Long John Silvers, Inc. v. Willingham et al

Filing 1

COMPLAINT against All Defendants Filing fee $ 350, receipt number 644-1280591., filed by Long John Silvers, Inc.. (Attachments: # 1 Cover Sheet, # 2 Exhibit A. Oracle Fran Ag part 1 & 2, # 3 Exhibit B. Broadway Fran Ag part 1 & 2, # 4 Exhibit C. Guaranty Agreements, # 5 Exhibit D. Conditional Reinstatement, # 6 Exhibit E. Default Ltrs, # 7 Exhibit F. Termination Ltr, # 8 Exhibit G. Bankruptcy Desist Ordr, # 9 Exhibit H. LJS Trademarks, # 10 Summons J. Willingham, # 11 Summons P. Willingham) (JSS)

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#7459, SOUTHWEST SEAFOOD SHOPPES, LLC
Tucson, /lJ!..

LONG JOHN SILVER'S®

FRANCHISE AGREEMENT
TABLE OF CONTENTS

PAGE

SECTION
1

GRANT OF FRANCHISE ......................................••............................................................................

2

2

TERM ........••..•...........•.•........................................•.........•.......................................................................

5

3

PREMISES

7

4

SUPPLIES, FOOD PRODUCTS, RECIPE ITEMS AND UNIFORMS

5

OPERA TING STANDARDS, PROCEDURES,

TRAINING AND SERVICING ...•........................ 11

6

FEES AND ADVERTISING

.......................•.............•............... ·

7

ADVERTISING

8

BOOKS, RECORDS, CONTROL PROCEDURES

9

INSURANCE - INDEMNITY ...................•..........................................................................................

to

OWNERSHIP

AND EQUIPMENT ...........•.............•.•..............................................................................

EXPENDITURES

9

····..··..·

.............................•.......................................................................................................

AND LIMITATIONS

..............................•............................................

ON USE OF PROPRIETARY

13
14
16
17

MARKS,

TRADE SECRETS .................••.....•....................................•..................................................................

19

11

TERMINATION

.........................••............................................

·......................•...............................•.•...

21

12

FRANCHISEE'S

OTHER BUSINESS INTERESTS ........•.....•............•.•...........................................

26

13

ASSiGNMENT ..............•......................................•......................•......................................•.•.................

27

14

FRANCHISE

31

15

GENERAL PROVISIONS ...............................•................................

ASSOCIATION .................................•................•...........................................••.............

·.......................................•.••........ 32

~J
J

FRANCHISE AGREEMENT

THIS FRANCHISE

AGREEMENT

between LONG JOHN SILVER'S,

is dated for reference purposes as of June 21, 2002, and it is entered into

INC., a Delaware

corporation

("Company"),

and SOUTHWEST

SEAFOOD

SHOPPES, LLC, an Arizona Limited Liability company ("Franchisee");

PRELIMINARY

A.

STATEMENTS:

The Company is the developer of and sole and exclusive owner of a distinctive food service system

("System")

under which food is sold to the public from restaurants

and other facilities operated

under the names

"Long John Silver's" or "Long John Silver's Seafood Shops" (ttLJS Restaurants").

B.

The System so developed now includes, among other things, the following elements, all or some of

which may be deleted, changed, improved or further developed by the Company from time to time: (1) procedures
the preparation
products,
cartons,

and serving of food and beverage products;

a secret batter
packages,

containers

control and procedures
specifications

mix and distinctive

(2) special ingredients,

service accessories (including,

confidential

without limitation,

for

recipes for food
uniforms,

menus,

and other paper and plastic items); (3) methods of achieving quality and quantity

designed to be advantageous

to WS Restaurant

for distinctive premises, featuring characteristic

operators

and consumers;

(4) plans and

interior and exterior style, design, decor, furnishings,

equipment layout and interior and exterior signage; (5) a uniform method of operating that is described in the "Long
John Silver's

Seafood Shops Confidential

including without limitation,

of Operations"

and in other communications

in bulletins, video and audio tapes, computer

means (all such other communications
referred

Manual

to as the "Confidential

and any supplements

Manual");

or additions

(6) distinctive and characteristic

to franchisees,

disks, on-line and via other electronic
thereto

being hereinafter

trademarks,

collectively

service marks (including,

without limitation, "Long John Silver's Seafood Shops" and "Long John Silver's"), signs, designs and emblems as the
Company

designates

("Proprietary

in the Confidential

Marks");

Manual or otherwise

(7) a public image that each restaurant

system and that all are operated

with uniform standards

in writing as prescribed

for use with the System

or other facility is a unit in an established franchise

of service and product

quality and portions;

(8) such

exclusive copyrights and trade secrets as have been and may from time to time be developed, which are owned by the
Company and which are disclosed to its franchisees in confidence in connection with the construction

and operation of

an WS Restaurant.

C.

Franchisee

wishes to obtain a franchise from the Company to operate an LJS Restaurant

pursuant

to

the System and to be afforded, or to have its designated personnel afforded, the training and other assistance provided
by the Company in connection therewith.

REV. 9/01

1

D.
maintain

Franchisee

recognizes that the terms and conditions in this Agreement

the Company's

high and uniform standards

enhance the public image of the Proprietary
opening and operating

the franchised

are reasonably

necessary to

of quality and service designed to protect the goodwill and

Marks and the System, and Franchisee

LJS Restaurant

recognizes the necessity of

in faithful compliance with the Company's

standards

and

specifications.

SECTION 1: GRANT OF FRANCHISE

1.01

Grant of Franchise.
(a)

This franchise

is being granted

based on the application,

financial statements

submitted by Franchisee to the Company prior to the Company's execution of this Agreement.
and warrants

that those materials:

(1) are accurate

and other documents
Franchisee

represents

and complete as of their respective dates and the date of this

Agreement; and (2) do not omit the statement of any material fact necessary to make them not misleading.
(b)

Subject to the conditions of this Agreement and Franchisee's

this Agreement,
("Franchised

the Company

Restaurant")

use such Proprietary

grants

to Franchisee:

(1) the right

continuing good faith performance

to build and operate

an LJS Restaurant

and to use the System at the location described on Schedule I ("Location");

Marks of the Company as are now or may hereafter

under

(2) the right to

be specifically designated by the Company

in writing for use with the System (as they may be changed, improved, and further developed from time to time) in
conjunction

with the Franchised

Restaurant;

and (3) the right to indicate to the public that the Franchised

is operated as a part of, or a unit in, the LJS Restaurant
(c)

chain.

The Company shall not own, operate or grant (nor grant others the right to own, operate or grant) a

franchise for an LJS Restaurant
I attached

Restaurant

hereto.

within the Territory,
(d)

within the area surrounding

Notwithstanding
LJS Restaurants

the Location designated as the "Territory"

on Schedule

the foregoing, the Company shall have the right to own, operate or franchise
at the locations described in Section 1.01(d)(I) of this Agreement.

The Company may own or operate, or grant franchises or licenses for others to operate LJS

Restaurants:
within the Territory

(1)

or toll roads, airports,
buildings (excluding

at the following locations: on rights-of-way

campus, educational,

shopping

industrial

or health care institutions,

or strip malls), military installations,

of any limited access highways
office or business complexes or

or at athletic arenas,

expositions,

convention

centers, fairs, zoos, theme parks or similar facilities or events; and
(2)

the Franchised

anywhere outside the Territory

Restaurant)

Review referenced

on such terms and conditions as the Company deems appropriate.

and further

outside the Territory.

The Company reserves the right to sell within the Territory,

that are the same as, or similar to, those sold in US Restaurants,
Proprietary

REV. 9/01

The Site Proposal

defined in Section 1.Ol(f) below shall govern disputes arising from the Company's

development of new LJS Restaurants
(e)

(regardless whether such location is within the trading area of

Marks designated for use with the System, provided:

2

directly or through third parties, products

using brand names the same as, or similar to, the

(I)
Restaurants,

The items sold by the Company

are of comparable

quality to any like items sold in LJS

are either packaged or bottled and are not sold for preparation

or consumption

outlet from which the items are sold, and are not sold by the Company through restaurant
(2)
Territory,

upon the premises or

outlets; and

In the event that the premises or outlet from which the items are sold is located within the

the Company

shall transfer

and contribute

to LJS Advertising,

Inc. ("LJS

Advertising",

hereinafter

further defined) on an annual basis an amount equal to one-half of the net income generated by the sales of such items
from such outlet to be used and administered
Section 7.01 of this Agreement.

by US Advertising for advertising and marketing programs pursuant

to

As used in this Section 1.01(e)(2), the term "net income" shall mean net income from

the sales of such items as reflected in the Company's annual audited financial statements.
(f)

The Company's

then current Site Proposal Review Policy ("Policy", a copy of the Policy in effect as of

the date of this Agreement being annexed hereto) shall govern any dispute that arises out of Company's
develop or authorize
because Franchisee
adverse

impact

("Development

the development
reasonably

(as defined
Dispute").

of a new US Restaurant

believes that the development

outside the Territory

The Policy, as modified pursuant

to which Franchisee

of the new LJS Restaurant

in the Policy) upon the gross sales generated

decision to
objects

will have a significant

from the Franchised

Restaurant

to the terms thereof and the terms of this Agreement,

shall remain in effect for the term of this Agreement, and Franchisee, so long as Franchisee
Franchisee as defined in the Policy, may invoke the procedures

is a Potentially Impacted

as set forth in the Policy. The Company may modify

the Policy from time to time, but the Company may not materially modify the Policy: (1) for a period of five (5) years
following the effective date of the Policy as defined therein without the approval of the Franchise Association Board
(hereinafter

defined) ; and (2) following the date that is five (5) years after the effective date of the Policy except upon

consultation

with the Franchise Association Board.

arising from any modification

to the Policy made in accordance

agrees not to institute any legal or administrative
first attempting

1.02

Franchisee agrees that US shall incur no liability to Franchisee
with the Policy and this Agreement.

Franchisee

proceeding for claims arising out of a Development Dispute without

to resolve the matter in accordance with the Policy.

Other Restaurants.
(a)

Franchisee

franchise restaurants
parent corporation
(a) such restaurants

understands

that the Company

and food establishments

and its affiliates (hereinafter

other than LJS Restaurants.

and food establishments

are not operated

sales of seafood of the restaurant

or food establishment

(20%) or more of all sales of the restaurant
the restaurant

food" format.

Franchisee

further acknowledges

REV. 9/01

"Long John

are located within the Territory,

the gross

do not constitute or are not likely to constitute twenty percent
or (c) if such restaurants

are located within the

does not sell any battered seafood product in a quick service or "fast
and agrees that this franchise is solely for the Location and affords

Franchisee no rights in any additional franchise to be operated at any other location.
franchise issued hereunder

provided that:

under the names "Long John Silver's",

or food establishment;

or food establishment

and

Franchisee agrees that the Company, its

and affiliates may do so at any location, including locations within the Territory,

Silver's Seafood Shops" or similar trade names; (b) if such restaurants

Territory

defined) may operate

Neither this Agreement nor the

obligates the Company in any way to sell or issue any other franchise.

3

)

{]

8

(b)

As used in this Agreement with reference to Company or the Franchisee,

"affiliate"

shall mean any

entity that controls, is under common control with or is controlled respectively by the Company or the Franchisee.

1.03

Acceptance of Franchise;
(a)

Franchisee

Restaurant
thereof.

Use of Premises.

accepts

the franchise

and agrees

to diligently

develop

and operate

and to diligently promote the interests of the System for the term of this Agreement

Franchisee agrees to construct, maintain and operate the Franchised Restaurant

accordance

with (I) the Company's

manuals and procedures
Agreement.
(b)

and any renewal

only at the Location, and in

plans and specifications, (2) the System, (3) the Confidential

Manual, (4) other

as may be included in the System and revised from time to time, and (5) the terms of this

Franchisee

("Franchised

the Franchised

Restaurant

agrees to use the Franchised

Restaurant

and the premises

upon which it is located

Premises") solely for the operation of the Franchised Restaurant

and purposes designated in

this Agreement and for no other purpose.

1.04

Company Services.
The Company agrees to provide Franchisee with the following materials and services for the Franchised

Restaurant:
(a)
one (I) copy of the Confidential
hereof delivered and loaned to Franchisee
Company

Manual (a registered copy of which is concurrently

for the term hereof), and such additions and modifications

may issue from time to time, in its discretion.

replacement

fee for replacing copies of the Confidential

(b)

a sample of the Company's standardized

be used by Franchisee
(c)
Franchisee's

with the execution

The Company will require

payment

thereto as the

of its then current

Manual.
chart of accounts, statement of earnings and balance sheet, to

for reporting to the Company;

the Company's

regular and continuing supervisory services and periodic inspections and evaluations of

operation;

(d)

the Long John Silver's marketing and advertising program(s);

(e)

reasonable

Franchisee,

efforts,

the System standards

upon Franchisee's
and specifications

written

request,

to disseminate

to suppliers

for nonsecret food products and equipment

designated

by

items not subject to

Company patent rights.

NEITHER

THE

COMMUNICATED
RESTAURANTS

COMPANY'S

ACCEPTANCE

TO FRANCHISEE
SHALL CONSTITUTE

OF

THE

LOCATION

REGARDING THE COMPANY'S

NOR

SITE SELECTION

A WARRANTY OR REPRESENTATION

THE COMPANY'S

ACCEPTANCE

WILLING TO GRANT A FRANCHISE
IS NOT RESPONSIBLE

REV. 9/01

OF THE PROPOSED

FOR AN LJS RESTAURANT

INFORMATION

CRITERIA

FOR LJS

OF ANY KIND, EXPRESS OR

IMPLIED, AS TO THE SUIT ABILITY OF THE LOCATION FOR AN LJS RESTAURANT
PURPOSE.

ANY

SITE MERELY

OR FOR ANY OTHER
SIGNIFIES

THAT IT IS

FOR SUCH LOCATION.

THE COMPANY

FOR THE FAILURE OF THE LOCATION TO MEET FRANCHISEE'S

EXPECTATIONS

4

AS TO POTENTIAL
LOCATION

IS

SUITABILITY

REVENUES.

BASED

FRANCHISEE'S

SOLELY

ON

DECISION TO OPERATE AN LJS RESTAURANT

FRANCHISEE'S

INDEPENDENT

AT THE

INVESTIGATION

OF

THE

owns the Franchised

Restaurant

OF THE LOCATION FOR AN LJS RESTAURANT.

SECTION 2: TERM
(Delete 2.01 or 2.~2)

2.01

4. ~

Owne"Mp of ' •.•nch;"" R",tau•.•nt.
(a)

Franchisee warrants

and represents to thUc~at

~isee
&oil

Premises.

Franchisee agrees that it shall notify the Company

Franchised

Restaurant

(b)

Premises.

Unless previously

'

writi

fan,

./
terminated

pursuant

to the terms

his

(a)
Franchised

e

eXlf

, he term of the franchise
on

.;L...

'

,

Restaurant.

Franchisee
Restaurant

g,re

ta
"

Lease of Franchised

its ownership of the

~

granted herein shall commence on the date of last execution of tbis Agreeni

2.02

nge regarding

warrants

and represents

Premises pursuant

to the Company

that

to a lease or sublease agreement,

Franchisee

leases or subleases

of which Franchisee

the

has provided the

Company with a true and accurate copy (together with any modifications or renewals thereof, "Lease").

