Exhibit 10(h)
PRELIMINARY AGREEMENT
KIDDIE ACADEMY FRANCHISING SYSTEMS, INC.
PRELIMINARY AGREEMENT
THIS PRELIMINARY AGREEMENT (this "Agreement") is made and entered into
on , 1996 by and between KIDDIE ACADEMY FRANCHISING SYSTEMS,
INC., a Maryland corporation with its principal offices at Kiddie Academy
Corporate Center, 000 Xxxxx Xxxx, Xxx Xxx, Xxxxxxxx 00000 ("Kiddie Academy"),
and
, whose principal address is
("Applicant").
WHEREAS, Kiddie Academy licenses a system (the "Kiddie Academy System")
relating to the establishment, development and operation of child care learning
centers known as Kiddie Academy Centers;
WHEREAS, Kiddie Academy licenses the use of the trademark and service
xxxx "Kiddie Academy Child Care Learning Centers" and such other trade names,
trademarks and service marks as are now, or may later be, designed as part of
the Kiddie Academy System (the "Marks");
WHEREAS, Applicant has applied to Kiddie Academy for a franchise to
operate a Kiddie Academy Center utilizing the Kiddie Academy System and the
Marks within the following designated area (the "Designated Area"):
and Kiddie Academy has accepted that application in reliance upon the
representations made in it; and
WHEREAS, Applicant wishes to avail itself of Kiddie Academy's expertise
in locating an acceptable site and securing financing prior to executing a
Franchise Agreement.
NOW THEREFORE, the parties mutually agree as follows:
Section 1. APPLICANT'S DUTY TO LOCATE SITE
Applicant will use its best efforts to seek and select a location
within the Designated Area acceptable to Kiddie Academy for the operation of a
Kiddie Academy Center. The final site will be subject to the approval of both
Applicant and Kiddie Academy, which approval shall not be unreasonably withheld
or delayed.
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Section 2. ASSISTANCE BY KIDDIE ACADEMY
Kiddie Academy will use its reasonable efforts to assist Applicant in
its location of a site and in securing third-party financing by:
a. Loaning to Applicant a Business Resource Packet which contains a
sample business plan, an initial list of lenders and financial brokers, and a
sample loan application;
b. Loaning to Applicant a Site Approval Resource Packet which contains,
among other items, Kiddie Academy's site specifications and background
information, a sample real property lease, and instructions for preparing a
trade area study;
c. Providing a consultation between Applicant and Kiddie Academy's
staff prior to the commencement of Applicant's search for an acceptable site and
its application for financing. The consultation will be held, at Applicant's
option, at Kiddie Academy's Corporate Headquarters in Bel Air, Maryland, in
which event all of Applicant's travel, lodging and food expenses will be paid
for by Applicant, or by telephone. The consultation will be scheduled according
to the availability of Kiddie Academy's personnel;
d. Consulting with Applicant on an as-needed basis throughout the term
of this Agreement for purposes of assisting Applicant in determining the
availability and feasibility of prospective sites within the Designated Area and
in obtaining third-party financing;
e. Inspecting prospective sites after Kiddie Academy's initial
screening of proposed locations; and
f. Assisting in the negotiation of the lease or sales agreement for the
location mutually agreed upon by Applicant and Kiddie Academy.
Section 3. APPROVAL BY KIDDIE ACADEMY
Prior to Kiddie Academy's approval of a site, Applicant will submit to
Kiddie Academy (a) evidence of having secured financing sufficient to meet the
minimum financial requirements outlined in Item 7 of Kiddie Academy's Uniform
Franchise Offering Circular previously provided to Applicant; and (b) a written
proposal consisting of a description of the proposed site, a trade area study
and competition survey prepared by Applicant in accordance with Kiddie Academy's
specifications, and a letter of intent or other evidence satisfactory to Kiddie
Academy confirming Applicant's intent to obtain the proposed site. Kiddie
Academy will provide Applicant with written notice of its approval or
disapproval of the proposed site within fifteen (15) days after receiving
Applicant's complete written proposal. Applicant must receive Kiddie Academy's
prior written approval of a proposed site before entering into a lease or
purchase agreement for such site. Kiddie Academy's approval of a final location
will be made on the basis that it meets Kiddie Academy's
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standards for general location and neighborhood, traffic patterns, size, layout
and other physical characteristics, rental, lease terms including duration, and
general conditions for use as a Kiddie Academy Center. Kiddie Academy's approval
of a site will not constitute a judgment as to the relative desirability of that
location in comparison to other locations and will in no way be deemed a
judgment or guaranty by Kiddie Academy of the expected success or profitability
of such site.
