FA14-1996 SL
PIZZA HUT, INC.
LOCATION FRANCHISE AGREEMENT
DATE: _______________________
PARTIES: Pizza Hut, Inc.
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▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Franchisee _______________________
_______________________
_______________________
_______________________
RECITALS: PHI franchises a system of restaurants throughout the United
States and in certain foreign countries under the name and ▇▇▇▇
"PIZZAEHUT".
Franchisee desires to obtain a franchise to operate "PIZZAEHUT"
restaurants at the site(s) specified in this Agreement. PHI is
willing to grant the rights set forth in this Agreement to Franchisee,
subject to Franchisee's strict compliance with the terms of this
Agreement;
AGREEMENT NOW, THEREFORE, in consideration of the mutual promises and
agreements set forth in this Agreement, PHI and Franchisee agree as
follows:
1. DEFINITIONS In this Agreement, the following terms have the
following meanings:
1.1. Adequate Delivery Service. OAdequate Delivery ServiceO
means delivery of Approved Products in accordance with the standards
described in SectionE2.3.
1.2 Advertising Fund. The OAdvertising FundO is the fund
established in accordance with SectionE7.1, into which PHI,
Franchisee, and other domestic franchisees of PHI (subject to the
terms of SectionE7.1) make payments for national advertising, and
which PHI or its designee will spend in accordance with SectionE7.1.
1.3. Affiliates. A Person's "Affiliates" are all Persons that
directly or indirectly control, are controlled by, or are under common
control with, the Person.
1.4. Agreement. "Agreement" means this Franchise Agreement
(including all Appendices), as amended from time-to-time.
1.5. Approved Products. "Approved Products" are the food,
beverages, promotional items, and other products approved by PHI (in
the Manual or another written document) for sale in, or other
disposition to the public from, System Restaurants.
1.6. Co-op. "Co-op" means any co-operative advertising
association established in accordance with SectionE 7.4.
1.7 Delivery Area. ODelivery AreaO means the area(s) described
in AppendixEB, or the modified Delivery Area if Franchisee's Delivery
Area is changed pursuant to SectionE2.3.
1.8. Direct or Indirect. "Direct or indirect", when used in
describing ownership or other interests in an entity or an agreement,
means that intervening levels of ownership are disregarded.
1.9. Franchisee. "Franchisee", when capitalized, means the
Person(s) identified as "Franchisee" on the first page of this
Agreement, or any approved successor.
1.10. Good Standing. Franchisee is in "Good Standing" under
this Agreement at all times except when Franchisee is in default of
this Agreement (regardless of whether PHI has given Franchisee notice
pursuant to SectionE18.2).
1.11. Gross Sales. "Gross Sales" means the total of all cash
or other payments received (including the fair value of an exchange
and all payments by check, credit, or charge account, regardless of
whether the checks, credits, or charge accounts are ultimately paid)
for the sale or use of any products, goods, or services that are sold
at or from any System Restaurant. Gross Sales exclude only price
discounts and allowances, and taxes imposed directly on sales or
services by governmental authorities, and then only if the amount of
the tax is added to or absorbed in the selling price and is actually
paid to the appropriate governmental authority.
1.12. Interest. "Interest", when used in the context of an
interest in Franchisee or in this Agreement, means any direct or
indirect beneficial or legal ownership interest in Franchisee or in
this Agreement.
1.13. IPHFHA. "IPHFHA" means I.P.H.F.H.A., Inc., a Delaware
corporation, that is frequently referred to as the International Pizza
Hut Franchise Holders Association.
1.14. Lease. "Lease" means any written or oral contract
allowing one Person to possess or use the property of another Person,
and includes subleases and contracts for deed.
1.15 Location(s). OLocation(s)O means the specific site or
sites, listed in AppendixEB, at which franchisee is authorized by this
Agreement to operate System Restaurants.
1.16. Manual. The "Manual" is the set of documents (in one
or more volumes), as published, supplemented and revised (from time-to-
time), and disseminated by PHI, that explain and define the proper
operation of System Restaurants.
1.17. Person. "Person" means both natural persons and legal
entities (including corporations, partnerships, limited liability
companies, and trusts).
1.18. PHI. "PHI" means PizzaEHut, Inc., a Delaware
corporation, and its successors and assigns.
1.19. PizzaEHut Marks. "PizzaEHut Marks" means only those
trademarks, trade names, service marks, trade dress (including product
package designs), symbols, slogans, emblems, logos, insignia, designs,
external and internal building designs and other architectural
features, and any combination of the foregoing that Franchisee is
authorized to use in connection with the System Restaurants.
AppendixEA to this Agreement is a list of the PizzaEHut Marks that
consist of words or a combination of words and design that Franchisee
is authorized to use on the date of this Agreement. PHI may, from
time to time, designate other PizzaEHut Marks pursuant to SectionE3.1
of this Agreement.
1.20. Related Persons. FranchiseeOs "Related Persons"
consist of all Persons having an Interest in Franchisee; all of
Franchisee's Affiliates; the officers, directors, partners, trustees,
and beneficiaries of Franchisee and of any Person having an Interest
in Franchisee; and the spouses and minor children of any of the
foregoing individuals.
1.21 System Restaurants. OSystem RestaurantsO are only the
following three types of OPizzaEHutO restaurant concepts: (a) "Red
Roof" restaurants - (PHI's original concept) from which Pizza Hut
pizza (and other Approved Products) are sold for dine in and carryout
consumption, and may be delivered for off-premises consumption; (b)
Delivery restaurants - from which Pizza Hut pizza (and other Approved
Products) are delivered for off-premises consumption; and (c)
Delivery/Carryout (or "DelCo") restaurants - from which Pizza Hut
pizza (and other Approved Products) are sold for carryout and are
delivered, all for off-premises consumption.
1.22. System Restaurant Concepts. The phrase "System
Restaurant Concepts" refers collectively to the three types of Systems
Restaurants describe in SectionE1.21. "System Restaurants" and "System
Restaurant Concepts" do not include any other OPizzaEHutO restaurant
concept or any other type of restaurant or business owned by PHI or
its Affiliates.
1.23. Term. "Term" means the period during which the rights
granted by this Agreement are in effect, which starts on the date of
this Agreement, and (unless terminated early as allowed by SectionE
18) ends on the day before the 20th anniversary of this Agreement,
with no rights of renewal.
1.24. Transfer. "Transfer" includes every absolute or
conditional method of transferring a legal or equitable, record or
beneficial Interest in Franchisee or in this Agreement, whether
voluntary, involuntary, or by operation of law, and includes a change
in beneficiaries or trustees of a trust.
2. GRANT OF FRANCHISE
2.1. Grant of Franchise. PHI grants to Franchisee, during the
Term, the non-exclusive franchise to operate System Restaurants at the
Location(s),using the PizzaEHut Marks; to promote and sell Approved
Products and related services from System Restaurants at the
Location(s); and to deliver Approved Products produced at System
Restaurants throughout the Delivery Area (subject to Franchisee
providing Adequate Delivery Service as provided for in SectionE2.3).
Franchisee may not operate any System Restaurant except at the
Location(s), and may not deliver products produced at the System
Restaurants or using the PizzaEHut Marks except within the Delivery
Area. Franchisee covenants that it will use its best efforts to
promote sales of Approved Products from its System Restaurants and
throughout the Delivery Area.
2.2. No Subfranchise Right. The franchise granted by this
Agreement is personal to Franchisee. Franchisee may not subfranchise
to any other Person all or any part of the franchise granted by this
Agreement.
2.3. Delivery Service. Franchisee shall provide Adequate
Delivery Service to the entire Delivery Area throughout the Term.
Adequate Delivery Service means delivery service in accordance with
PHI's then-current standards for delivery.
At any time during the Term, PHI may consider whether
Franchisee is providing Adequate Delivery Service to the entire
Delivery Area. If PHI preliminarily determines that Franchisee is not
providing Adequate Delivery Service throughout the Delivery Area, PHI
will give Franchisee written notice of the areas within the Delivery
Area that are not receiving Adequate Delivery Service. Franchisee
may, within 90 days, submit a written protest to PHI that identifies
the geographic boundaries of the area to which Franchisee contends it
is providing Adequate Delivery Service. If Franchisee fails to timely
submit a written protest, PHI's preliminary determination shall become
immediately effective. PHI will consider any written protest timely
submitted by Franchisee but PHI shall in its sole discretion make the
final determination of the area to which Franchisee is providing
Adequate Delivery Service. PHI will give Franchisee written notice of
its final determination within 90 days after receipt of Franchisee's
written protest, at which point it shall be effective. The Delivery
Area shall be re-defined to include only the areas to which PHI
finally determines Franchisee is providing Adequate Delivery Service.
2.4. Relocation Rights. If Franchisee desires to relocate any of
Franchisee's existing System Restaurants, Franchisee will request
PHI's permission to do so. As part of its request, Franchisee must
supply PHI with justification for the relocation (such as expiration
of an existing lease or changed demographics) and any other
information PHI requests. If PHI consents to the relocation, PHI will
notify Franchisee of the portion (if any) of the initial fee that
Franchisee may transfer from the existing System Restaurant to the
proposed replacement System Restaurant and the date by which
Franchisee must open the replacement System Restaurant to receive the
credit (if any). To receive any credit, Franchisee must open the
replacement System Restaurant for business within 12 months after
closure of the existing System Restaurant. This Agreement will govern
Franchisee's operations at any such replacement System Restaurant.
2.5. Limitations on the Franchise. Franchisee (a)Emay not
conduct any business using any portion of the System Restaurant
Concepts licensed by this Agreement at any sites except the
Location(s), and (b)Emay not make deliveries of products produced at
the System Restaurants to any points outside the Delivery Area.
2.6. Protected Radius. During the Term, PHI will not develop or
operate, or allow any other franchisee or licensee to develop or
operate, System Restaurants (i.e., specifically limited to the System
Restaurant Concepts franchised by this Agreement) at the Location(s)
or at any point within 500 yards of the Location(s). Furthermore, as
long as Franchisee is providing Adequate Delivery Service throughout
the Delivery Area, PHI will not provide delivery service, and will not
allow any other licensee or franchisee to provide delivery service,
for Approved Products using the PizzaEHut Marks to any point within
the Delivery Area.
Except as set forth in this SectionE2.6, Franchisee has no
exclusivity and no rights to exclude development of concepts owned,
franchised or licensed by PHI or its Affiliates. PHI and its
Affiliates may develop and operate, or may franchise and license
others to operate, any business concept except the System Restaurant
Concepts at any place, including immediately adjacent to the
Location(s), and may use the PizzaEHut Marks or any other trademarks
owned or developed by PHI or its Affiliates in connection with those
concepts, even if such concepts sell products that are the same as, or
similar to, Approved Products.
3. DESIGNATION AND USE OF MARKS
3.1. Designation of PizzaEHut Marks. PHI may, from time-to-time,
designate new PizzaEHut Marks as applicable to the System Restaurants.
In addition, PHI may, from time-to-time, modify or delete existing
PizzaEHut Marks. PHI will give Franchisee written notice of the
addition, modification, or deletion of PizzaEHut Marks. Franchisee
will cease use of any deleted PizzaEHut Marks within the time stated
in the notice of deletion. PHI now owns and may in the future own
marks that are not PizzaEHut Marks. Franchisee will have absolutely
no right to use any ▇▇▇▇ owned or controlled by PHI except the
PizzaEHut Marks.