Franchisee

shall promptly

shall cause

provide the Company with copies of any material modifications of the Lease. Franchisee

the Lease to contain a provision that allows Franchisee

and the Company

to fulfill the requirements

of Section

11.02(c) and 1l.03(c).
(b)

Unless previously

terminated

pursuant

to the terms of this Agreement,

the term of the franchise

granted herein shall commence on the date of last execution of this Agreement and expire on June 30, 2021. The term
of this Agreement shall not extend beyond the expiration of Franchise's

2.03

Lease.

Renewal.
(a)

Franchisee

may, at its option, renew this franchise for two (2) additional

each; however, Franchisee's
expiration of Franchisee's
following conditions:

term(s) of five (5) years

exercise of its renewal option shall not extend the term of this franchise

Lease. In addition, in order to exercise its renewal option, Franchisee

beyond the

must satisfy all of the

(I) Franchisee must give the Company written notice of its election to renew no less than six (6)

months, nor more than nine (9) months, prior to the end of the then current term. (2) At the time when notice is given
and at the end of the then current term, Franchisee must not be in default of any provision of this Agreement, or any
other agreement
Franchisee

between Franchisee or any of its affiliates and the Company or any of the Company's

and all of its affiliates shall have substantially

complied with the terms and conditions

agreements during the initial and any prior renewal term(s) of this Agreement.
shall have satisfied all monetary

obligations owed by them to the Company,

renewal, and have timely met all sucb Obligations throughout

REV. 9/01

affiliates, and
of all such

(3) Franchisee

and all of its affiliates

its subsidiaries

and affiliates prior to

tbe initial and all prior renewal terms of this Agreement.

5

(4) Franchisee
request.

shall provide such financial

(5) Franchisee

information

must execute the Company's

cause the execution of personal guarantees
terms and conditions

limitation, increased

royalty fees and advertising

substantially

such increased royalty fees and/or advertising
fees or advertising

Franchisee

then current standard

and other attachments

which may contain

not provide for royalty

regarding

expenditures,
contributions

may

form renewal franchise agreement

(and

from those set forth herein,

in excess of those the Company

(hereinafter

defined) shall execute a general release, in a form satisfactory

similar to the Franchised

Restaurant.

(6) Franchisee

employees, in their corporate

to such date, against

notice of renewal

Franchisee

and its officers,

of any and all claims

or arising from an event or
directors,

shareholders

is due.

(7) Franchisee

shall present

evidence satisfactory
Restaurant

to the Company

Premises for the duration

renewal term; and (8) Franchisee shall complete, or provide for, such renovation and modernization
Restaurant

and Franchised

limitation,

such remodeling

furniture,

signs and equipment,

Restaurant

Premises

(including structural

as the Company
modifications),

may reasonably

redecoration,

ofthe Proprietary

require,

including,

satisfaction

agrees to execute the Company's

standard

without

public image required

by the

Marks consistent with such image.

of the conditions set forth in Section 2.03(a).

then current

of the

of fixtures,

The Company may, at its option and in its sole discretion, conditionally accept Franchisee's

its renewal option pending Franchisee's

that

of the Franchised

repair and replacement

as may be necessary botb to reflect the then current

Company of new franchisees and to ensure the presentation

Franchisee

and

unless such claims are pending and not finally resolved as of the date

has the right to remain in possession of the Franchised

(b)

of new

and individual capacities, including, without limitation, claims arising under federal,

state and local laws, rules and ordinances,
Franchisee's

the Company

then requires

shall

and each of its Owners

to the Company,

may have as of the date of execution of the renewal franchise agreement,
prior

without

provided that such renewal franchise agreement

for LJS Restaurants

events which occurred

including,

(provided that the Company shall then be requiring

franchisees

Franchisee

reasonably

as required by such renewal franchise agreement),

different

expenditures

as the Company

In such event,

form renewal franchise agreement

Section 2.03(a)(5), which agreement may provide for a term of a duration substantially

exercise of

pursuant

to

shorter than the renewal term

provided for in this Agreement and which may grant to the Company the right to terminate

the same immediately

upon notice to Franchisee.
(c)

Upon the expiration

of the initial term of this Agreement as stated in Section 2.02(b) and the renewal

terms as stated in Section 2.03(a), Franchisee
Franchised

Restaurant,

of the then current

delivery of the application
agreement,

for the

subject to the following conditions: (1) Francbisee shall have made written application

Company for the new franchise agreement
expiration

shall be entitled to tbe issuance of a new franchise agreement

no less than six (6) months, nor more than nine (9) months, prior to the

term; (2) Franchisee

shall have tendered

to the Company,

concurrently

for the new franchise agreement, and in lieu of the initial fee prescribed

an administrative

to the

fee equal to 10% of the initial fee; and (3) Franchisee

conditions for renewal set forth in Sections 2.03(a)(2) through 2.03(a)(8), inclusive.

with tbe

by the franchise

shall have satisfied all of the
The new franchise

agreement

shall provide for an initial term and option terms, if any, equal to the terms then being offered by the Company to new
franchisees

REV. 9/01

for LJS Restaurants

similar to the Franchised

Restaurant

6

and it shall not provide for royalty fees or

advertising contributions
to the Franchised

in excess of those the Company then requires of new franchisees for LJS Restaurants

similar

Restaurant.

SECTION 3: PREMISES AND EOUIPMENT

3.01

Casualty Damage.
If the Franchised

casualty, Franchisee

Restaurant

is damaged

or rendered

shall repair or restore the Franchised

totally or partially

Restaurant

by fire or other

to its former condition within a reasonable

time, not to exceed six (6) months after the date of the fire or casualty.

The proceeds of all insurance

Franchisee

covering the Franchised

Franchised

Restaurant,

and Franchisee

judgment,

the damage

or destruction

is of such an extent that it is feasible for Franchisee,

substantial

expense additional to the insurance proceeds, to repair or reconstruct

repair or reconstruct
the Franchised

or restoring

without

the LJS Restaurant

the LJS Restaurant

in accordance

with those specifications.

is rendered totally or partially untenantable

prior to the date of expiration

Notwithstanding

by
the

reasonable
incurring

in accordance

Long John Silver's layout and decor specifications, the Company may require Franchisee

Restaurant

this Agreement,

Premises shall be applied to the cost of repairing

carried

shall pay the balance, if any, of such costs. If, in the Company's

with the then standard

Restaurant

untenantable

to

the foregoing, if

by fire or other casualty within two (2) years

of the initial term of this Agreement or any renewal term, Franchisee

may terminate

provided that Franchisee shall have notified the Company in writing of its election to terminate

no

later than thirty (30) days following the casualty.

3.02

Purchase and Installation
(a)

Franchisee

of Equipment and Furnishing.

shall purchase and install and use in and about the Franchised

items and only such items of equipment
fixtures, furnishings,

interior

(including, without limitation,

Restaurant

food and beverage preparation

and exterior signage, make-up air and exhaust handling

equipment,

registers, software and computers) and other personal property (collectively, "Equipment")
Company from time to time as Approved Brands on the Company's
Confidential

Premises such
equipment,

electronic

as are designated

required Equipment and Furnishings

cash
by the

List in the

Manual, or which otherwise have been approved by the Company in writing and which strictly conform

to the appearance,

uniform standards

and specifications of the Company and the System as established

time. The Company's

specifications

request.

desires to purchase or install any item not so listed or approved,

If Franchisee

and standards

for such Equipment shall be provided to Franchisee

from time to
upon written

Franchisee or the supplier of

such item shall submit to the Company a written request for approval of the item. The Company shall have the right
to require, among other things, that a sample of the item be delivered (or otherwise be made available in a manner
acceptable

to the Company),

at the Company's

option, either to the Company

laboratory

designated by the Company for testing prior to acting on the request for approval.

A charge not to exceed

the cost of the testing shall be paid to the Company by Franchisee or by the item's supplier.

The Company shall not

be liable for any damage to such items resulting from the testing process.
any item previously approved

REV. 9/01

by it, and to revoke its approval

7

or to an independent

certified

The Company reserves the right to retest

if the item fails to continue to meet the Company's

,

standards

and specifications.

Upon notification

by the Company, through

revision of the Confidential

otherwise, that approval of any item has been revoked, Franchisee shall not thereafter

purchase or, if the Company so

directs, use such item. The Company may at any and all times inspect all Equipment
Franchisee's

Manual or

and its installation

to assure

compliance with the Company's standards and specifications.

(b)

Franchisee

shall not install, sell or use on the Franchised

telephone booths, entertainment

Restaurant

Premises any vending machines,

devices, products or services not included in the System without the Company's

prior

written consent.

3.03

Maintenance
(a)

Franchisee's
standards

of Premises and Equipment.

Franchisee

shall maintain at all times during the term of this Agreement and any renewals hereof, at

expense, the Franchised

Restaurant

and public image of the Company

Franchised

Restaurant

(b)

without

obsolete signs and Equipment,
set out in the Confidential

limitation,

or alterations

to the

Restaurant

Premises in the highest degree of sanitation,

repair

such periodic repainting,

to Equipment

and replacement

of

with its then current standards

shall not attach or exhibit any signs, displays or posters on or in the exterior or interior of

Restaurant

If Franchisee

or on the Franchised

Restaurant

Premises, other than signs, posters or displays then

in writing by the Company, nor permit others to do so.

fails to comply with this Section 3.03 in the Company's judgment,

other rights the Company has, the Company may notify Franchisee
correct such deficiency.

repairs

as the Company may reasonably direct in accordance

currently supplied, required or authorized
(d)

with the high

Manual or otherwise.

Franchisee

the Franchised

and the System, and shall make no additions

shall keep the Franchised

including,

(c)

thereon in conformity

Premises without the Company's prior written consent.

Franchisee

and condition,

Premises and all Equipment

then in addition to all

and specify the action Franchisee

must take to

If Franchisee fails or refuses within ten (10) days after delivery of such notice, to initiate and

thereafter

continue in good faith and with due diligence a bona fide program to complete such required maintenance,

sanitation

and repair, the Company will have the right (in addition to all other rights in this Agreement),

obligation,

to enter the Franchised

Franchisee's

3.04

Restaurant

behalf and at Franchisee's

Premises and effect such maintenance,

repairs

but not the

or sanitation

on

expense.

Renovation of Equipment and Premises.

In addition to performing

maintenance

required under Sections 3.03(a) and (b), Franchisee

request, but no more often than once every five (5) years, refurbish the Franchised Restaurant
the building

design, trade

Company's

then current

replacement

of Equipment,

dress, color schemes and presentation
public image, including,
redecoration

will not require any image enhancement
that being required of Company-owned

REV. 9/01

without

and modifications
refurbishment

of the Proprietary

limitation,

Premises to conform to

Marks

extensive structural

to existing improvements.

shall, at the Company's

consistent
changes,

The Company

that has a capital cost on a per restaurant

LJS Restaurants.

8

with the

remodeling,
agrees that it

basis in excess of

SECTION 4: SUPPLIES, FOOD PRODUCTS, RECIPE ITEMS AND UNIFORMS

4.01

Use of Food, Supplies and Other Items.
(a)

Franchisee shall serve, sell or offer for sale all food and beverage products and only such products (1)

as are listed as standard
uniform standards

menu items from time to time in the Confidential

of quality and portions and appear on the Company's

from time to time in the Confidential
handling and preparation

Manual;

(2) as meet the Company's

Approved Food and Beverage Brands List

Manual; and (3) as have been prepared in accordance with the recipes and food

methods and procedures designated from time to time in the Confidential

(b)

Franchisee shall maintain all such products in sufficient supply at all times.

(c)

Franchisee

Manual.

shall discontinue

immediately serving, selling or offering for sale any of such products as

the Company may, in its sole discretion, disapprove in writing at any time.

4.02

Sampling and Testing.
Franchisee

Franchised

shall permit the Company or its agents, at any and all reasonable

Restaurant

Premises samples of any inventory items, without payment therefor,

necessary for testing by the Company or an independent,
the Company's

4.03

times, to remove from the

then current standards

certified laboratory,

in amounts reasonably

to determine whether the samples meet

and specifications.

Suppliers of Food Supplies and Other Items.
(a)

Franchisee shall purchase from the Company or sources designated by the Company such secret recipe

items as are set forth from time to time in the Confidential

Manual.

Franchisee

shall not purchase such items from

any other source or use any other item in substitution therefor.
(b)

Except as set forth in Section 4.03(a), Franchisee shall purchase only those food products, paper and

plastic goods and service items (collectively, "Products")
standards

for handling and distribution

source.

Franchisee

(including

of products) of the Company and the System in effect from time to time and

which are included on the Company's
Brands Lists appearing

that conform to the specifications and standards

then current

in the Confidential

Manual.

must request the Company's

Approved
Franchisee

Food and Beverage Brands
may purchase

and Approved

such approved

Products

from any

approval of any Products not included on the Approved Lists, and

the Company may require samples of any such Products to be submitted to it or to a designated independent,
testing laboratory
unreasonably
Company's

for testing to determine whether approval shall be granted.

certified

The Company agrees that it will not

withhold its approval for any Product upon receiving such a request so long as such Product meets the
then current specifications and standards.

exceed the cost of such testing.

Franchisee shall pay upon invoice to Company a charge not to

The Company reserves the right to retest any Product previously approved

to revoke its approval of any Product that fails to continue to meet the Company's standards
notification
specifications

by the Company
and standards

that

any Product

of the Company

being used is unapproved

and System, Franchisee

Company so directs, immediately cease to use the unacceptable Product.

REV. 9/01

Paper

9

by it and

and specifications.

or otherwise

shall not thereafter

Upon

does not satisfy the
purchase

and, if the

4.04

Uniforms.
Franchisee

shall purchase, for its employees' use, uniforms that conform strictly to the current specification,

design and style of the Company as set forth from time to time in the Confidential Manual or otherwise in writing.

4.05

System Purchasing
(a)

Franchisee

enter into arrangements
to both Company
Franchisee's

acknowledges

and agrees that the Company may from time to time at its sole discretion

with distributors

LJS Restaurants

participation

Company.

Programs.

and suppliers whereby such distributors

and those operated

in any Purchasing

and suppliers offer to sell Products

by Long John Silver's franchisees ("Purchasing

Program shall be on a voluntary basis and shall not be required by the

The Company agrees that it will not earn a profit from the Purchasing

and administer

the Purchasing

Program

suppliers

based upon franchisee

Program

shall be used to offset the Company's

reasonably

related to the administration

by the Company
administrative

of the Purchasing

sole discretion, continue a program ("Patronage

franchisee

participants

Program by such participating
(1)

on a prorata

rebates received from
within the Purchasing

and overhead costs incurred

in connection with and

Program.

The Company has established

basis in proportion

and may, in its

whereby any net income (after taxes) realized

within the Purchasing

franchisees ("Patronage

Franchisee

and that it will manage

as a result of transactions

Dividend Program")

by the Company as a result of franchisee transactions
individual

Program

so that any income or revenue received (including

purchases)

Program").

