Exhibit 10.8
PAPA JOHN'S
FRANCHISE AGREEMENT
Franchisee: ___________________________
Address: ___________________________
___________________________
TABLE OF CONTENTS
Page
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RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. Grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Term, Renewal and Expiration . . . . . . . . . . . . . . . . . . . 2
3. Franchise Fees and Payments . . . . . . . . . . . . . . . . . . . . 4
4. Franchisor Services . . . . . . . . . . . . . . . . . . . . . . . . 5
5. Territorial Provisions . . . . . . . . . . . . . . . . . . . . . . 6
6. Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7. Proprietary Marks; Copyright . . . . . . . . . . . . . . . . . . . 8
8. Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9. Telephone Number . . . . . . . . . . . . . . . . . . . . . . . . . 13
10. Construction, Design and Appearance; Equipment . . . . . . . . . . 14
11. Operations; Standards of Quality; Inspections . . . . . . . . . . . 19
12. Products; Commissary; Menu . . . . . . . . . . . . . . . . . . . . 22
13. Accounting and Reports . . . . . . . . . . . . . . . . . . . . . . 23
14. Transfers; Our Right of First Refusal . . . . . . . . . . . . . . . 24
15. Death, Incapacity or Dissolution . . . . . . . . . . . . . . . . . 27
16. Your Additional Covenants . . . . . . . . . . . . . . . . . . . . . 28
17. Trade Secrets and Confidential Information . . . . . . . . . . . . 30
18. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(i)
19. Termination by Us . . . . . . . . . . . . . . . . . . . . . . . . . 32
20. Obligations upon Termination or Expiration . . . . . . . . . . . . 34
21. Independent Contractor; Indemnification . . . . . . . . . . . . . . 37
22. Your Representations . . . . . . . . . . . . . . . . . . . . . . . 38
23. ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
24. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
25. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
EXHIBIT A ADDENDUM TO LEASE . . . . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B ASSIGNMENT OF TELEPHONE NUMBERS AND LISTINGS . . . . . . . . B-1
(ii)
PAPA JOHN'S
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FRANCHISE AGREEMENT
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SINGLE LOCATION FRANCHISE
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THIS FRANCHISE AGREEMENT ("Agreement") is made this _____ day of
_______________, 19__, by and between PAPA JOHN'S INTERNATIONAL, INC., a
Delaware corporation ("we", "us" or "Papa John's"), and _____________________,
a ________________________ ("you"). If you are a corporation, certain
provisions of the Agreement also apply to your owners and will be noted.
RECITALS:
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A. We and our Affiliates have expended time, money and effort to
develop a unique system for operating retail restaurants devoted primarily to
carry-out and delivery of pizza and other food items. The chain of current and
future Papa John's restaurants are referred to as the "Papa John's Chain" or the
"Chain."
B. The Chain is characterized by a unique system which includes special
recipes and menu items; distinctive design, decor, color scheme and furnishings;
software and programs; standards, specifications and procedures for operations;
procedures for quality control; training assistance; and advertising and
promotional programs all of which we may improve, amend and further develop from
time to time (the "System").
C. We identify our goods and services with certain service marks, trade
names and trademarks, including, but not limited to, "Papa John's," "Papa John's
Pizza," "Better Ingredients. Better Pizza." and "Pizza Papa John's Delivering
the Perfect Pizza!" as well as certain other trademarks, service marks, slogans,
logos and emblems that have been or may be designated for use in connection with
the System from time to time (the "Marks").
D. You now desire to enter into this Agreement regarding the operation
of one Papa John's restaurant under the System and the Marks at the location
listed below (the "Restaurant").
E. We have agreed to grant you a franchise for the Restaurant;
NOW, THEREFORE, the parties agree as follows:
1. GRANT. Subject to the terms and conditions of this Agreement and
your continuing faithful performance, we hereby grant to you the non-exclusive
right and franchise (the "Franchise") to operate a retail restaurant under the
System and the Marks to be located at:
______________________________
______________________________
(the "Location")
Pursuant to this grant, you, at your own expense, shall construct or
remodel, and equip, staff, open and operate the Restaurant at the Location.
Unless otherwise agreed in writing by us, you shall commence operating the
Restaurant within 60 days after the signing of this Agreement, and must
diligently operate such business in accordance with this Agreement for the Term
(defined below). Approval of the Location by us does not constitute an
assurance, representation or warranty of any kind, expressed or implied, as to
(i) the suitability of the Location for a Papa John's Restaurant, (ii) the
successful operation of the Restaurant, or (iii) for any other purpose. Our
approval of the Location indicates only that we believe it complies with
acceptable minimum criteria we establish solely for our purposes at the time of
the evaluation.
2. TERM, RENEWAL AND EXPIRATION.
(a) INITIAL TERM. The Franchise shall be for a term of 10 years
from the date of this Agreement, unless terminated earlier as provided in this
Agreement (the "Initial Term").
(b) TERM. As used in this Agreement, "Term" shall mean the
Initial Term or the Renewal Term, as the case may be.
(c) RENEWAL OF FRANCHISE. This Agreement shall not automatically
renew upon the expiration of the Initial Term. You shall, however, have an
option to renew the Franchise upon the expiration of the Initial Term. You may
renew the Franchise for one additional 10 year term (the "Renewal Term") if, and
only if, each and every one of the following conditions has been satisfied:
(i) You have given us written notice of your desire to renew
the Franchise not less than 3 months nor more than 6 months prior to the end of
the Initial Term; provided that if we have not received notice from you of your
desire to renew within such period, we will notify you and you shall have a
period of 10 days thereafter within which to submit the renewal notice;
(ii) You are in full compliance with this Agreement and there
is no uncured default by you under this Agreement, and there has been no series
of defaults by you during the Initial Term (i.e., an abnormal frequency of
defaults or a default that has occurred repeatedly, or a combination thereof),
whether or not such defaults were cured, all your debts and obligations to us
and our Affiliates under this Agreement or otherwise are current and your
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obligations to the Marketing Fund and each Cooperative (defined below) of which
you are a member are current;
(iii) You execute and deliver to us, within 10 days after
delivery to you, the form of Papa John's Franchise Agreement being offered to
new franchisees on the date you give the notice under this Section, including
all exhibits and our other then-current ancillary agreements, which agreements
shall supersede this Agreement and all ancillary agreements in all respects, and
the terms and conditions of which may differ substantially from this Agreement;
provided that such Franchise Agreement shall provide for a term of 10 years;
(iv) You secure the right to continue possession of the
Premises for a period at least equal to the Renewal Term, or alternatively you
secure premises at another location that we approve for the same period;
(v) Your Principal Operator (defined below) and manager
attend and successfully complete our training program for new franchisees;
(vi) We are then continuing to offer Papa John's Pizza
franchises in the state in which the Restaurant is located and have all required
documents filed and all necessary approvals to offer Papa John's franchises in
that state;
(vii) You have paid us a renewal fee of $3,000;
(viii) You execute and deliver to us a general release, in the
form we prescribe, releasing, to the fullest extent permitted under the laws of
the state where the Restaurant is located, all claims that you may have against
us and our Affiliates and subsidiaries, and their respective officers,
directors, shareholders and employees in both their corporate and individual
capacities; and
(ix) You make, or provide for in a manner reasonably
satisfactory to us, such renovation and re-equipping of the Restaurant as may be
necessary or appropriate to reflect the then-current standards and image of the
System, including, without limitation, renovation or replacement of signs,
equipment, furnishings, fixtures and decor; provided, however, that substantial
renovation and re-equipping shall not be required if you have substantially
renovated the Restaurant within the 3-year period immediately preceding the end
of the Initial Term.
(d) EXPIRATION. Renewal of the Franchise after the Initial Term
shall not constitute a renewal or extension of this Agreement, but shall be
conditioned upon satisfaction of the above provisions. Upon expiration of the
Renewal Term, further renewal rights will be governed by the Franchise Agreement
executed by you upon expiration of the Initial Term. If you fail to meet any of
the conditions under Section 2.(c) above with respect to the renewal of the
Franchise, then the Franchise shall automatically expire at the end of the
Initial Term.
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3. FRANCHISE FEES AND PAYMENTS.
(a) INITIAL FRANCHISE FEE AND ROYALTIES. In consideration of the
grant of the Franchise, you agree to pay us the following fees:
(i) An Initial Franchise Fee of $20,000 which shall be paid
upon the execution of this Agreement and which shall be deemed fully earned and
is non-refundable.
(ii) A continuing royalty (the "Royalty") of 4% of the "Net
Sales" of the Restaurant for each "Period" (as defined in Section 13.(b));
provided that any time after the 3rd anniversary date of this Agreement we may
increase the Royalty to as much as 5% of Net Sales for the remainder of the
Initial Term and the Renewal Term, if applicable. However, we may increase the
Royalty only if our form of Franchise Agreement being offered to new Papa John's
franchisees at the time of the increase provides for a Royalty of more than 4%.
Net Sales shall mean the gross sales of the Restaurant (whether such sales are
evidenced by cash, check, credit, charge account or otherwise), less sales tax
collected on such sales and paid to the State or other local taxing authority.
The Royalty is due on the 10th day of the month following each Period.
(b) PAYMENTS. Prior to the opening of the Restaurant (and
thereafter as requested by us), you shall execute and deliver to us, our bank(s)
and your bank, as necessary, all forms and documents that we may request to
permit us to debit your bank account, either by check, via electronic funds
transfer or other means utilizing the "Information System" (as defined in
Section 10.(d)) or such alternative methods as we may designate ("Payment
Methods"). You must comply with all procedures specified by us from time to
time, and/or take such reasonable actions as we may request to assist in any of
the Payment Methods. We may use the Payment Methods to collect the amount of
each Period's Royalty and any other amounts due to us, our Affiliates or the
Papa John's Marketing Fund, Inc. under this Agreement or otherwise, including,
but not limited to, "Marketing Fund" (as defined in Section 8.(b))
contributions, purchases from "PJFS" (as defined in Section 12.(b)), Printing &
Promotions, Inc. and all of our other Affiliates. The Royalty and Marketing Fund
contributions shall be debited on the 10th of each month, or if the 10th falls
on a weekend or bank holiday, then on the next business day. Commissary
payments will be debited one business day after products are delivered to the
Restaurant. We will determine your Net Sales for each Period via the
Information System, or if we are unable to do so, you shall report your Net
Sales in writing on or before the 7th day of the month following each Period.
Such reporting shall be in addition to all other reporting requirements under
Section 13. If you fail to report Net Sales on a timely basis, we may estimate
the Net Sales of the Restaurant for such Period and debit your bank account the
amount of the Royalty and Marketing Fund contribution based on such estimate. If
an estimate results in an overpayment, we shall deduct the amount of the
overpayment from the next Period's Royalty. Any deficiency resulting from such
estimate may be added to the next Royalty and/or Marketing Fund contribution
payment(s) due and debited against your bank account. If, at any time, we
determine that you have underreported the Restaurant's Net Sales, or underpaid
any Period's Royalty, Marketing Fund contributions or payments to any of our
Affiliates, we are authorized to immediately debit your account for these
amounts by any of the Payment Methods. You shall notify us at least 20
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days prior to closing or making any change to the account against which such
debits are to be made. If such account is closed or ceases to be used, you
shall immediately provide all documents and information necessary to permit us
to debit the amounts due from an alternative account. You acknowledge that
these requirements are only a method to facilitate prompt and timely payment of
amounts due and shall not affect any obligation or liability for amounts owed.
If for any reason your account cannot be electronically debited, you shall
submit payments by check (certified or cashier's check if requested by us) on or
before the dates when due. You shall indemnify and hold us harmless from and
against all damages, losses, costs and expenses resulting from any dishonored
debit against your account, regardless whether resulting from the act or
omission of you or your bank; provided that you shall not be obligated to
indemnify us for any dishonored debit caused by our negligence or mistake.
4. FRANCHISOR SERVICES. During the Term, we agree to provide to you
the following services:
(a) specifications for the design of the Restaurant and related
facilities to be used in the operation of the Restaurant;
(b) specifications for fixtures, furnishings, decor,
communications and computer hardware and software, signs and equipment;
(c) the names and addresses of designated and approved suppliers,
and standards and specifications for (i) all food products, beverages,
ingredients and cooking materials sold from or used in the operation of the
Restaurant, and (ii) all containers, boxes, cups, packaging, menus, uniforms and
other products and materials used in connection with the operation of the
Restaurant;
(d) a pre-opening management training program for the "Principal
Operator" (as defined in Section 11) and one or more approved managers, and such
other persons as we may reasonably designate, and such other training for your
employees at the locations and for such periods as we may designate from time to
time; provided that you shall be responsible for all expenses incurred by such
persons in connection with training, including, without limitation, all costs of
travel, lodging, meals and wages;
(e) Our supervision and periodic inspections and evaluations of
your operation as described more fully in Section 11.(j) which supervision,
inspections and evaluations shall be conducted at such times and in such manner
as we shall reasonably determine; and
(f) We shall communicate to you information relating to the
operation of a Papa John's restaurant to the extent we deem it necessary or
pertinent.
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5. TERRITORIAL PROVISIONS.
(a) TERRITORY. Subject to the provisions of this Section 5, we
agree that during the Term we will not locate nor license another to locate a
Papa John's restaurant within a one and one-half mile radius of the Location
(the "Territory"). Notwithstanding the foregoing, enclosed malls, institutions
(such as hospitals or schools), airports, parks (including theme parks), and
sports arenas (collectively "Special Sites") shall be excluded from protection
within the Territory and we may open Papa John s restaurants, or franchise the
right to open Papa John s restaurants to other persons at any Special Site
locations, regardless of where they are located. If this Agreement is signed
pursuant to a Development Agreement with us, in no event shall the Territory
extend outside the boundaries of the "Development Area" as defined in the
Development Agreement and neither termination nor expiration of the Development
Agreement shall alter this limitation. We do not warrant or represent that no
other Papa John's restaurant will solicit or make any sales within the
Territory, and you expressly acknowledge and agree that such solicitations or
sales may occur within the Territory. We shall have no duty to protect you from
any such sales, solicitations, or attempted sales. You recognize and
acknowledge that (i) you will compete with other Papa John's restaurants that
are now, or that may in the future be, located near or adjacent to your
Territory, and (ii) that such restaurants may be owned by us, our Affiliates or
third parties. You acknowledge and agree that if you relocate the Restaurant,
the Territory will not change (i.e., the radius will not be applicable to the
new location, even though we have approved the new location).
