EXHIBIT 10.2
REZcity.com
REZcity Plus
A Division of Rezconnect Technologies, Inc.
FRANCHISE AGREEMENT
EXHIBIT B TO THE OFFERING CIRCULAR
THIS CONTRACT IS SUBJECT TO ARBITRATION
---------------------------------------
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TABLE OF CONTENTS
I.
GRANT.................................................................2
II.
TERRITORY.............................................................2
III. TERM AND
RENEWAL......................................................3
IV. BUSINESS
LOCATION.....................................................4
V. TRAINING AND
ASSISTANCE...............................................5
VI. USE OF SYSTEM AND
MARKS...............................................6
VII. OPERATIONS
MANUAL.....................................................7
VIII. CONFIDENTIAL
INFORMATION..............................................7
IX. MODIFICATION OF THE
SYSTEM............................................8
X.
ADVERTISING...........................................................8
XI. PAYMENTS TO
FRANCHISEE................................................9
XII. BILLING, ACCOUNTING AND
RECORDS.......................................9
XIII. STANDARDS OF QUALITY AND
PERFORMANCE.................................10
XIV. FRANCHISOR'S OPERATIONS
ASSISTANCE...................................11
XV.
INSURANCE............................................................12
XVI.
COVENANTS............................................................14
XVII. DEFAULT AND
TERMINATION..............................................15
XVIII. RIGHTS AND DUTIES OF
PARTIES UPON EXPIRATION OR TERMINATION..........17
XIX. TRANSFERABILITY OF
INTEREST..........................................18
XX. DEATH OR INCAPACITY OF
FRANCHISEE....................................20
XXI. RIGHT OF FIRST
REFUSAL...............................................21
XXII. INDEPENDENT CONTRACTOR AND
INDEMNIFICATION...........................21
XXIII.
NON-WAIVER...........................................................22
XXIV.
NOTICES..............................................................22
XXV. COST OF ENFORCEMENT OR
DEFENSE.......................................23
XXVI.
APPROVALS............................................................23
XXVII. ENTIRE
AGREEMENT.....................................................23
XXVIII.SEVERABILITY AND
CONSTRUCTION........................................24
XXIX. APPLICABLE
LAW.......................................................24
XXX.
ARBITRATION..........................................................25
XXXI. FORCE
MAJEURE........................................................26
XXXII. FRANCHISEE DEFINED;
GUARANTY.........................................26
XXXIII.CAVEAT...............................................................26
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XXXIV.
ACKNOWLEDGMENTS......................................................26
EXHIBITS
--------
A. MAP OF TERRITORY B.
COMMISSION SCHEDULE
C. GUARANTY AND ASSUMPTION OF
OBLIGATIONS D. PROMISSORY NOTE
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RezConnect Technologies, Inc.
FRANCHISE AGREEMENT
This
Franchise Agreement (this "Agreement"), made this ____ day of
___________, 20___ by and between RezConnect Technologies, Inc., a company
operating under the laws of the State of New
York, and having its principal
place of business
at 560 Sylvan
Avenue, Englewood Cliffs, New Jersey 07632
(hereinafter referred to as "RezCity.com" or "Franchisor"),
and
__________________________
an
individual/partnership/corporation/limited
liability company established in the State of
____________,
whose principal
address is
__________________________________________________ (hereinafter
referred to as
"Franchisee").
W I T N E S S E T H:
WHEREAS,
Franchisor has
developed a system
("System"), identified
by
the Mark "RezCity.com"
relating to the establishment, development and
operation
of a business specializing in
the sale of Internet based marketing tools such as
banner advertisements on the home page and calendar
pages of the
REZcity.com
website, content licensing, creating websites with unlimited
pages featuring a
shopping cart order system
and other forms of Internet Advertising. In addition
to the services described, the franchisee can elect to operate a
consignment
business online and provide an auction model through the eBAY Marketplace
(Hereby described as REZcity Plus). We all provide tools such as real-time
reservations, confirmations and appointment scheduling, business-to-consumer
negotiating of retail products and services.
Other services include search
engine submission and domain
name site
registration. All of
these services are
designed for small to medium
sized businesses and local community organizations.