Program shall be returned

to the purchases

made through

annually to

the Purchasing

Dividend").

shall not be eligible to receive a Patronage

Dividend if it or any of its affiliates has

received from Company written notice of default of a monetary obligation in excess of $5,000.00 or a material nonmonetary obligation under this Agreement or any other agreement with Company and it has not cured or in good
faith disputed in writing in its entirety such default as of the date of the distribution
(2)

of the Patronage

The Company shall have the right to set off against any Patronage

Dividend.

Dividend any amounts owed

to Company by Franchisee or its affiliates.
(b)

The Company

profit and loss statements
advise the Franchise
Company

further

Association

prior written

defined); (5) must be performed

performed

REV. 9/01

the costs and administration

Association

and to periodically
of the Purchasing

Board may cause the Company's

notice to the Company;

at the Company's

corporate

conduct of its business; (4) must be performed

must be provided

Program

defined) quarterly
consult with and
Program.

The

books and records

of

Program to be audited from time to time, provided that any such audits: (1) must be

annually; (3) must be performed
Company's

Board regarding

agrees that the Franchise

by reasonable

Association Board (hereinafter

with respect to the Company Purchasing

accounts for any Purchasing
preceded

agrees to provide to the Franchise

(2) must be performed

headquarters

no more frequently

and not unreasonably

at the expense of the Franchise

than

interfere with the

Association (hereinafter

by a recognized national accounting firm reasonably acceptable to the Company; (6)

or made available

to Franchisee

by the Franchise

in accordance with generally accepted accounting procedures.

10

Association

upon request;

and (7) must be

4.06

Fountain Beverages.
Notwithstanding

sell in the Franchised

any provision in Section 4 or this Agreement to the contrary,

Restaurant

The Coca Cola Company's

fountatn

Franchisee agrees that it shall

beverages (hereinafter

Cola Classic, diet Coke and Sprite, except to the extent that: (1) the foregoing agreement
law; or (2) Franchisee

is a party to or bound by any existing agreement

Coca Cola Company's

fountain beverages.

that prohibits

The phrase "fountain beverages"

defined), including Coca

is prohibited
Franchisee

by applicable

from selling The

shall mean beverages that are dispensed

from post-mix, pre-mix or frozen beverage dispensers, bubblers or similar equipment.

SECTION 5: OPERATING

5.01

Operational
(a)

STANDARDS, PROCEDURES,

Standards.

Franchisee shall operate the Franchised Restaurant

which, among other things, sets forth the standard
recipes, menus and instructions
the Confidential
Franchised

TRAINING AND SERVICING

Cor food preparation

in strict accordance with the Confidential

method of operation for an LJS Restaurant,
and the control of quality and portions.

Manual

the business format,
Franchisee

shall keep

Manual and all of its contents in confidence except to the extent disclosure is necessary to operate the

Restaurant.

of the Confidential

Franchisee understands

and agrees the Company may, from time to time, revise the contents

Manual and such other manuals, standards,

any, as it may develop for use with the System, and Franchisee

instructions,

formulas, recipes and specifications,

shall comply with each changed requirement

if

within

such reasonable time as the Company may require.
(b)

Franchisee shall at all times keep current its copy of the Confidential Manual and other manuals issued

to it by the Company;

in the event of any dispute as to the contents, current status and completeness of any of such

manuals, the master copy of such manual maintained by the Company shall control.
(c)

Franchisee shall promptly pay when due all taxes levied or assessed on Franchisee in the conduct of the

business franchised

under this Agreement including, without limitation, unemployment

and sales taxes.

In the event

of any bona fide dispute as to liability for taxes assessed, Franchisee may contest the validity or the amount of the tax
in accordance with procedures

of the taxing authority or applicable law; however, in no event shall Franchisee permit

a tax sale or seizure by levy of execution or similar writ or warrant,
Franchised Restaurant
(d)

or attachment

by a creditor, to occur against the

Premises, or any improvements thereon.

Franchisee

shall comply with all federal, state, and local laws, rules and regulations,

and shall timely

obtain and maintain all permits, certificates and licenses necessary for the full and proper conduct of the Franchised
Restaurant,

including,

without limitation,

business and fictitious name registrations,
clearances.

Copies of all inspection

building and other construction

and occupancy

sales tax permits, health and sanitation

reports, warnings,

certificates

permits, licenses to do

permits and ratings and fire code

and ratings issued by any governmental

during the term of this Agreement in connection with the conduct of the Franchised Restaurant
Franchisee's
Franchisee

REV. 9/01

failure

to meet or maintain

with any applicable

the highest governmental

law, rule or regulation

standards

shall be forwarded

II

which cite or indicate

or less than

to the Company

entity

full compliance

by

within five (5) days of

Franchisee's

receipt thereof, and Franchisee

shall remedy same within the time period specified in the respective

,

citation, report or other notice, or within ten (10) days if no time period is so specified.
(e)

Franchisee shall not sell or offer for sale any alcoholic beverages at or from its premises, except beer or

wine, which may be offered only where lawful and in strict compliance with the Confidential

5.02

Operating

Hours.

The Franchised

Restaurant

shall be open and in normal operation for such minimum hours and days as may

from time to time be prescribed in the Confidential

5.03

Manual.

Manual or otherwise by the Company in writing.

Training.
(a)

The Company will maintain

and conduct programs

for training

Franchisee

and its employees.

The

Company shall maintain unit(s) and/or training center(s) in Lexington, Kentucky or elsewhere as deemed necessary
by the Company
Company

for training

Franchisee

deems necessary.

Company-trained,

The Company

shall determine

have satisfactorily

experience

and training

completed

performance

opening manager,

training.

employees as the

of Franchisee's

(1) the number

In so doing, the Company

of the trainee.

Unless otherwise

prior to opening the Franchised

assuming the position of manager in the Franchised
currently

and supervisory

employees

to be

(2) the training period necessary to adequately train the employees, and (3) whether and when the

employees

Franchisee's

and such of its executive, managerial

Restaurant,

shall consider

specified in writing

Restaurant,

the background,
by the Company,

and all successor managers,

prior to

shall successfully complete the minimum period then

specified by the Company for management training at such location(s) as the Company may designate.
(b)

In addition to the required management training, all other employees of Franchisee must undergo such

on-the-job and instructional

training as the Company may from time to time require.

use such training

equipment

materials,

Franchisee

time to time may require,
programs

conducted

Manual.

and such executive, managerial,
shall attend

by the Company;

shall purchase and

and supplies to properly conduct such training as may be specified by the

Company from time to time in the Confidential
(c)

Franchisee

supervisory

and other employees as the Company

and successfully complete subsequent
however, no individual shall be required

training,

refresher,

from

and retraining

to attend more than two (2) such

additional training programs in each calendar year.
(d)

Upon failure for any reason of Franchisee

training, retraining

or refresher program

or any of its employees to complete successfully

required by the Company, Franchisee

any

shall designate another trainee who

shall attend and successfully complete the program, and who, if the Company so directs, shall perform the functions of
the category of employee for which the program was offered.
(e)

Franchisee shall pay all expenses of travel, room, board, training supplies and materials and salaries or

wages of Franchisee's

employees while in training, as well as fees to defray the cost of any meeting room facilities as

shall be established by the Company from time to time. The Company agrees that fees charged for supplies, materials
or meeting room facilities shall only be used to cover the Company's
meeting room facilities and not to generate a profit for the Company.

REV. 9101

12

costs incurred

for such supplies, materials

or

.~

5.04

Continuing Services.
(a)

The Company shall furnish to Franchisee,

and services, and printed

material

in connection

from time to time, such merchandising

therewith,

as are furnished

and operating

generally to other franchisees

aids
of the

Company.
(b)

The Company

Restaurant

from time to time, in its discretion,

to consult with Franchisee

Restaurant,

or its management

and shall inspect the Franchised

Restaurant

shall send its representatives

representative

On reasonable

written

relative to the operation

of the Franchised

Premises with or without prior notice to determine

efficiency and quality of the operation and the faithfulness of Franchisee's
(c)

to the Franchised

request by Franchisee,

furnish services regarding

specific problems encountered

provided by the Company

under Section S.04(b). Franchisee

compliance with the System.

as determined

by Franchisee

the

by the Company,

the Company

shall

which are beyond the scope of the services

shall reimburse the Company

promptly

for its actual

time expended and expenses incurred in aiding Franchisee with such problems.

SECTION 6: FEES AND ADVERTISING

6.01

EXPENDITURES

Renewal and Royalty Fee.
(a)

Franchisee

shall pay to the Company,

upon the execution of this Agreement,

a renewal fee of Two

Thousand Dollars ($2,000).
(b)

Franchisee shall pay to the Company as a royalty fee, a sum equal to four percent (4%) of Franchisee's

Gross Receipts (as defined below) from the operation

of the Franchised

Restaurant

until June 30, 2006.

following July I, 2006, Franchisee shall pay to the Company royalty fees calculated at the then-current
then being offered by the Company pursuant
similar to the Franchised

Restaurant.

to its then-current

Franchisee

Upon and

standard

rate

Uniform Franchise Offering Circular for restaurants

shall pay the royalty fee monthly by the tenth (10th) day of each

month for the preceding month's Gross Receipts. A report of the Gross Receipts of the Franchised

Restaurant

for the

preceding month shall accompany each payment.

6.02

Advertising Contributions.
(a)

Franchisee

shall pay to the Company

or its designee for advertising

and marketing

described in Sections 7.01(a) and 7.01(b), a sum equal to five percent (5%) of Franchisee's
operation

of the Franchised

Restaurant.

the preceding month's Gross Receipts.

as

Gross Receipts from the

Payment shall be made on or before the tenth (10th) day of each month for
A report of the Gross Receipts of the Franchised

month shall accompany each payment.

REV. 9101

programs

13

Restaurant

for the preceding

o

8
6.03

Definition of Gross Receipts.
"Gross Receipts"

for computation

of the fees payable pursuant

to Sections 6.01 and 6.02 shall mean gross

receipts from sales of food, food products, beverages and any other items or services sold in or from the Franchised
Restaurant
approved

Premises

or derived

pay telephones,

from the business operated

excluding

if any, and (2) all sales, use, excise and similar taxes separately

Franchisee for, and remitted to, governmental

6.04

on the Premises,

only (1) receipts

from

billed and collected by

authorities and agencies.

Charge on Late Payments.
In addition to any other rights the Company may have, the Company will impose a charge on late payments

of the lesser of (1) the maximum rate permitted by Kentucky law or (2) one and one-half percent (1 1/2%) per month,
from the date due until paid.

6.05

Gross Receipts Tax.
Franchisee

shall pay the Company an amount equal to any sales, value added, gross receipts or similar tax

required to be paid or collected by the Company and calculated solely on required payments from Franchisee

to the

Company hereunder.

6.06

Direct Debit Arrangement.
The Company shall have the right, upon written notice to Franchisee,

direct debit arrangement

as described in this Section 6.06 upon the occurrence

the event that Franchisee

has been delinquent

to require Franchisee

to establish a

of any of the following events: (1) In

in the payment of any of its monetary obligations to Company or its

affiliates on two (2) or more occasions during any twelve (12) month period; or (2) in the event that Company has
given Franchisee

a notice of default arising from any of its monetary obligations under this Agreement.

If and when

the Company exercises its rights established in this Section 6.06, Franchisee shall establish a direct debit arrangement
with Franchisee's
arrangement

bank(s) for all payments to be made to the Company or any of its affiliates.

shall be entered into between Franchisee and its bank(s) and shall provide for the electronic transfer of

funds from Franchisee'S
instructions

Such direct debit

bank(s) to the Company's

from the Company, whether transmitted

be for multiple future transfers.

accounts within twenty-four

(24) hours of receipt of written

by facsimile, courier or regular mail and such instructions

may

Franchisee shall maintain sufficient funds in its account at all times to ensure that all

amounts due the Company and its affiliates are promptly and fully paid.

SECTION 7: ADVERTISING

7.01

Origination
(a)

furtherance

Recognizing the value of advertising,

and the importance

of the standardization

of advertising

to the

of the goodwill and public image of the System, Franchisee agrees that the Company or its designee shall

conduct, determine,

REV. 9/01

and Approval of Advertising.

maintain and administer all national, regional, local and other advertising

14

and marketing

as may

be instituted

from time to time, and shall direct all such advertising

concepts, materials,
Company

planning the Company's

consult with and advise the Franchise

Association

Board (hereafter

for each of its Company-owned

the United States equivalent to those it requires from comparable

franchised

LJS Restaurants

may spend in any fiscal year an amount greater or less than the aggregate
expenditures

LJS Restaurants

contributions

of all LJS

or obtained

from other lenders to cover deficits or to establish surpluses to be invested for future use.

agrees that its advertising

in that year. Additional advertising funds may be advanced by the Company

contributions

materials,

advertising

contributions;

may be used to meet any and all costs incident to the advertising

media placement

and all forms of sales promotions;

other activities reasonably

Restaurants,

of the Company's

Restaurant,

and marketing

advertising

are intended

materials,

or in

funds. The Company agrees
(including commissions,

and not to generate

net income or profit for the

general operating expenses that are not reasonably

and marketing

programs.

to maximize general

and the Company makes no representation

the Franchised

advertising

shall be used to promote the sales of LJS Restaurants,

such advertising,

Company or its affiliates nor to defray unallocated

expenditures

by

or direction of LIS advertising

purchases)

including the cost of developing and producing

that advertising

by

and any income generated as a result of such contributions

for media or advertising

of

(2) taxes upon income generated

market research, preparing

related to the administration

contributions

rebates or discounts

administration

and

costs and overhead, iC any, as may be incurred

and (3) such reasonable administrative

or its affiliates in conducting

that all advertising

Franchisee

including without limitation: (1) consumer public relations, marketing research, development

advertising

the Company

in

in the United States.

in advertising

programs,

The

defined) in

Restaurants

marketing

over the

advertising and marketing programs and budget.

The Company shall make advertising expenditures

The Company

with sole discretion

media, nature, type, scope, frequency, place, form, copy, layout and context used therein.

agrees to periodically

(b)

and marketing

understands

public recognition

or warranty

will benefit directly or pro-rata

Franchisee

and acknowledges

and acceptance

that any particular

from such advertising.

related to the

LJS Restaurant,

of all LJS
including

The Company does not act as a

trustee or in any other fiduciary capacity with respect to the advertising monies.
(c)
Franchisee

To promote and increase the demand for the products
may conduct,

at its separate

expense, advertising

described in Section 6.02. All such additional advertising

and services of the Franchised

in addition

Restaurant,

to that received for the expenditures

must either be prepared or previously approved in writing

by the Company.
(d)
directories

Franchisee

shall, at its separate

expense: (1) obtain a listing in the white pages of the telephone

serving the location of the Franchised

specified by the Company

Restaurant,

for all LJS Restaurants

which listing shall be the kind and size as may be

from time to time in the Confidential

writing; and (2) obtain and maintain an adequate supply of brochures,
kind and size, and at such locations in and around
require of all LIS Restaurants
(e)

Upon written

special or additional
newspaper

REV. 9/01

photostats,

the Franchised

from time to time in the Confidential
request from Franchisee,

approved

local advertising

radio commercial

pamphlets and promotional
Restaurant

as the Company

may reasonably

Manual or otherwise in writing.

plans and materials,

merchandising

15

in

materials of the

the Company or its designee(s) will provide Franchisee

and marketing

duplicates,

Manual or otherwise

materials,

with

including, without limitation,

sales aids, special promotions

and

similar advertising and marketing materials. Such special or additional materials and services shall be provided at
the Company's cost, including reasonable overhead, which shall be in addition to the fee specified in Section 6.02.

