EXHIBIT B
(TO MASTER FRANCHISE OFFERING CIRCULAR)
MASTER FRANCHISE AGREEMENT
THE QUIZNO'S CORPORATION
MASTER FRANCHISE AGREEMENT
FOR ____________________
MASTER FRANCHISEE
DATE OF AGREEMENT
TABLE OF CONTENTS
SECTION PAGE
1 PREAMBLES...................................................1
2 CERTAIN DEFINITIONS.........................................1
3 DEVELOPMENT RIGHTS AND OBLIGATIONS..........................5
3.1 GRANT OF DEVELOPMENT RIGHTS............................5
3.2 TERRITORIAL RIGHTS OF MASTER FRANCHISEE................5
3.3 DEVELOPMENT OBLIGATIONS................................5
3.4 EXTENSION OF DEVELOPMENT TERM..........................6
3.5 FRANCHISE AND AREA DIRECTOR AGREEMENTS.................6
3.6 RIGHTS RETAINED BY FRANCHISOR..........................7
4 GUIDANCE AND ASSISTANCE.....................................7
4.1 INITIAL TRAINING.......................................7
4.2 CONTINUING TRAINING....................................7
4.3 CONTINUING GUIDANCE AND SUPPORT BY FRANCHISOR..........7
4.4 OPERATING MANUAL.......................................8
4.5 ASSISTANCE IN OPENING PILOT RESTAURANT.................9
4.6 PRODUCT AND OPERATIONS DEVELOPMENT.....................9
5 OPERATIONS OBLIGATIONS OF MASTER FRANCHISEE.................9
5.1 FORM AGREEMENTS........................................9
5.2 APPOINTMENT OF AREA DIRECTORS.........................10
5.3 TRAINING AND SUPPORT..................................10
5.4 SYSTEM STANDARDS......................................10
5.5 COMPLIANCE WITH THE SYSTEM............................11
5.6 MASTER FRANCHISE PREMISES.............................11
6 OTHER OBLIGATIONS OF MASTER FRANCHISEE.....................11
6.1 CHIEF EXECUTIVE OFFICER...............................11
6.2 OTHER MANAGEMENT PERSONNEL OF
MASTER FRANCHISEE.....................................12
6.3 INSURANCE.............................................12
6.4 RECORDS AND REPORTS...................................13
6.5 GOVERNMENTAL APPROVALS................................14
6.6 COMPLIANCE WITH LEGALREQUIREMENTS/GOOD RESTAURANT PRACTICES
15
6.7 SUPPLY ARRANGEMENTS...................................15
7 INITIAL AND CONTINUING FEES................................16
7.1 INITIAL FEES..........................................16
7.2 INITIAL FRANCHISE AND AREA DIRECTOR FEES..............16
7.3 CONTINUING FEES.......................................16
7.4 INTEREST ON LATE PAYMENTS.............................16
7.5 WITHHOLDING TAXES.....................................17
7.6 CURRENCY OF PAYMENT...................................17
7.7 EXCHANGE CONTROLS.....................................18
7.8 STAMP DUTIES..........................................18
8 MARKETING..................................................18
9 CONFIDENTIAL INFORMATION...................................19
10 EXCLUSIVE RELATIONSHIP.....................................20
11 INDEPENDENT CONTRACTORS/INDEMNIFICATION....................20
11.1 INDEPENDENT CONTRACTORS...............................20
11.2 NO LIABILITY FOR ACTS OF OTHER PARTY..................21
11.3 TAXES.................................................21
11.4 INDEMNIFICATION.......................................21
12 MARKS......................................................22
12.1 GOODWILL AND OWNERSHIP OF THE MARKS...................22
12.2 LIMITATIONS ON MASTER FRANCHISEE'S
USE OF THE MARKS......................................22
12.3 NOTIFICATION OF INFRINGEMENT AND CLAIMS...............22
12.4 DISCONTINUANCE OF USE OF MARKS........................23
12.5 REGISTERED USER AGREEMENTS............................23
12.6 MASTER FRANCHISEE'S TRADE NAME........................23
13 TRANSFER...................................................24
13.1 BY FRANCHISOR.........................................24
13.2 BY MASTER FRANCHISEE..................................24
13.3 FRANCHISOR'S RIGHT OF FIRST REFUSAL...................24
13.4 DEATH OF MASTER FRANCHISEE............................25
14 TERMINATION OF AGREEMENT...................................25
14.1 BY MASTER FRANCHISEE..................................25
14.2 BY FRANCHISOR.........................................26
15 RIGHTS AND OBLIGATIONS UPON TERMINATION OR EXPIRATION......26
15.1 MARKS.................................................26
15.2 COVENANT NOT TO COMPETE...............................27
15.3 AREA DIRECTOR AND FRANCHISE AGREEMENTS................27
15.4 CONTINUING OBLIGATIONS................................28
16 ENFORCEMENT................................................28
16.1 INFORMAL DISPUTE RESOLUTION...........................28
16.2 FORMAL DISPUTE RESOLUTION.............................28
16.3 SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS.....29
16.4 WAIVER OF OBLIGATIONS.................................30
16.5 RIGHTS OF PARTIES ARE CUMULATIVE......................30
16.6 WAIVER OF PUNITIVE DAMAGES AND JURY TRIAL.............31
16.7 LIMITATION OF CLAIMS..................................31
16.8 COSTS AND LEGAL FEES..................................31
16.9 GOVERNING LAW/CONSENT TO JURISDICTION.................32
16.10NO RIGHT TO SET-OFF...................................32
17 REPRESENTATIONS OF MASTER FRANCHISEE.......................32
18 MISCELLANEOUS PROVISIONS...................................33
18.1 BINDING EFFECT........................................33
18.2 CONSTRUCTION..........................................33
18.3 GOVERNING LANGUAGE....................................33
18.4 NOTICES, REPORTS AND PAYMENTS.........................33
JOINDER..........................................................36
EXHIBITS AND ATTACHMENTS
EXHIBIT A - DEVELOPMENT AREA
EXHIBIT B - DEVELOPMENT QUOTA
EXHIBIT C - MARKS
EXHIBIT D - OWNERSHIP INTERESTS
GUARANTY AND ASSUMPTION OF OBLIGATIONS
THE QUIZNO'S CORPORATION
MASTER FRANCHISE AGREEMENT
FOR _____________________
THIS AGREEMENT is made and entered into this ____ day of _________, 2000,
by and between THE QUIZNO'S CORPORATION, a corporation organized under the laws
of the State of Colorado, U.S.A. ("Franchisor"), and __________________________
_______________________________________________________________________________
("Master Franchisee").
1. PREAMBLES.
Franchisor has developed methods for establishing, operating and promoting
restaurants offering submarine sandwiches, salads, other food products and
beverages and related restaurant and carry out services ("QUIZNO'S Restaurants")
which include the use and license of proprietary rights in certain valuable
trade names, service marks and trademarks owned by Franchisor (the "Marks"),
including the service ▇▇▇▇ "QUIZNO'S," and Franchisor's distinctive techniques,
expertise and knowledge in the establishment, operation and promotion of
restaurants and related licensed methods of doing business.
Franchisor grants master franchises to qualified parties to develop and
operate and to franchise others to develop and operate QUIZNO'S Restaurants in
defined market areas under the Marks and pursuant to the System (defined below).
Franchisee recognizes and acknowledges the benefits to be derived from
being identified and associated with Franchisor and being able to utilize the
System and therefore desires to acquire a master franchise for QUIZNO'S
Restaurants in the Development Area (defined below). Franchisor is willing to
grant Master Franchisee such master franchise under the terms and conditions
which are contained in this Agreement.
2. CERTAIN DEFINITIONS.
For purposes of this Agreement, the terms listed below have the meanings
indicated. Other terms used in this Agreement are defined and construed in the
context in which they occur.
"Affiliate" - any Person (defined below) or entity that directly or
indirectly owns or controls, that is directly or indirectly owned or controlled
by, or that is under common ownership or control with another Person. For
purposes of this definition, the term "control" shall mean the possession,
directly or indirectly, of a Controlling Interest (defined below).
"Agreement Date" - the date on which this Agreement is executed by the
last party to sign.
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"Agreement Term" - the period commencing upon the Agreement Date and ending
upon the expiration or termination of the last Franchise Agreement in the
Development Area to expire or terminate, or termination of this Agreement in
accordance with the provisions hereof.
"Area Director" - a representative of Master Franchisee authorized by
Master Franchisee pursuant to an Area Director Agreement to sell franchises for
QUIZNO'S Restaurants in a defined geographic area within the Development Area
and to provide site selection and support services to QUIZNO'S Restaurants
within such geographic area.
"Area Director Agreement" - the form of area director marketing agreement
(including all exhibits, ancillary documents and guarantees attached thereto)
approved by Franchisor, as periodically modified in accordance with this
Agreement.
"Area Directorship" - the right to sell franchises for QUIZNO'S Restaurants
and the obligation to provide site selection and support services to Franchisees
pursuant to an Area Director Agreement.
"Competitive Business" - any business operating, or forming joint ventures
to operate, or granting franchises or licenses to others to operate, a
restaurant or other food service business deriving more than 10% of its gross
receipts, excluding gross receipts relating to the sale of alcoholic beverages,
from the sale of submarine, hoagie, hero-type or deli-style sandwiches (other
than another QUIZNO'S Restaurant operated by Franchisee).
"Confidential Information" - as defined in Section 9.
"Controlling Interest" - A Person shall be deemed to have a controlling
interest if that Person has the right to vote twenty five percent (25%) or more
of the voting securities or other interest of a partnership, corporation or
other form of limited liability company, or is entitled to receive twenty five
percent (25%) or more of the net profits of any such entity, or is otherwise
able to direct or cause the direction of the management or policies of any such
entity. A trustee of a trust shall be deemed to hold one hundred percent (100%)
of the voting interests of the trust and each beneficiary of a trust shall be
deemed to hold his proportionate share of the voting interest of the trust or,
if such interest is indeterminate, one hundred percent (100%) of the voting
interests of the trust.
"Development Area" - the geographic area or areas described on Exhibit A
to this Agreement.
"Development Period" - each period of time defined as a Development Period
on Exhibit B to this Agreement.
"Development Quota" - the minimum number of QUIZNO'S Restaurants that must
be open and in operation at the end of each Development Period in each of the
geographic areas which comprise the Development Area, as set forth on Exhibit B
to this Agreement.
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"Development Rights" - the right to grant Franchises (defined below) and
Area Directorships for the development and operation of QUIZNO'S Restaurants to
be located in the Development Area.
"Development Term" - the period during which Master Franchisee is
authorized to grant Franchises and Area Directorships, which will commence on
the Agreement Date and will expire, unless extended or terminated in accordance
with the terms of this Agreement, on the tenth (10th) anniversary of the
Agreement Date.
"Dollars" and "$" - the legal currency of the United States.
"Form Agreements" - as defined in Section 5.1.
"Franchise" - the right to develop and operate a QUIZNO'S Restaurant at a
specified location within the Development Area and to use the Marks and the
System in the operation thereof pursuant to a Franchise Agreement (defined
below).
"Franchise Agreement" - the form of franchise agreement (including all
exhibits, ancillary documents and guarantees attached thereto) approved by
Franchisor, as periodically modified in accordance with Section 5.1.
"Franchisee" - one or more person(s) that is (are ) a party to a Franchise
Agreement with Master Franchisee for the development and operation of a
Restaurant within the Development Area, whether or not such person(s) is (are)
an Affiliate of Master Franchisee.
"Gross Sales" - sales of any kind for all services or products from or
through a Restaurant, including any such sale of services or products made for
cash or upon credit, or partly for cash and partly for credit, regardless of
collection of charges for which credit is given, regardless of whether such sale
is conducted in compliance with or in violation of the terms of the Franchise
Agreement and regardless of whether such sale is at the Restaurant or off-site,
but exclusive of discounts, sales, value-added or service taxes or other similar
taxes and credits actually collected from customers and paid to the appropriate
taxing authority. Gross Sales shall also include the fair market value of any
services or products received by Franchisee in barter or exchange for its
services and products.
"Legal Requirements" - applicable laws, ordinances, regulations, rules,
administrative orders, decrees and policies of any government, governmental
agency or department, including without limitation the governments of the
Development Area and the United States.
"Marks" - the trademarks, service marks, logos and other commercial
symbols set forth on Exhibit D to this Agreement which Franchisor from time to
time authorizes Master Franchisee to use and sublicense to Franchisees to
identify Restaurants and the Products offered by such Restaurant. Such
trademarks, service marks, logos and other commercial symbols are subject to
modification and discontinuance and may include additional or substitute
trademarks, service marks, logos and commercial symbols as provided in this
Agreement.
