants were permitted to hold interests in
or perform services for a Competitive Business (defined below). You also
acknowledge that we have granted the Franchise 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 twenty-five
(25) miles of the RESTAURANT;
(3) have any direct or indirect interest as a disclosed or
beneficial owner in a Competitive Business operating within ten (10)
miles of any XXXXX'X SUBS Restaurant other than the RESTAURANT;
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(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 XXXXX'X SUBS 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 the 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 submarine sandwiches as its
primary product (other than a XXXXX'X SUBS Restaurant operated under a franchise
agreement with us). You agree to obtain similar covenants from the personnel we
specify.
8. SYSTEM STANDARDS
A. COMPLIANCE WITH SYSTEM STANDARDS
You acknowledge and agree that your operation and maintenance of the
RESTAURANT according to System Standards are essential to preserve the goodwill
of the Marks and all XXXXX'X SUBS Restaurants. Therefore, at all times during
the term of this Agreement, you agree to operate and maintain the RESTAURANT
according to each and every System Standard, as we periodically modify and
supplement them during the term of this Agreement, even if you believe that a
System Standard, as originally issued or subsequently modified or supplemented,
is not in the System's or your RESTAURANT's best interests. System Standards may
regulate any one or more of the following for the RESTAURANT:
(1) design, layout, decor, appearance and lighting; periodic
maintenance, cleaning and sanitation; periodic remodeling; replacement
of obsolete or worn-out leasehold improvements and Operating Assets;
periodic painting; and use of interior and exterior signs, emblems,
lettering and logos;
(2) types, models and brands of required Operating Assets and
Supplies;
(3) required or authorized products and services and product
and service
15
categories; product preparation, storage, handling and packaging
procedures; and product inventory requirements;
(4) designated or approved suppliers (which may be limited to
or include us) of Operating Assets and Supplies and supplier approval
procedures and criteria;
(5) terms and conditions of the sale and delivery of, and
terms and methods of payment for, Supplies and services that you obtain
from us or unaffiliated suppliers; our right not to sell any products
to you, or to sell products to you only on a "cash-on-delivery" or
other basis, if you are in default under any agreement with us; and our
right (without liability) to advise your suppliers and others with whom
you, we and other franchise owners deal that you are in default under
any agreement with us;
(6) sales, marketing, advertising and promotional programs and
materials and media used in these programs;
(7) use and display of the Marks;
(8) staffing levels for the RESTAURANT and matters relating to
managing the RESTAURANT; communication to us of the identities of the
RESTAURANT's personnel; and qualifications, training, dress and
appearance of employees (although you will have sole responsibility and
authority concerning the selection and promotion of your employees, the
hours they work, their rates of pay and other benefits, the work
assigned to them and their working conditions);
(9) days and hours of operation of the RESTAURANT;
(10) participation in market research and testing and product
and service development programs;
(11) acceptance of credit and debit cards, other payment
systems and check verification services;
(12) bookkeeping, accounting, data processing and record
keeping systems and forms; methods, formats, content and frequency of
reports to us of sales, revenue, financial performance and condition;
and furnishing tax returns and other operating and financial
information to us;
(13) types, amounts, terms and conditions of insurance
coverage required to be carried for the RESTAURANT and standards for
underwriters of policies providing
16
required insurance coverage; our protection and rights under these
policies as an additional named insured; required or impermissible
insurance contract provisions; assignment of policy rights to us;
periodic verification of insurance coverage that must be furnished to
us; our right to obtain insurance coverage for the RESTAURANT at your
expense if you fail to obtain required coverage; our right to defend
claims; and similar matters relating to insured and uninsured claims;
(14) complying with applicable laws; obtaining required
licenses and permits; adhering to good business practices; observing
high standards of honesty, integrity, fair dealing and ethical business
conduct in all dealings with customers, suppliers and us; and notifying
us if any action, suit or proceeding is commenced against you or the
RESTAURANT or if you receive any report, citation or notice regarding
the RESTAURANT's failure to comply with any health, cleanliness or
safety standard; and
(15) regulation of any other aspects of the operation and
maintenance of the RESTAURANT that we determine from time to time to be
useful to preserve or enhance the efficient operation, image or
goodwill of the Marks and XXXXX'X SUBS Restaurants.
You agree that System Standards prescribed from time to time in the
Operations Manual, or otherwise communicated to you in writing or other tangible
form, constitute provisions of this Agreement as if fully set forth herein. All
references to this Agreement include all System Standards as periodically
modified.
B. MODIFICATION OF SYSTEM STANDARDS.
We may periodically modify System Standards, which may accommodate
regional or local variations as we determine, and any modifications may obligate
you to invest additional capital in the RESTAURANT ("Capital Modifications")
and/or incur higher operating costs. Except for the Computer System, we will not
obligate you to make any Capital Modifications during the first three (3) years
of the term of this Agreement or after that time when the investment cannot in
our reasonable judgment be amortized during the remaining term of this
Agreement, unless we agree to extend the term of this Agreement so that the
additional investment, in our reasonable judgment, may be amortized, or unless
the investment is necessary in order to comply with applicable laws. We agree to
give you sixty (60) days to comply with Capital Modifications we require that
will cost up to Five Thousand Dollars ($5,000.00), ninety (90) days to comply
with Capital Modifications we require that will cost between Five Thousand
Dollars ($5,000.00) and Ten Thousand Dollars ($10,000.00), and one hundred
twenty (120) days to comply with Capital Modifications we require that will cost
over Ten Thousand Dollars ($10,000.00). Your failure to comply with
modifications to System Standards within the required time periods is an
incurable default under this Agreement, as provided in Section 14.B. below.
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9. MARKETING.
A. MARKETING FUND
Recognizing the value of advertising and marketing to the goodwill and
public image of XXXXX'X SUBS Restaurants, we have established a marketing fund
(the "Marketing Fund") for the advertising, marketing and public relations
programs and materials we deem appropriate. You agree to contribute to the
Marketing Fund four percent (4%) of the Gross Sales of the RESTAURANT, payable
in the same manner as the Royalty due hereunder. XXXXX'X SUBS Restaurants that
we or our affiliates own will contribute to the Marketing Fund on the same basis
as our franchise owners.
We will direct all programs financed by the Marketing Fund, with sole
discretion over the creative concepts, materials and endorsements used and their
geographic, market and media placement and allocation. You agree that the
Marketing Fund may be used to pay the costs of preparing and producing video,
audio and written materials; administering regional and multi-regional marketing
and advertising programs, including, without limitation, purchasing trade
journal, direct mail and other media advertising and employing advertising,
promotion and marketing agencies to provide assistance; and supporting public
relations, market research and other advertising, promotion and marketing
activities. The Marketing Fund periodically will furnish you with samples of
advertising, marketing and promotional formats and materials at no cost.
Multiple copies of these materials will be furnished to you at our direct cost
of producing them, plus any related shipping, handling and storage charges.