7.02

Advertising Agency and Use of Advertising Contributions.
(a)

The Company shall have the right to delegate and redelegate its responsibilities and duties hereunder

to any designee(s) of its choosing, including LJS Advertising, or any successor or other agency; however, the right of
final approval of all advertising programs shall be retained at all times by the Company.

Any usual agency

commissions and discounts granted for media purchases shall be netted against the invoices for such purchases. The
Company further agrees that, subject to unforeseeable matters beyond the Company's reasonable control, the annual
amounts spent by the Company for total agency expenses and production costs (excluding media commissions),
including allocated administrative costs and overhead, shall not exceed 25% of the sum of the annual total franchisee
advertising contributions;

and (2) total annual advertising expenditures made by the Company for each of its

Company-owned LJS Restaurants in the United States in accordance with Section 7.01(b) above.
(b)

The Company agrees to provide to the Franchise Association Board (hereinafter defined) quarterly

financial statements with respect to the Company's advertising programs and expenditures.

The Company further

agrees that the Franchise Association Board may cause the Company's books and records of accounts for its
advertising programs to be audited from time to time, provided that any such audits: (1) must be preceded by
reasonable prior written notice to the Company; (2) must be performed no more frequently than annually; (3) must be
performed at the Company's corporate headquarters and not unreasonably interfere with the Company's conduct of
its business; (4) must be performed by a recognized national accounting firm reasonably acceptable to the Company;
(5) must be provided or made available to Franchisee by the Franchise Association upon request; and (6) must be

performed in accordance with generally accepted accounting procedures. One half of the cost of such audit shall be
paid by the Franchisee Association and one half of such cost shall be paid from advertising contributions, provided
that the portion ofthe costs paid from advertising contributions shall not exceed $10,000.00.

SECTION 8: BOOKS, RECORDS, CONTROL PROCEDURES

8.01

Bookkeeping System.
(a)

The Company shall furnish to Franchisee cost-control procedures to which Franchisee shall adhere, as

well as a sample format of a chart of accounts, statement of earnings and balance sheet, which Franchisee shall use in
reporting to the Company.
(b)

The Company shall have the right to require Franchisee to use computer-based cash registers and

software that are fully compatible with the Company's computer system and which include an information interface
capability which allows Franchisee to communicate electronically with the Company's computer system.

The

Company, in its sole discretion, may require Franchisee to obtain a data grade telephone line to be used to facilitate
communications between Franchisee's computer-based cash registers and the Company's computer system.

The

Company shall not be entitled to require Franchisee to replace its then existing cash register or point of sale system

REV. 9101

16

(including any such system installed to meet the requirements

of this Section 8.01(b» more frequently than once every

five (5) years from the date of installation by Franchisee of any cash register or point of sale system installed to meet
the requirements

8.02

of this Section 8.01(b).

Reports.
At the Company's

writing, Franchisee

request and as specified from time to time in the Confidential

Manual or otherwise

in

shall submit to the Company, for review or auditing, such forms, reports, records and financial

statements as the Company may reasonably designate.

8.03

Marketing

Information.

At the Company's
Franchisee's

8.04

shall promptly

furnish requested

marketing

information

based on

records.

Franchisee's
Franchisee

accurate

request, Franchisee

Records.
shall at all times maintain and preserve, during the term of this Agreement,

books, records and accounts in accordance

full, complete and

with generally accepted accounting principles, of such kind, for

such length of time and in the form and manner prescribed

by the Company from time to time in the Confidential

Manual or otherwise in writing.

8.05

Inspection of Franchisee's
The Company

reasonable

shall have the right to examine and audit Franchisee's

times and places (including, without limitation, at Franchisee's

shall immediately

understatement

charges thereon

of gross receipts by Franchisee

as provided

records,

principal

pay to the Company the amount of any overdue, unreported

such audit, with late payment

Company's

Records.

in paragraph

accounts

place of business).

or understated
6.04 herein.

in excess of three percent

and books at
Franchisee

payment disclosed by

If any audit reveals an

(3%), Franchisee

shall also pay the

fees, charges and expenses (including, without limitation, travel expenses and reasonable

accounting

and

legal fees) incurred in connection with such audit.

SECTION 9: INSURANCE AND INDEMNITY

9.01

Indemnity.
Franchisee agrees to indemnify and hold harmless the Company, its affiliates and their respective officers and

employees

from liability

proceedings, judgments

in connection

with, Franchisee's

operation

claims, liability,

of the Franchised

in its sole discretion, and without Franchisee's

17

demands,

actions,

suits,

fees arising directly or indirectly from, as

The Company shall have the right to defend and settle any Indemnified

Company deems appropriate,

REV. 9101

damages,

or costs of any kind or nature, including attorneys'

a result of, or otherwise
Matter").

for any and all debts, obligations,

consent.

Restaurant

Matter

("Indemnified

in such manner as the

Franchisee agrees to reimburse

the Company for all costs reasonably
reasonable

attorneys'

fees.

incurred in defending such Indemnified

Franchisee's

obligations

subsequent to the expiration or termination

9.02

Franchisee's
(a)

under

Matter, including, without limitation,

this Section shall continue

in full force and effect

ofthis Agreement.

Insurance.

Prior to opening the Franchised

Restaurant,

Franchisee,

at its expense, shall obtain, and thereafter

maintain during the entire term of this Agreement and any renewal(s) thereof, the following insurance

in full force

and effect:
(1)

comprehensive

one or more excess or umbrella

general liability insurance (through a single policy or by a primary

policy with

policies) including personal injury, bodily injury, liquor liability (where applicable)

and products liability insurance, with minimum policy limits of Five Million Dollars ($5,000,000) in the aggregate, and
One Million Dollars ($1,000,000) per occurrence,

and property damage insurance with policy limits in the minimum

amount of One Million Dollars ($1,000,000) per occurrence,
Company's

insuring Franchisee

and the Company,

as well as the

affiliates, officers, directors, and employees, as additional named insureds, against any liability that may

accrue or have accrued against them, and any claim that is brought against them, by reason of the operation
Franchisee

by

of its business, or by reason of any incident which may occur upon, in, about or in connection with the

Franchised Restaurant
(2)

Premises;
worker'S compensation,

social security, unemployment

compensation,

disability insurance

and

such other insurance coverages as may now or hereafter be required by law; and
(3)

fire, business interruption,

the full replacement
(b)

cost of the Franchised Restaurant

Franchisee

may be reasonably

casualty and extended coverage insurance with limits of not less than

acknowledges

increased

and its Equipment and other improvements.

that the minimum coverages and policy limits required

from time to time by the Company

Franchisee agrees to comply with such new requirements

by this Section 9.02

for its own and Franchisee's

protection

and

promptly upon receipt of written notice from the Company;

however, in no event shall any such increase require minimum policy limits greater than (1) limits then required for
Company-owned

LJS Restaurants,

or (2) Five Million Dollars ($5,000,000), whichever is less. Every insurance policy

required by this Section 9.02 shall be written by one or more insurance companies possessing an A.M. Best rating of at
least A, XII, or such other rating as the Company may specify in the Confidential Manual or otherwise in writing.
(c)

Franchisee's

obligation to obtain and maintain the foregoing insurance in the amounts specified shall

not be diminished in any way by reason of any insurance which may be maintained

by the Company, nor shall such

obligation relieve Franchisee of liability under the indemnity provisions set forth in Section 9.01.

9.03

Evidence of Insurance.
Franchisee

shall deliver or cause to be delivered certificates (or copies thereof) of all insurance

required

by

this Section 9 to the Company or, at the Company's request, the policy or policies shall be deposited with and held by
the Company

or its designee.

Franchisee

shall also deliver to the Company evidence of payment of all insurance

premiums.

REV. 9/01

18

o

o
9.04

Notice.
All insurance

policies shall provide for notice to the Company of any cancellation,

or non renewal thereunder

at least thirty (30) days prior to such occurrence

termination,

modification

and shall permit, but not require,

the

Company to cure any default in payment of premiums within ten (10) days after written notice. If the Company cures
the default, Franchisee
administrative

9.05

shall immediately pay the Company the cost of curing the default together with a reasonable

fee to defray the Company's expenses in connection therewith.

Waiver of Subrogation.
Franchisee

and its successors and assigns hereby waive, prior to loss, all of their rights of recovery from the

Company, its affiliates, successors and assigns, and their right to sue for loss or damage to the Franchised
and the Franchised

Restaurant

Premises, the adjacent premises and improvements

or other property

provided such loss or damage is within the coverage of the insurance provided for herein.
policies carried

by Franchisee

on the Franchised

Restaurant

or adjoining

property

Restaurant

of Franchisee;

All property

insurance

shall, if reasonably

possible,

contain an express waiver of subrogation.

SECTION 10:
OWNERSHIP

AND LIMITATIONS

PROPRIETARY

10.01

Ownership of Proprietary

MARKS, TRADE SECRETS

Marks, Trade Secrets.

All right, title and interest in and to all Proprietary
the goodwill associated

therewith

interest is or shall be transferred
has any such ownership,

are the sole property

Marks, trade secrets, systems, instruction

Franchisee

Franchisee

shall not represent

in any manner that it

acknowledges

that on expiration

or termination

Agreement, no monetary sum shall be designated by it as attributable

10.02

Franchisee

acknowledges

outside the scope of this Agreement
Company's

to any goodwill associated with Franchisee's

that the use of the Proprietary
without

the Company's

remains in effect and thereafter,

prior

Marks or other components
written

consent,

directly or indirectly,

REV. 9/01

thereof.

19

of the System

is an infringement

Marks.

Franchisee

of the
shall not,

commit any act of infringement

contest or aid in contesting the validity or the Company's ownership of the System or Proprietary
other action in derogation

use

Marks.

exclusive right, title and interest in and to the System and the Proprietary

while this Agreement

of this

Marks.

Limitations on Use of Proprietary
(a)

manuals and

of the Company or its affiliates and no such right, title or

by virtue of this Agreement.

right, title or interest.

of the System and the Proprietary

ON USE OF

or

Marks, or take any

(b)

Franchisee

shall not incorporate

any of the Proprietary

Marks, including without limitation

John Silver's Seafood Shops" or "Long John Silver's," or words similar thereto in any trade, corporate

"Long

or firm name

of Franchisee or any of its affiliates.
(c)

Franchisee

shall not display or use any of the Proprietary

except as specifically authorized

hereunder,

Marks or other components

nor do or omit to do anything to endanger

right to use the Proprietary

the Company's

proprietary

Marks or the System.

10.03

of the System

Marks.

Use of Proprietary
Franchisee

Franchisee,

understands

and acknowledges

that

each and every detail of the System is important

the Company and other franchisees to develop and maintain high and uniform standards

service, and to protect the reputation
(a)

and goodwill of LJS Restaurants.

to

of quality and

Therefore, Franchisee shall:

operate and advertise under the System name as specified in the Confidential

Manual, without prefix

or suffix;
(b)

adopt and use the Proprietary

(c)

observe

such requirements

Marks solely in the manner prescribed by the Company;
with respect

Company may from time to time direct in the Confidential
(d)

to trademark

registration

and copyright

notices as the

Manual or otherwise in writing;

use, promote and offer for sale only those menu items, products and services which are part of the

System and meet the standards

or specifications as prescribed

by the Company from time to time in the Confidential

Manual or otherwise in writing.

10.04

Defense of Proprietary

Marks.

Franchisee shall promptly notify the Company of any claim, demand, or cause of action based upon or arising
from any attempt by any other person, firm or corporation
thereof.

Franchisee

corporation

also agrees to notify the Company

or governmental

to use the Proprietary

Marks or any colorable imitation

promptly of any litigation instituted

agency against the Company or Franchisee

by any person, firm,

relating to the Proprietary

Marks, and the

Company shall have the sole right and duty to defend any such action. The Company shall have the exclusive right to
contest or bring action against any third party regarding
shall exercise such right in its sole discretion.
Proprietary

Marks or components

the third party's

use of any of the Proprietary

In any defense or prosecution

of the System undertaken

of any litigation

by the Company, Franchisee

Marks and

relating

shall cooperate

to the
with the

Company and execute any and all documents and take all actions as may be desirable or necessary in the opinion of
the Company's
warranty,

10.05

out such defense or prosecution.

The Company

makes no representation

express or implied, as to the use, exclusive ownership, validity or enforceability

Nondisclosure
(a)

relating

counsel, to carry

REV. 9101

Marks.

of Trade Secrets and Confidential Information.

The Company has disclosed and will continue to disclose to Franchisee certain confidential information

to the development,

ingredients,

ofthe Proprietary

or

specifications,

marketing

and operation

of LJS Restaurants,

recipes, and methods of preparation

20

including

and presentation

without

of certain

limitation:

(1)

food and beverage

products;

(2) site selection criteria

Restaurants;

(3) sales, marketing

specifications

for, and suppliers

operating

results and financial

methods

of labor

(collectively

control,

for LJS Restaurants
and advertising

of, certain

"Proprietary

storage,

Without

Information

Notwithstanding

nor use any Proprietary

the foregoing,

Franchisee

materials,

(5) knowledge

product

Information

Franchised

Restaurant;

supplies and equipment;

other than the Franchised
handling

the Company's

and management

prior written

approval,

Restaurant;

Franchisee

for the benefit of any other

shall not,
divulge any

person

or entity.
prior

employees only to the extent necessary for operation

of the

Information

without

and (6)

the Company's

and (2) to the extent such Proprietary

Information

of

of LJS Restaurants

(regardless of cause of termination)

may disclose Proprietary

written consent (I) during the term hereof to Franchisee's

of LJS

(4) knowledge of

during the term of the Agreement, any renewal hereof and thereafter
Proprietary

for the development

and techniques for LJS Restaurants;

of LJS Restaurants,

control,

Information").

programs

food products,

performance

inventory

and plans and specifications

has become public otber than through any

action or disclosure of Franchisee.
(b)

Franchisee

will be inadequate
therefore,

acknowledges that the Company will suffer irreparable

to compensate

Franchisee

the Company

harm and that monetary damages

for any breach by Franchisee

of the terms of Section 10.05(a);

agrees that for such breach the Company shall be entitled to injunctive relief in addition to all

other remedies it may have.

10.06

Survival.
The covenants set forth in this Section 10 shall survive the termination

or expiration of this Agreement.