Section 4. LEASE
Kiddie Academy agrees to expend time and effort and to incur expenses
as may reasonably be required to help locate and approve a site as described in
paragraph 1 above and to assist in the negotiation of the lease or purchase of a
location jointly approved by the Applicant and Kiddie Academy. The Applicant and
Kiddie Academy will jointly approve the lease or purchase agreement before its
execution by Applicant. Any lease entered into by Applicant as contemplated by
this Agreement will contain those provisions that are required by Kiddie
Academy's standard form of Franchise Agreement. Applicant hereby acknowledges
that the lease or purchase contract of any site approved by Kiddie Academy is
likely to be subject to contingencies such as Applicant's ability to obtain
licensing, zoning approvals or a building permit. The ability to satisfy such
contingencies is solely the responsibility of Applicant and in no way will
Kiddie Academy be responsible for Applicant's failure to satisfy any or all of
such contingencies.
Section 5. COLLATERAL ASSIGNMENT
Applicant will execute a collateral assignment of Applicant's lease, in
a form prescribed by Kiddie Academy, to secure the franchisee's obligations to
Kiddie Academy under the terms of the Franchise Agreement.
Section 6. PRELIMINARY AGREEMENT FEE
In consideration of Kiddie Academy entering into this Agreement,
Applicant, at the execution of this Agreement, has paid to Kiddie Academy the
amount of Twelve Thousand Five Hundred Dollars ($12,500.00) (the "Preliminary
Agreement Fee"). The Preliminary Agreement Fee is deemed fully earned upon its
receipt by Kiddie Academy, and is non-refundable, except as otherwise set forth
in Section 7 below. In the event that Applicant enters into a Franchise
Agreement, as contemplated by Section 8 below, then upon the commencement of the
initial term of the Franchise Agreement, the Preliminary Agreement Fee will be
credited, in full, against the Franchise Fee payable under that agreement.
Section 7. TERMINATION/REFUND OF PRELIMINARY AGREEMENT FEE
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PRIOR TO EXECUTION OF LEASE OR PURCHASE CONTRACT
a. Applicant may, for any reason, withdraw the application for a
franchise to operate a Kiddie Academy Center and request Kiddie Academy's mutual
agreement to the termination of this Agreement. This request must be in writing
and must be made prior to the execution by Applicant of a lease or purchase
contract for Applicant's Kiddie Academy Center. Kiddie Academy will agree to
Applicant's request for termination, provided that Kiddie Academy may condition
its agreement on the execution by Applicant of a mutual general release, in a
form prescribed by Kiddie Academy, of any and all claims against Kiddie Academy
and its affiliates, and their respective officers, directors, agents, and
employees. Upon such termination, Kiddie Academy will refund Applicant the
Preliminary Agreement Fee less the sum of Seven Thousand Five Hundred Dollars
($7,500.00) to cover Kiddie Academy's lost or deferred opportunity costs. In
addition, Kiddie Academy's expenses will be deducted from the Preliminary
Agreement Fee, which expenses shall include, but not be limited to, the airfare,
travel, food and lodging expenses incurred by Kiddie Academy's employees in
locating or approving a site on Applicant's behalf, and the payroll expenses of
such employees.
b. Kiddie Academy may, in its sole discretion, terminate this Agreement
for any reason by written notice to Applicant at any time before Applicant
executes a lease or purchase contract for Applicant's Kiddie Academy Center.
Upon such termination, Kiddie Academy will refund to Applicant the entire amount
of the Preliminary Agreement Fee.
c. Following Applicant's execution of a lease or purchase contract for
Applicant's Kiddie Academy Center, this Agreement may not be terminated by
Kiddie Academy or Applicant and all fees and other amounts paid by Applicant to
Kiddie Academy will be deemed fully earned by Kiddie Academy and non-refundable,
in consideration of administrative and other expenses incurred by Kiddie Academy
under this Agreement, including the salaried services of its personnel, and for
Kiddie Academy's lost or deferred opportunity to franchise others. However, the
Preliminary Agreement Fee and Site Approval Fee, as defined below, may be
credited against the Franchise Fee payable by Applicant under its Franchise
Agreement, as more specifically set forth in Section 6 above and Section 8
below.
