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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FRANCHISE
THIS
FRANCHISE
AGREEMENT
JAN 2 0 21m
Delaware
corporation
,
("Company"),
AGREEMENT
is
dated
and it is entered
for
reference
into between
and SOUTHWEST
SEAFOOD
purposes
LONG JOHN
SHOPPES,
as
SILVER'S,
of
INC., a
LLC, an Arizona Limited
Liability Company ("Franchisee").
PRELIMINARY
A.
The Company
system ("System")
STATEMENTS:
is the developer of and sole and exclusive owner of a distinctive food service
under which food is sold to the public from restaurants
and other facilities operated under the
name "Long John Silver's" (flLJS Restaurants").
B.
The System so developed now includes, among other things, the following elements, all or some
of which may be deleted, changed,
procedures
for the preparation
recipes for food products,
uniforms,
improved
or further
and serving of food and beverage products;
consumers;
control and procedures
(4) plans and specifications
style, design, decor, furnishings,
operating
that is described
communications
confidential
designed to be advantageous
for distinctive premises, featuring
equipment
to LJS Restaurant
characteristic
operators
interior
and
and exterior
layout and interior and exterior signage; (5) a uniform method of
in the "Long John Silver's Confidential
Manual
of Operations"
and in other
to franchisees, including without limitation, in bulletins, video and audio tapes, computer disks,
being hereinafter
Silver's"),
(2) special ingredients,
and other paper and plastic items); (3) methods of achieving
on-line and via other electronic means (all such other communications
trademarks,
from time to time: (1)
a secret batter mix and distinctive service accessories (including, without limitation,
menus, cartons, packages, containers
quality and quantity
developed by the Company
collectively referred
to as the "Confidential
and any supplements
Manual");
or additions thereto
(6) distinctive
and characteristic
service marks (including, without limitation, "Long John Silver's Seafood Shops" and "Long John
signs, designs and emblems as the Company
writing as prescribed
designates in the Confidential
for use with the System ("Proprietary
Marks");
Manual or otherwise in
(7) a public image that each restaurant
other facility is a unit in an established franchise system and that all are operated
with uniform standards
or
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
C.
pursuant
Franchisee
wishes to obtain
and operation of an LJS Restaurant.
a franchise
from the Company
to operate
an LJS Restaurant
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.
D.
necessary
Franchisee
to maintain
the goodwill
Rev. 3/04
recognizes
the Company's
and enhance
the public
that
the terms
and conditions
high and uniform standards
image of the Proprietary
1
in this Agreement
are reasonably
of quality and service designed to protect
Marks
and the System,
and Franchisee
()
J1
recognizes the necessity of opening and operating the franchised LJS Restaurant in faithful compliance with
G
the Company's standards and specifications.
SECTION 1: GRANT OF FRANCHISE
1.01
Grant of Franchise.
(a)
This francbise is being granted based on the application, financial statements and other
documents submitted by Franchisee to the Company or its affiliates (hereinafter defined) prior to the Company's
execution of this Agreement. Franchisee represents and warrants that those materials: (1) are accurate 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 continuing good faith performance
under tbis Agreement, the Company grants to Franchisee: (1) the right to build and operate an LJS Restaurant
("Franchised Restaurant") and to use the System at the location described on Schedule I ("Location"); (2) the
right to use such Proprietary Marks of the Company as are now or may hereafter 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 tbe public that the
Franchised Restaurant is operated as a part of, or a unit in, the LJS Restaurant chain.
(c)
The Company shall not own, operate or grant (nor grant others the right to own, operate or
grant) a franchise for an LJS Restaurant within the area surrounding the Location designated as the "Territory"
on Schedule I attached hereto. Nothwithstanding the foregoing, the Company shall have the right to own,
operate or franchise within the Territory, LJS Restaurants at the locations described in Section l.Ol(d) of this
Agreement.
(d)
The Company may own or operate, or grant franchises or licenses for others to operate LJS
Restaurants:
(I)
within the Territory at the following locations: on rights-of-way of any limited access
highways or toll roads, airports, campus, educational, industrial or health care institutions, office or business
complexes or buildings (excluding exterior in-line units in shopping or strip malls), military installations, or at
athletic arenas, expositions, convention centers, fairs, zoos, theme parks, interior mall locations or similar
facilities or events; and
(2)
anywhere outside the Territory (regardless whether such location is within the trading
area of, or otherwise proximate to the Franchised Restaurant) on such terms and conditions as the Company
deems appropriate.
The Site Proposal Review referenced and further defined in Section l.OI(f) below shall
govern disputes arising from the Company's development of new LJS Restaurants outside the Territory.
(e)
The Company reserves the right to sell within the Territory, directly or through third parties and
through such channels of distribution as the Company may determine (including mail order and internet sales),
products that are the same as, or similar to, those sold in LJS Restaurants, using brand names the same as, or
similar to, the Proprietary Marks designated for use with the System, provided:
(I)
The items sold by the Company are of comparable quality to any like items sold in LJS
Restaurants, are either packaged or bottled and are not sold for preparation or consumption upon any particular
Rev. 3/04
2
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(]
premises or outlet from which the items may be sold, and are not sold by the Company through restaurant
outlets; and
(2)
In the event that any premises or outlet from which the items are sold is located within
the Territory, 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 by LJS Advertising for advertising and
marketing programs pursuant to Section 7.01 of this Agreement. 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.
(I)
The Company's then current Site Proposal Review Policy ("Guidelines", a copy of the Guidelines
in effect as of the date of this Agreement being annexed hereto) shall govern any dispute that arises out of
Company's decision to develop or authorize the development of a new LJS Restaurant outside the Territory.
1.02
Other Restaurants.
(a)
Franchisee understands that the Company and its affiliates (hereinafter defined) may operate and
franchise restaurants and food establishments other than LJS Restaurants. Franchisee agrees that the Company,
its parent corporation and affiliates may do so at any location, including locations within the Territory, provided
that: (a) such restaurants and food establishments are not operated under the names "Long John Silver'S",
"Long John Silver's Seafood Shops" or similar trade names; (b) if such restaurants are located within the
Territory, the gross sales of seafood of the restaurant or food establishment do not constitute or are not likely to
constitute twenty percent (20%) or more of all sales of the restaurant or food establishment; or (c) if such
restaurants are located within the Territory the restaurant or food establishment does not sell any battered
seafood product in a quick service or "fast food" format. Franchisee further acknowledges 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. Neither this Agreement nor the franchise issued hereunder obligates the Company in any way
to sell or issue any other franchise.
(b)
As used in this Agreement with reference to Company or the Franchisee, "afflltate'' 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; Use of Premises.
(a)
Franchisee accepts the franchise and agrees to diligently develop and operate the Franchised
Restaurant and to diligently promote the interests of the System for the term of this Agreement and any
renewal thereof. Franchisee agrees to construct, maintain and operate the Franchised Restaurant only at the
Location, and in accordance with (1) the Company's plans and specifications, (2) the System, (3) the
Confidential Manual, (4) other manuals and procedures as may be included in the System and revised from
time to time, and (5) the terms of this Agreement.
(b)
Franchisee agrees to use the Franchised Restaurant and the premises upon which it is located
("Franchised Restaurant Premises") solely for the operation of the Franchised Restaurant and purposes
designated in this Agreement and for no other purpose.
Rev. 3/04
3
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1.04
Company Services.
The Company agrees to provide Franchisee with the following materials and services for the
Franchised Restaurant:
(a)
upon Franchisee's request, written guidelines for site selection;
(b)
standard plans, drawings and specifications for the Franchised Restaurant and its related
facilities;
(c)
standard layouts and specifications for fixtures, furnishings, interior design and decor, signs and
equipment for the System;
(d)
such pre-opening assistance as the Company may, in its discretion, deem necessary for Franchisee
to meet System standards;
(e)
a pre-opening management training program and such other training at such locations and for
such periods as may be designated by the Company from time to time in the Confidential Manual, subject to
Section 5.03 of this Agreement;
(1)
on-site opening assistance for the Franchised Restaurant, if determined by the Company to be
necessary;
(g)
one (1) copy of the Confidential Manual (a registered copy of which is concurrently with the
execution hereof delivered and loaned to Franchisee for the term hereof), and such additions and modifications
thereto as the Company may issue from time to time, in its discretion. The Company will require payment of its
then current replacement fee for replacing copies of the Confidential Manual.
(h)
a sample of the Company's standardized chart of accounts, statement of earnings and balance
sheet, to be used by Franchisee for reporting to the Company;
(i)
the Company's regular and continuing supervisory services and periodic inspections and
evaluations of Franchisee's operation;
0)
the Long John Silver's marketing and advertising program(s);
(k)
reasonable efforts, upon Franchisee's written request, to disseminate to suppliers designated by
Franchisee, the System standards and specifications for nonsecret food products and equipment items not subject
to Company patent rights.
NEITHER
THE COMPANY'S
ACCEPTANCE
OF THE LOCATION
NOR ANY INFORMATION
COMMUNICATED TO FRANCHISEE REGARDING THE COMPANY'S SITE SELECTION CRITERIA
FOR LJS RESTAURANTS SHALL CONSTITUTE A WARRANTY OR REPRESENTATION OF ANY
KIND, EXPRESS OR IMPLIED, AS TO THE SUITABILITY OF THE LOCATION FOR AN LJS
RESTAURANT OR FOR ANY OTHER PURPOSE.
THE COMPANY'S ACCEPTANCE
OF THE
PROPOSED SITE MERELY SIGNIFIES THAT IT IS WILLING TO GRANT A FRANCHISE FOR AN
LJS RESTAURANT FOR SUCH LOCATION.