SECTION 11: TERMINATION

11.01

Termination.
(a)

automatically

Franchisee

shall be deemed to be in default,

and all rights granted

under

this Agreement

shall

terminate without notice to Franchisee upon the occurrence of any of the following events:
(1)

(2)
bankrupt

if Franchisee shall become insolvent or make a general assignment for the benefit of creditors.
if a petition is filed against and consented to by Franchisee,

or if Franchisee

is adjudicated

a

or insolvent.
(3)

Franchisee's
or temporary)

if any proceeding

for the appointment

of a receiver of Franchisee

or other custodian

for

business or assets is filed and consented to by Franchisee, or if a receiver or other custodian (permanent
of Franchisee's

assets or property,

or any part thereof,

is appointed

by a court

of competent

jurisdiction.
(4)

if a final judgment

against Franchisee or affecting Franchisee's

business remains unsatisfied or

of record for thirty (30) days or longer (unless supersedeas bond is filed).
(5)

if execution is levied against Franchisee's

against the assets of the Franchised

Restaurant

days, or if the assets of the Franchised Restaurant

REV. 9/01

business or property,

is instituted against Franchisee

or suit to foreclose any lien

and not dismissed within thirty (30)

are sold after levy thereupon by any sheriff, marshal or constable.

21

(b)

Franchisee

shall be deemed to be in default, and the Company

Agreement and all rights granted hereunder
default, upon the occurrence
(1)

at any time by notice to Franchisee without any opportunity

if Franchisee fails for any reason to have opened the Franchised

transact business at the Franchised

third

party

without

Restaurant

for business within

ceases to operate or otherwise abandons or forfeits the legal right to

is convicted of a felony, a crime involving moral turpitude,

likely, in the Company's

sole judgment,

Marks, the goodwill associated therewith or the Company's
(3)

to cure the

Restaurant;

if Franchisee

offense that is reasonably

this

of any of the following events:

one (1) year from the date hereof, or thereafter

(2)

may, at its option, terminate

to affect adversely

or any other crime or

the System, the Proprietary

rights therein;

if Franchisee purports to transfer any rights or obligations arising under this Agreement to any
the Company's

prior

written

consent,

contrary

to the terms

of paragraph

13.02 of this

Agreement;
(4)

if Franchisee

identifying characteristic
Company's

misuses or makes any unauthorized

of the System, or otherwise

materially

use of the Proprietary

Marks or any other

impairs the goodwill associated

therewith,

or the

rights therein;
(5)

if Franchisee

discloses to a third party any Proprietary

Information

or other confidential

information

learned from the Company or relating to the System or if Franchisee uses or permits to be used any such

information

or secret, unique or confidential food product or other element of the System in a restaurant

other than the Franchised

Restaurant

or if Franchisee breaches any duty of confidentiality

or business

imposed on Franchisee

in

this Agreement or otherwise by law;
(6)

if three (3) or more notices of default pursuant

for the same, similar or different defaults within a twelve (I2)-month
terminated

in lieu of the Company's
(7)

information

to Section 11.01(c) have been sent to Franchisee
period, in which event this Agreement may be

sending the fourth (4th) or any subsequent Notice of Default;

if Franchisee

made

or makes

any material

misrepresentation

to the Company

in any

or report provided prior to or during the term of this Agreement; or
(8)

if Franchisee

fails to repair

or restore

the Franchised

Restaurant

Premises

condition within six (6) months of its being damaged or rendered totally or partially untenantable

to its former
by fire or other

casualty, as required by Section 3.01(e).
(c)
Agreement

Franchisee

shall be deemed to be in default and the Company

and all rights granted

under this Agreement

following events and Franchisee's
(1)

if Franchisee

Franchisee's

notice upon the occurrence

this

of any of the

failure to cure such default within the time period set forth below:
fails, refuses or neglects to adhere to the standards

System as set forth in the Confidential
without limitation

without further

may, at its option, terminate

and specifications

of the

Manual and otherwise adopted by the Company from time to time, including

failure to adhere

to Sections 4.01 (a), 4.01(b), 4.01 (c), 4.03(a) or 4.03 (b) of this

Agreement;
(2)

if Franchisee

or any of its affiliates fails, refuses or neglects to pay promptly

amounts owed to the Company or any of its affiliates;

REV. 9/01

22

when due any

(3)
information

if Franchisee

fails, refuses or neglects to submit to the Company

any financial

or other

required under this Agreement;
(4)

if Franchisee

fails, refuses or neglects to obtain the Company's

prior written

approval

or

consent as required under this Agreement;
(5)

if Franchisee

fails, refuses or neglects to observe the conditions governing

the sale of beer or

wine set out in Section 5.01(1);
(6)

if Franchisee

fails, refuses or neglects to observe any other of its obligations

under

this

Agreement or to carry out the terms of this franchise in good faith.
(d)

Franchisee

shall have the opportunity

and right to cure the events of default listed in Section II.Ol(c)

for a period of three (3) days with respect to Subsection (I), ten (10) days with respect to Subsection (2) and thirty (30)
days with respect to Subsections (3) through (6) following the Company's delivery of written notice of default.

11.02

Effect of Termination
(a)

Franchisee,

or Expiration.

upon any termination

Company, its affiliates and subsidiaries
Franchisee,
attorneys'

or expiration

of this Agreement,

shall promptly

any and all sums owed to them. In the event of termination

such sums shall include all actual and consequential

pay to the

for any default by

damages, costs and expenses, including reasonable

fees and expenses, incurred by the Company as a result of the default (whether such fees and expenses are

incurred through use of the Company's

own legal staff or otherwise), and late payment charges thereon until paid at

the lower of (1) the highest rate permitted
Franchise

acknowledges

Company

is Franchisee's

by Kentucky law, or (2) one and one-half percent (1 112%) per month.

and agrees that the proximate cause of the actual and consequential
act of default and not Company's

damages sustained by

exercise of its right to terminate

this Agreement.

The

foregoing Obligation shall give rise to and remain a lien in favor of the Company against any and all of the assets of
the Franchisee at the time of default including specifically, but not limited to, the Franchised Restaurant.
(b)
terminate.

Upon termination
Franchisee

it hereunder

or expiration

hereof for any reason, all of Franchisee's

shall immediately cease to use any Proprietary

Information

rights hereunder

shall

or other trade secrets disclosed to

or any paper or plastic goods, emblems, signs (other than pole signs and roof signs, which are governed

by Section 11.02(c», displays or other property on which the Company's name, any of the Proprietary
confusing simulation thereof are imprinted.

Franchisee shall not otherwise use or duplicate the System or any portion

thereof or assist others to do so. Franchisee
remove from the Franchised

Restaurant

Marks or any

shall, on or before the effective date of termination

or expiration:

(1)

Premises all signs, emblems and displays identifying it as being associated

with the Company or the System; (2) cease to use and return to the Company all copies of the Confidential

Manual

and all other manuals,

instructions

and (3)

relinquish its Franchised

Restaurant

(c)

Upon termination

Company, Franchisee

or materials delivered to it by the Company or otherwise
telephone number.
or expiration

of this Agreement,

unless otherwise

directed

shall modify the exterior and interior design and decor of the Franchised

and shall make or cause to be made such changes in signs, buildings and structures
direct, so as to effectively distinguish the Franchised

REV. 9/01

hereunder;

Restaurant

23

in writing
Restaurant

by the
Premises

as the Company shall reasonably

from its former appearance

and from any other LJS

Restaurant.

Franchisee shall commence the required modifications immediately upon the termination

this Agreement
expiration.
Company

and sball complete the modifications

or expiration of

within thirty (30) days following the date of termination

or

If Franchisee fails or refuses to comply with this Section 11.02(e), in addition to any other rights whieh the
may have, the Company shall have the right to enter upon the Franehised

Restaurant

Premises without

being guilty of trespass or any other tort and make or cause to be made such changes at Franchisee's

expense, which

Franchisee shall pay on demand.
(d)

Franchisee

and the Company

agree that the Company's

damages

provisions of this Section 11.02 are difficult to estimate or determine accurately.
by Franchisee

resulting

Therefore,

from a breach

of the

in the event of a breach

of the provisions of this Section, Franchisee shall pay the Company the sum of Fifty Dollars ($50) per

day beginning on the thirty-first

(31st) day after the date of termination

or expiration ofthis Agreement, not to exceed

a maximum of Seven Thousand Five Hundred Dollars ($7,500) if termination
this Agreement,

and a maximum of Ten Thousand

occurs during the first ten (10) years of

Dollars ($10,000) thereafter.

Such payment shall be made as

liquidated damages and not as a penalty, it having been agreed by Franchisee and the Company that the payments are
reasonably

representative

notwithstanding

of the actual damage sustained by the Company in the event of such a breach.

the provision for liquidated damages, the Company shall be entitled to injunctive relief if Franchisee

continues to operate as an LJS Restaurant
(e)
indebtedness

However,

The covenants

set forth

or breaches any other covenant herein.
in Sections

11.02(a) through

(d), inclusive,

and all rights,

that may accrue to the Company under this Agreement shall survive any termination

claims and

or expiration

of

this Agreement and be enforceable by the Company.
(f)

Upon termination

or expiration of this Agreement, Franchisee shall cease to hold itself out in any way

as a franchisee of the Company or do anything that would indicate any relationship

11.03

between it and the Company.

Company's Purchase Rights and Obligations.
(a)

Upon termination

or expiration of this Agreement, the Company shall have the option to purchase all

of the assets and business comprising the Franchised Restaurant,
and improvements,

and any items of LJS Restaurant

Equipment, including without limitation equipment, furnishings,

signs, sign faces, decor. food items and supplies of Franchisee
made at the fair market,
goodwill. if any.
within a reasonable

If Franchisee

by a person or firm experienced in the appraisal

allowance

for

of restaurant

property.

The

values shall be averaged and that average shall be the fair market value of the Business Property
Provided, however, if the two (2) appraisals differ by more than ten percent (10%), the

shall appoint a third appraiser,

If the Company

whose appraisal

shall be binding upon the parties as the fair

The cost of the third appraisal

shall be borne equally by the Company and

elects to exercise its option to purchase,

it shall have the right to set off against the

purchase price all amounts due from Franchisee

REV. 9/01

including an appropriate

shall be

and the Company cannot agree on the fair market value of the Business Property

market value of the Business Property.
Franchisee.

Any such purchase

time, the Company and Franchisee each shall commission at their respective expense an appraisal

and binding upon the parties.
two (2) appraisers

("Business Property").

going concern value of the Business Property,

of the value of the Business Property
two (2) appraised

including the land and building, the leasehold estate

under this Agreement.

24

Franchisee shall cause any lease that affects

the Franchised

Restaurant

Premises

or any other item subject to this option to contain

appropriate

language

permitting the Company to assume such lease without fees or additional charges.
(b)

In the case of expiration,

the Company shall exercise its option hereunder

at least thirty (30) days prior to expiration.

In the case of termination

by giving Franchisee

for any other reason, the Company

exercise its option by giving Franchisee notice within thirty (30) days after such termination.
in either case (expiration

or termination)

written notice given to Franchisee

hereunder

within ten (10) days following Company's

(c)

receipt of the determination

price shall be paid within thirty (30) days of the date of such exercise.

or surety's subrogation

of the fair

The Company's

option

held by it or with respect to which it may

interest.

In the event that at any time during the term of this Agrecment or at any time prior to the date that is

one (1) year following the termination

of this Agreement or the expiration of the term of this Agreement, Franchisee

desires to accept any bona fide written offer from a third party to purchase
comprising

Provided, however, that

In the event the Company shall exercise its option, the closing shall be held

is without prejudice to its right under any security agreement

have a guarantor's

shall

the Company shalt have the right to rescind the exercise of its option upon

market value of the Business Property.
and the purchase

notice

the Franchised

Restaurant,

Franchisee

all or substantially

all of the assets

shall so notify the Company in writing, such notice to contain a

copy of the offer and any other written information

relating to the offer given or received by the third party offeror.

The Company shall have the option to purchase such assets on the same terms and conditions offered by the third
party. except that the Company shall have at least fifteen (15) days to prepare for closing.

If the third party offer is

such that the Company may not reasonably be required to furnish the same consideration,

terms or conditions, then

the Company

If the Company

may purchase

the assets to be sold for the reasonable

equivalent

in cash.

exercise its option, it shall have the right to set off against purchase price all amounts due from Franchisee
Agreement.

Franchisee

shall cause any lease that affects the Franchised

subject to this option to contain appropriate
additional charges.

Restaurant

elects to
under this

Premises or any other item

language permitting the Company to assume such lease without fees or

The Company shall notify the Franchisee of its intention to exercise its option within ten (10) days

after receipt of the Franchisee's

notice and other required information.

Any material change in the terms of the third

party offer prior to transfer to the third party shall constitute a new offer, subject to the same option by the Company
as in the case of an initial offer.

The Company's

failure to exercise the option afforded

by this Section shall not

constitute a waiver of any other provision of this Agreement, nor shall such failure constitute a waiver of its right to
exercise its option with respect to any subsequent third party offer.

11.04

Company's

Obligation to Purchase.

Franchisee

shall notify the Company within ten (10) days of the expiration or termination

of its desire to sell its unbroken inventory packages of approved items and supplies to the Company.

of this Agreement
At the expiration

of the ten (10) day notice period, Franchisee shall deliver such items at its expense, with an itemized inventory listing,
to the nearest Company-owned

LJS Restaurant

or to such other unit as may be designated

Company shall purchase such items at Franchisee's

The

cost and shall pay Franchisee. or set off the amount due therefor

against any amount owed the Company by Franchisee, within seven (7) days after delivery.

REV. 9/01

by the Company.

25

SECTION 12: FRANCHISEE'S

12.01

OTHER BUSINESS INTERESTS

Notification of Other Business Activity.
Without

limiting Franchisee's

intention to participate

obligations

under Section 12.02, Franchisee

or engage directly or indirectly in any other restaurant,

shall notify the Company

food service or hospitality

activity, at least thirty (30) days before (1) Franchisee becomes a party to any agreement or understanding
such activity or (2) such activity commences, whichever is earlier.
information

12.02

Franchisee

of its

business
relating to

shall provide the Company with such

about the activity as the Company may reasonably request.

Competing Business.
Unless otherwise

specified, the term "Owners"

as used in this Section 12.02 and in this Agreement

shall

include, individually and collectively, all partners, officers, directors, members and holders, directly or indirectly (and
any partners,

officers or directors of any such holder), of any beneficial interest in any entity comprising Franchisee

or in the franchise granted
receive valuable training

hereunder.

and confidential

regarding the promotional,
Franchisee

further

Franchisee

operational,

acknowledges

acknowledges

that, pursuant

and trade secret information,

to this Agreement,

Franchisee

including, without limitation,

will

information

sales and marketing methods and techniques of the Company and the System.

its obligation

under this Agreement

to develop the franchised

business and to

promote the interests of the System. Accordingly, Franchisee agrees that:
(a)

During the term of the Agreement, Franchisee and its Owners shall not, except as otherwise approved

in writing by the Company, either directly or indirectly, for itself, or through, on behalf of, or in conjunction
person, persons, partnership,

or corporation,

with any

own, maintain, engage in, or have any interest in any restaurant

service business if (I) the gross sales of seafood of that restaurant
twenty percent (20%) or more of all sales of the restaurant

or food

or business constitute or are likely to constitute

or business, or (2) the restaurant

or business sells any

battered seafood product in a quick service or "fast food" format
(b)

Subject to Section 12.02(a), Franchisee

all or a portion of a restaurant,

and its Owners may, during the term of this Agreement, own

food service or hospitality business, on the condition that:

(1)

Franchisee does not use or allow others to use any part of the System in such business;

(2)

such business does not employ or seek to employ any person who is at that time employed by the

Company, or otherwise induce such employee to leave his or her employment;
(3)

such business is not advertised on or from the Franchised Restaurant

does not share or is not combined in any advertisement
(4)
Franchised

Restaurant

(c)

directly

REV. 9101

and

No business shall be directed or diverted at any time for any reason by Franchisee
to any such restaurant,

Franchisee

or indirectly,

from the

food service or hospitality business.