Section 8. FRANCHISE AGREEMENT/SITE APPROVAL FEE
a. Unless Applicant withdraws its application for a franchise to
operate a Kiddie Academy Center or unless this Agreement has been terminated by
Kiddie Academy pursuant to Section 7 above, Applicant agrees that, concurrently
with its execution of a lease or purchase contract for a site as contemplated by
this Agreement, Applicant will execute Kiddie Academy's standard form of
Franchise Agreement, at which time Applicant hereby agrees to pay to Kiddie
Academy an additional fee in the amount of Twelve Thousand Five Hundred Dollars
($12,500) (the "Site Approval Fee"). The Site Approval
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Fee is deemed fully earned upon its receipt by Kiddie Academy, and is
non-refundable. However, the Site Approval Fee will be credited, in full,
against the Franchise Fee payable under Applicant's Franchise Agreement upon the
commencement of the initial term of that agreement. The Franchise Agreement to
be executed by Applicant will be for a term that will commence upon the issuance
of a building permit for Applicant's Kiddie Academy Center or when the final
remaining contingency in Applicant's lease or purchase contract is met,
whichever last occurs. Until the term of the Franchise Agreement commences, this
Agreement will remain in full force and effect and Applicant will not be deemed
a Kiddie Academy franchisee. At such time as the term of the Franchise Agreement
commences, the Franchise Agreement will in all respects supersede this Agreement
which will terminate automatically.
b. In the event a lease or purchase contract contingency is not met and
cancellation of the lease or purchase contract occurs, Kiddie Academy will not
refund the Preliminary Agreement Fee or Site Approval Fee previously paid by
Applicant. Kiddie Academy's sole obligation to Applicant in such event will be
to continue to assist Applicant, at no additional cost to Applicant, in its
efforts to locate an alternative site and to negotiate a corresponding lease or
purchase contract for Applicant's Kiddie Academy Center, in accordance with the
terms of this Agreement, subject to the termination provisions set forth in
Section 9 below.
Section 9 AUTOMATIC TERMINATION
a. Unless terminated sooner by Applicant or Kiddie Academy pursuant to
Section 7 above or by the commencement of Applicant's Franchise Agreement
pursuant to Section 8 above, this Agreement will terminate automatically and be
of no further force and effect on that date which is twelve (12) months after
the date of this Agreement; provided, however, that the term of this Agreement
may be extended for an additional six (6) months by a written agreement entered
into between Applicant and Kiddie Academy prior to the expiration of the initial
12-month term. So long as Applicant did not enter into a lease or purchase
contract for Applicant's Kiddie Academy Center during such 12-month period, or
any extension thereof, upon such termination, Kiddie Academy will refund
Applicant the Preliminary Agreement Fee, less the sum of Seven Thousand Five
Hundred Dollars ($7,500.00) to cover Kiddie Academy's lost or deferred
opportunity costs. In addition, Kiddie Academy's expenses will be deducted from
the Preliminary Agreement Fee, which expenses shall include, but not be limited
to, the airfare, travel, food and lodging expenses incurred by Kiddie Academy's
employees in locating or approving a site on Applicant's behalf, and the payroll
expenses of such employees. Kiddie Academy may require that Applicant execute
and deliver a mutual general release, in a form prescribed by Kiddie Academy, of
any and all claims against Kiddie Academy and its affiliates, and their
respective officers, directors, agents and employees, prior to the refund of any
portion of the Preliminary Agreement Fee to Applicant.
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b. In the event that Applicant enters into a lease or purchase contract
for Applicant's Kiddie Academy Center, then the 12-month term, or any extension
thereof, described in subparagraph a above, will be automatically extended for
the duration of any period that such lease or purchase contract is subject to
any contingencies required to be satisfied prior to the commencement of the
lease term or closing under the purchase contract, as the case may be, it being
the intention of the parties that this Agreement not terminate automatically
pursuant to subparagraph a above during any contingency period of such lease or
purchase contract.
c. In the event that Applicant enters into a lease or purchase contract
for Applicant's Kiddie Academy Center during the initial 12-month term of this
Agreement, or any extension thereof, but such lease or purchase contract is
terminated due to the failure to satisfy any contingency set forth in such lease
or purchase contract, then the 12-month time period described in subparagraph a
above shall begin anew as of the date such lease or purchase contract is
terminated in order to allow Applicant an additional 12-month period to select
an acceptable site before this Agreement is subject to automatic termination.
Unless terminated sooner by the commencement of Applicant's Franchise Agreement
pursuant to Section 8 above, this Agreement shall terminate automatically upon
the termination of such additional 12-month period and, following such
termination, Applicant shall not be entitled to the refund of any fees or other
amounts previously paid to Kiddie Academy.
Section 10. LIMITATION OF LIABILITY
Kiddie Academy's sole liability to the Applicant under this Agreement
will be to refund all amounts paid to Kiddie Academy by Applicant under this
Agreement, in whole or in part, as provided in this Agreement, and Kiddie
Academy will have no other liability to Applicant.
