1
EXHIBIT 10.13
FRANCHISE AGREEMENT
BY AND BETWEEN
REMEDYTEMP, INC.
AND
_________________________
DATED
__________ __, 199_
FTC
2
TABLE OF CONTENTS
PAGE
----
1. DEFINITIONS....................................................................1
2. GRANT OF FRANCHISE.............................................................5
3. TERRITORIAL RIGHTS.............................................................5
3.1. LOCATION.................................................................5
3.2. TERRITORY................................................................5
3.3. RESTRICTIONS.............................................................5
3.3.1. Relinquishment Procedures........................................5
3.4. RESERVED RIGHTS..........................................................6
3.4.1. Franchisor's Reserved Rights.....................................6
3.4.2. Franchisee's Reserved Rights.....................................6
4. TERM AND RENEWAL...............................................................6
4.1. INITIAL TERM.............................................................6
4.2. SUCCESSIVE TERMS - FRANCHISEE'S OPTION...................................6
4.3. SUCCESSIVE TERMS - PROCEDURES............................................7
4.3.1. Franchisor's Responsibilities....................................7
4.3.2. Franchisee's Responsibilities....................................7
4.4. NO SUCCESSIVE TERMS .....................................................7
5. FEES. ....................................................................7
5.1. INITIAL FRANCHISE FEE....................................................7
5.2. CONTINUING FEES, UNCOLLECTIBLES, COLLECTION EXPENSES.....................7
5.3. PAYMENT OF FRANCHISEE'S SHARE............................................8
5.4. LATE PAYMENTS............................................................8
i
3
5.5. APPLICATION OF PAYMENTS..................................................8
5.6. CALCULATION OF FRANCHISOR'S SHARE........................................8
5.7. DETERMINATION OF GROSS MARGIN............................................9
5.8. AGGREGATION OF HOURS OF OTHER BUSINESSES.................................9
5.9. ALLOCATION OF TEMPORARY EMPLOYEE EXPENSES................................9
6. COMMENCEMENT AS A REMEDY FRANCHISEE...........................................10
6.1. TIME LIMITATIONS........................................................10
6.2. FRANCHISOR'S APPROVAL TO COMMENCE OPERATIONS............................10
7. TRAINING......................................................................10
7.1. INITIAL TRAINING........................................................10
7.1.1. Training.........................................................10
7.2. COMPLETION OF TRAINING; ADDITIONAL EVALUATION...........................10
7.3. FAILURE TO COMPLETE TRAINING/EVALUATION.................................10
7.4. NATIONAL BUSINESS CONFERENCE............................................11
8. EMPLOYMENT, BILLING, COLLECTION AND PAYMENT OF TEMPORARY EMPLOYEE EXPENSES....11
8.1. FRANCHISOR'S OBLIGATIONS................................................11
8.1.1. Employment of Temporary Employees...............................11
8.1.2. ▇▇▇▇▇▇▇▇ and Collections........................................11
8.2. FRANCHISEE'S OBLIGATIONS................................................12
8.2.1. Temporary Employees..............................................12
8.2.2. Credit Policies.................................................12
8.2.3. Workers' Compensation Risk Policies.............................12
ii
4
8.2.4. Transmittal of Payments.........................................12
8.3. NATURE OF COLLECTIONS RELATIONSHIP......................................12
9. ADDITIONAL SERVICES TO BE PROVIDED BY FRANCHISOR..............................13
9.1. OPENING PUBLICITY.......................................................13
9.2. MANAGEMENT ASSISTANCE...................................................13
9.3. ADDITIONAL GUIDANCE.....................................................13
9.4. ACQUISITION OF GOODS AND SERVICES.......................................13
9.5. ON-LINE OPERATING MANUAL................................................13
9.5.1. Confidential Nature.............................................13
9.5.2. Contents........................................................13
9.5.3. Modification by Franchisor......................................14
9.5.4. Strict Compliance by Franchisee.................................14
10. MARKS. ...................................................................14
10.1. OWNERSHIP.............................................................14
10.2. USE...................................................................14
10.3. PROHIBITED USES.......................................................15
10.4. NOTICES...............................................................15
10.5. CONTROL OF PROCEEDINGS................................................15
10.6. DISCONTINUANCE OF USE.................................................15
10.7. INDEMNIFICATION.......................................................15
11. RELATIONS....................................................................16
11.1. NATURE OF RELATIONSHIP................................................16
11.2. IDENTIFICATION........................................................16
11.3. OBLIGATIONS...........................................................16
12. INDEMNIFICATION..............................................................16
iii
5
13. TRADE SECRETS................................................................17
13.1. LIMITS ON USE.........................................................17
13.2. NONCOMPETITION........................................................17
13.2.1. Franchisee's Covenant Not to Compete During
Term of Agreement........................................17
13.2.2. Solicitation of Customers....................................18
13.2.3. Solicitation of Employees....................................18
13.2.4. Employees' Covenants Not To Compete..........................18
13.2.5. Franchisee's Covenant Not to Compete Following Termination...18
13.2.6. Exceptions...................................................19
14. MINIMUM PERFORMANCE STANDARDS AND OFFICE DEVELOPMENT REQUIREMENTS+...........19
14.1. MINIMUM GROSS ▇▇▇▇▇▇▇▇................................................19
14.2. REMEDIES FOR FAILURE TO SATISFY MINIMUM PERFORMANCE STANDARDS.........19
14.3. OFFICE DEVELOPMENT REQUIREMNETS.......................................19
15. IMAGE AND OPERATING STANDARDS................................................20
15.1. SERVICES..............................................................20
15.2. SPECIFICATIONS, STANDARDS AND PROCEDURES..............................20
15.3. COMPLIANCE WITH LAWS..................................................20
15.4. REPORTS...............................................................21
15.5. ACTIONS...............................................................21
15.6. BUSINESS RELATIONS - PROFESSIONAL CONDUCT.............................21
15.7. HIRING, TRAINING AND CONDUCT OF EMPLOYEES.............................21
iv
6
16. INSURANCE....................................................................21
16.1. POLICIES..............................................................21
16.2. PROOF OF COVERAGE.....................................................21
16.3. ENDORSEMENTS..........................................................22
16.3.1. Additional Insured...........................................22
16.3.2. Cross-Liability..............................................22
16.3.3. Waiver of Subrogation........................................22
16.4. LOSS OF COVERAGE......................................................22
16.5. FAILURE TO MAINTAIN...................................................22
16.6. INSURANCE PROGRAMS....................................................22
16.7. OBLIGATION UNCONDITIONAL..............................................22
17. COOPERATIVE ADVERTISING......................................................23
18. LOCAL ADVERTISING BY FRANCHISEE..............................................23
18.1. REQUIRED ADVERTISING..................................................23
18.2. CONDUCT...............................................................23
18.3. APPROVALS.............................................................23
19. ACCOUNTING, REPORTS, FINANCIAL STATEMENTS....................................24
19.1. MAINTENANCE...........................................................24
19.2. REPORTS...............................................................24
20. PERIODIC REVIEWS, INSPECTIONS AND AUDITS.....................................24
20.1. PERIODIC REVIEWS......................................................24
20.2. INSPECTIONS...........................................................24
20.3. AUDITS................................................................25
21. COMPUTERIZED MANAGEMENT AND OPERATIONAL SYSTEM...............................25
21.1. SOFTWARE LICENSE......................................................25
v
7
21.2. SOFTWARE UPDATE AND SUPPORT. ........................................26
21.3. HARDWARE..............................................................26
21.4. HARDWARE MAINTENANCE..................................................26
21.5. INFORMATION RETRIEVAL.................................................26
22. TRANSFER.....................................................................26
22.1. BY FRANCHISOR.........................................................26
22.2. BY FRANCHISEE.........................................................26
22.3. CHANGE OF BUSINESS FORM...............................................26
22.4. DEEMED ASSIGNMENT.....................................................27
22.5. FRANCHISOR'S RIGHT OF FIRST REFUSAL...................................27
22.6. FURTHER CONDITIONS....................................................27
22.6.1. Transfer to Franchisee's Corporation.........................27
22.6.2. Other Transfers..............................................28
22.6.3. Covenants Not to Compete Unaffected..........................29
22.7. ASSIGNMENT IN CASE OF DEATH OR INCAPACITY.............................29
22.7.1. Assignment to Original Signatory.............................29
23. TERMINATION..................................................................30
23.1. TERMINATION WITH OPPORTUNITY TO CURE..................................30
23.2. TERMINATION WITH NO OPPORTUNITY TO CURE...............................30
23.3. OTHER TERMINATION RIGHTS..............................................31
23.4. LIQUIDATED DAMAGES....................................................31
24. RIGHTS AND OBLIGATIONS AFTER TERMINATION OR EXPIRATION.......................32
24.1. PAYMENT OF AMOUNTS OWED...............................................32
vi
8
24.2. MARKS.................................................................32
24.3. TRADE SECRETS.........................................................32
24.4. CLIENT LISTS..........................................................32
25. ENFORCEMENT..................................................................33
25.1. SEVERABILITY AND SUBSTITUTION.........................................33
25.2. WAIVER................................................................34
25.3. NONWAIVER.............................................................34
25.4. FORCE MAJEURE.........................................................34
25.5. SPECIFIC PERFORMANCE AND INJUNCTIVE RELIEF............................34
25.6. RIGHTS CUMULATIVE.....................................................35
25.7. GOVERNING LAW.........................................................35
25.8. ARBITRATION...........................................................35
25.9. BINDING EFFECT........................................................35
25.10. MODIFICATION..........................................................35
25.11. CONSTRUCTION..........................................................35
25.12. ATTORNEYS' FEES AND EXPENSES.........................................36
26. NOTICES AND PAYMENTS.........................................................36
27. MULTIPLE ORIGINALS...........................................................37
vii
9
EXHIBIT "A" FRANCHISE LOCATIONS
EXHIBIT "B" TERRITORY
EXHIBIT "C" MINIMUM PERFORMANCE STANDARDS
EXHIBIT "D" OFFICE DEVELOPMENT REQUIREMENTS
EXHIBIT "E" NONDISCLOSURE AND NONCOMPETITION AGREEMENT
EXHIBIT "F" SOFTWARE LICENSE AGREEMENT
viii
10
REMEDYTEMP, INC.
FRANCHISE AGREEMENT
This Franchise Agreement (this "AGREEMENT"), is made effective as of
_____________, 199__, ("EFFECTIVE DATE") by and between RemedyTemp, Inc., a
California corporation, having its principal place of business at ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("FRANCHISOR"), and __________________
____________________________________________ _________________ _________________
_________________________, (residing at / having its principal place of business
at) __________________________________ ("FRANCHISEE") with reference to the
following facts:
RECITALS
WHEREAS, Franchisor owns Trade Secrets (hereinafter defined) relating to
a unique system Franchisor has developed for providing temporary staffing and
placement services (the "REMEDY SYSTEM"), and the Remedy System and the business
of Franchisor, its licensees and its franchisees transacted in accordance with
the Remedy System, have acquired a distinctive, high-quality reputation and
public identity and have generated significant goodwill;
WHEREAS, Franchisor has the exclusive right to use certain proprietary
service marks and other trademarks, service marks and logos connected with the
Remedy System as specified by Franchisor from time to time;
WHEREAS, Franchisor, through its advertising and marketing programs, its
high-quality service and the Remedy System, has established a national
reputation and a demand for the qualified temporary personnel and the other
services it makes available to business and industry under the Marks
(hereinafter defined); and
WHEREAS, Franchisee desires to obtain the benefits of the Remedy System
and the right to operate a franchised RemedyTemp temporary employment service
business using the Marks designated by Franchisor, upon the terms and conditions
herein set out.
NOW, THEREFORE, Franchisor and Franchisee agree as follows:
1. DEFINITIONS.
Terms used in this Agreement and not otherwise defined herein shall have
the meanings set forth below:
"ACCOUNTING PERIOD" shall mean Franchisor's monthly accounting period,
which currently varies from twenty-eight (28) to thirty-five (35) days, except
that the first Accounting Period under this Agreement shall be the portion of
Franchisor's monthly accounting period which commences on the Effective Date and
the last Accounting Period
1
11
shall be the portion of Franchisor's monthly accounting period which ends with
the term of this Agreement.
"AFFILIATE" shall mean any company directly or indirectly owned or
controlled by Franchisor that offers services or products, or transacts other
business with Franchisee.
"AGREEMENT" shall mean this Franchise Agreement dated _________________,
199__.
"APPROPRIATE FRANCHISEE" shall mean, with respect to any client or
customer, the Franchisee within whose protected territory that client's or
customer's business is situated.
"CONTINUING FEES" shall mean a monetary amount equal to the greater of
(a) seven and one-half percent (7.5%) of Gross ▇▇▇▇▇▇▇▇ (excluding all permanent
employee placement amounts), or (b) Franchisor's Share (hereinafter defined). In
no event shall the amount of the Continuing Fees be less than seven and one-half
percent (7.5%) of Gross ▇▇▇▇▇▇▇▇.
"CONTRACT YEAR" shall mean, for the first Contract Year, the period of
twelve (12) consecutive Accounting Periods commencing from the Effective Date
and for each subsequent Contract Year, the period of twelve (12) consecutive
Accounting Periods commencing upon the anniversary of the Effective Date.
"FRANCHISED BUSINESS" shall mean a license to use the Marks, the On-line
Operating Manual, and the Remedy System only and exclusively for the operation
of a RemedyTemp temporary employment service business as set forth in this
Agreement.
"FRANCHISEE'S SHARE" shall mean a monetary amount equal to the Gross
Margin (hereinafter defined) after deducting therefrom the Continuing Fees
payable to Franchisor, the adjustments described in Section 5.2. of this
Agreement, and any other amounts due Franchisor under this Agreement or
otherwise. The Franchisee's Share shall be calculated during each Accounting
Period commencing on the date of the opening of the Franchised Business.
"FRANCHISOR'S SHARE" for purposes of calculating the Continuing Fees for
each Accounting Period, shall be a percentage of the Gross Margin (hereinafter
defined) of the Franchised Business determined according to Sections 5.6. and
5.7., plus fifteen percent (15%) of Franchisee's ▇▇▇▇▇▇▇▇ for permanent employee
placement services during the Accounting Period, including liquidation fees.
"GROSS BILLABLE HOURS" shall mean the total number of hours for which
temporary employees were placed with clients through the Franchised Business
during a particular time period.
"GROSS ▇▇▇▇▇▇▇▇" shall mean gross amounts received or receivable,
directly or indirectly, from or in connection with all services, consultation,
assistance or sales provided from, or through or attributable to the Franchised
Business regardless of where or to whom
2
12
provided, including, without limitation, services of temporary and permanent
employees, excluding bona fide refunds and adjustments.