(b) OTHER BUSINESSES. You understand and agree that we reserve
the right, either directly or through Affiliates, to operate or franchise or
license others to operate or franchise, restaurants or other food related
establishments or businesses other than Papa John's restaurants and you agree
that we and our Affiliates may do so within the Territory; provided, that such
restaurants or food establishments or businesses do not sell pizza on a delivery
basis, or primarily on a carry-out basis. We also reserve the right to develop,
market and conduct any other business under the Marks or any other trademark.
(c) OTHER METHODS OF DISTRIBUTION. We also reserve the right,
directly or through third parties, to manufacture or sell, or both, within and
outside your Territory, pizza and other products that are the same as or similar
to those sold in Papa John's restaurants using brand names which are the same
as, or similar to, the Marks through any channel of distribution; provided that
such items are not sold through restaurants or on a pre-cooked, ready-to-eat
basis.
6. PREMISES.
(a) LEASED PREMISES. If you intend to lease the premises where
the Restaurant will be operated (the "Premises"), you shall submit to us copies
of the executed signature pages of all such leases immediately after signing and
copies of the full leases and any exhibits and addendum at such other times as
we may request. The term of all leases plus all options for you to renew shall
together equal or exceed the Term. All leases pertaining to the Premises shall
also include an Addendum in the form of Exhibit A attached hereto, or shall
contain terms and condit-
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ions substantially similar to those contained in EXHIBIT A that we approve. A
copy of the executed Addendum must also be submitted to us.
(b) OWNED PREMISES. If you intend to own the Premises, you shall
furnish to us proof of ownership prior to the date you begin any construction,
build-out or remodeling of the Premises. In the event you decide to sell the
Premises at any time prior to the expiration or termination of the Franchise
Agreement, you must notify us of your intention. We shall have a right of first
refusal to purchase the Premises on the same terms and conditions as set forth
in Section 14.(b)(i). If the sale will also involve a relocation of the
Restaurant, you shall submit to us for our approval your proposed plans
(including copies of any proposed lease or contract of purchase) for an
alternate location.
(c) PREMISES IDENTIFICATION. Regardless of whether you own or
lease the Premises, you must, within ten days after the expiration or
termination of the Franchise Agreement, remove all signs and other items and
indicia that serve, directly or indirectly, to identify the Premises as a Papa
John's restaurant and make such other modifications as are reasonably necessary
to protect the Marks and the Papa John's System, and to distinguish the Premises
from Papa John's restaurants. To enforce this provision, we may pursue any or
all remedies available to us under applicable law. Your obligation shall be
conditioned upon our giving you prior notice of the modifications to be made and
the items removed.
(d) SUITABILITY OF PREMISES. Regardless of whether the Premises
are owned or leased, it shall be your responsibility to determine that the
Premises can be used, under all applicable laws and ordinances, for the purposes
provided herein and that the Premises can be constructed or remodeled in
accordance with the terms of this Agreement and you shall obtain all permits and
licenses that may be required to construct, remodel and operate the Restaurant.
You agree that the Premises will not be used for any purpose other than the
operation of the Restaurant in compliance with this Agreement.
(e) RELOCATION; ASSIGNMENTS. You shall not, without first
obtaining our written consent: (i) relocate the Restaurant; or (ii) renew or
materially alter, amend or modify any lease, or make or allow any transfer,
sublease or assignment of your rights under any lease or owned location
pertaining to the Premises. Such consent shall not be unreasonably withheld.
You agree to give us notice not less than 30 days prior to any of the foregoing.
We may require you to relocate the Restaurant to another location upon (A)
expiration of the original term or any extension or renewal of your lease, (B)
expiration of the Initial Term or Renewal Term of this Agreement, or (C) any
significant damage to the Premises or surrounding areas, or other event, that
would provide you with an option or right to terminate the lease. You agree to
give us notice not less than 60 days prior to the expiration of your lease, and
to give us written notice within five days after the occurrence of any event
covered by (C) above. Our right to require you to relocate shall not be
exercisable during the first two years of the Initial Term, and thereafter shall
be conditioned upon (1) the availability of a location approved by us for such
relocation, (2) our offering to extend the Term of this Agreement for not less
than five years, or at our option, offering to enter into our then-current form
of franchise agreement (which shall include an initial
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term of not less than 10 years), and (3) the Territory (as measured from the new
location) not extending into the "Territory" of any other Papa John's Pizza
franchisee. YOU ACKNOWLEDGE THAT SUCH RELOCATION, IF REQUIRED, WOULD INVOLVE
SUBSTANTIAL ADDITIONAL INVESTMENT BY YOU DURING THE TERM OF THIS AGREEMENT, AND
MAY INCLUDE, WITHOUT LIMITATION, AN OBLIGATION TO LEASE OR BUY LAND, CONSTRUCT A
FREE-STANDING BUILDING, INSTALL LEASEHOLD IMPROVEMENTS AND/OR PURCHASE NEW
EQUIPMENT AND SIGNAGE.
7. PROPRIETARY MARKS; COPYRIGHT.
(a) OWNERSHIP OF COPYRIGHTS. You acknowledge and agree that (i)
we may authorize you to use certain copyrighted or copyrightable works (the
"Copyrighted Works"), including the Manuals and the "Proprietary Programs" (as
defined in Section 10.(c)(i)(B)), (ii) the Copyrighted Works are the valuable
property of us, and (iii) your rights to use the Copyrighted Works are granted
to you solely on the condition that you comply with the terms of this Agreement.
You acknowledge and agree that we will further create, acquire or obtain
licenses for certain copyrights in various works of authorship used in
connection with the operation of the Restaurant, all of which shall be deemed to
be Copyrighted Works under this Agreement. Such Copyrighted Works include, but
are not limited to, the materials and information provided to you by us for use
in the operation of the Proprietary Programs. You shall not undertake to
patent, copyright or otherwise assert proprietary rights to the Proprietary
Programs and any data generated by the use of the Proprietary Programs or any
portion thereof. Copyrighting of any material by us shall not be construed as
causing the material to be public information. You will cause all copies of the
Proprietary Programs and any data generated by the use of the Proprietary
Programs in your possession to contain an appropriate copyright notice or other
notice of proprietary rights specified by us.
(b) OWNERSHIP; USE BY OTHERS. You agree that we are the owner of
(i) the Marks and all goodwill associated with or generated by the use of the
Marks, and (ii) the Copyrighted Works and any data generated by use of the
Copyrighted Works. You agree that all works of authorship related to the System
that are created in the future will be owned by, or licensed to, us or our
Affiliates. Your use of the Copyrighted Works and the Marks does not vest you
with any interest therein other than the non-exclusive license to use the
Copyrighted Works and Marks granted in this Agreement. You shall execute any
documents that we or our counsel deem necessary for the protection of the
Copyrighted Works or the Marks or to maintain their validity or enforceability,
or to aid us in acquiring rights in or in registering any of the Marks or any
trademarks, trade names, service marks, slogans, logos or emblems that we
subsequently adopt. You shall give notice to us of any knowledge that you
acquire concerning any actual or threatened infringement of the Copyrighted
Works or the Marks, or the use by others of names, marks or logos that are the
same as or similar to the Marks. You shall cooperate with us in any suit, claim
or proceeding involving the Marks or the Copyrighted Works or their use to
protect our rights and interests in the Marks or the Copyrighted Works. We, in
our sole discretion, shall control all decisions concerning the Marks or the
Copyrighted Works.
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(c) USE OF MARKS. You shall use the Marks only in connection with
the operation of the Restaurant at the Location specified herein, and shall use
them only in the manner that we authorize. Your right to use the Marks is
limited to use during the Term of this Agreement and in compliance with
specifications, procedures and standards prescribed by us from time to time. You
shall prominently display the Marks in the manner that we prescribe on all
signs, plastic and paper products, and other supplies and packaging materials
that we designate. You shall not fail to perform any act required under this
Agreement, or commit any act that would impair the value of the Marks or the
goodwill associated with the Marks. You shall not at any time engage in any
business or market any product or service under any name or mark that is
confusingly or deceptively similar to any of our Marks. You shall not use any
of the Marks as part of your corporate or trade name and shall not use any
trademark, trade name, service mark, logo, slogan or emblem that we have not
authorized for use in connection with the Restaurant. You shall obtain such
fictitious or assumed name registrations as required by applicable state law and
forward to us copies of the same upon request.
(d) DESIGNATION AS YOU. You shall identify yourself as the owner
of the Franchise in conjunction with the use of the Marks, including, without
limitation, on checks, invoices, receipts, letterhead and contracts, as well as
at conspicuous locations on the Premises in a form which specifies your name,
followed by the phrase "An independently owned and operated franchise" or such
other phrase as we direct.
(e) DISCONTINUANCE OF USE; ADDITIONAL MARKS AND/OR COPYRIGHTS. You
shall modify or discontinue use of any Mark or Copyrighted Work if a court of
competent jurisdiction orders it, or if we in our sole discretion deem it
necessary or advisable. You shall comply with our directions regarding any such
Mark or Copyrighted Work within 30 days after receipt of notice from us. You
shall also use such additional or substitute Marks or Copyrighted Works as we
shall direct. We shall not be obligated to compensate you for any costs or
expenses incurred by you to modify or discontinue using any Mark or Copyrighted
Work or to adopt additional or substitute Copyrighted Works or Marks.
8. ADVERTISING.
(a) CONTRIBUTIONS AND EXPENDITURES. 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, we and you agree as
follows:
(i) MONTHLY CONTRIBUTIONS AND EXPENDITURES. Each month
during the Term, you shall make the following contributions and expenditures for
advertising:
(A) You shall contribute to the "Marketing Fund," as
defined below, such amount as the Board of Directors of the Marketing Fund
(the "Board") may designate from time to time, which amount shall not
exceed 1-1/2% of the monthly Net Sales of the Restaurant, except as set
forth in (iii), below.
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(B) You shall contribute to the "Cooperative" (as
defined below) that percentage of Net Sales that the governing body of the
Cooperative may designate from time to time, which amount shall not be
less than 2% nor more than 5% of the monthly Net Sales of the Restaurant,
except as set forth in (iii), below.
(C) You shall expend such amounts as we may designate
from time to time for local advertising as provided below; provided, that
the aggregate amount that you may be required to spend on local
advertising together with your Marketing Fund contributions will not
exceed 4% of the Net Sales of the Restaurant.
(ii) INCREASES IN CONTRIBUTIONS.
(A) MARKETING FUND CONTRIBUTIONS. The Board may
increase the maximum required contribution to the Marketing Fund to 2-1/2%
of Net Sales, provided such increase is approved by the owners of not less
than 60% of the restaurants required to contribute to the Marketing Fund
(including both Franchisor-owned and franchised restaurants). Any
increase in the required contribution to the Marketing Fund in excess of
2-1/2% of Net Sales must be approved by not less than 2/3 of the
restaurants required to contribute to the Marketing Fund (including
restaurants that we own and franchises).
(B) COOPERATIVE CONTRIBUTIONS. We may approve a
monthly contribution rate to the Cooperative of less than 2% of Net Sales.
The governing body of the Cooperative may increase the required
contribution to the Cooperative to a percentage of Net Sales in excess of
5%, provided that any such increase is approved by not less than two-
thirds of the restaurants required to contribute to the Cooperative
(including both Franchisor-owned and franchised restaurants). We also
have the right to authorize any Cooperative to determine contributions on
a different basis (fixed amount, geographic location, etc.). Our decision
on any issue concerning Cooperative contributions shall be final.
(b) MARKETING FUND. Papa John's Marketing Fund, Inc., a Kentucky
nonstock, nonprofit corporation (the "Marketing Fund"), has been organized for
the purposes set forth in the Articles of Incorporation and By-Laws of the
Marketing Fund, as they may be amended from time to time. You shall
automatically become a non-voting member of the Marketing Fund upon the
execution of this Agreement, and prior to the opening of the Restaurant you
shall execute and deliver to the Marketing Fund an Advertising Agreement in the
form prescribed by the Board.
(i) You agree and acknowledge that the Marketing Fund is
intended to increase recognition of the Marks and to further the public image
and acceptance of the System and that we, the Marketing Fund and the directors
of the Marketing Fund do not undertake any obligation to ensure that
expenditures by the Marketing Fund in or affecting any geographic area are
proportionate or equivalent to contributions to the Marketing Fund by Papa
John's restaurants operating in such geographic area or that you or the
Restaurant will benefit directly or in proportion to your contribution to the
Marketing Fund. We, our officers, directors, agents and
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employees shall not be deemed a fiduciary or trustee of the contributions to, or
the assets of, the Marketing Fund. We, the Marketing Fund and our respective
officers, directors, agents and employees shall not be liable to you with
respect to the maintenance, direction or administration of the Marketing Fund,
including without limitation, with respect to contributions, expenditures,
investments and borrowings, except for acts constituting willful misconduct.
(ii) We and our Affiliates shall make contributions to the
Marketing Fund for each restaurant that we own on the same basis as required of
comparable franchisees within the System.
(iii) As long as you are in compliance with the Advertising
Agreement and the Articles and By-Laws of the Marketing Fund, you will be
furnished with advertising materials that were produced by or for the Marketing
Fund for System-wide distribution on the same terms and conditions as such
materials are furnished to other franchisees.
(iv) You shall make your monthly contribution to the
Marketing Fund on the date and in the manner provided for in the Advertising
Agreement and the By-Laws and shall submit such statements and reports as the
Board may designate from time to time. From time to time the Board may
designate one or more accounts to which such contributions shall be made, and
you shall make such payments by separate checks. Contributions to the Marketing
Fund may be used to defray our expenses only to the extent of the administrative
costs and overhead that we may reasonably incur in rendering services to the
Marketing Fund.
(v) The funds collected by the Marketing Fund, and any
earnings thereon, are not and shall not be our asset or the asset of any
franchisee.
(vi) Although the Marketing Fund is intended to be of
perpetual duration, the Board has the right to terminate the Marketing Fund.