3.2. Use of PizzaEHut Marks. The franchise granted to Franchisee
to use the PizzaEHut Marks is applicable only to Franchisee's System
Restaurants located at the Location(s), except that Franchisee may use
the PizzaEHut Marks in connection with advertisements for the System
Restaurants and may deliver products produced at the System
Restaurants throughout the Delivery Area. Franchisee will use the
PizzaEHut Marks strictly according to the terms and conditions of this
Agreement.
Franchisee may not offer or sell any food, beverage, or other
product (whether or not an Authorized Product) at or from any System
Restaurant under or in connection with any trademark, service ▇▇▇▇,
trade name, or trade dress (including product package design) other
than the PizzaEHut Marks, without PHI's prior, written consent in each
case. Franchisee will cause all point of purchase materials and all
other paper goods, all exterior/interior signage, and all promotional
and advertising materials to bear the PizzaEHut Marks as instructed by
PHI.
3.3. Ownership of PizzaEHut Marks. PHI is the sole and exclusive
owner of the PizzaEHut Marks. Nothing contained in this Agreement
vests in Franchisee any interest in any of the PizzaEHut Marks, other
than the limited license granted by this Agreement. All goodwill now
or in the future associated with and/or identified by one or more of
the PizzaEHut Marks (including any goodwill arising out of
Franchisee's use of the PizzaEHut Marks) belongs directly and
exclusively to PHI.
Franchisee may not interfere in any manner with, and will not
attempt to attack, contest, or prohibit, (a) any use of the PizzaEHut
Marks by PHI or by any other franchisee or licensee of PHI that is not
directly contrary to the terms of this Agreement, or (b) PHIOs
ownership of the PizzaEHut Marks. The provisions of this SectionE3.3
will survive the termination or expiration of this Agreement.
3.4. Protection of PizzaEHut Marks. Franchisee will immediately
notify PHI, in writing, if (a) a third party claims that the PizzaEHut
Marks infringe trademarks owned by the third party, or otherwise
challenges Franchisee's use of the PizzaEHut Marks, or (b) Franchisee
knows or suspects that a third party is infringing the PizzaEHut
Marks. Franchisee will provide PHI with any information available to
Franchisee about the matter.
PHI will use reasonable efforts to protect the PizzaEHut Marks,
including (in its sole and absolute discretion) instituting,
prosecuting, and/or settling judicial or administrative actions or
proceedings. Whenever requested to do so by PHI, Franchisee will
cooperate fully in those actions or proceedings. Franchisee may not,
however, take any action with respect to any challenges against
FranchiseeOs use of the PizzaEHut Marks, or any known or suspected
infringements of the PizzaEHut Marks by other parties, without PHI's
prior, written approval (which PHI may grant or withhold in its sole
discretion).
Franchisee will exercise caution in its use of the PizzaEHut
Marks to ensure that the PizzaEHut Marks (and the goodwill associated
with them) are not jeopardized in any manner. Franchisee may not use
the PizzaEHut Marks in any manner or in connection with any statement
or material that is (in PHI's reasonable judgment) in bad taste or
inconsistent with PHI's public image, or that could tend to involve
PHI in a matter of political or public controversy, or tend to bring
disparagement, ridicule, or scorn upon PHI, the PizzaEHut Marks, or
the goodwill associated with the PizzaEHut Marks.
4. TRAINING AND ASSISTANCE
4.1. Management Training Programs.
A. PHI Programs. PHI will offer a training program for
Franchisee and the managers of Franchisee's System Restaurants, at
locations and at times selected by PHI. The training programs, which
may include more than one segment, will be structured to provide
practical training in the implementation of the System Restaurant
Concepts, and the operation of System Restaurants. PHI will bear the
costs of providing the actual training programs, including the
overhead costs of training, staff salaries, materials, and all
technical training tools. Franchisee will pay all traveling, living,
compensation, and other expenses incurred by Franchisee or
Franchisee's employees in connection with attendance at the training
programs. The course content, format, operation, and manner of
conducting these training programs will be in the sole control of PHI.
B. Training Mandatory. Franchisee will not allow any of
Franchisee's System Restaurants to be managed by any person who has
not successfully completed PHI's management training course. If a
manager dies, resigns, or is terminated, Franchisee will not be in
default of this requirement if the successor manager begins the
required training course within 90 days after first assuming the
duties of a manager and successfully completes the course.
C. Independent Training Programs. Franchisee may request
that PHI approve a management training program proposed by Franchisee
as an alternate method of complying with this SectionE4.1. PHI has no
duty to review Franchisee's program unless Franchisee pays all costs
of PHI's review; PHI has no duty to approve Franchisee's program
unless Franchisee satisfies PHI that Franchisee's program is at least
the equivalent of PHI's program. PHI may revoke its approval of
Franchisee's training program whenever, in PHI's opinion, the training
program fails to satisfy this standard.
5. MANUAL
5.1. Loan of Manual. PHI will loan to Franchisee, at no charge,
one complete set of the applicable portions of the Manual for each
System Restaurant. Franchisee may borrow from PHI further copies of
some or all portions of the Manual, upon payment of the fee set by
PHI.
5.2. Ownership of Manual. All copies of the Manual will remain
the exclusive property of PHI. Franchisee may not copy, and will
prevent all Persons, including Franchisee's employees and Related
Persons, from copying, any portion of the Manual. Franchisee will
return to PHI, at the end of the Term, all copies of the Manual in the
possession of Franchisee, Franchisee's employees or its Related
Persons.
5.3. Confidentiality of Manual. The entire contents of the
Manual constitute PHI's confidential trade secrets. Franchisee may
not, and will use its best efforts to ensure that no other Persons
disclose or use (except as authorized by this Agreement) any of the
contents of the Manual or any other trade secrets of PHI, whether
during or after the Term.
5.4. Protection of Trade Secrets. The information contained in
the Manual is a trade secret; disclosure of any of the information
contained in the Manual would cause irreparable harm to PHI. PHI is
entitled to obtain injunctive relief against Franchisee, without
posting bond or other security, to protect the contents of the Manual
from disclosure and improper use. Franchisee waives all defenses it
might otherwise have to equitable relief for this purpose.
5.5. Updates. PHI may, from time-to-time, update, correct or
modify the Manual. Franchisee will follow any instructions from PHI
concerning those updates, corrections and modifications, including
instructions to remove and replace certain pages contained in the
Manual, and instructions to destroy or to return to PHI the old (or
removed) pages or volumes. If there is ever a disagreement about the
proper contents of the Manual, the master copy of the Manual kept by
PHI at its home office is conclusively the controlling version.
6. STANDARDS; DUTIES OF FRANCHISEE AND OPERATOR
6.1. Interpretation of Standards. PHI has sole discretion to
interpret the standards that it sets forth in the Manual or elsewhere.
6.2. Promulgation of Standards. In the Manual, PHI has
promulgated standards of operation for each type of System Restaurant.
PHI has also promulgated standards of usage for the PizzaEHut Marks,
and other standards intended to ensure the consistency of the System
Restaurant Concepts. PHI may, from time-to-time, add to, delete, or
change standards. Franchisee will comply with any change in the
standards within the time-frame set by PHI. At all times throughout
the Term, Franchisee will comply with all standards then current.
6.3. Limitation on Promulgation of Standards. PHI will not
impose any new or modified standard that requires structural changes,
remodeling, or renovation with a cost estimated by PHI to exceed
$10,000.00 per System Restaurant, more often than once every 5 years.
6.4. Inspections. PHI's authorized representatives may enter
upon the premises of Franchisee's System Restaurants at any time
during the System Restaurant's normal business hours, and at any other
reasonable time, for the purpose of determining whether the business
is being conducted in accordance with PHI's standards, the Manual and
the terms of this Agreement.
If any inspection indicates any deficiency, Franchisee will correct or
repair the deficiency within 48 hours after Franchisee receives a
written report of the deficiency from PHI. If (a) the deficiency is
one that Franchisee has a right to cure under SectionE18.2 and (b) the
deficiency cannot be cured within 48 hours, Franchisee will not be in
default if Franchisee begins the necessary corrections or repairs
within the 48-hour period, and diligently pursues the work to
completion. If the deficiency is one that imminently threatens the
health or safety of FranchiseeOs employees or the consuming public,
PHI may (instead of terminating this Agreement as allowed by
SectionE18.1 H) require Franchisee to cease operating the effected
System Restaurant until the deficiency is corrected. If Franchisee
does not cure the deficiency within the permitted time, PHI may make,
or hire someone else to make, the corrections or repairs. Franchisee
will reimburse PHI, upon demand, for all of PHI's repair expenses.
6.5. Compliance with Laws. Franchisee will comply with all
applicable laws and regulations governing the operation of its System
Restaurants.
6.6. Identification. Franchisee will maintain PHI-approved
signage, identifying the System Restaurant as a PIZZA HUT restaurant,
and giving any other information that PHI requires. In addition,
Franchisee will prominently post a PHI-approved sign inside each
System Restaurant, stating Franchisee's name and stating that the
System Restaurant is operated by Franchisee under a franchise from
PHI.
6.7. Uniforms. Franchisee will require all employees, while
working in any System Restaurant, to: (a) wear uniforms of the color,
design, and other specifications that PHI designates from time-to-
time, and (b) present a neat and clean appearance.
6.8. Coin-Operated Machines. Franchisee may not permit any
vending, game, audio, video, other coin- or currency-operated
machines, or any other service, product, or entertainment machine of
any kind (whether or not similar to those listed), to be installed or
maintained on the premises of Franchisee's System Restaurants without
PHI's prior written approval. Unless otherwise provided in the
Manual, PHI consents to the installation in each System Restaurant of
up to the following numbers of coinDoperated machines:
Delivery and DelCo
Red Roof Restaurants Restaurants
One cigarette Two newspaper
vending machine vending machines
Two newspaper One coin telephone
vending machines
Two coin telephones One video game
machine
Onevideo game
machine
One audio jukebox
The portion of receipts from all coinDoperated machines located on the
premises of a System Restaurant that is payable as directed by
Franchisee (even if paid by the vendor directly to the unitOs manager)
is part of Gross Sales.
6.9. Assumed Name Certificate. Franchisee will promptly file and
publish, in all states and counties in which Franchisee does business,
a certificate of doing business under an assumed or fictitious name.
Franchisee will indicate in each certificate that it is doing business
as OPizzaEHutO under a franchise from PHI. Franchisee will furnish a
certified copy of each certificate to PHI promptly after its filing
6.10. Approved Products. Franchisee may not manufacture,
advertise for sale, sell, or give away from any System Restaurant any
product except Approved Products. All Approved Products will be
distributed under the specific name or ▇▇▇▇ (if any) approved by PHI.
A. Standard and Optional Items. Franchisee will offer for
sale in each of its System Restaurants all Approved Products that PHI
designates as OstandardO for the type of System Restaurant, unless PHI
agrees otherwise in writing. In addition, Franchisee may offer
Approved Products designated by PHI as OoptionalO for the System
Restaurant in which offered.
B. Menu Modification. Any time PHI notifies Franchisee
that an item will become a OstandardO Approved Product, or that an
item will no longer be an Approved Product (either OstandardO or
OoptionalO), PHI will include a deadline by which Franchisee must
offer the new OstandardO Approved Product for sale, or must cease
selling the item that is no longer an Approved Product. The deadline
will be at least 90 days after PHI gives Franchisee the notice, in the
case of a new OstandardO Approved Product, and at least 30 days after
PHI gives Franchisee the notice, in the case of a product that is no
longer an Approved Product.
C. No Unprepared Products. Franchisee may not sell or
distribute any food product or ingredient except as a complete and
fully prepared food product ready for immediate consumption.