The Marketing Fund will be accounted for separately from our other
funds and will not be used to defray any of our general operating expenses,
except for the reasonable salaries, administrative costs, travel expenses and
overhead we may incur in activities related to administering the Marketing Fund
and its programs, including, without limitation, conducting market research,
preparing advertising, promotion and marketing materials and collecting and
accounting for contributions to the Marketing Fund. The Marketing Fund will not
be our asset. All contributions to the Marketing Fund will be held for the
benefit of those who have contributed to the Marketing Fund and used solely for
the purposes for which the contributions were made. We may spend, on behalf of
the Marketing Fund, in any fiscal year an amount greater or less than the
aggregate contribution of all XXXXX'X SUBS Restaurants to the Marketing Fund in
that year, and the Marketing Fund may borrow from us or others to cover deficits
or invest any surplus for future use. All interest earned on moneys contributed
to the Marketing Fund will be used to pay advertising costs before other assets
of the Marketing Fund are expended. We will prepare an annual statement of
moneys collected and costs incurred by the Marketing Fund and furnish the
statement to you upon written request. We can have the Marketing Fund
incorporated or operated
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through a separate entity anytime we deem appropriate, and the successor entity
will have all of the rights and duties specified in this Section.
You acknowledge that the Marketing Fund is intended to maximize
recognition of the Marks and patronage of XXXXX'X SUBS Restaurants. Although we
will endeavor to utilize the Marketing Fund to develop advertising and marketing
materials and programs and to place advertising and marketing that will benefit
all XXXXX'X SUBS Restaurants, we undertake no obligation to ensure that
expenditures by the Marketing Fund in or affecting any geographic area are
proportionate or equivalent to the contributions to the Marketing Fund by
XXXXX'X SUBS Restaurants operating in that geographic area or that any XXXXX'X
SUBS Restaurant will benefit directly or in proportion to its contribution to
the Marketing Fund from the development of advertising and marketing materials
or the placement of advertising and marketing. Except as expressly provided in
this Section, we assume no direct or indirect liability or obligation to you for
collecting amounts due to, or maintaining, directing or administering, the
Marketing Fund.
We can defer or reduce contributions of a XXXXX'X SUBS Restaurant
franchise owner and, upon thirty (30) days' prior written notice to you, reduce
or suspend contributions to and operations of the Marketing Fund for one or more
periods of any length and terminate (and, if terminated, reinstate) the
Marketing Fund. If the Marketing Fund is terminated, all unspent moneys on the
date of termination will be distributed to our franchise owners and to us and
our affiliates in proportion to their and our respective contributions to the
Marketing Fund during the preceding twelve (12) month period.
B. ADVERTISING COOPERATIVES.
You agree that we may, in our sole discretion, designate any geographic
area in which two (2) or more XXXXX'X SUBS Restaurants are located as a region
in order to establish an advertising cooperative ("Cooperative"). The
Cooperative's members in any area will include all of XXXXX'X SUBS Restaurants
operating in that area. Each Cooperative will be organized and governed in a
form and manner, and begin operating on a date, that we determine in advance.
Each Cooperative's purpose is, with our approval, to administer advertising
programs and develop promotional materials for the area that the Cooperative
covers. If, as of the time you sign this Agreement, we have established a
Cooperative for the geographic area in which the RESTAURANT is located, or if we
establish a Cooperative in the area covering your RESTAURANT during this
Agreement's term, you must sign any documents we require to become a member of
the Cooperative and participate in the Cooperative as those documents require.
In addition to your Marketing Fund contribution in Paragraph A above,
you agree to contribute to the Cooperative the amounts that we prescribe from
time to time, not to exceed five
19
percent (5%) of the RESTAURANT's Gross Sales, although the Cooperative's members
may increase the required contribution by a two-thirds (2/3) vote of all XXXXX'X
SUBS Restaurant franchise owners who are members of that Cooperative. Each
franchise owner will have one vote, regardless of the number of XXXXX'X SUBS
Restaurants that franchise owner (or its affiliates) operates within the
Cooperative's area. You must pay us your Cooperative contribution in the same
manner as the Royalty, and we will forward it for the Cooperative's use.
You agree to submit to us and the Cooperative any reports that we
require. We or our designee will maintain and administer the Cooperative's
account according to the Cooperative's governing documents. We will operate the
Cooperative solely to collect and spend Cooperative contributions for the
purposes described above. The Cooperative and its members may not use any
advertising or promotional plans or materials without our prior written consent.
C. BY YOU.
You agree that any advertising, promotion and marketing you conduct
will be completely clear and factual and not misleading and conform to the
highest standards of ethical advertising and marketing and the advertising and
marketing policies which we prescribe from time to time. Samples of all
advertising, promotional and marketing materials which we have not prepared or
previously approved must be submitted to us for approval before you use them. If
you do not receive written disapproval within fifteen (15) days after we receive
the materials, they will be considered approved. You may not use any
advertising, promotional or marketing materials that we have disapproved.
10. RECORDS, REPORTS AND FINANCIAL STATEMENTS.
You agree to establish and maintain at your own expense a bookkeeping,
accounting and record keeping system conforming to the requirements and formats
we prescribe from time to time. We may require you to use a Computer System in
order to maintain certain sales data and other information. You agree to furnish
to us in the manner and format that we prescribe from time to time:
(1) on Monday of each week, a report on the RESTAURANT's Gross
Sales during the week ending on the immediately preceding Sunday;
(2) within five (5) days after their filing, copies of all
sales tax returns for the RESTAURANT (you agree that we can
periodically verify with the appropriate tax authorities the sales
taxes that you have paid);
(3) within thirty (30) days after the end of each fiscal
quarter of the
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RESTAURANT, a profit and loss statement for the RESTAURANT for
the immediately preceding fiscal quarter and year-to-date and a balance
sheet as of the end of that fiscal quarter;
(4) within ninety (90) days after the end of the RESTAURANT's
fiscal year, annual profit and loss and source and use of funds
statements and a balance sheet for the RESTAURANT as of the end of that
fiscal year; and
(5) within ten (10) days after our request, exact copies of
federal and state income and other tax returns and the other forms,
records, books and other information we may periodically require.
You agree to verify and sign each report and financial statement in the manner
we prescribe. We can disclose data derived from these reports without
specifically identifying you or the RESTAURANT (unless we have your written
consent to do so). We also can require you, if you ever fail to comply with any
provision of this Agreement, to have audited financial statements prepared on an
annual basis. Moreover, we can, as often as we deem appropriate (including on a
daily basis), access all computer registers and other computer systems that you
maintain in operating the RESTAURANT and retrieve all information relating to
the RESTAURANT's operations.
11. INSPECTIONS AND AUDITS
A. OUR RIGHT TO INSPECT THE RESTAURANT.
To determine whether you and the RESTAURANT are complying with this
Agreement and all System Standards, we and our designated agents have the right
at any time during your regular business hours, and upon forty-eight (48) hours'
prior notice to you, to:
(1) inspect the RESTAURANT;
(2) observe, photograph and videotape the operations of the
RESTAURANT for consecutive or intermittent periods we deem necessary;
(3) remove samples of any Supplies for testing and analysis;
(4) interview personnel and customers of the RESTAURANT; and
(5) inspect and copy any books, records and documents relating
to your operation of the RESTAURANT.