However, the Marketing Fund shall not be terminated until all monies held by it
have been expended for the purposes set forth in its Articles of Incorporation
and By-Laws or distributed as permitted by law.
(c) REGIONAL COOPERATIVE ADVERTISING. You agree that we shall
have the right, in our sole discretion, to designate from time to time a
geographical area in which the Restaurant is located for the purpose of
establishing an advertising cooperative (the "Cooperative"). If a Cooperative
has been established applicable to the Restaurant at the time you commence
operations, you shall immediately become a member of such Cooperative. If a
Cooperative applicable to the Restaurant is established at any later time during
the Term, you shall become a member of such Cooperative no later than 30 days
after the date on which the Cooperative commences operation. In no event shall
the Restaurant be required to contribute to more than one Cooperative. We may
designate, from time to time, a formula for calculating a proration or reduction
of the contribution rate for restaurants in a Cooperative based on media
coverage, demographics or other factors. The following provisions shall apply
to each Cooperative:
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(i) Each Cooperative shall be organized and governed in a
form and manner, and shall commence operation on a date, that we designate in
advance in writing. On all matters to be voted on by the Cooperative's
membership, each member shall have one vote for each restaurant it owns.
(ii) Each Cooperative shall be organized for the purposes of
producing and conducting general advertising programs and activities for use in
and around the applicable geographic area and developing standardized
promotional materials for use by the members.
(iii) We shall make contributions to each Cooperative of which
we are a member on the same basis as required of comparable franchisees within
the System.
(iv) No advertising programs or materials may be used by the
Cooperative or furnished to its members, and no advertising or promotional
activities may be conducted by the Cooperative, without our prior written
approval. All such programs, materials and planned activities shall be
submitted to us for approval in accordance with the procedure set forth below. A
Cooperative may employ only advertising agencies that have been approved by us.
(v) Subject to the provisions above, each Cooperative shall
have the right to require its members to make contributions to the Cooperative
in such amounts as are determined by the governing body of the Cooperative.
(vi) You shall make your contributions to the Cooperative on
the date and in the manner designated by the Cooperative. You shall also submit
such statements and reports as may be designated from time to time by us or the
Cooperative. The Cooperative shall submit to us such statements and reports as
we may designate from time to time.
(vii) Notwithstanding the foregoing, we, in our sole
discretion, may, upon written request of a franchisee stating reasons supporting
such request, grant to any franchisee an exemption from the requirement of
membership in a Cooperative. Such an exemption may be for any length of time
and may apply to one or more restaurants owned by such franchisee. If an
exemption is granted to a franchisee, such franchisee may be required to expend
on local advertising the full amount that would otherwise be payable to the
Cooperative. We may also exempt one or more restaurants owned or controlled by
us from the requirement of membership in a Cooperative for such periods as we
reasonably deem appropriate. Our decision concerning an exemption shall be
final.
(d) LOCAL ADVERTISING. Subject to the limits set forth above, you
agree to spend for local advertising such percentage of your Net Sales as we
from time to time direct. You shall submit verification of your local
advertising expenditures at such times and in such form as we request from time
to time.
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(i) SUPPLEMENTAL ADVERTISING. You shall have the right to
conduct, at your separate expense, supplemental advertising in addition to the
expenditures specified herein. All such supplemental advertising shall have
been either prepared or previously approved by us within the 90-day period
preceding their intended use, or shall be approved by us as provided below.
(ii) YELLOW PAGES ADVERTISING. You shall, at your own
expense, obtain (or contribute to the cost of obtaining) a listing for the
Restaurant in each "yellow pages" and other telephone directory serving the
Territory and each such listing shall be of the style, format and size, and in
such form, as we may specify from time to time.
(e) OUR APPROVAL. Prior to their use by the Cooperative or by
you, samples of all advertising and promotional materials not prepared or
previously approved by us within the 90-day period preceding their intended use
shall be submitted to us (via commercial overnight courier or through the mail
return receipt requested) for our approval, to ensure consistency with the
then-current standards and image of the System and protection of the Marks and
the goodwill associated therewith. If disapproval is not received within 20
days from the date of receipt by us of such materials, we shall be deemed to
have given the required approval. The Cooperative and you may not use, and must
cease using, any advertising or promotional materials that we may at any time
disapprove, regardless whether we have previously approved any such items.
(f) OUR ADVERTISING. We may from time to time expend our own
funds to produce such promotional materials and conduct such advertising as we
deem necessary or desirable. In any advertising conducted solely by or for us,
we shall have the sole discretion to determine the products and geographical
markets to be included, and the medium employed and we shall not have any duty
or obligation to supply you with any advertising or promotional materials
produced by or for us at our sole expense.
(g) OWNERSHIP OF ADVERTISING. We shall be the sole and exclusive
owner of all materials and rights that result from advertising and marketing
programs produced and conducted, whether by you, us, the Cooperative or the
Marketing Fund. Any participation by you in any advertising, whether by
monetary contribution or otherwise, shall not vest you with any rights in the
Marks employed in such advertising or in any tangible or intangible materials or
rights, including copyrights, generated by such advertising. If requested by
us, you shall assign to us any contractual rights or copyright you acquire in
any advertising.
9. TELEPHONE NUMBER. The only telephone number(s) assigned to the
Restaurant [is/are] ____________________. Upon termination or expiration of the
Franchise, you shall cease using such telephone number(s). In no event shall
you use such number(s) for any other business. You further agree that if you
obtain any additional or substitute telephone service or telephone number(s) at
the Restaurant, you will promptly notify us and such additional or substitute
number(s) shall be subject to this Agreement. You shall immediately take all
such actions as may be necessary to transfer any telephone number and any
telephone directory listings associated with the Restaurants or the Marks to us.
You acknowledge that, as between us and
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you, we have the sole right to and interest in all telephone numbers and
directory listings associated with the Restaurants or the Marks. Concurrently
with the execution of this Agreement, you shall execute and deliver the form of
assignment of telephone numbers and listings (the "TELEPHONE NUMBER
ASSIGNMENT"), required by the applicable local telephone company or, if the
local telephone company has no form, our current blank assignment form attached
to this Agreement as Exhibit B. You acknowledge and agree that the telephone
company and all listing agencies may accept this Agreement and/or the Telephone
Number Assignment as conclusive evidence of our exclusive right in such
telephone numbers and directory listings and its authority to direct their
transfer.
Upon termination or expiration of this Agreement (without renewal or
extension), we shall have the right and are hereby empowered to effectuate the
Telephone Numbers Assignment and, in such event, you shall have no further
right, title or interest in the telephone numbers and listings and shall remain
liable to the telephone company for all charges and fees owing to the telephone
company on or before the effective date of the assignment hereunder.
You agree and acknowledge that as between us and you, upon termination or
expiration of the Franchise Agreement, we shall have the sole right to and
interest in the telephone numbers and listings, and you appoint us as your true
and lawful attorney-in-fact to direct the telephone company to assign same to
us, and execute such documents and take such actions as may be necessary to
effectuate the assignment. Upon such event, you shall immediately notify the
telephone company to assign the telephone numbers and listings to us. If you
fail to promptly direct the telephone company to assign the telephone numbers
and listings to us, we shall direct the telephone company to effectuate the
Telephone Number Assignment. The parties agree that the telephone company may
accept our written direction, the Franchise Agreement or the Telephone Number
Assignment as conclusive proof of our exclusive rights in and to the telephone
numbers and listings upon such termination or expiration and that such
assignment shall be made automatically and effective immediately upon telephone
company's receipt of such notice from us or you. The parties further agree that
if the telephone company requires that the parties execute the telephone
company's assignment forms or other documentation at the time of termination or
expiration of the Franchise Agreement, our execution of such forms or
documentation on your behalf shall effectuate your consent and agreement to the
assignment. The parties agree that at any time after the date hereof, they will
perform such acts and execute and deliver such documents as may be necessary to
assist in or accomplish the assignment described herein and the Telephone Number
Assignment upon termination or expiration of the Franchise Agreement.
10. CONSTRUCTION, DESIGN AND APPEARANCE; EQUIPMENT.
(a) CONSTRUCTION. You agree that you will construct or remodel
the Premises at the Location in accordance with our construction or remodeling
plans and design, layout and decor specifications. You shall purchase or lease
the pizza preparation, beverage storage or dispensing, storage and other
equipment, displays, fixtures, and furnishings that we designate. You shall
make no changes to any building plan, design, layout or decor, or any equipment
or signage
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without our prior written consent, and shall maintain the interior and exterior
decor in such manner as may be reasonably prescribed from time to time by us.
(b) SIGNS. You shall prominently display, at your expense, both
on the interior and exterior of the Premises, advertising signs in such form,
color, number, location and size, and containing such Marks, logos and designs
as we shall designate. Such signs shall be obtained from a source designated or
approved by us. You shall obtain all permits and licenses required for such
signs and shall also be responsible for ensuring that all signs comply with all
laws and ordinances. You shall not display in or upon the Premises any sign or
advertising of any kind to which we object.
(c) PAPA JOHN'S PROFIT SYSTEM(TM); PURCHASE AND INSTALLATION. You
agree to (1) acquire the "Information System" (as defined below) for the
Restaurant and the right to use, for the term of this Agreement, the "Designated
Software" (as defined below) in the manner specified by us, (2) obtain any and
all peripheral equipment and accessories, arrange for any and all support
services and take all other actions that may be necessary to enable the
"Information System" (as defined below) and the Designated Software to operate
as specified by us (including but not limited to installation of electrical
wiring and cabling, and temperature and humidity controls) that may be necessary
to prepare the Restaurant to enable the "Papa John's Profit System(TM)" (as
defined below) to operate as specified by us, and (3) install and commence using
the Designated Software on the Information System, and use such items solely in
the operation of the Restaurant in the manner specified by us. You shall be
responsible for all costs associated with the foregoing, including but not
limited to transportation, installation, sales, use, excise and similar taxes,
and site preparation. You agree to operate only Designated Software on the Papa
John's Profit System(TM). You acknowledge and agree that the Designated
Software, and all additions, modifications and enhancements thereto, shall be
deemed to be "confidential information" and shall be subject to Section 17 of
this Agreement.
(i) DEFINITIONS. For purposes of this Agreement, the terms
listed below shall have the meanings that follow them.
"DESIGNATED SOFTWARE" - Such software, programming and services as we may
specify or require from time to time for use by you in the Restaurant. The
Designated Software does not include any data or data bases owned or compiled by
us for use with the Papa John's Profit System or otherwise or any data
generated by the use of the Designated Software. The Designated Software may
consist of either or both of the following:
(A) PACKAGED SOFTWARE. The Designated Software may
consist of software purchased and licensed from us or a third party and/or
may contain third-party subcomponents that we have the authority to
license or sell to you ("Packaged Software") pursuant to and in accordance
with agreements that we enter into with such third-party vendors
(collectively, the "Packaged Software Agreements").
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(B) PROPRIETARY PROGRAMS. The Designated Software may
consist of or contain proprietary computer software programs that we may
develop or cause to be developed and that are owned by us and that we
designate for use on the Papa John's Profit System in the operation of a
Restaurant, including any modifications, additions or enhancements to such
software programs ("Proprietary Programs").
"INFORMATION SYSTEM" - Those brands, types, makes, and/or models of
communications and computer systems or hardware specified and required by us for
use in the Restaurant or between or among Papa John's Restaurants and/or us.
This Information System will include point of sale systems, information storage,
retrieval, transmission systems and security systems.
"PAPA JOHN'S PROFIT SYSTEM(TM)" - The Designated Software and Information
System collectively.
(ii) GRANT OF LICENSE. We agree to grant to you, and to
cause our Vendors (defined below) to grant to you, a nonexclusive,
nontransferable, nonassignable license to use the Designated Software, subject
to the same terms and conditions as the Designated Software is licensed to our
other franchisees in general. You agree to be bound by the terms of each
Packaged Software Agreement and, to the extent you purchase all or portions of
the Designated Software from or through us, agree that the vendors and licensors
of all or portions of the Designated Software (collectively, the "Vendors") are
third-party beneficiaries of this Agreement with full rights to enforce this
Agreement as it pertains to the Designated Software. You acknowledge and agree
that the Designated Software and any data generated by the use of the Designated
Software are the valuable, proprietary property and trade secret of us and/or
our Vendors, and you agree to use the utmost care to safeguard the Designated
Software and any data generated by the use of the Designated Software and to
maintain the copyright protection and the secrecy and confidentiality thereof.
(III) ACCESS; ENHANCEMENTS AND CHANGES.
(A) ACCESS TO SYSTEM. We shall have the right at all
times to access the Papa John's Profit System(TM) and to retrieve,
analyze, download and use the Designated Software, and all software, data
and files stored or used on the Papa John's Profit System(TM). We may
access the Papa John's Profit System in the Restaurant or from other
locations, including our headquarters and regional offices. You shall
store all data and information on the Papa John's Profit System(TM) that
we designate from time to time. No unauthorized data or information may
be stored on the Papa John's Profit System(TM).
(B) ENHANCEMENTS AND CHANGES. During the term of this
Agreement, and provided that you are in compliance with the terms of this
Agreement, we shall provide to you, and you shall promptly implement, all
upgrades, modifications, enhancements, extensions, error corrections and
other changes to the Papa John's Profit System developed or adopted by us
for use in the operation of the Restaurant.
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(C) INFORMATION SYSTEMS MAINTENANCE. You agree to
maintain the Information System in accordance with our published
maintenance program, as amended from time to time (which will also be
adhered to by our restaurants). You also agree that if you fail to
maintain the Information System in accordance with our published
maintenance program, you shall reimburse any costs that we or our agents
incur to bring your Information System up to our standards. The published
maintenance program may include, but is not limited to, a hardware spares
program and a preventative maintenance program. You acknowledge that such
maintenance is necessary to help ensure the proper functioning of the Papa
John's Profit System(TM).