"GROSS MARGIN" shall mean sums billed by Franchisor to customers of the
Franchised Business on account of temporary employee placement services after
deducting therefrom all Temporary Employee Expenses (hereinafter defined)
attributable to temporary employees.
"INITIAL FRANCHISE FEE" shall mean a franchise fee of Eighteen Thousand
Dollars ($18,000.00), Eight Thousand Dollars ($8,000.00) of which shall be
designated as a non-refundable training fee as set forth in Section 7.3. of this
Agreement. If this Agreement is Franchisee's second or subsequent franchise
agreement, the amount of the franchise fee shall be Ten Thousand Dollars
($10,000.00).
"INITIAL TERM" unless terminated sooner pursuant to Sections 7.3.,
14.2., or 23., the Initial Term shall expire ten (10) years from the Effective
Date.
"LOCATION" shall mean the office or offices within the Territory
(hereinafter defined) from which the Franchised Business shall be conducted. The
Location shall be either (i) at the address set forth in Exhibit A attached
hereto and incorporated herein by this reference or (ii) at an address approved
by Franchisor pursuant to Section 3.1.
"MANAGER" shall mean the person primarily responsible to coordinate and
manage the Franchised Business for Franchisee and who will devote full time to
the coordination and management thereof.
"MARKS" shall mean "RemedyTemp," "Remedy," "Remedy Temporary Services,"
"Hire Intelligence," "Intelligent Staffing," "EDGE," "VSM," "The Intelligent
Temporary" and the related logotypes, and other service marks, trademarks, and
logos developed or owned by Franchisor that are designated by Franchisor, in its
sole discretion, for use in connection with the Franchised Business after the
Effective Date.
"MINIMUM PERFORMANCE STANDARDS" shall mean the amount of average Gross
Billable Hours specified in Exhibit C attached hereto and incorporated herein by
this reference.
"NATIONAL ACCOUNT CUSTOMERS" shall mean any customer designated as such
by Franchisor, based upon Franchisor's sole determination that, because such
customer conducts its business at multiple locations situated in more than one
licensed geographic territory of Franchisor, the account of such client or
customer shall be negotiated and secured either (i) by Franchisor or (ii) with
Franchisor's assistance and approval.
"NATIONAL BUSINESS CONFERENCE" shall mean a meeting of Franchisor's
franchisees to be held from time to time at Franchisor's discretion.
3
13
"NON-▇▇▇▇ BUSINESSES" shall mean temporary and regular employment
service businesses operated under trademarks, service marks, or logotypes other
than the Marks, offering services similar to those provided by the Franchised
Business, including but not limited to information technology, accounting and
legal temporary staffing businesses.
"ON-LINE OPERATING MANUAL" shall mean the Franchisor's confidential
on-line automated library and procedural help system as well as any hardcopy
operating manuals provided by Franchisor to Franchisee, containing the Trade
Secrets, including, without limitation, specifications, standards and procedures
by which the Franchisee shall conduct the Franchised Business, as amended from
time to time by Franchisor.
"PROTECTED CUSTOMER" shall mean a customer situated within the protected
territory of another franchisee of Franchisor.
"REPURCHASE FORMULA" shall mean an amount equal to the average monthly
Franchisee's Share remitted by Franchisor to Franchisee during the twelve-month
period prior to Franchisor's election, multiplied by the number of months during
which this Agreement has been in effect up to, but not more than, six (6).
"SOFTWARE" shall mean computer software used in connection with the
management and operation of the Franchised Business.
"SUCCESSIVE AGREEMENT" shall mean a franchise agreement between
Franchisor and Franchisee for the Franchised Business, commencing immediately
following the expiration of the Initial Term of this Agreement subject to the
terms of Section 4., the term of which shall be five (5) years.
"TEMPORARY EMPLOYEE EXPENSES" shall mean wages, payroll taxes, workers'
compensation insurance premiums, expenses and related charges, longevity pay,
holiday pay as described in the On-line Operating Manual, state employment
charges and taxes, any additional expenses pursuant to contractual agreements
with clients and, to the extent maintained by Franchisor, all insurance charges,
including, without limitation, liability insurance, policy premiums, policy
deductibles for covered losses or claim costs and expenses for any losses not
covered by an insurance policy attributable to temporary employees furnished by
the Franchised Business during the term of this Agreement.
"TERRITORY" shall mean the protected geographic area, described in or
identified by the map attached as Exhibit "B" to this Agreement and incorporated
herein by this reference, within which the license granted under this Agreement
is exclusive to the Franchisee.
"TRADE SECRETS" shall mean all customer lists, sales and promotional
information, employee lists, financial information furnished or disclosed to
Franchisee by Franchisor, the Software, the On-line Operating Manual, and other
information with respect to Franchisor, the Remedy System, customers of
Franchisor (i) of which Franchisee becomes aware as a result of its franchise
relationship with Franchisor, (ii) which has actual or potential economic value
to Franchisor from it not being generally known to other persons who could
4
14
obtain economic value from its disclosure or use, and (iii) which is the subject
of reasonable efforts by Franchisor to maintain its secrecy or confidentiality,
whether assembled and compiled by Franchisee or produced and provided by
Franchisor, and the physical embodiments of such information, all of which are
the confidential and trade secret property of Franchisor.
2. GRANT OF FRANCHISE.
Franchisor hereby grants to Franchisee, and Franchisee accepts, subject
to and in accordance with the terms and conditions of this Agreement, the
Franchised Business.
3. TERRITORIAL RIGHTS.
3.1. LOCATION. Franchisee shall conduct the Franchised Business from the
Location and such other address(es) as Franchisor shall approve in writing. If,
as of the Effective Date, the Location has not yet been selected, Franchisee
shall select the Location, subject to Franchisor's written approval. If any
Location is leased to the Franchisee, all such leases must be fully assignable,
and Franchisee shall provide copies of all such executed leases to Franchisor.
Franchisee shall commence operations at the Location within ninety (90) days
after the date of this Agreement.
3.2. TERRITORY. Except as provided in Sections 3.4.1. and 14.2., so long
as Franchisee is in full compliance with the terms and conditions of this
Agreement, Franchisor shall not itself conduct or grant to any other person the
right to conduct a Remedy franchise or license from a location within the
Territory.
3.3. RESTRICTIONS. Franchisee's license is limited to the Territory.
Franchisee shall not sell the services provided by the Franchisee through the
Franchised Business to customers situated in the protected territory of another
franchisee of the Franchisor. Franchisee shall not provide the services provided
by the Franchisee through the Franchised Business to customers situated in an
unlicensed geographic area absent prior written authorization from Franchisor.
If Franchisee provides its services to any customer situated in an
unlicensed geographic area which subsequently becomes a Protected Customer of
another franchisee of Franchisor or, if for any other reason, Franchisee shall
sell the services provided through the Franchised Business to a Protected
Customer of another franchisee of Franchisor, upon being notified thereof,
Franchisee shall immediately relinquish all sales and service rights associated
with such customer to the Appropriate Franchisee for such Protected Customer.
5
15
3.3.1. RELINQUISHMENT PROCEDURES. In the event of an
encroachment on a protected territory as set forth in this Section 3.3.,
Franchisee shall:
(i) Coordinate the substitution of temporary employees
by the Appropriate Franchisee for those placed with
the Protected Customer by Franchisee in such a
manner as to minimize the impact of the
substitution on the Protected Customer; and
(ii) Within five (5) days of becoming aware of the
encroachment, and prior to the substitution, (a)
notify the Protected Customer that further requests
for Remedy temporary staffing services should be
directed to the Appropriate Franchisee and (b)
provide the Protected Customer with a schedule for
substitution of temporary employees.
3.4. RESERVED RIGHTS.
3.4.1. FRANCHISOR'S RESERVED RIGHTS. Franchisor reserves all
rights not expressly granted to Franchisee hereunder. Without limiting
the generality of the foregoing, Franchisor reserves the right, without
geographic or other limitation, to:
(i) Own and operate temporary and regular employment
service businesses offering services similar to
those provided by the Franchised Business,
including Non-▇▇▇▇ Businesses situated within the
Territory, and grant franchises to own and
operate same;
(ii) Acquire and operate pre-existing personnel
companies as Non-▇▇▇▇ Businesses and grant
franchises to own and operate same;
(iii) Provide billing, collecting, payroll, accounting
services and financing of receivables to other
firms; and
(iv) Negotiate and enter into contracts with National
Account Customers to provide services offered by
the Franchised Business and require Franchisee to
service National Account Customer locations
within the Territory on the terms negotiated.
3.4.2. FRANCHISEE'S RESERVED RIGHTS. Provided Franchisee is not
in material default or breach of this Franchise Agreement, Franchisee
reserves a 30-day right of first refusal with respect to any Non-▇▇▇▇
Business franchise offered by the Franchisor within the Territory,
conditioned upon fulfillment, to Franchisor's satisfaction, of
franchisee qualification criteria established by Franchisor, in its sole
discretion, for such Non-▇▇▇▇ Business franchise.
4. TERM AND RENEWAL.
4.1. INITIAL TERM. The Initial Term shall commence on the Effective
Date.
6
16
4.2. SUCCESSIVE TERMS - FRANCHISEE'S OPTION. Subject to the conditions
of this Section 4., so long as the Franchisee has complied with this Agreement
and is in full compliance with this Agreement to Franchisor's satisfaction when
the Initial Term expires, and contingent upon the Franchisee's execution of
general releases, in form satisfactory to Franchisor, of all claims against
Franchisor and its officers, directors, employees and agents, Franchisee shall
have the option to enter into a Successive Agreement. The terms of the
Successive Agreement, including, without limitation, the levels of Continuing
Fees and other fees, shall be the same as the terms set forth in Franchisor's
then-standard form of franchise agreement for a new franchise of the type
granted hereunder, except that, under the Successive Agreement, no initial or
renewal franchise fee shall be charged the Franchisee. Franchisor shall have the
right to charge Franchisee for services that Franchisor renders to Franchisee or
expenses that Franchisor incurs in connection with such Successive Agreement.
4.3. SUCCESSIVE TERMS - PROCEDURES. Franchisee shall notify Franchisor
in writing of its desire to enter into a Successive Agreement no earlier than
three hundred sixty (360) days and no later than one hundred eighty (180) days
prior to the expiration of the Initial Term. Time is of the essence.
Franchisee's failure to provide such written notice within the specified time
limitations shall constitute Franchisee's election not to enter into a
Successive Agreement. In the event any law applicable to such Successive
Agreement shall require additional notice, this Agreement shall be deemed
amended to conform with the minimum requirement of such law and, until such
additional notice has been given, this Agreement shall remain in effect on a
month-to-month basis.
4.3.1. FRANCHISOR'S RESPONSIBILITIES. Upon receipt of
Franchisee's notice, Franchisor shall determine whether Franchisee has
complied and is in compliance with this Agreement to Franchisor's
satisfaction. If so, Franchisor shall then deliver to Franchisee (i) a
form Successive Agreement; (ii) general release forms; and (iii) any
ancillary agreements and documents then customarily used by Franchisor
in the grant of franchises of the type described in this Agreement. Each
of these agreements shall be modified, as necessary, to conform to
Section 4.2. hereof.
4.3.2. FRANCHISEE'S RESPONSIBILITIES. Franchisee shall execute
the agreements and releases described in Section 4.3.1. and return the
executed documents to the Franchisor within thirty (30) days of
Franchisee's receipt thereof. Franchisee's failure to execute and return
the agreements and releases shall constitute Franchisee's election not
to enter into a Successive Agreement.
4.4. NO SUCCESSIVE AGREEMENT. In the event that a Successive Agreement
is not entered into and the Franchised Business is not transferred to a third
party pursuant to the terms of this Agreement, Franchisee shall, for a period of
time beginning at least thirty (30) days prior to and ending thirty (30) days
after the expiration of this Agreement, prepare, assist and cooperate with
Franchisor (in such manner determined by Franchisor) in the: (i) collection of
all accounts receivable due to Franchisor; (ii) transition of all temporary
7
17
employees; and (iii) the orderly transition of clients of the Franchised
Business to Franchisor, a franchisee of Franchisor, or designee of Franchisor.
5. FEES.
5.1. INITIAL FRANCHISE FEE. Upon execution of this Agreement, Franchisee
shall pay Franchisor an Initial Franchise Fee.
5.2. CONTINUING FEES, UNCOLLECTIBLES, COLLECTION EXPENSES. Following the
end of each Accounting Period, Franchisee's Share shall be calculated by
deducting from Gross Margin the following amounts:
(i) the Continuing Fees;
(ii) Franchisee's pro-rata share of all receivables declared
uncollectible during the Accounting Period;
(iii) Franchisee's pro-rata share of all legal and other
out-of-pocket collection expenses incurred by Franchisor
related to Franchised Business ▇▇▇▇▇▇▇▇;
(iv) to the extent that receivables remain uncollected beyond
one hundred twenty (120) days after the invoice date,
interest on Franchisee's pro-rata share of such
receivables up until the time they are either collected or
deemed uncollectible by Franchisor (at a monthly interest
rate of the lesser of one and one-half percent (1.5%) or
the maximum rate allowable by law); and
(v) at Franchisor's discretion, any other amounts owed by
Franchisee to Franchisor or any of its Affiliates.
To the extent that any payments are received during the Accounting
Period on account of receivables previously deemed uncollectible, Franchisee's
Share shall be increased accordingly.
5.3. PAYMENT OF FRANCHISEE'S SHARE. As long as this Agreement remains in
effect and Franchisee is not in default hereunder, Franchisor will pay to
Franchisee Franchisee's Share within fifteen (15) days after the end of each
Accounting Period.
5.4. LATE PAYMENTS. If any amount payable by Franchisee to Franchisor or
any Affiliate of Franchisor under this Agreement or otherwise is not paid when
due, Franchisor shall be entitled, in addition to the amount due, to payment, as
liquidated damages, in an amount equal to the lesser of two percent (2%) per
month of the late payment from the date due until paid or the maximum rate
allowable under applicable law. This provision is neither an agreement by
Franchisor to accept any late payment nor a commitment by Franchisor to extend
credit or otherwise finance any aspect of the Franchised Business, and shall not
be construed as such.
8
18
5.5. APPLICATION OF PAYMENTS. Franchisor shall have the right to apply
any payment(s) received from Franchisee to any amount(s) owed Franchisor or
Franchisor's Affiliates by Franchisee under this Agreement or otherwise
regardless of Franchisee's designation as to application of such payment(s).