6.11. SUS Computer System. Franchisee will use and maintain
in all System Restaurants the franchisee version of the SUS (Single
Unit System) Computer System (or such other computerized point-of-sale
system as PHI may designate or approve), including all enhancements,
upgrades, modifications, and additions to the SUS system designated by
PHI. PHI is currently the only approved supplier of the SUS System
software. Franchisee will acquire the SUS System software from PHI by
signing a separate License and Support Agreement, a copy of the
current version of which is attached as AppendixEH. The SUS License
and Support Agreement requires Franchisee to pay PHI's standard
support and maintenance fees. Franchisee will acquire all necessary
hardware to operate the SUS System software from a vendor approved by
PHI, and will dedicate that hardware solely to the operation of the
SUS System.
The SUS System software, and all enhancements, additions, upgrades,
and modifications thereto, constitute PHI's confidential information
subject to the confidentiality requirements of SectionsE5.3, 5.4 and
12. Franchisee will store all data and information on the SUS System
as PHI may designate from time to time. PHI may, at any time, access
Franchisee's SUS System and retrieve, analyze, download and use all
software, data and files stored or used thereon.
PHI owns all aspects of the SUS System, including all enhancements,
upgrades, modifications and additions, regardless of who develops or
conceives of any such changes. Upon termination of this Agreement,
Franchisee will cooperate fully in the removal of the SUS System
software from all of Franchisee's System Restaurants.
6.12. Prices. Franchisee will establish, in its sole
discretion, prices for all Approved Products sold by Franchisee.
7. ADVERTISING
7.1. National Advertising.
A. Advertising Fund. Subject to the remainder of this
Section 7.1, Franchisee will make a monthly payment to PHI (for the
Advertising Fund) in an amount equal to 3% of Franchisee's Gross Sales
from each System Restaurant for the prior month. PHI will use the
Advertising Fund to develop and administer advertising, promotional,
and marketing programs designed to promote and enhance the collective
success of all System Restaurants, except that PHI, in its sole
discretion, may rebate some or all of the Advertising Fund to
Franchisee and other franchisees for use in local marketing. PHI need
not expend payments to the Advertising Fund in the same year that they
are received, and need not prove that Franchisee received any benefit
from Franchisee's payments to the Advertising Fund. PHI's good faith
decisions regarding expenditure of the Advertising Fund will be final
and binding. PHI may, in its sole discretion, seek input from
Franchisee or other franchisees regarding expenditure of the
Advertising Fund.
B. IPHFHA. On the date of this Agreement, PHI is a party
to an agreement dated March 31, 1975 (as subsequently amended) with
IPHFHA concerning advertising for System Restaurants (the "Advertising
Committee Agreement"). During the period that the Advertising
Committee Agreement is in force, Franchisee will be a member of
IPHFHA, will abide by the constitution, bylaws, rules and regulations
of IPHFHA, and will timely pay the dues that IPHFHA assesses its
members for contribution to the national advertising fund administered
by the Advertising Committee under the Advertising Committee
Agreement. The amount that Franchisee pays as dues to IPHFHA for
contribution to the national advertising fund administered by the
Advertising Committee under the Advertising Committee Agreement will
be credited, dollar for dollar, toward Franchisee's 3% national
advertising obligations set forth in Section 7.1.A. PHI will remit
all of the national advertising payments that Franchisee makes to PHI
to the Advertising Committee. At any time that IPHFHA holds a vote
concerning the dues to be paid by its members, Franchisee will
exercise all of Franchisee's voting power to implement a dues rate
equal to 3% of the prior months Gross Sales.
C. Delegation of Authority. During the period that the
Advertising Committee Agreement is in force, PHI may delegate its
authority over, and control of, the Advertising Fund to the
Advertising Committee. During the period of this delegation, PHI will
have no responsibility for the Advertising Fund, or for the decisions
made by the Advertising Committee. PHI will nonetheless retain final
control over all uses of the Pizza Hut Marks.
7.2. Local Advertising. In addition to the payments required by
Section 7.1, Franchisee will expend each month 1% of Franchisee's
prior month's Gross Sales from each System Restaurant on local
advertising in the general marketing area of Franchisee's System
Restaurants. Such local advertising shall be confined to broadcast
media, subject to PHI's prior written consent.
7.3. Approval of Advertising. All advertising copy and other
materials used by Franchisee will be in strict conformity with the
standards, formats, and specimens contained in the Manual or otherwise
established by PHI. Franchisee may not use any design, advertisement,
sign, or form of publicity, unless first submitted to PHI and approved
by PHI in writing (except with respect to prices), and not later
disapproved. Any request by Franchisee for PHI's approval will be
addressed to PHI (marked, "Attention: Advertising Department - Ad
Review"), and PHI will endeavor to respond within 30 days. Whenever
Franchisee elects to use, in the manner and time frame intended by
PHI, advertising supplied by PHI or a promotional item specifically
approved by PHI, Franchisee may use that advertising or promotional
item without further approval.
Upon written notice from PHI, Franchisee will immediately discontinue
use of any unapproved advertising materials. If Franchisee does not
discontinue and remove the unapproved materials within 5 days after
notice, PHI or its authorized agents may, at any time, enter upon the
premises of Franchisee's System Restaurants or elsewhere and remove
and destroy the materials without paying for them and without being
liable for trespass or other tort.
7.4. Co-operative Advertising. PHI may, from time-to-time,
establish co-operative advertising associations ("Co-ops") for various
groups of System Restaurants. PHI may establish or modify Co-ops
based upon marketing areas, type(s) of System Restaurants, or any
other criteria chosen by PHI in its sole discretion. If PHI elects to
establish Co-ops, it may, from time-to-time, direct Franchisee to join
one or more Co-ops and to contribute some or all of Franchisee's local
advertising money (otherwise required to be expended by Franchisee
pursuant to SectionE7.2) to one or more of the Co-ops. The monthly
contributions to a Co-op (if any) required by this SectionE7.4 will be
made on or before the 20th day of each month, based on the prior
month's Gross Sales of each of Franchisee's System Restaurants in the
Co-op. PHI reserves the right to establish bylaws, voting rules,
membership agreements, standard advertising agency agreements, and
other standards concerning the operation of Co-ops, advertising
agencies retained by Co-ops, and advertising programs conducted by Co-
ops .
8. PURCHASE OF EQUIPMENT, SUPPLIES AND OTHER PRODUCTS
8.1. Use of Approved Supplies and Approved Distributors. PHI
may, from time-to-time, publish one or more listings of approved
equipment, supplies, and distributors, which listings may be specific
as to manufacturer, brand name, item/model/catalog number, preparation
or manufacturing facility, or other factors considered relevant by
PHI. PHI may add to or delete from the listings at any time.
Franchisee will only purchase and use approved equipment and supplies
in connection with Franchisee's operations under this Agreement, and
will obtain all equipment and supplies only from or through approved
distributors. If Franchisee desires to purchase any equipment or
supplies that are not then approved, or to purchase any items from or
through a distributor that is not then approved, Franchisee will
submit to PHI a written request for approval. PHI may inspect the
facilities of the manufacturer, producer, or distributor, and may
require Franchisee (or the manufacturer, producer, or distributor) to
submit samples, specifications, and other information concerning any
equipment or supplies for which approval is sought. PHI is not
required to inspect or test any proposed manufacturer, producer, or
distributor until PHI is satisfied that all costs associated with
inspection and testing of the proposed manufacturer, producer, or
distributor and of samples of their products (including salaries of
PHI employees, travel costs, and laboratory charges) will be borne by
Franchisee (or the manufacturer, producer, or distributor). PHI may
reDinspect the facilities and products of any approved manufacturer,
producer, or distributor from time-to-time, and may revoke its
approval upon failure to continue to meet any of PHI's criteria as
then in effect.
8.2. Trade Secret Items. PHI's spice blends are highly
confidential secret recipes and are trade secrets of PHI.
Accordingly, Franchisee may use only PHI's secret spice blends in the
preparation of Approved Products and will buy from PHI, or a source
designated by PHI, Franchisee's full requirements of PHI's spice
blends as well as any other trade secret or patented items that PHI
develops in the future.
8.3. Product Rebate.
A. For the purpose of this SectionE8.3, the term "Company"
includes any business entity controlling, controlled by, or under
common control with, PHI.
B. Franchisee may purchase from Company, upon such terms
as Company may offer, such items as Company may offer for sale to
Franchisee.
C. Within 4 months after the end of each fiscal year of
Company, Company will determine its rate of gross profit and its rate
of net pre-tax profit attributable to sales by Company to all its
PizzaEHut franchisees of only food, paper products, and similar
restaurant supplies (but not of any other items, including, without
limitation, nonfood items manufactured by Company and other items such
as furnishings, interior and exterior decor items, and equipment) for
the fiscal year.
In making this determination, the sales, gross profit, and
net pre-tax profit for all entities will be combined (without
considering accounting eliminations) into one financial statement, and
Company's cost will be reduced by any cash discounts that Company
received from its vendors.
D. If --
i) the rate of gross profit as determined by Company
exceeds 14%, or
ii) the rate of net pre-tax profit as determined by
Company exceeds 2.5%,
then in either event Company will, within 30 days thereafter, pay to
Pizza Hut franchisees entitled thereto, in the manner provided in
paragraph E. below, an amount equal to the excess as determined under
either i) or ii) above, whichever is greater; provided, however, that
the aggregate payment called for herein shall in no event exceed an
amount equal to Company's net pre-tax profit attributable to sales of
food, paper products, and similar restaurant supplies by Company to
all its Pizza Hut franchisees for said fiscal year.
E. Company will pay to each Pizza Hut franchisee its share
of the amount determined to be payable by Company under paragraphs C.
and D. above, in the form of a cash payment or a credit, at the option
of the franchisee, pursuant to procedures established by Company. The
share of each Pizza Hut franchisee will be in an amount which bears
the same relationship to the total amount determined to be payable by
Company under paragraphs C. and D. above as such franchisee's gross
purchases from Company of food, paper products, and similar restaurant
supplies bear to gross purchases of such items from Company by all
franchisees; the parties expressly agree that such share shall be
determined without regard to any other factors, including, without
limitation, product mix variations, delivery and service charges,
regional price variations, or other price variations.
9. FEES AND PAYMENT SCHEDULE
9.1. Initial Franchise Fee. Franchisee will pay PHI an initial
franchisee fee of $25,000 for each System Restaurant. The initial
franchise fees will be fully earned when due, and will not be
refundable, in whole or in part, under any circumstances. The entire
initial franchise fee is payable before the System Restaurant opens.
9.2. Monthly Service Fees. Franchisee will pay PHI monthly an
amount equal to 6.5% of Franchisee's Gross Sales from each System
Restaurant for the prior month. If applicable law prohibits
Franchisee from paying PHI a percentage of Franchisee's revenues from
the sale of alcoholic beverages, Franchisee will pay PHI monthly an
amount equal to 7% of Franchisee's Gross Sales (excluding from those
Gross Sales, however, all revenues from the sale of alcoholic
beverages) from each System Restaurant in the affected jurisdiction
for the prior month. Franchisee will pay all monthly service fees on
or before the 20th day of the month. If PHI has not received the fee
by the last day of the month in which the payment is due, Franchisee
will pay a "late charge" equal to 1.5% of the delinquent amount (or
such lesser amount as PHI may designate) and an equal late charge for
each subsequent month that payment is delayed. PHI may apply any
payments received from Franchisee to the oldest amounts due from
Franchisee, regardless of any contrary designation by Franchisee.