THE COMPANY IS NOT RESPONSIBLE FOR THE
FAILURE OF THE LOCATION TO MEET FRANCHISEE'S EXPECTATIONS AS TO POTENTIAL
REVENUES. FRANCHISEE'S DECISION TO OPERATE AN LJS RESTAURANT AT THE LOCATION
IS BASED SOLELY ON FRANCHISEE'S INDEPENDENT INVESTIGATION OF THE SUITABILITY OF
THE LOCATION FOR AN LJS RESTAURANT.
Rev. 3/04
4
SECTION 2: TERM
(Delete 2.01 or 2.02)
2.01
Ownership of Franchised Restaurant.
(a)
Franellisee warrants aad reflresents to tile Comflany tllat Franehisee OWRS
tile FraRehised
Restaurant Premises. Franellisee agnes tllat it shall natify tile CaffiflaBYia writing ar any ehaage regarding its
ownershifl er the FFBaehisedRes.auraal Premises.
(b)
Unless pre>,tieuslyterminated pursuant to the terms af this Agreement, the term af tile francllise
granted herein shall be twenty (1D) years eommeBeing an the date tllat the Franehised Restaurant opens far
COffiflllny'sreeords ("Opening Date").
I!'J IT IAl
2.02
HEft
r-#..lI/
Lease of Franchised Restaurant.
(a)
Franchisee warrants and represents to the Company that Franchisee leases or subleases the
Franchised Restaurant Premises pursuant to a lease or sublease agreement, of which Franchisee has provided
the Company with a true and accurate copy (together with any modifications or renewals thereof, "Lease").
Franchisee shall promptly provide the Company with copies of any material modifications of the Lease.
Franchisee shall cause the Lease to contain a provision that allows Franchisee and the Company to fulfill the
requirements of Section 11.02(c) and 11.03(c).
(b)
Unless flFe~iouslyterminated pursuant to the terms af tllis Agreements The term of the franchise
granted herein shall be twenty (10) fifteen (15) years commencing on April 30, 2002 and expiring on April 30,
2017 the date that the Franchised Restaurant apens far business as reparteE! by Franchisee in accorE!IlBee,j\tith
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the terms of this Agreement and as reflected en the Camplln)"s rccerE!s(,'OpeniBg Date"). Provided, however,
that Franchisee agrees that it shall not open the Franchised Restaurant for business prior to the Lease
commencement date and the term of this Agreement shall not extend beyond the expiration of Franchisee's
::se.
Renewal.
(a)
INITIAlHER'!¢'[
Franchisee may, at its option, renew this franchise for two (2) additional term(s) of five (5)
years each; however, Franchisee's exercise of its renewal option shall not extend the term of this franchise
beyond the expiration of Franchisee's Lease. In addition, in order to exercise its renewal option, Franchisee
must satisfy all of the following conditions:
(1) 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 between Franchisee or any of its
affiliates and the Company or any of the Company's affiliates, and Franchisee and all of its affiliates shall
have substantially complied with the terms and conditions of all such agreements during the initial and any
prior renewal term(s) of this Agreement.
(3)
Franchisee and all of its affiliates shall have satisfied all
monetary obligations owed by them to the Company, its subsidiaries and affiliates prior to renewal, and have
timely met all such obligations throughout the initial and all prior renewal terms of this Agreement.
(4)
Franchisee shall provide such financial information regarding Franchisee as the Company reasonably may
Rev. 3/04
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request.
a
(5) Franchisee must execute the Company's then current standard
form renewal franchise~:1
'-'
agreement (and cause the execution of personal guarantees and other attachments as required by such
renewal franchise agreement), which may contain terms and conditions substantially different from those set
forth herein, including, without limitation, increased royalty fees and advertising expenditures (provided that
the Company shall then be requiring such increased royalty fees and/or advertising expenditures,
provided
that such renewal franchise agreement shall not provide for royalty fees or advertising contributions in excess
of those the Company then requires of new franchisees for LJS Restaurants similar to the Franchised
Restaurant.
(6) Franchisee and each of its Owners (hereinafter defined) shall execute a general release, in a
form satisfactory to the Company, of any and all claims Franchisee may have as of the date of execution of
the renewal franchise agreement, or arising from an event or events which occurred prior to such date,
against the Company and its officers, directors, shareholders
and employees, in their corporate
and
individual capacities, including, without limitation, claims arising under federal, state and local laws, rules
and ordinances, unless such claims are pending and not finally resolved as of the date Franchisee's notice of
renewal is due. (7) Franchisee shall present evidence satisfactory to the Company that Franchisee has the
right to remain in possession of the Franchised Restaurant Premises for the duration of the renewal term;
and (8) Franchisee shall complete, or provide for, such renovation and modernization of the Franchised
Restaurant and Franchised Restaurant Premises as the Company may reasonably require, including, without
limitation, such remodeling (including structural modifications), redecoration, repair and replacement of
fixtures, furniture, signs and equipment, as may be necessary both to reflect the then current public image
required by the Company of new franchisees and to ensure the presentation of the Proprietary
consistent with such image.
(b)
Marks
The Company may, at its option and in its sole discretion, conditionally accept Franchisee's
exercise of its renewal option pending Franchisee's satisfaction of the conditions set forth in Section 2.03(a). In
such event, Franchisee agrees to execute the Company's then current standard form renewal franchise agreement
pursuant to Section 2.03(a)(5), which agreement may provide for a term of a duration substantially 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 shall be entitled to the issuance of a new franchise
agreement for the Franchised Restaurant, subject to the following conditions: (1) Franchisee shall have made
written application to the Company for the new franchise agreement no less than six (6) months, nor more than
nine (9) months, prior to the expiration of the then current term; (2) Franchisee shall have tendered to the
Company, concurrently with the delivery of the application for the new franchise agreement, and in lieu of the
initial fee prescribed by the franchise agreement, an administrative fee equal to 10% of the initial fee; and (3)
Franchisee shall have satisfied all of the conditions for renewal set forth in Sections 2.03(a)(2) through 2.03(a)(8),
inclusive. The new franchise agreement shall provide for an initial term and option term'S, if any, equal to the
terms then being offered by the Company to new franchisees for LJS Restaurants similar to the Franchised
Restaurant and it shall not provide for royalty fees or advertising contributions in excess of those the Company
then requires of new franchisees for LJS Restaurants similar to the Franchised Restaurant.
Rev. 3/04
6
SECTION 3: PREMISES AND EOUIPMENT
3.01
Construction of Restaurant.
(a)
The Company shall furnish to Franchisee one copy of a preliminary site layout, a set of
generic plans and specifications for a standard Long John Silver's restaurant of the type specified in this
subsection, and a list of and layout for standardized furnishings and equipment for the specified type of
restaurant.
(b)
Franchisee at its expense (1) shall have the generic plans and specifications adapted as necessary
to construct and operate the Long John Silver's restaurant on the Franchised Restaurant Premises, and (2) shall
have such adapted plans including the final site layout stamped by an architect licensed by the state where the
Franchised Restaurant will be located. Any such adaptations and all plans, specifications and layouts other than
those furnished by the Company must be approved in writing by the Company prior to Franchisee's obtaining
permits, construction bids or commencing construction.
The Company's approval shall signify only its
acceptance of the appearance of the restaurant building, and shall not signify that the approved plans or
specifications comply with applicable codes. Such approval shall not result in any liability of the Company to
Franchisee. Franchisee agrees to indemnify the Company against claims of liability relating to such approval as
provided in Section 9.01 of this Agreement.
(c)
Layout and plans and specifications, prepared or approved by the Company, shall not thereafter
be changed or modified without the Company's prior written consent. Before commencing any construction of
the Franchised Restaurant, Franchisee shall furnish to the Company a letter certifying that all required permits
and certifications required for the lawful construction and operation of the Franchised Restaurant have been
obtained and all other requirements for its lawful construction and operation have been met, including, without
limitation, zoning, access, signage, fire, health and safety requirements.
(d)
Construction of the building and improvements shall begin as soon as possible after the Company
furnishes or approves the site layout, plans and specifications (the "Approval Date").
The building and
improvements shall be constructed in strict compliance with the plans and specifications and shall be completed
within eight (8) months after the Approval Date. The Company, in its discretion, may inspect the construction at
all reasonable times. At least thirty (30) days in advance of the Franchised Restaurant's projected Opening Date,
Franchisee shall, by written notice, request the Company to perform its final inspection. Franchisee shall open the
Franchised Restaurant for business as soon after completion of the building and installation of furnishings and
equipment as is reasonably possible, but in no event before the Company's final inspection is performed and
written approval is given.
(e)
If the Franchised Restaurant is damaged or rendered totally or partially untenantable by fire or
other casualty, Franchisee shall repair or restore the Franchised Restaurant 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
carried by Franchisee covering the Franchised Restaurant Premises shall be applied to the cost of repairing or
restoring the Franchised Restaurant, and Franchisee shall pay the balance, if any, of such costs. If, in the
Company's reasonable judgment, the damage or destruction is of such an extent that it is feasible for Franchisee,
without incurring substantial expense additional to the insurance proceeds, to repair or reconstruct the LJS
Restaurant in accordance with the then standard Long John Silver's layout and decor specifications, the
Company may require Franchisee to repair or reconstruct the LJS Restaurant in accordance with those
Rev. 3/04
7
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specifications.