5.6. CALCULATION OF FRANCHISOR'S SHARE. Franchisor's Share shall be
calculated in accordance with the following Schedule of Total Temporary Employee
Hours Billed:
9
19
Schedule of Total
Temporary Employee Hours Billed Per Contract Year
-------------------------------------------------
Less Than Percentage
Greater or of
Than and Equal To Gross Margin
---------- ------- ------------------ ---------------
0 100,000 hours 40.0%
100,000 200,000 hours 39.0%
200,000 500,000 hours 37.0%
500,000 35.0%
5.7. DETERMINATION OF GROSS MARGIN. The percentage of Gross Margin to be
used to calculate Franchisor's Share at the end of each Accounting Period shall
be determined according to Section 5.6. by applying the sum of (1) the total
number of temporary employee hours billed during that Accounting Period; plus
(2) the total number of temporary employee hours billed during all previous
Accounting Periods (if any) during the same Contract Year; plus (3) the total
number of temporary employee hours billed during the immediately preceding
Contract Year (if any).
5.8. AGGREGATION OF HOURS OF OTHER BUSINESSES. The cumulative number of
temporary employee hours billed for purposes of this Section shall be the
aggregate of such hours for the Franchised Business and other Remedy Temporary
Services businesses owned by Franchisee, if any, for which one of the following
conditions are satisfied: (1) the protected territory of each other Remedy
Temporary Services businesses is contiguous with the Territory; or (2) if
Franchisee is a partnership or a corporation, all of the shareholders or
partners, as applicable, of such other franchises must constitute all of the
shareholders or partners of Franchisee under this Agreement.
5.9. ALLOCATION OF TEMPORARY EMPLOYEE EXPENSES. Franchisee understands
and agrees that Franchisor may (but shall not be obligated to) maintain a
blanket policy of workers' compensation insurance covering temporary employees
furnished by the Franchised Business and temporary employees furnished by other
Remedy Temporary Services businesses. Franchisor shall have the right to
allocate to Franchisee a portion of the premiums for such insurance in
Franchisor's sole, good faith discretion based on the workers' compensation
claims experience of temporary employees furnished by the Franchised Business
during the term of this Agreement in relation to workers' compensation claims
experience of temporary employees furnished by other Remedy Temporary Services
businesses covered by such blanket policy of insurance. Franchisor may similarly
allocate state unemployment insurance premiums in its sole, good faith
discretion based on unemployment claim experience of temporary employees
furnished by the Franchised
10
20
Business during the term of this Agreement in relation to such claims from other
Remedy Temporary Services businesses in the state in which the Territory is
situated.
6. COMMENCEMENT AS A REMEDY FRANCHISEE.
6.1. TIME LIMITATIONS. Within ninety (90) days after the Effective Date,
Franchisee shall:
(i) Furnish and equip office space and facilities for the
Franchised Business which satisfy Franchisor's
specifications;
(ii) Cause staff who will perform tasks in connection with the
Franchised Business to satisfactorily complete the initial
training program described in Section 7. hereof;
(iii) Obtain all required licenses, insurance policies; and
(iv) Take all other actions necessary to commence operating the
Franchised Business.
6.2. FRANCHISOR'S APPROVAL TO COMMENCE OPERATIONS. Franchisee shall not
conduct the Franchised Business or otherwise operate as a Remedy franchise until
Franchisee has complied with Sections 6. and 7. of this Agreement to
Franchisor's satisfaction.
7. TRAINING.
7.1. INITIAL TRAINING. Franchisor shall furnish for the Franchisee and
Manager, an initial ten (10) day training program covering topics in the
management of the Franchised Business which may include, but are not limited to,
the sales, service and operations of a franchised office. Additional employees
of Franchisee may be provided training at no charge to Franchisee; however, such
training shall be provided based upon space availability at regularly scheduled
training programs. Franchisee shall be responsible for all personal and employee
salaries, other compensation, expenses and other costs, including but not
limited to, travel and living expenses associated with attendance or
participation in the initial training program.
7.1.1. TRAINING. The training shall include extensive classes in
all aspects of the Franchised Business at the Franchisor's corporate
headquarters located in Aliso Viejo, California, or such other place or
additional places as may be designated by the Franchisor.
7.2. COMPLETION OF TRAINING; ADDITIONAL EVALUATION. Franchisee and
Manager shall, as a condition subsequent to this Agreement, complete
Franchisor's training program to Franchisor's sole subjective satisfaction,
exercised in good faith. During the initial training program, Franchisor shall
have the right to evaluate Franchisee's and Manager's fitness to operate the
Franchised
11
21
Business. The parties hereby expressly recognize and acknowledge that only the
Franchisor is capable of making this judgment due to its unique experience and
knowledge of the business methods involved in the operations of the Franchised
Business.
7.3. FAILURE TO COMPLETE TRAINING/EVALUATION. Upon Franchisor's good
faith determination that Franchisee lacks fitness to operate as a franchisee, or
has failed to satisfactorily complete the training program, Franchisor shall
provide written notice of such determination to Franchisee and Franchisor may,
in its sole discretion elect to terminate this Agreement by repurchasing the
Franchise from the Franchisee for the Initial Franchise Fee less the
non-refundable training fee of Five Thousand Dollars ($5,000.00).
7.4. NATIONAL BUSINESS CONFERENCE. Franchisor, at its sole discretion,
may sponsor a National Business Conference and may require the attendance of the
Franchisee and/or the Manager. The National Business Conference will be designed
to provide further training, provide information and facilitate discussions, on
topics of interest to franchisees and will be of a one (1) to four (4) day
duration. Franchisee shall be responsible for all personal and employee salaries
and other compensation, and other costs and expenses, including, but not limited
to, travel and living expenses, in connection with attendance at or
participation in such National Business Conference.
8. EMPLOYMENT, BILLING, COLLECTION AND PAYMENT OF
TEMPORARY EMPLOYEE EXPENSES.
8.1. FRANCHISOR'S OBLIGATIONS.
8.1.1. EMPLOYMENT OF TEMPORARY EMPLOYEES. Temporary employees
provided by the Franchised Business shall be employees of the Franchisor
and Franchisor shall pay all Temporary Employee Expenses.
8.1.2. ▇▇▇▇▇▇▇▇ AND COLLECTIONS. Franchisor shall ▇▇▇▇ customers
for all regular and temporary placement services provided by the
Franchised Business and shall collect all payments made by customers for
all regular and temporary employee placement services provided by the
Franchised Business (including liquidation fees paid for temporary
employees hired on a regular basis by a customer). Franchisor shall
endeavor in good faith to collect all ▇▇▇▇▇▇▇▇ made by Franchisor to
customers of Franchisee and, in performing such work, shall apply
substantially the same collection procedures and policies employed by
Franchisor with its own customers. The payments and accounts receivable
that arise from all regular and temporary employee placement services
provided by the Franchised Business shall be property of Franchisor.
12
22
8.2. FRANCHISEE'S OBLIGATIONS.
8.2.1. TEMPORARY EMPLOYEES. Franchisee shall exercise its best
efforts to recruit, screen, interview, test, hire, train, indoctrinate,
assign, place and dispatch temporary employees on behalf of Franchisor
in strict compliance with all applicable local, state, and federal law,
including, without limitation, all laws related to employment
discrimination. Prior to placement of any temporary employee through the
Franchised Business, Franchisee shall obtain from such temporary
employee a current application for employment in a form satisfactory to
Franchisor. Franchisee shall maintain the original application in its
files in accordance with retention policies as may be prescribed by
Franchisor from time to time and shall promptly provide Franchisor with
a copy of such application on request.
8.2.2. CREDIT POLICIES. Franchisee shall adhere to all credit
policies and practices that may be recommended by Franchisor from time
to time. Franchisor reserves the right to review the creditworthiness of
any new client and to set credit limitations for clients. Franchisee
shall not provide services to clients deemed uncreditworthy or clients
whose accounts Franchisor has deemed delinquent and shall not extend
credit to any client in any amount exceeding the credit limits set by
Franchisor for such client. In the event that Franchisor incurs
collection expenses or any other losses or deems any receivables
uncollectible in connection with any client or account for which
Franchisee has failed to adhere to Franchisor's credit policies and
practices, Franchisor shall be entitled to deduct all such expenses,
losses or uncollectibles in calculating Franchisee's Share pursuant to
Section 5.2.1.
8.2.3. WORKERS' COMPENSATION RISK POLICIES. Franchisee shall
adhere to all workers' compensation risk minimization policies that may
be recommended by Franchisor from time to time. Franchisee shall
investigate the nature of work for which temporary employees are
provided and shall refrain from providing temporary employees to any
client which, in Franchisor's opinion, involves an excessive risk of
workers' compensation claims.
8.2.4. TRANSMITTAL OF PAYMENTS. Franchisee shall immediately
forward to Franchisor, without any deduction of any kind, any payment
received by Franchisee from customers on account of ▇▇▇▇▇▇▇▇ made by
Franchisor.
8.3. NATURE OF COLLECTIONS RELATIONSHIP. Franchisor shall endeavor in
good faith to collect all ▇▇▇▇▇▇▇▇ made by Franchisor for accounts of
Franchisee, but Franchisor is not an agent, legal representative, joint
venturer, partner, employee or servant of Franchisee and shall not be a
fiduciary of Franchisee by reason of the billing and collection arrangements
described in this Agreement. Franchisor shall not be obligated to commence any
legal proceeding against any customer, and shall not be responsible to
Franchisee for any uncollected receivables unless due to its gross negligence or
willful malfeasance.
13
23
9. ADDITIONAL SERVICES TO BE PROVIDED BY FRANCHISOR.
9.1. OPENING PUBLICITY. Franchisor shall provide Franchisee with
information and materials with which Franchisee shall conduct a direct mail
advertising campaign prior to and upon commencement of the Franchised Business.
9.2. MANAGEMENT ASSISTANCE. Franchisor shall provide the services of a
Franchisor representative to assist Franchisee in managing the Franchised
Business for a period of approximately five (5) days within the sixty (60) days
following commencement of operations of the Franchised Business. In order to
prevent dissemination of the Trade Secrets, absent written approval, Franchisee
is prohibited from retaining outside operations and marketing consultants, other
than legal and accounting counsel.
9.3. ADDITIONAL GUIDANCE. Franchisor, at its sole discretion, may
require Franchisee to provide operating, accounting, and other reports and may
conduct inspections or authorize its representatives to conduct inspections of
the Franchised Business operations and records. Franchisor shall review such
reports and/or inspections and, on the basis thereof, may provide guidance with
respect to (a) management and operation of the Franchised Business; (b)
advertising standards and operating procedures used by Remedy franchisees; (c)
acquisition of supplies, insurance and other products and services; (d)
administrative, bookkeeping, accounting and general operating and management
procedures; (e) employee training; (f) use of the Software; and (g) such other
matters as Franchisor deems necessary, appropriate or advisable. Franchisor may
furnish guidance through Franchisor's confidential On-line Operating Manual,
bulletins, written correspondence, meetings, or personal consultations with
Franchisee. Upon Franchisee's reasonable request, Franchisor may furnish
additional guidance with respect to the operation of the Franchised Business.
9.4. ACQUISITION OF GOODS AND SERVICES. Franchisor shall assist
Franchisee in identifying sources of certain goods and/or services that
Franchisee may use in connection with the operation of the Franchised Business.
9.5. ON-LINE OPERATING MANUAL.
9.5.1. CONFIDENTIAL NATURE. Whereas, Franchisor's confidential
On-line Operating Manual contains Trade Secrets related to the operation
of Franchisor's business, the Franchised Business, and other Remedy
franchisees, Franchisee is strictly prohibited from disclosing the
On-line Operating Manual or any part thereof to any person or entity
other than Franchisee's employees without Franchisor's prior express
written consent. Any such disclosure shall be deemed to constitute a
material breach of this Agreement and shall constitute just cause for
termination of this Agreement by the Franchisor pursuant to Section
23.2. of this Agreement.
9.5.2. CONTENTS. The On-line Operating Manual contains mandatory
specifications, standards and operating procedures prescribed from time
to time by Franchisor for Remedy franchisees and information concerning
other obligations of
14
24
Franchisee and the operation of the Franchised Business. The On-line
Operating Manual may also contain recommended specifications, standards
and procedures.
9.5.3. MODIFICATION BY FRANCHISOR. Franchisor shall have the
right, in its sole discretion, to modify the On-line Operating Manual
from time to time to reflect changes in the various attributes
associated with or constituting part of the Remedy System including,
without limitation, image, methods, standards, specifications and
procedures.
9.5.4. STRICT COMPLIANCE BY FRANCHISEE. Franchisee expressly
agrees to conduct the Franchised Business in strict compliance with the
specifications, standards and operating procedures established by
Franchisor and incorporated in the On-line Operating Manual, as modified
by Franchisor from time to time.
10. MARKS.
10.1. OWNERSHIP. Franchisee's license to use the Marks derives only from
this Agreement. This Agreement confers no goodwill or other interest in the
Marks other than the non-exclusive right to use them in connection with the
Franchised Business for the duration of this Agreement. Franchisee acknowledges
and agrees that all goodwill resulting from Franchisee's use of the Marks shall
inure exclusively to Franchisor's benefit. Franchisee shall not sub-franchise,
sub-license or otherwise authorize any other person to use the Marks, except in
connection with the use of training materials by clients of the Franchised
Business as expressly permitted in the Operating Manual. In the event that
Franchisor authorizes and licenses Franchisee to use additional proprietary
trade and service marks or commercial symbols from time to time during the
duration of this Agreement, all provisions of this Agreement which apply to the
Marks shall apply equally to all such additional marks and symbols.
10.2. USE. Franchisee shall only use the Marks to identify the
Franchised Business. Franchisee shall prominently display the Marks on
stationery, invoices, packaging and supply materials and in connection with
advertising and marketing of the Franchised Business pursuant to the
specifications, standards and operating procedures set forth in the On-line
Operating Manual.
In order to protect the goodwill and reputation associated with
the Marks, Franchisee further covenants and agrees as follows:
(a) A reasonable number of samples of all uses of the Marks shall
be submitted to Franchisor for its review at any time upon Franchisor's
reasonable request therefor.
(b) Franchisee's use of the Marks shall not reflect adversely
upon the good name of Franchisor or upon the goodwill and reputation associated
with the Marks.
15
25
(c) Franchisee acknowledges that the goodwill of the Marks is
dependent on satisfactory customer service. Therefore, Franchisee agrees to use
all commercially reasonable efforts to provide customer service at all locations
of the Franchised Business at a level of quality commensurate with that
presently provided at other Franchisor locations.
10.3. PROHIBITED USES. Franchisee shall not use the Marks as part of any
corporate or trade name or with any prefix, suffix, or modifying words, terms,
designs, or symbols other than logos authorized for use by Franchisee under this
Agreement. Franchisee shall not use the Marks in any modified form, in
connection with performance of any unauthorized services, or in any other
manner, unless expressly authorized in writing by Franchisor. Franchisee shall
not use any of the Marks in signing any contract, check, purchase agreement,
negotiable instrument or other legal obligation, application for any license or
permit, or in any manner that may result in liability of Franchisor for any debt
or obligation of Franchisee whatsoever.