For a period of one (I) year after the expiration

cause of termination,
either

with the Franchised Restaurant;

Premises and the business

or termination

of this Agreement,

regardless

of the

and its Owners shall not, except as otherwise approved in writing by the Company,

for itself, or through,

on behalf of, or in conjunction

26

with any person,

persons,

partnership

or corporation,

own, maintain, engage in, or have any interest in any restaurant

food service, which is located within one and one-half (1 112) miles of the Franchised
of seafood of the restaurant
of the restaurant

or business engaged in

Restaurant,

or business constitute or are likely to constitute twenty percent (20

if (I) the gross sales

%

or business, or (2) the restaurant

)

or more of all sales

sells any battered seafood product in a quick service or "fast food"

format.
(d)

The Company shall have the right, in its sole discretion and without Franchisee's

consent, to reduce the

scope of any covenant in Section 12.02. Any covenant as reduced shall be fully enforceable.
effective immediately

upon receipt by Franchisee of written notice thereof, and Franchisee

The reduction shall be
shall comply immediately

with the covenant as so reduced.
(e)

Franchisee

from this Agreement,

expressly agrees that any claim it may have against the Company, whether or not arising

shall not constitute a defense to the Company's

enforcement

of the covenants

in this Section

12.02.
(1)

Franchisee

acknowledges

cause the Company irreparable

that its failure to comply with the requirements

of this Section 12.02 will

injury, and Franchisee hereby accordingly agrees that in addition to all other legal or

equitable rights and remedies which the Company may have under this Agreement or otherwise, the Company shall
be entitled and Franchisee hereby consents to the entry of an order by any court of competent jurisdiction
performance
(g)

of, or for an injunction against violation of, the requirements
Franchisee

have other opportunities

for specific

of this Section 12.02.

expressly acknowledges that its Owners possess skills and abilities of a general nature and
for exploiting such skills, so that enforcement of the covenants in this Article will not deprive

any of them of their goodwill or ability to earn a living. If Franchisee or any of its Owners fails or refuses to abide by
any of the foregoing covenants, and the Company obtains enforcement

in a judicial or arbitration

proceeding,

the

applicable covenant shall be in effect and continue for a period of time expiring one (1) year after the date Franchisee
or its Owners or such other person as may be affected commences compliance with the order enforcing the applicable
covenant.
(h)

Subsections

(a) through (d) of this Section 12.02 shall not apply to ownership

Owner of less than a ten percent (10%) beneficial interest in the outstanding
which is registered

by Franchisee

or any

equity securities of any corporation

under the Securities Exchange Act of 1934, unless Franchisee

shall also serve as a director

or

executive officer of or in a management capacity in such corporation.

SECTION 13: ASSIGNMENT OR TRANSFER

13.01

Assignment by Company.
The Company

may assign this Agreement and any or all benefits and obligations

notice to or consent from Franchisee,

provided

that the assignee assumes and agrees to perform

obligation under this Agreement accruing after the date of the assignment.

REV. 9/01

arising from it without

27

the Company's

\,,~

13.02

Franchisee as Corporation
(a) Franchisee

voluntarily

or Other Entity; Assignment by Franchisee.

and its Owners shall not, without the Company's

or involuntarily,

by operation

of law or otherwise,

prior written consent, directly or indirectly,

sell, assign, transfer,

mortgage or otherwise encumber any interest or partial interest in Franchisee,
granted

herein, or offer or attempt to do so, or permit the same to be done.

convey, give away, pledge,

this Agreement,

or in the franchise

Any actual or purported

assignment

occurring by operation of law or otherwise without the Company's prior written consent shall be a material default of
this Agreement and shall be null and void.
(b)

If Franchisee or any successor is a partnership,
(1)

The Articles

Articles of Organization,

Operating

the issuance and transfer
documents

of Partnership,

Partnership

Agreement,

Agreement and other organizational

of any interest in Franchisee

and of resolutions

limited liability company or corporation:

of Franchisee's

Articles

of Incorporation,

and governing documents shall provide that

is restricted by the terms of this Agreement.

board of directors

By-Laws,

authorizing

Copies of such

its entry into this Agreement

shall be

furnished to the Company upon request.
(2)
interest

All general partners and all direct and indirect holders ofa ten percent (10%) or greater equity

in any entity

agreement

comprising

Franchisee

personally guaranteeing

the Company and undertaking

shall upon Franchisee's

execution

of this Agreement

to the Company the full payment and performance

of Franchisee's

execute an
obligations to

to be bound, individually, jointly and severally, by all the terms of this Agreement,

including, without limitation, the restrictions

on assignment contained herein.

The personal Guaranty

shall be in the

form annexed hereto as Exhibit "B" or in such other form as the Company may from time to time prescribe.
(3)

Franchisee

shall not use the name "Long John Silver'S," any other Proprietary

Mark, or any

name deceptively similar thereto, in a public offering of its securities, except to reflect its franchise relationship
the Company.
Franchisee
pursuant

Neither Franchisee

with

nor any of its Owners may issue or sell, or offer to issue or sell, any securities of

or an affiliate of Franchisee,

regardless of whether such sale or offer would be required to be registered

to the provisions of the Securities Act of 1933, as amended, or the securities laws of any other jurisdiction,

without obtaining the Company's
restrictions

requirements

and

concerning use of information about the Company, its affiliates or the System.
(4)

transfers

prior written consent and complying with all of the Company's

Franchisee

shall furnish the Company, at the time of execution of this Agreement and upon all

subject to the provisions of this Section 13.02, a list of all stockholders,

members and partners

having an

interest in Franchisee, their respective percentage interests and the number of shares directly and indirectly owned or
controlled by each.
(5)
records

Franchisee,

of any securities

certificates

representing

if a corporation,

shall maintain stop transfer instructions

with voting rights subject to the restrictions
outstanding

voting securities to be surrendered

against tbe transfer on its

of this Section 13.02 and shall cause all
for reissuance and cause all certificates

voting securities in the future to be issued with this legend printed conspicuously upon the face of each certificate:
"The transfer
terms

REV. 9/01

of this certificate and the shares it represents

and conditions

of a certain

Franchise

28

Agreement

is subject to the
witb Long John

for

Silver's, Inc. Reference is made to that Agreement and to certain restrictive
provisions of the Articles and By-Laws of this corporation."
(c)

Franchisee

and necessary
procedures

acknowledges

and agrees that the restrictions

to protect the System, the Company's

and quality, as well as the Company's

Company,

Franchisee,

and other franchisees.

shall take effect without the Company's
(d)

Upon Franchisee's

Proprietary

imposed herein are reasonable

Marks, Proprietary

high reputation

No attempted

on transfer

and operating

and image, and are for the protection

assignment or transfer

permitted

of the

by this Section 13.02

written consent.

written request, the Company shall not unreasonably

assignment subject to the restrictions

Information

of this Section 13.02; however, the Company's

withhold its consent to any

consent may be conditioned

on

the satisfaction of the following requirements:
(I)

neither

Franchisee

nor any successor

or affiliate

of Franchisee

is in default

under

Agreement or any other agreement with the Company, and all of the accrued monetary obligations of Franchisee

this
or

such successor or affiliate to the Company have been satisfied;
(2)

the assignor or transferor

release under seal, in a form prescribed

and its Owners (as defined in Section 12.02) have executed a general

by the Company, of any and all claims against the Company, its affiliates and

their officers, directors and employees in their individual and corporate capacities;
(3)

the assignee or transferee has demonstrated

Company's

then current

managerial

requirements;
(4)

Company's

requirements

for new franchisees,

to the Company's satisfaction that it meets all of the

the assignee or transferee

then current

standard

including, without limitation,

character,

has executed and/or caused all necessary parties to execute: (a) the

form Franchise Agreement, including the personal guaranty

13.02(b)(2) and such other then current

financial and

ancillary agreements

as the Company may reasonably

described

in Section

require;

or, at the

Company's option (b) a written assignment in a form prescribed by the Company, assuming and agreeing to discharge
all of the assignor's obligations under this Agreement and all other ancillary agreements.

The Franchise Agreement

shall be for a term expiring on the expiration date of this Agreement and it shall be renewable only upon the terms set
forth in such then current Franchise Agreement;
(5)

in the sole discretion

of the Company,

responsible for the operation of the Franchised Restaurant

the assignee or transferee

shall have satisfactorily

and any of its employees

completed the Company's

training

then in effect for all new franchisees;
(6)

except in the case of an assignment to a corporation

for convenience of ownership

pursuant

to

Section 13.02(e), a transfer fee has been paid to the Company in an amount determined by the Company, not to exceed
Two Thousand
transfer,

Dollars ($2,000), to defray the Company's

including,

without

evaluations,

retraining,

Agreement

by Franchisee

limitation,

and additional

reasonable

the cost of legal and accounting
supervision.

Provided,

to an affiliate as a contemporaneous

franchise agreements for LJS Restaurants

costs and expenses in connection
fees, credit

and investigation

charges,

however, that in the case of the assignment
part of the assignment

of additional

of this

Company

by Franchisee to an affiliate, the total transfer fee shall not exceed $5,000.

(7)the assignee or transferee is not a business competitor of the Company; and

REV. 9/01

with the

29

(8)the requirements
(e)

If Franchisee

convenience

of ownership,

requirements,

of Section 15.08(b) are met.

is an individual and desires to assign all of his rights to a corporation

formed solely for

the Company's

on the following

consent

to such assignment

shall be conditioned

in addition to those in Sections 13.02(b) and (c):
the assignee's Articles of Incorporation

(1)

confined exclusively to operating the Franchised

Restaurant

and By Laws shall provide that its activities shall be
or other businesses franchised under similar agreements

with the Company, its subsidiaries, or affiliates;
(2)

Franchisee shall be the owner of a majority voting interest in the securities of the assignee; and

(3)

all shareholders

with the requirements

to which Subsection 13.02(b)(2) applies shall comply

of that Subsection.

Upon the dissolution

(f)

Franchisee,

of the assignee corporation

or death of Franchisee

the personal representative

assign or otherwise transfer

or of a stockholder,

or trustee who is legally authorized

If the personal representative

offer to sell such interest, and if under applicable law Franchisee's
are distributable

partner

of

to transfer the affected interest may sell,

the affected interest in Franchisee to a third party, subject to the conditions set forth in

this Agreement for any other transfer.

Restaurant

member or a general

does not receive, or desire to accept, a bona fide
rights in this Agreement and in the Franchised

to heirs or legatees who would otherwise qualify as franchisees and assignees under the

terms of this Section 13.02, the Company shall consent to such assignment, provided such prospective assignees agree
to accept all the conditions imposed on Franchisee by this Agreement.
(g)

If any person, partnership,

corporation

or other entity with an jnterest

subject to the restrictions

this Section 13.02 desires to accept any bona fide written offer from a third party to purchase
prospective

transferor

of

such interest, the

shall notify the Company in writing of each such offer, such notice to contain a copy of the

offer and any other written

information

relating to the offer given or received by the third party offeror.

The

Company shall have the option to purchase such business, franchise and interest, including any lease, on the same
terms and conditions

offered by the third party, except that the Company shall have at least fifteen (15) days to

prepare for closing.

If the third party offer is such that the Company may not reasonably

same consideration,

terms or conditions, then the Company may purchase the interest to be sold for the reasonable

equivalent

If the parties cannot agree within a reasonable time on the reasonable equivalent

in cash.

consideration,
appraiser

terms, or conditions contained in the offer, the consideration

designated

by the Company,

prospective transferor
and other required

whose determination

be required to furnish the

shall be determined

shall be binding.

in cash of the

by an independent

The Company

shall notify the

of its intention to exercise its option within ten (10) days after receipt of the transferor's

information.

Any material change in the terms of the third party offer prior to transfer

notice
to the

third party shall constitute a new offer, subject to the same option by the Company as in the case of an initial offer.
The Company's

failure to exercise the option afforded by this Section 13.02(g) shall not constitute

other provision of this Agreement,
transfer,

including any of the requirements

a waiver of any

of Section 13.02 with respect to the proposed

nor shall such failure constitute a waiver of its right to exercise its option with respect to any subsequent

third party offer.

REV. 9/01

30

(h)

The Company's

consent to a transfer

of any interest subject to the restrictions

of this Section 13.02

shall not constitute a waiver of any claims it may have against the assignor, nor shall it be deemed a waiver of the
Company's

right to demand exact compliance with any of the terms of this Agreement by the assignee at any time and

from time to time.

SECTION 14: FRANCHISE ASSOCIATION

14.01

Franchise Association.
The Company will recognize one (1) independent

("Franchise

Association")

14.02 of this Agreement.

association that represents

so long as such association shall continue to meet the criteria set forth in Sections 14.01 and
Subject to the foregoing, the Company will not restrict Franchisee

other US Franchise Owners, nor from forming or participating
of US

franchisees.

Long John Silver's franchisees

from associating

in the lawful activities of any independent

As used in this Section 14.01, the phrase "US

Franchise Owner]s]"

with

association

shall mean the person or

entity that has executed and is identified as the franchisee in an US franchise agreement.
(a)

The membership ofthe Franchise Association must be comprised of (1) LJS Franchise Owners owning

at least 51 % of all Long John Silver's franchise owned and operated restaurants

in the United States; and (2) 51 % of

all LJS Franchise Owners in the United States.
(b)
provisions

The Franchise
of this Agreement

Association must be governed by written by-laws that are not inconsistent
and that provide that the Franchise

material changes to the by-laws.

Association

The Franchise Association Board (hereinafter

with a certified copy of the by-laws and any material

amendments

with the

shall advise the Company

of any

defined) shall provide the Company

to the by-laws.

The Company

shall have no

obligation to enforce the by-laws.
(c)
the Company

The Franchise
in representing

Association must have been formed for a primary purpose of consulting and advising
the interests

of Long John Silver's franchisees,

and membership

in the Franchise

Association must be limited solely to US Franchise Owners that are not owned or controlled by the Company or any
affiliate of the Company.
(d)

The Franchise

Association must have at least one (I) standing committee appointed

Association Board whose primary function is to manage audits of the Company's
the Company's

14.02

books and records with respect to

advertising and system purchasing functions pursuant to Sections 7.02(b) and 4.05(b) above.

Franchise Assoeiation Board.
(a)

The Franchise Association must be governed and represented

is duly elected on a periodic basis by the Franchise
ensure

by the Franchise

that the composition

of the Franchise

Association membership

Association

by a board of directors or like body that
("Franchise

Board is representative

Association

of all Franchise

Board").

To

Association

members: (1) At least 40% ofthe Franchise Association Board must be nominated and elected in regional elections by
LJS Franchise Owners living or having principal business offices within designated geographic
the Franchise

,

REV. 9101

Association

Board or the Franchise

areas determined

Association in an effort to have each of the regionally

31

by

elected

Franchise Association Board members represent an approximately

equal Dumber of LJS Restaurants;

and (2) At least

10% of the Franchise Association Board must be nominated and elected by LJS Franchise Owners who own five (5)
or less lJS Restaurants.
(b)

The Franchise Association Board must be composed of LJS Franchise Owners who are individuals, or

individuals

who own, directly

partnerships,

corporations,

(c)
obligation

or indirectly,

a controlling

interest

in LJS Franchise

Owners

that

are

limited liability companies or other entities.