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You agree to cooperate with us fully in these inspections, observations,
photographing, videotaping, product removal and interviews. If we exercise any
of these rights, we will use our best efforts not to interfere unreasonably with
the RESTAURANT's operations. You agree to present to your customers the
evaluation forms that we periodically prescribe and to participate and/or
request your customers to participate in any surveys performed by us or on our
behalf.
B. OUR RIGHT TO AUDIT
We have the right at any time during your business hours, and upon
forty-eight (48) hours' prior notice to you, to inspect and audit, or cause to
be inspected and audited, your (if you are a corporation, limited liability
company or partnership) and the RESTAURANT's business, bookkeeping and
accounting records, sales and income tax records and returns and other records.
You agree to cooperate fully with our representatives and independent
accountants we hire to conduct any inspection or audit. If any inspection or
audit discloses an understatement of the RESTAURANT's Gross Sales, we can debit
your account, as provided in Section 3.B. above, for the Royalty, Marketing Fund
contributions and Cooperative contributions due on the amount of the
understatement, plus interest from the date originally due until the date of
payment. Further, if an inspection or audit is made necessary by your failure to
furnish reports, supporting records or other information as required, or to
furnish these items on a timely basis, or if an understatement of Gross Sales is
greater than two percent (2%) for any period reviewed, you agree to reimburse us
for the cost of the inspection or audit, including, without limitation, the
charges of attorneys and independent accountants and the travel expenses, room
and board and compensation of our employees. These remedies are in addition to
our other remedies and rights under this Agreement and applicable law.
12. 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 herein.
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 the
Franchise 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
22
or other interest in you or the RESTAURANT may be transferred without our prior
written approval. 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:
(1) this Agreement;
(2) you; or
(3) the RESTAURANT.
An assignment, sale, gift or other disposition includes the following events:
(a) transfer of ownership of capital stock or a partnership
interest;
(b) merger or consolidation or issuance of additional
securities or interests representing an ownership interest in you;
(c) any sale of an ownership interest in you or any security
convertible to an ownership interest in you;
(d) transfer of an interest in you, this Agreement or the
RESTAURANT in a divorce, insolvency or corporate or partnership
dissolution proceeding or otherwise by operation of law;
(e) transfer of an interest in you, this Agreement or the
RESTAURANT, in the event of your death or the death of one of your
owners, by will, declaration of or transfer in trust or under the laws
of intestate succession; or
(f) pledge of this Agreement (to someone other than us) or of
an ownership interest in you as security, foreclosure upon the
RESTAURANT or your transfer, surrender or loss of possession, control
or management of the RESTAURANT.
C. CONDITIONS FOR APPROVAL OF TRANSFER
If you (and your owners) are in full compliance with this Agreement,
then, subject to the other provisions of this Section 12, we will approve a
transfer that meets all the applicable requirements of this Paragraph. A
non-controlling ownership interest in you (determined before the date on which a
proposed transfer is to occur) may be transferred as long as the proposed
transferee
23
and its direct and indirect owners are individuals of good character and
otherwise meet our then applicable standards for XXXXX'X SUBS Restaurant
franchise owners. A transfer of ownership, possession or control of the
RESTAURANT may be made only in conjunction with a transfer of this Agreement. If
the transfer is of this Agreement or a controlling interest in you, or is one of
a series of transfers (regardless of the period of time over which these
transfers take place) which in the aggregate constitute the transfer of this
Agreement or a controlling interest in you, all of the following conditions must
be met prior to or concurrently with the effective date of the transfer:
(1) the transferee has sufficient business experience,
aptitude and financial resources to operate the RESTAURANT;
(2) you have paid all Royalties, Marketing Fund contributions,
Cooperative contributions, amounts owed for purchases from us and all
other amounts owed to us or to third-party creditors and have submitted
all required reports and statements;
(3) the transferee and its owners and affiliates are not
engaged in a Competitive Business;
(4) the transferee (or its managing owner) and its manager (if
different from your manager) have agreed to complete our standard
training program;
(5) you are allowed to transfer the Lease;
(6) the transferee has agreed to be bound by all of the terms
and conditions of this Agreement;
(7) you or the transferee pays us a transfer fee in the amount
of $2,500 to defray expenses we incur in the transfer, including the
costs of training the transferee (or its managing owner) and its other
personnel;
(8) you (and your transferring owners) have executed a general
release, in form satisfactory to us, of any and all claims against us
and our shareholders, officers, directors, employees and agents;
(9) 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 operation of the RESTAURANT;
(10) if you or your owners finance any part of the sale price
of the transferred interest, you and/or your owners have agreed that
all of the transferee's obligations under
24
any promissory notes, agreements or security interests that you or your
owners have reserved in the RESTAURANT are subordinate to the
transferee's obligation to pay Royalties, Marketing Fund contributions
and other amounts due to us and otherwise to comply with this
Agreement;
(11) you and your transferring owners (and your 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 15.D.
hereof; and
(12) you and your transferring owners have agreed that you and
they will not directly or indirectly at any time or in any manner
(except with other XXXXX'X SUBS Restaurants you own and operate)
identify yourself or themselves or any business as a current or former
XXXXX'X SUBS Restaurant, or as one of our licensees or franchise
owners, use any Xxxx, any colorable imitation thereof or other indicia
of a XXXXX'X SUBS 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 suggests or indicates a connection or
association with us.
If the proposed transfer is among your owners, Subparagraph (7) of the above
requirements will not apply, although the transferee is required to reimburse us
for any administrative costs we incur in the transfer. We can review all
information regarding the RESTAURANT that you give the transferee, correct any
information that we believe is inaccurate and give the transferee copies of any
reports you have submitted to us or we have made regarding the RESTAURANT.
D. TRANSFER TO A WHOLLY-OWNED CORPORATION OR LIMITED
LIABILITY COMPANY.
Notwithstanding Paragraph C of this Section, if you are in full
compliance with this Agreement, you may transfer this Agreement to a corporation
or limited liability company which conducts no business other than the
RESTAURANT and, if applicable, other XXXXX'X SUBS Restaurants, in which you
maintain management control and of which you own and control one hundred percent
(100%) of the equity and voting power of all issued and outstanding capital
stock or other ownership interests, and further provided that all assets of the
RESTAURANT are owned, and the entire business of the RESTAURANT is conducted, by
a single corporation or limited liability company. Transfers of ownership
interests in this corporation or limited liability company will be subject to
the provisions of Paragraph C of this Section. You agree to remain personally
liable under this Agreement as if the transfer to the corporation or limited
liability company had not occurred.
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E. YOUR DEATH OR DISABILITY.