10.4. NOTICES. Franchisee shall give such notices of trade and service
▇▇▇▇ registrations as Franchisor specifies. Franchisee shall obtain such
fictitious or assumed name registrations as applicable law requires and shall
file statements of abandonment of use of such fictitious or assumed names as
applicable law requires or when it becomes appropriate to do so. Franchisee
shall immediately notify Franchisor of any apparent infringement of or challenge
to Franchisee's use of the Marks, or claim by any person of any rights in the
Marks, and Franchisee shall not communicate with any person other than
Franchisor and Franchisor's counsel in connection with any such infringement,
challenge, or claim.
10.5. CONTROL OF PROCEEDINGS. Whereas the license to the Marks granted
under this Agreement is non-exclusive, Franchisor retains sole discretion to
take or refrain from taking any action in connection with any possible or actual
infringement, challenge or claim described in this Section 10. Franchisor
retains the exclusive right to control any litigation, Patent and Trademark
Office or other proceeding that in any way relates to any of the Marks.
10.6. DISCONTINUANCE OF USE. In the event that Franchisor determines
that Franchisor and/or Franchisee should modify or discontinue use of any or all
of the Marks, and/or use one or more additional or substitute trade or service
marks, Franchisee shall comply with Franchisor's directions to modify or
otherwise discontinue use of such Marks within such reasonable time and pursuant
to such directions that Franchisor specifies to Franchisee in writing.
Franchisor shall have no obligation to compensate Franchisee for any costs that
Franchisee incurs in connection with any such modification or discontinuance.
10.7. INDEMNIFICATION. So long as Franchisee's use of the Marks complies
with the terms of this Agreement, including, without limitation, this Section
10. and the On-line Operating Manual, Franchisor shall indemnify Franchisee
against and reimburse Franchisee for all damages for which Franchisee is held
liable in any proceeding arising from Franchisee's use of the Marks and for all
costs that Franchisee reasonably incurs in defense of any such claim against
Franchisee or in any such proceeding in which Franchisee is named as
16
26
a party, provided Franchisor receives timely written notice of any such claim
from Franchisee, has the right to fully control the defense of any such claim
and receives Franchisee's full cooperation in such defense.
11. RELATIONS.
11.1. NATURE OF RELATIONSHIP. Franchisor and Franchisee are independent
businesses and/or businesspersons, have dealt at arm's length in entering into
this Agreement, and will continue to deal at arms length as independent
contractors for the duration of this Agreement. Franchisor and Franchisee shall
have no agency, joint venture, employer-employee, partnership, fiduciary, or
other special relationship.
11.2. IDENTIFICATION. In all transactions with clients, patrons,
suppliers, public officials and Franchisee's employees and colleagues,
Franchisee shall conspicuously identify itself as the operator of the Franchised
Business under a franchise from Franchisor. Franchisee shall place such other
notices of independent ownership on forms, business cards, stationery,
advertising and other materials as Franchisor may from time to time require.
11.3. OBLIGATIONS. Except as this Agreement expressly authorizes,
neither Franchisee nor Franchisor shall make any express or implied agreement,
warranty, guaranty or representation or incur any debt, in the name of or on
behalf of the other. Neither Franchisee nor Franchisor shall represent that
their relationship is other than that of independent contractors or Franchisor
and Franchisee. Neither Franchisee nor Franchisor shall have any obligation or
liability under any agreement, representation, or warranty made by the other
that is not expressly authorized by this Agreement. Franchisor shall have no
obligation for any damages to any person or party that arises directly or
indirectly from the Franchised Business whether caused by Franchisee's negligent
or willful action or failure to act. Franchisor shall have no liability for any
sales, use, occupation, excise, gross receipts, income, property, license, or
other fees or taxes, whether levied upon Franchisee, the Franchised Business, or
Franchisee's property, or upon Franchisor, in connection with services rendered
or activities or business conducted by Franchisee or payments to Franchisor
pursuant to this Agreement.
12. INDEMNIFICATION.
Franchisee shall indemnify and hold Franchisor, and Franchisor's
shareholders, directors, officers, employees, agents, attorneys, successors in
interest and assignees harmless against and promptly reimburse them for, any and
all loss, damages, liability and attorneys' fees and other costs and expenses
incurred by any of them as a result of any violation of this Agreement by, or
any act of omission or commission on the part of Franchisee, or any of its
agents, servants or employees, and from all claims demands losses, costs,
damages (including consequential and punitive damages), suits, judgments,
penalties, expenses and liabilities of any kind or nature whatsoever arising
directly or indirectly out of or in connection with the Franchised Business as a
result of any such violation or act of
17
27
omission or commission by franchisee, or any of its agents, servants, or
employees. Franchisor shall have the right to defend any such claim against
Franchisor at Franchisee's expense. This indemnity shall continue in full force
and effect after and regardless of this Agreement's expiration or termination.
13. TRADE SECRETS.
Franchisee agrees that all Trade Secrets are and will remain the
confidential and trade secret property of Franchisor. Upon expiration or
termination of this Agreement for any reason, and as a condition precedent to
receiving payment of any sums due from Franchisor upon such expiration or
termination, Franchisee shall immediately return to Franchisor all material
containing Trade Secrets.
13.1. LIMITS ON USE. Franchisee acknowledges and agrees that ownership
of all right, title and interest in the Trade Secrets are and shall remain
vested solely in Franchisor and Franchisee disclaims any right or interest
therein or the goodwill derived therefrom. Franchisee shall acquire no interest
in the Trade Secrets other than the right to use them in developing and
conducting the Franchised Business during this Agreement's term. Franchisee
shall not challenge or contest the right, title or interest of Franchisor in and
to the Trade Secrets. Franchisee's duplication or use of the Trade Secrets in
any other endeavor or business shall constitute an unfair method of competition.
Franchisee shall:
(i) not use the Trade Secrets in any business or other
endeavor other than in connection with the Franchised
Business;
(ii) maintain absolute confidentiality of the Trade Secrets
during and after this Agreement's term;
(iii) make no unauthorized copy of any portion of the Trade
Secrets, including, without limitation, the On-line
Operating Manual, bulletins, supplements, confidential
correspondence, or other confidential communications,
whether written or oral; and
(iv) implement, maintain, and diligently utilize all reasonable
procedures prescribed from time to time by Franchisor to
prevent unauthorized use and disclosure of the Trade
Secrets, including, without limitation, restrictions on
disclosure to employees and use of non-disclosure and
non-competition provisions as Franchisor prescribes in
employment agreements with employees who may have access
to the Trade Secrets. Promptly upon Franchisor's request,
Franchisee shall deliver executed copies of such
agreements to Franchisor.
13.2. NONCOMPETITION.
13.2.1. FRANCHISEE'S COVENANT NOT TO COMPETE DURING TERM OF
AGREEMENT. Franchisee recognizes that Franchisor's Trade Secrets are the
underpinning of Franchisor's business, and protection of the Trade
Secrets is a matter of critical importance to Franchisor, and Franchisee
acknowledges Franchisor's need to protect the Trade Secrets against
unauthorized use or disclosure as well as
18
28
Franchisor's simultaneous need to encourage free exchange of ideas and
information among Remedy franchisees. Franchisee agrees that neither
Franchisee, nor, as applicable, any shareholder who owns more than three
percent (3%) of the outstanding capital stock of Franchisee, nor any
general partner, director, officer, manager nor other key employee of
Franchisee, nor the spouse or immediate family member of any such person
shall directly or indirectly conduct or hold an ownership interest,
directly or indirectly, in any temporary employment service, regular
employment service, or other similar competing business or program, or
any entity that grants franchises or licenses to others to conduct or
operate similar or competing systems or businesses during the term of
this Agreement. Accordingly, Franchisee shall have all applicable
persons execute the Nondisclosure and Non-Competition Agreement attached
hereto as Exhibit E. Franchisee's promise to deal exclusively with
Franchisor is a significant element of the consideration for which
Franchisor grants the rights in this Agreement and Franchisor has
entered into this Agreement in reliance upon such promise.
13.2.2. SOLICITATION OF CUSTOMERS. Franchisee shall not, without
the prior written consent of Franchisor, within the Territory, either
directly or indirectly, on its own behalf or in the service or on behalf
of others, solicit, divert or appropriate to any competing business, any
person or entity which is, or was at any time during the preceding two
(2) year period, a customer of the Franchised Business.
13.2.3. SOLICITATION OF EMPLOYEES. Franchisee shall not, either
directly or indirectly, on its own behalf or on the behalf of others,
solicit, divert or hire away, or attempt to solicit, divert or hire
away, to any competing business, any person employed by Franchisor,
whether or not such employee is a full-time or temporary employee of
Franchisor, whether or not such employment was pursuant to a written
agreement and whether or not such employment was for a determined period
or was at will; nor will Franchisee solicit, divert or hire away or
attempt to solicit, divert or hire away to the Franchised Business or
any competing business any such employee of any licensee or franchisee
of Franchisor, without the prior written consent of such licensee or
franchisee of Franchisor.
13.2.4. EMPLOYEES' COVENANTS NOT TO COMPETE. Franchisee shall
obtain from each of its employees within five (5) days after the date of
this Agreement, or the date of employment of each employee, whichever is
later, covenants and agreements not to compete, in form and substance
satisfactory to Franchisor. Such covenants and agreements shall be for
the benefit of and enforceable by Franchisor against the employee. In
the event that Franchisee becomes aware of any actual or threatened
violation of any such covenants and agreements by any of its employees,
Franchisee shall promptly and fully advise Franchisor in writing of all
related facts known to Franchisee. Franchisee may take action to prevent
or stop any such violation as it deems appropriate, at its own expense,
except that, it may not waive its rights or give any release without the
express written consent of Franchisor. Franchisor may request that
Franchisee take action or may take action itself to
19
29
prevent or stop any such violation. Franchisee will cooperate with
Franchisor in all ways reasonably requested by Franchisor to prevent or
stop any such violation, including, without limitation, instituting or
permitting to be instituted in the name of Franchisee any demand, suit
or action which Franchisor determines to be necessary or appropriate. If
Franchisor makes any such demand, the suit or action will be maintained
and prosecuted at the expense of Franchisor unless otherwise agreed.
13.2.5. FRANCHISEE'S COVENANT NOT TO COMPETE FOLLOWING
TERMINATION. Upon expiration or termination of this Agreement for any
reason, Franchisee and, as applicable, its partners and its shareholders
shall not, for a period of two (2) years thereafter, have any interest
as an owner, manager, employee, operator or consultant or in any other
capacity in any business, venture, program or enterprise the primary
function of which is to provide temporary or permanent employee
placement within the Territory or within fifty (50) miles of the
Territory.
13.2.6. EXCEPTIONS.
13.2.6.1. PRIOR AUTHORIZATION UNDER SEPARATE AGREEMENT.
The foregoing restrictions shall not prohibit Franchisor from
entering into a separate written agreement prior to entering
into this Agreement whereby Franchisee may be permitted to
continue to own and operate such business during the term of
this Agreement or following the expiration or termination of
this Agreement; provided, however, that Franchisee shall in no
event provide permanent placement services for any temporary
services employee of the Franchisor through any permanent
employment placement service so authorized.
13.2.6.2. PUBLICLY-TRADED STOCK. The restrictions in
this Section 13.2. shall not apply to ownership of securities
traded on a nationally recognized stock exchange that constitute
less than three percent (3%) of the shares of the class of
securities issued and outstanding, or to the conduct of other
franchised businesses pursuant to franchise agreements with
Franchisor.
14. MINIMUM PERFORMANCE STANDARDS AND
OFFICE DEVELOPMENT REQUIREMENTS+.
14.1. MINIMUM GROSS ▇▇▇▇▇▇▇▇. During each year during the term of this
Agreement, Franchisee's average Gross Billable Hours shall be not less than the
Minimum Performance Standards.
14.2. REMEDIES FOR FAILURE TO SATISFY MINIMUM PERFORMANCE STANDARDS.
Franchisor shall determine Franchisee's compliance with the Minimum Performance
Standards within sixty (60) days after each anniversary date of this Agreement.
If Franchisee at any time fails to satisfy the Minimum Performance Standards,
Franchisor shall have the option, exercisable at any time within ten (10) months
20
30
after the end of any year in which the Minimum Performance Standards are not
satisfied, to either (a) purchase the Franchised Business by paying to
Franchisee an amount calculated in accordance with the Repurchase Formula; or
(b) itself operate a Remedy Temporary Services business within the Territory; or
(c) grant a franchise to others to do so (in which event Franchisee shall have
no right of first refusal with respect thereto). Franchisor shall exercise its
option by providing written notice to Franchisee of its election to do so.
If Franchisor elects to purchase the Franchised Business, upon such
purchase, this Agreement shall be terminated as if terminated by Franchisor
pursuant to the provisions of Section 23. hereof. Franchisor's payment of the
Repurchase Formula amount shall be made in two (2) equal monthly installments of
principal, without interest, beginning ninety (90) days following the effective
date of such termination.
14.3 OFFICE DEVELOPMENT REQUIREMENTS. Franchisee shall open the number
of office Locations within the geographical areas specified and by the
designated time as set forth on the office development requirements attached
hereto as Exhibit D. In the event that Franchisee fails to open an office within
the geographical territory by the designated time pursuant to Exhibit D,
Franchisor shall have the right to unilaterally modify the Franchise Agreement
to eliminate such geographical area from the Territory and shall be free to
operate or license/franchise to a third party the right to operate a Remedy
franchised business within such area.
15. IMAGE AND OPERATING STANDARDS.
15.1. SERVICES. Franchisee shall offer all services designated by
Franchisor. Franchisee shall not, without Franchisor's written approval, offer
any services or products in connection with the Franchised Business that are not
authorized by Franchisor.
15.2. SPECIFICATIONS, STANDARDS AND PROCEDURES. Franchisee acknowledges
that every detail of the Franchised Business's operation, appearance, supplies
used, and services offered is critically important to Franchisor, other Remedy
franchisees, and to Franchisee's clients and customers. Absent written consent,
Franchisee shall devote full time to development of the Franchised Business in
accordance with Franchisor's standards. Franchisee shall comply with all
mandatory specifications, standards and operating procedures, regardless of
whether these appear in the On-line Operating Manual, or are communicated to
Franchisee in writing or by other means, relating, without limitation, to:
(i) conduct of Franchisee's employees;
(ii) appearance and decor and standards of services and conduct
of the Franchised Business;
(iii) signage and advertising;
(iv) equipment;
(v) supplies and suppliers;
(vi) computer hardware and software systems; and
(vii) days and hours during which the Franchised Business will
operate, receive personnel and telephone calls, and be
open to provide service to clients.
21
31
15.3. COMPLIANCE WITH LAWS. Franchisee shall conduct the Franchised
Business in compliance with all applicable laws, ordinances and regulations,
including, without limitation, all laws and regulations relating to insurance,
unemployment insurance and withholding and payment of federal, state and local
income taxes. Franchisee shall obtain and maintain in Franchisee's name all
required licenses, permits and certificates relating to the conduct of the
Franchised Business. Upon Franchisor's request, Franchisee shall immediately
transmit copies of each such license, permit and certificate to Franchisor.