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"Owners" - all persons or entities holding Ownership Interests (defined
below) in Master Franchisee and all persons or entities who have other direct or
indirect property rights in Master Franchisee or this Agreement (the persons or
entities who are Owners as of the date of this Agreement are listed on Exhibit E
to this Agreement).
"Ownership Interest" - a direct or indirect, disclosed or undisclosed,
legal or beneficial ownership or property right or voting right, including,
without limitation: (a) in relation to a company, the ownership of shares or
other equity interests in the company; (b) in relation to a partnership, the
ownership of a general or limited partnership interest; (c) in relation to a
trust, the ownership of the beneficial interest of such trust; or (d) the right
to cast some or all of the votes associated with such shares or interests.
"Person" - an individual, corporation, general or limited partnership,
limited liability company, trust, association or other legal entity.
"Pilot Restaurant" - as defined in 3.1.
"Products" - all products and services which Franchisor authorizes for
sale by Restaurants.
"Restaurant" - a QUIZNO'S Restaurant located within the Development Area.
"Restricted Persons" - (1) Owners who have a Controlling Interest in
Master Franchisee; (2) Affiliates of Master Franchisee; (3) the parents,
spouses, natural and adopted children of Master Franchisee and of Owners of a
Controlling Interest in Master Franchisee, and (4) the officers, directors and
management personnel of Master Franchisee and its Affiliates.
"Submarine Sandwich Restaurant" - a business, including a QUIZNO'S
Restaurant, that offers for sale submarine, hoagie or hero-type or deli-style
sandwiches.
"System" - the recipes, methods, techniques, formats, systems, methods,
procedures, standards, and specifications which Franchisor specifies for use in
the operation of QUIZNO'S Restaurants, all of which Franchisor may improve,
further develop or otherwise modify from time to time.
"United States" and "U.S." - The United States of America.
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3. DEVELOPMENT RIGHTS AND OBLIGATIONS.
3.1 GRANT OF DEVELOPMENT RIGHTS.
Subject to the terms and conditions of this Agreement, Franchisor hereby
grants to Master Franchisee the Development Rights during the Development Term
and the right to function as the franchisor under Franchise Agreements with
Franchisees and Area Director Agreements with Area Directors. Master Franchisee
may not itself own or operate QUIZNO'S Restaurants or Area Directorships during
the Agreement Term; however, Master Franchisee may grant Franchises or Area
Directorships to its Affiliates. Franchisees and Area Directors, including
Affiliates of Master Franchisee, shall execute a Franchise Agreement for each
such QUIZNO'S Restaurant and an Area Director Agreement for each Area
Directorship, as applicable. The rights granted to Master Franchisee by this
Agreement are limited to the Development Area and Master Franchisee agrees that
it is not hereby granted any rights to franchise, and that it will not operate
or grant Franchises for QUIZNO'S Restaurants or Area Directorships for locations
outside of the Development Area, nor solicit prospective Franchisees or Area
Directors from outside the Development Area.
Before granting any Franchise to a Person that is not an Affiliate of
Master Franchisee, Master Franchisee shall, in compliance with the Development
Quota, cause an Affiliate to sign a Franchise Agreement and open a QUIZNO'S
Restaurant within the Development Area that successfully passes Franchisor's
operational review, to be used as a prototype Restaurant and training facility
(the "Pilot Restaurant"). An Affiliate of Master Franchisee shall operate the
Pilot Restaurant or a replacement therefor at all times during the Development
Term and any extension thereof.
3.2 TERRITORIAL RIGHTS OF MASTER FRANCHISEE.
Except as hereinafter provided, and provided that Master Franchisee is in
full compliance with this Agreement, Franchisor and its Affiliates will not
operate or grant Franchises, Area Directorships, or other development rights for
QUIZNO'S Restaurants within the Development Area during the Development Term.
After the termination of this Agreement or the termination or expiration of the
Development Term (unless the Development Term is extended as provided in this
Agreement), Franchisor and its Affiliates shall have the right to operate and
grant Franchises and Development Rights for QUIZNO'S Restaurants within the
Development Area, subject only to the territorial rights (if any) granted to
Franchisees and Area Directors.
3.3 DEVELOPMENT OBLIGATIONS.
Master Franchisee agrees to comply with the Development Quota with respect
to each Development Period. The determination as to whether Master Franchisee
has met its development obligations hereunder shall be made based on the number
of Restaurants open and operating at the end of a Development Period. For
purposes of the development obligations hereunder, a Restaurant that has been
open and in operation and is subsequently permanently closed, rendered
inoperable by fire or other casualty or required to be closed due to
condemnation or other governmental action, during the last six (6) months of a
Development Period, shall be counted as open and operating at the end of such
Development Period (but not thereafter); any other Restaurant must be open and
operating in compliance with the applicable Franchise Agreement in order to be
counted toward the satisfaction of the Development Quota. Master Franchisee
agrees that during the Agreement Term, it will at all times faithfully, honestly
and diligently perform its obligations hereunder and will continuously exert its
best efforts to promote and enhance the development and operation of QUIZNO'S
Restaurants within the Development Area.
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3.4 EXTENSION OF DEVELOPMENT TERM.
Upon expiration of the Development Term, if Master Franchisee has
substantially complied with all of the terms of this Agreement during the
Development Term, including without limitation the Development Quota, subject to
the terms of Section 3.4, Master Franchisee shall have the right to extend the
Development Term for ten (10) additional years. Master Franchisee shall give
Franchisor written notice of its request for an extension of the Development
Term not more than twelve (12) months nor less than six (6) months prior to the
expiration of the Development Term. Within sixty (60) days following
Franchisor's receipt of such notice from Master Franchisee, Franchisor and
Master Franchisee shall negotiate in good faith concerning a new development
quota for the extended Development Term. In connection with the extension of the
Development Term, Master Franchisee and all Owners shall execute general
releases, in a form satisfactory to Franchisor, of any and all claims against
Franchisor and its Affiliates and their respective shareholders, directors,
officers, employees, agents, successors and assigns. If Franchisor and Master
Franchisee do not execute a binding agreement extending the term of the
Development Term prior to the expiration thereof, Master Franchisee's
Development Rights pursuant to this Agreement shall be deemed to have expired
and Franchisor shall have the right to operate and grant franchises and
development rights for QUIZNO'S Restaurants in the Development Area, subject
only to territorial rights previously granted to Franchisees and Area Directors.
Upon expiration of the extended Development Term as set forth above, if
Master Franchisee has substantially complied with all of the terms of this
Agreement during such extended Development Term, including without limitation
the Development Quota for the extended Development Term, Master Franchisee shall
have the right to extend the Development Term for a second period of ten (10)
additional years, subject to the terms and conditions set forth herein with
respect to the first extension of the Development Term.
3.5 FRANCHISE AND AREA DIRECTOR AGREEMENTS.
Master Franchisee will enter into a Franchise Agreement or Area Director
Agreement directly with each Franchisee and Area Director. Master Franchisee
will enforce each Franchise Agreement and Area Director Agreement, and will
ensure compliance with all Legal Requirements, including without limitation
regulations affecting the sale of Franchises and Area Directorships in the
Development Area. Franchisor shall be named as a third party beneficiary of each
Franchise Agreement and Area Director Agreement and will have the right, but not
the obligation, to assume the Master Franchisee's obligations thereunder in
accordance with Section 15.3.
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Master Franchisee will have the sole obligation for approving each
Franchisee. Franchisor will have the right to approve any prospective Area
Director prior to execution of the Area Director Agreement in accordance with
Section 5.2. Master Franchisee shall have the right to establish development
goals with respect to any Area Directorship sold in the Development Area,
provided that non-performance of any Area Director with respect to such goals
will not affect Master Franchisee's obligation to meet Master Franchisee's
Development Quota. Master Franchisee shall be responsible for any payments to
Area Directors in the Development Area (including commissions on royalties or
other payments due under the Area Director Agreement).
3.6 RIGHTS RETAINED BY FRANCHISOR.
Except as expressly limited by Sections 3.2 and 3.3., Franchisor (on
behalf of itself, its Affiliates and its designees) retains all rights to
develop, manufacture, market, distribute or sell the Products or any other
product or service within or outside the Development Area and to engage in any
business or activity within or outside the Development Area.
4. GUIDANCE AND ASSISTANCE.
4.1 INITIAL TRAINING.
Franchisor will furnish at its principal office in the United States a
training program to the initially appointed senior managers of Master Franchisee
at no charge to Master Franchisee. Master Franchisee shall pay charges
established by Franchisor for training programs furnished to any individual who
replaces a previously trained manager. Master Franchisee agrees to be
responsible for all travel and living expenses and compensation for its managers
who attend such training programs. Master Franchisee shall attend and
successfully complete the initial training prior to opening the Pilot Restaurant
or granting Franchises or Area Directorships.
4.2 CONTINUING TRAINING.
Franchisor will periodically conduct additional training programs relating
to various aspects of the development and operation of QUIZNO'S Restaurants.
Franchisor will have the right to designate one (1) or more senior managers of
Master Franchisee who will be required to attend such conferences or training
programs, which will be provided at no charge to Master Franchisee except that
Master Franchisee agrees to be responsible for all travel and living expenses
and compensation of its managers who attend such conferences and training
programs.
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4.3 CONTINUING GUIDANCE AND SUPPORT BY FRANCHISOR.
Franchisor shall provide ongoing advice and guidance to Master Franchisee
concerning the development, operation and franchising of QUIZNO'S Restaurants.
In connection with such assistance, Franchisor shall furnish written and other
materials and various of its personnel to communicate the System to Master
Franchisee. Franchisor personnel shall be available for periodic consultation in
English with personnel of Master Franchisee by telephone, facsimile transmission
and correspondence. Franchisor will furnish to Master Franchisee copies (in
English) of advertising and marketing materials developed by Franchisor for
QUIZNO'S Restaurants and information relating to products, equipment and
computer systems and software developed and implemented in QUIZNO'S Restaurants
in the United States.
4.4 OPERATING MANUAL.
Franchisor shall loan to Master Franchisee a copy of its operating manual
for the development and operation of QUIZNO'S Restaurants used in the United
States. Master Franchisee shall submit for review and approval by Franchisor in
English any modifications to the System and System Standards (defined below)
that Master Franchisee believes to be necessary to comply with the Legal
Requirements of the Development Area or for the commercial success of QUIZNO'S
Restaurants operated in the Development Area. Franchisor agrees to consider such
proposed modifications in good faith and to notify Master Franchisee in writing
of Franchisor's acceptance or rejection of such modifications, specifying the
reasons for any rejections. Modifications to the System and System Standards
shall be reflected in the operating manual for the Development Area (the
"Operating Manual"). If necessary, Master Franchisee shall cause (at its
expense) the Operating Manual to be translated into the language of the
Development Area. The Operating Manual and the copyright therein and in any
translations thereof shall be the property of Franchisor and Master Franchisee
agrees to execute any and all instruments and documents, render such assistance
and take such action as may, in the opinion of Franchisor's counsel, be
necessary or advisable to establish, protect and maintain the interests of
Franchisor in the Operating Manual and the copyright therein. Except for
providing one (1) copy of the Operating Manual to each Franchisee and each Area
Director, Master Franchisee agrees that it will not copy or disclose any part of
the Operating Manual to any person other than its employees who have a need to
know the contents of the Operating Manual.
Master Franchisee, within thirty (30) days of receiving any updated
information regarding the Operating Manual, shall in turn update its copy of the
Operating Manual as instructed by Franchisor and shall conform its operations
with the updated provisions within a reasonable time thereafter. Master
Franchisee shall also be responsible for ensuring that each of the Franchisees
and Area Directors in the Development Area shall, in turn, update their copy of
the Operating Manual as instructed by Franchisor, and shall conform their
operations with the updated provisions within a reasonable period of time
thereafter. Master Franchisee acknowledges that a master copy of the Operating
Manual maintained by Franchisor at its principal office shall be controlling in
the event of a dispute relative to the content of any Operating Manual.
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4.5 ASSISTANCE IN OPENING PILOT RESTAURANT.
Franchisor will provide on-site advice, guidance and support for a period
of thirty (30 ) days in connection with the opening and initial operations of
the Pilot Restaurant.