Notwithstanding
the foregoing, if the Franchised
Restaurant
is rendered
total I)' or partially
X
'"'
untenantable
by fire or other casualty within two (2) years prior to the date of expiration of the initial term of this
Agreement or any renewal term, Franchisee
may terminate this Agreement, 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
(a)
and Installation
Franchisee
of Equiement
shall purchase and install and use in and about tile Franchised
such items and only such items of equipment
equipment,
and FurniShing.
fixtures, furnishings,
(ineluding, without limitation,
Restaurant
Premises
food and beverage preparation
interior and exterior slgnage, make-up air and exhaust handling equipmt!nt,
electronic cash registers, software and computers) and other personal property (collectively> "Equipment")
as are
designated by the Company from time to time as Approved Brands on the Company's required Equipment
Furnishings
and
List in the Confidential Manual. or which otherwise have been approved by the Company in writing
and which strictly conform to the appearance,
uniform standards
System as established from time to time. The Company's
or the
and specifications
specifications and standards
Company and the
for such Equipment
shall
be provided to Franchisee upon written request. If Franchisee desires to purcbase or install any item not so listed
or approved, Franchisee or the supplier of such item shall submit to the Company a written request Corapproval
of the item,
The Company shaJi 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),
either to the Company or to an independent
certified laboratory
acting on the request for approval.
Il(}t
Franchisee
or by the item's supplier.
revoke its approval
jf
option,
designafed by the Company for testing prior to
to exceed the cost of the testing shall be paid to the Company by
The Company shall nilt be Hable for any damage to such items resulting
The Company reserves the right to retest any item previously approved by it, and to
from the testing process.
notification
A charge
at the Company's
the item fails to continue to meet the Company's
by the Company, through
revision of tbe Confidential
standards
and specifications.
Upon
Manual or otherwise, that approval of any
item bas been revoked, Franchisee sban not thereafter purchase or, if tbe Company so directs. use such item. The
Company may at any and all times inspect all Equipment
and its installation to assure Franchisee's
compliance
with the Company's standards and spedfications.
(b)
Franchisee
shall not install, sell or use on the Franchised
machines, telephone booths, entertainment
Restaurant
Premises any vending
devices, products or services not Included in the System without the
Company's prior written consent.
33)3
Maintenance of Premises and Equipment.
(a)
Franchisee shall maintain at all times during the term of this Agreement and any renewals hereof,
at Franchisee's
expense, the Franchised
higb standards
and public image of the Company and the System, and shall make no additions ur alterations to
the Franchised Restaurant
(b)
repair
Franchisee
and condition,
Restaurant
thereon in conformity with the
Premises without the Company's prior written consent.
shall keep the Francbised
including,
without
limitation,
replacement
of obsolete signs and Equipment.
then current
standards
Rev. 3/04
Premises and all Equipment
Restaurant
such pertedlc
as the Company
set out in the Confidential
Premises in the highest degree of sanitation,
repainting,
may reasonably
Manual or otherwise.
8
repairs
to Equipment
direct in accordance
and
with its
D
1'1
(c)
Franchisee
shall not attach or exhibit any signs, displays or posters on or in the exterior or
interior of the Franchised
Restaurant
or on the Franchised
Restaurant
Premises, other than signs, posters or
displays then currently supplied, required or authorized in writing by the Company, nor permit others to do so.
(d)
addition
If Franchisee
fails to comply with this Section 3.03 in the Company's
to all other rights the Company
Franchisee
must take to correct
has, the Company
such deficiency.
may notify Franchisee
If Franchisee
judgment,
then in
and specify the action
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
sanitation
addition
to all other rights in this Agreement),
Premises
maintenance,
and effect such maintenance,
and repair, the Company
but not the obligation,
repairs
or sanitation
will have the right (in
to enter the Franchised
on Franchisee's
behalf
Restaurant
and at Franchisee's
expense.
3.04
Renovation
of Equipment
In addition
to performing
Company's
request,
Premises
Marks
and Premises.
maintenance
structural
improvements.
remodeling,
The Company
SECTION
then current
replacement
public image, including,
of Equipment,
agrees that it will not require
a capital cost on a per restaurant
4.01
Sections 3.03(a) and (b), Franchisee
redecoration
4: SUPPLIES,
FOOD PRODUCTS,
without
RECIPE
Restaurant
of the Proprietary
limitation,
extensive
and modifications
any image enhancement
basis in excess of that being required
shall, at the
the Franchised
design, trade dress, color schemes and presentation
with the Company's
changes,
under
but no more often than once every five (5) years, refurbish
to conform to the building
consistent
required
to existing
refurbishment
of Company-owned
that has
LJS Restaurants.
ITEMS AND UNIFORMS
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 Manual; (2) as meet the Company's
of quality and portions and appear on the Company's
List from time to time in the Confidential
and food handling and preparation
Approved Food and Beverage Brands
Manual; and (3) as have been prepared
methods and procedures
designated
in accordance with the recipes
from time to time in the Confidential
Manual.
(b)
Franchisee
shall maintain
aU such products
in sufficient supply at all times.
(c)
Franchisee 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 shall permit the Company or its agents, at any and all reasonable times, to remove from the
Franchised
reasonably
Restaurant
Premises
of any inventory
items, without
necessary for testing by the Company or an independent,
the samples meet the Company's
Rev. 3/04
samples
then current standards
certified laboratory,
and specifications.
9
payment
therefor,
in amounts
to determine whether
0
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4.03
{]
U
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")
that conform to the specifications and standards
(including standards for handling and distribution of products) of the Company and the System in effect from
time to time and which are included on the Company's then eurrent Approved Food and Beverage Brands and
Approved Paper Brands Lists appearing in the Confidential Manual.
Franchisee may purchase such approved
Products from any source. Franchisee must request the Company's 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, certified testing laboratory for testing to determine whether approval shall be granted.
The Company agrees that it will not unreasonably withhold its approval for any Product upon receiving such a
request so long as such Product meets the Company's then current specifications and standards.
Franchisee shall
pay upon invoice to Company a charge not to exceed the cost of such testing. The Company reserves the right to
retest any Product previously approved by it and to revoke its approval of any Product that fails to continue to
meet the Company's standards
and specifications.
Upon notification by the Company that any Product being
used is unapproved or otherwise does not satisfy the specifications and standards of the Company and System,
Franchisee
shall not thereafter
purchase
and, if the Company
so directs, immediately
cease to use the
unacceptable Product.
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
Purchasing Cooperative Membership.
So long as this Agreement is in effect, Franchisee
John Silver's National Purchasing Cooperative,
its Certificate
of Incorporation
shall become and remain a member of the Long
Inc. or its successors (the "Purchasing
and Bylaws as in effect from time to time, including without limitation the
provisions of the Bylaws concerning purchasing commitments.
a member
of the Purchasing
Co-op"), and abide by
Co-op shall terminate
Franchisee's
upon dissolution
obligation to become and remain
of the Purchasing
Co-op, or if an
agreement is reached between the Company and the Franchise Association (defined in Section 14.01) to delete
from this Agreement the requirement
that Franchisee
become and remain
a member
of the Purchasing
Co-op.
4.06
Fountain Beverages.
Notwithstanding
any provision in Section 4 or this Agreement to the contrary, Franchisee agrees that it
shall sell in the Franchised
Restaurant
The Coca Cola Company's
fountain beverages (hereinafter
defined),
including Coca Cola Classic, diet Coke and Sprite, except to the extent that: (1) the foregoing agreement is
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prohibited by applicable law; or (2) Franchisee is a party to or bound by any existing agreement that prohibits ~]
Franchisee from selling The Coca Cola Company's fountain beverages. The phrase "fountain beverages" shall
mean beverages that are dispensed from post-mix, pre-mix or frozen beverage dispensers, bubblers or similar
equipment.
SECTION 5: OPERATING STANDARDS, PROCEDURES, TRAINING AND SERVICING
5.01
Operational Standards.
(a)
Franchisee shall not be permitted to open the Franchised Restaurant for business unless at the
time of such opening, all of the following conditions have been met:
(1)
Franchisee and its owners and affiliates are not in default under any agreement
between Franchisee or any of its owners and affiliates and the Company or any of the Company's affiliates and,
during the six (6) month period immediately preceding the proposed Opening Date, Franchisee has not continued
in default beyond any applicable cure period under any agreement between Franchisee or any of its affiliates and
the Company or any of its affiliates.
(2)
Franchisee is current on all monetary and nonmonetary obligations due the Company
(3)
The Company has determined, in its reasonable discretion, that Franchisee is operating
and its affiliates.
each of its Franchised Restaurants, and is capable of operating the proposed Franchised Restaurant, in
accordance with the terms of all franchise agreements between Franchisee and the Company, and in accordance
with the Long John Silver's System (as may be set forth in the Confidential Manual or otherwise from time to
time by the Company).
(4)
Franchisee has provided such financial information regarding Franchisee as the
Company reasonably may request.
(5)
Franchisee's architect has certified to the Company that the Franchised Restaurant
was constructed strictly in accordance with the final plans and specifications approved by the Company, and that
the equipment installed at the Franchised Restaurant complies with the equipment specifications in effect as of
the date the Company approved the site for the Franchised Restaurant.
(b)
Franchisee shall operate the Franchised Restaurant in strict accordance with the Confidential
Manual which, among other things, sets forth the standard method of operation for an LJS Restaurant, the
business format, recipes, menus and instructions for food preparation and the control of quality and portions.
Franchisee shall keep the Confidential Manual and all of its contents in confidence except to the extent disclosure
is necessary to operate the Franchised Restaurant. Franchisee understands and agrees the Company may, from
time to time, revise the contents of the Confidential Manual and such other manuals, standards, instructions,
formulas, recipes and specifications, if any, as it may develop for use with the System, and Franchisee
shall
comply with each changed requirement within such reasonable time as the Company may require.
(c)
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.
(d)
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
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the event of any bona fide dispute as to liability for taxes assessed, Franchisee may contest the validity or the
0
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, or attachment by a
creditor, to occur against the Franchised Restaurant Premises, or any improvements thereon.