9.3. Transfer Fees. As partial reimbursement of PHI's costs of
review and approval of a Transfer of any Interest in Franchisee or in
this Agreement, Franchisee will pay PHI, on or before the effective
date of each Transfer, and as a condition to PHI's approval, a
transfer fee equal to $2,500 plus an additional $250 for each Location
covered by this Agreement (whether or not Franchisee is then operating
a System Restaurant at any Location).
9.4. Offset Rights. At any time that Franchisee or its Related
Persons are 30 days or more delinquent in paying any sums owed to PHI
or its Affiliates, PHI may offset any sums owing by PHI against moneys
owed by Franchisee or its Related Persons.
9.5 Taxes. In additon to the other payments provided for in
this Agreement, Franchisee will pay PHI, or its Affilates, all sales
taxes, personal property taxes, excise taxes, value added taxes and
similar taxes imposed upon or required to be collected or paid by PHI,
or its Affilates, on account of services or goods furnished to
Franchisee through sale, lease or otherwise, or on account of
collection by PHI of the Initial Franchise Fees or Monthly Service
Fees called for by this Agreement. Franchisee shall pay such taxes
upon demand and in the manner designated by PHI, or its Affiliates.
10. BUSINESS PREMISES
10.1. Restrictions on Use. Unless Franchisee receives PHI's
prior, written consent, Franchisee will conduct from the premises of
each of Franchisee's System Restaurants (including any adjacent
sidewalks and parking areas) only business activities licensed by this
Agreement.
10.2. Site Selection. Franchisee is solely responsible for
selecting sites at which to develop System Restaurants. PHI will not
be liable to Franchisee if a location chosen by Franchisee fails to be
profitable or otherwise fails to meet Franchisee's expectations.
10.3. Construction of System Restaurants. Franchisee will
obtain all necessary governmental permits and licenses before
constructing, modifying, or remodeling any System Restaurant.
Franchisee will complete any construction or other work on each System
Restaurant within a reasonable time after Franchisee begins work on
that System Restaurant. Franchisee will begin operation of each new
System Restaurant within 30 days after completion of construction, and
will give PHI at least 10 days written notice before beginning
operations.
10.4. Right to De-Identify. If the premises at which a
System Restaurant is operated are leased, the lease will contain an
express right of de-identification, in the following form:
Upon termination or non-renewal of this Lease,
Lessee/Tenant may de-identify the leased premises. If
Lessee/Tenant fails to do so, Pizza Hut, Inc., is given
the express right to de-identify. Deidentification
consists of removal of all signs; modification or
remodeling of all identifying architectural features
(by removing the cupola from the roof, replacing any
trapezoidal windows with rectangular windows, and
similar actions); repainting as necessary to no longer
use the color scheme used by Pizza Hut, Inc.; and any
other steps necessary (in the sole discretion of Pizza
Hut, Inc.) to effectively distinguish the formerly
leased premises from Pizza Hut, Inc.'s proprietary
building design(s). All de-identification will be done
without cost to Lessor/Landlord.
10.5. Repair and Maintenance. Franchisee will repair and
repaint the interior and exterior of all System Restaurants as
appropriate and as requested by PHI. Franchisee will, at all times,
maintain the interior and exterior of the System Restaurants as well
as the surrounding premises in a clean and orderly condition. If
Franchisee leases the locations on which the System Restaurants are
located, Franchisee will require the leases to contain an express
right to undertake this repair and maintenance.
10.6. Proof of Compliance. Before opening each System
Restaurant, Franchisee will provide to PHI either a copy of a deed
showing that title to the real estate on which the System Restaurant
will be located is held by Franchisee, or a letter from the landlord
of the premises in the form of Appendix C.
10.7. System Restaurant Closure. Franchisee may not cease to
operate any System Restaurant without PHI's prior consent, except upon
condemnation or expiration of a lease pursuant to its terms at
execution. Franchisee acknowledges that the damages to PHI from
unauthorized closure of a System Restaurant are difficult to
calculate; therefore, if Franchisee violates this SectionE10.7,
Franchisee will pay as liquidated damages, and not as a penalty, an
amount equal to 24 times the average monthly service fees paid or due
with respect to the closed System Restaurant during the calendar year
before the closing. If the System Restaurant was not open for
business for a full calendar year, the liquidated damages will be 24
times the highest monthly service fee during the period the System
Restaurant was open.
11. BOOKS AND RECORDS
11.1. Maintenance of Books and Records. Franchisee will keep
on the premises of each of Franchisee's System Restaurants or at
Franchisee's principal place of business, and will preserve for at
least 5 years after the date of their preparation (regardless of any
intervening expiration or termination of this Agreement), true and
accurate records, ledgers, accounts, books, and data in the form that
PHI requires. Franchisee's records will accurately reflect all
details relating to the business done at each System Restaurant.
Franchisee will submit to PHI with its payment of the monthly service
fees a monthly statement of Gross Sales and, within 45 days after the
close of each fiscal quarter, a quarterly profit and loss statement,
on a unit-by-unit basis. In addition, Franchisee will, within 90 days
after the end of each of Franchisee's fiscal years, provide PHI with a
complete annual profit and loss statement and a consolidated balance
sheet prepared in accordance with generally accepted accounting
principles, consistently applied. If requested by PHI, the annual
profit and loss statement and balance sheet will be reviewed by an
independent certified public accountant in accordance with the
Statements on Standards for Accounting and Review Services, and will
contain a signed opinion by the accountant to that effect. PHI
reserves the right to require any further information about
Franchisee's business under this Agreement that PHI from time to time
reasonably prescribes. PHI will take reasonable precautions to
maintain the confidentiality of all financial reports provided by
Franchisee, but if Franchisee executes any promissory notes to PHI,
PHI may disclose the financial reports provided by Franchisee to any
third party to whom PHI sells or pledges (or attempts to sell or
pledge) the promissory notes from Franchisee.
11.2. Inspection and Audit. PHI and its agents or
representations may examine and audit all of Franchisee's records,
accounts, and books at all reasonable times. Franchisee will
cooperate with any examination or audit by gathering records,
accounts, and books for easy access, and by providing other assistance
PHI reasonably requests. If any inspection or audit discloses that
any financial statement delivered to PHI by Franchisee is in error,
Franchisee will immediately pay to PHI any deficiency found to be
owing, plus a finance charge at the maximum rate permitted by law,
accruing from the date payment was first due. If the deficiency is 2%
or more of the amount due, then in addition, Franchisee will reimburse
PHI for the cost and expense of the inspection or audit within 5
business days after receiving a ▇▇▇▇ from PHI.
11.3. Selection of Accountants. Franchisee will use the
accounting services of a national or large regional firm of certified
public accountants selected by Franchisee, or another accounting
service reasonably satisfactory to PHI. Franchisee will notify PHI of
the name and qualifications of any accounting service (other than a
national or large regional firm of certified public accountants)
selected by Franchisee; that accounting service will be considered
satisfactory to PHI unless, within 30 days after PHI's receipt of
Franchisee's notice of the name and qualifications of the accounting
service, PHI notifies Franchisee of PHI's objection to the accounting
service. PHI may withdraw its approval of any accounting service
(including national and large regional firms) upon reasonable advance
notice to Franchisee.
12. COVENANTS AGAINST COMPETITION
12.1. Acknowledgments. Franchisee acknowledges:
A. Uniqueness. The food products, methods of doing
business, and other elements composing the System Restaurant Concepts
(including the information set forth in the Manual) are distinctive,
and have been developed by PHI at great effort, time, and expense.
B. Secret Information. Franchisee has regular and
continuing access to valuable and confidential trade secrets regarding
the System Restaurant Concepts, and to PHI's knowledge, know-how, and
expertise concerning the operation of a retail food business. It
would be an unfair method of competition for Franchisee to use or
duplicate any of PHI's trade secrets, knowledge, know-how, or
expertise for any use other than operations pursuant to this
Agreement.
12.2. In-Term Covenants. During the Term, Franchisee and its
Related Persons may not (without the prior, written consent of PHI),
directly or indirectly, individually or as a partner, joint venturer,
shareholder, officer, creditor, director, employee, trustee, or agent
of an organization, own, operate, finance, or provide consulting
services to any business (other than a System Restaurant operated
pursuant to this Agreement) engaged in the business of operating
restaurants (including the delivery and carryout aspects of
restaurants) that sell pizza, pasta or other food items similar to
Approved Products.
During the Term, Franchisee and its Related Persons may not
(without the prior, written consent of PHI) lease, sublease, or
otherwise permit the use of, any portion of any premises owned,
leased, or controlled by any of them for purposes of operating a
business (other than a System Restaurant operated pursuant to this
Agreement) engaged in whole or substantial part (more than 10% of its
sales), in the production or sale (at wholesale or retail) of any
pizza, pasta or other food items similar to Approved Products.
12.3. Post-Term Covenants. For a period beginning on the
termination or expiration of this Agreement and ending on the date
specified below, neither Franchisee nor its Related Persons may
engage, nor assist others to engage, directly or indirectly,
individually or as a partner, joint venturer, shareholder, officer,
creditor, director, employee, or agent, in the production or sale (at
wholesale or retail) of any pizza, pasta or other food items similar
to Approved Products: (a) within a 25-mile radius of any Location;
(b)Eanywhere within the county within which one or more Locations are
situated; or (c)Eanywhere within 10 miles of a location in the United
States at which PHI or any subsidiary, Affiliates or franchisee of PHI
operates a System Restaurant on the date of termination or expiration
of this Agreement.
For a period beginning on the date any Person Transfers all of
its Interest in Franchisee or in this Agreement, and ending on the
date specified below, the transferring Person may not engage, directly
or indirectly, individually or as a partner, joint venturer,
shareholder, officer, creditor, director, employee, or agent, in the
production or sale (at wholesale or retail) of any pizza, pasta or
other food items similar to Approved Products: (a) within a 25-mile
radius of any Location; (b)Eanywhere within the county within which
one or more Locations are situated; or (c)Eanywhere within 10 miles of
a location in the United States at which PHI or any subsidiary,
Affiliates or franchisee of PHI operates a System Restaurant on the
date of termination or expiration of this Agreement.
As to each of the covenants, and any Person bound by the
covenants, contained in this SectionE12.3, the covenant will expire on
the date the Person has been in full compliance with the covenant for
18 consecutive months. Each of the covenants set forth in the
foregoing paragraphs are independent of the others, and the
unenforceability of one will not affect the others.
12.4. Perpetual Covenant. In addition to the covenants of
confidentiality contained in SectionE5.3, Franchisee and its Related
Persons may never (whether during or after the Term) take any actions
that would have the probable effect of impairing PHI's ownership of or
goodwill in the PizzaEHut Marks and/or in the System Restaurant
Concepts.
12.5. Stock Ownership. The limitations on being a direct or
indirect owner or shareholder of a business, as contained in this
SectionE12, do not apply to ownership of 1% or less of the issued and
outstanding stock in any corporation traded on a national stock
exchange.
13. EMPLOYMENT RELATIONS
13.1. Franchisee's Employees. Franchise will be solely
responsible for all of Franchisee's employment practices, including
hirings, terminations, and other personnel actions. Franchise will
protect, defend, and indemnify PHI, its affiliates, officers, and
employees, from any and all proceedings, claims, and causes of action
instituted by Franchisee's employees, or by others, that arise from
Franchisee's employment practices.