(D) IDEAS AND SUGGESTIONS. You shall promptly
disclose to us all ideas and suggestions for modifications or enhancements
of the Papa John's Profit System(TM) or any component thereof that are
conceived or developed by or for you, and we and our Affiliates shall have
the right to use and license such ideas and suggestions. All
modifications and enhancements made to the Papa John's Profit System(TM)
together with the copyright therein shall be the property of us (or the
appropriate Vendor if we so designate), without regard to the source of
the modification or enhancement, and you hereby assign all of your right,
title, and interest in any ideas, modifications, and enhancements to us
(or the appropriate Vendor if we so designate). You agree to execute any
documents, in the form provided by us, that we determine are necessary to
reflect such ownership.
(E) REMOVAL. Upon expiration or termination of this
Agreement, you shall allow our employees or agents to remove the
Designated Software from the Information System, shall immediately return
to us the Designated Software, each component thereof, any data generated
by the use thereof, all documentation for the Designated Software and
other materials or information that relate to or reveal the Designated
Software and its operation. You shall immediately destroy any and all
back-up or other copies of the Designated Software or parts thereof, and
any data generated by the use of the Designated Software (other than
financial information relating solely to you).
(iv) ON-SITE INSTALLATION AND SUPPORT FEE. You agree to pay
to us upon installation of the Designated Software on your Information System,
an on-site installation and support fee (the "On-Site Installation and Support
Fee") in the amount of $2,500, plus all reasonable travel, lodging and other
expenses that we incur in connection with the installation. In exchange for
this On-Site Installation and Support Fee, we will install the Designated
Software on the Information System and provide one or more of our system
installers/trainers at the Restaurant, generally 2 days before the Restaurant
opens for installation and training and 2 days after the Restaurant is open, for
support. This installer/trainer will assist your employees in the use of the
Papa John's Profit System(TM). We may also charge additional On-Site
Installation and Support Fees, not to exceed $750 plus expenses, each time an
enhancement or modification to the Papa John's Profit System(TM) is installed at
the Location. The On-Site Installation and Support Fees do not include any
hardware, supplies, data cabling, electrical wiring, or cash drawer or shelving
installation or other site work necessary to prepare the Restaurant for the Papa
John's Profit
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System(TM). These are your sole responsibility. However, some or all of these
materials and services may be offered by us or our agent for an additional fee.
If more than 4 days of on-site training and support is required, it will be
provided by us or our agent for $500 per day plus additional expenses.
(v) SOFTWARE SUPPORT FEE. You agree to pay to us a
recurring software support service fee ("Software Support Fee") in the amount of
$100 per Period. Such fee shall be payable in advance on the 15th day of each
month commencing in the Period immediately following the installation of the
Designated Software on the Papa John's Profit System(TM) and continuing through
the Term. In exchange for this fee, we will provide general assistance and
support for your Papa John's Profit System(TM). This fee entitles you to 3
telephone calls per Period. Additional calls may be billed at $35 each.
(vi) SOFTWARE MAINTENANCE FEE. You agree to pay to us a
software maintenance fee, which shall not be more than 20% of the license fees
of the Designated Software as published by Vendors or by us in any year
("Software Maintenance Fee"). This fee shall be payable in advance on the 15th
day of the month. This Software Maintenance Fee includes software maintenance,
research and development, upgrades and enhancements and installation media, if
any, that we adopt, require or provide. Installation on the Papa John's Profit
System(TM), if required, will be charged as defined in Section 10.(c)(iv).
(vii) INCREASES IN FEES. The On-Site Installation and Support
Fee, Software Support Fee, the Software Maintenance Fee and/or per diem charges
may be increased by us from time to time.
(viii) WARRANTIES AND LIMITATION OF LIABILITY. We represent
and warrant to you that if we sell or license the Proprietary Programs to you:
(A) we will have all rights, licenses and authorizations necessary to license
the Proprietary Programs to you, subject only to nonexclusive licenses granted
to others; and (B) the Proprietary Programs will not, and as a result of any
enhancements, improvements or modifications provided by us will not, to the best
of our knowledge, infringe upon any United States patent, copyright or other
proprietary right of any third party. In the event your use of the Proprietary
Programs as provided by us is enjoined as a result of a claim by a third party
of patent or copyright infringement or violation of proprietary rights, we
shall, in our sole discretion, either (1) procure for you the right to continue
use of the Proprietary Programs as contemplated hereunder, or (2) replace the
Proprietary Programs or modify it such that there is no infringement of the
third party's rights; and such action by us shall be your sole and exclusive
remedy against us in such event. We do not represent or warrant to you, and
expressly disclaim any warranty that the Proprietary Programs are error-free or
that the operation and use of the Proprietary Programs by you will be
uninterrupted or error-free. We shall have no obligation or liability for any
expense or loss incurred by you arising from use of the Proprietary Programs in
conjunction with any other computer program.
EXCEPT FOR THE ABOVE EXPRESS LIMITED WARRANTIES, WE MAKE NO WARRANTIES,
EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH RESPECT TO
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THE DESIGNATED SOFTWARE OR ANY PORTION THEREOF, INCLUDING ANY PROGRAM
DOCUMENTATION OR OTHER MATERIAL FURNISHED HEREUNDER, OR ANY COMPONENT THEREOF,
AND THERE ARE EXPRESSLY EXCLUDED ALL WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE WITH RESPECT THERETO. WE SHALL HAVE NO LIABILITY FOR
CONSEQUENTIAL, EXEMPLARY, INCIDENTAL OR PUNITIVE DAMAGES.
(d) MAINTENANCE, REMODELING, RE-EQUIPPING, ENHANCEMENTS AND
REPLACEMENTS. You agree at all times to maintain the Restaurant in accordance
with our standards, and that you will, within 90 days from the date of written
notice from us, remodel or re-equip or perform such maintenance at the
Restaurant in accordance with the specifications we provide. Such maintenance,
remodeling and re-equipping may include, without limitation, replacing worn out,
obsolete, or dated equipment, fixtures, furnishings and signs; structural
modifications; painting and redecorating; or purchasing more efficient or
improved equipment. We may require you to perform maintenance and remodeling
and to purchase equipment at such times as we deem necessary and reasonable;
provided, that we may not require any significant remodeling of the Restaurant
during the first 2 years of the Initial Term. We may, during the term of this
Agreement, require you to modify, enhance and/or replace all or any part of the
Information System and/or the Designated Software at your expense, and you
agree, within 120 days of receipt of written notice from us, to acquire, or
acquire the right to use for the remainder of the term of this Agreement, the
modified, enhanced or replacement version of the Information System and/or
Designated Software specified by us. You agree to take all other actions as may
be necessary to enable the modified, enhanced or replacement Information System
and Designated Software to operate as specified by us. Any such modifications,
enhancements, and replacements may require you to incur costs to purchase, lease
and/or license new or modified computer hardware and/or software or other
equipment and to obtain different and/or additional service and support services
during the term of this Agreement. You acknowledge that we cannot estimate the
costs of future maintenance, enhancements, modifications, and replacements to
the Restaurant, equipment, signage, Papa John's Profit System or other items.
YOU ACKNOWLEDGE THAT EQUIPMENT, ADDITIONS, ENHANCEMENTS, ALTERATIONS,
MAINTENANCE AND RENOVATIONS REQUIRED BY US MAY INVOLVE SUBSTANTIAL ADDITIONAL
INVESTMENT BY YOU DURING THE TERM OF THIS AGREEMENT.
11. OPERATIONS; STANDARDS OF QUALITY; INSPECTIONS.
(a) PRINCIPAL OPERATOR. You shall designate an individual to
serve as the "Principal Operator" of the Restaurant. The Principal Operator
shall meet the following qualifications:
(i) The Principal Operator shall own at least a 5% equity
interest in you; provided that you shall not be in default of this requirement
if the Principal Operator is entitled to a bonus of not less than 5% of the net
profits of the Restaurant, payable after the end of each Period, and also has
the right to acquire not less than a 5% equity interest in you within 12 months
of his or her hire date, which rights shall be evidenced by a written agreement
between
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the Principal Operator and you. You shall provide us with a copy of any such
agreement upon request. Once the Principal Operator has acquired an equity
interest in you, he or she must continue to own that interest (or a greater
interest) during the entire period he or she serves as the Principal Operator.
(ii) The Principal Operator shall devote full time and best
efforts to the supervision and conduct of the development and operation of the
Restaurant and, as required in this Agreement, shall agree to be bound by
confidentiality and non-competition provisions of the Owner Agreement. At such
time as the Principal Operator becomes an owner of an interest in you, he or she
must agree to be bound by all the provisions of the Owner Agreement.
(iii) The Principal Operator shall be a person approved by us
who shall complete our initial training requirements and who shall participate
in and successfully complete all additional training as we may reasonably
designate.
If, at any time for any reason, the Principal Operator no longer qualifies
to act as such, you shall promptly designate another Principal Operator subject
to the same qualifications listed above. Any sale or transfer of any portion of
the Principal Operator's interest in you, if any, that would reduce the
Principal Operator's equity interest or voting rights in you to less than 5% of
the total shall be deemed a transfer of an interest and shall be subject to the
terms and conditions of Section 14 hereof; and any failure to comply with such
terms and conditions shall be deemed a default by you under this Agreement.
However, if the Principal Operator owns 5% or less of you, then a transfer of
the Principal Operator's interest to you, another shareholder, member or partner
of you or to a successor Principal Operator shall not require our consent, shall
not be subject to our right of first refusal and no transfer fee shall be
required. You shall promptly notify us in writing of any such transfer and
provide all information about the transferee and the terms of the transfer as we
may reasonable request.
(b) MANAGEMENT OF THE RESTAURANT. The Principal Operator and one
or more competent managers approved by us (which approval shall not be
unreasonably withheld) and who have successfully completed our initial training
program shall personally devote their full time and best efforts to the
management and operation of the Restaurant in order to ensure compliance with
this Agreement and to maintain our high standards. Management responsibility
shall include, without limitation, presence of the Principal Operator or a
manager at the Restaurant during all business hours; maintaining the highest
standards of product quality and consistency; maintaining the Restaurant in the
highest condition of sanitation, cleanliness and appearance; and supervising
employees to ensure that the highest standard of service is maintained and to
ensure that your employees deal with customers, suppliers, us, and all other
persons in a courteous and polite manner.
(c) COMPLIANCE WITH OUR STANDARDS. You shall have full
responsibility for the conduct and terms of employment for your employees and
the day-to-day operation of your business. However, you shall operate the
Restaurant through strict adherence to the standards, specifications and
policies of the System as they now exist, and as they may from time to time be
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modified, in order to ensure compliance with the quality standards of the
System. Such standards and policies include, without limitation: (i)
specifications and preparation methods for food and beverages; (ii) hours of
operation; (iii) menu items and services offered; (iv) employee uniform
requirements and specifications; and (v) use of specified emblems and Marks on
containers, bags, boxes, napkins, and other products.
(d) TRAINING. Should any employee or prospective employee of you
perform work that in our reasonable judgment requires additional training,
skills or knowledge, such employee shall take part in such additional training
and instruction. You shall be solely responsible for all wages, travel and
living expenses, and all other costs incurred by you and your employees in
connection with any training or instruction that we provide. You shall also, at
your own expense, conduct at the Restaurant such training and instruction, using
such materials, equipment and supplies, as we may reasonably require from time
to time.
(e) MANUALS. We will lend to you one or more manuals that contain
(i) the mandatory and suggested specifications, standards and operating
procedures prescribed from time to time by us and (ii) information relative to
other obligations hereunder and the operation of the Restaurant (the "Manuals").
The Manuals shall at all times remain our sole property. We may, from time to
time, revise the contents of the Manuals. To the extent that we deem it
necessary or appropriate, we will provide you with policy and procedure
statements or other written notice of specifications, standards and procedures.
You agree to promptly adopt and use the formulas, methods, procedures, policies,
menus, recipes, food products and other standards and specifications contained
in the Manuals, policy and procedure statements and other written notices as
issued from time to time by us. You acknowledge and agree that all information
in the Manuals, policy and procedure statements and other notices constitute
confidential information and trade secrets, and shall not be disclosed at any
time by you. You shall not copy any part of the Manuals or any other
communication or information provided by us.
(f) VARIATIONS IN STANDARDS. You shall not implement any change
to the System without our prior written consent. However, because complete and
detailed uniformity under varying conditions may not be possible or practical,
we specifically reserve the right, in our sole discretion and as we may deem in
the best interests of you or the Chain, to vary the System, including specific
standards, policies and/or procedures, within the Restaurant or any other
restaurant(s) in the Chain based upon peculiarities of a particular location or
circumstances, including, but not limited to, density of population and other
demographic factors, size of the Territory, business practices or customs, or
any other condition that we deem to be of importance to the operation of such
restaurant(s) or the Chain. You acknowledge that because of these factors and
others, there may be variations from standard specifications and practices in
the Chain and that you shall not be entitled to require us to grant like or
similar variations or privileges to you.
(g) YOUR DEVELOPMENTS. We shall have the right to use and
incorporate into the System for the benefit of other franchisees and us any
modifications, ideas or improvements, in whole or in part, developed or
discovered by you or your employees or agents, without any liability or
obligation to you or the developer thereof.
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(h) COMPLIANCE WITH LAWS. You shall at all times during the Term
comply with all applicable laws, ordinances, rules and regulations of all
governmental bodies.
(i) COURTESY; COOPERATION. At all times and under all
circumstances, you and your employees shall treat all customers and other
persons, including our agents, officers, and employees with the utmost respect
and courtesy, and shall fully cooperate with us and our agents, officers, and
employees in all aspects of the franchise relationship.
(j) INSPECTIONS. An agent, officer or employee of ours may make
inspections of the Restaurant to ensure compliance with all required standards,
specifications and procedures. Our representative shall be allowed to inspect
the condition and operation of the Restaurant and all areas of the Restaurant at
any time during normal business hours. Such inspections may include, without
limitation, (i) reviewing sales and order forms, (ii) observing the Principal
Operator and all managers and your other employees, (iii) interviewing any such
persons, (iv) interviewing customers of the Restaurant in order to evaluate your
performance and to ensure that the Restaurant is being operated in accordance
with the requirements of this Agreement and the Manuals, and (v) conducting any
type of audit or review necessary to evaluate your compliance with all required
standards, specifications or procedures. We may, from time to time, make
suggestions and give mandatory instructions with respect to your operation of
the Restaurant, as we consider necessary or appropriate to ensure compliance
with the then-current quality standards of the System and to protect the
goodwill and image of the System.