15.4. REPORTS. Within five (5) days after receiving any report or notice
from any government agency or department, or from any licensing organization,
Franchisee shall deliver to Franchisor a complete copy of such report or notice.
15.5. ACTIONS. Franchisee shall notify Franchisor in writing, as soon as
possible, but not later than five (5) days after commencement of any action,
suit or proceeding against the Franchisee or the Franchised Business, or after
issuance of any order, writ, injunction, award or decree of any court or
government agency concerning the Franchisee or the Franchised Business.
15.6. BUSINESS RELATIONS - PROFESSIONAL CONDUCT. In all dealings with
clients and customers, suppliers, Franchisor, Franchisee's own employees and all
others, Franchisee shall adhere to the highest standards of ethical and
professional conduct, honesty, integrity, good faith and fair dealing.
Franchisee shall use its best efforts to develop, maintain and promote the
Franchised Business and its public image. Franchisee shall refrain from any
business practice that Franchisor determines may injure Franchisor's business,
other franchisees of Franchisor or the goodwill associated with the Marks.
15.7. HIRING, TRAINING AND CONDUCT OF EMPLOYEES. Franchisee shall have
exclusive responsibility for all obligations that arise from employment and
compensation of Franchisee's employees and, except as set forth in Section 7.,
for the proper training of employees in the operation of the Franchised
Business. Franchisee shall require all employees to conduct themselves at all
times in a professional and courteous manner.
16. INSURANCE.
16.1. POLICIES. During this Agreement's term, Franchisee shall, at its
sole cost and expense, maintain insurance policies issued by carriers with an
A.M. Best rating of "A: Class X," or better, and in forms satisfactory to
Franchisor, covering the risks enumerated and in at least the amounts of
coverage specified in the On-line Operating Manual. Franchisor, in its sole
discretion, may from time to time increase or decrease the amounts of coverage
required under such insurance policies. Franchisor may from time to time require
different or additional kinds of insurance, such as excess liability insurance,
to reflect
22
32
inflation, identification of new risks, changes in law or standards of
liability, higher damage awards or other changes in relevant circumstances.
16.2. PROOF OF COVERAGE. Franchisee shall provide evidence satisfactory
to Franchisor that such insurance policies are in force at least ten (10) days
before commencing the Franchised Business. Furthermore, Franchisee shall provide
Franchisor with copies of all required insurance policies and related documents
within ten (10) days following any request by Franchisor for such disclosure.
Franchisee shall provide Franchisor with satisfactory evidence of renewal of
required insurance policies fifteen (15) days prior to the expiration of any
such policies. Satisfactory evidence shall consist, at a minimum, of binders of
coverage or certificates of insurance including copies of required endorsements
issued by the insurance carrier or an authorized representative thereof.
23
33
16.3. ENDORSEMENTS.
16.3.1. ADDITIONAL INSURED. The Comprehensive General Liability,
Automobile Liability and Errors and Omissions (Professional Liability)
Insurance policies required under this Agreement shall be endorsed to
show Franchisor, its officers, directors, agents and employees, as
additional insureds thereunder with respect to Franchise operations
performed by or on behalf of the named insured. These endorsements shall
provide that insurance for the additional insureds shall be primary and
not contributing with any other insurance maintained by the additional
insureds.
16.3.2. CROSS-LIABILITY. The Comprehensive General Liability,
Comprehensive Automobile Liability and Errors and Omissions
(Professional Liability) policies required under this Agreement shall be
endorsed to show that each such policy applies separately to each
insured against which claim is made or suit is brought, except with
respect to the limits of the insurance company's liability.
16.3.3. WAIVER OF SUBROGATION. Franchisee's Workers'
Compensation and Errors and Omissions (Professional Liability) policies
shall be endorsed to show that the respective insurers agree to waive
all rights of subrogation against the Franchisor, its officers,
directors, agents and employees.
16.4. LOSS OF COVERAGE. The required insurance policies shall include a
provision requiring insuring companies to provide not less than thirty (30) days
written notice to Franchisor of any intent to cancel, not to renew, or to
materially alter or reduce the required insurance. Franchisee shall not alter,
reduce, cancel, or fail to renew or replace the required insurance without prior
written consent of Franchisor, which shall be at Franchisor's sole discretion
but not unreasonably withheld and which, if given, shall not waive any other
rights of Franchisor.
16.5. FAILURE TO MAINTAIN. If Franchisee fails for any reason to
maintain all required insurance policies, or to furnish evidence satisfactory to
Franchisor that such insurance policies are in force, Franchisor shall have the
option, but not the obligation, in addition to Franchisor's other rights and
remedies, to obtain insurance on Franchisee's behalf. In such circumstances
Franchisee shall cooperate with Franchisor in Franchisor's efforts to obtain and
maintain such insurance; promptly execute all forms or instruments; allow any
inspections of the Franchised Business appropriate or necessary to obtain such
insurance; and pay Franchisor on demand all costs and premiums incurred by
Franchisor.
16.6. INSURANCE PROGRAMS. Franchisor may, but is not required to,
establish programs for its franchisees, including Franchisee, for any of the
required insurance coverage. Franchisee shall enroll and maintain its
participation in any such programs, if requested to do so by Franchisor.
16.7. OBLIGATION UNCONDITIONAL. Separate insurance that Franchisor from
time to time maintains shall not effect Franchisee's obligation to maintain
insurance as
24
34
described in this Section 16. Franchisor shall have no liability for the
sufficiency of insurance that Franchisor requires Franchisee to maintain, that
Franchisor maintains on Franchisor's behalf, or that Franchisor obtains for
Franchisee pursuant to this Section 16.
17. COOPERATIVE ADVERTISING.
At such times as Franchisor deems appropriate, Franchisor may, but shall
not be obligated to, delineate or modify the boundaries of a marketing region
that encompasses the Territory for purposes of administering a cooperative
advertising program among Remedy franchisees in that region. If Franchisor
establishes any such region, Franchisee shall participate in cooperative
advertising in the same manner and to the same extent as a majority of Remedy
offices in the region elect. The size and composition of such region and any
other marketing regions delineated by Franchisor shall be binding upon
Franchisee. Each Remedy franchisee in such region shall have the right to cast
one vote for each Franchised Business operated by such franchisee in such region
and the Franchisor shall, similarly, have the right to cast one vote for each
Remedy office operated by Franchisor in such region, in all questions considered
by the members of such region.
18. LOCAL ADVERTISING BY FRANCHISEE.
18.1. REQUIRED ADVERTISING. Franchisee shall provide and maintain
suitable signs approved by Franchisor identifying the Franchised Business as a
Remedy franchise, and advertise Franchisee's offices and services in conformity
with the On-line Operating Manual. Franchisee shall secure at least one "Yellow
Page" advertisement in the primary telephone directory for the Territory, using
ad copy approved by Franchisor. Franchisee shall maintain a computerized mailing
list of the Franchised Business' clients for direct mailing purposes and shall
promptly provide a copy of such list to Franchisor upon request.
18.2. CONDUCT. Franchisee shall advertise the services offered by the
Franchised Business factually, ethically and in good taste in Franchisor's
judgment. Advertising by Franchisee shall be subject to Franchisor's approval as
provided in Section 18.3. Franchisee shall refrain from any advertising
technique or program that Franchisor determines may injure Franchisor's
business, other franchisees of Franchisor or the goodwill associated with the
Marks.
18.3. APPROVALS. Franchisee shall submit to Franchisor, before use,
samples of all local advertising materials, and descriptions of all local
advertising programs, not prepared or previously approved by Franchisor, for
Franchisor's approval. Franchisee shall not use any advertising material or
program that Franchisor disapproves. Franchisor's failure to provide Franchisee
written notice of Franchisor's decision concerning any such submission within
ten working (10) days after Franchisor receives the submission shall constitute
Franchisor's approval.
25
35
19. ACCOUNTING, REPORTS, FINANCIAL STATEMENTS.
19.1. MAINTENANCE. Franchisee shall, at Franchisee's expense, maintain
true business records and books of account at the Location according to
generally accepted accounting principles and other methods and procedures
prescribed by Franchisor. All such records shall be open to inspection and
copying by Franchisor and/or Franchisor's authorized representatives at the
Location during regular business hours or at other reasonable times requested by
Franchisor. Franchisee shall cooperate in Franchisor's inspection and copying.
Franchisee shall keep and preserve, for at least six (6) years from the dates of
their preparation, business tax returns, reports, and complete and accurate
financial records for the Franchisee's Franchised Business.
19.2. REPORTS. Franchisee shall furnish Franchisor the following items,
signed and verified by Franchisee, in the form and manner that Franchisor
prescribes from time to time:
(i) within thirty (30) days after the end of each calendar
quarter, a profit and loss statement for the preceding
calendar quarter and a year-to-date profit and loss
statement for the Franchised Business;
(ii) within ninety (90) days after the end of Franchisee's
fiscal year, a balance sheet and an annual profit and loss
statement reflecting all year-end adjustments for the
Franchised Business prepared and certified by an
independent certified public accountant;
(iii) upon request, any requested Social Security reports,
Immigration and Naturalization Service reports or forms,
state and federal unemployment reports, federal income tax
returns, state, county or city income, franchise, or other
tax returns, and other federal, state or other
governmentally mandated reports; and
(iv) such other reports as required under the On-Line Operating
Manual from time-to-time.
20. PERIODIC REVIEWS, INSPECTIONS AND AUDITS.
20.1. PERIODIC REVIEWS. From time to time, at times that Franchisor
designates, Franchisee and Manager shall meet with Franchisor's representatives
to discuss and review the Franchised Business' operations, status and financial
performance.
20.2. INSPECTIONS. To determine whether Franchisee and the Franchised
Business are complying with this Agreement and with specifications, standards
and operating procedures prescribed by Franchisor for operation of the
Franchised Business, Franchisor or Franchisor's designated agents shall have the
right at any reasonable time and without prior notice to Franchisee to:
(i) interview Franchisee and employees of the Franchised
Business;
26
36
(ii) interview the Franchised Business' clients and customers,
Franchisee's suppliers and any other person with whom
Franchisee does business;
(iii) confer with members and staff of government agencies with
authority over Franchisee about matters relevant to the
Franchised Business; and
(iv) require Franchisee to participate and/or request
Franchisee's clients and customers, Franchisee's suppliers
and any others to participate in any marketing surveys
performed by or on behalf of Franchisor.
20.3. AUDITS.
(i) Franchisor shall have the right, during regular business
hours of Franchisee and without prior notice to
Franchisee, to inspect, copy and/or audit or cause to be
inspected, copied and/or audited the business,
bookkeeping, accounting, sales tax, income tax, files, and
other records of the Franchised Business, and the books
and records of any individual, partnership or corporation
that owns the Franchised Business. Franchisee shall fully
cooperate with Franchisor's representatives or independent
certified public accountants in any such inspection or
audit.
(ii) If Franchisee's failure to maintain or furnish reports,
supporting records or other information required by this
Agreement or the On-line Operating Manual makes necessary
any such inspection or audit, Franchisee shall reimburse
Franchisor for the costs of such audit or inspection. Such
reimbursement shall include, without limitation, charges
of any independent accountants and travel expenses, room
and board and compensation of Franchisor's employees and
other agents or representatives who participate in such
inspection or audit.
(iii) The remedies in this Section 20. shall be additional to
and not in lieu of Franchisor's other remedies and rights
under this Agreement or applicable law.
21. COMPUTERIZED MANAGEMENT AND OPERATIONAL SYSTEM.
21.1. SOFTWARE LICENSE. Franchisee shall license from Franchisor the
right to use certain computer software designated by Franchisor (the "Software")
to be used in connection with the administration, management and operation of
the Franchised Business. Franchisor shall license the Software to Franchisee on
the terms and conditions pursuant to the Software License Agreement, attached
hereto as Exhibit F (the "Software License Agreement"). Franchisee shall utilize
the Software in the operation of the Franchised Business as set forth in the
On-Line Operating Manual, which may be updated by Franchisor, at its sole
discretion. Franchisee and Franchisor shall duly perform all of their respective
obligations under the Software License Agreement and a default thereunder shall
constitute a default under this Agreement. The term of the Software License
Agreement shall be the
27
37
same as the term of this Agreement. In the event of an assignment of this
Agreement pursuant to Section 22. below, the Software License Agreement shall be
assigned to the assignee of this Agreement.
21.2. SOFTWARE UPDATE AND SUPPORT. Franchisee shall pay Franchisor an
annual software fee, as set forth in the Software License Agreement attached
hereto as Exhibit F and incorporated herein by reference, for published updates
of the Software and for technical assistance, support for installation and
program support of the Software as updated from time to time.
21.3. HARDWARE. At Franchisee's expense, prior to commencement of
operations of the Franchised Business, Franchisee shall purchase through
Franchisor the computer hardware and related equipment required for the
operation and use of the Software and install such hardware and equipment at the
premises of the Franchised Business. Any and all such hardware and related
equipment must fully comply with Franchisor's specifications as set forth in the
On-Line Operating Manual.
21.4. HARDWARE MAINTENANCE. At Franchisee's expense, Franchisee shall
procure and maintain in force during the entire term of this Agreement a
maintenance agreement with a vendor designated by Franchisor to maintain the
computer hardware described in this Section 21., the On-Line Operating Manual
and the Software License Agreement.
21.5. INFORMATION RETRIEVAL. During the term of this Agreement,
Franchisee shall afford Franchisor access via telephone modem to Franchisee's
computer system to enable Franchisor to periodically upload and download data to
facilitate Franchisor's performance of automated payroll and related services
hereunder.
22. TRANSFER.
22.1. BY FRANCHISOR. This Agreement shall be fully transferable by
Franchisor.
22.2. BY FRANCHISEE. Franchisee understands and acknowledges that the
rights and duties created by this Agreement are personal to Franchisee or its
owners and that Franchisor has entered into this Agreement in reliance upon the
individual or collective character, skill, aptitude, attitude, business ability
and financial capacity of Franchisee or its owners. Therefore, except as
hereinafter provided, neither Franchisee's interest in this Agreement nor any of
its rights or privileges herein or obligations hereunder shall be sold,
assigned, transferred, sublicensed, shared or divided or otherwise transferred
by Franchisee, in whole or in part, voluntarily or involuntarily, by operation
of law or otherwise in any manner, except upon prior written approval of
Franchisor, and in accordance with the
28
38
provisions of this Section 22. Any assignment or transfer without such approval
shall constitute a breach of this Agreement and shall convey no rights or
interest in the Franchised Business to such purported assignees or transferees.
The only permissible methods of sale, transfer or assignment of the Franchised
Business are those set forth in this Section 22.