13.2. Interference. During the Term, neither PHI nor
Franchisee may employ, directly or indirectly, any individual in a
managerial position who is at the time, or was at any time during the
prior 6 months, employed in a managerial position by the other party,
nor may Franchisee employ, directly or indirectly, any individual in a
managerial position who is at the time, or was at any time during the
prior 6 months employed in a managerial position by any other
franchisee of PHI. This restriction will not be violated if, at the
time PHI or Franchisee employs the individual, the current or former
employer has given its written consent. If the restrictions contained
in this SectionE13 are violated, the amount of actual damages will be
difficult to determine; therefore, the former employer will be
entitled to liquidated damages in an amount equal to twice the total
annual compensation of the employee involved (annualized, if
appropriate, to reflect the rate of compensation for a full year's
employment), plus reimbursement of all costs and attorneys' fees
incurred. For purposes of this SectionE13, "managerial position"
means all employees at the pay grade of restaurant manager and above.
14. TRANSFERS
14.1. Transfers by PHI. PHI may Transfer its rights and
obligations under this Agreement without the consent of, or notice to,
Franchisee. This Agreement will inure to the benefit of, and be
binding upon, the successors and assigns of PHI.
14.2. Transfers by Franchisee. Except as otherwise permitted
by this SectionE14 and SectionE15, neither Franchisee nor any Person
with an interest in Franchisee may, without PHI's prior written
consent, directly or indirectly Transfer any Interest in this
Agreement or any Interest in Franchisee. Any purported Transfer
without PHI's prior, written consent will have no effect, except to
cause a default under this Agreement.
14.3. Transfer of Assets. Franchisee may not, without PHI's
prior written consent, Transfer or offer to Transfer any assets that
bear any of the PizzaEHut Marks, except (a) to PHI or a subsidiary or
franchisee of PHI, or (b) to an established salvage dealer, who
destroys or disables the assets transferred under FranchiseeOs direct
supervision.
In addition, Franchisee may not, without PHI's prior written
consent, offer to Transfer by public or private auction, or advertise
publicly for Transfer, any of the furnishings, interior and exterior
decor items, supplies, inventory, fixtures, equipment, smallwares, or
other personal property used in connection with Franchisee's System
Restaurants.
14.4. Consent to Transfers. PHI may withhold its consent to
any proposed Transfer unless, in addition to the other requirements of
this SectionE14 and the requirements of SectionE15, the following
conditions are met, to PHI's satisfaction, before the effective date
of the proposed Transfer:
A. No Default. Franchisee is not in default under this
Agreement or any other agreement with PHI, and Franchisee and its
Related Persons have satisfied all accrued monetary and other
obligations to PHI and its Affiliates.
B. Release. Franchisee and the transferor have each
executed a general release, in a form prescribed by PHI, of all
accrued claims against PHI, its Affiliates, and their respective
officers, directors, and employees.
C. Transfer Standards. The proposed transferee has
demonstrated to PHI's satisfaction that the proposed transferee is, in
all respects, acceptable to PHI (including, if the proposed transferee
is already a franchisee of PHI, that it is in Good Standing under its
franchise agreements with PHI), and that the proposed transferee meets
all of PHI's then current requirements for new franchisees (or for
holders of an interest in a franchisee, as the case may be) including
possession of good moral character and reputation, work experience,
aptitude, financial background and condition, credit rating, absence
of conflicting interests, and ability to comply fully with the terms
of this Agreement.
D. Assumption of Obligations. The proposed transferee has
entered into a written assumption agreement, in a form prescribed by
PHI, assuming and agreeing to discharge all of transferor's
obligations relating to this Agreement and to the System Restaurants
covered by this Agreement (including all obligations owing to third
parties not related to PHI).
E. Training. If not previously trained, the proposed
transferee, its manager, and its other employees responsible for the
operation of all System Restaurants, have satisfactorily completed the
training PHI then requires under SectionE4.1.
F. Transfer Fee. The transfer fee required by SectionE9.3
has been paid.
G. Acknowledgment. If Franchisee or any owner of an
Interest in Franchisee is transferring all of its Interest in this
Agreement or in Franchisee, the proposed transferor has signed an
acknowledgment that the covenants contained in SectionE12 will
continue to apply to the proposed transferor after the Transfer.
14.5. Death or Incapacity. Upon the death or permanent
incapacity of Franchisee or any individual with an Interest in
Franchisee, the executor, administrator, or personal representative of
the affected individual will Transfer all of the individual's Interest
to a third party approved by PHI within 6 months. All Transfers
pursuant to this SectionE14.5, including Transfers by devise or
inheritance, will be subject to the same conditions as any other
Transfer (including the conditions set forth in SectionsE14.4 and
14.6). Nevertheless, in the case of a Transfer by devise or
inheritance, if the heirs or devisees of the deceased are unable to
meet the conditions in SectionE14.4, the personal representative of
the deceased will have a reasonable time (not more than 12 months
after the date of death) to dispose of the decedent's Interest in this
Agreement or in Franchisee, subject to all applicable terms and
conditions for Transfers contained in this Agreement. In the case of
permanent incapacity of an individual owner of an Interest in
Franchisee or in this Agreement, the incapacitated individual may,
with PHI's written consent, retain a non-controlling ownership
Interest in Franchisee.
14.6. Right of First Refusal. If Franchisee or any owner of
an Interest in Franchisee receives and desires to accept any bona fide
offer to Transfer all or any part of his, her, or its Interest in this
Agreement or in Franchisee, and the intended Transfer is not a gift to
a spouse or a direct descendant, and if the Transfer of such Interest
would either (1) result in a change in control of the Franchisee, or
(2) constitute a Transfer of any Interest by a Person holding a 10% or
greater Interest in Franchisee, Franchisee or the proposed transferor
will submit to PHI an executed copy of the agreement for Transfer
(which will be conditioned on this right of first refusal). PHI may,
within 30 days after receipt of a signed copy of the agreement and all
necessary supporting documentation (including financial statements),
send written notice to the transferor that PHI (or a Person designated
by PHI) intends to purchase the Interest which is proposed to be
Transferred on the same terms and conditions (or, at PHI's election,
the reasonable cash equivalent, not including the value of any tax
benefits, of any non-cash consideration) offered by the third party.
Any material change in the terms of an agreement before closing will
constitute a new agreement, subject to the same right of first refusal
by PHI (or its designee) as in the case of the initial agreement.
PHI's failure to exercise its right of first refusal will not
constitute a waiver of any other provision of this Agreement,
including any of the requirements of this SectionE14 with respect to
approval of the proposed transferee.
15. NON-INDIVIDUAL FRANCHISEES If Franchisee, any owner of an
Interest in Franchisee, or any successor thereof, is not an
individual, then each of the following provisions will apply:
15.1. List of Individual Owners. Upon execution of this
Agreement, upon each Transfer of an Interest in Franchisee, and at any
other time upon PHI's request, Franchisee will furnish PHI a list of
all Persons having an Interest in Franchisee, an indication of the
voting rights and percentage Interest of each of those Persons, and a
list of all officers, directors and similar officials of Franchisee,
in the form of AppendixED. PHI may require the same information
regarding all Persons having an Interest in Franchisee.
15.2. Personal Guaranties. Upon the execution of this
Agreement, upon each Transfer of an Interest in Franchisee, and at any
other time upon PHI's request, all holders of a 10% or greater
Interest in Franchisee will execute a written agreement in the form of
Appendix E, personally guaranteeing, jointly and severally with all
other holders of a 10% or greater Interest in Franchisee, the full
payment and performance of Franchisee's obligations to PHI and to
PHI's Affiliates. On the same occasions, all officers, directors and
similar officials of Franchisee, and all holders of an Interest in
Franchisee, will sign an agreement in the form of AppendixEF,
undertaking to be bound by all the terms of this Agreement, including
the restrictions on Transfers and the covenants of confidentiality and
against competition. None of these guaranties or agreements will be
released by a Transfer of an Interest in Franchisee; all guaranties
and undertakings may be released only by a written release signed by
PHI.
15.3. Organizational Documents. All of Franchisee's
organizational documents (including articles of partnership,
partnership agreements, articles of incorporation, bylaws,
shareholders agreements, and trust instruments) will recite that the
issuance and Transfer of any Interest in Franchisee is restricted by
the terms of this Agreement, and that the sole purpose for which
Franchisee is formed (and the sole activity in which Franchisee is or
will be engaged) is the conduct of a retail food business pursuant to
one or more franchise agreements from PHI. Franchisee will submit to
PHI, upon the execution of this Agreement, a resolution of Franchisee
(or its governing body) in the form of AppendixEG.
15.4. Transfer Restrictions. Franchisee will maintain stop
instructions against the Transfer on its records of any securities or
other ownership Interests, and will not issue securities or other
evidences of ownership without the following legend printed legibly
and conspicuously on the face of the security or other evidence of
ownership:
The transfer of this certificate and the interests
it represents are subject to the terms and conditions
of one or more Franchise Agreements with Pizza Hut,
Inc., and to the restrictive provisions of the
organizational documents of the issuer. Please refer
to those documents for the terms of the restrictions.
15.5. Permitted Assignments. Franchisee may assign not more
than an aggregate total of 20% of the Interests in Franchisee to
employees of Franchisee who are actively engaged in the operation of
Franchisee's business under this Agreement, as long as the proposed
transferee submits to PHI a franchise application in the form
prescribed by PHI from time to time. Transfers under this provision
may be made without complying with the other terms of this SectionE15.
Once created, those ownership Interests will be subject to all terms
and conditions of this Agreement, including the restrictions on
Transfers, the requirements of shareholder guaranties and agreements,
and the covenants of confidentiality and against competition.
15.6. No Publicly Traded Ownership Interests. Franchisee and
its Related Persons may not offer, solicit, engage in, or effect any
transaction, whether financial or otherwise, that could foreseeably
result, directly or indirectly, in Opublic tradingO or Opublic
ownershipO (as those terms are commonly understood for purposes of
federal and state securities laws) of any securities or other
Interests in (a) Franchisee, (b) any parent company of Franchisee, (c)
this Agreement, or (d) the System Restaurants operated by Franchisee
or any assets used by Franchisee in connection with those System
Restaurants.
15.7. Changes in Ownership or Organization. Franchisee and
its Related Persons will not reorganize or otherwise change the
ownership or organizational structure of Franchisee or its Related
Persons in any manner that is inconsistent with the provisions of
SectionsE14 and 15.
16. INSURANCE AND INDEMNIFICATION
16.1. Property Insurance. Franchisee will obtain and
maintain throughout the Term, at its own expense, property insurance
on an all-risk basis including flood coverage up to the limits
available in the National Flood Insurance program, from financially-
responsible insurance companies, insuring Franchisee's System
Restaurants and their respective contents (whether those System
Restaurants are completed or under construction) for the full
replacement value of the System Restaurants. In the event of damage
covered by insurance, the proceeds of the insurance will be used to
restore the System Restaurants to their original condition within 120
days, unless restoration is prohibited by the appropriate lease or
applicable law, or PHI has otherwise consented in writing.
16.2. Liability Insurance. Franchisee will obtain and
maintain throughout the Term, at its own expense, with a financially-
responsible insurance company, comprehensive general liability
insurance (including products liability and completed operations
coverage), comprehensive automobile liability insurance (including
coverage for all owned, non-owned, leased, or hired vehicles), and
liquor liability (dram shop) insurance, all in amounts at least equal
to $3,000,000 combined single limit for death, personal injury, and
property damage, as well as workers' compensation insurance (coverage
B). All liability insurance maintained by Franchisee will designate
PHI as an additional insured, as its interests may appear, and will
insure against PHI's vicarious liability for actual and (unless
prohibited by applicable law) punitive damages assessed against
Franchisee.