(1) Transfer Upon Death or Disability. Upon your death or disability
or, if you are a corporation, limited liability company or partnership, the
death or disability of the Managing Owner or the owner of a controlling interest
in you, your or the owner's executor, administrator, conservator, guardian or
other personal representative must transfer your interest in this Agreement or
the owner's interest in you to a third party. The disposition of this Agreement
or the interest in you (including, without limitation, transfer by bequest or
inheritance) must be completed within a reasonable time, not to exceed six (6)
months from the date of death or disability, and will be subject to all of the
terms and conditions applicable to transfers contained in this Section. A
failure to transfer your interest in this Agreement or the ownership interest in
you within this period of time constitutes a breach of this Agreement. In this
Agreement, the term "disability" means a mental or physical disability,
impairment or condition that is reasonably expected to prevent or actually does
prevent you, the Managing Owner or an owner of a controlling interest in you
from managing and operating the RESTAURANT.
(2) Operation Upon Death or Disability. If, upon your death or
disability or the death or disability of the Managing Owner or the owner of a
controlling interest in you, the RESTAURANT is not being managed by a trained
manager, your or the owner's executor, administrator, conservator, guardian or
other personal representative must within a reasonable time, not to exceed
fifteen (15) days from the date of death or disability, appoint a manager to
operate the RESTAURANT. The manager will be required to complete training at
your expense. Pending the appointment of a manager as provided above or if, in
our judgment, the RESTAURANT is not being managed properly any time after your
death or disability or after the death or disability of the Managing Owner or
the owner of a controlling interest in you, we have the right, but not the
obligation, to assume the management of the RESTAURANT. All funds from the
operation of the RESTAURANT during the period we have assumed its management
will be kept in a separate account, and all expenses of the RESTAURANT,
including compensation, other costs and travel and living expenses of our
manager, will be charged to this account. We also can charge a reasonable
management fee (in addition to the Royalty, Marketing Fund contributions and
Cooperative contributions payable under this Agreement), not to exceed fifteen
percent (15 %) of the RESTAURANT's Gross Sales, during the period we have
assumed the RESTAURANT's management. Operation of the RESTAURANT during any
period will be on your behalf, provided that we have a duty to utilize only our
reasonable efforts and will not be liable to you or your owners for any debts,
losses or obligations incurred by the RESTAURANT or to any of your creditors for
any Supplies or services the RESTAURANT purchases during any period in which we
have assumed its management.
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F. EFFECT OF CONSENT TO TRANSFER.
Our consent to a transfer of this Agreement and the RESTAURANT or any
interest in you does not constitute a representation as to the fairness of the
terms of any contract between you and the transferee, a guarantee of the
prospects of success of the RESTAURANT or transferee or a waiver of any claims
we may have against you (or your owners) or of our right to demand the
transferee's exact compliance with any of the terms or conditions of this
Agreement.
G. OUR RIGHT OF FIRST REFUSAL.
If you (or any of your owners) at any time determine to sell, assign or
transfer for consideration an interest in this Agreement and the RESTAURANT or
an ownership interest in you, you (or your owner) agree to obtain a bona fide,
executed written offer and xxxxxxx money deposit (in the amount of five percent
(5 %) or more of the offering price) from a responsible and fully disclosed
offeror (including lists of the owners of record and beneficially of any
corporate or limited liability company offeror and all general and limited
partners of any partnership offeror and, in the case of a publicly-held
corporation or limited partnership, copies of the most current annual and
quarterly reports and Form 10K) and immediately submit to us a true and complete
copy of the offer, which includes details of the payment terms. To be a valid,
bona fide offer, the proposed purchase price must be denominated in a dollar
amount. The offer must apply only to an interest in you or in this Agreement and
the RESTAURANT and may not include an offer to purchase any of your (or your
owners') other property or rights. However, if the offeror proposes to buy any
other property or rights from you (or your owners) under a separate,
contemporaneous offer, the separate, contemporaneous offer must be disclosed to
us, and the price and terms of purchase offered to you (or your owners) for the
interest in you or in this Agreement and the RESTAURANT must reflect the bona
fide price offered and not reflect any value for any other property or rights.
We have the right, exercisable by written notice delivered to you or
your selling owner(s) within thirty (30) days from the date of the delivery to
us of both an exact copy of the offer and all other information we request, to
purchase the interest for the price and on the terms and conditions contained in
the offer, provided that:
(1) we may substitute cash for any form of payment proposed in
the offer;
(2) our credit will be deemed equal to the credit of any
proposed purchaser;
(3) we will have not less than sixty (60) days after giving
notice of our election to purchase to prepare for closing; and
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(4) we are entitled to receive, and you and your owners agree
to make, all customary representations and warranties given by the
seller of the assets of a business or the capital stock of an
incorporated business, as applicable, including, without limitation,
representations and warranties as to:
(a) ownership and condition of and title to stock or other
forms of ownership interest and/or assets;
(b) liens and encumbrances relating to the stock or other
forms of ownership interest and/or assets; and
(c) validity of contracts and the liabilities, contingent or
otherwise, of the corporation whose stock is being purchased.
If we exercise our right of first refusal, you and your selling
owner(s) agree that, for a period of two (2) years commencing on the date of the
closing, you and they will be bound by the non-competition covenant contained in
Section 15.D. hereof.
If we do not exercise our right of first refusal, you or your owners
may complete the sale to the purchaser on the exact terms of the offer, subject
to our approval of the transfer as provided in Paragraphs B and C of this
Section, provided that, if the sale to the purchaser is not completed within
sixty (60) days after delivery of the offer to us, or if there is a material
change in the terms of the sale (which you agree promptly to communicate to us),
we will have an additional right of first refusal during the thirty (30) day
period following either the expiration of the sixty (60) day period or notice to
us of the material change(s) in the terms of the sale, either on the terms
originally offered or the modified terms, at our option.
13. EXPIRATION OF THIS AGREEMENT.
A. YOUR RIGHT TO ACQUIRE A SUCCESSOR FRANCHISE.
Upon expiration of the term of this Agreement, if you (and each of your
owners) have substantially complied with this Agreement during its term, and
provided that:
(1) you maintain possession of and agree to remodel and/or
expand the RESTAURANT, add or replace improvements and Operating Assets
and otherwise modify the RESTAURANT as we require to bring it into
compliance with specifications and standards then applicable for
XXXXX'X SUBS Restaurants, or
(2) if you are unable to maintain possession of the Premises,
or if in our
28
judgment the RESTAURANT should be relocated, you secure substitute
premises we approve, develop these premises in compliance with
specifications and standards then applicable for XXXXX'X SUBS
Restaurants and continue to operate the RESTAURANT at the Premises
until operations are transferred to the substitute premises,
then, subject to the terms and conditions set forth in this Section 13, you can
acquire a successor franchise to operate the RESTAURANT as a XXXXX'X SUBS
Restaurant for a ten (10) year term on the terms and conditions of the franchise
agreement we then are using in granting franchises for XXXXX'X SUBS Restaurants
(modified as necessary to reflect the fact that it is for a successor
franchise), provided, however, that you only will have to pay a successor
franchise fee equal to 25 percent (25 %) of the then current initial franchise
fee charged under our standard franchise agreement, or Two Thousand Five Hundred
Dollars ($2,500), whichever is lower.