22.3. CHANGE OF BUSINESS FORM. Whether or not an assignment or transfer
of the Franchised Business is involved, Franchisee, whether an individual or
otherwise, shall not change its business form, whether to obtain the services of
a partner, to merge, consolidate, reorganize, or to accomplish any other change,
without the prior written approval of Franchisor.
22.4. DEEMED ASSIGNMENT. If Franchisee is at any time a corporation,
then one or more transactions involving (i) issuance of any securities by
Franchisee, or (ii) the transfer of stock or voting power of Franchisee, or
(iii) any merger or consolidation involving Franchisee, the effect of which
shall result in Franchisee's shareholders owning or controlling less than
fifty-one percent (51%) of the aggregate voting securities of Franchisee or
otherwise losing the right to control the affairs of Franchisee, shall be deemed
to be an assignment of this Agreement within the meaning of this Section 22.
If Franchisee is at any time a partnership, then the death, voluntary or
involuntary or other withdrawal of any general partner, admission of any
additional general partner, or transfer of any general partner's interest in the
property, management or profits and/or losses of the partnership shall be deemed
to be an assignment within the meaning of this Section 22.
22.5. FRANCHISOR'S RIGHT OF FIRST REFUSAL. If Franchisee desires to sell
or otherwise transfer the Franchised Business and assign this Agreement,
Franchisee shall deliver to Franchisor written notice setting forth all the
terms of the proposed transfer and assignment and all information that
Franchisor requests concerning the proposed assignee. Franchisor shall have the
option, during the fifteen (15) days after receipt of the notice, to purchase
the Franchised Business and accept assignment of this Agreement on the terms
contained in the notice, provided that Franchisor shall have the right to
substitute the cash equivalent of any noncash consideration described in such
notice. If Franchisor exercises this option, the purchase of the Franchised
Business by Franchisor must be completed no later than thirty (30) days after
Franchisor's notice to Franchisee of its purchase election.
If Franchisor does not exercise this option during such fifteen (15) day
period then Franchisee may, during the following one hundred twenty (120) days,
transfer the Franchised Business and assign this Agreement to the proposed
assignee on the terms in the notice, provided that the assignment shall be made,
without limitation, in compliance with this Section 22. Any proposed transfer
not completed within such one hundred twenty (120) day period or any material
change in the terms of the proposed transaction prior to closing shall
constitute a new offer to which Franchisor shall have the right of first refusal
and shall require compliance with this Section 22.5.
29
39
22.6. FURTHER CONDITIONS. If Franchisor elects not to exercise its right
of first refusal, Franchisor's approval of a proposed transfer shall not be
unreasonably withheld. However, without limitation of the foregoing, imposition
of any or all of the following conditions precedent to Franchisor's approval
shall be deemed to be reasonable:
22.6.1. TRANSFER TO FRANCHISEE'S CORPORATION. If Franchisee is
an individual or partnership and desires to assign and transfer his
rights to a newly organized corporation solely for the convenience of
ownership:
(i) Such corporation's charter shall provide that its
activities are confined exclusively to operating
the Franchised Business as set forth in this
Agreement;
(ii) Franchisee shall be, and shall remain, the owner
of the majority stock interest in the transferee
corporation;
(iii) The individual Franchisee (or if the Franchisee
is a partnership, one of the general partners)
shall be, and shall remain, the principal
executive officer of the corporation;
(iv) The transferee corporation shall enter into a
written assignment with Franchisee and
Franchisor, in form satisfactory to Franchisor,
assuming all of the Franchisee's obligations
under this Agreement;
(v) Each stock certificate of the transferee
corporation shall have conspicuously endorsed
upon it a statement that it is held subject to,
and that further assignment or transfer thereof
is subject to, all restrictions imposed upon
assignments and transfers by this Agreement;
(vi) No new shares of common or preferred voting stock
in the transferee corporation shall be issued to
any person, partnership, trust, foundation, or
corporation without obtaining Franchisor's prior
written consent; and
(vii) All accrued money obligations of Franchisee to
Franchisor, its Affiliates or assignees, shall be
satisfied prior to assignment or transfer.
22.6.2. OTHER TRANSFERS. If the transfer, other than such
transfer authorized under Section 22.6.1. of this Agreement, as
consummated alone or together with other related previous, simultaneous,
or proposed transfers, would have the effect of transferring control of
the Franchised Business to someone other than an original signatory of
this Agreement:
(i) The proposed assignee(s) or, if the proposed
assignee is a corporation, its principal
officers, shareholders, or directors, shall be of
good moral character and demonstrate skills,
qualifications and economic resources necessary
in Franchisor's reasonable judgment, to operate
the franchise that this Agreement contemplates
and, in any event, at least
30
40
equal to the Franchisee's skills, qualifications
and economic resources;
(ii) The proposed assignee(s) shall expressly assume
in writing, for Franchisor's benefit, all
Franchisee's obligations under this Agreement;
(iii) The proposed assignee(s) shall have completed the
training program and additional evaluation to
Franchisor's sole subjective satisfaction, as
described in Section 7.;
(iv) As of the date of any such transfer, Franchisee
shall have fully satisfied all Franchisee's
obligations, including accrued money obligations,
to Franchisor and Franchisor's Affiliates and
assignees under this Agreement and any other
agreement, arrangement or understanding;
(v) Franchisor shall require the proposed
assignee(s), including all shareholders and
partners of the proposed assignees(s), to jointly
and severally execute Franchisor's standard form
Franchise Agreement then being offered to
prospective franchisees of Franchisor, except
that, other than any fees designated in such
Franchise Agreement as non-refundable training
fees, no initial franchisee fee shall be required
from the proposed assignee and the term of the
Agreement shall be modified to equal the
remaining term under this Agreement;
(vi) Franchisee shall pay Franchisor a transfer fee of
Five Thousand Dollars ($5,000.00), which is
deemed to be reasonably required to cover
Franchisor's expenses (other than training
expenses) relating to such transfer; and
(vii) Franchisee shall have executed a written release
in a form approved by Franchisor, releasing
Franchisor from all liabilities.
22.6.3. COVENANTS NOT TO COMPETE UNAFFECTED. No sale,
assignment, transfer, conveyance, encumbrance or gift of any interest in
this Agreement, or in the Franchised Business, shall relieve Franchisee,
and as applicable, its shareholders or partners participating in any
transfer, of the obligations of the covenants not to compete contained
in Section 13.2. of this Agreement.
22.7. ASSIGNMENT IN CASE OF DEATH OR INCAPACITY. If, as applicable,
Franchisee, or Franchisee's majority stockholder, or general partner dies or
becomes permanently disabled for any mental or physical condition (as evidenced
by an inability to perform usual duties for a period of four (4) consecutive
months), the surviving spouse, heirs, beneficiaries, devisees, or legal
representative of said individual, partner or shareholder shall have the
opportunity to participate in partnership of the Franchised Business during the
one hundred eighty (180) days following such death or incapacity, provided that
during that time such participant shall maintain all standards and obligations
required under this Agreement. During such one hundred eighty (180) day period,
such
31
41
participant shall either satisfy all the then-current qualifications for a
purchaser of a Remedy franchise in accordance with the requirements of this
Section 22. or sell, transfer, or assign such participant's ownership interest
in Franchisee, or, if applicable, this Agreement and the Franchised Business to
a person who satisfies the Franchisor's then-current standards for new Remedy
franchisees.
22.7.1. ASSIGNMENT TO ORIGINAL SIGNATORY. If, as a result of the
death or incapacity of a shareholder or partner of the Franchisee, all
of the deceased or disabled party's interest in this Agreement or the
Franchised Business is transferred to an original signatory to this
Agreement, then, upon written notice to Franchisor, Franchisor shall
consent to the continued operation of the Franchised Business pursuant
to the terms of this Agreement.
23. TERMINATION.
23.1. TERMINATION WITH OPPORTUNITY TO CURE. Except as provided in
Section 23.2., when Franchisee receives written notice from Franchisor that
Franchisee has failed to comply with the terms of this Agreement, Franchisee
shall have thirty (30) days to cure the breach(es) and to prove such cure to
Franchisor. If any breach of this Agreement is not cured within thirty (30) days
of Franchisee's receipt of notice of such breach, Franchisor may terminate this
Agreement upon written notice to Franchisee of such termination, effective on
the expiration of the cure period.
23.2. TERMINATION WITH NO OPPORTUNITY TO CURE. If any of the following
events of default occur, Franchisor may terminate this Agreement immediately
upon delivery to Franchisee of notice of termination. Franchisor shall have no
obligation to allow Franchisee any opportunity to cure any such event of
default.
(i) Franchisee is declared bankrupt or judicially determined
to be insolvent, or all or a substantial part of the
assets of Franchisee or the Franchised Business are
assigned to or for the benefit of any creditor, or
Franchisee admits his inability to pay Franchisee's debts
as they come due;
(ii) Franchisee abandons the Franchised Business by failing to
operate for five (5) consecutive days during which
Franchisee is required to operate the Franchised Business
under this Agreement's terms, or any shorter period after
which it is not unreasonable under the facts and
circumstances for Franchisor to conclude that Franchisee
does not intend to continue to operate the Franchised
Business;
(iii) Franchisee has made any material misrepresentation
relating to acquisition of the Franchised Business;
(iv) Franchisee engages in conduct that, in Franchisor's sole
discretion, materially and unfavorably reflects upon the
operation and reputation of the Franchised Business or the
Remedy System;
32
42
(v) Franchisee fails for a period of ten (10) days or such
longer period as applicable laws may require, after
notification of noncompliance, to comply with any federal,
state or local law or regulation applicable to operation
of the Franchised Business;
(vi) After curing any failure described in Section 23.1.
Franchisee engages in the same noncompliance, regardless
of whether such noncompliance is corrected after notice;
(vii) Franchisee repeatedly fails to comply with one (1) or more
requirements of this Agreement regardless of whether
corrected after notice;
(viii) The Franchised Business is seized, taken over or
foreclosed by a government official in the exercise of
such official's duties, or seized, taken over, or
foreclosed by a creditor, lienholder or lessor, provided
that a final judgment against Franchisee remains
unsatisfied for thirty (30) days, unless a supersedeas or
other appeal bond has been filed;
(ix) A levy of execution is made upon the Franchised Business
or upon any property used in the Franchised Business and
is not discharged within five (5) days after such levy;
(x) Franchisee is convicted of a felony or other criminal
misconduct relevant to operation of the Franchised
Business;
(xi) Franchisee attempts to transfer the Franchised Business or
make an assignment of this Agreement in violation of
Section 22. of this Agreement;
(xii) In the event of death or incapacity, the surviving spouse,
heirs, beneficiaries, devisees, or legal representatives
fail to comply with the provisions of Section 22.7.; or
(xiii) Franchisee discloses, attempts or threatens to disclose
any of the Trade Secrets in violation of this Agreement.
23.3. OTHER TERMINATION RIGHTS. Franchisor's right to terminate this
Agreement is in addition to all other rights and remedies, whether at law or in
equity, that Franchisor might have against Franchisee as a result of any breach
or default by Franchisee of any provision of this Agreement.
23.4. LIQUIDATED DAMAGES. Franchisee understands and acknowledges that
Franchisee is obligated by this Agreement to operate the Franchised Business as
set forth herein for a term of ten (10) years, and any attempt by Franchisee to
terminate this Agreement prior to the expiration date shall be deemed to be a
material breach of this Agreement and shall be grounds, at Franchisor's sole
discretion, for termination by Franchisor pursuant to Section 23.2. The parties
hereto agree that it would be impracticable and extremely difficult to determine
the actual damages to Franchisor arising from any such termination of this
Agreement. Therefore, the parties agree that in the event of any such
termination, Franchisee shall pay to Franchisor as liquidated damages in an
amount equal to twelve (12) times the average monthly Franchisor's Share for the
six (6) month period prior to any such termination, such amount being a
reasonable estimate, as of the date of this
33
43
Agreement, of Franchisor's actual damages resulting from such termination. If
such liquidated damages are not paid in full by Franchisee within 14 days of the
date of termination, interest shall accrue on any unpaid balance at a rate equal
to the lesser of (a) eighteen percent (18%) per annum or (b) the maximum rate
allowed by law until such balance is paid in full. Nothing contained in this
Section 23.4. shall be construed as a limitation on (i) the rights or remedies
of Franchisor to recover for any indebtedness owed Franchisor by Franchisee at
the time of such termination, (ii) Franchisor's right to seek specific
performance or other equitable relief with respect to this Agreement, or (iii)
Franchisor's right to recover its reasonable attorneys' fees, court costs and
expenses incurred in enforcing its rights under this Agreement. This Section
23.4. shall survive termination of this Agreement.
24. RIGHTS AND OBLIGATIONS AFTER TERMINATION OR EXPIRATION.
24.1. PAYMENT OF AMOUNTS OWED. Upon expiration of this Agreement or
termination for any reason, and regardless of any other provision of this
Agreement, all amounts owed to Franchisor or Franchisor's Affiliates, including
but not limited to amounts pursuant to this Agreement, and interest due on any
of these amounts shall be immediately due and payable.
24.2. MARKS. After termination or expiration of this Agreement,
Franchisee shall:
(i) refrain from directly or indirectly, at any time or in any
manner, identifying Franchisee or any business as a
current or former Remedy franchisee or business;
(ii) refrain from using any Marks or any colorable imitation of
any Marks or other indicia of a Franchised Business in any
manner or for any purpose or use for any purpose any trade
name, trade or service ▇▇▇▇ or other commercial symbol
that suggests or indicates a connection or association
with Franchisor;
(iii) remove and discontinue use of all signs, sign faces,
stationery, advertising materials, informational or other
brochures, and other materials containing any of the Marks
or otherwise identifying or relating to the Franchised
Business;
(iv) take all action necessary or appropriate to cancel all
fictitious or assumed name or equivalent registrations
relating to Franchisee's use of any of the Marks; and
(v) furnish to Franchisor within thirty (30) days after the
effective date of termination or expiration, evidence
satisfactory to Franchisor of Franchisee's compliance with
all obligations under this Section 24.
24.3. TRADE SECRETS. Upon termination or expiration of this Agreement,
Franchisee shall immediately cease to use any of the Trade Secrets disclosed to
Franchisee pursuant to this Agreement. Upon such termination or expiration,
Franchisee shall
34
44
immediately return to Franchisor all confidential or proprietary materials that
Franchisor has loaned to Franchisee. Franchisee's continued use of any of the
Trade Secrets or any other confidential or proprietary materials or information
following the expiration of this Agreement or termination of this Agreement for
any reason shall constitute an unfair method of competition.