Our travel services feature online 24/7 reservations/bookings for Airlines,
Hotels, Cars, Limos, Tours and Cruises products with
over 55 bookable engines
("Services")
WHEREAS, the
distinguishing
characteristics
of the System
include,
without limitation,
the RezCity.com home
page located at http://www.rezcity.com
featuring "city guides" for over fifty three thousand (53,000) cities and
communities; the proprietary Internet marketing package which includes the
Services, the RezCity.com
Confidential Operations Manual ("Manual"); methods for
recruiting, hiring and training employees; inventory, cost controls, record
keeping, all of which may be changed, improved and further developed by
Franchisor from time to time;
and
WHEREAS, Franchisor
is the owner of the
right, title and interest,
together with all the goodwill connected thereto, in and to the trademarks
"RezConnect.com" and "RezCity.com" and other
trademarks, domain
names, service
marks and trade dress, associated logos, commercial symbols, trade names,
trademarks, service marks and trade dress as are now, or in the future,
designated as an integral
part of the System (the "Mark[s]"); and
WHEREAS, Franchisee
understands
and acknowledges the importance of
Franchisor's high and uniform
standards of quality,
operations and service
and
the necessity of operating
the Franchised
Business in strict
conformity
with
Franchisor's standards and
specifications; and
WHEREAS, Franchisor
is the licensee of
certain proprietary
software
from 411Web.com, Inc., with the right to sub-license the software to its
franchisees; and
WHEREAS, Franchisor
expressly disclaims the making of and
Franchisee
acknowledges that it has not
received nor relied upon any warranty or guarantee,
express or implied, as to the revenues, profits or success of the business
venture contemplated by this
Agreement. Franchisee acknowledges that it has read
this Agreement and
Franchisor's Uniform
Franchise Offering Circular and that it
has no knowledge of any
representation by Franchisor or its officers, directors,
shareholders, employees or agents that are
contrary to the
statements made
in
<PAGE>
Franchisor's Uniform
Franchise Offering Circular or to the terms hereof.
NOW, THEREFORE,
the parties, in
consideration of the undertakings and
commitments of each party to
the other set forth in this Agreement, hereby agree
as follows:
I.
GRANT
-----
A
Franchisor hereby
grants to Franchisee,
subject to the terms
and conditions hereof, the right and license to
operate a business offering the
Services to local businesses, community organizations, not-for-profit's,
merchants and professionals
within their franchised territory.
B In
consideration
of the payments received and the mutual
covenants contained in this Agreement,
Franchisor hereby
grants to Franchisee,
and Franchisee hereby accepts, a license for the territory hereinafter
described. Franchisor hereby grants to Franchisee, and Franchisee hereby
accepts, the right, license and privilege of using "RezCity.com" and
"RezConnect.com" and other Marks of Franchisor solely and only upon and in
connection with activities
authorized under this
Agreement. Franchisee
agrees
not to make or authorize any
use, direct or indirect, of the Marks for any other
purpose or in any other way.
Franchisee
acknowledges that
Franchisor may grant
other licenses for the use of the Marks or
utilize the Marks in any manner
whatsoever subject to the
provisions of this Agreement.
II.
TERRITORY
---------
A The territory granted shall be as described on Exhibit A
("Territory"). During this Agreement term, Franchisor will not establish or
license any other person or
entity to provide Internet advertising services or
other related services
operating under the
RezCity.com trademark
and utilizing
the System within the
Territory; provided, however, that Franchisor shall
retain
the right:
1. to establish
other Franchises at any location outside of
Franchisee's Territory, as Franchisor, in its sole discretion, deems
appropriate;
2. to establish,
and license
others to establish businesses
under other systems using
other proprietary marks, which businesses may offer or
sell services and products
which are competitive with or different from
those
services and products offered
by the Franchised
Business, and which
businesses
may be located within or outside the Territory; Rezconnect Technology which
consists of a
Net-to-Phone-to-Net application and WEB 2 Web applications are
and
will be used by various
companies and websites
which may compete
directly with
the franchisee in his market
or on the Internet. We
are not providing exclusive
use of the applications to Franchisees but
will not offer our technology using
REZcity platform other than
thru the Franchisee.
3. to contract with sales organizations and other Sales
Consultant(s) to allow the Sales Consultants and its sales force to engage
in
the sale of Internet
advertising including the Services; provided, however,
that
Sales Consultants shall not
be licensed to utilize the RezCity.com trademark as
its principal trade name under which it operates, but may be permitted to
identify itself as a
"RezCity.com-Authorized Dealer"; provided further, that
the
Franchisee shall receive a commission based
upon the sale of Services and other
Internet advertising by each Sales Consultant occurring in Franchisee's
Territory in accordance with
Section V of this Agreement. Sales organization is
optional and not required for franchisee to accept, unless already in
marketplace and all deals
will continue.
B
Upon execution
of this Agreement , Franchisee shall pay a
franchise fee
("Franchise
Fee") to
Franchisor
of
___________________________________
DOLLARS ($_________). Said Franchise Fee
shall be deemed fully earned
and non-refundable upon execution of this Agreement
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as consideration for expenses incurred by Franchisor in
furnishing
assistance
and services to Franchisee
and for Franchisor's lost or deferred opportunity to
grant this franchise to other third parties, except as may be specifically
provided in this Agreement
and/or any exhibit attached hereto.