X. XXXXX OF A SUCCESSOR FRANCHISE.
You agree to give us written notice of your election to acquire a
successor franchise no earlier than twelve (12) months and no later than nine
(9) months before the expiration of this Agreement. We agree to give you written
notice ("Our Notice"), not more than ninety (90) days after we receive your
notice, of our decision, in accordance with Paragraph A of this Section:
(1) to grant you a successor franchise;
(2) to grant you a successor franchise on the condition that
deficiencies of the RESTAURANT, or in your operation of the RESTAURANT,
are corrected; or
(3) not to grant you a successor franchise based on our
determination that you and your owners have not substantially complied
with this Agreement during its term.
If applicable, Our Notice will:
(a) describe the remodeling and/or expansion of the RESTAURANT
and other improvements or modifications required to bring the
RESTAURANT into compliance with then applicable specifications and
standards for XXXXX'X SUBS Restaurants; and
(b) state the actions you must take to correct operating
deficiencies and the time period in which these deficiencies must be
corrected.
If we elect not to grant a successor franchise, Our Notice will describe the
reasons for our decision. Your right to acquire a successor franchise is subject
to your continued compliance with all of the terms and conditions of this
Agreement through the date of its expiration, in addition to your
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compliance with the obligations described in Our Notice.
If Our Notice states that you must cure certain deficiencies of the
RESTAURANT or its operation as a condition to the grant of a successor
franchise, we will give you written notice of a decision not to grant a
successor franchise, based upon your failure to cure these deficiencies, not
less than ninety (90) days before the expiration of this Agreement, provided,
however, that we will not be required to give you this ninety (90) days notice
if we decide not to grant you a successor franchise due to your breach of this
Agreement during the ninety (90) day period before its expiration. If we fail to
give you:
(i) notice of deficiencies in the RESTAURANT, or in your
operation of the RESTAURANT, within ninety (90) days after we receive
your timely election to acquire a successor franchise (if we elect to
grant you a successor franchise under subparagraphs (2) and (b) above);
or
(ii) notice of our decision not to grant a successor franchise
at least ninety (90) days before the expiration of this Agreement, if
this notice is required,
we may extend the term of this Agreement for the period of time necessary in
order to provide you with either reasonable time to correct deficiencies or the
ninety (90) days notice of our refusal to grant a successor franchise required
under this Section. If you fail to notify us of your election to acquire a
successor franchise within the prescribed time period, we need not grant you a
successor franchise.
C. AGREEMENTS/RELEASES
If you satisfy all of the other conditions to the grant of a successor
franchise, you and your owners agree to execute the form of franchise agreement
and any ancillary agreements we then are customarily using in granting successor
franchises for XXXXX'X SUBS Restaurants (modified as necessary to reflect the
fact that it is for a successor franchise). You and your owners further agree to
execute general releases, in form satisfactory to us, of any and all claims
against us and our shareholders, officers, directors, employees, agents,
successors and assigns. Failure by you or your owners to sign these agreements
and releases and deliver them to us for acceptance and execution within sixty
(60) days after their delivery to you will be deemed an election not to acquire
a successor franchise.
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14. TERMINATION OF AGREEMENT.
A. BY YOU.
If you and your owners are in full compliance with this Agreement and
we materially fail to comply with this Agreement and do not correct the failure
within thirty (30) days after written notice of the material failure is
delivered to us or, if the failure cannot be corrected within thirty (30) days,
provide reasonable evidence of our effort to correct the failure within a
reasonable time, not to exceed sixty (60) days after your notice, you may
terminate this Agreement effective thirty (30) days after delivery to us of
written notice of termination. Your termination of this Agreement for any other
reason or without this notice will be deemed a termination without cause.
B. BY US.
We have the right to 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 purchasing the Franchise or operating
the RESTAURANT;
(2) you (or your Managing Owner) fail successfully to complete
initial training to our satisfaction;
(3) you fail to begin operating the RESTAURANT within one
hundred eighty (180) calendar days after the execution of this
Agreement;
(4) you abandon or fail actively to operate the RESTAURANT for
three (3) or more consecutive business days, unless the RESTAURANT has
been closed for a purpose we have approved or because of casualty or
government order;
(5) you surrender or transfer control of the operation of the
RESTAURANT without our prior written consent;
(6) 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;
(7) you fail to maintain the insurance we require from time to
time;
(8) you interfere with our right to inspect the RESTAURANT or
observe its
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operations, as provided in Section 11 of this Agreement;
(9) you (or any of your owners) engage in any dishonest or
unethical conduct which may adversely affect the reputation of the
RESTAURANT or another XXXXX'X SUBS Restaurant or the goodwill
associated with the Marks;
(10) you (or any of your owners) make an unauthorized
assignment of this Agreement or of an ownership interest in you or the
RESTAURANT;
(11) in the event of your death or disability or the death or
disability of the Managing Owner or the owner of a controlling interest
in you, this Agreement or the owner's interest in you is not assigned
as required;
(12) you lose the right to possess the Premises;
(13) we have sent a notice of termination under any other
franchise agreement for a XXXXX'X SUBS Restaurant between you (or any
of your owners) and us;
(14) you (or any of your owners) make any unauthorized use or
disclosure of any Confidential Information or use, duplicate or
disclose any portion of the Operations Manual in violation of this
Agreement;
(15) you violate any health, safety or sanitation law,
ordinance or regulation and do not begin to cure the noncompliance or
violation immediately, and correct the noncompliance or violation
within seventy-two (72) hours, after written notice is delivered to
you;
(16) you fail to make payments of any amounts due to us and do
not correct the failure within ten (10) days after written notice of
the failure is delivered to you;
(17) you fail to pay when due any federal or state income,
service, sales or other taxes due on the operations of the RESTAURANT,
unless you are in good faith contesting your liability for these taxes;
(18) you fail to comply with modifications to System Standards
within the required time period;
(19) you (or any of your owners) fail on three (3) or more
separate occasions within any period of twelve (12) consecutive months
to do any one or more or combination of the following: (i) submit when
due reports or other data, information or supporting
32
records, (ii) pay when due any amounts due to us or (iii) otherwise
comply with this Agreement, whether or not any of the failures set
forth in subparagraphs (i) through (iii) are corrected after written
notice of the failure is delivered to you;
(20) 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; you consent to the appointment of a
receiver, trustee or liquidator of all or the substantial part of your
property; the RESTAURANT is attached, seized, subjected to a writ or
distress warrant or levied upon, unless the attachment, seizure, writ,
warrant or levy is vacated within thirty (30) days; or any order
appointing a receiver, trustee or liquidator of you or the RESTAURANT
is not vacated within thirty (30) days following the entry of the
order; or
(21) you (or any of your owners) fail to comply with any other
provision of this Agreement or any System Standard and do not correct
the failure within thirty (30) days after written notice of the failure
to comply is delivered to you.