24.4. CLIENT LISTS. It being recognized and acknowledged that
Franchisee's client base is derived, in large part, from its affiliation with
Franchisor and from the goodwill associated with the Marks, it is the intent of
the parties to this Agreement that the client base of the Franchised Business
shall inure to the benefit of the Franchisor and, upon expiration of this
Agreement or termination of this Agreement for any reason, Franchisee shall
deliver to Franchisor all copies of all materials in Franchisee's possession
which in any way identify the clients of the Franchised Business. Franchisee
further agrees not to contact clients of the Franchised Business for the purpose
of offering services of the type provided by the Franchised Business for a
period of two (2) years following the expiration or termination of this
Agreement. Franchisee agrees that any failure by Franchisee to fully comply with
this Section 24.4. shall constitute an unfair method of competition.
25. ENFORCEMENT.
25.1. SEVERABILITY AND SUBSTITUTION.
(i) Except as expressly provided to the contrary herein, each
part of this Agreement shall be severable. If any
provision is held invalid, or in conflict with any
applicable law or regulation in a final unappealable
ruling by a competent court, agency or other tribunal in a
proceeding to which Franchisor is a party, the ruling
shall not impair or otherwise effect remaining parts of
this Agreement that remain intelligible. Any portion held
invalid shall be deemed not to be part of this Agreement
when the time for appeal expires if Franchisee is a party
to such proceeding, otherwise when Franchisee receives
notice of non-enforcement of such provision from
Franchisor.
(ii) To the extent that Sections 13. or 24.2., relating to
trademarks, Trade Secrets and non-competition, or any part
of such sections is unenforceable because of geographical,
temporal or subject-matter scope, but could be enforceable
by reducing any or all of such scope, such provisions
shall be enforced to the fullest extent permissible under
applicable laws and public policies.
(iii) If any applicable law or rule requires greater prior
notice of termination or refusal to enter into a
Subsequent Agreement, or action different than this
Agreement requires, or if under any applicable law or rule
any provision of this Agreement or specification, standard
or operating procedure prescribed by Franchisor is invalid
or unenforceable, the prior notice and/or action required
by such law or
35
45
rule shall replace this Agreement's comparable
provisions. In such circumstances, Franchisor shall have
the right, in Franchisor's sole discretion, to modify
the invalid or unenforceable provision, specification,
standard or operating procedure to the extent required
to be valid and enforceable.
(iv) Franchisee shall satisfy the maximum duty permitted by law
under any promise or covenant subsumed within any of this
Agreement, that results from reducing any provision, or
specification, standard or operating procedure prescribed
by Franchisor, or striking from any such provision,
specification, standard or operating procedure, any
portion(s) that a court holds unenforceable, or orders to
be unenforced, in a final decision to which Franchisor is
a party, as if the remaining promise or covenant were a
separately articulated part of this Agreement. Such
modifications to this Agreement shall be effective only in
such jurisdiction, unless Franchisor elects to make them
applicable in other jurisdictions.
25.2. WAIVER. Franchisor or Franchisee may unilaterally waive or reduce
any obligation of or restriction upon the other only by a signed written
instrument. Such waiver shall take effect upon delivery of the instrument to the
other or such other date stated in the instrument. Any waiver shall be without
prejudice to the waiving party's other rights and shall be subject to continuing
review.
25.3. NONWAIVER. Franchisor and Franchisee shall not be deemed to waive
or impair the right to demand strict compliance with every term, condition and
covenant in this Agreement, or to declare any breach to be a default and to
terminate this Agreement prior to its expiration, or any other right, power or
option reserved in this Agreement, by virtue of:
(i) any custom or practice of the parties that varies from
this Agreement's terms;
(ii) any failure, refusal or neglect to exercise any right
under this Agreement or to insist upon strict compliance
with mandatory specifications, standards, operating
procedures or other obligations;
(iii) any waiver, forbearance, delay, failure or omission to
exercise any right, power or option, of the same, similar
or different nature, with respect to other franchisees; or
(iv) acceptance of payments after any breach of this Agreement.
25.4. FORCE MAJEURE. Neither Franchisor nor Franchisee shall be liable
or deemed to be in breach for loss, damage or failure to perform that results
from any of the following causes. Any delay that results from the following
causes shall extend performance accordingly or excuse performance in whole or in
part as is reasonable. However, such causes shall not excuse payment of amounts
due or owed at the time of such occurrence or payment of royalties due from
subsequent Gross ▇▇▇▇▇▇▇▇.
36
46
(i) strikes, inadequate supply of equipment, merchandise,
supplies, material or energy, or the voluntary foregoing
of the right to acquire or use any of these in order to
accommodate or comply with orders, requests, regulations,
recommendations or instructions of any government,
government department or government agency;
(ii) compliance with any law, rule, order, regulation,
requirement or instruction of a government agency other
than an order, requirement or instruction that arises from
a violation of law or this Agreement;
(iii) acts of God or the public enemy; or
(iv) acts or omissions of the other party.
25.5. SPECIFIC PERFORMANCE AND INJUNCTIVE RELIEF. Nothing in this
Agreement shall prevent Franchisor or Franchisee from obtaining specific
performance of this Agreement and injunctive relief against threatened conduct
that will cause loss or damages, under equity rules, including applicable rules
for obtaining restraining orders and preliminary injunctions. Franchisor shall
be entitled to injunctive relief without bond but upon due notice, in addition
to all further and other relief available at law or equity. Franchisee's sole
remedy upon entry of any injunction shall be dissolution of the injunction, if
warranted, upon hearing.
25.6. RIGHTS CUMULATIVE. Franchisor and Franchisee's rights under this
Agreement are cumulative. No exercise or enforcement of any right or remedy
shall preclude exercise or enforcement of any other right or remedy that the law
entitles Franchisor or Franchisee to enforce. Franchisee acknowledges that
execution of this Agreement does not entitle Franchisee the right to participate
in Franchisor's Franchisee Investment and Growth Program.
25.7. GOVERNING LAW. This Agreement shall be interpreted and construed
under California law except to the extent California law is preempted by federal
law including, without limitation, federal copyright, patent or trademark law.
However if any applicable state franchise investment or similar law or
regulation prohibits the parties from agreeing to be governed by California law
then this Agreement shall be governed by the law of the state that prohibits
application of California law.
25.8. ARBITRATION. Except as precluded by applicable law, any
controversy or claim that arises out of or relates to this Agreement, or any
breach of this Agreement, including, without limitation, any claim that any of
this Agreement is invalid, illegal, voidable or void, shall be submitted to
arbitration in accordance with the rules of the American Arbitration Association
or any similar successor body and judgment upon the award may be entered in any
court with jurisdiction thereof. The preceding sentence shall not limit
Franchisor's rights or remedies in connection with any action in any court of
competent jurisdiction for injunctive or other provisional relief that
Franchisor deems necessary or appropriate to compel Franchisee to comply with
Franchisee's obligations under this Agreement or to protect the Marks. Each
party shall appoint one arbitrator, and the two arbitrators so appointed shall
agree upon a third arbitrator to act as chairman. If a party fails
37
47
to appoint an arbitrator within thirty (30) days from the date upon which the
claimant's request for arbitration is communicated to the other party or, if the
two appointed arbitrators fail to nominate the chairman within thirty (30) days
from the date of appointment of the later appointed arbitrator, such arbitrator
shall be selected by the American Arbitration Association or successor body. The
award of the arbitrators shall include an award of reasonable attorneys' fees
and costs to the prevailing party, and shall be final. The parties agree to
waive their right to any form of appeal, to the greatest extent allowed by law,
and to share equally the fees and expenses of the arbitrators. Unless applicable
law requires otherwise, arbitration shall occur in Los Angeles, California. This
arbitration provision shall be self executing. If a party fails to appear at any
properly noticed arbitration proceeding, an award may be entered against such
party regardless of such failure to appear.
25.9. BINDING EFFECT. This Agreement shall inure to the benefit of and
shall bind the parties and their executors, administrators, heirs, assigns, and
successors in interest.
25.10. MODIFICATION. Except as expressly provided in Section 25.1., the
parties may modify this Agreement only by written instrument signed by the
parties.
25.11. CONSTRUCTION.
(i) The preambles and exhibit(s) are part of this Agreement.
This Agreement is the parties' entire agreement with
respect to its subject matter. There are no other prior or
contemporaneous oral or written understandings or
agreements between the parties relating to the subject
matter of this Agreement, and Franchisee expressly
acknowledges that it is not relying on any oral or written
representations of Franchisor, except as expressly set
forth herein.
(ii) Nothing in this Agreement shall confer any right or remedy
upon any third person or legal entity not a party to this
Agreement.
(iii) Except when this Agreement expressly requires Franchisor
to reasonably approve or not unreasonably withhold
approval of any action or request by Franchisee,
Franchisor shall have the right to refuse any request by
Franchisee or to withhold approval of any action by
Franchisee.
(iv) Headings in this Agreement are for convenience only.
Headings do not define, limit or construe the contents of
sections.
(v) "AFFILIATE" means any company directly or indirectly owned
or controlled by Franchisor that offers services or
products, or transacts other business with Franchisee.
(vi) If two or more persons are Franchisee under this Agreement
regardless of whether they are partners or joint venturers
or in another capacity or relation, their obligations
shall be joint and several.
(vii) If Franchisee or a transferee is a corporation or
partnership, then the terms "FRANCHISEE," "OWNER," and
"TRANSFEREE" mean, unless expressly made applicable to all
shareholders and partners, any person
38
48
who owns of record or beneficially ten percent (10%) or
more of the equity or control of Franchisee.
(viii) Franchisor and Franchisee are sophisticated parties acting
on the advice of competent legal counsel in entering into
this Agreement. Thus, Franchisee agrees that any common
law or statutory provision providing that an ambiguous or
uncertain term will be construed against the drafting
party is waived and shall not apply to the construction of
this Agreement.
25.12. ATTORNEYS' FEES AND EXPENSES. Should any party hereto commence
any action or proceeding for the purpose of enforcing or preventing the breach
of any provision hereof, whether by arbitration, judicial or quasi-judicial
action or otherwise or any appeal therefrom or for damages for any alleged
breach of any provision hereof or for a declaration of such party's rights or
obligations hereunder, then the prevailing party shall be reimbursed by the
losing party for all costs and expenses incurred in connection therewith,
including, but not limited to, reasonable attorney's fees for the services
(including all appeals) rendered to such prevailing party.
26. NOTICES AND PAYMENTS.
Written notices and reports that this Agreement or the On-Line Operating
Manual permit or require to be delivered shall be deemed so delivered when
delivered by hand, or one (1) business day after transmission by telegraph or
other electronic system, or three (3) business days after placement in the
United States Mail by registered or certified mail, return receipt requested,
postage prepaid and addressed to the party to be notified at the address first
written above or its most current principal business address of which the
notifying party has been notified. Payments and reports required by this
Agreement shall be directed to Franchisor at the address first written above or
at the address of which Franchisor from time to time notifies Franchisee, or to
such other persons and places as Franchisor may from time to time direct. Any
required payment or report not actually received by Franchisor during regular
business hours on the date due or postmarked by postal authorities at least two
(2) days prior to the date due shall be deemed delinquent.
39
49
27. MULTIPLE ORIGINALS.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. This Agreement shall become effective and binding
immediately upon its execution by all signatories.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first written above.
"FRANCHISOR" "FRANCHISEE"
REMEDYTEMP, INC. _______________________________
By:______________________________ By:____________________________
Name:____________________________ Name:__________________________
Title:___________________________ Title:_________________________
40
50
EXHIBIT "A"
TO
FRANCHISE AGREEMENT
FRANCHISE LOCATIONS
51
EXHIBIT "B"
TO
FRANCHISE AGREEMENT
TERRITORY
52
EXHIBIT "C"
TO
FRANCHISE AGREEMENT
MINIMUM PERFORMANCE STANDARDS
53
EXHIBIT "D"
TO
FRANCHISE AGREEMENT
OFFICE DEVELOPMENT REQUIREMENTS
54
EXHIBIT "E"
TO
FRANCHISE AGREEMENT
NONDISCLOSURE AND NONCOMPETITION AGREEMENT
55
NONDISCLOSURE AND NONCOMPETITION AGREEMENT
(FRANCHISEE)
In consideration of the execution by RemedyTemp, Inc. of a Franchise
Agreement with ______________________ relating to a Remedy franchise, the
undersigned, who are the Owners and/or Principal Officers of __________________
________________________________________________________________________________
__________________________________________________________________________ the
"FRANCHISEE" thereunder agree individual and jointly to comply with and be bound
by all provisions of the Franchise Agreement in any way related to nondisclosure
and noncompetition, including, but not limited to, Sections 9., 13. and 24. of
the Franchise Agreement.
This Nondisclosure and Noncompetition Agreement shall be executed by all
persons and other legal entities who are now and who shall from time to time be
such Beneficial Owners and/or Principal Officers, and the execution hereof by
all such persons and legal entities shall be the responsibility of the
undersigned.
SIGNATURE OF SIGNATURES OF
BENEFICIAL OWNERS PRINCIPAL OFFICERS
_____________________________________ ____________________________________
___% OF OWNERSHIP
_____________________________________ ____________________________________
___% OF OWNERSHIP
_____________________________________ ____________________________________
___% OF OWNERSHIP
_____________________________________ ____________________________________
___% OF OWNERSHIP
56
EXHIBIT "F"
TO
FRANCHISE AGREEMENT
SOFTWARE LICENSE AGREEMENT
57
REMEDYTEMP, INC.
SOFTWARE LICENSE AGREEMENT
This License Agreement (hereinafter "Agreement") is entered into as of
the _____ day of __________________, 199 _____ (the "Effective Date") by and
between RemedyTemp, Inc., (hereinafter "Remedy") and __________________________
____________________________________ (hereinafter "Franchisee").
For good and valuable consideration, the receipt and sufficiency of
which is acknowledged, the parties hereto agree to the following terms and
conditions:
1. License of Software. Subject to the terms and conditions of this
Agreement, Remedy will license to Franchisee one (1) or more I/SEARCH 2000
computer software program(s) and all related materials and documentation
(collectively, the "I/SEARCH 2000 Software") for an annual license fee (which
shall include all application updates and related support services),
installation costs plus shipping and handling costs, and all applicable
state/local/federal taxes, as further set forth in this Agreement. Subject to
the terms and conditions of this Agreement, Remedy hereby grants to Franchisee a
non-transferable non-exclusive right to use the I/SEARCH 2000 Software, ordered
and accepted as set forth above, for the term of this Agreement, as set forth in
Section 5 herein.
2. System Hardware. Franchisee shall maintain, at its sole cost and
expense, computer hardware and related equipment designated by Remedy, in its
sole discretion, as required for the use of the I/SEARCH 2000 Software.
Franchisee shall purchase such required computer hardware and related equipment
through Remedy. Remedy may, from time-to-time, modify, change, add or delete
specifications required for computer hardware and related equipment. Any change
in specifications provided by Remedy shall, which may require the purchase of
additional equipment or the upgrade of existing equipment, be implemented within
a reasonable time after notice of such change by Remedy and at the sole cost and
expense of Franchisee.