Section 11. CONFIDENTIALITY
a. The Business Resource Packet and Site Approval Resource Packet will
at all times remain the property of Kiddie Academy, and will be returned
promptly to Kiddie Academy upon the expiration or other termination of this
Agreement.
b. Applicant acknowledges that Kiddie Academy will devote significant
time, effort and resources to assist Applicant in identifying potential sites
suitable for the location and operation of a Kiddie Academy Center. Applicant
further acknowledges that the information that will be developed by Applicant or
Kiddie Academy as a result of their efforts is a valuable, confidential trade
secret of Kiddie Academy. Applicant therefore agrees that if this Agreement is
terminated for any reason, the Applicant will not, for a period of one (1) year
after the termination date of this Agreement, obtain any direct or indirect
ownership or leasehold interest in any site which Kiddie Academy identified to
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Applicant or negotiated for rights to lease or purchase on behalf of the
Applicant, or which was identified by Applicant during the term of this
Agreement. Furthermore, Applicant acknowledges that Kiddie Academy has devoted
significant time, effort, money and resources to develop goodwill for the name
Kiddie Academy. Applicant therefore agrees to refrain from any discussion or
communications with any employee, former employee, customer, landlord or any
person or persons associated with Kiddie Academy now or in the past, that may be
determined to defame, slander or be considered detrimental to the goodwill name
of Kiddie Academy.
c. Applicant further acknowledges that it will receive additional,
valuable confidential information in addition to the information regarding
potential sites referred to in the preceding paragraph. Applicant recognizes
that disclosure of any of this confidential information would be detrimental to
Kiddie Academy. Applicant agrees that Applicant will hold in strict confidence
any information designated by Kiddie Academy as confidential, including the
information contained in the Business Resource Packet and the Site Approval
Resource Packet, and will not disclose it to another person, without the prior
written consent of Kiddie Academy. Applicant's obligation to maintain the
confidentiality of information received from Kiddie Academy does not apply to
information which came to Applicant's attention before Kiddie Academy disclosed
it to Applicant or to information which becomes public knowledge through
disclosure by others without the assistance of Applicant.
Section 12. NONASSIGNMENT
This Agreement is personal to Applicant and may not be assigned, sold
or otherwise transferred by Applicant to any other person or entity except to a
corporation owned entirely by Applicant, so long as each and all of the
obligations of the Applicant are personally guaranteed by the original
individual applicants, and Kiddie Academy receives prior notice of the transfer,
along with a complete set of Applicant's corporate documents.
Section 13. APPLICABLE LAW/CONSENT TO FORUM
This Agreement takes effect upon its acceptance by Kiddie Academy in
Maryland and shall be interpreted and construed under the laws of that State,
which laws shall prevail in the event of any conflict of law. The parties agree
that any action brought by either party against the other in any court, whether
federal or state, will be brought within the United States District Court for
the District of Maryland or the Circuit Court of Harford County, State of
Maryland, and do hereby waive all questions of personal jurisdiction or venue
for the purpose of carrying out this provision.
Section 14. ARBITRATION
All disputes and claims relating to any provision of this Agreement
shall be settled
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by arbitration in Baltimore City, Maryland in accordance with the United States
Arbitration Act (9 United States Code, Section 1, et seq.) and the Rules of the
American Arbitration Association relating to the arbitration of disputes arising
under franchise and related agreements, if any; otherwise, the general rules of
commercial arbitration. All awards of the arbitrations shall be binding and
non-appealable except as otherwise provided in the United States Arbitration
Act. Judgment upon the award of the arbitrator may be entered in any court
having jurisdiction thereof. During the pendency of any arbitration proceeding
hereunder, Kiddie Academy and Applicant shall fully perform their obligations
under this Agreement.
Section 15. NOTICES
Any notices required or permitted under this Agreement shall be in
writing and shall be personally delivered with a receipt or mailed by registered
or certified mail, return receipt requested, postage prepaid, or sent by
Airborne Express or other nationally recognized overnight courier service, to
the respective parties at the address shown on the first page of this Agreement,
unless a different address has been designated in writing by the other party.
Any notice by certified or registered mail shall be deemed to have been given at
the time the return receipt is executed.
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APPLICANT ACKNOWLEDGES THAT HE/SHE HAS READ THIS AGREEMENT (AND KIDDIE
ACADEMY'S STANDARD FRANCHISE AGREEMENT AND UNIFORM FRANCHISE OFFERING CIRCULAR)
AND HAS BEEN GIVEN THE OPPORTUNITY TO CLARIFY ALL OF ITS TERMS AND PROVISIONS
AND TO CONSULT WITH ANY ATTORNEY OR OTHER PROFESSIONAL ADVISOR. APPLICANT
REPRESENTS THAT HE/SHE UNDERSTANDS THE TERMS, CONDITIONS AND OBLIGATIONS OF THIS
AGREEMENT AND AGREES TO BE BOUND BY THOSE TERMS, CONDITIONS AND OBLIGATIONS.
KIDDIE ACADEMY
FRANCHISING SYSTEMS, INC.
By:
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Witness Xxxxxxx X. Xxxxxx, President
APPLICANT
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Witness Applicant
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Witness Applicant
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Witness Applicant
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