Any LJS Franchise

Owner

that has received from LJS written

in excess of $5,000.00 or a material

agreements

equity

non-monetary

obligation

notice of default

of a monetary

under one or more of itsLJS

franchise

and has not cured or in good faith disputed in writing in its entirety such default as of the date for

nominations for the Franchisee Association Board shall not be eligible for election.
(d)

The Franchise

Association

Board shall have the authority

Association and the Company shall have the right to rely on the authority

to bind and represent
of the Franchise

the Franchise

Association Board.

The

person serving as chairman of the Franchise Association Board and president of the Franchise Association shall have
the authority

to bind and represent the Franchise Association Board and the Company shall have the right to rely on

such authority.

If the Franchise

Association by-laws allow the offices of chairman

two (2) different persons, the Company shall have tbe right to rely upon the authority

and president

to be occupied by

of the person holding the office

of president.

14.03

Consultation

With Franchisee Association.

The Company shall have the right to consult with and advise the Franchise Association Board on a periodic
basis.

The Company will consult with and advise the Franchise Association Board with respect to the Company's

advertising

and marketing

programs

and the Purchasing

Program

pursuant

to Sections 7.01(a) and 4.05(b) above.

The Company agrees that it shall provide the Franchise Association Board with a specimen copy of the Company's
Uniform Franchise Offering Circular ("UFOC")
the same with state franchising authorities;
the most previously

issued UFOC.

the UFOC shall be marked to show revisions to the UFOC as compared to

In addition,

material changes to the Company's standard

and all material amendments thereto as and when the Company files

the Company shall advise the Franchise

Association

Board of all

the Company or other franchisees

shall be and

form franchise agreement.

SECTION 15: GENERAL PROVISIONS

15.01

Improvements

to System.

All improvements

in the System developed by Franchisee,

become the sole and absolute property of the Company.

The Company may incorporate

System and shall have the sole and exclusive right to copyright,
Company's

own name to the exclusion of Franchisee,

such improvements

whose right to use such improvements

rights as a franchisee hereunder.

REV. 9/01

register and protect

such improvements

32

into the
in the

shall be limited to its

15.02

Governing Law Exclusive Jurisdiction.
(a)

This Agreement has been accepted by the Company and shall be deemed to have been made at

Lexington, Kentucky, and shall be governed and construed under and in accordance with the laws of the
Commonwealth
(b)

of Kentucky, which law shall prevail in the event of any conflict of law.
Franchisee

and the Company

agree that any action arising out of or relating

to this Agreement

(including, without limitation, the offer and sale of the Franchise), shall be instituted and maintained only in a state or
federal

court of general

jurisdiction

15.03

jurisdiction

in Fayette

County,

Kentucky,

and Franchisee

of such court and waives any objection it may have to either the jurisdiction

irrevocably

submits

to the

or venue of such court.

Severability.
(a)

Except as expressly provided to the contrary

Agreement shall be considered severable.
determined

herein, each section, part, term and provision of this

If, for any reason, any section, part, term or provision of this Agreement is

to be invalid, contrary to, or in conflict with, any existing or future law or regulation of a court or agency

having valid jurisdiction,

such determination

shall not impair the operation

or affect such other portions, sections,

parts, terms or provisions of this Agreement as may remain otherwise intelligible, and the latter will continue to be
given full force and effect and bind the parties hereto.

Such invalid sections, parts, terms and provisions shall be

deemed not to be a part of this Agreement.
(b)

If any applicable law or rule requires a greater period for notice to or performance

by Franchisee than

the period(s) provided in this Agreement, the period required by such law or rule shall be substituted

for the period

specified herein.
(c)

If any court in a final decision to which the Company is a party holds any provision of this Agreement

or portion thereof to be unenforceable

or reduces the scope of any covenant or provision herein, Franchisee

shall be

bound to the fullest extent by such covenant or provision as reformed or reduced to the maximum extent consistent
with such decision, and as if such reformed or reduced provision were separately set forth in and made a part of this
Agreement.

15.04

Franchisee Is Independent
(a)

Contractor.

This Agreement does not create a fiduciary relationship

be at all times an independent
representative,

contractor,

between the parties hereto.

and nothing herein contained shall constitute Franchisee

partner, joint venturer or employee of the Company.

Franchisee

shall

as the agent, legal

Franchisee shall not have any right or power to

and shall not bind or obligate the Company in any way or manner whatsoever,

nor represent that it has the right to

do so.
(b)

Franchisee

shall have sole responsibility

assessed by reason of its operation
and federal, property,

REV. 9/01

Restaurant

pay when due, all taxes levied or

under this Agreement, including, but not limited to, local, state

license, sales, use, leasehold, excise and income taxes. Franchisee shall be solely responsible for

all loss, damage and contractual
Franchised

and performance

for, and shall promptly

liabilities to third persons originating

in or in connection with the operation

and for all claims and demands for damages to property

33

of the

and for injury, illness or death of

persons directly or indirectly resulting therefrom.

Franchisee shall indemnify and save the Company harmless from

any such claims for taxes and other liabilities, loss, expense or damage.
(c)

In all building directories,

indicate its independent

ownership

public records and in its relationship

of the Franchised

Restaurant

with other persons, Franchisee

and that it is only a franchisee

shall

of the Company.

Franchisee and any permitted assignee shall file, and keep on file at all times in the proper public office for the locality
involved, a statement
permitted

showing the actual name of Franchisee

as the proprietor

by the law of the state and for the locality where the Franchised

of its business, if such is required
Restaurant

and Franchisee's

or

principal

place of business are loeated.
(d)

Franchisee shall affix a plaque or have printed or painted in a manner, form and style prescribed

the Company,
stationery,

in one or more places upon the Franchised

a notification

Restaurant

to the public to the effect that Franchisee

by

Premises and upon its business forms and

is franchised by the Company.

Franchisee

upon

request will furnish the Company with reasonable proof of its compliance with the terms of Sections 15.04(c) and (d).

15.05

Section Titles.
Section titles and Section and Subsection references are used for convenience only and shall not affect the

meaning or construction

15.06

of any provision of this Agreement.

Entire Agreement.
This Agreement, which shall include the preamble recitals, constitutes the entire agreement of the parties and

supersedes

all prior negotiations,

commitments,

representations

subject matter hereof, excepting only the following agreements:

and undertakings

of the parties with respect to the

None. The Company has made no representations

inducing the execution of this Agreement other than are expressly stated herein.

15.07

Number and Gender.
All the terms and words used in this Agreement, regardless of the number and gender in which they are used,

shall be deemed and construed to include any other number (singular or plural), and any other gender (masculine,
feminine or neuter), as the context or sense of this Agreement or any paragraph
same as if such words have been fully and properly written in the appropriate

15.08

or clause hereof may require, the

number and gender.

Obligations of Interested Parties.
(a)

obligations

Except as otherwise
herein

provided

made or undertaken

herein, all acknowledgments,

by Franchisee

shall be jointly

promises,

covenants,

and severally

agreements

made or undertaken

and
by

Franchisee, all persons Signing this Agreement in their individual capacities and all guarantors.
(b)

Franchisee

shall forward

to the Company

Agreement

and prior to the acquisition

Agreement

and any extension hereof, a Confidentiality

REV. 9/01

of any interest

concurrently
in Franchisee

with the execution

by a third party during

and Non-Competition

34

and delivery

Agreement

of this

the term of this

in the form set forth in

Exhibit A (as it may be revised by the Company from time to time), executed by every Owner (as defined in Section
12.02) of Franchisee.

15.09

Written Approval. Waiver and Nonwaiver.
(a)

Whenever

this Agreement

requires the prior approval

or consent of the Company,

make a timely written request therefor, and such approval must be obtained in writing.

Franchisee

shall

Except where this Agreement

expressly obligates the Company to reasonably approve or consent to (or not to unreasonably

withhold its approval of

or consent to) any action or request by Franchisee, the Company has the absolute right for any reason to refuse any
request

by Franchisee

or to withhold

Company

may also consider

submitted

in writing by Franchisee

approval

of or consent to any action by Franchisee.

at its option and, in its sole discretion,

Company makes no warranties
to Franchisee,

the Company's

by providing

for the Company's

or guarantees

other reasonable

prior

requests

The

severally

waiver of any obligation imposed by this Agreement.

The

upon which Franchisee may rely, and assumes no liability or obligation

any waiver, approval,

consent, or suggestion

to Franchisee

in connection

with this

franchise or by any neglect or delay in furnishing the same.
(b)

No failure of the Company to exercise any power reserved to it by this Agreement, or to insist upon

strict compliance by Franchisee

with any obligation or condition hereunder,

at variance with the terms hereof, shall constitute a waiver of the Company's
all of the terms hereof. Waiver by the Company of any particular
Company's

and no custom or practice of the parties
right to demand exact compliance with

default by Franchisee shall not affect or impair the

rights with respect to any subsequent default of the same, similar or different nature, nor shall any delay,

forbearance,

or omission of the Company to exercise any power or right arising out of any breach or default by

Franchisee

of any of the terms, provisions, or covenants hereof, affect or impair the Company's

same. nor shall such constitute

a waiver by the Company

a default and to terminate

of any right hereunder,

subsequent

breach

this Agreement

acceptance

by the Company of any payments due to it hereunder

right to exercise the

or the right to declare

prior to the expiration

of its term.

any

Subsequent

shall not be deemed to be a waiver by the Company

of any preceding breach by Franchisee of any terms, covenants or conditions of this Agreement.
(c)

No right or remedy conferred upon or reserved to the Company or Franchisee

by this Agreement

is

intended to be, nor shall it be deemed, exclusive of any other right or remedy herein or by law or equity provided or
permitted;

but each shall be cumulative of every other right or remedy.

(d)

No amendment,

change or variance

from this Agreement

shall be binding on either party

unless

mutually agreed to by the parties and executed in writing.

15.10

Notices, Payments.
(a)

Subject to Section 15.10(d), all notices, requests and reports permitted or required

to be delivered by

the provisions of this Agreement shall be deemed delivered: (I) at the time delivered by hand to the recipient party (or
to an officer, director

or partner

telegraph or other reasonably
the hands of a commercial

REV. 9/01

of the recipient

party);

(2) on the same date of the transmission

reliable electronic communication
courier service for guaranteed

by facsimile,

system; (3) one (I) business day after being placed in

overnight delivery; or (4) four (4) business days after

35

placement in the United States Mail by Registered or Certified Mail, Return Receipt Requested, postage prepaid and
addressed

to the party to be notified at its most current

principal business address of which the notifying party has

been notified in writing.
(b)

If notice is sent to the Company,

it shall be addressed

to the attention

of the President,

Long John

Silver's, Inc., P.O. Box 11988, Lexington, Kentucky 40579, with a copy to the attention of the General Counsel, at the
above address, or at such other address as the Company shall from time to time designate in writing.
(c)

If notice is sent to Franchisee,

it shall be addressed

to Franchisee,

care of its designated

4321 North Bear Claw Way, Tucson, AZ 85749 or at such other address as Franchisee

agent, at

shall from time to time

designate in writing.
(d)

All payments and reports to accompany

payments required

to be made hereunder

to the Company

shall be sent by the means specified in Subsection 15.10(a) (1) (3) or (4) above or by electronic wire payment transfer,
addressed

to the attention of the Treasurer

at the above address, or at such address or by such other means as the

Company shall from time to time designate in writing.

Any payment not actually received by the Company on or

before the date specified herein shall be deemed overdue if not postmarked

15.11

at least five (5) days prior to the date due.

Designated Agent of Franchisee.
Franchisee

transactions

hereby designates

with the Company.

binding on any partnerships

John P. Willingham

to act in its behalf and execute all documents

in all

All actions by such designee shall be binding upon Franchisee and shall be valid and

as if done by each and every partner.

The Company shall have no duty to deal with

anyone other than the designee; however, any documents submitted to the Company executed by any other officer or
partner shall be valid and binding upon Franchisee.

Franchisee shall promptly notify the Company in writing of any

change in its designee.

15.12

Acknowledgments.
(a)

hereunder,

Franchisee acknowledges that it has conducted an independent investigation of the business franchised
and recognizes that the business venture contemplated

its success will be largely dependent

upon Franchisee's

by this Agreement involves business risks and that

independent

business ability.

The Company

expressly

or guarantee,

express or

disclaims the making of, and Franchisee acknowledges that it has not received, any warranty
implied, as to the potential volume, profits or success of the business venture contemplated
(b)
understands

Franchisee

acknowledges

this Agreement.

by this Agreement.

that it has received, has had an ample time to read, has read, and fully

Franchisee further acknowledges that the Company has fully and adequately

the provisions of this Agreement, and that Franchisee has bad an adequate opportunity

explained

to be advised by advisors of

its own choosing regarding all pertinent aspects of this franchise and the franchise relationship.
(c)

Franchisee

acknowledges

that it received a copy of this Agreement,

the attachments

agreements if any, at least five (5) business days prior to the date on which this Agreement was executed.
further

acknowledges

that it has received the disclosure document required

Federal Trade Commission, titled "Disclosure Requirements

REV. 9/01

36

and Prohibitions

by the Trade Regulation
Concerning

Franchising

and related
Franchisee
Rule of the
and Business

Opportunity

Ventures,"

and such additional documents as are required by tbe state in whicb Franchisee is located at

least ten (10) days prior to the date on wbich this Agreement was executed.

IN WITNESS WHEREOF,

the Company and Franchisee have executed this Agreement as of the date(s) indicated

below.

---

LONG JOHN SILVER'S, INC.

BY:~)\~_

Forrest W. Ragsdale, III

Title: Senior Vice President and General Counsel

Dat"-#1-l1"........~----=-----------SOUTHWEST

SEAFOOD SHOPPES, LLC

g
Mana:ij,n
Date: __

-'/'-F-,~07-,~~p.,
.

7

REV. 9/01

37

PZ:

_

CONFIDENTIALITY

AND NONCOMPETITION

AGREEMENT

THIS AGREEMENT,

dated for reference purposes as of June 21, 2002, is entered into by and between Long

John Silver's, Inc., a Delaware corporation

("Company")

and Southwest Seafood Partner,

is: 4321 North Bear Claw Way, Tucson, AZ 85749 ("Interested

On June
SHOPPES,

21, 2002, the Company

LLC, ("Franchisee").

entered

Interested

execute a written agreement
Agreement.