3. Technical Support.
3.1. Remedy agrees to provide reasonable technical assistance to
Franchisee for installation and program support of the I/SEARCH
2000 Software as may be required from time-to-time by
Franchisee, the cost of which shall be included in the Annual
Fee set forth under Section 6.3. In the event ------------
Remedy personnel are required to travel to Franchisee
location(s), Franchisee agrees that Franchisee shall pay Remedy
all costs incurred as a result of such on-location service.
Payment of all such costs incurred shall be due and payable net
thirty (30) days upon receipt of invoice.
3.2 Remedy assumes that Franchisee and its employees shall have the
requisite skills to access and use the I/SEARCH 2000 Software.
If either Franchisee or
1
58
its employees do not have such requisite skill, Franchisee or
its employees shall obtain the skills needed, either through
Remedy training or elsewhere, at additional cost to Franchisee.
4. Hardware and Equipment Service. Franchisee shall purchase a hardware
maintenance contract with Remedy's designated vendor (the "Maintenance Vendor")
for hardware and equipment service during the term of this Agreement. The cost
of such maintenance contract shall be set by the Maintenance Vendor. Franchisee
shall look to the Maintenance Vendor or the applicable manufacturer of any
hardware and other equipment purchased from Remedy or otherwise used with the
I/SEARCH 2000 Software for any and all warranties and service of such items.
Remedy shall not be responsible for any warranties, service or support of such
items.
5. Term of Agreement. The term of this Agreement shall be for the term
or duration of the original Franchise Agreement, or any renewal thereof, entered
into and executed by and between Franchisee and RemedyTemp, Inc. (the "Franchise
Agreement"), subject to the provisions of Section 12 of this Agreement.
6. Payment Terms.
6.1 The fees for any item or service provided by Remedy to Franchisee
under this Agreement shall be as set forth below. Such fees may be changed from
time-to-time in Remedy's sole discretion, unless otherwise provided herein.
Accordingly, the prices for any items ordered by Franchisee under this Agreement
after the Effective Date are subject to change; provided that all fees shall be
charged at Remedy's published rates for such items in effect at the time
charged.
6.2 Late Payments. If any amount payable to Remedy under this Agreement
or otherwise is not paid when due, Remedy shall be entitled to payment as
specified under the Franchise Agreement.
6.3 Annual Fee. Franchisee shall pay to Remedy an annual fee of Two
Thousand Eight Hundred and Thirty-Two Dollars ($2,832) upon execution of this
Agreement (the "Annual Fee"). The Annual Fee shall cover all of Franchisee's
costs relating to: (1) the licensing the I/SEARCH 2000 Software; (2) Remedy's
service of the of I/SEARCH 2000 Software; (3) all Remedy's published updates of
the I/SEARCH 2000 Software; and (4) Remedy's technical support of the I/SEARCH
2000 Software. Upon the first year anniversary of the Effective Date, and each
subsequent annual anniversary date thereafter, Franchisee shall pay to Remedy an
Annual Fee of Two Thousand Eight Hundred and Thirty-Two Dollars ($2,832), for as
long as this Agreement remains in effect. The Annual Fees, and any other fees
owed to Remedy by Franchisee shall be due and payable as provided under
Paragraph 6.5(a) hereof.
6.4 Hardware Costs. Franchisee shall pay Remedy for any and all hardware
and equipment purchased from Remedy upon installation within thirty (30) days
upon receipt of invoice, as provided under Paragraph 6.5(b) hereof.
2
59
6.5 Payments.
(a) Remedy shall invoice Franchisee for all costs of annual license
fees, annual update fees, annual support fees, and all costs for shipping,
handling and applicable state/local/federal taxes. All amounts invoiced to
Franchisee, pursuant to this paragraph, shall be deducted by Remedy from the
Franchisee's Share pursuant to the Franchise Agreement.
(b) Remedy shall invoice Franchisee all costs for hardware and equipment
purchased by Franchisee from Remedy. Payment shall be due and payable to Remedy
within thirty (30) days of receipt of invoice.
6.6 Security Interest. Remedy reserves a security interest in all
hardware and equipment purchased hereunder and invoiced to Franchisee and in any
proceeds thereof to secure Franchisee's payment obligations to Remedy. Upon
Remedy's request, Franchisee agrees to promptly take such actions necessary, and
execute any documents required, to perfect and maintain such security interest.
7. Ownership.
7.1 Ownership and Use of Software. The I/SEARCH 2000 Software licensed
hereunder is solely for Franchisee's use in connection with the Franchised
Business (as defined in the Franchise Agreement) at Franchisee's franchise
premises. Franchisee understands and agrees that the I/SEARCH 2000 Software
shall at all times remain the sole and exclusive property of Remedy. Franchisee
shall at no time possess or have any right of ownership or proprietary interest
in or to the I/SEARCH 2000 Software, including any modifications thereto.
Accordingly, no title to or ownership interest in any part of the I/SEARCH 2000
Software is transferred to Franchisee. Title to all applicable rights in
patents, patent rights, copyrights, trademarks, service marks, trade names,
trade secrets and proprietary rights in the I/SEARCH 2000 Software are and shall
remain in Remedy. Franchisee agrees to be bound by and observe the proprietary
nature of I/SEARCH 2000 Software program and further, shall not take any action
to jeopardize, limit, or interfere with such proprietary information concerning
the I/SEARCH 2000 Software to any third party. Franchisee agrees to take
appropriate action by instruction or agreement with its employees who are
permitted access to the I/SEARCH 2000 Software to fulfill its obligations
hereunder.
7.2 Title to Hardware. Title to hardware and equipment purchased
hereunder shall transfer to Franchisee after all applicable payments therefor
have been made. Risk of loss and damage for, hardware and equipment, if any,
purchased hereunder shall pass to Franchisee upon shipment to Franchisee, F.O.B.
manufacturer's or Remedy's facilities, whichever location such items are shipped
from.
7.3 Rights of Third Parties. Franchisee acknowledges and agrees that its
acquisition and use of the hardware, the I/SEARCH 2000 Software and other any
other items pursuant to this Agreement may be subject to the rights of Remedy's
vendors thereof in such items and to Remedy's obligations to such persons in
connection with Remedy's acquisition
3
60
of such items. Accordingly, Franchisee agrees to execute such further
instruments and documents required by such persons to evidence or secure such
persons' rights in the items acquired by Franchisee under this Agreement.
8. No Warranty. REMEDY MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND,
WHETHER EXPRESS OR IMPLIED (EITHER IN FACT OR BY OPERATION OF LAW), WITH RESPECT
TO THE I/SEARCH 2000 SOFTWARE LICENSED HEREUNDER OR ANY HARDWARE OR OTHER
EQUIPMENT PURCHASED HEREUNDER, AND ALL SUCH WARRANTIES ARE HEREBY DISCLAIMED.
REMEDY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. ANY OTHER REPRESENTATIONS OR WARRANTIES MADE BY ANY PERSON,
INCLUDING EMPLOYEES OR REPRESENTATIVES OF REMEDY, WHICH ARE INCONSISTENT
HEREWITH SHALL BE DISREGARDED BY FRANCHISEE AND SHALL NOT BE BINDING UPON
REMEDY.
9. Liability Limitations. REMEDY SHALL NOT BE LIABLE FOR ANY
LIABILITIES, LOSSES, OR DAMAGES, INCLUDING, WITHOUT LIMITATION, SPECIAL,
INDIRECT, OR CONSEQUENTIAL DAMAGES OR LOSS OF USE, REVENUE, OR PROFITS, IN
CONNECTION WITH OR ARISING OUT OF ANY FAILURE OR DEFECT IN OR UNAVAILABILITY OR
USE OF THE I/SEARCH 2000 SOFTWARE OR THE HARDWARE AND EQUIPMENT, IF ANY,
PURCHASED HEREUNDER. REMEDY SHALL NOT HAVE ANY LIABILITY WITH RESPECT TO ANY
LOSS OR DAMAGE RELATED TO ANY (i) FAILURE OF THE I/SEARCH 2000 SOFTWARE; OR (ii)
ANY USE OF THE I/SEARCH 2000 SOFTWARE OR THE RESULTS OR DECISIONS MADE OR
OBTAINED BY USERS OF THE I/SEARCH 2000 SOFTWARE. THE LIMITATIONS CONTAINED IN
THIS SECTION SHALL APPLY EVEN IF ANY LIMITED REMEDY FAILS IN ITS ESSENTIAL
PURPOSE.
10. Nondisclosure. Franchisee shall keep confidential and shall require
its officers, directors and employees to keep the I/SEARCH 2000 Software
confidential. Franchisee shall not disclose the I/SEARCH 2000 Software to any
person or entity other than those employees of Franchisee who are authorized to
use the I/SEARCH 2000 Software. Franchisee shall use the same degree of
diligence and effort to protect the I/SEARCH 2000 Software from disclosure to
third parties as Franchisee uses to protect its own confidential information,
but in no event shall franchisee use less than reasonable diligence and effort
in protecting the I/SEARCH 2000 Software from disclosure. Franchisee shall
notify each employee having access to the I/SEARCH 2000 Software of the
nondisclosure obligations under this Agreement.
11. Notice of Inoperability. In the event the I/SEARCH 2000 Software
system is not operable for any reason, Franchisee shall notify the designated
representative of Remedy within twenty-four (24) hours of such inoperability, or
within one (l) business work day, whichever shall first occur.
4
61
12. License and Agreement Termination. In addition, Remedy shall have
the right to terminate Franchisee's license hereunder and this Agreement if
Franchisee fails to comply with the terms and conditions of this Agreement or
any Franchise Agreement. To exercise such termination rights, Remedy shall give
written notice to Franchisee of such failure and if such failure has not been
remedied within three (3) days after such notice, the Franchisee's license and
this Agreement shall terminate upon written notice from Remedy. Remedy shall
also have the right to immediately terminate Franchisee's license and this
Agreement upon written notice to Franchisee, if Franchisee breaches any of the
provisions of Section7 or 10 hereof. In the event the Franchise Agreement by and
between Remedy and Franchisee is terminated, or the Franchise is closed or sold
by Franchisee, unless Franchisee's rights and obligations hereunder are assigned
pursuant to the provisions of Section 19 hereof, this Agreement shall
automatically terminate.
13. Consequences of Termination. Upon termination, Franchisee shall
return all copies of the I/SEARCH 2000 Software along with all related reference
and other descriptive documentation related thereto to Remedy. Upon Remedy's
request, Franchisee shall be solely responsible for the return of any and all
hardware and related equipment which contains the I/SEARCH 2000 Software to
Remedy in order to allow Remedy to remove the I/SEARCH 2000 Software on such
hardware and equipment and then return such hardware and equipment to
Franchisee. All shipping costs for the above shall be paid by Franchisee. In the
event Franchisee ceases to do business, Remedy, in its sole discretion reserves
the right to take possession of the hardware and related equipment in order to
remove all I/SEARCH 2000 Software and any then existing data contained in the
I/SEARCH 2000 Software. If termination occurs prior to the end of a license term
for the I/SEARCH 2000 Software and Franchisee has paid in advance for the
license hereunder, Remedy shall refund to Franchisee a pro rata amount of the
license fee with respect to the remaining license term. In the event of
termination, all provisions of Section 7, 8, 9, and 10 shall survive termination
of this Agreement.
14. Insurance. Franchisee shall, during the term of this Agreement, be
responsible for maintaining all-risk insurance, including replacement cost in
any insurable amount as determined by Franchisee for any loss or damage to
system hardware using the I/SEARCH 2000 Software or destruction or loss of data
for use with the I/SEARCH 2000 Software maintained on the system. It shall be in
the sole discretion of Franchisee to maintain business interruption insurance
insuring against interruption of business as a result of any system failure,
damage or destruction. Remedy shall not have any responsibility for maintaining
any insurance to protect Franchisee against any and all loss or damage to system
hardware, software or data contained in the system using the I/SEARCH 2000
Software.
15. Modification and Discontinuance. All updates to I/SEARCH 2000
Software and all modules or options of I/SEARCH 2000 Software are subject to
change, revision, modification or discontinuance with thirty (30) days' advance
notice of Franchisees.
16. Waivers. The waiver or failure of either party to exercise in any
respect any right provided for herein shall not be deemed a waiver of any
further right thereunder. Termination of a license granted herein or of this
Agreement by either party shall not act as a
5
62
waiver of any breaches of the terms and conditions of this Agreement and shall
not act as a release of either party from any liability for breach of such
party's obligations hereunder.
17. Equitable Remedies. The obligation of Franchisee under Sections 7,
10, l2, and 13 hereof are of a special and unique character which gives them a
peculiar value to Remedy for which Remedy cannot be reasonably or adequately
compensated in damages in the event Franchisee breaches such obligations.
Therefore Remedy shall, in addition to other remedies which may be available, be
entitled to injunctive or other equitable relief in the event of the breach or
threatened breach of such obligation.
18. Representatives and Notices. All notices required to be given
hereunder shall be in writing to the parties' representatives at the addresses
set forth below. Notice shall be considered delivered and effective three (3)
working days after mailing when sent by registered or certified mail, return
receipt requested. Notice shall be deemed given on the date of service if
personally served or sent by a reputable overnight messenger service or on the
date of telecopying, if telecopied, provided that a copy of the telecopy is also
sent by United States mail. Either party, upon written notice to the other, may
change any name or address to which future notices shall be sent. Any notices
under this Agreement shall be sent to the following representatives:
If to Remedy:
Attention: Vice President, Information Technology
RemedyTemp, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to Franchisee:
Attention: __________________________________
__________________________________
__________________________________
Telephone: __________________________________
Fax: __________________________________
19. Assignment. Upon the assignment by Franchisee to any person or
entity (the "Assignee") of Franchisee's rights and obligations under the
Franchise Agreement in accordance with the provisions thereof, Franchisee shall
concurrently therewith assign all of its rights and obligations under this
Agreement to the Assignee, who shall, from and after such assignment of this
Agreement, assume and perform for the express benefit of Remedy the obligations
and liabilities of Franchisee hereunder. Except as set forth in the preceding
sentence, any assignment or transfer by Franchisee of this Agreement or of
Franchisee's rights or obligations hereunder without the prior written consent
of Remedy shall be void and shall constitute an event of default hereunder.
6
63
20. Further Assurances. Franchisee agrees to take such further actions
and to execute and deliver such further documents as may be required to
evidence, confirm or consummate the agreements set forth in this Agreement.
21. Authority. The parties by their respective signatures below
acknowledge and affirm that each is an authorized and designated representative
to execute this Agreement on behalf of their respective company.
This Agreement is executed as of the ________ day of _____________,
199__.
RemedyTemp, Inc. Remedy Franchisee
By: __________________________________ By: _______________________________
Title:__________________________________ Title:______________________________
▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Address:____________________________
7