C. ASSUMPTION OF MANAGEMENT.
We have the right (but not the obligation), under the circumstances
described below, to enter the Premises and assume the RESTAURANT's management on
your behalf for the period of time we deem appropriate. You will be obligated to
pay us our then current per diem charges, as well as the travel, living and
other expenses we incur, during the time we assume the RESTAURANT's management.
We also have the right to charge a reasonable management fee, not to exceed
fifteen percent (15 %) of the RESTAURANT's Gross Sales, during this time. If we
assume the RESTAURANT's management on your behalf, you acknowledge that we will
have a duty to utilize only reasonable efforts and will not be liable to you or
your owners for any debts, losses or obligations incurred by the RESTAURANT or
to any of your creditors for any Supplies or services the RESTAURANT purchases
during any period in which we have assumed its management.
We may assume the management of the RESTAURANT under the following
circumstances:
(1) if you abandon or fail actively to operate the RESTAURANT;
(2) if you fail to comply with any provision of this Agreement
or any System Standard and do not cure the failure within the time
period we specify in our notice to you; or
(3) if this Agreement expires or is terminated and we are
deciding whether to
33
exercise our option to purchase the RESTAURANT under Section 15.E.
below.
Our exercise of any of the rights granted by subparagraphs (1) and (2) above
will not affect our right to terminate this Agreement under Section 14.B. above.
15. OUR AND YOUR RIGHTS AND OBLIGATIONS UPON TERMINATION OR EXPIRATION OF
THIS AGREEMENT.
A. PAYMENT OF AMOUNTS OWED TO US
You agree to pay us 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 us are determined, the Royalties, Marketing Fund contributions,
Cooperative contributions, amounts owed for purchases from us, interest and all
other amounts owed to us which then are unpaid.
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 other XXXXX'X SUBS Restaurants you own and operate)
identify yourself or any business as a current or former XXXXX'X SUBS
Restaurant, or as one of our licensees or franchise owners, use any
Xxxx, any colorable imitation thereof or other indicia of a XXXXX'X
SUBS 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;
(3) you agree to deliver to us within thirty (30) days all
signs, sign-faces, sign-cabinets, marketing materials, forms and other
materials containing any Xxxx or otherwise identifying or relating to a
XXXXX'X SUBS Restaurant and allow us, without liability to you or third
parties, to remove all of these items from the RESTAURANT;
(4) if we do not have or do not exercise an option to purchase
the RESTAURANT under paragraph E of this Section, you agree that,
after, as applicable, the effective date of expiration of this
Agreement or the Notification Date, you will promptly and at your own
expense make the alterations we specify in our Operations Manual or
otherwise to distinguish the RESTAURANT clearly from its former
appearance and from
34
other XXXXX'X SUBS Restaurants so as to prevent confusion of the
public;
(5) you agree to notify the telephone company and all
telephone directory publishers of the termination or expiration of your
right to use any telephone, telecopy or other numbers and any telephone
directory listings associated with any Xxxx, authorize the transfer of
these numbers and directory listings to us or at our direction and/or
instruct the telephone company to forward all calls made to your
telephone numbers to numbers we specify. If you fail to do so, we can
take whatever action and sign whatever documents we deem appropriate on
your behalf to effect these events; and
(6) you agree to furnish us, within thirty (30) days after, as
applicable, the effective date of expiration of this Agreement or the
Notification Date, with evidence satisfactory to us of your compliance
with the foregoing obligations.
C. CONFIDENTIAL INFORMATION
You agree that, upon termination or expiration of this Agreement, you
will immediately cease to use any of our Confidential Information (including
computer software we have licensed to you) in any business or otherwise and
return to us all copies of the Operations Manual and any other 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 without cause, or
(3) expiration of this Agreement,
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 7 above)
operating:
(a) at the Premises;
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(b) within the Exclusive Area;
(c) within one (1) mile of any other XXXXX'X SUBS 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 comply with this Paragraph.
If any person restricted by this Paragraph refuses voluntarily to
comply with the foregoing 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 such 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. OUR RIGHT TO PURCHASE RESTAURANT.
(1) Exercise of Option.
Upon
(a) our termination of this Agreement according to its terms
and conditions,
(b) your termination of this Agreement without cause, or
(c) expiration of this Agreement (if we offer, but you elect
not to acquire, a successor franchise),
we have the option, exercisable by giving you written notice within sixty (60)
days from the date of the termination or expiration, to purchase the RESTAURANT
from you, including the leasehold rights to the Premises. (The date on which we
notify you whether or not we are exercising our option is referred to in this
Agreement as the "Notification Date.") We have the unrestricted right to assign
this option to purchase the RESTAURANT. We will be entitled to all customary
warranties and representations in our asset purchase, including, without
limitation, representations and warranties as to ownership and condition of and
title to assets; liens and encumbrances on assets; validity of contracts and
agreements; and liabilities affecting the assets, contingent or otherwise.
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(2) Leasehold Rights.
You agree at our election:
(a) to assign your leasehold interest in the Premises to us;
or
(b) to enter into a sublease for the remainder of the Lease
term on the same terms (including renewal options) as the Lease.
(3) Purchase Price.
The purchase price for the RESTAURANT will be its fair market value,
determined in a manner consistent with reasonable depreciation of the
RESTAURANT's Operating Assets and Supplies, provided that the RESTAURANT will be
valued as an independent business and its value will not include any value for:
(a) the Franchise or any rights granted by this Agreement;
(b) the Marks; or
(c) participation in the network of XXXXX'X SUBS Restaurants.
The RESTAURANT's fair market value will include the goodwill you developed in
the market of the RESTAURANT that exists independent of the goodwill of the
Marks and the System.
We may exclude from the assets purchased cash or its equivalent and any
Operating Assets and Supplies that are not reasonably necessary (in function or
quality) to the RESTAURANT's operation or that we have not approved as meeting
standards for XXXXX'X SUBS Restaurants, and the purchase price will reflect
these exclusions.
(4) Appraisal
If we and you are unable to agree on the RESTAURANT's fair market
value, its fair market value will be determined by three (3) independent
appraisers, each of whom will conduct an independent appraisal. We will appoint
one appraiser, you will appoint one appraiser and these two appraisers will
appoint the third appraiser. You and we agree to select our respective
appraisers within fifteen (15) days after we notify you that we are exercising
our option to purchase the RESTAURANT, and the two appraisers so chosen are
obligated to appoint the third appraiser within fifteen (15) days after the date
on which the last of them was appointed. You and we will bear the cost of our
own appraisers and share equally the fees and expenses of the third appraiser
37
chosen by the two appraisers. You agree that the appraisers will be instructed
to complete their appraisal within thirty (30) days after the third appraiser's
appointment. The RESTAURANT's fair market value will be deemed to be the median
appraisal of the three (3) independent appraisals.