12. PRODUCTS; COMMISSARY; MENU.
(a) PRODUCTS. You agree that you will use only those food items,
ingredients, beverages, cooking materials, containers, boxes, cups, packaging,
menus, uniforms, and other products and materials in the operation of the
Restaurant as we shall have specifically designated or approved. You may be
required to purchase from us certain products that involve trade secrets or that
have been specially prepared by us or at our direction or that we consider to be
integral to the System. We may require that certain products be purchased from
one or more designated suppliers. Products other than those required to be
obtained from us or a designated supplier may be purchased from any source
provided that the particular supplier and products have been approved by us. We
may, from time to time, amend the list of approved products and suppliers.
(b) COMMISSARIES. PJ Food Service, Inc. ("PJFS") and PJFS of
Mississippi, Inc. ("PJFS of Mississippi") presently supply designated and
approved products to restaurants owned by us or our Affiliates and those of our
franchisees from commissaries that are either owned or operated by PJFS, PJFS of
Mississippi or us (the "Commissaries"). PJFS and PJFS of Mississippi are
currently the only designated manufacturers of dough, and you must purchase
dough from PJFS, PJFS of Mississippi or a designated representative unless and
until such time as a successor supplier of dough is designated. Neither PJFS nor
PJFS of Mississippi has any obligation to continue supplying you or to continue
to operate its Commissary. If either of them ceases operating the Commissaries
or terminates service to you (other than as a result of the termination or
expiration of the Franchise), we shall provide you with the name, address and
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phone number of an alternative approved supplier(s) and the products to be
purchased from such supplier(s). All purchases by you from the Commissaries are
on the terms specified from time to time by PJFS or PJFS of Mississippi. PJFS
and PJFS of Mississippi, through us, hereby reserve the right to specify
different terms for different franchisees. We make no representations or
warranties about any of the services performed by or any of the products
produced or sold by or through PJFS or PJFS of Mississippi.
(c) MENU ITEMS. You shall offer for retail sale, and shall carry
on your menu, only those types, sizes, styles and brands of pizza, pizza dough,
pizza sauce, toppings, beverages, and other products as from time to time we may
specify, and shall make all menu items available for carry-out and delivery
service from the Restaurant. You agree that you will not sell or carry on your
menu any food items or other products we have not specified or approved.
(d) PRICING. You shall have the sole responsibility for
establishing your prices, but you shall charge the same price for each product
whether sold in the Restaurant or delivered unless we otherwise approve.
13. ACCOUNTING AND REPORTS.
(a) ACCOUNTING. We may lend to you and/or the person(s) who will
be preparing your reports and financial statements for each Period or year end
one or more manuals, which manual(s) may contain mandatory and/or optional (i)
accounting procedures, (ii) forms, (iii) chart of accounts, and (iv) other items
deemed relevant or necessary by us. You agree to direct your
bookkeeper/accountant to follow all mandatory policies, procedures, forms,
formats and other items set forth in such manuals. The accounting manual(s)
shall be part of the "Manuals" as defined in this Agreement.
(b) RECORDKEEPING. You shall establish and maintain accounting
and record keeping systems substantially in accordance with the specifications
and procedures provided by us and as amended from time to time, including,
without limitation, maintaining accounting records on a basis enabling or
facilitating reporting to us according to monthly or multi-week periods (each
such accounting period is referred to as "Period"). You shall make all such
records available to us upon request. You shall maintain and preserve, for at
least five years from the date of preparation, full, complete and accurate
books, records and accounts.
(c) PERIODIC REPORTS. On or before the 15th day of the month
following each Period, you shall deliver to us: (i) a statement, in the form
prescribed by us, of the revenues and expenses of the Restaurant for the
immediately preceding Period, and (ii) such other records and reports as are
requested by us, including but not limited to, bank statements, sales and
expense forms and reports, and a current balance sheet.
(d) REVIEW BY US. At all times during the Term, we, or our
authorized agent, shall have the right to review all your sales and expense
records and reports that are located in or which relate to the Restaurant, and
to make photocopies of all such items.
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(e) YEAR-END REPORTS. Within 120 days following your fiscal year
end, you shall provide us with copies of your financial statements, including an
income statement for the fiscal year just ended and a balance sheet as of the
end of such fiscal year, which financial statements shall have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis. You shall furnish us with copies of all of your federal and state income
tax returns and all state sales tax returns as we request from time to time. You
shall promptly notify us if any such return is not timely filed, or if any
extension is filed, and the reasons therefor.
(f) EXAMINATIONS AND AUDITS. We or our designated agents shall
have the right, at all times and upon reasonable notice, to examine or audit
your books and records, and to make photocopies thereof. If such examination or
audit should disclose any underpayment of the Royalty, Marketing Fund payments,
or any other sums or fees owed to us, you shall immediately pay the deficient
amount plus interest thereon from the date due until paid at a rate equal to 12%
per annum. All payments received will first be credited against interest due
and then against other payments due. If such an examination or audit discloses
an understatement in any statement or report of 5% or more, you shall, in
addition to the above provision, reimburse us for the cost of having your books
examined or audited. The foregoing shall be in addition to any other rights or
remedies we may have, including the termination of the Franchise granted herein.
14. TRANSFERS; OUR RIGHT OF FIRST REFUSAL.
(a) TRANSFERS BY US. We may transfer or assign this Agreement or
any or all of the rights, interests, benefits or obligations arising hereunder
without restriction. Upon any transfer or assignment of this Agreement by us,
we shall be released from all obligations and liabilities arising or accruing in
connection with this Agreement after the date of such transfer or assignment.
(b) TRANSFERS BY YOU. Your rights and interests under this
Agreement are and shall remain personal to you. You recognize that we have
granted the Franchise in reliance on your business and financial capacity and
other attributes, and in reliance upon the Owner Agreement. Accordingly,
neither you nor any holder of any capital stock or other ownership interest in
you (if you are a corporation or other entity) shall transfer (i) any interest
in this Agreement, (ii) any material portion of your assets or the assets of the
Restaurant, or (iii) any stock or other ownership interest in you, without
obtaining our prior written consent; provided that a member, partner or
shareholder of you may transfer all or a portion of such interest in you to
another member, partner or shareholder or to you (such person or entity being
referred to as a "Permitted Transferee") and such a transfer shall not be
subject to our consent or right of first refusal and no transfer fee shall be
required. You shall promptly notify us of any such transfer. For purposes of
this Agreement, the term "transfer" shall mean any issuance, sale, assignment,
gift, pledge, mortgage or any other encumbrance (other than a lien against your
assets to secure a loan for purchase of the Premises or the construction,
remodeling, equipping or operation of the Restaurant), transfer by bankruptcy,
transfer by judicial order, merger, consolidation, share exchange, transfer by
operation of law or otherwise, whether direct or indirect, voluntary or
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involuntary. Our consent to a particular transfer shall not be deemed as
consent to any subsequent or different transfer. If you grant a security
interest in your assets to secure a loan for purchase of the Premises or
construction, leasehold or equipment costs, the secured party shall agree in
writing that upon (A) default by you, it shall notify us and we shall have the
right, but not the obligation, to be substituted as the debtor and to cure the
default, and (B) any acceleration of indebtedness provisions of the loan
documents shall not be exercisable if we cure the default and assume the
indebtedness. Upon the occurrence of a default and our election to assume the
indebtedness, the Franchise and this Agreement shall automatically terminate and
we shall have the right under Section 20 to purchase the assets used in the
Restaurant. The purchase price as determined under Section 20 shall be reduced
by the amount of the debt that we assumed.
(i) OUR RIGHT OF FIRST REFUSAL. You shall give us at least
45 days prior written notice of any intended transfer of any of your rights or
interest under this Agreement or of the proposed transfer of any interest in you
or any material portion of your assets. Such notice shall set forth the name of
the proposed transferee and a detailed statement of all of the terms and
conditions of such intended or proposed transfer. Subject to subsection (c)
below, we will not unreasonably withhold our consent to a proposed transfer.
Irrespective of the qualifications or acceptability of any prospective
transferee, we shall have the first right and option to purchase the interest
intended or proposed to be transferred at the same price and on the same terms
and conditions contained in the notice. Should the proposed transfer involve
the payment of any non-cash consideration, we shall have the option to purchase
the interest at a price equal to the fair market value of such non-cash
consideration plus the amount, if any, of consideration paid in cash. We shall
determine the fair market value of the non-cash consideration using fair and
reasonable methods. We shall make such determination as promptly as
practicable, but in no event later than 30 days after we have received the
notice of the intended transfer. If you disagree with the value as we
determine, then you and Papa John's shall each hire an appraiser (or a single
appraiser, if you and Papa John's so agree) to value the non-cash consideration.
If the appraisals are within 20% of each other, then the difference between the
two shall be equally divided to establish the price at which we may exercise our
first right and option. If the difference between the appraisals is greater
than 20%, then the issue of the fair market value of such consideration shall be
determined by a third appraiser selected by the other two appraisers and whose
decisions shall be final, except that it may not be lower or higher than the
lowest appraisal and highest appraisal, respectively, determined by the first
two appraisers. Should a proposed transfer not involve the payment of any
consideration, we have the option to purchase the interest at a price equal to
1-1/2 times the Net Profits of the Restaurant over the previous 12-month period
(or the average monthly Net Profit of the Restaurant multiplied by 12, if it has
been operating less than 12 months) multiplied by the percentage that the
interest to be transferred bears to all interests in, or assets of, the
Restaurant or you, as the case may be. As used in this Agreement, Net Profits
means the amount of profit, if any, determined from statements of profit and
loss prepared by an independent public accountant that we find acceptable.
Within 30 days after we receive notice of a proposed transfer for no
consideration or solely for cash, or if the proposed transfer will not be solely
for cash, within 10 days after a determination is made of the fair market value
of the non-cash consideration, we will notify you that we are exercising our
right of first refusal or approving the transfer or denying approval of the
transfer. Our decision to deny approval shall be final.
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(ii) APPROVED TRANSFERS. If we decide not to exercise our
right of refusal, and if we approve the transfer in writing, you (or the
transferor of an interest in you) may make the proposed transfer on the exact
terms and conditions specified in your notice to us within 60 days after the
expiration of our option. If the transfer is not consummated within such
60-day period, you may not thereafter transfer such interest without again
complying with this Section.
(c) CONDITIONS ON TRANSFER. We agree that we will not
unreasonably withhold our consent to a proposed transfer if all of the following
conditions are satisfied:
(i) We shall have decided not to exercise our right of first
refusal as provided above;
(ii) You are in full compliance with this Agreement and there
are no uncured defaults by you hereunder, and all your debts and financial
obligations to us and our Affiliates under this Agreement or otherwise are
current and your obligations to the Marketing Fund and each Cooperative of which
you are a member are current;
(iii) The proposed transferee executes such documents as we
may reasonably require to evidence that such transferee has assumed your
obligations under this Agreement, and if required by us, the proposed transferee
executes, and in appropriate circumstances, causes such other parties as we may
require to execute, our then-current form of Owner Agreement, and other
then-current ancillary agreements, which documents may be substantially
different than those attached to this Agreement;
(iv) The proposed transferee enters into an Advertising
Agreement with the Marketing Fund and also becomes a member of the Cooperative
to which the Restaurant is required to contribute;
(v) Prior to the date of the proposed transfer, the proposed
transferee's Principal Operator and managers undertake and successfully complete
such training and instruction as we deem necessary;
(vi) We are satisfied that the proposed transferee (and if
the proposed transferee is an entity, all owners of any interest in such entity)
meets all of the requirements for our new franchisees applicable on the date we
receive notice of the proposed transfer and including, but not limited to, good
reputation and character, business experience, restaurant management experience,
and financial strength and liquidity;
(vii) You and any owner transferring an interest in you
acknowledge and agree in writing that you and they are bound by the
non-competition and confidentiality provisions set forth herein and in the Owner
Agreement (and any similar provision in any other document that either you or
they have executed) to the maximum extent allowed under applicable law;
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(viii) You and all owners of an interest in you execute a
general release, in the form prescribed by us, releasing, to the fullest extent
permitted under the laws of the state where either the Restaurant to be
transferred or you, as applicable, is/are located, all claims that you or any of
them may have against us or our Affiliates or subsidiaries, including our and
their respective shareholders, officers, directors and employees, in both their
individual and corporate capacities, and if you are the transferor, you shall
acknowledge in writing that your interest under this Agreement is terminated;
(ix) You shall pay to us a transfer fee of $3,000; provided,
that if the proposed transfer is of the Restaurant together with one or more
other Papa John's restaurants owned by you to a single transferee, then the
total transfer fee shall be an amount equal to the greater of $3,000 or our
actual costs and expenses incurred in approving and effecting the transfer,
including, without limitation, all "in-house" and outside personnel and
professional costs; and
(x) The proposed transferee and all owners of any interest
in a transferee that is an entity provide to us, at least 45 days prior to the
proposed transfer date, copies of financial statements for the preceding three
years, and where applicable, its certificate of incorporation and bylaws,
articles of organization and operating agreement (if an LLC) or agreement and
certificate of partnership (and any amendments or modifications thereof),
minutes and resolutions and all other documents, records and information
pertaining to the transferee's existence and ownership.
(d) OWNERSHIP AND STRUCTURAL CHANGES. Except for transfers
between Permitted Transferees, any ownership or structural changes in you,
including but not limited to, any merger, reorganization, issuance of additional
shares or classes of stock or additional membership or partnership interests,
shall constitute and be deemed a transfer of the Franchise and shall be subject
to our prior written approval.