(e)
Franchisee shall comply with aU 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, building and other construction and occupancy permits,
licenses to do business and fictitious name registrations, sales tax permits, health and sanitation permits and
ratings and fire code clearances. Copies of all inspection reports, warnings, certificates and ratings issued by any
governmental entity during the term of this Agreement in connection with the conduct of the Franchised
Restaurant which cite or indicate Franchisee's failure to meet or maintain the highest governmental standards or
less than full compliance by Franchisee with any applicable law, rule or regulation shall be forwarded to the
Company 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.
(I)
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 Manual.
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 Manual or otherwise by the Company in writing.
5.03
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) as deemed necessary by the Company for training
Franchisee and such of its executive, managerial and supervisory employees as the Company deems necessary.
The Company shall determine (1) the number of Franchisee's employees to be Company-trained, (2) the training
period necessary to adequately train the employees, and (3) whether and when the employees have satisfactorily
completed training.
In so doing, the Company shall consider the background, experience and training
performance of the trainee.
Unless otherwise specified in writing by the Company, Franchisee's opening
manager, prior to opening the Franchised Restaurant, and all successor managers, prior to assuming the position
of manager in the Franchised Restaurant, shall successfully complete the minimum period then currently
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. Franchisee shall
purchase and use such training materials, equipment and supplies to properly conduct such training as may be
specified by the Company from time to time in the Confidential Manual.
(c)
Franchisee and such executive, managerial, supervisory and other employees as the Company
from time to time may require, shall attend and successfully complete subsequent training, refresher, and
retraining programs conducted by the Company.
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12
(d)
Upon failure for any reason of Franchisee
training, retraining
or refresher
program
required
or any of its employees to complete successfully
by the Company, Franchisee
who shall attend and successfully complete the program,
c
C1
any 0
shall designate another trainee
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
salaries or wages of Franchisee's
supplies and materials
and
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
costs incurred
for
such supplies, materials or meeting room facilities and not to generate a profit [or the Company.
(t)
The Company at its expense will furnish a representative
Franchised
Restaurant
to assist in the opening activities of the
for a period not to exceed one (1) week, consisting of seven (7) eight (8}-hour days. Upon
request by Franchisee, or if the Company deems additional assistance necessary, the representative
for a reasonable
reasonable
period determined
expenses (induding
management
by the Company,
salary) in providing the representative
staff shall be at work in the Franchised
Company's
representative.
and Franchisee
Notwithstanding
Restaurant
notwithstanding
Restaurant
period.
Restaurant
for its
Franchisee's
during the hours assistance is provided by the
at its option, may decline to provide
fails to give written notice to the Company
Restaurant
is not the first US Restaurant
its Owners or affiliates, then the Company's
activities of the Franchised
the Company
not less than thirty (30) days in advance of the Opening Date.
the foregoing, if the Franchised
opened by Franchisee,
for the additional
the foregoing, the Company,
the assistance set forth in this Section 5.03(t) if Franchisee
opening of the Franchised
shall reimburse
shall remain
training
of the
Further,
constructed
and assistance
and
in the opening
shall be as deemed necessary by the Company upon, if deemed advisable
by the Company, consultation with Franchisee.
5.04
Continuing
(a)
Services.
The Company shall furnish to Franchisee,
from time to time, such merchandising
and operating
aids and services, and printed material in connection therewith, as are furnished generally to other franchisees of
the Company.
(b)
The Company from time to time, in its discretion, shall send its representatives
Restaurant
to consult with Franchisee
Franchised
Restaurant,
determine
or its management
and shall inspect the Franchised
the efficiency and quality of the operation
representative
Restaurant
relative
to the Franchised
to the operation
of the
Premises with or without prior notice to
and the faithfulness of Franchisee's
compliance
with the
System.
(c)
furnish
On reasonable written request by Franchisee, as determined
services regarding
specific problems
encountered
by Franchisee
by the Company, the Company shall
which are beyond the scope of the
services provided by the Company under Section 5.04(b). Franchisee sball reimburse
the Company promptly for
its actual time expended and expenses incurred in aiding Franchisee with such problems.
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13
SECTION
6.01
6: FEES AND ADVERTISING
EXPENDITURES
Initial and Royalty Fee.
(a)
Franchisee shall pay to the Company, upon the execution of this Agreement,
DODreeHFriRg, nonrefuRdable
fraDchise fee of Twenty
ThoHsand
Dollars
(SZCJ,OOO).
a renewal
QD
iRitial
fee of Two
Thousand Dollars ($2,000).
(b)
Franchisee shall pay to the Company as a royalty fee, a sum equal to five flerceRt (5%) four
percent (4%) of Franchisee's Gross Receipts (as defined below) from the operation of the Franchised Restaurant
until April 30, 2007. Upon and following May 1, 2007, Franchisee shall pay to the Company royalty fees
calculated at the then-current standard rate then being offered by the Company pursuant to its then-current
Uniform Franchise Offering Circular for restaurants similar to the Franchised Restaurant. Franchisee shall pay
the royalty fee monthly by the twentieth (20th) 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 eac
payment.
6.02
Advertising Contributions.
(a)
Franchisee shall pay to the Company or its designee for advertising and marketing progr ms as
described in Sections 7.01(a) and 7.01(b), a sum equal to five percent (5%) of Franchisee's Gross Receipts from
the operation of the Franchised Restaurant. Payment shall be made on or before the twentieth (20th) 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.
(b)
Franchisee shall pay to the Company or its designee, upon execution of this Agreement, an
additional sum equal to either (at Franchisee's election) Three Thousand Dollars ($3,000) or Five Thousand
Dollars ($5,000), for pre-opening and opening advertising arranged for and placed by the Company or its
designee. The Franchisee must give written notice to the Company of the opening of tbe Franchised Restaurant
not less than thirty (30) days in advance of the Opening Date to allow the Company to arrange for pre-opening
and opening advertising. The pre-opening/opening advertising fee is non-refundable. So long as the Company
receives the pre-opening and opening advertising payment from Franchisee, the Company shall, during the first
year of operation of the Franchised Restaurant, divert from the advertising contributions received from
Franchisee under Section 6.02(a) of this Agreement a matching amount (either $3,000 or $5,(00) to be used for a
grand opening advertising program for the Franchised Restaurant to be approved and administered by the
Company.
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 Premises or derived from the business operated on the Premises, excluding only
(1)
receipts from approved pay telephones, if any, and (2) all sales, use, excise and similar taxes separately billed and
collected by Franchisee for, and remitted to, governmental authorities and agencies.
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6.04
G
0
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 equ~1to 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, to require Franchisee to establish
a direct debit arrangement as described in this Section 6.06 upon the occurrence of any of the fellewing events:
(1) In the event that Franchisee has been delinquent 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 bank(s) for all payments to be made to the Company or
any of its affiliates. Such direct debit arrangement shall be entered into between Franchisee and its bank(s) and
shall provide for the eJectronic transfer of funds from Franchisee's bank(s) to the Company's accounts within
twenty-four (24) hours of receipt of written instructions from the Company, whether transmitted by facsimile,
courier or regular mail and such instructions may be for multiple future transfers. 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 and Approval of Advertising.
(a)
Recognizing the value of advertising, and the importance of the standardization of advertising to
the furtherance of the goodwill and public image of the System, Franchisee agrees that the Company or its
designee shall conduct, determine, maintain and administer all national, regional, local and other advertising and
marketing as may be instituted from time to time, and shall direct all such advertising and marketing with sole
discretion over the concepts, materials, media, nature, type, scope, frequency, place, form, copy, layout and
context used therein. The Company agrees to periodically consult with and advise the Franchise Association
Board (hereafter defined) in planning the Company's advertising and marketing programs and budget.
(b)
The Company shall make advertising expenditures for each of its Company-owned LJS
Restaurants in the United States equivalent to those it requires from comparable franchised LJS Restaurants in
the United States. The Company may spend in any fiscal year an amount greater or less than the aggregate
contributions of all LJS Restaurants in advertising expenditures in that year. Additional advertising funds may
be advanced by the Company or obtained from other lenders to cover deficits or to establish surpluses to be
invested for future use. Franchisee agrees that its advertising contributions may be used to meet any and all costs
Rev. 3/04
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8
incident to the advertising and marketing programs, including without limitation: (1) consumer public relations, !.l
""'
marketing research, development of advertising materials, media placement and all forms of sales promotions;
(2) taxes upon income generated by advertising contributions; and (3) such reasonable administrative costs and
overhead, if any, as may be incurred by the Company or its affiliates in conducting market research, preparing
advertising and marketing materials, or in other activities reasonably related to the administration or direction of
LJS advertising funds. The Company agrees that all advertising contributions and any income generated as a
result of such contributions (including commissions, rebates or discounts for media or advertising purchases)
shall be used to promote the sales of LJS Restaurants, including the cost of developing and producing such
advertising, and not to generate net income or profit for the Company or its affiliates nor to defray unallocated
general operating expenses that are not reasonably related to the administration of the Company's advertising
and marketing programs. Franchisee understands and acknowledges that advertising expenditures are intended
to maximize general public recognition and acceptance of all LJS Restaurants, and the Company makes no
representation or warranty that any particular LJS Restaurant, including the Franchised Restaurant, will benefit
directly or pro-rata from such advertising. The Company does not act as a trustee or in any other fiduciary
capacity with respect to the advertising monies.
(c)
To promote and increase the demand for the products and services of the Franchised Restaurant,
Franchisee may conduct, at its separate expense, advertising in addition to that received for the expenditures
described in Section 6.02. All such additional advertising must either be prepared or previously approved in
writing by the Company.