(5) Closing.
The purchase price will be paid at the closing of the purchase, which
will take place not later than sixty (60) days after determination of the
purchase price. We have the right to set off against the purchase price, and
thereby reduce the purchase price by, any and all amounts you or your owners owe
to us. At the closing, you agree to deliver instruments transferring to us:
(a) good and merchantable title to the assets purchased, free
and dear of all liens and encumbrances (other than liens and security
interests acceptable to us), with all sales and other transfer taxes
paid by you;
(b) all licenses and permits of the RESTAURANT which may be
assigned or transferred; and
(c) the leasehold interest in the Premises and improvements
thereon.
If you cannot deliver clear title to all of the purchased assets, or if there
are other unresolved issues, the closing of the sale will be accomplished
through an escrow. You and your owners further agree to execute general
releases, in form satisfactory to us, of any and all claims against us and our
shareholders, officers, directors, employees, agents, successors and assigns.
F. 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.
16. 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 and that nothing in this Agreement is intended to make
either you or us a general or special agent, joint venturer, partner or employee
of the other for any purpose. You agree to identify yourself
38
conspicuously in all dealings with customers, suppliers, public officials,
RESTAURANT personnel and others as the owner of the RESTAURANT under a franchise
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
franchise owner 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 RESTAURANT's operation or the business you conduct
under this Agreement.
C. TAXES.
We will have no liability for any sales, use, service, occupation,
excise, gross receipts, income, property or other taxes, whether levied upon you
or the RESTAURANT, due to the business you conduct (except any taxes we are
required by law to collect from you for purchases from us). Payment of all these
taxes is your responsibility.
D. 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, any and all taxes described in Paragraph C
of this Section and any and all claims and liabilities directly or indirectly
arising out of the RESTAURANT's operation 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 the
defense of 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 have the right to defend
any claim against us and them and to 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
39
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 "Franchise Owner 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 such third
party.
Under no circumstances will you or any other Franchise Owner
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 Franchise Owner Indemnified Party may recover from us.
17. ENFORCEMENT.
A. SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS.
Except as expressly provided to the contrary herein, each section,
paragraph, term and provision of this Agreement, and any portion thereof, 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 hereto,
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 thereto,
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 thereof, 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.
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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 franchise
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 System 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 hereof, and we will have the right, in
our sole discretion, to modify the invalid or unenforceable provision or System
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 hereof, as though it were
separately articulated in and made a part of this Agreement, that may result
from striking from any of the provisions hereof, or any System 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 thereof 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,
including, without limitation, any System Standard; our waiver, forbearance,
delay, failure or omission to exercise any right, power or option, whether of
the same, similar or different nature, with other XXXXX'X SUBS Restaurants; the
existence of other franchise agreements for XXXXX'X SUBS Restaurants which
contain different provisions from those contained in this Agreement; or our
acceptance of any payments due from you after any breach of this Agreement. No
special or restrictive legend or endorsement on any check or similar item given
to us will constitute a waiver, compromise, settlement or accord and
satisfaction. We are
41
authorized to remove or obliterate any legend or endorsement, which will have no
effect.
Neither we nor you will be liable for loss or damage or deemed to be in
breach of this Agreement if our or your failure to perform our or your
obligations results from:
(1) transportation shortages, inadequate supply of equipment,
products, supplies, labor, material or energy or the voluntary
foregoing of the right to acquire or use any of the foregoing in order
to accommodate or comply with the orders, requests, regulations,
recommendations or instructions of any federal, state or municipal
government or any department or agency thereof;
(2) acts of God;
(3) fires, strikes, embargoes, war or riot; or
(4) any other similar event or cause.
Any delay resulting from any of these causes will extend performance accordingly
or excuse performance, in whole or in part, as may be reasonable, except that
these causes will not excuse payments of amounts owed at the time of the
occurrence or payment of Royalties, Marketing Fund contributions or Cooperative
contributions due on any sales afterwards.
C. COSTS AND ATTORNEYS' FEES.
If we incur expenses due to your failure to pay when due amounts owed
to us, to submit when due any reports, information or supporting records or
otherwise 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. YOU MAY NOT WITHHOLD PAYMENTS DUE TO US.
You agree that you will not withhold payment of any amounts owed to us
on the grounds of our alleged nonperformance of any of our obligations under
this Agreement. You agree that all claims will, if not otherwise resolved, be
submitted to arbitration as provided in Paragraph F of this Section.
E. 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
42
enforcement of any other right or remedy under this Agreement which we or you
are entitled by law to enforce.
F. 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 THOSE AGREEMENT; OR
(4) ANY SYSTEM STANDARD RELATING TO THE ESTABLISHMENT OR
OPERATION OF THE RESTAURANT;
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 HE DEEMS PROPER IN THE CIRCUMSTANCES, INCLUDING, WITHOUT
LIMITATION, MONEY DAMAGES (WITH INTEREST ON UNPAID AMOUNTS FROM THE DATE DUE),
SPECIFIC PERFORMANCE,
43
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 I 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 PROCEEDING, 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.
44
G. 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 AS REQUIRED HEREBY, THE UNITED STATES TRADEMARK ACT
OF 1946 (XXXXXX ACT, 15 U.S.C. SECTIONS 1051 ET SEQ.) OR OTHER FEDERAL LAW, THIS
AGREEMENT, THE FRANCHISE AND ALL CLAIMS ARISING FROM THE RELATIONSHIP BETWEEN US
AND YOU WILL BE GOVERNED BY THE LAWS OF THE STATE WHERE THE RESTAURANT IS
LOCATED, EXCEPT THAT ANY STATE LAW REGULATING THE SALE OF FRANCHISES OR
GOVERNING THE RELATIONSHIP OF A FRANCHISOR AND ITS FRANCHISEE WILL NOT APPLY
UNLESS ITS JURISDICTIONAL REQUIREMENTS ARE MET INDEPENDENTLY WITHOUT REFERENCE
TO THIS PARAGRAPH.
H. CONSENT TO JURISDICTION
SUBJECT TO SECTION 17.F. 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 RESTAURANT IS LOCATED.
I. WAIVER OF PUNITIVE DAMAGES AND JURY TRIAL
EXCEPT FOR YOUR OBLIGATION TO INDEMNIFY US UNDER SECTION 16.D. 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
45
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.
J. 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.
K. LIMITATIONS OF CLAIMS.
Except for claims arising from your non-payment or underpayment of
amounts you owe us under this Agreement, 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.