15. DEATH, INCAPACITY OR DISSOLUTION.
(a) TRANSFER UPON DEATH, ETC. Upon your death or permanent
incapacity; or, if you are a corporation, limited liability company, partnership
or other entity, upon the death, incapacity or dissolution of any owner of any
interest in you; the executor, administrator, conservator, trustee or other
representative of such person or entity shall assign such interest in the
Franchise, or such interest in you, to us or a third party approved by us;
provided, that if the transferee is a Permitted Transferee, our right of first
refusal shall not apply and no transfer fee shall be payable. Further, if an
approved transfer involves less than 25% of the ownership of you, no transfer
fee shall be payable. If you are one or more individuals and any of you dies or
becomes permanently incapacitated, and if the law of the jurisdiction where the
Restaurant is located so provides, nothing contained in this Section shall deny
your spouse, heirs or personal representative the opportunity to participate in
the ownership of the Franchise for a reasonable time after your death or
incapacity, provided that: (i) this Agreement is valid and in effect, (ii) the
spouse, heirs or representative meets all conditions and qualifications
otherwise required of
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transferees, and (iii) such spouse, heirs or representative maintains and
complies with all standards and obligations contained in this Agreement. An
assignment under this Section 15 shall be completed within a reasonable time,
not to exceed 9 months from the date of death, permanent incapacity or
dissolution and shall (except as otherwise provided above) be subject to the
terms and conditions applicable to lifetime transfers contained in Section 14,
including our right of first refusal.
(b) MANAGEMENT BY US. Pending assignment, if the Principal
Operator ceases managing the Restaurant and another shareholder, member, partner
or employee of you that qualifies as the Principal Operator does not assume such
obligations, we may, at our sole option, appoint a manager to operate the
Restaurant for your account. All expenses of the Restaurant, including
compensation, travel and living expenses, and other costs of the appointed
manager, and a reasonable per diem fee for our administrative expenses, shall be
charged to you. Operation of the Restaurant during any such period shall be for
and on your behalf. The appointed manager shall have a duty only to utilize his
or her best efforts in the management of the Restaurant and neither we nor the
appointed manager shall be liable to you or your owners for any debts, losses,
liabilities or obligations incurred by the Restaurant, or to any of your
creditors for any merchandise, materials, supplies or services purchased by the
Restaurant during any period in which it is managed by our appointed manager.
16. YOUR ADDITIONAL COVENANTS.
(a) LIMITATIONS ON ACTIVITIES. If you are a corporation, limited
liability company, partnership or other entity, you shall not at any time during
the Term of this Agreement, own, operate or have any interest in any other
business or business activity other than the operation of Papa John's
restaurants pursuant to agreements with us. If you are an individual and are
also the Principal Operator, you have disclosed to us all businesses in which
you have an interest, or are engaged in, and covenant that you will notify us of
any intention to participate or engage, directly or indirectly, in any other
business activity at least 30 days before undertaking such activity or becoming
a party to any agreement or understanding relating to such activity. You shall
provide us with such information in regard thereto as we may reasonably request
and will not engage or participate in any such activity unless you receive our
written consent.
(b) EXECUTION OF ANCILLARY DOCUMENTS. Simultaneously with the
execution of this Agreement, you shall cause each person or entity owning any
beneficial interest in you to execute an Owner Agreement in the form provided by
us.
(c) YOUR NON-COMPETE. You covenant and agree that during the Term
of this Agreement (including the Renewal Term, if applicable) and for a period
of two years after the termination or expiration of the Franchise (the
"Restricted Period"), regardless of the reason for such termination or
expiration, you shall not, within a 10-mile radius of (A) the Restaurant, or (B)
any business location at which we or an Affiliate or our franchisee then
conducts a Papa John's business, engage in any of the following activities:
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(i) directly or indirectly enter into the employ of, render
any service to or act in concert with any person, partnership, limited liability
company, corporation or other entity that owns, operates, manages, franchises or
licenses any business that (A) sells pizza or other non-pizza products
(excluding soft drinks) that are the same as those sold by Papa John's
restaurants on a delivery basis, or (B) sells pizza or any such other products
primarily on a carry-out basis, including, without limitation, business formats
such as Domino's, Pizza Hut, Mr. Gatti's, Sbarro and Little Caesars (a
"Competitive Business"), or
(ii) directly or indirectly engage in any such Competitive
Business on your own account, or
(iii) become interested in any such Competitive Business
directly or indirectly as an individual, partner, member, shareholder, director,
officer, principal, agent, employee, consultant or in any other relationship or
capacity; provided, that the purchase of a publicly traded security of a
corporation engaged in such business or service shall not in itself be deemed
violative of this Section so long as you do not own, directly or indirectly,
more than 1% of the securities of such corporation.
To the extent required by the laws of the state in which the Restaurant is
located, the duration or the geographic areas included within the foregoing
covenants, or both, shall be deemed amended in accordance with Section 25.(a).
(d) MANAGERIAL AND SUPERVISORY EMPLOYEES. You covenant that you
shall cause all persons who are involved in managerial or supervisory positions
with you to enter into a Confidentiality Agreement as provided by us. You agree
to provide us with copies of such executed agreements upon request. If you have
reason to believe that any person has violated any such Confidentiality
Agreement, you shall promptly notify us and cooperate with us to protect us
against unfair competition, infringement, or other unlawful use of the Marks,
our trade secrets, recipes, or System. You further grant us the right, but not
the obligation, to prosecute any such lawsuits at our expense in your name.
(e) COPYING; NON-SOLICITATION. You shall not copy or duplicate
our System or any aspect thereof, or any of our trade secrets, recipes, methods
of operation, processes, formulas, advertising, marketing, designs, trade dress,
plans, software, programs, know-how or other proprietary ideas or information
nor will you convey, divulge, make available or communicate any such information
to any third party or assist others in doing so (except as permitted or required
by this Agreement). You covenant that you will not, either during the Term or
after it, employ or seek to employ any person who is employed by us, our
Affiliates or by any of our franchisees, or otherwise directly or indirectly
solicit, entice or induce any such person to leave their employment.
(f) VALIDITY OF MARKS AND COPYRIGHTS; REGISTRATIONS. You agree
that you will not, either during the Term or any time thereafter, directly or
indirectly challenge or contest the validity of, or take any action to
jeopardize our rights in or ownership of, any of the Marks
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or any registration of a Mark or any Copyrighted Work. If you violate this
provision, we shall be entitled to equitable, monetary and punitive remedies and
any other relief that may be available under applicable law, as well as the
recovery of all costs, expenses and attorneys' fees incurred by us as a result
of such violation.
(g) REASONABLENESS OF SCOPE AND DURATION. You agree that the
covenants and agreements contained herein are, taken as a whole, reasonable with
respect to the activities covered and their geographic scope and duration, and
you shall not raise any issue of the reasonableness of the areas, activities or
duration of any such covenants in any proceeding to enforce any such covenants.
You acknowledge and agree that you have other skills and resources and that the
restrictions contained in this Section 16 will not hinder your activities or
ability to make a living either under this Agreement or in general.
(h) ENFORCEABILITY. You agree that we may not be adequately
compensated by damages for a breach by you of any of the covenants and
agreements contained in this Section, and that we shall, in addition to all
other remedies, be entitled to injunctive relief and specific performance. The
covenants and agreements contained in this Section shall be construed as
separate covenants and agreements, and if any court finally determines that the
restraints provided for in any such covenants and agreements are too broad as to
the area, activity or time covered, said area, activity or time covered may be
reduced to whatever extent the court deems reasonable, and such covenants and
agreements shall be enforced as to such reduced area, activity or time.
17. TRADE SECRETS AND CONFIDENTIAL INFORMATION. You understand and
agree that we have disclosed or will disclose to you certain confidential or
proprietary information and trade secrets. Except as necessary in connection
with the operation of the Restaurant and as approved by us, you shall not,
during the Term or at any time after the expiration or termination of the
Franchise, regardless of the cause of termination, directly or indirectly, use
for your own benefit or communicate or divulge to, or use for the benefit of any
other person or entity, any trade secrets, confidential information, knowledge
or know-how concerning the recipes, food products, advertising, marketing,
designs, plans, software, programs or methods of operation of the Restaurant or
the System. You shall disclose to your employees only such confidential,
proprietary or trade secret information as is necessary to operate your business
hereunder and then only while this Agreement is in effect. Any and all
information, knowledge, or know-how, including without limitation, drawings,
materials, equipment, marketing, recipes, and other data, that we designate as
secret or confidential shall be deemed secret and confidential for purposes of
this Agreement.
18. INSURANCE.
(a) TYPES AND EXTENT OF COVERAGE. You shall obtain and maintain
throughout the Term such insurance coverages with such limits as specified below
(or such greater amounts of insurance as may be required by the terms of any
lease or mortgage relating to the Premises) under policies issued by carriers
rated "A" or better by A.M. Best Company:
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(i) fire, extended coverage, vandalism, malicious mischief
and special extended peril insurance at no less than the actual replacement
value of the building (if owned), the contents, and improvements of the
Restaurant;
(ii) workers' compensation and other insurance required by
law;
(iii) commercial general liability insurance on an
"occurrence" form covering all operations by or on behalf of you, providing
insurance for bodily injury liability, property damage liability and personal
injury liability for the limits of liability indicated below and including
coverage for:
(A) Premises and Operations Liability,
(B) Products and Completed Operations Liability,
(C) Independent Contractors Protective Liability,
(D) Blanket Contractual Liability insuring the
obligations assumed by you under this Agreement, and
(E) Incidental Medical Malpractice;
(iv) automobile liability insurance including non-owned
automobiles, with limits of liability not less than $1,000,000 combined single
limit each accident for bodily injury and property damage combined; and
(v) fire legal liability, with a minimum coverage limit of
$500,000, unless you own the Premises or have a cross-waiver of subrogation with
your landlord.
The limits of liability required for the policies specified in (iii) above are:
$1,000,000 each occurrence (combined single limit for bodily injury and property
damage), $1,000,000 personal injury liability, $1,000,000 aggregate for
products - completed operations, $2,000,000 general aggregate. Except with
respect to bodily injury and property damage included within the products and
completed operations hazards, the aggregate limit must apply separately to each
location if you operate at more than one location pursuant to multiple franchise
agreements with us. You are also required to maintain an umbrella policy with a
minimum of $1,000,000, which must expressly provide coverage above the coverages
listed above. We must be named as an additional insured on all your policies.
These are only the minimum coverages required. We do not represent or warrant
that these coverages are adequate. You should consult with your insurance
advisors to assure that you obtain all required coverages as well as any
additional types of coverages or higher limits that they may recommend.
(b) OTHER INSURANCE REQUIREMENTS. Upon request, you shall deliver
to us copies of all such policies of insurance and proof of payment therefor.
All policies required
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hereunder shall provide that the insurer shall endeavor to give us written
notice not less than 30 days prior to the date the coverage is canceled,
altered, or permitted to lapse or expire. We may, from time to time, increase
the limits of any required policy of insurance.
19. TERMINATION BY US.
(a) AUTOMATIC TERMINATION. You shall be in default under this
Agreement, and the Franchise and all rights granted to you in this Agreement
shall automatically terminate without notice to you, (i) if you make a general
assignment for the benefit of creditors; or if a petition in bankruptcy is filed
by you or (ii) such a petition is filed against and not opposed by you; or (iii)
if you are adjudicated as bankrupt or insolvent; or (iv) if a bill in equity or
other proceeding is filed for the appointment of a receiver or other custodian
for your business or assets and consented to by you; or (v) if a receiver or
other custodian (permanent or temporary) of your assets or property, or any part
thereof, is appointed by any court of competent jurisdiction; or (vi) if
proceedings for a composition with creditors under any state or federal law are
instituted by or against you; or (vii) if a final judgment against you remains
unsatisfied or of record for 30 days or longer (unless an appeal or supersedeas
bond is filed); or (viii) if you are liquidated or dissolved; or (ix) if any
portion of your interest in the Franchise becomes subject to an attachment,
garnishment, levy or seizure by any creditor or any other person claiming
against or in your rights; or (x) if execution is levied against your business
or property; or (xi) if the real or personal property of your Restaurant is sold
after levy thereupon by any sheriff, marshal, or constable; or (xii) for the
reasons described in Section 14.(b) hereof.
(b) WITHOUT NOTICE. You shall be in default and we may, at our
option, terminate the Franchise and all rights granted in this Agreement,
without affording you any opportunity to cure the default, effective upon the
earlier of receipt of notice of termination by you, or five days after mailing
of such notice by us, upon the occurrence of any of the following events:
(i) You at any time cease to operate or otherwise abandon
the Restaurant or forfeit the right to do or transact business in the
jurisdiction where the Restaurant is located or lose the right to possession of
the Premises; provided, however, that if any such loss of possession results
from the governmental exercise of the power of eminent domain, or if, through no
fault of yours, the Premises are damaged or destroyed, then you shall have 45
days after either such event in which to apply for our approval to relocate or
reconstruct the premises (which approval shall not be unreasonably withheld),
provided, that you shall either relocate or begin and diligently pursue
reconstruction of the Restaurant within 60 days after the event;
(ii) Except as otherwise permitted in Sections 14 and 15, any
owner of more than a 5% interest in you transfers all or part of such interest
or you transfer any interest in the Franchise or a material portion of your
assets or the assets of the Restaurant without our prior written consent;
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(iii) You or any person or entity owning more than 5% of you
is proven to have engaged in fraudulent conduct, or is convicted of, or pleads
guilty or no contest to a felony or a crime involving moral turpitude, or any
other crime or offense that is reasonably likely to have an adverse effect on
the Chain, the Marks or the goodwill associated therewith; provided, that if the
act or conviction involves your owner, we will not terminate the Franchise if
you notify us promptly after you learn of the event constituting the default,
and within 15 days of the date of the notice, either (A) the person or entity
that committed the wrongful act divests his, her or its entire interest in you,
or (B) you obtain our consent for such owner to maintain his, her or its
ownership interest.
(iv) An approved transfer is not effected within 9 months of
your death or incapacity, or the death, incapacity or dissolution of any owner
of an interest in you;
(v) You make any intentional, unauthorized disclosure or
divulgence of the contents of any Manual or other confidential information
provided to you by us;
(vi) You are given 3 or more notices of being in material
violation of any of the terms or requirements of this Agreement within any
12-month period, whether or not such defaults are timely cured after notice;
(vii) You fail to comply with any of your covenants set forth
in Sections 16 or 17, fail to maintain the insurance coverages under Section 18,
or make any material misrepresentation to us or breach any warranty or
representation made to us, whether in this Agreement or otherwise;
(viii) You knowingly or intentionally maintain false books or
records or submit any false record, statement or report to us; or
(ix) You, by act or omission, materially impair the value of,
or the goodwill associated with, the Chain, any of the Marks or the System.