16.3. Proof of Insurance. Franchisee will file with PHI
certificates of insurance showing all coverages required by this
SectionE16, and will promptly pay all premiums on the policies as and
when those premiums become due. In addition, all policies will
contain a provision requiring 30 days' prior, written notice to PHI,
by certified or registered mail, of any proposed cancellation or
modification of the policies. If Franchisee fails to obtain or
maintain the insurance required by this SectionE16, PHI may, in
addition to any other rights it may have, procure insurance for
Franchisee without notice, and Franchisee will pay the premiums for,
and PHI's cost of acquiring, that insurance immediately upon demand
for those amounts.
16.4. Indemnification and Waiver. Franchisee will indemnify
PHI, its Affiliates, and their respective employees, officers, and
directors against all loss, damage, or liability (including attorneysO
fees and costs) incurred by any of them owing to claims that arise
directly or indirectly from or in connection with Franchisee's
operations under this Agreement. If Franchisee fails to maintain the
insurance required by this SectionE16, or fails to name PHI as an
additional insured under that policy, then FranchiseeOs obligations of
indemnity under this SectionE16.4 will also extend to all liability
that would have been insured by an appropriate policy (including
liability arising from PHIOs own negligence). The insufficiency of
the insurance required to be maintained by Franchisee under the terms
of this SectionE16 will not be a defense to liability under this
SectionE16.4.
Franchisee waives all claims it may have against PHI, its
Affiliates, and their respective officers, directors, and employees
(including claims arising from training, establishment of procedures,
and food and other products distributed but not manufactured by PHI or
its Affiliates), except for claims arising from those parties'
intentional misconduct or gross negligence.
17. REQUESTS FOR WAIVERS AND CONSENTS
17.1. Requests for Waivers or Consents. Whenever Franchisee
desires PHI's waiver of any obligation in this Agreement, and whenever
this Agreement requires Franchisee to obtain PHI's prior, written
consent, Franchisee will address its written request for the waiver or
consent to PHI's Vice President-Franchising (unless PHI specifies
another individual or department in writing). The request will
specify the provision of this Agreement for which a waiver or consent
is sought, and will set forth the basis for the request. PHI's
failure to advise Franchisee within 45 days after receipt of the
request that a request is denied constitutes PHI's consent to the
request (except that, if PHI gives Franchisee written notice within
the 45-day period that PHI requires additional information or
documentation from Franchisee, the 45 days will not begin until
Franchisee has provided PHI with all relevant information and
documentation requested).
17.2. Effect of Waivers and Consents. All requests for
waivers and consents will be considered on a case-by-case basis, and
nothing requires PHI to grant any waiver or consent. PHI may
condition the grant of a waiver or consent as PHI considers
appropriate.
17.3. No Implied Waivers. Except as provided in
SectionE17.1, no other action or inaction by PHI will constitute a
waiver, or impair any right, power, or option reserved to PHI by this
Agreement. No waivers can be inferred from PHIOs failure to respond
to a situation with respect to which Franchisee has not requested a
waiver in accordance with SectionE17.1.
18. DEFAULT AND TERMINATION
18.1. Defaults Without Cure Right. Franchisee will be in
default and, in addition to all other remedies PHI has at law or in
equity, including money damages, injunctive relief, and attorney's
fees, PHI may, upon written notice to Franchisee, terminate this
Agreement without affording Franchisee any opportunity to cure the
default upon the occurrence of any of the following events or
conditions:
A. Financial Performance. If the total of Franchisee's
debts is greater than the fair value of Franchisee's assets, or if
Franchisee is generally not paying its debts as those debts become
due, or if Franchisee admits in writing its inability to pay its
debts, or if Franchisee makes a general assignment for the benefit of
its creditors, or if Franchisee ceases doing business as a going
concern, or if Franchisee files a petition commencing a voluntary case
under any chapter of the Bankruptcy Code (11 U.S.C. 101, et seq.), as
amended.
B. Improper Transfer. If, without the prior, written
consent of PHI, or in any other manner inconsistent with the terms of
this Agreement, (i) Franchisee Transfers or attempts to Transfer an
Interest in this Agreement, (ii) any owner of an Interest in
Franchisee Transfers or attempts to Transfer any portion of that
Interest, (iii)EFranchisee or any of its Related Persons violates
SectionE15.6, or (iv) Franchisee dissolves or liquidates.
C. Failure to Allow Inspection. If Franchisee does not
allow PHI or its employees or agents access to any System Restaurant
or to any of Franchisee's records, or if Franchisee otherwise impairs
PHI's rights of inspection and audit under this Agreement.
D. Criminal Conviction. If Franchisee (or any of its
Related Persons actively involved in the operation, supervision, or
management of any System Restaurant) is convicted of a felony or other
crime involving moral turpitude.
E. Disclosure of Secrets. If Franchisee or any of its
Related Persons discloses, permits the disclosure of, or uses, the
contents of the Manuals or any other trade secrets or confidential or
proprietary information provided to Franchisee by PHI, contrary to the
provisions of this Agreement or otherwise to the detriment of PHI.
F. Falsification of Records. If Franchisee knowingly or
through gross negligence maintains false books or records, or
knowingly or through gross negligence submits any false report to PHI.
G. Habitual Default. If Franchisee defaults under
SectionE18.2 on 3 or more occasions in any 12-month period, or on 5 or
more occasions in any 36-month period, even if Franchisee would
otherwise be given an opportunity under SectionE18.2 to cure the
particular default involved.
H. Endangerment. If Franchisee conducts the business
licensed by this Agreement so contrary to this Agreement and the
Manual as to constitute an imminent danger to the public health.
I. Material Misrepresentation. If Franchisee (or any
Person having a 10% or greater Interest in Franchisee) made a material
misrepresentation about any material fact in a franchise application
given to PHI.
J. Unauthorized Closure or Loss of Occupancy Right. If
any System Restaurant is closed for business for more than 15
consecutive days, for reasons other than a casualty loss, without
PHI's prior written consent, or Franchisee permanently loses its right
to occupy a Location.
18.2. Defaults Subject to Cure Rights. Franchisee will be in
default and, in addition to all other remedies PHI has at law or in
equity, including damages, injunctive relief, and attorney's fees, PHI
may, subject to the notice and cure provisions described below,
terminate this Agreement if 1)EFranchisee does not promptly pay when
due any moneys owing to PHI or its Affiliates, or 2)EFranchisee
breaches any term, covenant, duty, or condition of this Agreement not
listed in SectionE18.1.
PHI will not terminate this Agreement for any default under this
SectionE18.2 until PHI first gives Franchisee written notice of, and
an opportunity to cure, the default. Except as provided below, PHI
will give Franchisee 30 days after the effective date of notice to
cure any such default. If Franchisee's current default involves a
failure to timely pay amounts owing PHI or its Affiliates, and if
Franchisee has previously been in default for failure to timely pay
under this Agreement in the 12 months immediately before the date on
which PHI gives Franchisee notice of Franchisee's current default, PHI
will only be required to give Franchisee 10 days to cure Franchisee's
current default.
18.3. Non-Termination Remedies. If Franchisee defaults under
SectionE18.1, or does not timely cure a default under SectionE18.2,
PHI may, in its sole discretion, and in lieu of terminating this
Agreement, refuse to allow Franchisee to relocate any existing System
Restaurants or to develop any additional System Restaurants. PHI will
give Franchisee written notice if PHI elects this option. Any action
taken by PHI in accordance with this Section will be in addition to
any other right or remedy PHI may have, including a civil action for
legal or equitable relief.
19. POST-TERMINATION PROVISIONS
19.1. Use of PizzaEHut Marks and Systems. Upon expiration or
termination of this Agreement, Franchisee will immediately discontinue
use of the PizzaEHut Marks and of the System Restaurant Concepts. In
addition, upon notice from PHI, Franchisee will immediately
discontinue use of PHI's color scheme (by repainting, if necessary)
and will immediately remove all identifying architectural
superstructure (as set forth in the plans and specifications) and
other distinguishing structures, decor items, furniture, and equipment
from all former System Restaurants and other facilities as PHI may
direct, in order to effectively distinguish Franchisee's former System
Restaurants and other facilities from PHI's proprietary design(s) and
trade dress. If Franchisee does not make all required changes within
7 days after written notice, then PHI, in addition to any other remedy
it has, may enter upon the premises of any former System Restaurant
owned or leased by Franchisee, and make or cause to be made all
necessary changes at the expense of Franchisee (without being liable
for trespass or any other tort), which expense Franchisee will pay
upon demand.
19.2. Cessation of Rights. All obligations of PHI to
Franchisee under this Agreement, and all rights of Franchisee under
this Agreement, will immediately terminate upon termination of this
Agreement.
19.3. Effect on Other Duties. In no event will a termination
of this Agreement affect the obligations of Franchisee and its Related
Persons to pay their accrued monetary obligations to PHI and to comply
with their various post-term obligations, including the covenants in
SectionE12.
19.4. Spice Blends. Franchisee will sell and PHI will buy,
at Franchisee's cost, all quantities of the secret spices and other
trade secret items that Franchisee has in stock upon termination or
non-renewal of this Agreement.
19.5. Trademarked Items. PHI may, by written notice within
30 days after expiration or other termination of this Agreement,
purchase from Franchisee all items bearing any of the PizzaEHut Marks.
If PHI exercises this option, the purchase price for the items will be
the lowest of the fair market value of the items, Franchisee's
purchase price for the items, or Franchisee's book value for the
items.
19.6. Telephone Numbers. PHI may, upon written notice within
30 days after expiration or other termination of this Agreement, take
an assignment of all telephone numbers (and associated listings) for
Franchisee's System Restaurants and centralized order-taking
facilities (if any).
20. DISPUTE RESOLUTION
20.1. Jurisdiction and Governing Law. This Agreement takes
effect upon its acceptance and execution by PHI. This Agreement is
governed by, and should be construed in accordance with, the internal
laws of the State of Kansas (without giving effect to Kansas choice of
law rules). Franchisee acknowledges the importance to the System
Restaurant Concepts of uniformity of interpretation, and therefore
consents and waives any objections Franchisee might otherwise have to
the jurisdiction and venue of any state or federal court of general
jurisdiction in Sedgwick County, Kansas, or any other county or
district in which PHI then has its principal place of business, with
respect to any proceedings arising out of this Agreement or the
relationship between the parties. Franchisee further agrees that it
will bring any legal proceedings arising out of this Agreement or the
relationship between the parties only in such courts. Franchisee
agrees that mailing of any process to Franchisee's appropriate address
pursuant to SectionE21.5, by registered or certified mail or reputable
private delivery service, will constitute lawful and valid process.
20.2. Remedies Cumulative. All remedies provided in this
Agreement are cumulative and non-exclusive. PHI may simultaneously
seek relief specifically provided for by this Agreement and relief not
so provided, and may also seek two or more forms of relief otherwise
inconsistent, and that could not be granted simultaneously. A request
by PHI for interim damages for a particular violation will not
constitute an admission that the continuation of the violation would
not cause irreparable harm to PHI.
20.3. Mediation. All disputes between PHI and Franchisee
relating to this Agreement will be submitted to mediation under the
National Franchise Mediation Program administered by the Center for
Public Resources (or, if that program is discontinued, any successor
program or the nearest available substitute). This SectionE20.3
applies only to disputes that are specific to Franchisee and not to
issues that affect PHIOs franchisees generally.