4.6 PRODUCT AND OPERATIONS DEVELOPMENT.
Master Franchisee will authorize Franchisees to sell new Products and
advise Franchisees of modifications or additions to operating procedures for the
development and operation of QUIZNO'S Restaurants that Franchisor develops and
designates for use by QUIZNO'S Restaurant franchisees. If Franchisor determines
it is necessary, Franchisor will provide training to Master Franchisee
concerning such new Products and operating procedures at times and places
designated by Franchisor. Master Franchisee agrees to disclose to Franchisor all
ideas, concepts, methods, techniques, products and services relating to the
development and operation of QUIZNO'S Restaurants conceived or developed by
Master Franchisee and its Affiliates, Area Directors and Franchisees. Master
Franchisee acknowledges and agrees that any such ideas, concepts, methods,
techniques, products and services shall be considered works made for hire and
shall belong exclusively to Franchisor. If any such materials are determined not
to be "works made for hire," such materials are hereby assigned and transferred
completely and exclusively to and shall be owned by Franchisor and shall, at
Franchisor's discretion, be incorporated into the System for use by Master
Franchisee and the Franchisees. Neither Franchisor nor its Affiliates shall have
any obligation to make any payment to Master Franchisee or any other person with
respect to any such idea, concept, method, technique, product or service.
5. OPERATIONS OBLIGATIONS OF MASTER FRANCHISEE.
5.1 FORM AGREEMENTS.
Franchisor shall furnish to Master Franchisee a form of franchise
agreement and a form of area director agreement to be used in the Development
Area. Master Franchisee shall submit for Franchisor's review and approval any
modifications to such agreements that Master Franchisee believes to be necessary
to comply with Legal Requirements or for the commercial success of QUIZNO'S
Restaurants in the Development Area. Franchisor agrees to consider such proposed
modifications and reject only those which it concludes will be harmful to or
inconsistent with, the System or the operation of QUIZNO'S Restaurants, and
notify Master Franchisee of Franchisor's acceptance or rejection of such
modifications. The modified franchise agreement and area director agreement,
developed as hereinabove provided, are referred to respectively herein as the
"Franchise Agreement" and the "Area Director Agreement" and together as the
"Form Agreements." Master Franchisee acknowledges and agrees Franchisor
periodically may require Master Franchisee to modify the Franchise Agreement or
the Area Director Agreement. Master Franchisee agrees that it will not make any
other material changes to the Form Agreements without the prior written consent
of Franchisor. Master Franchisee agrees to (at its expense) translate the Form
Agreements into the language of the Development Area. Master Franchisee agrees
to submit a copy of such translations to Franchisor for its approval prior to
delivering them to prospective Franchisees or Area Directors.
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5.2 APPOINTMENT OF AREA DIRECTORS.
Master Franchisee shall obtain Franchisor's prior written approval before
appointing each Area Director. Master Franchisee shall submit to Franchisor in
writing such information as Franchisor may reasonably request from time to time
concerning each proposed Area Director.
5.3 TRAINING AND SUPPORT.
Master Franchisee agrees to develop a training program and to provide
training to Franchisees and Area Directors and their employees in accordance
with specifications prescribed by Franchisor. Master Franchisee agrees to
diligently and continuously provide support and assistance to Franchisees and
Area Directors and to diligently and competently perform all of its obligations
under Franchise Agreements and Area Director Agreements. All services and
assistance provided to Franchisees and Area Director Agreements in connection
with the operation of QUIZNO'S Restaurants and Area Directorships shall be
provided by Master Franchisee and such obligation of Master Franchisee shall not
be transferred, delegated or subcontracted to any other person (other than
Franchisor pursuant to this Agreement).
5.4 SYSTEM STANDARDS.
Master Franchisee acknowledges and agrees that the development and
operation of Restaurants in accordance with the mandatory recipes,
specifications, standards, operating procedures and rules Franchisor prescribes
for the development and operation of QUIZNO'S Restaurants (the "System
Standards") is the essence of this Agreement and essential to preserve the
goodwill of the Marks and all QUIZNO'S Restaurants. Therefore, Master Franchisee
agrees that, at all times during the Agreement Term, Master Franchisee will: (i)
comply with all System Standards; (ii) will cause Area Directors to comply with
all System Standards; and (iii) will cause Franchisees to develop, maintain and
operate Restaurants in compliance with all System Standards. All terms and
conditions of this Agreement related to System Standards shall relate to System
Standards as they may be periodically modified and supplemented by Franchisor in
its discretion during the Agreement Term. Among the aspects of the development
and operation of Restaurants that may be regulated by System Standards, and with
which Master Franchisee and Franchisees are obligated to comply, are:
maintenance of equipment and vehicles (if any); replacement of obsolete or
worn-out equipment, and signs; interior and exterior signs, emblems, decals,
lettering and logos; selection of Franchisees and Area Directors; types, models,
brands and designated and approved suppliers of required and authorized
equipment, signs, products, materials and supplies; sales and marketing
activities, advertising and promotional activities, customer communication and
retention programs, and materials and media required or authorized for use in
such activities and programs; use and display of the Marks, and use and display
of other trademarks and commercial symbols, including trademarks of approved
suppliers; staffing levels and functions of employees; qualifications, uniforms
and appearance of employees; initial and ongoing training and testing of
employees; minimum hours of operation; goods and services required or authorized
to be offered; arrangements with third parties to furnish products or services
to customers; participation in market research and testing, and product and
service development programs; management; use of approved advertising and
marketing materials; bookkeeping, accounting, inventory control, data processing
and record keeping systems and forms; formats, content, method and frequency of
reports of sales, revenues, financial performance and condition, and other
operating and financial information; types, amounts, terms and conditions of
required insurance coverage; compliance with applicable laws; obtaining required
licenses and permits; adherence to good business practices; observing high
standards of honesty, integrity, fair dealing and ethical business conduct; and
such other elements and aspects of the development, appearance and operation of,
and conduct of business by, Restaurants as is determined from time to time to be
useful or required to preserve or enhance the operation of Restaurants and the
image and goodwill of the Marks. Master Franchisee hereby agrees that System
Standards prescribed from time to time in the Operating Manuals, or otherwise
communicated to Master Franchisee, Area Directors and Franchisees in writing,
constitute provisions of this Agreement and the Form Agreements. All references
to this Agreement and the Form Agreements shall include all System Standards as
periodically modified.
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5.5 COMPLIANCE WITH THE SYSTEM.
Master Franchisee agrees to diligently and continuously monitor compliance
with the System, to strictly enforce compliance with the System Standards by all
Area Directors and Franchisees and to furnish assistance to Franchisees to
correct deficiencies in operation. Master Franchisee also agrees that if it is
unable to obtain a Franchisee's or an Area Director's compliance with the System
and System Standards, it will terminate the Franchise Agreement or Area Director
Agreement, as applicable. Master Franchisee agrees to consult with Franchisor
prior to terminating a Franchise Agreement or an Area Director Agreement. Master
Franchisee further agrees to enforce all post-termination obligations of
Franchisees and Area Directors under their Franchise Agreement and Area Director
Agreements.
5.6 MASTER FRANCHISE PREMISES. Master Franchisee shall obtain and at
all times during the Agreement Term maintain office facilities in the
Development Area for operation of Master Franchisee ("Master Office"). The
Master Office shall have a dedicated telephone line, which shall be answered
in the name of QUIZNO'S and shall otherwise be equipped and furnished and have
signage in a manner consistent with the image and minimum standards of
Franchisor.
6.0 OTHER OBLIGATIONS OF MASTER FRANCHISEE.
6.1 CHIEF EXECUTIVE OFFICER.
Concurrently with the execution of this Agreement Master Franchisee agrees
to designate a Chief Executive Officer, who shall be an Owner of Master
Franchisee and approved by Franchisor, to act as the Chief Executive Officer of
Master Franchisee. The Chief Executive Officer shall exert his full-time efforts
to the franchising, development and operation of Restaurants and shall not
engage in any other business or other activity, directly or indirectly, that
requires any significant management responsibility or time commitments or that
may otherwise conflict with Master Franchisee's obligations hereunder. The Chief
Executive Officer shall attend and complete to Franchisor's satisfaction such
training programs as Franchisor shall prescribe (which may be conducted in whole
or in part at one (1) or more of the offices of Franchisor in the United
States). If the relationship of the Chief Executive Officer with Master
Franchisee terminates, or if the proposed Chief Executive Officer fails to
satisfactorily complete such training programs, Master Franchisee agrees to
promptly designate a replacement Chief Executive Officer approved by Franchisor,
who shall satisfactorily complete such training programs. The Chief Executive
Officer shall speak, read and write the English language fluently.
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6.2 OTHER MANAGEMENT PERSONNEL OF MASTER FRANCHISEE.
Master Franchisee agrees to hire and maintain the number and level of
management personnel required for: (i) the management and supervision of the
grant of Franchises and Area Directorships; (ii) the development and operation
of Restaurants within the Development Area and the conduct of the Pilot
Restaurant in accordance with this Agreement. Master Franchisee shall keep
Franchisor advised of the identities of such management personnel. Master
Franchisee agrees that such personnel will be properly trained to perform their
duties. Franchisor will from time to time make available training programs for
such personnel at times and locations in the United States designated by
Franchisor. Such management personnel shall speak, read and write the English
language fluently.
6.3 INSURANCE.
Master Franchisee agrees to maintain insurance necessary to comply with
all Legal Requirements concerning insurance and to maintain general liability
insurance against claims for bodily and personal injury, death and property
damage caused by or occurring in connection with the conduct of Master
Franchisee's duties hereunder (including without limitation operation of the
Pilot Restaurant by Master Franchisee's Affiliate). Master Franchisee shall also
maintain in force other insurance of the types, in the amounts and with such
terms and conditions as Franchisor may from time to time reasonably prescribe in
the Operating Manual or otherwise. Such insurance shall be maintained under one
(1) or more policies of insurance containing minimum liability and types of
coverages appropriate in the Development Area. Each insurance policy shall name
Franchisor and its Affiliates that it designates as additional named insureds,
shall contain a waiver of all subrogation rights against Franchisor, its
Affiliates, and their successors and assigns, and shall provide for thirty (30)
days' prior written notice to Franchisor of any material modification,
cancellation, or expiration of such policy. Master Franchisee shall furnish to
Franchisor annually a copy of the certificates of insurance or other evidence
requested by Franchisor that such insurance coverage is in force. The
maintenance of sufficient insurance coverage shall be the responsibility of
Master Franchisee. Notwithstanding any other provision of this Agreement,
Franchisor shall have no obligation to prescribe types or amounts of insurance
coverage and shall have no obligation to indemnify Master Franchisee if it does
not do so or if the types or amounts of insurance coverage prescribed by
Franchisor are insufficient to fully cover a claim made against Master
Franchisee.
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6.4 RECORDS AND REPORTS.
Master Franchisee agrees to maintain and preserve at its principal office,
full, complete and accurate records and reports pertaining to the development
and operation of Restaurants and the performance by Master Franchisee of its
obligations under this Agreement, including, but not limited to, records and
information relating to: franchisee applications, inspection and supervisory
reports relating to the operation of Restaurants and Area Directorships, copies
of all Franchise Agreements and Area Director Agreements entered into by Master
Franchisee, records reflecting the financial condition and performance of Master
Franchisee, Area Directors and Franchisees, records of the receipts and
expenditures of the Marketing Program (defined below) and such other records and
reports as periodically may be prescribed by Franchisor. Franchisor and its
agents shall have the right to inspect, audit and make copies or extracts of
such records and reports and Master Franchisee agrees to fully cooperate with
any such inspection or audit during regular hours. Franchisor shall have the
right, at any time, during normal Restaurant hours, to inspect the premises of
any Restaurant and the office of any Area Director for the purpose of monitoring
compliance with Franchise Agreements and Area Director Agreements and Master
Franchisee's compliance with the terms of this Agreement.
In addition to the reports required in connection with the operation and
franchising of Restaurant, Master Franchisee shall deliver to Franchisor in the
form periodically prescribed by Franchisor the following:
(a) a notice of Restaurant opening within five (5) days following
the opening date of that Restaurant;
(b) by the twentieth (20th) day of each month, a report of the Gross
Sales for each Restaurant in the prior month, the number of Restaurants opened,
closed and under development during the immediately preceding month;
(c) within thirty (30) days of the end of each quarter of Master
Franchisee's financial year, a profit and loss account for such quarter and a
report disclosing Master Franchisee's net worth as of the end of such quarter,
and performance of each Area Director;
(d) within ninety (90) days after the end of Master Franchisee's
financial year, a financial year-end balance sheet for Master Franchisee and a
profit and loss account for such financial year reflecting all year-end
adjustments, and a statement of changes in financial condition on a basis
consistent with generally accepted accounting principles of the Development Area
(or, at Franchisor's option in accordance with any recognized international
accounting principles which may be adopted by appropriate standards-setting
bodies during the Agreement Term);
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(e) not less than sixty (60) days prior to the end of each Development
Period, a Restaurant development plan for the succeeding Development Period,
including capital and operating budgets and plans for sales of Franchises,
appointment of Area Directors and development of Restaurants;
(f) within sixty (60) days following the end of each Development
Period, an analysis of Master Franchisee's compliance with the development plans
for the previous Development Period;
(g) not less than sixty (60) days prior to the end of each financial
year of Master Franchisee, a marketing plan and budget describing the proposed
marketing activities and expenditures for the Marketing Program (hereinafter
defined) for the succeeding financial year;
(h) within sixty (60) days following the end of each financial year
of Master Franchisee, a report of the receipts and disbursements of, and
advertising, promotion, public relations, market research and other marketing
programs and activities undertaken by, the Marketing Program during the
preceding year; and
(i) such other data, reports, information, financial statements and
supporting records relating to Franchisees, Area Directors and Gross Sales of
Restaurants as Franchisor periodically prescribes.