(d)
Franchisee shall, at its separate expense: (1) obtain a listing in the white pages of the telephone
directories serving the location of the Franchised Restaurant, which listing shall be the kind and size as may be
specified by the Company for all LJS Restaurants from time to time in the Confidential Manual or otherwise in
writing; and (2) obtain and maintain an adequate supply of brochures, pamphlets and promotional materials of
the kind and size, and at such locations in and around the Franchised Restaurant as the Company may
reasonably require of all LJS Restaurants from time to time in the Confidential Manual or otherwise in writing.
(e)
Upon written request from Franchisee, the Company or its designee(s) will provide Franchisee
with special or additional approved local advertising and marketing plans and materials, including, without
limitation, newspaper photostats, radio commercial duplicates, merchandising materials, 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
Rev. 3/04
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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
of the 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 (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 of
this Section 8.01(b).
8.02
Reports.
At the Company's request and as specified from time to time in the Confidential Manual or otherwise in
writing, Franchisee 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 request, Franchisee shall promptly furnish requested marketing information based on
Franchisee's records.
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8.04
I"ranchisee's Records.
f1
~
Franchisee shall at all times maintain and preserve, during the term of this Agreement, full, complete
and accurate books, records and accounts in accordance 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 Records.
The Company shall have the right to examine and audit Franchisee's records, accounts and books at
reasonable times and places (including, without limitation, at Franchisee's principal place of business).
Franchisee shall immediately pay to the Company the amount of any overdue, unreported or understated
payment disclosed by such audit, with late payment charges thereon as provided in paragraph 6.04 herein. If any
audit reveals an understatement of gross receipts by Franchisee in excess of three percent (3%), Franchisee shall
also pay the Company's 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 for any and aU debts, obligations, damages, claims, liability, demands,
actions, suits, proceedings, judgments or costs of any kind or nature, including attorneys' fees arising directly or
indirectly from, as a result of, or otherwise in connection with, Franchisee's operation of the Franchised
Restaurant ("lndenmified Matter").
The Company shall have the right to defend and settle any lndenmified
Matter in such manner as the Company deems appropriate, in its sole discretion, and without Franchisee'S
consent. Franchisee agrees to reimburse the Company for all costs reasonably incurred in defending such
Indenmified Matter, including, without limitation, reasonable attorneys' fees. Franchisee's obligations under this
Section shall continue in full force and effect subsequent to the expiration or termination of this Agreement.
9.02
Franchisee's Insurance.
(a)
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:
(I)
comprehensive general liability insurance (through a single policy or by a primary
policy with one or more excess or umbrella 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, insuring
Franchisee and the Company, as well as the Company's 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 by Franchisee of its business, or by reason of any incident which
may occur upon, in, about or in connection with the Franchised Restaurant Premises;
Rev. 3/04
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(2)
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, casualty and extended coverage insurance with limits of not
less than the full replacement cost of the Franchised Restaurant and its Equipment and other improvements.
(b)
Franchisee acknowledges that the minimum coverages and policy limits required by this Section
9.02 may be reasonably increased from time to time by the Company for its own and Franchisee's protection and
Franchisee agrees to comply with such new requirements 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.
9.04
~
All insurance policies shall provide for notice to the Company of any cancellation, termination,
modification or nonrenewal thereunder at least thirty (30) days prior to such occurrence 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 shall immediately pay the Company the cost of curing the default
together with a reasonable administrative fee to defray the Company's expenses in connection therewith.
9.05
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
Restaurant and the Franchised Restaurant Premises, the adjacent premises and improvements or other property
of Franchisee; provided such loss or damage is within the coverage of the insurance provided for herein. AIl
property insurance policies carried by Franchisee on the Franchised Restaurant or adjoining property shan, if
reasonably possible, contain an express waiver of subrogation.
Rev. 3/04
19
~
0
SECTION 10:
OWNERSHIP
AND LIMITA nONS
PROPRIETARY
10.0 I
Ownership of Proprietary
ON USE OF
MARKS, TRADE SECRETS
Marks, Trade Secrets.
All right, title and interest in and to all Proprietary
Marks, trade secrets, systems, instruction manuals
and the goodwill associated therewith are the sole property ofthe Company or its affiliates and no such right, title
or interest is or shall be transferred
by virtue of this Agreement.
Franchisee shall not represent in any manner
that it has any such ownership, right, title or interest. Franchisee acknowledges that on expiration or termination
of this Agreement, no monetary sum shall be designated by it as attributable
to any goodwill associated with
Franchisee's use of the System and the Proprietary Marks.
10.02
Limitations on Use of Proprietary
(a)
Franchisee
Marks.
acknowledges that the use of the Proprietary
Marks or other components of the
System outside the scope of this Agreement without the Company's prior written consent, is an infringement of
the Company's exclusive right, title and interest in and to the System and the Proprietary
shall not, while this Agreement
infringement
remains in effect and thereafter,
Marks.
Franchisee
directly or indirectly, commit any act of
or contest or aid in contesting the validity or the Company's
ownership
of the System or
Proprietary Marks, or take any other action in derogation thereof.
(b)
Franchisee
shall not incorporate
any of the Proprietary
Marks, including without limitation
"Long John Silver's Seafood Shops" or "Long John Silver's," or words similar thereto in any trade, corporate or
firm name of Franchisee or any of its affiliates.
(c)
Franchisee shall not display or use any of the Proprietary
Marks or other components of the
System except as specifically authorized hereunder, nor do or omit to do anything to endanger the Company's
proprietary
10J»)
right to use the Proprietary Marks or the System.
Use of Proprietary
Franchisee
Marks.
understands
and acknowledges that each and every detail of the System is important
to
Franchisee, the Company and other franchisees to develop and maintain high and uniform standards of quality
and service, and to protect the reputation and goodwill of LJS Restaurants.
(a)
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
with respect to trademark
registration
by the Company;
and copyright notices as the
Company may from time to time direct in the Confidential Manual or otherwise in writing;
(d)
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
Confidential Manual or otherwise in writing.
Rev. 3/04
20
by the Company
from time to time in the
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 to use the Proprietary Marks or any colorable
imitation thereof. Franchisee also agrees to notify the Company promptly of any litigation instituted by any
person, firm, corporation or governmental agency against the Company or Franchisee 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 the third party's use of any of the
Proprietary Marks and shall exercise such right in its sole discretion. In any defense or prosecution of any
litigation relating to the Proprietary Marks or components of the System undertaken by the Company,
Franchisee shall cooperate 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 counsel, to carry out such defense or prosecution. The
Company makes no representation or warranty, express or implied, as to the use, exclusive ownership, validity or
enforceability of the Proprietary Marks.
10.05
Nondisclosure of Trade Secrets and Confidential Information.
(a)
The Company has disclosed and will continue to disclose to Franchisee certain confidential
information relating to the development, marketing and operation of LJS Restaurants, including without
limitation: (1) ingredients, specifications, recipes, and methods of preparation and presentation of certain food
and beverage products; (2) site selection criteria for LJS Restaurants and plans and specifications for the
development of LJS Restaurants; (3) sales, marketing and advertising programs and techniques for LJS
Restaurants; (4) knowledge of specifications for, and suppliers of, certain food products, materials, supplies and
equipment; (5) knowledge of operating results and financial performance of LJS Restaurants, other than the
Franchised Restaurant; and (6) methods of labor control, inventory control, storage, product handling and
management of US Restaurants (collectively "Proprietary Information"). Without the Company's prior written
approval, Franchisee shall not, during the term of the Agreement, any renewal hereof and thereafter (regardless
of cause of termination) divulge any Proprietary Information nor use any Proprietary Information for the benefit
of any other person or entity. Notwithstanding the foregoing, Franchisee may disclose Proprietary Information
without the Company's prior written consent (1) during the term hereof to Franchisee'S employees only to the
extent necessary for operation of the Franchised Restaurant; and (2) to the extent such Proprietary Information
has become public other than through any action or disclosure of Franchisee.
(b)
Franchisee acknowledges that the Company will suffer irreparable harm and that monetary
damages will be inadequate to compensate the Company for any breach by Franchisee of the terms of Section
10.05(a); therefore, Franchisee 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.
Rev. 3/04
21
SECTION 11: TERMINATION
11.01
Termination.
(a)
Franchisee shall be deemed to be in default, and all rights granted under this Agreement shall
automatically terminate without notice to Franchisee upon the occurrence of any of the following events:
(1)
if Franchisee shall become insolvent or make a general assignment for the benefit of
(2)
if a petition is filed against and consented
creditors.
adjudicated
a bankrupt
(permanent
or if Franchisee
is
or insolvent.
(3)
for Franchisee's
to by Franchisee,
if any proceeding for the appointment
of a receiver of Franchisee or other custodian
business or assets is filed and consented to by Franchisee, or if a receiver or other custodian
or temporary)
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
any lien against the assets of the Franchised
Restaurant
within thirty (30) days, or if the assets of the Franchised
business or property,
is instituted
or suit to foreclose
against Franchisee
Restaurant
and not dismissed
are sold after levy thereupon
by any
sheriff, marshal or constable.