The initial franchise
fee is based on a per
unit sale. A unit can
be
defined as a town or city with a
population
of 25,000 or less.
For a town
or
city with 25,000 or less in
population, the
franchise fee is $1,500. For towns
or cities greater than 25,000
in population, a
surcharge of $0.06 per person in
population is charged.
For example, if a town
or city has 15,000 in population,
the franchise fee would be $1,500; For a town with 30,000 in
population,
the
franchise fee would be
$1,800. The franchise fee is due and payable immediately
upon execution of the
Franchise Agreement.
The population is
based on the most
current U.S. Census Bureau
statistics. In the event a Franchisee selects REZcity
Plus, they are required to
purchase a minimum of three (3) contiguous units at a
minimum cost of
$4,500.
Upon the commencement of Franchisee's Franchised Business, Franchisee
shall pay to Franchisor a "Web Hosting Fee"
totaling One Hundred
Fifty Dollars
($150.00) for each
franchised
unit. The Web Hosting Fee is an annual
fee, due
from Franchisee to Franchisor
on each anniversary
year of the signed
franchise
Agreement. The Web Hosting Fee will increase each year (5%), to reimburse
Franchisor for its costs, including labor, maintenance and communications,
related to web hosting.
If Franchisee
does not pay
re-occurring
hosting
fee,
franchisee will be in default
of the Franchise Agreement.
C
Franchisee
acknowledges that
because complete and detailed
uniformity under many varying conditions may not be possible or practical,
Franchisor specifically
reserves the right and privilege, at its sole discretion
and as it may deem in the best interests of all concerned in any specific
instance, to vary standards for any System franchisee based upon the
peculiarities of the
particular site or circumstance, population of trade
area,
density of population,
business potential, existing business practices or
any
other condition which Franchisor deems to be of importance to the
successful
operation of such
franchisee's
business. Franchisee shall not be entitled
to
require Franchisor to disclose or grant to Franchisee a like or similar
variation
hereunder.
III.
TERM AND RENEWAL
----------------
A
This Agreement
shall be effective and
binding for an initial
term of five (5) years from
the date of its execution.
B
Franchisee shall have the right to renew this franchise at
the
expiration of the initial term of the franchise for two (2) additional
successive terms of five (5) years
each, provided that all of the following
conditions have been
fulfilled:
1. Franchisee
has, during the entire term of this Agreement,
substantially complied with
all its provisions;
2. Franchisee
has given notice of renewal to Franchisor as
provided below;
3. Franchisee has
satisfied all monetary
obligations owed by
Franchisee to Franchisor, or any affiliate of Franchisor, and has timely met
these obligations throughout
the term of this Agreement;
4. Upon renewal, Franchisee has executed
Franchisor's
then-current form of the Franchise Agreement or has executed renewal
documents
at Franchisor's election (with appropriate modifications to reflect the fact
that the Franchise Agreement
relates to the grant of a renewal franchise), which
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Franchise Agreement shall supersede this Agreement in all respects,
and the
terms of which may differ
from the terms of this
Agreement including,
without
limitation, a different percentage Sales Commission; provided, however,
Franchisee shall not be
required to pay the then-current initial Franchise Fee
or its equivalent;
and
5. Franchisee
has complied with Franchisor's then-current
qualifications and training
requirements.
C If
Franchisee
desires
to renew this franchise at the
expiration of this Agreement,
Franchisee shall give Franchisor written notice of
its desire to renew at least six (6)
months, but not more than twelve (12)
months, prior to the expiration of the
initial term of this
Agreement.
Within
thirty (30) days after its receipt of such timely notice, Franchisor shall
furnish Franchisee with
written notice of Franchisee's right to obtain a renewal
franchise. If the notice indicates that Franchisor
will permit
Franchisee
to
obtain a renewal franchise, Franchisee's right to obtain a renewal
franchise
will be contingent on continued
full compliance with this Agreement and any
other agreement between Franchisee and Franchisor and/or Franchisor's
affiliates. If, during the term of this
Agreement,
Franchisee
has failed
to
substantially comply with this Agreement, Franchisor may refuse to grant
Franchisee a renewal
agreement. Franchisor
will provide notice which states the
reasons for Franchisor's
decision. If Franchisor determines that
Franchisee is
not eligible to obtain a renewal franchise, but that the nature of the
noncompliance may be cured so that Franchisor is willing to consider
granting
Franchisee a renewal
franchise, Franchisor
will notify Franchisee
accordingly.