20.4. Injunctive Relief. In case of a breach or a threatened
breach of any provision of this Agreement by Franchisee, PHI will, in
addition to any other remedy it has, and notwithstanding any other
provision of this Agreement (including SectionE20.3), be entitled to
an injunction restraining Franchisee from committing or continuing to
commit any breach or threatened breach of this Agreement, without
showing or proving any actual damage sustained by PHI, and without
posting bond or other security. No action for a preliminary or
temporary injunction by PHI may be stayed pending mediation, but once
a temporary injunction (pending outcome of the dispute) is granted,
the issues underlying the dispute will be submitted to mediation in
accordance with SectionE20.3.
20.5. Attorneys' Fees. If PHI and Franchisee become involved
in litigation, the losing party will reimburse the prevailing party's
outside attorneys' fees and all expenses. This provision will not
apply to attorneys' fees incurred by the parties in connection with
mediation conducted pursuant to SectionE20.3.
21. MISCELLANEOUS
21.1. Relation of Parties. PHI and Franchisee are not and
will not be considered as joint venturers, partners, or agents of each
other. Neither Franchisee nor PHI will have the power to bind or
obligate the other except as set forth in this Agreement.
Franchisee specifically acknowledges that the relationship
created by this Agreement is not a fiduciary, special, or any other
similar relationship, but rather is an arm's-length business
relationship. PHI owes Franchisee no duties except as expressly
provided in this Agreement.
21.2. Counterparts. This Agreement may be executed in any
number of counterparts, each of which, when executed and delivered,
will be deemed an original, but all counterparts together will
constitute but one and the same instrument.
21.3. Third-Party Beneficiaries. The other franchisees of
PHI are intended beneficiaries of SectionE13 of this Agreement; the
Affiliates of PHI, and the employees, officers, and directors of PHI
and its Affiliates are intended thirdDparty beneficiaries of
SectionE16.4 of this Agreement. Nothing else in this Agreement is
intended to confer any rights or remedies upon any Person or legal
entity not a party to this Agreement.
21.4. Severability. The portions of this Agreement relating
to the payment of fees to PHI, and the portions relating to the
protection and preservation of the PizzaEHut Marks, the System
Restaurant Concepts, and PHI's trade secrets are critical to this
Agreement; if any portion of them is declared invalid or unenforceable
for any reason, PHI will have the option to terminate this Agreement
immediately, upon written notice to Franchisee. All other terms and
conditions of this Agreement, and every portion of those other terms
and conditions, will be considered severable. If, for any reason, any
portion of this Agreement (other than the nonseverable portions, as
defined in the first sentence of this SectionE21.4) is determined to
be invalid or contrary to or in conflict with any applicable present
or future law, rule, or regulation, in a final, unappealable ruling
issued by any court, agency, or tribunal with valid jurisdiction in a
proceeding to which PHI is a party, that ruling will not impair the
operation of, or have any other effect upon, any other portion of this
Agreement, each of which will remain binding upon the parties and
continue to be given full force and effect. Any invalid portion will
be deemed removed from this Agreement as of the date upon which the
ruling becomes final (if Franchisee is a party to such proceedings) or
upon Franchisee's receipt of notice of non-enforcement from PHI, and
will further be deemed replaced by the closest enforceable provision.
21.5. Protests, Requests and Notices. All protests, requests
and notices required or permitted by the terms of this Agreement will
be in writing and sent either by certified or registered mail (return
receipt requested), by reputable private delivery service, or by hand
delivery. All notices will be sent to the respective address of PHI
(marked, except as otherwise required by this Agreement, "Attention:
Vice President-Franchising") or Franchisee shown on page 1 of this
Agreement, until PHI or Franchisee (as the case may be) gives notice,
in writing, of a new address. Neither PHI nor Franchisee must send
multiple notices; a single notice to the specified address will
suffice, and if multiple addresses are specified by either party, the
sending party may send notices to any single address chosen in good
faith. Notices will be effective on the day delivery is made or first
attempted at the specified address during normal business hours (8
a.m. to 5 p.m., Monday through Friday, except national or state
holidays), except that notices of change of address will be effective
10 days after that date.
21.6. Time of Essence. Time is of the essence of this
Agreement and of each provision of this Agreement.
21.7 Rules of Construction. The following rules were used in
drafting this Agreement, and should be used in construing it:
A. Auxiliary Verbs. The auxiliary verb OwillO is used in
a mandatory fashion. Any time this Agreement provides that a party
will do something, the statement is obligatory, and is intended to
apply throughout the life of this Agreement. By contrast, the
auxiliary verb OmayO is permissive when stated affirmatively (Oa party
may do somethingO means that the party is permitted, but not required,
to take the action), and by extension, prohibitive when stated
negatively (that is, the statement that Oa party may not do somethingO
is a denial of permission, and therefore means not only that the
action is not required, but also that it is not permitted).
B. Includes. The word OincludesO (in all its tenses and
variations) is always used in the non-exclusive sense. As a result,
the words "including" or "includes" can always be read as if followed
by the phrase, "but [is] not limited to" or the phrase, "without
limitation".
C. Accounting Periods. Any time that this Agreement calls
for a party to take an action OmonthlyO, the party may instead use
regular accounting periods that are no longer than 35 days long. For
example, a party may use 13 accounting periods of 4 weeks each (a
O52/53 week fiscal yearO) or may use 12 accounting periods arranged so
that there are two 4Dweek and one 5Dweek accounting period each fiscal
quarter. PHI currently uses a 52/53 week fiscal year, divided into 13
4Dweek periods, ending on the Wednesday before the last Saturday in
December of each year; PHI may change its accounting cycle on 30 daysO
written notice to Franchisee. If Franchisee chooses to use one of
these methods of accounting, Franchisee will notify PHI of the method
chosen and the fiscal yearDend used, and may not switch accounting
years without consent from PHI.
D. Locations, Boundaries and Measurements. The sites of
the Locations and the boundaries of the Delivery Area are based on the
physical location of the references used to describe the Locations or
the boundaries on the date of this Agreement. If a street address is
used to describe a Location, the renumbering of the addresses will not
serve to move the Location. If a specified boundary of the Delivery
Area is described as a street, the center line of the street is
intended; if the boundary is described as a political dividing line
(such as a city limit), the line utilized by the appropriate political
jurisdiction is intended. The area and physical location of any
Location or of the Delivery Area will not be altered by a subsequent
movement of the references originally used to describe the Location or
the Delivery Area. Furthermore, it is only those points to the
"inside" of the boundary that form a part of the Delivery Area (for
example, if a Delivery Area is bounded on the north by Main Street,
only the area south of the center line of Main Street is within the
Delivery Area ).
For all calculations based upon a distance (for example, the
limitation on opening a System Restaurant within 500 yards of a
Location), the measurement will be made in a straight line between the
nearest points; if any portion of an object is within the prescribed
distance from a point, the entire object is considered to be within
that distance.
21.8. Merger. This Agreement (together with the Manual,
which is incorporated by reference into this Agreement) contains the
entire agreement of the parties with respect to the subject matter
discussed in this Agreement.
All prior discussions or negotiations (written or oral),
including those included in PHI's offering circular, are merged into
this Agreement, and no representations, inducements, promises, or
agreements not embodied in this Agreement will survive the execution
of this Agreement. This Agreement may not be modified or amended
except (i) pursuant to SectionE17, (ii) by a modification, supplement,
or revision to the Manual issued by PHI in accordance with the terms
of this Agreement, or (iii) by a written document, signed by both
parties, specifically referring to the portion of this Agreement being
modified or amended.
ATTEST: PIZZA HUT, INC.
___________________________ By:_____________________________
Secretary/Assistant Secretary Vice President, Franchising
ATTEST: _______________________________
___________________________ By:_____________________________
[Secretary/Assistant Secretary]
Title:_________________________
APPENDIX A
PARTIAL LIST OF "PIZZAEHUT" MARKS
RegistrationRegistration
▇▇▇▇ Number ___Date__
PIZZAEHUT 729,847 04/10/62
PIZZAEHUT 1,043,014 07/06/76
PIZZAEHUT 1,069,731 07/19/77
PIZZAEHUT 926,516 01/04/72
PIZZAEHUT Logo (service ▇▇▇▇) 1,028,170 10/23/75
PIZZAEHUT Logo (trademark) 1,061,317 03/15/77
PIZZAEHUT Logo (trademark) 1,089,680 04/19/78
THICK 'N CHEWY 1,096,909 07/18/78
THIN 'N CRISPY 1,096,198 07/11/78
Building Design No.1 852,458 07/09/68
Building Design No.2 1,068,095 06/21/76
PIZZAEHUT within Sign Design 1,079,511 12/13/77
Roof Design (trademark) 1,116,486 04/10/79
BIG TOPPER (trademark) 1,374,944 12/10/85
PERSONAL PAN PIZZA (trademark) 1,400,567 07/08/86
BOOK IT! (service ▇▇▇▇) 1,430,605 02/24/87
PIZZAEHUT (trademark) lined for color red1,443,457 06/16/87
PIZZAEHUT DELIVERY Design (trademark) 1,445,612 06/13/87
PIZZAEHUT Delivery - Truck Design 1,474,524 01/26/88
MAKIN' IT GREAT! (service ▇▇▇▇) 1,505,367 09/20/88
BOOK IT! and design 1,561,899 10/24/89
PIZZAEHUT Logo (with phone design) 1,661,222 10/15/91
MAKIN' IT GREAT FOR KIDS! 1,693,612 06/09/91
PERSONAL PAN PIZZA EXPRESS
AND DESIGN 1,772,099 05/15/93
APPENDIX B
LOCATIONS:
DELIVERY AREA:
APPENDIX C
Pizza Hut, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇. ▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SUBJECT: LEASE AGREEMENT
DATED: ____________________
PREMISES LOCATION: ____________________
____________________
LEASE COMMENCEMENT DATE: ____________________
TO PIZZA HUT, INC.
The purpose of this letter is to confirm that the Lease described
above, between
_______________________________________________________, as Lessor,
and your franchisee, ___________________________________, as Lessee
contains the following provision:
Upon expiration or termination of this Lease, Lessee/Tenant
may de-identify the leased premises. If Lessee/Tenant fails
to do so, Pizza Hut, Inc., may de-identify. De-
identification consists of removal of all signs, modification
or remodeling of all identifying architectural features (by
removing the cupola from the roof, replacing any trapezoidal
windows with rectangular windows, and similar actions),
repainting as necessary to no longer use the color scheme
used by Pizza Hut, Inc., and any other steps necessary (in
the sole discretion of Pizza Hut, Inc.) to effectively
distinguish the formerly leased premises from Pizza Hut,
Inc.'s proprietary building design(s). All de-identification
will be done without cost to Lessor/Landlord.
As Lessor under the Lease Agreement, the undersigned agrees not to
modify the provision set forth above without the prior, written
consent of Pizza Hut, Inc.
At any time upon 10 days written notice to Lessor, Pizza Hut, Inc.,
may receive a copy of the Lease Agreement together with any amendments
thereto.
___________________________
By:________________________
"LESSOR"
Address:____________________
___________________________
Phone:______________________
APPENDIX D
CERTIFICATE OF OWNERSHIP
The undersigned, who is the authorized representative of
____________________________________ ("Franchisee"), hereby certifies
to PizzaEHut, Inc., that the following information is true and correct
and reflects all of the individuals who own (directly or indirectly)
any interest in Franchisee:
Shareholder, Officer, Percentage
Director, Member, of
Name Manager, and/or Partner Interest
____________________ ________________ ________
____________________ ________________ ________
____________________ ________________ ________
____________________ ________________ ________
____________________ ________________ ________
____________________ ________________ ________
____________________ ________________ ________
____________________ ________________ ________
____________________ ________________ ________
____________________ ________________ ________
____________________ ________________ ________
____________________ ________________ ________
Dated as of the ____ day of __________________, 19___.