(b)
Franchisee shall be deemed to be in default, and the Company may. at its option, terminate this
Agreement and all rights granted hereunder at any time by notice to Franchisee without any opportunity to cure
the default, upon the occurrence of any of the following events:
(I)
if Franchisee
fails for any reason to have opened the Franchised
business within one (1) year from the date hereof, or thereafter
Restaurant
for
ceases to operate or otherwise abandons or
forfeits the legal right to transact business at the Franchised Restaurant;
(2)
if Franchisee
is convicted of a felony, a crime involving moral turpitude,
other crime or offense that is reasonably
System, the Proprietary
(3)
Agreement
paragraph
if Franchisee
purports
to transfer
the Company's
to affect adversely the
rights therein;
any rights or obligations
prior written
arising under
consent, contrary
this
to the terms of
13.02 of this Agreement;
if Franchisee
any other identifying characteristic
therewith, or the Company's
(5)
confidential information
in a restaurant
confidentiality
misuses or makes any unauthorized
use of the Proprietary
of the System, or otherwise materially
Marks or
impairs the goodwill associated
rights therein;
if Franchisee
discloses to a third
party
any Proprietary
Information
learned from the Company or relating to the System or if Franchisee
to be used any such information
or other
uses or permits
or secret, unique or confidential food product or other element of the System
or business other than the Franchised
Restaurant
or if Franchisee
breaches
any duty of
imposed on Franchisee in this Agreement or otherwise by law;
(6)
Rev. 3/04
sole judgment,
Marks, the goodwill associated therewith or the Company's
to any third party without
(4)
Franchisee
likely, in the Company's
or any
if three (3) or more notices of default pursuant
to Section 11.01(c) have been sent to
for the same, similar or different defaults within a twelve (12)-month period, in which event this
22
!w
'"
Yl
2'1
Agreement may be terminated
sending the fourth (4th) or any subsequent Notice of ~l
'..J
in lieu of the Company's
Default;
(7)
if Franchisee made or makes any material misrepresentation
to the Company in any
information 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 to its
former condition within six (6) months of its being damaged or rendered totally or partially untenantable
by
fire or other casualty, as required by Section 3.01(e).
(c)
Franchisee shall be deemed to be in default and the Company may, at its option, terminate this
Agreement and all rights granted under this Agreement without further notice upon the occurrence of any of the
following events and Franchisee's failure to cure such default within the time period set forth below:
if Franchisee
(1)
fails, refuses or neglects to adhere to the standards
and specifications
of the System as set forth in the Confidential
Manual and otherwise adopted by the Company from time to
time, including without limitation Franchisee's
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 when
due any amounts owed to the Company or any of its affiliates;
(3)
other information
if Franchisee
fails, refuses or neglects to submit to the Company
any financial or
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
11.01(c) for a period of three (3) days with respect to Subsection (1), 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)
or Expiration.
Franchisee, upon any termination
or expiration of this Agreement, shall promptly pay to the
Company, its affiliates and subsidiaries any and all sums owed to them.
default by Franchisee,
In the event of termination
such sums shall include all actual and consequential
for any
damages, costs and expenses,
including reasonable attorneys' 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 by Kentucky law, or (2) one and
one-half percent (1 112%) per month. Franchise acknowledges and agrees that the proximate cause of the actual
and consequential damages sustained by Company is Franchisee's act of default and not Company's 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.
Rev. 3/04
23
of'1
't!
,,1
(b)
terminate.
Upon termination or expiration hereof for any reason, all of Franchisee's rights hereunder shall
Franchisee
shall immediately
cease to use any Proprietary
Information
or other trade secrets
disclosed to it hereunder 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
Marks or any 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 shall, on or before the effective
date of termination or expiration: (1) remove from the Franchised Restaurant
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 or materials delivered to it by
the Company or otherwise hereunder; and (3) relinquish its Franchised Restaurant telephone number.
(c)
Upon termination
or expiration of this Agreement, unless otherwise directed in writing by the
Company, Franchisee shall modify the exterior and interior design and decor of the Franchised
Restaurant
Premises and shall make or cause to be made such changes in signs, buildings and structures as the Company
shall reasonably direct, so as to effectively distinguish the Franchised Restaurant from its former appearance and
from any other US Restaurant.
termination
or expiration
Franchisee shall commence the required modifications immediately upon the
of this Agreement
and shall complete the modifications
following the date of termination or expiration.
within thirty (30) days
If Franchisee fails or refuses to comply with this Section 11.02(c),
in addition to any other rights which the Company may have, the Company shall have the right to enter upon the
Franchised 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 resulting from a breach of the
provisions of this Section 11.02 are difficult to estimate or determine accurately.
Therefore, in the event of a
breach by Franchisee 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
of this
Agreement, not to exceed a maximum of Seven Thousand Five Hundred Dollars ($7,500) if termination occurs
during the first ten (10) years of this Agreement, and a maximum of Ten Thousand 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 of the actual damage sustained by the Company in
the event of such a breach.
However, notwithstanding
the provision for liquidated damages, the Company shall
be entitled to injunctive relief if Franchisee continues to operate as an US Restaurant
or breaches any other
covenant herein.
(e)
indebtedness
The covenants set forth in Sections 11.02(a) through (d), inclusive, and all rights, claims and
that may accrue to the Company
under
this Agreement
shall survive any termination
or
expiration of this Agreement and be enforceable by the Company.
(I)
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 between it and the
Company.
11.03
Company's Purchase Rights and Obligations.
(a)
Upon termination
or expiration
of this Agreement,
the Company
purchase all of the assets and business comprising the Franchised Restaurant,
Rev. 3/04
24
shall have the option to
including the land and building,
0
the leasehold estate and improvements, and any items of LJS Restaurant Equipment, including without limitation
equipment, furnishings, signs, sign faces, decor, food items and supplies of Franchisee ("Business Property").
Any such purchase shall be made at the fair market, going concern value of the Business Property, including an
appropriate
allowance for goodwill, if any. If Franchisee and the Company cannot agree on the fair market value
of the Business Property within a reasonable time, the Company and Franchisee each shall commission at their
respective expense an appraisal of the value of the Business Property by a person or firm experienced in the
appraisal of restaurant
property.
The two (2) appraised values shall be averaged and that average shall be the
fair market value of the Business Property and binding upon the parties.
Provided, however, if the two (2)
appraisals differ by more than ten percent (10%), the two (2) appraisers shall appoint a third appraiser, whose
appraisal shall be binding upon the parties as the fair market value of the Business Property.
third appraisal shall be borne equally by the Company and Franchisee.
The cost oCthe
If the Company elects to exercise its
option to purchase, it shall have the right to set off against the purchase price all amounts due from Franchisee
under this Agreement.
Franchisee shall cause any lease that affects the Franchised Restaurant
other item subject to this option to contain appropriate
Premises or any
language permitting the Company to assume such lease
without fees or additional charges.
(b)
In the case of expiration,
the Company
shall exercise
Franchisee notice at least thirty (30) days prior to expiration.
the Company
termination.
Provided, however, that in either case (expiration
following Company's
receipt of the determination
hereunder
In the case of termination
shall exercise its option by giving Franchisee
right to rescind the exercise of its option upon written
its option
for any other reason,
notice within thirty
or termination)
(30) days after such
the Company shall have the
notice given to Franchisee
within ten (10) days
of the fair market value of the Business Property.
event the Company shall exercise its option, the closing shall be held and the purchase
within thirty (30) days of the date of such exercise. The Company's option hereunder
its right under any security agreement
surety's subrogation
(c)
substantially
In the
price shall be paid
is without prejudice to
held by it or with respect to which it may have a guarantor's
or
interest.
In the event that at any time during the term of this Agreement
date that is one (1) year following the termination
Agreement,
by giving
Franchisee
of this Agreement
or at any time prior to the
or the expiration
of the term of this
desires to accept any bona fide written offer from a third party to purchase
all of the assets comprising the Franchised
Restaurant,
Franchisee
shall so notify the Company
in writing, such notice to contain a copy of the offer and any other written information
given or received by the third party offeror.
all or
relating to the offer
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
required
for closing. If the third party offer is such that the Company
to furnish the same consideration,
may not reasonably
be
terms or conditions, then the Company may purchase the assets
to be sold for the reasonable equivalent in cash. If the Company elects to exercise its option, it shall have the
right to set off against purchase price all amounts due from Franchisee
under this Agreement.
Franchisee
shall cause any lease that affects the Franchised Restaurant
Premises or any other item subject to this option
to contain appropriate
to assume such lease without fees or additional
charges.
language permitting
The Company shall notify the Franchisee of its intention to exercise its option within thirty (30) days
after receipt of the Franchisee's
notice and other required information.
the third party offer prior to transfer
Rev. 3/04
the Company
Any material change in the terms of
to the third party shall constitute
25
a new offer, subject to the same
e
0
n
\:J
(j
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 this
Agreement of its desire to sell its unbroken inventory packages of approved items and supplies to the Company.
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
designated
by the Company.
LJS Restaurant
The Company shall purchase
or to such other unit as may be
such items at Franchisee's
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.
SECTION 12: FRANCHISEE'S
12.01
OTHER BUSINESS INTERESTS
Notification of Other Business Activity.
Without limiting Franchisee's
its intention to participate
obligations under Section 12.02, Franchisee shall notify the Company of
or engage directly or indirectly in any other restaurant,
business activity, at least thirty (30) days before (1) Franchisee
understanding
food service or hospitality
becomes a party
to any agreement
relating to such activity or (2) such activity commences, whichever is earlier.
or
Franchisee shall
provide the Company with such information about the activity as the Company may reasonably request.
12.02
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 hereunder.
Franchisee
will receive valuable training
Franchisee acknowledges that, pursuant to this Agreement,
and confidential and trade secret information,
including, without
limitation, information regarding the promotional, operational, sales and marketing methods and techniques of
the Company and the System. Franchisee further acknowledges 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 with any person, persons, partnership,
or corporation, own, maintain, engage in, or have any interest
in any restaurant or food service business if (1) the gross sales of seafood of that restaurant or business constitute
or are likely to constitute twenty percent (20%) or more of all sales of the restaurant
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 and its Owners may, during the term of this Agreement,
own all or a portion of a restaurant, food service or hospitality business, on the condition tbat:
Rev. 31M
26
C
n
~;J
(1)
Franchisee does not use or allow others to use any part of the System in such
il
~J
LJ
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 Premises and
the business does not share or is not combined in any advertisement with the Franchised Restaurant; and
(4)
No business shall be directed or diverted at any time for any reason by Franchisee
from the Franchised Restaurant to any such restaurant, food service or hospitality business.