Each such report and financial statement furnished by Master Franchisee
shall be verified as correct and signed by Master Franchisee in the manner
prescribed by Franchisor. Master Franchisee shall immediately report to
Franchisor any events or developments which may have a significant or material
adverse impact on the performance of Master Franchisee under this Agreement or
the goodwill associated with the Marks and Restaurants.
Master Franchisee shall also require each Franchisee to submit reports
required by Franchisor from time to time, including those reports required by
the Franchise Agreements.
6.5 GOVERNMENTAL APPROVALS.
Master Franchisee agrees to execute any and all instruments and documents,
render such assistance, and otherwise cooperate with Franchisor, in order to
obtain all governmental approvals necessary at any time during the Agreement
Term, in the opinion of Franchisor's counsel, to comply with the Legal
Requirements. At its option, Franchisor shall have the right to submit, or to
require Master Franchisee to submit, this Agreement or either of the Form
Agreements to any governmental entity or agency ("Agency") for registration or
approval in the event Franchisor determines such registrations or approvals are
necessary in order to comply with the Legal Requirements. If the Agency requires
that any amendments be made to this Agreement or the Franchise Agreement as a
condition to such approval or registration and such amendments are acceptable to
Franchisor, Franchisor will deliver to Master Franchisee for execution an
addendum to this Agreement or either or both of the Form Agreement, or other
appropriate documents, to reflect such amendments. If Franchisor determines in
good faith that the effect of any amendment required by the Agency as a
condition to registration or approval will be materially detrimental to its
interests, Franchisor may terminate this Agreement by delivering written notice
thereof to Master Franchisee. If any governmental registration or approval is
required before the parties may implement this Agreement, and if the Agency has
not registered or approved this Agreement or the Franchise Agreement within one
hundred eighty (180) days of the date of their submission to the Agency for such
approval or registration, Franchisor may terminate this Agreement by delivering
written notice thereof to Master Franchisee. In the event Franchisor terminates
this Agreement for any of the reasons set forth in the immediately preceding
sentence, provided that Master Franchisee has fully cooperated with Franchisor
in the registration or approval process and Master Franchisee and its Owners
have executed general releases, in form acceptable to Franchisor, releasing
Franchisor and its Affiliates and their respective officers, directors,
shareholders, employees and agents from any and all liability, Franchisor shall
refund all amounts paid by Master Franchisee hereunder, less any expenses
incurred by Franchisor in connection with the execution of this Agreement and
the attempts to obtain governmental approval thereof.
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6.6 COMPLIANCE WITH LEGAL
REQUIREMENTS/GOOD RESTAURANT PRACTICES.
Master Franchisee and its Affiliates shall secure and maintain in force in
their names all required licenses, permits, and certificates relating to Master
Franchisee's obligations hereunder, including without limitation conduct of the
Pilot Restaurant by Master Franchisee's Affiliate. Master Franchisee and its
Affiliates shall at all times comply with Legal Requirements. All advertising by
Master Franchisee, its Affiliates and Franchisees shall be completely factual
and conform to high standards of ethical advertising. Master Franchisee, its
Affiliates and Franchisees shall in all dealings with Franchisor, public
officials and other third parties adhere to high standards of honesty,
integrity, fair dealing and ethical conduct, and will refrain from any practice
which may be injurious to the reputation of Franchisor or Master Franchisee and
the goodwill associated with the Marks and QUIZNO'S Restaurants. Master
Franchisee shall notify Franchisor within five (5) days of the commencement of
any action, suit, or proceeding, and of the issuance of any order, writ,
injunction, award, or decree of any court, agency, or other governmental
instrumentality, which may adversely affect the operation or financial condition
of Master Franchisee, a Franchise, an Area Director or a Restaurant.
6.7 SUPPLY ARRANGEMENTS.
The Pilot Restaurant will be built using U.S. equipment suppliers
designated by Franchisor. Master Franchisee shall establish and maintain supply
arrangements on competitive terms and conditions for products and equipment to
be sold by or used in the operation of QUIZNO'S Restaurants, and such
arrangements shall be subject to Franchisor's prior written approval. Master
Franchisee shall ensure that all such products and equipment comply with System
Standards.
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7. INITIAL AND CONTINUING FEES.
7.1 INITIAL FEES.
Concurrently with the execution of this Agreement, Master Franchisee shall
pay to Franchisor an Initial License Fee in the amount of US $______________.
Master Franchisee acknowledges and agrees that the Initial License Fee
represents payment for the initial grant of the rights to use the Marks and
System, for Franchisor's foregone opportunity to use or license those rights and
benefits granted to Master Franchisee hereunder, that Franchisor has earned the
Initial License Fee upon receipt thereof and that the Initial License Fee is
under no circumstances (except as specifically set forth herein) refundable to
Master Franchisee after it is paid to Franchisor.
7.2 INITIAL FRANCHISE AND AREA DIRECTOR FEES.
Master Franchisee agrees to pay to Franchisor thirty percent (30%) of all
initial franchise fees and all initial area director fees received by Master
Franchisee under all Franchise Agreements and Area Director Agreements
(including without limitation such agreements with Affiliates of Master
Franchisee). Franchisor's portion of such fees shall be payable to Franchisor
within five (5) business days of Master Franchisee's receipt of those fees and
shall be fully earned by Franchisor upon payment, notwithstanding any subsequent
decision by Master Franchisee to refund all or a portion of the initial
franchise fee or area director fee.
7.3 CONTINUING FEES.
Master Franchisee agrees to pay to Franchisor a Continuing License Fee,
equal to 30% (thirty percent) of all royalties and other recurring fees (but not
advertising and marketing fees) received by Master Franchisee from Franchisees
and Area Directors (including without limitation Affiliates of Master
Franchisee). The Franchise Agreements will provide for payments of royalties and
other amounts owed directly to Master Franchisee (on a weekly basis by
electronic transfer in the case of royalty and other recurring fees). Although
Franchisor may elect to cause Master Franchisee to terminate any Franchisee who
fails to pay royalties and other fees when due, Master Franchisee shall be
primarily responsible for ensuring payment and compliance with other terms of
the Franchise Agreements for any Franchisee located within the Development Area.
Master Franchisee shall pay the Continuing License Fee to Franchisor on the
tenth (10th) day of each month (unless a holiday, in which case payment will be
due the next business day) for royalties and other fees collected the previous
month.
7.4 INTEREST ON LATE PAYMENTS.
All amounts which Master Franchisee owes to Franchisor or its Affiliates
under this Agreement or any related agreement shall bear interest after the due
date at the rate of one and one-half percent (1.5%) per month, unless such rate
is higher than the highest legal rate permitted by applicable law, in which
case, the rate payable shall be the highest legal rate permitted by law. Such
interest shall be payable in the same currency as the principal debt on which
interest accrues. Master Franchisee acknowledges that this Section 7.4 shall not
constitute Franchisor's agreement to accept such payments after they are due or
a commitment by Franchisor to extend credit to, or otherwise finance Master
Franchisee or the Pilot Restaurant. Master Franchisee acknowledges that its
failure to pay all such amounts when due shall constitute grounds for
termination of this Agreement notwithstanding the provisions of this Section
7.4.
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7.5 WITHHOLDING TAXES.
In the event that any amounts payable by Master Franchisee to Franchisor
hereunder are subject to withholding or other taxes that Master Franchisee is
required to deduct from such payments, Master Franchisee agrees to promptly
deliver to Franchisor receipts of applicable governmental authorities for all
such taxes withheld or paid. Master Franchisee shall be responsible for and
shall indemnify and hold Franchisor and its Affiliates harmless against any
penalties, interest and expenses incurred by or assessed against Franchisor or
its Affiliates as a result of Master Franchisee's failure to withhold such taxes
or to timely remit them to the appropriate taxing authority. Master Franchisee
agrees to fully and promptly cooperate with Franchisor to provide such
information and records as Franchisor may request in connection with any
application by Franchisor to any taxing authority with respect to tax credits,
exemptions or refunds available for any withholding or other taxes paid or
payable by Master Franchisee. In the event Franchisor is required to refund to
Master Franchisee any amounts paid hereunder, Franchisor shall not be required
to refund that portion of those amounts which were withheld by Master Franchisee
in order to comply with any applicable tax law unless and until Franchisor
receives a refund of such amounts from the applicable government or agency
thereof or utilizes a foreign tax credit which is directly attributable to such
amounts on its United States federal income tax return which is accepted by the
United States Treasury or with respect to which the period within which such
credit may be reduced or disallowed has expired.
7.6 CURRENCY OF PAYMENT.
All payments by Master Franchisee to Franchisor under this Agreement shall
be made in Dollars unless otherwise specified by Franchisor. All payments
hereunder to be calculated in the currency of the Development Area and converted
into Dollars for payment to Franchisor shall be converted at the spot currency
rate announced by the New York Office of Citibank as of 10:00 a.m. New York time
on the business day immediately preceding the date payment is transmitted
provided, however, that in the event a payment is transmitted after the date
payment is due, the currency exchange rate used shall be the rate as of the date
payment was due or the rate as of the date the payment is transmitted, whichever
rate produces the larger amount in the currency of payment. All payments made
hereunder shall be made in full net of any bank charges by telegraphic or
electronic transfer to a bank of Franchisor's choosing located in the United
States or elsewhere, or, if Franchisor so elects, shall be deposited in a bank
of Franchisor's choosing located within the Development Area.
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7.7 EXCHANGE CONTROLS.
Master Franchisee shall use its best efforts to obtain any consents or
authorizations which may be necessary in order to permit timely payments in
Dollars of all amounts payable hereunder. If at any time, any legal restriction
is imposed upon the purchase of Dollars or the transfer to or credit of a
non-resident party with payments in Dollars, Master Franchisee shall notify
Franchisor immediately. While such restrictions are in effect, Franchisor may
require payment in any currency designated by Franchisor that is available to
Master Franchisee or, at Franchisor's option, may require Master Franchisee to
deposit all amounts due but unpaid as a result of such a restriction in any type
of account, in any bank or institution in the Development Area designated by
Franchisor. Franchisor shall be entitled to all interest earned on such
deposits. Franchisor may also elect to receive payment in the form of products
or services available to Master Franchisee or its Affiliates, the value of which
will be based on the actual cost of such products or services to Master
Franchisee or its Affiliates. If payment is made in products or services, Master
Franchisee agrees to deliver such products or services to Franchisor or its
designated agent or shipper within the Development Area.
7.8 STAMP DUTIES.
Master Franchisee shall within the time prescribed by applicable law,
submit an executed copy of this Agreement to each governmental agency within the
Development Area responsible for the assessment of any stamp duty or comparable
duties or taxes for the purposes of assessing or obtaining an opinion as to the
stamp duty payable on or in respect of this Agreement and Master Franchisee
agrees to pay all stamp duties and comparable duties and taxes (including any
penalties for late payment) assessed to be payable on or in respect of this
Agreement.
8. MARKETING.
Master Franchisee agrees to (a) establish, maintain and administer a
Franchisee funded marketing fund for the Development Area (the "Marketing
Fund"); (b) require all Franchisees (including those which are Affiliates of
Master Franchisee) to contribute to the Marketing Fund in accordance with the
terms of their Franchise Agreements; (c) direct the creation and implementation
of advertising, marketing and promotional programs for the Development Area; (d)
adapt the marketing materials provided to the Marketing Fund by Franchisor for
use in the Development Area; and (e) furnish each Franchisee with reasonable
quantities of marketing, advertising and promotional materials without charge.