L. CONSTRUCTION.
The preambles and exhibits are a part of this Agreement which, together
with the Operations Manual and our other written policies, constitutes our and
your entire agreement except as provided below, and there are no other oral or
written understandings or agreements between us and you relating to the subject
matter of this Agreement, except that you acknowledge that we justifiably have
relied on your representations made before the execution of this Agreement, as
set forth in Section 1. Except as contemplated by the arbitration provisions of
Section 17.F., 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
46
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 Owner hereunder, 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 (or a
transferee of this Agreement and the RESTAURANT or an interest in you),
including, without limitation, any person who has a direct or indirect interest
in you (or a transferee), this Agreement, the Franchise or the RESTAURANT 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 the revenue, profits,
rights or assets thereof. References to a "controlling interest" in you mean the
percent of your voting shares or other voting rights resulting from dividing one
hundred percent (100%) of such ownership interests by the number of your owners
immediately before or after the time the determination must be made. "Person"
means any natural person, corporation, limited liability company, general or
limited partnership, unincorporated association, cooperative or other legal or
functional entity.
The term `RESTAURANT" includes all of the assets of XXXXX'X SUBS
Restaurant you operate under this Agreement, including its revenue and income
and the Lease.
This Agreement may be executed in multiple copies, each of which will
be deemed an original.
18. NOTICES AND PAYMENTS
All written notices, reports and payments permitted or required to be
delivered by the provisions of this Agreement or the Operations Manual will be
deemed so delivered:
(1) at the time delivered by hand;
(2) at the time delivered via computer transmission and, in
the case of the Royalty and Marketing Fund contributions, at the time
we actually debit your account;
(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
47
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. Any required
payment or report which we do not actually receive during regular business hours
on the date due (or postmarked by postal authorities at least two (2) days
before then) will be deemed delinquent.
48
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement effective on the date stated on the first page hereof.
JRECK SUBS GROUP, INC. OWNER
a Colorado corporation
(IF CORPORATION, LIMITED
LIABILITY COMPANY OR
PARTNERSHIP):
-------------------------------
[Name]
By: ________________________________ By: ___________________________
Title:_________________________ Its:_______________________
DATED:______________________________ DATED:_________________________
(IF INDIVIDUAL(S)):
-------------------------------
[Signature]
-------------------------------
[Print Name]
-------------------------------
[Signature]
-------------------------------
[Print Name]
49
EXHIBIT A
TO THE FRANCHISE AGREEMENT
BETWEEN JRECK SUBS GROUP, INC.
AND ______________________
DATED ________, 199
Effective Date: This Exhibit A is current and complete
as of __________, 199
You and Your Owners
1. Form of Owner.
(a) Proprietorship. Your owner(s) (is) (are) as follows:
----------------------------
----------------------------
----------------------------
(b) Corporation, Limited Liability Company or Partnership. You
were incorporated or formed on ________________, 19_, under the laws of
the State of ____________________ You have not conducted business under
any name other than your corporate, limited liability company or
partnership name and ____________________. The following is a list of
your directors, if applicable, and officers as of the effective date
shown above:
Name of Each Director/Officer Position(s) Held
------------------------------------- -----------------------
------------------------------------- -----------------------
------------------------------------- -----------------------
------------------------------------- -----------------------
------------------------------------- -----------------------
2. Owners. The following list includes the full name and mailing
address of each person who is one of your owners (as defined in the Franchise
Agreement) and fully describes the nature of each owner's interest (attach
additional pages if necessary).
Owner's Name and Address Description of Interest
(a) _____________________________________ _______________________
B-50
(b) _____________________________________ _______________________
(c) _____________________________________ _______________________
(d) _____________________________________ _______________________
JRECK SUBS GROUP, INC. OWNER
a Colorado corporation
(IF CORPORATION, LIMITED
LIABILITY COMPANY OR
PARTNERSHIP):
-------------------------------
[Name]
By: ________________________________ By: __________________________
Title:_________________________ Its:______________________
(IF INDIVIDUAL(S)):
-------------------------------
[Signature]
-------------------------------
[Print Name]
-------------------------------
[Signature]
-------------------------------
[Print Name]
X-00
XXXXXXX X
XXXXXXXXX XXXX
0. The Exclusive Area referred to in Section 1.D. of the Franchise
Agreement shall be as follows:
================================================================================
================================================================================
If the Exclusive Area is identified by counties or other political
subdivisions, political boundaries shall be considered fixed as of the date of
this Agreement and shall not change for the purpose hereof, notwithstanding a
political reorganization or change to the boundaries or regions. All street
boundaries shall be deemed to end at the street center line unless otherwise
specified above.
JRECK SUBS GROUP, INC. OWNER
a Colorado corporation
(IF CORPORATION, LIMITED
LIABILITY COMPANY OR
PARTNERSHIP):
-------------------------------
[Name]
By: ________________________________ By: ___________________________
Title:__________________________ Its:_______________________
(IF INDIVIDUAL(S)):
-------------------------------- -------------------------------
[Signature] [Signature]
-------------------------------- -------------------------------
[Print Name] [Print Name]
B-52
GUARANTY AND ASSUMPTION OF OBLIGATIONS
THIS GUARANTY AND ASSUMPTION OF OBLIGATIONS is given this _____ day of
_____________, 19_, by _________________________________________________________
================================================================================
--------------------------------------------------------------------------------
In consideration of, and as an inducement to, the execution of that
certain Franchise Agreement of even date herewith (the "Agreement") by Jreck
Subs Group, 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 ("Owner") 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 direct and
immediate liability under this guaranty will be joint and several; (2) he will
render any payment or performance required under the Agreement upon demand if
Owner fails or refuses punctually to do so; (3) such liability will not be
contingent or conditioned upon our pursuit of any remedies against Owner 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 Owner or to any other person, including, without
limitation, the acceptance of any partial payment or performance or the
compromise or release of any claims, none of which 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 Owner
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 signature
on the same day and year as the Agreement was executed.
GUARANTOR(S)
---------------------------- ----------------------------------
JRECK SUBS GROUP, INC.
FRANCHISE AGREEMENT
-----------------------------------
OWNER
-----------------------------------
DATE OF AGREEMENT
-----------------------------------
ADDRESS OF RESTAURANT
-----------------------------------
-----------------------------------
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION.
TABLE OF CONTENTS
Page
1. PREAMBLES, ACKNOWLEDGMENTS AND GRANT OF FRANCHISE
2. SITE SELECTION, LEASE OF PREMISES
AND DEVELOPMENT AND OPENING OF RESTAURANT.
3. FEES
4. TRAINING AND ASSISTANCE
5. MARKS
6. CONFIDENTIAL INFORMATION
7. EXCLUSIVE RELATIONSHIP
8. SYSTEM STANDARDS
9. MARKETING
10. RECORDS, REPORTS AND FINANCIAL STATEMENTS
11. INSPECTIONS AND AUDITS
12. TRANSFER
13. EXPIRATION OF THIS AGREEMENT
14. TERMINATION OF AGREEMENT
15. OUR AND YOUR RIGHTS AND OBLIGATIONS UPON
TERMINATION OR EXPIRATION OF THIS AGREEMENT
16. RELATIONSHIP OF THE PARTIES/INDEMNIFICATION
17. ENFORCEMENT
18. NOTICES AND PAYMENTS
EXHIBITS
EXHIBIT A - LISTING OF OWNERSHIP INTERESTS
EXHIBIT B - EXCLUSIVE AREA