(c)
For a period of one (1) year after the expiration or termination of this Agreement, regardless of
the cause of termination, 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 with any person,
persons, partnership or corporation, own, maintain, engage in, or have any interest in any restaurant or business
engaged in food service, which is located within one and one-half (1 112)miles of the Franchised Restaurant, if (1)
the gross sales of seafood of the restaurant or business constitute or are likely to constitute twenty percent (20%)
or more of all sales of the restaurant or business, or (2) the restaurant 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. The
reduction shall be effective immediately upon receipt by Franchisee of written notice thereof, and Franchisee
shall comply immediately with the covenant as so reduced.
(e)
Franchisee expressly agrees that any claim it may have against the Company, whether or not
arising from this Agreement, shall not constitute a defense to the Company's enforcement of the covenants in this
Section 12.02.
(t)
Franchisee acknowledges that its failure to comply with the requirements of this Section 12.02 will
cause the Company irreparable 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 for
specific performance of, or for an injunction against violation of, the requirements of this Section 12.02.
(g)
Franchisee expressly acknowledges that its Owners possess skills and abilities of a general nature
and have other opportunities for exploiting such skills, so that enforcement of the covenants in this Article will
not deprive any of them of their goodwin 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 by Franchisee or
any Owner of less than a ten percent (10%) beneficial interest in the outstanding equity securities of any
corporation which is registered 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.
Rev. 3/04
27
SECTION 13: ASSIGNMENT
13.01
OR TRANSFER
Assignment by Company.
The Company
may assign this Agreement
and any or all benefits and obligations
arising from it
without notice to or consent from Franchisee, provided that the assignee assumes and agrees to perform the
Company's
13.02
obligation under this Agreement accruing after the date of the assignment.
Franchisee as Corporation
(a)
indirectly,
or Other Entity; Assignment by Franchisee.
Franchisee and its Owners shall not, without the Company's
voluntarily
or involuntarily,
prior written consent, directly or
by operation of law or otherwise, sell, assign, transfer,
convey, give
away, pledge, mortgage or otherwise encumber any interest or partial interest in Franchisee, this Agreement,
or in the franchise granted herein, or offer or attempt to do so, or permit the same to be done. 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
By-Laws, Articles of Organization,
of Partnership,
limited liability company or corporation:
Partnership
Agreement,
Operating Agreement and other organizational
shall provide that the issuance and transfer of any interest in Franchisee
Agreement.
Articles of Incorporation,
and governing documents
is restricted
by the terms of this
Copies of such documents and of resolutions of Franchisee's board of directors authorizing its entry
into this Agreement shall be furnished to the Company upon request.
(2)
All general partners
and all direct and indirect holders of a ten percent (10%) or
greater equity interest in any entity comprising Franchisee shall upon Franchisee's execution of this Agreement
execute an agreement personally guaranteeing to the Company the full payment and performance of Franchisee's
obligations to the Company and undertaking
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,
tt
any other Proprietary
Mark,
or any name deceptively similar thereto, in a public offering of its securities, except to reflect its franchise
relationship with the Company.
Neither Franchisee nor any of its Owners may issue or sell, or offer to issue or
sell, any securities of Franchisee or an affiliate of Franchisee, regardless of whether such sale or offer would be
required to be registered pursuant to the provisions of the Securities Act of 1933, as amended, or the securities
laws of any other jurisdiction, without obtaining the Company's prior written consent and complying with all of
the Company's requirements
and restrictions concerning use of information about the Company, its affiliates or
the System.
(4)
Franchisee shall furnish the Company, at the time of execution of this Agreement and
upon all transfers 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)
Franchisee,
if a corporation,
shall maintain
stop transfer
instructions
against the
transfer on its records of any securities with voting rights subject to the restrictions of this Section 13.02 and shall
Rev. 3/04
28
f1
f.)
,.1
cause all certificates representing
outstanding voting securities to be surrendered
for reissuance and cause all f1
t,.;
certificates for voting securities in the future to be issued with this legend printed conspicuously upon the face of
each certificate:
"The transfer of this certificate and the shares it represents is subject to the terms and
conditions of a certain Franchise Agreement with Long John Silver's, Inc. Reference is
made to that Agreement
and to certain restrictive provisions of the Articles and
By-Laws ofthis corporation."
(c)
Franchisee
acknowledges
and agrees that the restrictions
on transfer
imposed herein are
reasonable and necessary to protect the System, the Company's Proprietary Marks, Proprietary
Information and
operating procedures and quality, as well as the Company's high reputation and image, and are for the protection
of the Company, Franchisee, and other franchisees.
No attempted assignment or transfer permitted by this
Section 13.02 shall take effect without the Company's written consent.
(d)
Upon Franchisee's written request, the Company shall not unreasonably withhold its consent to
any assignment subject to the restrictions
of this Section 13.02; however, the Company's
consent may be
conditioned on the satisfaction of the following requirements:
(1)
neither Franchisee nor any successor or affiliate of Franchisee is in default under this
Agreement or any other agreement with the Company, and all of the accrued monetary obligations of Franchisee
or such successor or affiliate to the Company have been satisfied;
(2)
the assignor or transferor and its Owners (as defined in Section 12.02) have executed:
(a) a general release under seal, in a form prescribed
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;
and (b) a transfer agreement in a form prescribed by the company;
(3)
the assignee or transferee has demonstrated
all of the Company's then current requirements
to the Company's satisfaction that it meets
for new franchisees, including, without limitation, background
check, financial and restaurant managerial experience requirements;
(4)
the assignee or transferee has executed and/or caused all necessary parties to execute:
(a) the Company's then current standard form Franchise Agreement, including the personal guaranty described
in Section 13.02(b)(2) and such other then current ancillary agreements as the Company may reasonably require;
and (b) a transfer agreement in a form prescribed by the Company.
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,
the assignee or transferee
employees responsible for the operation of the Franchised Restaurant
and any of its
shall have satisfactorily completed the
Company's training then in effect for all new franchisees;
(6)
Franchisee shall have paid or caused to have been paid to the Company a transfer fee
as follows: (a) for transfers to existing Long John Silver's franchisees or franchisees of Company affiliates, $2,000
for the first Franchise Agreement transfer and $1,000 for each additional transfer consummated
same transaction;
as part of the
(b) for transfers to parties other than existing Long John Silver's franchisees or franchisees of
Company affiliates, $2,000 for the first Franchise Agreement transfer and $1,500 for each additional transfer
consummated as part of the same transaction; (c) in the case of an assignment to a corporation for convenience of
Rev. 3/04
29
fj
{]
ownership pursuant to Section I3.02(e), no transfer fee shall be payable; and (d) in the case of the assignment of
this Agreement by Franchisee to an affiliate as a contemporaneous part of the assignment of additional franchise
agreements for LJS Restaurants by Franchisee to an affiliate, the transfer fee shall be $2,000 for the first
Franchise Agreement transferred and $1,000 for each additional transfer consummated as part of the same
transaction, not to exceed $5,000.
(7)
(8)
(e)
the assignee or transferee is not a business competitor of the Company; and
the requirements of Section 15.08(b) are met.
If Franchisee is an individual and desires to assign all of his rights to a corporation formed
solely for convenience of ownership, the Company's consent to such assignment shall be conditioned on the
following requirements, in addition to those in Sections 13.02(b) and (c):
(1)
the assignee's Articles of Incorporation and By Laws shall provide that its activities
shall be confined exclusively to operating the Franchised Restaurant 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
(3)
all shareholders of the assignee corporation to which Subsection 13.02(b)(2) applies
assignee; and
shall compJy with the requirements of that Subsection.
(t)
Upon the dissolution or death of Franchisee or of a stockholder, member or a general partner of
Franchisee, the personal representative or trustee who is legally authorized to transfer the affected interest may
sell, assign or otherwise transfer the affected interest in Franchisee to a third party, subject to the conditions set
forth in this Agreement for any other transfer. If the personal representative does not receive, or desire to accept,
a bona fide offer to sell such interest, and if under applicable law Franchisee's rights in this Agreement and in the
Franchised Restaurant are distributable 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 interest subject to the restrictions
of this Section 13.02 desires to accept any bona fide written offer from a third party to purchase such interest, the
prospective transferor 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 tbe option to purchase such business, franchise and interest, including any lease, on the same
terms and conditions offered by tbe 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 may purchase the interest to be sold for the
reasonable equivalent in cash. If the parties cannot agree within a reasonable time on the reasonable equivalent
in cash of the consideration, terms, or conditions contained in the offer, the consideration shall be determined by
an independent appraiser designated by the Company, whose determination shall be binding. The Company
shall notify the prospective transferor of its intention to exercise its option witbin thirty (30) days after receipt of
the transferor's notice and other required information. Any material change in tbe 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 13.02(g) shall
not constitute a waiver of any other provision of this Agreement, including any of the requirements of Section
Rev. 3/04
30
i:1
""
e
n
13.02 with respect to the proposed transfer, nor shall such failure constitute a waiver of its right to exercise its
option with respect to any subsequent third party offer.
(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
14.01
ASSOCIATION
Franchise Association.
The Company
franchisees ("Franchise
will recognize one (1) independent
association that represents
Long John Silver's
Association") so long as such association shall continue to meet the criteria set forth in
Sections 14.01 and 14.02 of this Agreement.
Subject to the foregoing, the Company will not restrict Franchisee
from associating with other LJS Franchise Owners, nor from forming or participating in the lawful activities of
any independent
association of LJS franchisees.
As used in this Section 14.01, the phrase "LJS Franchise
Owner'[s]" shall mean the person or entity that has executed and is identified as the franchisee in an LJS
franchise agreement.