Master Franchisee may purchase advertising materials developed by Franchisor
from Franchisor's domestic Marketing and Promotion Fund. Master Franchisee
agrees to make available to all Franchisees within ninety (90) days after the
end of its financial year a report of the receipts and expenditures of and the
advertising, promotion, public relations, market research and other marketing
programs and activities of the Marketing Fund during the preceding financial
year. If Master Franchisee receives any vendor rebates from sales of Products
within the Development Area, Master Franchisee shall deposit the full amount of
all rebates into the Marketing Fund. Other than vendor rebates disclosed to
Franchisor, Master Franchisee will not negotiate for, receive or accept income
of any sort in connection with sales from or to ▇▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
- ▇▇ -
▇▇▇▇▇▇▇▇▇▇ shall make available for sale to Master Franchisee advertising
and marketing materials developed for use in the U.S. The purchase price shall
be reasonable and related to the materials expected usefulness in the
Development Area.
9. CONFIDENTIAL INFORMATION.
Franchisor possesses (and will continue to develop and acquire) certain
confidential and proprietary information ("Confidential Information") relating
to the development, operation and franchising of QUIZNO'S Restaurants,
including: the terms of this Agreement; franchisee selection criteria; plans and
specifications for the development of QUIZNO'S Restaurants; recipes; training
materials, programs and systems; methods, techniques, formats, specifications,
standards, procedures, sales and marketing techniques, computer software
programs, statistical data, and knowledge of and experience relating to the
development and operation of QUIZNO'S Restaurants; marketing and advertising
programs; knowledge of specifications for and suppliers of certain products,
materials, supplies, equipment, fixtures, furnishings and services; and
knowledge of operating results and financial performance of QUIZNO'S
Restaurants. Franchisor will disclose certain Confidential Information to Master
Franchisee and to certain employees of Master Franchisee in training programs,
the Operating Manual and in guidance furnished to Master Franchisee and its
employees during the Agreement Term.
Master Franchisee acknowledges and agrees that neither Master Franchisee
nor any employee or Affiliate of Master Franchisee will acquire any interest in
the Confidential Information, other than the right to utilize the Confidential
Information in performing its obligations hereunder and as disclosed to certain
employees of Master Franchisee's Affiliate who are Franchisees during the
Agreement Term, and that the use or duplication of any Confidential Information
in any other restaurant operation would constitute an unfair method of
competition. Master Franchisee further acknowledges and agrees that Confidential
Information is proprietary, includes trade secrets of Franchisor, is not
generally known or easily accessible and is important to Franchisor and its
Affiliates and other master franchisees, area directors and franchisees of
Franchisor. Consequently, Franchisor will disclose the Confidential Information
to Master Franchisee solely on the condition that Master Franchisee and its
Owners agree, and Master Franchisee and Owners do hereby agree, that Master
Franchisee and the Restricted Persons during the term of this Agreement and
subsequent to its expiration or termination: will not use Confidential
Information in any other restaurant operation or capacity; will maintain the
absolute confidentiality of Confidential Information; will not make unauthorized
copies of any portion of Confidential Information; will adopt and implement all
reasonable procedures that Franchisor prescribes from time to time to prevent
unauthorized use or disclosure of Confidential Information, including without
limitation restrictions on disclosure thereof to Franchisees, Restaurant
personnel and others; and will impose all of the aforementioned restrictions and
obligations on all Franchisees. Notwithstanding anything to the contrary
contained in this Agreement, the restrictions on Master Franchisee's disclosure
and use of Confidential Information will not apply to information that is or
becomes generally known in the quick service restaurant industry other than
through disclosure (whether deliberate or inadvertent) by Master Franchisee, an
Area Director or a Franchisee, or to the disclosure of Confidential Information
in judicial or administrative proceedings to the extent that Master Franchisee
is legally compelled to disclose such information, provided Master Franchisee
must have used its best efforts and afforded Franchisor the opportunity to
obtain an appropriate protective order or other assurance satisfactory to
Franchisor of confidential treatment for the information required to be
disclosed.
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10. EXCLUSIVE RELATIONSHIP.
Master Franchisee acknowledges and agrees that Franchisor would be unable
to protect the Confidential Information against unauthorized use or disclosure
and would be unable to encourage a free exchange of ideas and information among
owners of QUIZNO'S Restaurants if master franchisees, area directors,
franchisees and their management personnel were permitted to hold Ownership
Interests in or perform services for Competitive Business. Master Franchisee
further acknowledges that restrictions on the right of Master Franchisee and the
Restricted Persons to hold Ownership Interests in or perform services for
Competitive Business will not hinder their activities under this Agreement or
otherwise. Franchisor has entered into this Agreement with Master Franchisee on
the express condition that with respect to the operation of Submarine Sandwich
Restaurants and other restaurants engaged in the production and sale of the
Products, Master Franchisee and the Restricted Persons will deal exclusively
with Franchisor. Master Franchisee therefore agrees that during the Agreement
Term, Master Franchisee and Restricted Persons will not have any direct or
indirect (through a Restricted Person or otherwise) Ownership Interest in any
Competitive Business in the Development Area or elsewhere, perform services as a
director, officer, manager, employee, consultant, representative, agent or
otherwise for any Competitive Business or directly or indirectly employ or seek
to employ any person who is employed by Franchisor, its Affiliates or by any
other master franchisee, area director or franchisee of Franchisor, nor induce
any such person to leave said employment without the prior written consent of
such person's employer.
11. INDEPENDENT CONTRACTORS/INDEMNIFICATION.
11.1 INDEPENDENT CONTRACTORS.
It is understood and agreed by the parties that this Agreement does not
create a fiduciary relationship between them, that Franchisor and Master
Franchisee are and shall be independent contractors, and that nothing in this
Agreement is intended to make either party a general or special agent, joint
venturer, partner, or employee of the other for any purpose. Master Franchisee
shall conspicuously identify itself in all dealings with others as a
subfranchisor of Franchisor and shall conspicuously and prominently place such
other notices of independent ownership on such forms, cards, stationery, and
other materials as Franchisor may require from time to time.
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11.2 NO LIABILITY FOR ACTS OF OTHER PARTY.
Master Franchisee shall not employ any of the Marks in signing any
contract, application for any license or permit, or in a manner that may result
in liability of Franchisor or its Affiliates for any indebtedness or obligation
of Master Franchisee, nor will Master Franchisee use the Marks in any way not
expressly authorized herein. Except as expressly authorized in writing, neither
Franchisor nor Master Franchisee shall make any express or implied agreements,
warranties, guarantees or representations, or incur any debt in the name of or
on behalf of the other, or represent that their relationship is other than
Franchisor and subfranchisor, and neither Franchisor nor Master Franchisee shall
be obligated by or have any liability under any agreements or representations
made by the other that are not expressly authorized in writing, nor shall
Franchisor be obligated for any damages to any person or property directly or
indirectly arising out of the development or operation of Restaurants including
the Pilot Restaurant.
11.3 TAXES.
Franchisor shall have no liability for any sales, value added, use,
service, stamp duty, occupation, excise, gross receipts, income, property,
payroll or other taxes, whether levied upon this Agreement, Master Franchisee,
one (1) or more Restaurants, Franchisees or Area Directors or Master
Franchisee's property, or upon Franchisor, in connection with operations
conducted by Master Franchisee (except any taxes that Franchisor is required by
law to collect from Master Franchisee with respect to purchases from Franchisor
or taxes described in Section 7.5). Payment of all such taxes shall be the
responsibility of Master Franchisee.
11.4 INDEMNIFICATION.
Master Franchisee agrees to indemnify, defend and hold Franchisor, its
Affiliates, and their respective shareholders, directors, officers, employees,
agents, and their respective successors and assignees, harmless against and to
reimburse them for all claims, causes of action, costs, expenses, loss,
liability, damages or obligations arising from or relating to Master
Franchisee's obligations pursuant to this Agreement, including without
limitation obligations under this Section, any and all taxes described in
Section 11.3, the operation of the Pilot Restaurant, the direction and
administration of the Marketing Fund, the operation of any Restaurant or Area
Directorship, or the transfer of any interest in this Agreement, a Franchise
Agreement, an Area Director Agreement, or an Ownership Interest in Master
Franchisee, to the extent that such claims, causes of action, costs, expenses,
loss, liability, damages or obligations do not arise from the negligence or
wrongful conduct of Franchisor. For purposes of this indemnification, "claims"
shall mean and include all obligations, actual and consequential damages, and
costs incurred in the defense of any claim against Franchisor, including without
limitation reasonable accountants', attorneys', attorney assistants',
arbitrators' and expert witness fees, costs of investigation and proof of facts,
court costs, other litigation expenses, and travel and living expenses.
Franchisor shall have the right to defend any such claim against it in such
manner as Franchisor deems appropriate. This indemnity shall continue in full
force and effect subsequent to and notwithstanding the expiration or termination
of this Agreement.
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12. MARKS.
12.1 GOODWILL AND OWNERSHIP OF THE MARKS.
Master Franchisee acknowledges that Master Franchisee's right to use the
Marks is derived solely from this Agreement and is limited to granting
Franchises and Area Directorships in the Development Area in accordance with the
terms hereof. Any unauthorized use of the Marks by Master Franchisee shall
constitute a breach of this Agreement and an infringement of the rights of
Franchisor in and to the Marks. Master Franchisee acknowledges and agrees that
all usage of the Marks by Master Franchisee, Area Directors and Franchisees and
any goodwill established by such use shall inure to the exclusive benefit of
Franchisor and that this Agreement does not confer any goodwill or other
interests in the Marks upon Master Franchisee, other than the right to grant
Franchises and Area Directorships in compliance with this Agreement. All
provisions of this Agreement applicable to the Marks shall apply to any other
trademarks and commercial symbols hereafter authorized for use by and licensed
to Master Franchisee by Franchisor. Master Franchisee agrees that neither Master
Franchisee nor its Affiliates will use or attempt to register any other
trademarks, service marks or other commercial symbol for use in connection with
the development, operation or franchising of QUIZNO'S Restaurants. Master
Franchisee covenants that it will not directly or indirectly, either alone or in
conjunction with others, challenge or take any action to cause a challenge to
the validity or ownership of the Marks or to obstruct the efforts of Franchisor
or its Affiliates with respect to the registration thereof.
12.2 LIMITATIONS ON MASTER FRANCHISEE'S USE OF THE MARKS.
Master Franchisee shall not use the Marks as part of any corporate or
trade name or with any prefix, suffix, or other modifying words, terms, designs,
or symbols, or in any modified form, nor may Master Franchisee use any ▇▇▇▇ in
connection with the performance or sale of any unauthorized services or products
or in any other manner not expressly authorized in writing by Franchisor. All
Marks shall be displayed in the manner prescribed by Franchisor.
12.3 NOTIFICATION OF INFRINGEMENT AND CLAIMS.
Master Franchisee shall immediately notify Franchisor of any apparent
infringement of or challenge (actual or threatened) to Master Franchisee's or an
Area Director's or a Franchisee's use of any ▇▇▇▇, or claim by any person of any
rights in any ▇▇▇▇ or a confusingly or deceptively similar trademark or service
▇▇▇▇. Master Franchisee shall not communicate with any person other than its
counsel, Franchisor and Franchisor's counsel with respect to any such
infringement, challenge or claim. Franchisor shall have sole discretion to take
such action as it deems appropriate in connection with any such infringement,
challenge or claim, and the right to control any settlement, litigation,
arbitration or administrative proceeding arising therefrom. Master Franchisee
agrees to execute any and all instruments and documents, render such assistance,
and take such action as may, in the opinion of Franchisor's counsel, be
necessary or advisable to protect and maintain the interests of Franchisor in
the Marks. Franchisor will reimburse Master Franchisee for the reasonable
expenses incurred and paid by Master Franchisee in complying with the
requirements imposed by this Section, so long as Master Franchisee has used the
Marks in accordance with this Agreement.
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In the event that Franchisor elects not to take action with respect to any
alleged infringement or challenge to a ▇▇▇▇, Master Franchisee may take such
action and Franchisor shall cooperate with Master Franchisee in doing so,
provided that Franchisor shall retain the ultimate authority to control and
approve or disapprove the conduct and settlement of any action taken by Master
Franchisee with respect to such infringement or challenge.
12.4 DISCONTINUANCE OF USE OF MARKS.
If it becomes advisable at any time in Franchisor's sole judgment for
Master Franchisee and one (1) or more Area Directors or Franchisees to modify or
discontinue use of any ▇▇▇▇ or for Master Franchisee to use one or more
additional or substitute trademarks or service marks, Master Franchisee agrees
to immediately comply with and require such Area Directors and Franchisees to
immediately comply with Franchisor's directions to modify or otherwise
discontinue the use of such ▇▇▇▇, or use one or more additional or substitute
trademarks, logos or commercial symbols. Franchisor will have no obligation to
reimburse Master Franchisee or any Area Directors or Franchisees for any
expenditures made by them to modify or discontinue the use of a ▇▇▇▇ or to adopt
substitutes for discontinued Marks, including, without limitation, any
expenditures relating to advertising or promotional materials, and no obligation
to reimburse Master Franchisee or Franchisees for any loss of goodwill of their
Restaurants related to a discontinued ▇▇▇▇.