"Franchisee"
ATTEST:
_____________________________ By: _________________________
Its authorized representative
Title: _______________________
APPENDIX E
PERSONAL GUARANTY
PIZZA HUT, INC.
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▇. ▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: Guaranty of Franchisee Obligations
Dear Franchisor:
To induce you to enter into the Location Franchise Agreement dated
_____________, with __________________________________ as
"Franchisee", or to induce you to approve a transfer of a direct or
indirect interest in the Franchise Agreement or in Franchisee, we
represent and agree as follows:
1. We are all of the holders (directly or indirectly) of 10% or
more of the record or beneficial ownership interests in Franchisee.
2. We each personally guarantee, jointly and severally with
each other, the complete performance of each of the terms and
conditions of the Location Franchise Agreement to be performed by
Franchisee, and jointly and severally agree to indemnify Pizza Hut,
Inc., its "Affiliates" (as that term is defined in the Location
Franchise Agreement), and the officers, directors, and employees of
each of them from any liability or expense (including reasonable
attorneys' fees) sustained by reason of the failure of Franchisee to
perform and comply with the terms and conditions of the Location
Franchise Agreement.
3. We understand that disposition of our interest in Franchisee
will not release our liability under this Guaranty, and that only a
written release signed by PizzaEHut, Inc., will have that effect.
4. We also understand that this is a continuing, absolute, and
unconditional Guaranty, co-extensive with the Location Franchise
Agreement. We each expressly waive notice of acceptance of this
Guaranty, notice of default by Franchisee, and notice of nonpayment or
nonfulfillment of Franchisee's duties, liabilities, and obligations
under the Location Franchise Agreement.
Very truly yours,
_______________________
_______________________
_______________________
APPENDIX F
ASSUMPTION OF OBLIGATIONS
PIZZA HUT, INC.
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▇. ▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: Assumption of Obligations
Dear Franchisor:
To induce you to enter into the Location Franchise Agreement dated
_____________, with __________________________________ as "Franchisee"
, or to induce you to approve a transfer of a direct or indirect
interest in the Location Franchise Agreement or in Franchisee, we
represent and agree as follows:
1. We are all of the officers and directors of Franchisee, and
all of the holders (directly or indirectly) of any record or
beneficial ownership interests whatsoever in Franchisee.
2. We each agree to be bound individually by all terms and
obligations of the Location Franchise Agreement that are applicable to
Franchisee's "Related Persons" (as that term is defined in the
Location Franchise Agreement). Without trying to list those terms and
obligations, we understand that they include restrictions on
disposition of interests in Franchisee and covenants of
confidentiality and against competition.
3. We understand that neither the expiration or termination of
the Location Franchise Agreement, nor a disposition of our interests
in Franchisee, will release our responsibility to comply with the
terms and obligations of the Location Franchise Agreement that are
applicable after expiration or termination, or after a disposition (as
the case may be). We also understand that there are covenants of
confidentiality and against competition in the Location Franchise
Agreement that survive the expiration, termination, or disposition of
our interests.
Very truly yours,
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
APPENDIX G
CERTIFICATE OF CORPORATE RESOLUTION
The undersigned hereby certify to PizzaEHut, Inc. ("PHI"),
that they are the duly elected, qualified, and acting President
and Secretary of _____________________________________, a
___________________ corporation ("Franchisee"), and that at a
duly convened joint meeting of the shareholders and directors of
Franchisee, attended by all of them, held on the ____ day of
_______________, 19___, the following resolutions unanimously
were adopted:
WHEREAS, Franchisee has entered into a Location
Franchise Agreement (the "Agreement") with PHI to
operate PizzaEHut restaurants in the location(s)
specified in AppendixEB of the Agreement; and
WHEREAS, SectionsE14 and 15 of the Agreement impose
certain requirements upon Franchisee, restrict the
issuance and transfer of any interest in Franchisee,
and require that Franchisee submit to PHI a resolution
of Franchisee, ratified by all individuals who own an
Interest in Franchisee, which states that without PHI's
prior written consent, no Interests in Franchisee will
be issued, transferred, or assigned to any person or
entity without PHI's prior written consent.
NOW, THEREFORE, be it resolved (jointly by all
individuals who own an Interest in Franchisee) that,
except as permitted by SectionsE14, and 15 of the
Agreement, no shares of stock or other interests in
Franchisee shall be issued, transferred, or assigned to
any person or legal entity without PHI's written
consent; and
FURTHER RESOLVED that the Secretary or a similarly
charged officer of Franchisee shall maintain stop
transfer instructions against the transfer on the
corporation's records of any securities that do not
comply with the restrictions of this resolution and
SectionsE14 and 15 of the Agreement; and
FURTHER RESOLVED that the Secretary or a similarly
charged officer legibly and conspicuously print the
following legend on all securities or other documents
evidencing an ownership interest in Franchisee:
The transfer of this certificate is subject
to the terms and conditions of one or more
Franchise Agreements with PizzaEHut, Inc.,
and to the restrictive provisions of the
organizational documents of the issuer.
Please refer to those documents for the terms
of the restrictions.
The undersigned further certify to PHI that the Articles of
Incorporation and Bylaws of Franchisee restrict Franchisee's
business activities to operations licensed by PHI or its
subsidiaries and affiliates, and that Franchisee is in compliance
with those restrictions.
This certificate is executed _______________________, 19___.
"Franchisee"
By: _________________________
, President
ATTEST: By: _________________________
, Secretary
PIZZA HUT, INC.
LOCATION FRANCHISE AGREEMENT
TABLE OF CONTENTS
PAGE
DATE 1
PARTIES 1
RECITALS 1
AGREEMENT 1
1. DEFINITIONS
1.1 Adequate Delivery Service 1
1.2 Advertising Fund 1
1.3 Affiliates 1
1.4 Agreement 1
1.5 Approved Products 1
1.6 Co-op 2
1.7 Delivery Area 2
1.8 Direct or Indirect 2
1.9 Franchisee 2
1.10 Good Standing 2
1.11 Gross Sales 2
1.12 Interest 2
1.13 IPHFHA 2
1.14 Lease 2
1.15 Locations 2
1.16 Manual 2
1.17 Person 2
1.18 PHI 2
1.19 PizzaEHut Marks 3
1.20 Related Persons 3
1.21 System Restaurants 3
1.22 System Restaurant Concepts 3
1.23 Term 3
1.24 Transfer 3
2. GRANT OF FRANCHISE
2.1 Grant of Franchise 3
2.2 No Subfranchise Right 4
2.3 Delivery Service 4
2.4 Relocation Rights 4
2.5 Limitations on the Franchise 4
2.6 Protected Radius 4
3. DESIGNATION AND USE OF MARKS
3.1 Designation of PizzaEHut Marks 5
3.2 Use of PizzaEHut Marks 5
3.3 Ownership of PizzaEHut Marks 5
3.4 Protection of PizzaEHut Marks 5
4. TRAINING AND ASSISTANCE
4.1 Management Training Programs 6
5. MANUAL
5.1 Loan of Manual 6
5.2 Ownership of Manual 7
5.3 Confidentiality of Manual 7
5.4 Protection of Trade Secrets 7
5.5 Updates 7
6. STANDARDS; DUTIES OF FRANCHISEE AND OPERATOR
6.1 Interpretation of Standards 7
6.2 Promulgation of Standards 7
6.3 Limitation on Promulgation of Standards 7
6.4 Inspections 7
6.5 Compliance with Laws 8
6.6 Identification 8
6.7 Uniforms 8
6.8 Coin-Operated Machines 8
6.9 Assumed Name Certificate 8
6.10 Approved Products 9
6.11 SUS Computer System 9
6.12 Prices 9
7. ADVERTISING
7.1 National Advertising 10
7.2 Local Advertising 10
7.3 Approval of Advertising 10
7.4 Co-operative Advertising 11
8. PURCHASE OF EQUIPMENT, SUPPLIES, AND OTHER PRODUCTS
8.1 Use of Approved Supplies and Approved Distributors 11
8.2 Trade Secret Items 12
8.3 Product Rebate 12
9. FEES AND PAYMENT SCHEDULE
9.1 Initial Franchise Fee 13
9.2 Monthly Service Fees 13
9.3 Transfer Fees 13
9.4 Offset Rights 13
9.5 Taxes 13
10. BUSINESS PREMISES
10.1 Restrictions on Use 13
10.2 Site Selection 13
10.3 Construction of System Restaurants 14
10.4 Right to De-Identify 14
10.5 Repair and Maintenance 14
10.6 Proof of Compliance 14
10.7 System Restaurant Closure 14
11. BOOKS AND RECORDS
11.1 Maintenance of Books and Records 14
11.2 Inspection and Audit 15
11.3 Selection of Accountants 15
12. COVENANTS AGAINST COMPETITION
12.1 Acknowledgments 15
12.2 In-Term Covenants 16
12.3 Post-Term Covenants 16
12.4 Perpetual Covenant 17
12.5 Stock Ownership 17
13. EMPLOYMENT RELATIONS
13.1 Franchisee's Employees 17
13.2 Interference 17
14. TRANSFERS
14.1 Transfers by PHI 17
14.2 Transfers by Franchisee 17
14.3 Transfer of Assets 17
14.4 Consent to Transfers 18
14.5 Death or Incapacity 18
14.6 Right of First Refusal 19
15. NON-INDIVIDUAL FRANCHISEES
15.1 List of Individual Owners 19
15.2 Personal Guaranties 19
15.3 Organizational Documents 20
15.4 Transfer Restrictions 20
15.5 Permitted Assignments 20
15.6 No Publicly Traded Ownership Interests 20
15.7 Changes in Ownership or Organization 20
16. INSURANCE AND INDEMNIFICATION
16.1 Property Insurance 20
16.2 Liability Insurance 21
16.3 Proof of Insurance 21
16.4 Indemnification and Waiver 21
17. REQUESTS FOR WAIVERS AND CONSENTS
17.1 Requests for Waivers or Consents 21
17.2 Effect of Waivers and Consents 22
17.3 No Implied Waivers 22
18. DEFAULT AND TERMINATION
18.1 Defaults Without Cure Right 22
18.2 Defaults Subject to Cure Rights 23
18.3 NonDTermination Remedies 23
19. POST-TERMINATION PROVISIONS
19.1 Use of PizzaEHut Marks and Systems 24
19.2 Cessation of Rights 24
19.3 Effect on Other Duties 24
19.4 Spice Blends 24
19.5 Trademarked Items 24
19.6 Telephone Numbers 24
20. DISPUTE RESOLUTION
20.1 Jurisdiction and Governing Law 24
20.2 Remedies Cumulative 25
20.3 Mediation 25
20.4 Injunctive Relief 25
20.5 Attorneys' Fees 25
21. MISCELLANEOUS
21.1 Relation of Parties 25
21.2 Counterparts 25
21.3 Third-Party Beneficiaries 25
21.4 Severability 26
21.5 Protests, Requests and Notices 26
21.6 Time of Essence 26
21.7 Rules of Construction 26
21.8 Merger 27
APPENDICES
APPENDIX A PARTIAL LIST OF MARKS
APPENDIX B LOCATIONS AND DELIVERY AREA
APPENDIX C LANDLORD CERTIFICATION
APPENDIX D CERTIFICATE OF OWNERSHIP
APPENDIX E PERSONAL GUARANTY
APPENDIX F ASSUMPTION OF OBLIGATIONS
APPENDIX G CORPORATE RESOLUTION
APPENDIX H SUS LICENSE AND SUPPORT AGREEMENT