(a)
The membership
of the 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)
The Franchise Association must be governed by written by-laws that are not inconsistent with the
provisions of this Agreement and that provide that the Franchise Association shall advise the Company of any
material
changes to the by-laws.
The Franchise
Association Board (hereinafter
defined) shall provide the
Company with a certified copy of the by-laws and any material amendments to the by-laws. The Company shall
have no obligation to enforce the by-laws.
(c)
The Franchise Association must have been formed for a primary
advising the Company in representing
purpose of consulting and
the interests of Long John Silver's franchisees, and membership in the
Franchise Association must be limited solely to LJS 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 (1) standing committee appointed
by the
Franchise Association Board whose primary function is to manage audits of the Company's books and records
with respect to the Company's
advertising and system purchasing
functions pursuant
to Sections 7.02(b) and
4.05(b) above.
14.02
Franchise Association Board.
(a)
The Franchise Association must be governed and represented by a board of directors or like body
that is duly elected on a periodic basis by the Franchise
Board").
Association membership
("Franchise
To ensure that the composition of the Franchise Association Board is representative
Association
of all Franchise
Association members: (1) At least 40% of the Franchise Association Board must be nominated and elected in
regional elections by LJS Franchise
Owners living or having principal
business offices within designated
geographic areas determined by the Franchise Association Board or the Franchise Association in an effort to
have each of the regionally elected Franchise Association Board members represent
Rev. 3/04
31
an approximately
equal
0
G
number of US Restaurants;
and (2) At least 10% of the Franchise Association Board must be nominated and ~
'_1
elected by US 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 or indirectly, a controlling equity interest in US Franchise Owners
that are partnerships, corporations, limited liability companies or other entities.
(c)
Any US Franchise Owner that has received from LJS written notice of default of a monetary
obligation in excess of $5,000.00 or a material non-monetary
obligation under one or more of its US franchise
agreements 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 to bind and represent the Franchise
Association and the Company shall have the right to rely on the authority of 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 and president to be occupied by two (2) different persons, the Company shall have the right to rely
upon the authority 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
pursuant
to Section 7.01(a). The Company agrees that
it shall provide the Franchise Association Board with a specimen copy of the Company's
Offering Circular
("UFOCtI)
and all material amendments
Uniform Franchise
thereto as and when the Company files the same
with state franchising authorities;
the UFOC shall be marked to show revisions to the UFOC as compared to
the most previously issued UFOC.
In addition, the Company shall advise the Franchise Association Board of
all material changes to the Company's standard form franchise agreement.
SECTION 15: GENERAL PROVISIONS
15.01
Improvements
to System.
All improvements
in the System developed by Franchisee, the Company or other franchisees shall be
and become the sole and absolute
improvements
15.02
of the Company.
The Company
may incorporate
such
into the System and shall have the sole and exclusive right to copyright, register and protect
such improvements
improvements
property
in the Company's
own name to the exclusion of Franchisee,
whose right to use such
shall be limited to its rights as a franchisee hereunder.
Governing Law Exclusive Jurisdiction.
(a)
This Agreement has been accepted by the Company and shall be deemed to have been made at
Louisville, Kentucky,
Commonwealth
Rev. 3/04
and shall be governed and construed
under and in accordance
of Kentucky, which law shall prevail in the event of any conflict oflaw.
32
with the laws of the
i]
(b)
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 in Jefferson County, Kentucky, and Franchisee irrevocably submits
to the jurisdiction of such court and waives any objection it may have to either the jurisdiction or venue of such
court.
15.03
Severability.
(a)
Except as expressly provided to the contrary herein, each section, part, term and provision of this
Agreement shall be considered severable.
If, for any reason, any section, part, term or provision of this
Agreement is determined 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 th~ 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 Contractor.
(a)
This Agreement does not create a fiduciary relationship between the parties hereto. Franchisee
shall be at all times an independent contractor, and nothing herein contained shall constitute Franchisee as the
agent; legal representative, partner, joint venturer or employee of the Company. 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 for, and shall promptly pay when due, all taxes levied or
assessed by reason of its operation and performance under this Agreement, including, but not limited to, local,
state and federal, property, license, sales, use, leasehold, excise and income taxes. Franchisee shall be solely
responsible for all loss, damage and contractual liabilities to third persons originating in or in connection with the
operation of the Franchised Restaurant and for all claims and demands for damages to property 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, public records and in its relationship
with other persons,
Franchisee shall indicate its independent ownership of the Franchised Restaurant
and that it is only a
franchisee 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 Showing the actual name of Franchisee as the
proprietor of its business, if such is required or permitted by the law of the state and for the locality where
Rev. 3104
33
fl
0
~
fl
the Franchised
(d)
Restaurant
and Franchisee's
principal
G
place of business are located.
Franchisee shall affix a plaque or have printed or painted in a manner, form and style prescribed
by the Company, in one or more places upon the Franchised
Restaurant
Premises and upon its business forms
and stationery, a notification to the public to the effect that Franchisee is franchised by the Company.
UP()O
request will furnish
the Company
with reasonable
proof of its compliance
Franchisee
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 shan include the preamble recitals, constitutes the entire agreement of the parties
and supersedes all prior negotiations, commitments,
to the subjed
and undertakings
matter hereof, excepting only tbe following agreements:
representations
15.07
representations
NONE
of the parties with respect
• The Company has made no
inducing the execution ofthis Agreement other than are expressly stated herein.
Number and Gender.
All the terms and words used in this Agreement, regardless of the number and gender in which they are
used, shan 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
require, the same as if such words have been fully and properly written in the appropriate
15.08
Obligations
(a)
obligations
ofInterested
or clause hereof may
number and gender.
Parties.
Except as otherwise provided herein, all acknowledgments,
herein made or undertaken
by Franchisee
promises, covenants, agreements
and
shall be jointly and severally made or undertaken
by
Franchisee, all persons signing this Agreement in their individual capacities and all guarantors.
(b)
Franchisee
shall forward to the Company
concurrently
Agreement
and prior to the acquisition of any interest in Franchisee
Agreement
and any extension hereof, a Confidentiality
Exhibit A (as it may be revised by the Company
with the execution and delivery of this
by a third party during the term of this
and Non-Competition
Agreement in the form set forth in
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
01'
consent of the Company,
shall make a timely written request therefor, and such approval must be obtained in writing.
Agreement
expressly
obligates the Company
to reasonably
approve
the Company has the absolute right
for any reason to refuse any request by Franchisee or to withhold the Company's
approval of or consent to any
The Company may also consider at its option and, in its sole discretion, other reasonable
prior requests severally submitted in writing by Franchisee
Rev. 3/04
Except where this
or consent to (or not to unreasonably
withhold its approval of or consent to) any action or request by Franchisee,
action by Franchisee.
Franchisee
34
for the Company's
waiver of any obligation imposed
~3
by this Agreement. The Company makes no warranties or guarantees upon which Franchisee may rely, and
assumes no liability or obligation to Franchisee, by providing 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, and no custom or practice of
the parties at variance with the terms hereof, shall constitute a waiver of the Company's right to demand exact
compliance with all of the terms hereof. Waiver by the Company of any particular default by Franchisee shall
not affect or impair the Company's 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 right to exercise the same, nor shall such constitute a waiver by the Company of any right hereunder,
or the right to declare any subsequent breach a default and to terminate this Agreement prior to the expiration of
its term. Subsequent acceptance by the Company of any payments due to it hereunder shall not be deemed to be
a waiver by the Company or 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 IS.I0(d), aU notices, requests and reports permitted or required to be delivered
by the provisions of this Agreement shall be deemed delivered: (1) at the time delivered by hand to the recipient
party (or to an officer, director or partner of the recipient party); (2) on the same date of the transmission by
facsimile, telegraph or other reasonably reliable electronic communication system; (3) one (1) business day after
being placed in the hands of a commercial courier service for guaranteed overnight delivery; or (4) four (4)
business days after 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., 1441 Gardiner Lane, Louisville, Kentucky 40213, 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 agent,
at 4321 North Bear Claw Way, Tucson, Arizona 85749 or at such other address as Franchisee 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 lS.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
Rev. 3/04
35
e
G
G
the Company on or before the date specified herein shall be deemed overdue if not postmarked at least five (5) ~
.'"
days prior to the date due.
15.11
Designated Agent of Franchisee.
Franchisee hereby designates John Willingham to act in its behalf and execute all documents in all
transactions with the Company. All actions by such designee shall be binding upon Franchisee and shall be
valid and binding on any partnerships 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)
Franchisee acknowledges that it has conducted an independent investigation of the business
franchised hereunder, and recognizes that the business venture contemplated by this Agreement involves
business risks and that its success will be largely dependent upon Franchisee's independent business ability. The
Company expressly disclaims the making of, and Franchisee acknowledges that it has not received, any warranty
or guarantee, express or implied, as to the potential volume, profits or success of the business venture
contemplated by this Agreement.
(b)
Franchisee acknowledges that it has received, has had an ample time to read, has read, and
fully understands
this Agreement.
Franchisee further acknowledges that the Company has fully and
adequately explained the provisions of this Agreement, and that Franchisee has had an adequate opportunity
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 and
related agreements if any, at least five (5) business days prior to the date on which this Agreement was
executed.
Franchisee further acknowledges that it has received the disclosure document required by the
Trade Regulation Rule of the Federal Trade Commission, titled "Disclosure Requirements and Prohibitions
Concerning Franchising and Business Opportunity
Ventures,"
and such additional documents as are
required by the state in which Franchisee is located at least ten (10) days prior to the date on which this
Agreement was executed.
Rev. 3/04
36
IN WITNESS
WHEREOF,
the Company
and Franchisee
have executed-t
is Agreement
as of tlle-
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