12.5 REGISTERED USER AGREEMENTS.
Master Franchisee shall at the request and expense of Franchisor do all
acts and execute all documents necessary or desirable in Franchisor's opinion
for establishing Master Franchisee as a user of the Marks hereunder and, where
required, for the registration of Master Franchisee's permitted use with
governmental agencies. Following such request, Master Franchisee shall not be
entitled to exercise any of the rights granted by this Agreement until Master
Franchisee has executed and delivered such documents to Franchisor. Any
registered user agreement shall be in form and substance acceptable to
Franchisor.
12.6 MASTER FRANCHISEE'S TRADE NAME.
Master Franchisee acknowledges that Franchisor has a prior and superior
claim to the Marks and "QUIZNO'S" trade name. Franchisor grants Master
Franchisee the right to use the trade name "QUIZNO'S" in the legal name of the
entity used in conducting the Master Franchisee's business provided for in this
Agreement. Master Franchisee agrees not to register or attempt to register any
trade name using the word "QUIZNO'S" in Master Franchisee's name or in any other
person or business entity name without the prior written consent of Franchisor.
When this Agreement is terminated, Master Franchisee shall execute any
assignment or other document Franchisor requires to transfer to the Franchisor
any rights Master Franchisee may possess in a trade name utilizing "QUIZNO'S" or
any other ▇▇▇▇ owned by the Franchisor.
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13. TRANSFER.
13.1 BY FRANCHISOR.
This Agreement is fully transferable by Franchisor and shall inure to the
benefit of any assignee or other legal successor to the interests of Franchisor
herein. Master Franchisee acknowledges and agrees that Franchisor may assign or
delegate any or all of its rights and obligations under this Agreement to an
Affiliate or an unaffiliated third party. In the event Franchisor delegates or
assigns any obligations as aforesaid, Franchisor may direct Master Franchisee to
make payments due to Franchisor hereunder directly to the delegate or assignee.
13.2 BY MASTER FRANCHISEE.
Master Franchisee understands and acknowledges that the rights and duties
created by this Agreement are personal to Master Franchisee and the Owners and
that Franchisor has entered into this Agreement in reliance upon the individual
or collective character, skill, aptitude, attitude, business ability and
financial capacity of Master Franchisee and the Owners. Therefore, neither this
Agreement, a Controlling Interest in Master Franchisee, nor any Area Director
Agreement or Franchise Agreement may be transferred, in a single transfer or a
series of transfers, without the prior written approval of Franchisor, which may
be withheld in Franchisor's sole discretion. Any such transfer without such
approval shall constitute a breach hereof and shall convey no rights to or
interests in this Agreement, and Area Director Agreement or any Franchise
Agreement. Master Franchisee agrees to reimburse Franchisor for all reasonable
expenses incurred by Franchisor in evaluating and approving a proposed transfer.
As used in this Agreement, the term "transfer" shall include, without
limitation, whether voluntary or involuntary, direct or indirect: an assignment,
sale, gift or pledge; the grant of a mortgage, charge, lien or security interest
including, without limitation, the grant of a collateral assignment; a merger or
consolidation, or issuance of additional Ownership Interests or redemption of
Ownership Interests; a sale of voting interests or of securities convertible to
voting interests, or an agreement granting the right to exercise, or control the
exercise, of voting rights of any holder of an Ownership Interest; and a
transfer that occurs as a result of divorce, insolvency, corporate or
partnership dissolution, or upon death, by will, intestate succession or by
declaration of, or transfer to, a trust.
13.3 FRANCHISOR'S RIGHT OF FIRST REFUSAL.
If Master Franchisee or an Owner shall at any time determine to sell or
transfer an interest in this Agreement, the assets of Master Franchisee (other
than in the ordinary course of business), one (1) or more Area Director
Agreements, one (1) or more Franchise Agreements or a Controlling Interest in
Master Franchisee, Master Franchisee or the Owners, as applicable, agree to
obtain a bona fide, executed written offer and ▇▇▇▇▇▇▇ money deposit in the
amount of five percent (5%) or more of the offering price from a qualified,
responsible and fully disclosed purchaser and a true and complete copy of the
offer and any proposed ancillary agreements shall immediately be submitted to
Franchisor. The offer must apply only to this Agreement, the assets of Master
Franchisee, the Area Director Agreement(s), the Franchise Agreement(s) or an
Ownership Interest in Master Franchisee and may not include the purchase of any
other property or rights. Franchisor or its designee shall have the right,
exercisable by written notice delivered to Master Franchisee or the Owners
within thirty (30) days from the date of delivery of an exact copy of such offer
to Franchisor, to purchase such interests for the price and on the terms and
conditions contained in such offer, provided that Franchisor may substitute cash
or marketable securities of equal value for any form of payment proposed in such
offer. Franchisor's credit shall be deemed equal to the credit of any proposed
purchaser. Franchisor shall have not less than ninety (90) days to prepare for
closing. If Franchisor does not exercise its right of first refusal, Master
Franchisee or the Owners may complete the sale to such purchaser pursuant to and
on the exact terms of such offer, subject to Franchisor's approval of the
transfer as provided in this Section, provided that if the sale to such
purchaser is not completed within one hundred twenty (120) days after delivery
of such offer to Franchisor, or there is a material change in the terms of the
sale, Franchisor shall have an additional right of first refusal for thirty (30)
days on the terms and conditions applicable to the initial right of first
refusal, except that Franchisor shall have the option to substitute any of the
modified terms of purchase for those contained in the original offer.
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13.4 DEATH OF MASTER FRANCHISEE.
Upon the death of an Owner of Master Franchisee, the executor,
administrator, conservator, or other personal representative of such Owner
shall, within a reasonable time from the date of death, transfer the deceased
Owner's interest in this Agreement, Master Franchisee, or the assets of Master
Franchisee, to such deceased Owner's heirs or legatees, provided the transferees
are approved by Franchisor, in accordance with this Section. If the Owner's
heirs or legatees cannot meet the conditions of this Agreement, the Owner's
personal representative shall transfer the Owner's interest to a third party in
accordance with the provisions of this Section.
14. TERMINATION OF AGREEMENT.
14.1 BY MASTER FRANCHISEE.
If Master Franchisee is in substantial compliance with this Agreement and
Franchisor materially breaches this Agreement, Master Franchisee may terminate
this Agreement effective sixty (60) days after delivery of written notice of
termination if Master Franchisee gives written notice of such breach to
Franchisor and Franchisor does not cure such breach within sixty (60) days after
delivery of notice of such breach, or if such breach cannot reasonably be cured
within sixty (60) days after delivery of notice of such breach, does not
undertake within sixty (60) days after delivery of such notice, and continue
until completion, reasonable efforts to cure such breach. Any termination of
this Agreement by Master Franchisee other than as provided in Section 14.1 shall
be deemed a termination by Master Franchisee without cause.
14.2 BY FRANCHISOR.
Franchisor may at its option terminate the Agreement Term or the
Development Term, effective upon the delivery of written notice of termination
to Master Franchisee or, if applicable, upon Master Franchisee's failure to cure
a breach of this Agreement before the expiration of any period of time within
which such breach may be cured in accordance with the provisions set forth
below, if: (i) Master Franchisee fails to satisfy the Development Quota for two
consecutive Development Periods or an aggregate of four (4) Development Periods;
(ii) Franchisor elects to terminate this Agreement as provided in Section 6.5;
(iii) Master Franchisee or an Owner makes an assignment or transfer in violation
of this Agreement; (iv) Master Franchisee or an Owner of a Controlling Interest
in Master Franchisee is convicted by a trial court of, or pleads guilty to, a
crime or offense that may adversely affect the goodwill associated with the
Marks or the reputation of QUIZNO'S Restaurants, or engages in conduct that
adversely affects the reputation of Franchisor or the goodwill associated with
the Marks; (v) Master Franchisee or an Owner applies for trademark or service
▇▇▇▇ registration of any of the Marks anywhere in the world, or makes any
unauthorized use of the Marks or an unauthorized use or disclosure of the
Confidential Information; (vi) Master Franchisee becomes insolvent in the sense
that Master Franchisee is unable to pay its bills as they become due or the
liabilities of Master Franchisee exceed its assets; (vii) Master Franchisee
makes an assignment for the benefit of creditors or an admission of its
inability to pay its obligations as they become due; (viii) Master Franchisee
files a voluntary petition in bankruptcy, files any pleading seeking any
reorganization, liquidation or dissolution under any law, admits or fails to
contest the material allegations of any such pleading filed against it, or is
adjudicated a bankrupt or insolvent; (ix) a receiver, trustee, liquidator or
other person acting in a comparable capacity is appointed for a substantial part
of the assets of Master Franchisee; (x) the claims of creditors of Master
Franchisee or its Owners are abated or subject to a moratorium under any law;
(xi) a Restricted Person violates the restrictions set forth in Section 9 or
Section 10; (xii) Master Franchisee fails to pay any amount when due hereunder
to Franchisor and fails to correct such failure within ten (10) days after
written notice thereof; or (xiii) Master Franchisee fails to comply with any
other provision of this Agreement and does not correct such failure within sixty
(60) days after written notice of such failure or, if or if such breach cannot
reasonably be cured within sixty (60) days after delivery of notice of such
breach, does not undertake within sixty (60) days after delivery of such notice,
and continue until completion, reasonable efforts to cure such breach.
15. RIGHTS AND OBLIGATIONS UPON TERMINATION OR EXPIRATION.
15.1 MARKS.
Except with respect to any ongoing obligations of Master Franchisee under
Section 15.3, Master Franchisee and the Owners agree that after the termination
of this Agreement or expiration of the Agreement Term, they: (i) will not
directly or indirectly identify Master Franchisee as a current or former Master
Franchisee of, or as otherwise associated with, Franchisor; (ii) will not use
any ▇▇▇▇, or any trade name, trademark or commercial symbol that is deceptively
similar to any ▇▇▇▇, in any manner or for any purpose; (iii) will not use any
trade name, trademark or commercial symbol that suggests or indicates a
connection or association with Franchisor; (iv) will remove all signs containing
any ▇▇▇▇ and return to Franchisor or destroy all forms and materials containing
any ▇▇▇▇; and (v) will return to Franchisor all copies of the Operating Manual
and any other confidential materials which have been loaned or made available by
Franchisor pursuant to this Agreement.
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15.2 COVENANT NOT TO COMPETE.
Upon termination of this Agreement or upon expiration of the Agreement
Term, for a period of two (2) years commencing on the effective date of such
termination or expiration, Master Franchisee and the Restricted Persons agree
they will not: (i) have any direct or indirect (through a Restricted Person or
otherwise) Ownership Interest in any Competitive Business located or operating
within the Development Area, or within any other Development Area in which
QUIZNO'S Restaurants are then under development or in operation; (ii) perform
services as a director, officer, manager, employee, consultant, representative,
agent or otherwise for any Competitive Business located or operating within the
Development Area or within any other Development Area in which QUIZNO'S
Restaurants are then under development or in operation; or (iii) directly or
indirectly employ or seek to employ, any person who is employed by Franchisor,
its Affiliates or by any other master franchisee, area director or franchisee of
Franchisor or its Affiliates, nor induce nor attempt to induce any such person
to leave said employment without prior written consent of Franchisor and such
person's employer.
15.3 AREA DIRECTOR AND FRANCHISE AGREEMENTS.
Unless Master Franchisee has extended the Development Term pursuant to
Section 3.4, upon expiration or termination of the Development Term, Master
Franchisee shall no longer have Development Rights hereunder but shall be
entitled to collect commissions on royalties from Restaurants open in the
Development Area on the date of termination or expiration for the remainder of
the term remaining under the applicable Franchise Agreement provided that Master
Franchisee continues to provide required services as franchisor therefor.