(c) WITH NOTICE AND FAILURE TO CURE. Except for those defaults
provided for under subsections (a) or (b) above, you shall be in default
hereunder for any failure to maintain or comply with any of the terms,
covenants, specifications, standards, procedures or requirements imposed by this
Agreement or in any Manual, policy or procedure statement or other written
document provided by us, or to carry out the terms of this Agreement in good
faith. For such defaults, we will provide you with written notice and 15 days
to cure or, if a default cannot reasonably be cured within 15 days, to begin
within that time substantial and continuing action to cure such default and to
provide us with evidence of such actions. If the defaults specified in such
notice are not cured within the 15-day period, or if substantial and continuing
action to cure has not been initiated, we may, at our option, terminate the
Franchise effective on the earlier of the date of receipt by you of notice of
termination or 5 days after the mailing of such notice by us. Such defaults
shall include, without limitation, the occurrence of any of the following
events:
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(i) You fail to construct, remodel, or commence operating
the Restaurant in accordance with this Agreement;
(ii) You fail, refuse, or neglect to promptly pay any monies
owing to us, our Affiliates or the Marketing Fund or a Cooperative when due, or
to submit the financial or other information required under this Agreement;
(iii) Any person or entity owning 5% or less of you transfers
such interest in violation of this Agreement; provided, however, that your right
to cure such a default shall be conditioned upon you immediately notifying us of
the improper transfer and taking all actions necessary to either (A) obtain our
approval thereof or, (B) if approval is not desired or the transfer or
transferee is not approved by us, to re-acquire the interest so transferred;
(iv) A threat or danger to public health or safety results
from the construction, maintenance, or operation of the Restaurant;
(v) You misuse or make any unauthorized use of the Marks; or
(vi) You, by act or omission in connection with the operation
of the Restaurant, permit a continuing violation of any applicable law,
ordinance, rule, or regulation of a governmental body.
(d) MATERIALITY OF BREACHES. You acknowledge and agree that a
breach or violation of any term, covenant, condition, warranty, representation
or other obligation by you (other than a breach or violation that may be cured
under Section 19.(c) and is in fact cured within 15 days after notice) shall
constitute a material breach and default under this Agreement. Any breach or
violation that may be cured under Section 19.(c) and that is not in fact cured
within the 15-day cure period shall also constitute a material breach and
default under this Agreement.
20. OBLIGATIONS UPON TERMINATION OR EXPIRATION.
(a) POST TERMINATION OBLIGATIONS. Upon termination or expiration
of the Franchise, all rights granted to you under this Agreement shall
terminate, the Franchise shall revert to us, and you shall have the following
obligations with respect to the Restaurant franchised under this Agreement:
(i) You shall immediately cease to operate the business
franchised under this Agreement, and shall not thereafter, directly or
indirectly, represent to the public or hold yourself out as a Papa John's
franchisee with respect to such business;
(ii) You shall immediately and permanently cease to use, in
any manner whatsoever, all confidential information, Designated Software,
methods, procedures and techniques used by or associated with the System, and
the proprietary Marks "Papa John's,"
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"Papa John's Pizza," and all other Marks and distinctive forms, slogans, signs,
symbols, logos and devices associated with the Papa John's Chain;
(iii) You shall immediately return to us any property held or
used by you that is owned by us and shall cease to use, and either destroy or
convey to us, all signs, advertising materials, displays, stationery, forms and
any other materials that bear or display the Marks;
(iv) You shall take such actions as may be necessary to
cancel any assumed name or similar registration that contains the mark "Papa
John's" or "Papa John's Pizza" or any other Mark, and you shall furnish us with
evidence satisfactory to us of compliance with this obligation within thirty
(30) days after termination or expiration of the Franchise;
(v) You shall, if we elect to purchase the assets of the
Restaurant pursuant to Section 20.(b) below, assign to us any interest that you
have in any lease for the Premises; provided that we agree to use reasonable
efforts to effect a termination of the existing lease for the Premises and enter
into a new lease on reasonable terms with the landlord. In the event we are
unable to negotiate an acceptable new lease, we will indemnify and hold you
harmless from any ongoing liability under the lease from the date on which we
assume possession of the Premises. The assignment of the lease shall be made at
the same time as we purchase the assets of the Restaurant pursuant to Section
20.(b). If we do not elect to purchase the assets of the Restaurant, you
shall, within 10 days after termination or expiration of the Franchise, make
such modifications and alterations to the Premises as may be necessary to
distinguish the appearance of the Premises from that of other Papa John's
restaurants and shall make such specific additional changes thereto as we may
reasonably request;
(vi) You shall promptly pay all sums owed to us, and if the
Franchise is terminated for any reason other than as a result of a material
breach of this Agreement by us that is not cured within 30 days or such longer
period as may be necessary after written notice thereof from you, such sums
shall include all damages, costs, and expenses, including reasonable attorneys'
fees, incurred by us as a result of the default and the termination, which
obligation shall give rise to and remain, until paid in full, a lien in favor of
us against any and all of the personal property, furnishings, equipment, signs,
fixtures and inventory owned by you and located on the Premises on the date the
Franchise terminated;
(vii) You shall pay to us all damages, costs and expenses,
including reasonable attorneys' fees, incurred by us subsequent to the
termination or expiration of the Franchise in obtaining injunctive or other
relief for the enforcement of any term, covenant or provision of this Agreement;
(viii) You shall immediately deliver to us all Manuals, policy
and procedure statements, instructions, and other materials related to operating
the Restaurant, including, without limitation, brochures, charts and any other
materials provided by us and all copies thereof, and you shall neither retain
nor convey to another any copy or record of any of
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the foregoing and shall allow us to remove the Designated Software as described
in Section 10.(c)(iii)(E);
(ix) If requested by us, you shall take all further action
and execute all documents necessary to convey and assign to us all telephone
numbers that have been used in the operation of the Restaurant or if we do not
so request, you shall cease all use of such telephone numbers; and
(x) You shall comply with the covenants contained in this
Agreement, including, but not limited to, the covenants not to compete and the
covenants not to disclose trade secrets or confidential information contained in
Sections 16 and 17.
(b) ASSET PURCHASE OPTION. Upon termination of this Agreement by
us, upon termination of this Agreement by you without cause or upon expiration
of this Agreement, we shall have the option, exercisable by giving written
notice thereof within 15 days from the date of such expiration or termination,
to purchase from you all the assets used in the Restaurant. Assets shall
include, without limitation, leasehold improvements, equipment (including the
Information System), furniture, fixtures, signs and inventory for the
Restaurant. We shall have the unrestricted right to assign this option to
purchase. We or our assignee shall be entitled to all customary warranties and
representations given by the seller of a business including, without limitation,
representations and warranties as to (i) ownership, condition and title to
assets; (ii) liens and encumbrances relating to the assets; and (iii) validity
of contracts and liabilities, inuring to us or affecting the assets, contingent
or otherwise. The purchase price for the assets of the Restaurant shall be the
fair market value thereof, determined as of the date of termination or
expiration of this Agreement in a manner consistent with reasonable depreciation
of leasehold improvements owned by you and the equipment, furniture, fixtures,
signs and inventory of the Restaurant, provided that the purchase price shall
not contain any factor or increment for any trademark, service mark or other
commercial symbol used in connection with the operation of the Restaurant, or
any goodwill or "going concern" value for the Restaurant and further provided
that we may exclude from the assets purchased hereunder any equipment,
furniture, fixtures, signs and inventory that do not, as determined by us in our
sole discretion, meet quality standards for Papa John's restaurants. If you and
we are unable to agree on the fair market value of the assets, the fair market
value shall be determined by an independent appraiser selected by us and you. If
you and we are unable to agree on a single appraiser, each party shall each
select one appraiser, who shall select a third appraiser, and the fair market
value shall be deemed to be the average of the three (3) independent appraisals.
The fees and costs of such appraiser or appraisers shall be borne equally by you
and us. Except as provided above, nothing contained herein shall restrict the
manner in which the appraisers so selected value the leasehold improvements,
equipment, furniture, fixtures, signs and inventory. The purchase price shall
be paid in cash, a cash equivalent, or marketable securities of equal value at
the closing of the purchase, which shall take place no later than 90 days after
receipt by you of notice of exercise of this option to purchase, at which time
you shall deliver instruments transferring to us or our assignee: (1) good and
merchantable title to the assets purchased, free and clear of all liens and
encumbrances (other than liens and security interests acceptable to us or our
assignee), with all sales and other transfer taxes
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paid by you; and (2) all licenses and permits of the Restaurant that may be
assigned or transferred. If you cannot deliver clear title to all of the
purchased assets as aforesaid, or in the event there shall be other unresolved
issues, the closing of the sale shall be accomplished through an escrow.
Further, you and we shall, prior to closing, comply with all applicable legal
requirements, including the bulk sales provisions of the Uniform Commercial Code
of the state in which the Restaurant is located. We shall have the right to set
off against and reduce the purchase price by any and all amounts owed by you to
us, and the amount of any encumbrances or liens against the assets or any
obligations assumed by us. You and each owner of an interest in you shall
indemnify us against all liabilities not so assumed. If we or our assignee
exercise this option to purchase, pending the closing of such purchase as
hereinabove provided, we shall have the right to appoint a manager to maintain
the operation of the Restaurant as set forth under Section 15.(b).
Alternatively, we may require you to close the Restaurant during such time
period without removing any assets from the Restaurant. You shall maintain in
force all insurance policies required pursuant to this Agreement, until the
closing on the sale.
21. INDEPENDENT CONTRACTOR; INDEMNIFICATION.
(a) INDEPENDENT CONTRACTOR. It is understood and agreed by the
parties that this Agreement creates only a contractual relationship between the
parties subject to normal rules of contract law. This Agreement does not create
a fiduciary relationship between us and you and you are and shall remain an
independent contractor. Nothing in this Agreement is intended to constitute
either party an agent, legal representative, subsidiary, joint venturer,
partner, employee, or servant of the other for any purpose whatsoever. You
agree to hold yourself out to the public as an independent contractor, separate
and apart from us. You agree that you shall not make any contract, agreement,
warranty, or representation on our behalf without our prior written consent, and
you agree that you shall not incur any debt or other obligation in our name.
This Agreement shall not be deemed to confer any rights or benefits to any
person or entity not expressly named herein.
(b) BUSINESS MANAGEMENT. You agree and acknowledge that: (i) we
will have no responsibility for the day-to-day operations of the Restaurant or
the management of your business; and (ii) you shall independently control the
operation of your business and the results of your operations will depend almost
exclusively on your business acumen and promotional and managerial efforts.
(c) INDEMNIFICATION. We shall not be liable by reason of any act
or omission by you in your operation of the Restaurant or for any claim, cause
of action or judgment arising therefrom against you or us. You agree to hold
harmless, defend and indemnify us and our Affiliates, and our and their
respective shareholders, officers, directors, agents, and employees, from and
against any and all losses, expenses, judgments, claims, costs (including
reasonable attorney fees) and damages arising out of or in connection with any
claim or cause of action in which we shall be a named defendant and that arises,
directly or indirectly, out of the operation of, or in connection with, your
Restaurant, other than a claim resulting directly from our negligence.
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22. YOUR REPRESENTATIONS. You hereby acknowledge and represent that:
(a) all information submitted to us by you or those owning an
interest in you, including all applications, financial statements and other
documents and information, is true and correct in all respects and does not omit
any material statement or item of fact necessary to make the statements made
therein not false or misleading;
(b) We have not represented (i) that you will earn, can earn, or
are likely to earn a gross or net profit, (ii) that we have knowledge of the
relevant market, or (iii) that the market demand will enable you to earn a
profit from the Franchise;
(c) You have read and understood this Agreement and the disclosure
document entitled "Papa John's Franchise Offering Circular" (the "Offering
Circular") required by the Federal Trade Commission or the state in which the
Restaurant will be located. You understand that we make no representation or
warranty regarding your relevant market or the profitability of business
operations under the System and that no representations have been made by us, or
by any of our Affiliates or our or their officers, directors, shareholders,
employees or agents, that are contrary to or inconsistent with the terms of this
Agreement or with the statements made in the Offering Circular that accompanied
a copy of this Agreement;
(d) You accept the terms, conditions and covenants contained in
this Agreement as being reasonable and necessary to maintain our standards of
quality, service and uniformity and in order to protect and preserve the
goodwill of the Marks. You acknowledge that other franchisees of ours have been
or will be granted franchises at different times and in different situations.
You further acknowledge that the provisions of the franchise agreements pursuant
to which such franchises were granted may vary materially from those contained
in this Agreement and that your obligation arising here-under may differ
substantially from other franchisees; and
(e) You recognize that the System may evolve and change over time
and that the Franchise involves an investment of substantial risk and its
success is dependent primarily upon your business acumen and your efforts and
other factors beyond our control. You have conducted an independent
investigation of the Franchise and have had ample time and opportunity to
consult with independent professional advisors (lawyers, accountants, etc.), and
have not received or relied upon any express or implied guarantee as to
potential volumes, revenues, profits or success of the business venture
contemplated by the Franchise.