Interested

Party"):

into a Franchise

Party understands

Agreement and its franchise rights may be terminated

LLC, whose notice address

Agreement

that Franchisee

with SOUTHWEST

SEAFOOD

will be in default under Franchise

if each general partner or stockholder

of Franchisee

does not

to be personally bound by the covenants in Sections 10.05 and 12.02 of the Franchise

Party desires to acquire and/or maintain an interest in Franchisee,

and has an interest

in

ensuring that Franchisee complies fully with all of the terms of the Franchise Agreement.
In consideration

of the Company's

and valuable consideration,

agreement not to terminate the Franchise Agreement, and for other good

the receipt and sufficiency of which is hereby acknowledged,

Interested

Party hereby

agrees:
(1)

That he or she will comply with all the requirements

set forth in Section 12.02 of the Franchise

Agreement.
(2)

That he or she will observe the restrictions on disclosure of confidential and trade secret information

set forth in Section 10.05 of the Franchise Agreement, both during its term and after its termination

or expiration,

regardless of whether he continues to be directly or indirectly associated with the Company or Franchisee.
IN WITNESS WHEREOF,

the parties hereto have executed this Agreement at Lexington, Kentucky on the

day and year first above written.

LONG JOHN SILVER'S, INC.

r'""

~I

BY:_~k'
Forrest W. Ragsdale, I

11;...,......-....:::-..;;....

_

Title: Senior Vice President and General Counsel

INTERESTED

Exhibit A

PARTY

o
o

"

PERSONAL GUARANTY

In consideration

of, and as an inducement

SEAFOOD SHOPPES, LLC, ("Franchisee")
personally and unconditionally
that Franchisee

guarantees

shall punctually

Franchise Agreement.

Agreement

with SOUTHWEST

dated June 21, 2002, by Long John Silver's, Inc. ("LJS"), the undersigned
to LJS, its affiliates, successors, assigns, parent and its parent's

pay and perform

The undersigned

to, the execution of the Franchise

each and every undertaking,

further waives acceptance

notice of demand for payment of any indebtedness

agreement

hereby

other subsidiaries,

and covenant

set forth in the

and notice of acceptance of the foregoing undertakings;

or for performance

of any obligations

protest and

of obligations hereby guaranteed;

notice of default to any party with respect to the indebtedness or performance

hereby guaranteed;

any right he

or she may have to require that an action be brought against Franchisee or any other person as a condition of liability; and
any and all other notices and legal or equitable defenses to which he or she may be entitled.
and agrees that his or her direct and immediate liability under this Guaranty
render

any payment

punctually

or performance

required

under

Franchise

to do so; that such liability shall not be contingent

The undersigned

further consents

shall be joint and several; that he or she shall

Agreement

upon demand

or conditioned

if Franchisee

upon the pursuit

fails or refuses

of any remedies against

Franchisee or any other person; and that such liability shall not be diminished, relieved or otherwise affected by the extension
of time, credit or any other indulgence which LJS, its affiliates, successors, assigns, parent or its parent's

other subsidiaries,

may, from time to time, grant to Franchisee or to any other person, including, without limitation, the acceptance of any partial
payment or performance,
Guaranty.

This Guaranty

or the compromise or release of any claims, none of which shall in any way modify or amend this
shall continue and be irrevocable

extensions thereof, and Guarantor's

throughout

the term of the Franchise

Agreement

obligations hereunder shall not be diminished or affected by the termination

and any

or expiration

of the term of the Franchise Agreement.
IN WITNESS WHEREOF,

the undersigned

has executed this Agreement as of the same day and year as the above

nt-Wll~xecuted.

GUARANTOR

---

"- -;

GUARANTOR'S

,

Southwest SeafoGd Sl1eJ31'es,LlC
4321 N. Bear Claw Way

---Ii::.

GUARANTOR'S

Exhibit B

MAILING ADDRESS:

lucson, Arizona 85749

".j[

SOCIAL SECURITY NUMBER

SCHEDULE I

The Location is:

4100 North Oracle Road, Tucson, AZ 85705

The Territory

is the area comprised of a circle having a one and one-half (llli) mile radius with the above Location as

the center point of the circle.

In addition,
Restaurant,

if the Franchised

Restaurant

is or was originally

constructed

as a freestanding,

single-use

US

then for the first five (5) years of the initial term only, expiring June 30, 2006, of the Franchise Agreement

to which this Schedule I is attached, the Company will not own, operate or grant a franchise for (nor grant to others
the right to own, operate or grant a franchise for) a Co-branded
having a three (3) mile radius and having the Franchised

US Restaurant
Restaurant

within an area comprised of a circle

as the center of such circle ("Extended

Territory").

As used in this Schedule I, and solely Cor purposes of defining the Extended Territory,

Restaurant"

shall mean a location at which an LJS Restaurant

location as another

food service business.

is operated

The term "Co-branded

US

in conjunction

Restaurant"

"Co-branded

with and at the same

shall exclude the following

locations and facilities, and the Company shall have the right to own, operate or franchise LJS Restaurants
Extended Territory
additional

(but not within the Territory)

at such locations and facilities:

(1)

brand or concept operated within or in conjunction with the US Restaurant

or concept's

exterior signage is subordinate

to the US Restaurant

interior image is limited to counter trade dress and menuboard;
or gas station, unless an additional
US Restaurant

operate or franchise US Restaurants

LJS Restaurants

where the additional

signage and the additional

and (2) LJS Restaurants

within the

brand's

brand's

within a convenience store
with the

In addition, the Company shall have the right to own,

within the Extended Territory

described in Section 1.01(d) (I) of the Franchise Agreement.

with an

or concept's

established and reputable food service brand is operated in conjunction

from the convenience store or gas station.

LJS

(and the Territory)

at the locations and facilities

SITE PROPOSAL REVIEW POLICY
November 5,1999

SECTION 1:PRELIMINARY

1.01

STATEMENTS

General Purpose.
(a)

("System")

One of Long John
through

Silver's

the development

compete against other restaurant

Inc.ts ("US")

of new franchised

chains.

desires to be responsive to its existing franchisees'

(b)

The purpose

relating to LJS restaurant
(c)

restaurant

is to expand

outlets to enable US,

its restaurant

its franchisees

system

and the System to

While LJS, as the developer, owner and licensor of the trademarks

other elements of the System, has sole decision-making

franchised or US-owned

prime objectives

authority

regarding the granting and denial of franchises, LJS

concerns about the possible impact of the development

on existing franchisees'

and

LJS restaurant

of a new

operations.

of this Policy is to provide an efficient and effective process for reconciling

disputes

development.

This Policy has been adopted effective as of November 5, 1999 ("Effective Date") in conjunction

the Long John Silver's Franchise

Advisory Board ("FAB"),

as the same was constituted

on the date hereof.

with
For a

period of five (5) years following the Effective Date, US will not materially modify this Policy without the approval of
the FAB, or any successor board of directors
franchisees ("Board").

or other governing body of the then-recognized

association

of LJS

Following the date that is five (5) years after the Effective Date, LJS may materially

modify

this Policy only upon consultation with the Board.

SECTION 2: NOTIFICATION

2.1

OF NEW FRANCHISE DEVELOPMENT

Notification.
(a)

restaurant

Within fifteen (15) days following LJS's determination
site or to develop a new company-owned

notice ("Notice")

to all LJS franchisees

LJS restaurant

site ("Proposed

whose existing LJS restaurant

affected by development of the Proposed Site ("Potentially
(b)

that it intends to approve a new franchised LJS

As used in this Policy. "Potentially

operations

Site"), LJS shall first provide
may be significantly

adversely

Impacted Franchisee[s)").

Impacted Franchisees"

who are entitled to receive an Application

Notice are:
(I)

US franchisees who have one or more existing units within ten (10) miles of the Proposed Site if

LJS determines that population within the area of a circle having a three (3)-mile radius and the Potentially Impacted
Franchisee's

existing LJS restaurant
(2)

as the center point ("Population

Density") is 10,000 or less; and

LJS franchisees who have one or more units within five (5) miles of the Proposed Site if LJS

determines that the Population Density is more than 10,000 and less than 20,000; and
(3)

LJS franchisees who have one or more units within three (3) miles of the Proposed Site if LJS

determines that the Population Density is 20,000 or more.

1

,l

(4)

Notwithstanding

Impacted Franchisees
monetary

obligation

franchise agreements

the foregoing

Sections 2.01(b)(I)

through

2.01 (b)(3), inclusive,

Potentially

shall not include any LJS franchisee who has received from LJS written notice of default of a
in excess of $5,000.00 or a material

non-monetary

obligation

under one or more of its LJS

and has not cured or in good faith disputed in writing in its entirety such default as of the date

of the Application Notice.
(c)

Proposed

rights-of-way
institutions,

Sites shall exclude LJS restaurants

at tbe following locations

of any limited access highways or toll roads, airports,
office or business

complexes or buildings,

military

campus, educational,
installations,

("Excluded
industrial

or at atbletic

Sites"):

on

or health care

arenas,

expositions,

convention centers, fairs, zoos, theme parks or similar facilities or events. Potentially Impacted Franchisees shall not
be entitled to object to the development of, and shall not receive any Application Notice for Excluded Sites.

SECTION 3: IMPACT STUDY

3.01

Initiation of Impact Study.
(a)

Each Potentially

Site will have a significant
restaurant(s)

Impacted Franchisee who reasonably

adverse impact (hereinafter

believes that the development

defined) upon the revenue generated

shall have the right to commission an impact study by an Approved Consultant

order to support the Potentially Impacted Franchisee's
(b)

(hereinafter

defined) in

position.

the amount of $5,000.00 payable to LJS, and the Potentially Impacted Franchisee's
firm from the list of approved

consultants

("Approved

Consultants")

Franchise Association Board from time to time. The Approved Consultants
franchisee

from its existing LJS

Each Potentially Impacted Franchisee shall have ten (10) days following the date of the Notice to notify

LJS of its intent to eommission an impact study. The Potentially Impacted Franchisee's

consulting

of the Proposed

and LJS shall consult with and advise the Board

Alternatively,

a Potentially Impacted Franchisee

Impacted Franchisee's

seleetion of a restaurant

to the

shall not be affiliates of LJS or any LJS

in developing

the list of Approved

provides LJS with reasonably satisfactory

notice.

industry

that LJS shall provide

may directly engage an Approved Consultant

study, so long as the Potentially Impacted Franchisee
along with the Potentially

notice shall include a check in

Consultants.

to conduct the impact
proof of engagement

The engagement shall require the Approved Consultant

deliver the results of the impact study within a reasonable

time concurrently

to LJS and the Potentially

to

Impacted

Franchisee.
(c)

A Potentially

as an "Objecting

3.02

Impacted Franchisee who initiates an impact study pursuant

to this Policy is referred to

Franchisee".

Cost of Impact Study.
(a)

If the results of the impact study conclude that development of the Proposed

adversely impact (hereinafter
LJS will reimburse

defined) the gross sales generated by the Objecting Franchisee's

(or refund, as applicable) the $5,000.00 paid by the Objecting Franchisee

cost of the impact study.

Site will significantly
LJS restaurant,

then

and LJS shall pay the

If the impact study concludes that development of the Proposed Site will not significantly

2

adversely impact the gross sales generated by the Objecting Franchisee's
study shall be paid directly by the Objecting Franchisee

LJS restaurant,

then the cost of the impact

or out of the $5,000.00 submitted

to LJS by the Objecting

Franchisee (with any excess funds to be returned promptly).

3.03

Significant Adverse Impact.
(a)

The development

Objecting Franchisee's

of a Proposed

LJS restaurant

Site will be deemed to have a significant

adverse impact upon an

if the impact study commissioned by the Objecting Franchisee

solely as a result of the opening of an LJS restaurant

concludes that,

at the Proposed Site and without giving effect to any margin of

error or like concept, the annual gross sales generated by the Objecting Franchisee's

LJS restaurant

will decrease by

ten percent (10%) or more over the period of one (1) year following the opening date of the new LJS restaurant

at the

Proposed Site.

3.04

LJS's and Objecting Franchisee's
(a)

Elections.

If the results of the impact study conclude that development

adversely impact the revenue generated by the Objecting Franchisee's
alternatives
Objecting

of the Proposed

LJS restaurant,

Site will significantly

then LJS must elect one of the

set forth in Section 3.04(a)(I) or (2) below, such election to be made in writing and delivered to the
Franchisee

within fifteen (15) days following the date that the Approved Consultant

delivers the impact

study to LJS.
(1)

LJS shall not develop or approve development of the Proposed Site; or

(2)

LJS shall offer to execute an agreement

that will obligate LJS to divert and allocate, for a

period of one (1) year following the opening date of the new LJS restaurant
one-half (112) of the Objecting

Franchisee's

at the Proposed Site, an amount equal to

royalties paid by the Objecting

Franchisee

during such one (1) year

period for the purpose of funding local (i.e., in the market area in which the Objecting Franchisee's
advertising

restaurant

lies)

and marketing programs approved by LJS.
(3)

LJS pursuant

The Objecting Franchisee shall have fifteen (15) days following its receipt of any offer made by

to Section 3.04(a)(2) above witbin which to accept or reject the offer.

The Objecting

Franchisee's

acceptance or rejection must be made in writing and its failure to timely deliver its acceptance or rejection shall be
deemed acceptance

of LJS's offer. If the Objecting Franchisee accepts the offer, then LJS may develop or approve

development of the Proposed Site and the Objecting Franchisee shall release LJS from any liability to the Objecting
Franchisee arising from LJS's development or approval of the development.

If the Objecting Franchisee

rejects the

offer, LJS sball not approve the Applicant's development of the Proposed Site.
(b)
adversely

If the results of the impact study conclude that development of the Proposed Site will not significantly

impact the revenue generated

by the Objecting

Franchisee's

LJS restaurant,

then LJS may develop or

approve development

of the Proposed Site. In the event that LJS approves the development of Proposed Site and an

Objecting Franchisee

continues to object, then the Objecting Franchisee must elect one of the following alternatives,

such election to be made in writing delivered to LJS within fifteen (15) days following the date that LJS notifies
Objecting Franchisee of the intended development of the Proposed Site:

3

(1)

The Objecting

Franchisee and US shall execute an agreement that will obligate US to divert

and allocate, for a period of six (6) months following the opening date of the new US restaurant
an amount equal to one-half (112) of the Objecting

Franchisee's

royalties paid by the Objecting

at the Proposed Site,
Franchisee

during

such six (6) month period for the purpose of funding local (i.e., in the market area in which the Objecting Franchisee's
restaurant

lies) advertising

and marketing

alternative,

then the Objecting

Applicant's

approved

Alternatively,

shall release US

by US.

If the Objecting

Franchisee

the Objecting

Franchisee

from any liability arising from US's

chooses this

development.
(2)

Franchisee

programs

sball have the right to pursue

approval

against

US

of the

such

remedies as are available under applicable law.
The Objecting Franchisee's

election shall be its sole and exclusive remedy for the potential or actual adverse

effect of the development of the Proposed Site.

4

OWNERSHIP

OF SOUTHWEST

SEAFOOD SHOPPES, LLC

An Arizona Limited Liability Company

John Willingham

73.3%

Mike & Amy Barbee

8.0%

Paul Chenoweth

1.5%

Carl Chavez

2.1%

Patrick H. Cahalan Trust

1.5%

Jack & Pauline Willingham

1.5%

Kerry Habiger

1.5%

Jim & Sharon Lowell

.6%

Dean & Sandra Hardwick

3.0%

Bruce Miller

1.5%

Mark Willingham

1.5%

Scott Prickett

1.5%

Dan Gutierrez

1.0%

Diane Preece

2.4%

SOUTHWEST SEAFOOD SHOPPES, LLC