In addition to, and not in lieu of, the rights of Franchisor and the
obligations of Master Franchisee under this Section, if this Agreement
terminates or expires (including termination or expiration of the Development
Term), Master Franchisee agrees to assign to Franchisor or its designee, at the
option of Franchisor: (i) all of its rights and obligations under those Area
Director Agreements designated by Franchisor, and (ii) in consideration of the
payment provided in this Section, all of its rights and obligations under those
Franchise Agreements designated by Franchisor. Franchisor may exercise its right
to assignment of any Franchise Agreement at any time after termination of the
Agreement Term or the Development Term until the expiration or termination of
that Franchise Agreement (including any renewal terms). If Franchisor exercises
the option provided for in this Section, it shall have ninety (90) days from the
date of the notice exercising such option to designate the Franchise
Agreement(s) to be assigned and prepare for closing. The payment to be made for
each Franchise Agreement assigned shall be an amount equal to one third (0.3333)
of the royalty (but not advertising) fees actually paid by the Franchisee
pursuant to that Franchise Agreement during the five (5) year period commencing
with the effective date of assignment. Such payments shall be made to Master
Franchisee on or before thirty (30) days following the end of each calendar
quarter. Franchisor may deduct from the payments due to Master Franchisee
pursuant to this Section any amount then due and owing to Franchisor or its
Affiliates under this Agreement. If Franchisor terminates the Agreement Term or
the Development Term for cause (other than failure to meet the Development
Quota) or if Master Franchisee terminates this Agreement without cause, Master
Franchisee shall not be entitled to the foregoing payment for any assigned
Franchise Agreement. Master Franchisee shall not be entitled to receive, or
obligated to make, further payments (except as provided in this Section 15.3) of
royalties or other amounts from Franchise Agreements or to Area Director
Agreements assigned to Franchisor, provided that such assignment will not limit
Master Franchisee's indemnification obligations for claims arising from facts
that occur prior to the assignment date. The Form Agreements shall set forth
Franchisor's right to assignment as provided in this Section. The Area Director
Agreements and Franchise Agreements transferred, as designated by Franchisor,
shall be assigned free and clear of any liens, charges and encumbrances.
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15.4 CONTINUING OBLIGATIONS.
All obligations of Franchisor and Master Franchisee which expressly or by
their nature survive the termination of this Agreement or the expiration of the
Agreement Term shall continue in full force and effect subsequent to and
notwithstanding its expiration or termination and until they are satisfied in
full or by their nature expire.
16. ENFORCEMENT.
16.1 INFORMAL DISPUTE RESOLUTION.
Prior to filing any proceeding, except as provided in Section 16.2
concerning temporary restraining orders and injunctive relief, the party
intending to file such a proceeding shall be required to notify the other party
in writing of the existence and the nature of the dispute. Franchisor and Master
Franchisee each agree that within fifteen (15) business days of the other
party's receipt of such notice, the Chief Executive, Chief Operating Officer or
other senior executive officer of both Franchisor and Master Franchisee shall
meet in Denver, Colorado, U.S.A., for a minimum of two (2) eight (8) hour days
in order to attempt to resolve the dispute amicably. If such informal dispute
resolution attempts prove to be unsuccessful, the notifying party may initiate a
proceeding as described in Section 16.2.
16.2 FORMAL DISPUTE RESOLUTION.
If the parties are unable to resolve any dispute informally under Section
16.1, any party may commence a proceeding pursuant to the terms and limitations
set forth in this Section 16. All controversies, disputes or claims arising
between Franchisor, its Affiliates, and their respective officers, directors,
shareholders, partners, agents, employees and attorneys (in their representative
capacity) and Master Franchisee (and its Owners and the guarantors of this
Agreement) arising out of or related to the relationship of the parties, this
Agreement or any provision hereof, any Area Director Agreement or Franchise
Agreement or any related agreement, the validity of this Agreement or any
provision hereof or any System Standard relating to the establishment or
operation of QUIZNO'S Restaurants (collectively, "Claims") shall be commenced in
the District Court for the City & County of Denver, Colorado, U.S.A., or the
United States District Court for the District of Colorado, U.S.A., or any other
state or federal court in the district where Franchisor then has its principal
office. The parties have negotiated regarding a forum in which to resolve any
disputes that may arise between them and have agreed to select a forum in order
to promote stability in their relationship. Therefore, the parties waive any
objection they may have to the personal jurisdiction of or venue in such courts.
The parties further agree that in connection with any such proceeding, any party
shall submit or file any Claim that would constitute a compulsory counterclaim
(as defined by Rule 13 of the United States Federal Rules of Civil Procedure or
its successor Rule) within the same proceeding as the Claim to which it relates.
Any such Claim which is not submitted or filed as described above shall be
barred. Notwithstanding anything to the contrary contained in this Section,
Master Franchisee and Franchisor 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. 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 of the
Agreement Term or the termination of this Agreement.
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Master Franchisee, its Affiliates and the Owners agree not to bring any
Claim asserting that any of the Marks are generic or otherwise invalid. Master
Franchisee, its Affiliates and the Owners agree that their sole recourse for
Claims arising between the parties shall be against Franchisor or its successors
and assigns, and further agree that the shareholders, directors, officers,
employees and agents of Franchisor and its Affiliates (other than Master
Franchisee) shall not be personally liable nor named as a party in any action
arising from a Claim. The parties agree that any proceeding will be conducted on
an individual, not a class-wide, basis, and that a proceeding involving a Claim
may not be consolidated with any other proceeding between Franchisor and any
other person or entity. No previous course of dealing shall be admissible to
explain, modify or contradict the terms of this Agreement. No implied covenant
of good faith and fair dealing shall be used to alter the express terms of this
Agreement.
16.3 SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS.
All provisions of this Agreement are severable and this Agreement shall be
interpreted and enforced as if all completely invalid or unenforceable
provisions were not contained herein and partially valid and enforceable
provisions shall be enforced to the extent valid and enforceable. To the extent
that the exclusive dealing provisions of Section 10 or the post-termination
restrictive covenant set forth in Section 15.2 is deemed unenforceable by virtue
of its scope in terms of geographic area, activity prohibited or length of time,
but may be made enforceable by reductions of any of them, Master Franchisee and
Franchisor agree that same shall be enforced to the fullest extent permissible
under the laws and public policies applied in the jurisdiction in which
enforcement is sought. If any applicable and binding law or rule of any
jurisdiction requires a greater prior notice of the termination of this
Agreement than is required hereunder or the taking of some other action not
required hereunder, or if under any applicable and binding law or rule of any
jurisdiction, any provision of this Agreement or any specification, standard or
operating procedure prescribed by Franchisor is invalid or unenforceable, the
prior notice or other action required by such law or rule shall be substituted
for the comparable requirements hereof, and Franchisor shall have the right, in
its sole discretion, to modify such invalid or unenforceable provision,
specification, standard or operating procedure to the extent required to be
valid and enforceable. Such modifications to this Agreement shall be effective
only in such jurisdiction and shall be enforced as originally made and entered
into in all other jurisdictions.
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16.4 WAIVER OF OBLIGATIONS.
Franchisor and Master Franchisee may by written instrument unilaterally
waive any obligation of or restriction upon the other under this Agreement. No
acceptance by Franchisor of any payment by Master Franchisee or any other person
or entity and no failure, refusal or neglect of Franchisor or Master Franchisee
to exercise any right under this Agreement or to insist upon full compliance by
the other with its obligations hereunder shall constitute a waiver of any
provision of this Agreement. Franchisor makes no warranties or guarantees upon
which Master Franchisee may rely, and assumes no liability or obligation to
Master Franchisee, by granting any waiver, approval, or consent to Master
Franchisee, or by reason of any neglect, delay, or denial of any request
therefor. Any waiver granted by Franchisor shall be without prejudice to any
other rights Franchisor may have, will be subject to continuing review by
Franchisor, and may be revoked, in Franchisor's sole discretion, at any time and
for any reason, effective upon delivery to Master Franchisee of ten (10) days'
prior written notice. Franchisor and Master Franchisee shall not be deemed to
have waived or impaired any right, power or option reserved by this Agreement
(including, without limitation, the right to demand exact compliance with every
term, condition and covenant herein, or to declare any breach thereof to be a
default and to terminate this Agreement prior to the expiration of its term), by
virtue of any custom or practice of the parties at variance with the terms
hereof; any failure, refusal, or neglect of Franchisor or Master Franchisee to
exercise any right under this Agreement or to insist upon exact compliance by
the other with its obligations hereunder, including, without limitation, any
System Standard; any waiver, forbearance, delay, failure, or omission by
Franchisor to exercise any right, power, or option, whether of the same, similar
or different nature, with respect to any QUIZNO'S Restaurants or any franchise
agreement therefor; or the acceptance by Franchisor of any payment from Master
Franchisee after any breach of this Agreement.
16.5 RIGHTS OF PARTIES ARE CUMULATIVE.
The rights of Franchisor and Master Franchisee hereunder are cumulative
and no exercise or enforcement by Franchisor or Master Franchisee of any right
or remedy hereunder shall preclude the exercise or enforcement by Franchisor or
Master Franchisee of any other right or remedy hereunder or which Franchisor or
Master Franchisee is entitled by law to enforce.
- 30 -
16.6 WAIVER OF PUNITIVE DAMAGES AND JURY TRIAL.
Franchisor and Master Franchisee hereby waive to the fullest extent
permitted by law, any right to or claim for any punitive, exemplary or special
damages against the other and agree that in the event of a dispute between them,
except as otherwise provided herein, each shall be limited to the recovery of
any actual damages sustained by it (provided that this limitation shall not
apply to statutory penalties such as those set forth in 15 U.S.C. ' 1117(a)).
Franchisor and Master Franchisee irrevocably waive trial by jury in any action,
proceeding or counterclaim, whether at law or in equity, brought by either of
them. The parties acknowledge that the parties' waiver of jury trial rights
provides the parties with the mutual benefit of uniform interpretation of this
Agreement and any dispute arising out of this Agreement or out of the parties'
relationship created by this Agreement, and further acknowledge the receipt and
sufficiency of mutual consideration for such benefit.
16.7 LIMITATION OF CLAIMS.
Except with regard to Master Franchisee's obligations to pay to Franchisor
Restaurant Opening Fees, Continuing Fees and other payments due Franchisor and
its Affiliates pursuant to this Agreement, any and all Claims arising out of or
relating to this Agreement or the relationship of Master Franchisee and
Franchisor shall be barred unless a proceeding is commenced within one (1) year
from the date Franchisor or Master Franchisee knew or, exercising reasonable
diligence should have known, of the facts giving rise to such Claims, or the
period of time in which Claims must be brought under applicable law, whichever
is less, or such Claim shall be barred. The parties understand that such time
limit may be shorter than otherwise allowed by law.
16.8 COSTS AND LEGAL FEES.
If Franchisor or Master Franchisee is required to enforce this Agreement
in a proceeding, the party prevailing in such proceeding shall be reimbursed by
the other party for its costs and expenses, including without limitation
reasonable attorneys' fees (for attorneys and legal assistants), accountants'
fees, and expert witness fees, costs of investigation and proof of facts, court
costs, other litigation expenses and travel and living expenses, whether
incurred prior to, in preparation for or in contemplation of the filing of any
such proceeding. If Franchisor is required to engage legal counsel in connection
with any failure by Master Franchisee to comply with this Agreement, Master
Franchisee shall reimburse Franchisor for any of the above-listed costs and
expenses incurred by it.
- 31 -
16.9 GOVERNING LAW/CONSENT TO JURISDICTION.
Master Franchisee and Franchisor agree that, except to the extent governed
by the United States Trademark Act of 1946 (▇▇▇▇▇▇ Act, 15 U.S.C. Section 1051
et seq.) or other federal law, this Agreement and the relationship of the
parties shall be governed by the internal laws of the State of Colorado, U.S.A.
except that its choice of law and conflict of law rules shall not apply and any
franchise registration, disclosure, relationship or similar statute which may be
adopted by the State of Colorado shall not apply unless its jurisdictional
requirements are met independently without reference to this Section. Franchisor
may file an action seeking an order pursuant to Section 16.2 or to enforce any
judgment or order in any such court or in any court located in the Development
Area. Master Franchisee irrevocably submits to the jurisdiction of such courts
and waives any objection it may have to either the jurisdiction or venue of such
courts.
16.10 NO RIGHT TO SET-OFF.
Master Franchisee shall not be allowed to set off amounts owed to
Franchisor hereunder against any monies owed to or claimed by Master Franchisee,
which right of set off is hereby expressly waived by Master Franchisee.
17. REPRESENTATIONS OF MASTER FRANCHISEE.
Master Franchisee represents and warrants that it has induced Franchisor
to enter into this Agreement based on the following representations and
warranties made to Franchisor. The following representations and warranties
shall survive termination of this Agreement.
(a) Master Franchisee understands and acknowledges that Franchisor
has made no promise or guarantee, express or implied, that Master Franchisee
will be able to comply with any applicable laws and regulations concerning the
sale of franchises in the Development Area throughout the entire term hereof,
but Master Franchisee agrees to use best efforts to comply with the same.