23. ENFORCEMENT.
(a) ARBITRATION. EXCEPT FOR CONTROVERSIES, DISPUTES OR CLAIMS
RELATED TO OR BASED ON: (1) ANY ACTION BY US TO STOP OR PREVENT ANY THREAT OR
DANGER TO PUBLIC HEALTH OR SAFETY RESULTING FROM THE CONSTRUCTION, MAINTENANCE,
OR OPERATION OF THE RESTAURANT; (2) ANY ACTION ARISING OUT OF OR RELATING TO ANY
FINANCING PROVIDED TO YOU BY US OR OUR AFFILIATES AND THE AGREE-
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MENTS, NOTES, LIENS AND SECURITY INTERESTS RELATED THERETO AND THE ENFORCEMENT,
INTERPRETATION OR COLLECTION THEREOF; OR (3) AT OUR OPTION, YOUR VIOLATION OF
ANY PROVISION OF SECTION 16 OR 17 HEREOF, OR YOUR USE OF THE MARKS AFTER THE
EXPIRATION OR TERMINATION OF THIS AGREEMENT; ALL CONTROVERSIES, DISPUTES OR
CLAIMS BETWEEN US (INCLUDING OUR AFFILIATES, SHAREHOLDERS, OFFICERS, DIRECTORS,
AGENTS OR EMPLOYEES)AND YOU (INCLUDING YOUR OWNERS, GUARANTORS, AFFILIATES AND
EMPLOYEES, IF APPLICABLE) ARISING OUT OF OR RELATED TO:
(i) THIS AGREEMENT OR ANY OTHER AGREEMENT BETWEEN YOU AND US
OR ANY PROVISION OF ANY SUCH AGREEMENT;
(ii) OUR RELATIONSHIP WITH YOU, INCLUDING ISSUES RELATING TO
OUR DECISION TO TERMINATE THAT RELATIONSHIP;
(iii) THE VALIDITY OF THIS AGREEMENT OR ANY OTHER AGREEMENT
BETWEEN YOU AND US OR ANY PROVISION OF ANY SUCH AGREEMENT; OR
(iv) ANY STANDARD, SPECIFICATION OR OPERATING PROCEDURE
RELATING TO THE ESTABLISHMENT OR OPERATION OF THE RESTAURANT
WILL BE SUBMITTED FOR BINDING ARBITRATION TO THE LOUISVILLE, KENTUCKY
OFFICE OF THE AMERICAN ARBITRATION ASSOCIATION ON DEMAND OF EITHER PARTY. SUCH
ARBITRATION PROCEEDING WILL BE CONDUCTED IN LOUISVILLE, KENTUCKY AND, EXCEPT AS
OTHERWISE PROVIDED IN THIS AGREEMENT, WILL BE HEARD BY ONE ARBITRATOR IN
ACCORDANCE WITH THE THEN CURRENT FRANCHISING ARBITRATION RULES, IF ANY, OR
OTHERWISE BY THE THEN CURRENT COMMERCIAL ARBITRATION RULES OF THE AMERICAN
ARBITRATION ASSOCIATION. ALL MATTERS RELATING TO ARBITRATION WILL BE GOVERNED
BY THE FEDERAL ARBITRATION ACT (9 U.S.C. SECTIONS 1 ET SEQ.) AND NOT BY ANY
STATE ARBITRATION LAW.
THE ARBITRATOR WILL HAVE THE RIGHT TO AWARD OR INCLUDE IN THE AWARD ANY
RELIEF THAT THE ARBITRATOR DEEMS PROPER IN THE CIRCUMSTANCES, INCLUDING, WITHOUT
LIMITATION, MONEY DAMAGES (WITH INTEREST ON UNPAID AMOUNTS FROM THE DATE DUE),
SPECIFIC PERFORMANCE, INJUNCTIVE RELIEF AND ATTORNEYS' FEES AND COSTS, PROVIDED
THAT THE ARBITRATOR WILL NOT HAVE THE RIGHT TO DECLARE ANY MARK GENERIC OR
OTHERWISE INVALID OR, EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT, TO AWARD
EXEMPLARY OR PUNITIVE
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DAMAGES. THE AWARD AND DECISION OF THE ARBITRATOR WILL BE CONCLUSIVE AND
BINDING UPON ALL PARTIES HERETO, AND JUDGMENT UPON THE AWARD MAY BE ENTERED IN
ANY COURT OF COMPETENT JURISDICTION.
WE AND YOU AGREE TO BE BOUND BY THE PROVISIONS OF ANY LIMITATION ON THE
PERIOD OF TIME IN WHICH CLAIMS MUST BE BROUGHT UNDER APPLICABLE LAW OR THIS
AGREEMENT, WHICHEVER EXPIRES EARLIER. WE AND YOU FURTHER AGREE THAT, IN
CONNECTION WITH ANY SUCH ARBITRATION PROCEEDING, EACH PARTY MUST SUBMIT OR FILE
ANY CLAIM THAT WOULD CONSTITUTE A COMPULSORY COUNTERCLAIM (AS DEFINED BY RULE 13
OF THE FEDERAL RULES OF CIVIL PROCEDURE) WITHIN THE SAME PROCEEDING AS THE CLAIM
TO WHICH IT RELATES. ANY SUCH CLAIM THAT IS NOT SUBMITTED OR FILED AS DESCRIBED
ABOVE WILL BE FOREVER BARRED.
WE AND YOU AGREE THAT ARBITRATION WILL BE CONDUCTED ON AN INDIVIDUAL, NOT
A CLASS-WIDE, BASIS, AND THAT AN ARBITRATION PROCEEDING BETWEEN US (INCLUDING
OUR AFFILIATES, SHAREHOLDERS, OFFICERS, DIRECTORS, AGENTS OR EMPLOYEES) AND YOU
(INCLUDING YOUR OWNERS, GUARANTORS, AFFILIATES AND EMPLOYEES, IF APPLICABLE) MAY
NOT BE CONSOLIDATED WITH ANY OTHER ARBITRATION PROCEEDING BETWEEN US AND ANY
OTHER PERSON, CORPORATION, LIMITED LIABILITY COMPANY OR PARTNERSHIP.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS SECTION, WE AND
YOU EACH HAVE THE RIGHT IN A PROPER CASE TO OBTAIN TEMPORARY RESTRAINING ORDERS
AND TEMPORARY OR PRELIMINARY INJUNCTIVE RELIEF FROM A COURT OF COMPETENT
JURISDICTION; PROVIDED, HOWEVER, THAT WE AND YOU MUST CONTEMPORANEOUSLY SUBMIT
OUR DISPUTE FOR ARBITRATION ON THE MERITS AS PROVIDED HEREIN EXCEPT AS OTHERWISE
PROVIDED IN THE FIRST PARAGRAPH OF THIS SECTION 23.(a).
THE PROVISIONS OF THIS SECTION ARE INTENDED TO BENEFIT AND BIND CERTAIN
THIRD PARTY NON-SIGNATORIES AND WILL CONTINUE IN FULL FORCE AND EFFECT
SUBSEQUENT TO AND NOTWITHSTANDING THE EXPIRATION OR TERMINATION OF THIS
AGREEMENT.
(b) GOVERNING LAW. ALL MATTERS RELATING TO ARBITRATION WILL BE
GOVERNED BY THE FEDERAL ARBITRATION ACT (9 U.S.C. SECTIONS 1 ET SEQ). EXCEPT TO
THE EXTENT GOVERNED BY THE FEDERAL ARBITRATION ACT, THE UNITED STATES TRADEMARK
ACT OF 1946 (LANHAM ACT, 15 U.S.C. SECTIONS 1051 ET SEQ.) OR OTHER FEDERAL LAW,
THIS AGREEMENT AND ALL CLAIMS ARISING FROM THE RELATIONSHIP BETWEEN US AND YOU
WILL BE
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GOVERNED BY THE LAWS OF THE COMMONWEALTH OF KENTUCKY WITHOUT REGARD TO ITS
CONFLICT OF LAWS PRINCIPLES.
(c) CONSENT TO JURISDICTION AND VENUE. YOU AND YOUR OWNERS AGREE
THAT ALL JUDICIAL ACTIONS BROUGHT BY US AGAINST YOU OR YOUR OWNERS OR BY YOU OR
YOUR OWNERS AGAINST US OR OUR SUBSIDIARIES, AFFILIATES, SHAREHOLDERS, OFFICERS,
DIRECTORS, AGENTS OR EMPLOYEES MUST BE BROUGHT IN A COURT OF COMPETENT
JURISDICTION IN JEFFERSON COUNTY, KENTUCKY OR FEDERAL DISTRICT COURT FOR THE
WESTERN DISTRICT OF KENTUCKY AND YOU (AND EACH OWNER) IRREVOCABLY SUBMIT TO THE
JURISDICTION OF SUCH COURTS AND WAIVE ANY OBJECTION YOU, HE OR SHE MAY HAVE TO
EITHER THE JURISDICTION OF OR VENUE IN SUCH COURTS. NOTWITHSTANDING THE
FOREGOING, WE MAY BRING AN ACTION TO OBTAIN A RESTRAINING ORDER OR TEMPORARY OR
PRELIMINARY INJUNCTION, OR ENFORCE AN ARBITRATION AWARD, IN ANY FEDERAL OR STATE
COURT OF GENERAL JURISDICTION IN THE STATE IN WHICH YOU RESIDE OR IN WHICH THE
RESTAURANT IS LOCATED.
(d) WAIVER OF PUNITIVE DAMAGES. EXCEPT WITH RESPECT TO YOUR
OBLIGATION TO INDEMNIFY US PURSUANT TO SECTION 21 AND CLAIMS WE BRING AGAINST
YOU UNDER SECTIONS 16.(c), 16.(f) AND 17, WE AND YOU AND YOUR OWNERS WAIVE TO
THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHT TO OR CLAIM FOR ANY PUNITIVE OR
EXEMPLARY DAMAGES AGAINST THE OTHER AND AGREE THAT, IN THE EVENT OF A DISPUTE
BETWEEN US, THE PARTY MAKING A CLAIM WILL BE LIMITED TO EQUITABLE RELIEF AND TO
RECOVERY OF ANY ACTUAL DAMAGES IT SUSTAINS.
(e) WAIVER OF JURY TRIAL. WE AND YOU IRREVOCABLY WAIVE TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER AT LAW OR IN EQUITY,
BROUGHT BY EITHER OF US.
(f) LIMITATIONS OF CLAIMS. EXCEPT FOR CLAIMS BROUGHT BY US WITH
REGARD TO YOUR OBLIGATIONS UNDER SECTIONS 16 AND 17, AND YOUR OBLIGATION TO
INDEMNIFY US PURSUANT TO SECTION 21, ANY AND ALL CLAIMS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE RELATIONSHIP OF YOU AND US PURSUANT TO THIS
AGREEMENT WILL BE BARRED UNLESS AN ACTION IS COMMENCED WITHIN ONE (1) YEAR FROM
THE DATE ON WHICH THE ACT OR EVENT GIVING RISE TO THE CLAIM OCCURRED, OR ONE (1)
YEAR FROM THE DATE ON WHICH YOU OR WE KNEW OR SHOULD HAVE KNOWN, IN THE EXERCISE
OF REASONABLE DILIGENCE, OF THE FACTS GIVING RISE TO SUCH CLAIMS, WHICHEVER
OCCURS FIRST.
(g) COSTS, EXPENSES AND ATTORNEYS' FEES. Except as provided in
Sections 16.(f), 20 and 21, each party shall pay its own costs, expenses and
attorneys' fees in any
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arbitration, claim, suit or proceeding arising out of this Agreement or the
franchise relationship of the parties.
24. NOTICES. All notices, requests, demands and other communications
required or permitted to be given or made under this Agreement shall be in
writing and shall be given (i) by personal delivery or (ii) provided such
notice, request, demand or communication is actually received by the party to
which it is addressed in the ordinary course of delivery, by deposit in the
United States mail, postage prepaid, or (iii) by registered or certified mail,
return receipt requested, postage prepaid, or by delivery to a nationally-
recognized overnight courier service, in each case, addressed as follows, or to
such other person or entity as either party shall designate by notice to the
other in accordance herewith:
Us: If by Mail:
P.O. Box 99900
Louisville, Kentucky 40269-9990
ATTN: General Counsel
If by Courier or Personal Delivery:
10801 Electron Drive, Suite 100
Louisville, Kentucky 40299-3880
ATTN: General Counsel
You: ____________________________________
____________________________________
ATTN: _____________________________
25. MISCELLANEOUS.
(a) TOLLING; SEVERABILITY. During any period in which any
covenant in Section 16 or 17 is being breached by you, including any period in
which we or you are seeking administrative or judicial enforcement,
interpretation or modification of any such covenant, and all appeals thereof,
the Restricted Period shall toll and be suspended. You agree to be bound to the
maximum extent permitted by law that is subsumed within the terms of any
provision hereof, as though it were separately articulated in and made a part of
this Agreement, that may result from the striking of any provision hereof by a
court, or that a court holds to be unenforceable in a final decision to which we
are a party, or that may result from reducing the scope of any provision to the
extent required to comply with a court order or with any state or federal law,
whether currently in effect or subsequently enacted.
(b) CONSTRUCTION. All references herein to the masculine, neuter,
or singular shall be construed to include the masculine, feminine, neuter, or
plural, as the case may require. All acknowledgements, warranties,
representations, covenants, agreements, and obligations herein made or
undertaken by you shall be deemed jointly and severally undertaken by all those
executing this Agreement as you.
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(c) ENTIRE AGREEMENT. This Agreement, the documents incorporated
herein by reference and the Exhibits attached hereto, comprise the entire
agreement between the parties, and all prior understandings or agreements
concerning the subject matter hereof are canceled and superseded by this
Agreement. The Exhibits to this Agreement are incorporated herein by reference
and made a part hereof as if set out in full herein.
(d) AFFILIATE. As used in this Agreement, the term "Affiliate"
shall mean any person or entity that is owned or controlled by us or which owns
or controls us or is under common control with us, directly, or through one or
more intermediaries.
(e) AMENDMENTS. Except for those permitted to be made
unilaterally by us, no supplement, amendment or variation of the terms of this
Agreement shall be valid unless made in writing and signed by the parties
hereto.
(f) WAIVERS. No failure by us to exercise any right given to us
hereunder, or to insist upon strict compliance by you with any obligation,
agreement or undertaking hereunder, and no custom or practice of the parties at
variance with the terms hereof shall constitute a waiver of our right to demand
full and exact compliance by you with the terms hereof. Waiver by us of any
particular default by you shall not affect or impair our rights with respect to
any subsequent default of the same or of a different nature, nor shall any delay
or omission by us to exercise any right arising from such default affect or
impair our rights as to such default or any subsequent default.
(g) COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
(h) HEADINGS. The headings used in this Agreement are for
convenience only, and the paragraphs shall be interpreted as if such headings
were omitted.
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(i) TIME OF ESSENCE. You agree and acknowledge that time is of
the essence with regard to your obligations hereunder, and that all of your
obligations are material to us and this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
on the day, month and year first written above.
PAPA JOHN'S INTERNATIONAL, INC.
By:____________________________________
Title:______________________________
_______________________________________
FRANCHISEE
By:____________________________________
Title:______________________________
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