What rights does the Carbones Pizzeria franchise agreement grant to the franchisee?

W I T N E S S E T H:

WHEREAS, Franchisor controls or is the owner of certain commercial trade names, trademarks, service marks, domain names and other commercial symbols including associated logos now or hereafter selected, used or promoted by Franchisor and licensed to Franchisee in connection with the Carbone System (as defined below) (collectively, "Names and Marks"); and

WHEREAS, Franchisor has created and developed certain skill and know-how in the sale and preparation of pizza and various other food and beverage items, including the development of unique and valuable recipes and sales procedures, business plans, standards, specifications, methods, processes, techniques, and sourcing, all of which may be changed from time to time by Franchisor (collectively, the "Carbone System") but specifically excluding any employee policies or procedures that Franchisor may make available to Franchisee for its optional use during the term of this Agreement; and

WHEREAS, Franchisee wishes, upon the terms and conditions set forth in this Agreement, to be assisted and trained by Franchisor to engage in the business of operating a restaurant selling pizza and other items under the Names and Marks (the "Franchise"), all in accordance with the Carbone System, it being understood that Franchisee recognizes the importance to Franchisor and to the public of maintaining the distinctive standards, qualities and attributes of a Carbone's Pizza Restaurant, and Franchisee is willing to maintain such standards, qualities and attributes.

NOW, THEREFORE, in consideration of the foregoing recited facts and the mutual agreements and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which is acknowledged by each party, the parties agree as follows:

1. Grant of Franchise.

• a. Franchisor grants Franchisee a Franchise to use the Carbone System to develop and operate a restaurant selling pizza and other food items under the Names and Marks during the term of this Agreement.
• b. The location of the restaurant to be operated under this Agreement is set forth on the Rider (the "Restaurant") to this Agreement, and such address shall not be changed without the prior written approval of Franchisor.

2. Term and Renewal.

• a. The initial term of this Agreement shall be for a period of ten (10) years, commencing on the date of this Agreement, unless sooner terminated as provided in this Agreement.
• b. Franchisee may, at its option, renew the Franchise granted by this Agreement for one period of ten (10) years provided Franchisee: (i) is not in violation of any of the terms of this Agreement; (ii) executes the then-current form of franchise agreement used by Franchisor at that time in connection with the sale of Franchises; (iii) pays a renewal fee of One Thousand Five Hundred Dollars ($1,500) (the "Renewal Fee") at the time it provides its notice of renewal as discussed below; (iv) updates its Restaurant to meet all of Franchisor's then-current requirements; and (v) provides Franchisor with written notice of its intent to renew the Franchise not less than one hundred eighty (180) days and not more than three hundred sixty-five (365) days prior to the expiration of the initial ten (10) year term.
• c. Franchisee shall not be obligated to pay the franchise fee described in Section 5(a) of this Agreement in the event of any such renewal, but shall pay the Renewal Fee.

3. Territory.

• a. During the term of this Agreement, and provided that Franchisee is not in default under this Agreement, Franchisor will not grant to anyone else a Franchise to operate, and will not itself operate, a restaurant operating under the Carbone's Pizza or Carbone's Pizzeria name, the physical premises of which are located within the area described on the Rider to this Agreement (the "Franchisee Territory"). Franchisee acknowledges that the foregoing restrictions do not prevent Franchisor or its affiliates from any activity not specifically set forth in such restrictions, including:
  • (1) Franchisor and its affiliates may operate and allow others to operate similar or identical businesses within the Franchisee Territory if such businesses do not operate under the Carbone's Pizza or Carbone's Pizzeria names;
  • (2) Franchisor and its affiliates may operate similar or identical business outside of the Franchisee Territory under any trademarks even if the businesses compete with the Restaurant;
  • (3) Franchisor and its affiliates may operate or allow others to operate businesses inside the Franchisee Territory under any trademarks, including the Names and Marks, so long as the businesses are not competitive with the Restaurant;
  • (4) Franchisor and its affiliates may sell any products it or its affiliates provide to Franchisee for use in its Restaurant to any party, whether in or outside the Franchisee Territory;
  • (5) Franchisor and its affiliates may sell, or grant third parties the right to sell, goods and services that are the same as or competitive with those sold by the Restaurant under any trademarks, including the Names and Marks, through other

• distribution channels including the Internet, catalog sales, telemarketing or other direct marketing, in and outside of the Franchisee Territory;
• (6) Franchisor and its affiliates may sell frozen pizzas and other frozen items, whether under the Names and Marks or otherwise, to customers and resellers who may be located in the Franchisee Territory, including supermarkets and convenience stores; and
• (7) Franchisor and its affiliates may acquire businesses in the Franchisee Territory that are similar to the Restaurant or sell their businesses whether through a sale of assets or stock to anyone, regardless whether they operate or franchise the operation of businesses similar to the Restaurant.
• b. Franchisee may not deliver into the franchisee territory of another Carbone's Pizza franchisee, whether directly or indirectly, or via any third party. However, Franchisee may deliver outside of its Franchisee Territory into areas that are not in a franchisee territory of another Carbone's Pizza franchisee, but if Franchisor grants a franchise territory which includes any such area, Franchisee shall immediately cease delivery activities in such area. e

4. Covenant Not to Compete; Covenant as to Trade Secrets.

• a. Franchisee acknowledges Franchisor must be protected against the potential for unfair competition by Franchisee's use of Franchisor's training, assistance and trade secrets in direct competition with Franchisor or its franchisees. Franchisee therefore agrees that it shall not:
  • (1) During the term of this Agreement, either directly or indirectly: (a) operate, own, manage, or be employed by or consult with, any Competing Business other than one operated under a valid franchise agreement with Franchisor, or any business or venture that is granting franchises or licenses for the operation of a Competing Business; or (b) divert or attempt to divert any customer or potential customer to any competitor of the Carbone System.
  • (2) For two (2) years following the termination or assignment of this Agreement, either directly or indirectly, operate, own, manage, be employed by, lease space to, lend money to, or consult with, any Competing Business, other than one operated under a valid franchise agreement with Franchisor, or any business or venture that is granting franchises or licenses for the operation of a Competing Business, that is located or doing business in the Restricted Area.
• b. In the event of the violation of Section 4.a.(2) by Franchisee, the period of time Franchisee shall be required to abide by the breached obligation shall be extended to a period of two (2) years after Franchisee is no longer in breach of such obligation.
• c. Franchisee further agrees that at no time shall it or any of its owners or employees, use any Confidential Information (as defined below) directly or indirectly, except as necessary for the proper operation of the Franchise pursuant to this Agreement. For the

• purposes of this Section, "use" means to use directly or indirectly, either as an individual or as a member of, consultant to, or investor in a joint venture, partnership, limited partnership, association or other entity, or to use as an officer, director, employee, consultant, or shareholder of any corporation or other entity.
• d. Franchisee acknowledges and agrees that Franchisor's remedy at law is inadequate and that in the event of any breach or threatened breach of the provisions of this Section Franchisor shall be entitled to temporary and final injunctive relief in addition to any other relief allowed by law.

5. Franchise Fees; Royalties.

• a. Franchisee shall pay to Franchisor an initial fee of Twenty-five Thousand Dollars ($25,000.00) (the "Franchise Fee"), payable in full upon the execution of this Agreement. It is expressly understood and agreed by the parties that the Franchise Fee is and shall be fully earned by Franchisor upon the signing of this Agreement and no part of the Franchise Fee shall be refunded to Franchisee for any reason whatsoever.

Source: Item 23 — RECEIPTS (FDD pages 30–116)