(b) Franchisor has made no representations or statements of actual,
average, projected or forecasted sales, profits or earnings to Master Franchisee
upon which Master Franchisee has in any way relied upon in entering into this
Agreement, except as may be set forth in Franchisor's Uniform Franchise Offering
Circular.
(c) Master Franchisee acknowledges that it has read this Agreement
and understands and accepts the terms contained in this Agreement as being
reasonably necessary to maintain Franchisor's high standards of quality and
service and the uniformity of those standards and thereby to protect and
preserve the goodwill of the Marks and the integrity of the System. Master
Franchisee acknowledges that it has conducted an independent investigation of
the business venture contemplated by this Agreement and recognizes that, like
any other business, the nature of this business may evolve and change over time,
that the investment involves business risks and that the success of the venture
is largely dependent upon Master Franchisee's business abilities and efforts.
Master Franchisee further represents to Franchisor, as an inducement to its
entry into this Agreement, that Master Franchisee has made no misrepresentations
in obtaining the license granted pursuant to this Agreement.
- 32 -
18. MISCELLANEOUS PROVISIONS.
18.1 BINDING EFFECT.
This Agreement is binding upon the parties and their respective executors,
administrators, heirs, assigns and successors in interest, and shall not be
modified except by written agreement signed by both Master Franchisee and
Franchisor.
18.2 CONSTRUCTION.
The preambles and exhibits are a part of this Agreement, which constitutes
the entire agreement of the parties, and, except for Area Director Agreements
and Franchise Agreements, there are no other oral or written understandings or
agreements between Franchisor and Master Franchisee relating to the subject
matter of this Agreement. The headings of the several sections and subsections
hereof are for convenience only and do not define, limit or construe the
contents of such sections or subsections. The term "Master Franchisee" as used
herein is applicable to one or more persons, a corporation or a partnership, as
the case may be, and the singular usage includes the plural and the masculine
and neuter usages include the other and the feminine. If two or more persons are
at any time Master Franchisee hereunder, whether or not as partners or joint
venturers, their obligations and liabilities to Franchisor shall be joint and
several. This Agreement may be executed in multiple copies, each of which shall
be deemed an original.
18.3 GOVERNING LANGUAGE.
This Agreement and the Operating Manual originally will be written in the
English language, and all questions of interpretation of this Agreement or the
Operating Manual shall be resolved by reference to the same as written in
English.
18.4 NOTICES, REPORTS AND PAYMENTS.
All written notices, reports and payments permitted or required to be
delivered by the provisions of this Agreement or of the Operating Manual shall
be deemed so delivered at the time delivered by hand, five (5) business days
after being placed in the hands of a commercial courier service for express
delivery or ten (10) days after placement with a government mail service by
Registered or Certified Mail (or the equivalent), Return Receipt Requested,
postage prepaid. All such notices, reports and payments shall be addressed to
the parties as follows:
- 33 -
If to Franchisor: The Quizno's Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Legal Department
If to Master ___________________________________
Franchisee: ___________________________________
___________________________________
___________________________________
A change by any party with respect to the address for delivery of all such
notices and reports must be delivered in writing to the other party within ten
(10) business days of any such change in address. Any required payment or report
not actually received by Franchisor during regular hours on the date due (or
postmarked by government postal authorities at least two (2) days prior thereto)
will be deemed delinquent. For purposes of this Agreement, the term "business
day" shall exclude Saturdays, Sundays and official holidays.
- 34 -
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
in multiple counterparts in _______, _______ on the day and year first above
written.
THE QUIZNO'S CORPORATION _____________________________
Master Franchisee (Print Name)
By:_________________________ By:_________________________
Name:_______________________ Name:_______________________
Title:______________________ Title:______________________
- 35 -
JOINDER
In consideration of, and as a condition to, the grant by Franchisor to
Master Franchisee of the master franchise rights set forth in this Agreement,
the undersigned Owners (on behalf of themselves and the Restricted Persons)
hereby agree to be personally bound by the provisions of this Agreement
applicable to them.
OWNERS
______________________________ ___________________________
Name: Name:
______________________________ ___________________________
Name: Name:
- 36 -
EXHIBIT A
TO THE MASTER FRANCHISE AGREEMENT
BY AND BETWEEN THE QUIZNO'S CORPORATION
AND
DATED ___________________
DEVELOPMENT AREA
The Development Area referred to in Section 2 of the captioned agreement
shall consist of .
THE QUIZNO'S CORPORATION _____________________
Master Franchisee
By:_________________________ By:______________________
Name:_______________________ Name:____________________
Title:______________________ Title:___________________
A - 1
EXHIBIT B
TO THE MASTER FRANCHISE AGREEMENT
BY AND BETWEEN
THE QUIZNO'S CORPORATION
AND ________________
DATED __________________
DEVELOPMENT QUOTA
Cumulative
Number of
QUIZNO'S
Restaurants to
be Open and in
Date Operation in the
Development Development Area
Development Period Date Development ("Development
Period Commences Period Ends Quota")
--------------------------------------------------------------------
First January 1, December 31,
Second January 1, December 31,
Third January 1, December 31,
Fourth January 1, December 31,
Fifth January 1, December 31,
Sixth January 1, December 31,
Seventh January 1, December 31,
Eighth January 1, December 31,
Ninth January 1, December 31,
Tenth January 1, December 31,
THE QUIZNO'S CORPORATION ___________________________
Master Franchisee
By:_________________________ By:________________________
Name:_______________________ Name:______________________
Title:______________________ Title:_____________________
B - 1
EXHIBIT C
TO THE MASTER FRANCHISE AGREEMENT
BY AND BETWEEN
THE QUIZNO'S CORPORATION
AND ______________________
DATED __________________
MARKS
As of the date of this Agreement, Master Franchisee shall be authorized to use
the following Marks in connection with the franchising of QUIZNO'S Restaurants
pursuant to this Agreement, all of which are registered on the Principal
Register of the United States Patent and Trademark Office:
Application Application
or or
Registration Registration
Country Trademark Number Date Status Classes
----------- -------------- ---------- ------------- ------------ -------------
Australia Quizno's App. # 30 March
789815 1999 Pending 30, 32, 42
Quizno's Subs
Australia Oven Baked App. # 30 March 30, 32, 42
Classics 789814 ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ Quizno's 6 February No
Reg. # 1998 Registered classification
489496 in Canada
Quizno's Subs
Canada Oven Baked App. # No
Classics not yet Pending classification
(and design) available in Canada
Europe-CTM Quizno's App. # 28 January
1057223 1999 Pending 42
Quizno's Subs
Europe-CTM Oven Baked 28 January
Classics App. # 1999 Pending 42
1057264
Great Quizno's Reg. # 18 August
Britain 1576926 1995 Registered 42
Quizno's Subs
Great Oven Baked
Britain Classics App # 30, 32, 42
(and design) ▇▇▇▇▇▇▇
▇▇▇▇▇ Quizno's Reg. # 21 May
4275508 1999 Registered 42
Quizno's Subs
Japan Oven Baked
Classics App. # 1 March Pending 42
(and design) 17745/99 ▇▇▇▇
▇▇▇▇▇▇ Quizno's Reg. # 30 August
502259 1995 Registered 42
Puerto Quizno's 23 September
Rico None ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇ Quizno's 12 September
Reg. # 1994 Registered 42
6014/94
South Quizno's 11 January
Korea Reg. # 1996 Registered 42
29994
C - 1
EXHIBIT D
TO THE MASTER FRANCHISE AGREEMENT
BY AND BETWEEN
THE QUIZNO'S CORPORATION
AND ________________
DATED __________________
OWNERSHIP INTERESTS
Master Franchisee represents and warrants that it is duly organized and
validly existing in good standing under the laws of the jurisdiction of its
incorporation or organization, is qualified to do business in all jurisdictions
in which its business activities or the nature of properties owned by Master
Franchisee requires such qualification, and has the corporate or other authority
to execute, deliver and carry out all of the terms of this Agreement.
Master Franchisee further represents and warrants that all Owners and
their interests in Master Franchisee are completely and accurately listed on
this Exhibit D and agree that Master Franchisee will execute such revised
versions of Exhibit D as may be necessary during the term of this Agreement to
reflect any changes in the information contained in original Exhibit D.
1. Ownership Structure. If MASTER FRANCHISEE is a company or other entity
(including a partnership or an entity having limited liability), MASTER
FRANCHISEE and its Owners represent and warrant that the ownership structure of
MASTER FRANCHISEE is as follows:
Class of Number of Units Percentage of
Ownership of Ownership Total Ownership
Name of Owner Interest Interests Interests
--------------- ----------------- --------------- --------------------
D - 1
There are no other authorized classes of Ownership Interests of MASTER
FRANCHISEE.
OWNERS
______________________________ _______________________________
Name: Name:
______________________________ _______________________________
Name: Name:
D - 2
GUARANTY AND ASSUMPTION OF OBLIGATIONS
UNDER THE MASTER FRANCHISE AGREEMENT
DATED ______________________,
BETWEEN
THE QUIZNO'S CORPORATION
AND
In consideration of, and as an inducement and a condition to, the
execution of that certain MASTER FRANCHISE AGREEMENT of even date herewith (the
"Agreement") between THE QUIZNO'S CORPORATION ("Franchisor") and ("Master
Franchisee"), each of the undersigned hereby personally and unconditionally: (1)
guarantees to Franchisor, and its successors and assigns, for the term of the
Agreement and thereafter as provided in the Agreement, that Master Franchisee
shall punctually pay and perform each and every undertaking, agreement and
covenant set forth in the Agreement; and (2) agrees to be personally bound by,
and personally liable for the breach of, each and every provision in the
Agreement, both monetary obligations, including without limitation, the
obligations to pay costs and legal fees as provided in the Agreement, and the
obligation to take or refrain from taking specific actions or to engage or
refrain from engaging in specific activities, including without limitation the
provisions of the Agreement relating to competitive activities.
Each of the undersigned waives: (1) acceptance and notice of acceptance by
Franchisor of the foregoing undertakings; (2) notice of demand for payment of
any indebtedness or nonperformance of any obligations hereby guaranteed; (3)
protest and notice of default to any party with respect to the indebtedness or
nonperformance of any obligations hereby guaranteed; (4) any right he may have
to require that an action be brought against Master Franchisee or any other
person as a condition of liability; (5) all rights to payments and claims for
reimbursement or subrogation which any of the undersigned may have against
Master Franchisee arising as a result of the execution of and performance under
this guaranty by the undersigned; and (6) any and all other notices and legal or
equitable defenses to which he may be entitled.
Each of the undersigned consents and agrees that: (1) his direct and
immediate liability under this guaranty shall be joint and several not only with
Master Franchisee, but also among the undersigned; (2) he shall render any
payment or performance required under the Agreement upon demand if Master
Franchisee fails or refuses punctually to do so; (3) such liability shall not be
contingent or conditioned upon pursuit by Franchisor of any remedies against
Master Franchisee or any other person; (4) such liability shall not be
diminished, relieved or otherwise affected by any extension of time, credit or
other indulgence which Franchisor may from time to time grant to Master
Franchisee or to any other person, including without limitation the acceptance
of any partial payment or performance, or the compromise or release of any
claims, none of which shall in any way modify or amend this guaranty, which
shall be continuing and irrevocable throughout the term of the Agreement and for
so long thereafter as there are any monies or obligations owing by Master
Franchisee to Franchisor under the Agreement; and (5) the written acknowledgment
of Master Franchisee, accepted in writing by Franchisor, or the judgement of any
court of competent jurisdiction establishing the amount due from Master
Franchisee shall be conclusive and binding on the undersigned as guarantors.
D - 3
If Franchisor is required to assert a claim for amounts owed by Master
Franchisee to Franchisor hereunder, or if Franchisor is required to enforce this
Guaranty and Assumption of Obligations, Franchisor shall be entitled to
reimbursement of its costs and expenses, including but not limited to,
reasonable accountants', attorneys' attorney assistants', arbitrators' and
expert witness fees, costs of investigation and proof of facts, court costs,
other litigation expenses and travel and living expenses, whether incurred prior
to, in preparation for or in contemplation of the filing of any such proceeding.
If Franchisor is required to engage legal counsel in connection with any failure
by the undersigned to comply with this guaranty, the undersigned shall reimburse
Franchisor for any of the above-listed costs and expenses incurred by it.
This Guaranty and Assumption of Obligations shall be governed by the
internal laws of the State of Colorado, U.S.A., except that its choice of law
and conflict of law rules shall not apply.
IN WITNESS WHEREOF, each of the undersigned has hereunto affixed his
signature on the same day and year as the Agreement was executed.
OWNERS
______________________________ ___________________________
Name: Name:
______________________________ ___________________________
Name: Name:
D - 4