Franchisee will be eligible
for a renewal
franchise if Franchisee has cured the
noncompliance within thirty
(30) days of Franchisor's notice of noncompliance to
Franchisee.
IV.
BUSINESS LOCATION
-----------------
A
Franchisee must locate
the business office for the Franchised
Business from a premises
which is located
within the
Territory ("Premises").
Franchisee's acceptance of a franchise for the operation of a Franchised
Business at the location of the Premises is based on Franchisee's own
independent investigation of its suitability for a Franchised Business.
Franchisee may establish the office for the Franchised Business within the
majority owner's residence
(subject to local
zoning laws).
Franchisor does not
evaluate the location. If a Franchisee selects REZcity Plus, Franchisee is
required to lease a storage
facility that is
located within the
same territory
as the Franchised
Business.
B
Franchisee agrees, at
its expense, to do or
cause to be done
the following within ninety
(90) days after the date of this Agreement:
1. obtain all required
building, utility,
sign, health,
and
business permits and licenses and any other
required permits and
licenses,
if
any;
2. construct all
required improvements
to the Premises,
and
decorate Franchisee's Premises in compliance
with layouts and
specifications
approved by Franchisor, if
any;
3. purchase
and install all required computer equipment,
furniture, furnishings and
signs;
4. purchase the
opening inventory of office supplies; and
5. hire personnel required for Franchisee's Franchised Business,
if any.
C
Franchisee must not open the Franchised Business and commence
business until:
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1. all of the
obligations pursuant
to the other
provisions
of
Section IV. of this Agreement
have been fulfilled;
2. Franchisor
has received a fully
executed form of
collateral
assignment of telephone
numbers and listings, if required;
3. Franchisee
and its personnel have
satisfactorily
completed
initial training;
.........4. Franchisee has furnished Franchisor with certification
that
all required building,
utility, sign, health, sanitation, business and other
permits and licenses have been obtained from any applicable governmental
authority, including any certificate of occupancy and approvals
necessary
to
operate a business (if any);
and
.........5. Franchisor
has been furnished with copies of all insurance
policies required by this Agreement, or such other evidence of insurance
coverage and payment of
premiums as Franchisor may request.
D........Franchisee
must comply with these
conditions and be prepared
to open the Franchised Business within one hundred twenty (120) days after
signing this Agreement and only after having satisfactorily completed the
initial training program as
specified in Section V.
V.
TRAINING
AND ASSISTANCE
-----------------------
A
Franchisor shall make training available to Franchisee and
its
manager, who shall successfully complete each required training and
familiarization course conducted. Initial training shall cover
aspects of the
operation of a Franchised
Business, and shall be conducted in three
(3) phases
("Phase[s] I -
III"):
Phase I
This Phase is
a self-study
course lasting several
days depending upon Franchisee's technical background
and time spent
each day reviewing the materials.
Franchisee must pass a
proficiency
examination
over
the Internet
via an online tutorial program to
successfully complete Phase I.
Phase II
For REZcity:
This Phase lasts
twelve (12) hours over
several weeks online.
Franchisee
may elect to
visit
REZcity.com Corporate
Headquarters,
or any other
location that the Franchisor operates from including a
location selected by the Area Representative, if one
exits in franchisee's
market for in-class
training.
In-class training is
recommended
but not
mandatory.
This Phase is designed to provide Franchisee with an
understanding of
products and services as well as
sales and public relations skills.
For REZcity Plus: This Phase lasts eighteen (18) hours
over
several weeks
online. Franchisee may elect to
visit REZcity.com Corporate Headquarters, or any other
location that the Franchisor operates from including a
location selected by the Area Representative, if one
exists in franchisee's
market for in-class
training.
In-Class training is
recommended
but not
mandatory.
This Phase
begins
with
twelve
(12)
hours of
REZcity.com training
and is followed by an additional
six (6) hours of training on the auction program.
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Phase III
Prior to beginning
operation, Franchisor
or its Area
Representative shall provide Franchisee
with
counseling and offer
its experience and
knowledge on
pertinent issues
Franchisee has in
establishing
the
Franchised Business.
Franchisor
shall be available
during normal
business hours and can be reached by
fax, telephone and/or the Internet.
If Franchisee selects in-house training, all expenses of attendance
at
the initial training by Franchisee and its employees including, without
limitation, travel, and room and board expenses, shall be the sole
responsibility of Franchisee.
If Franchisee
selects online
training, the
only
expense associated is a long
distance telephone call into the conference line.
B As
part
of ongoing assistance,
Franchisor will make
available
a telephone line which
Franchisee may use to communicate with Franchisor during
normal business hours to request advice
regarding sales matters, business or
technical issues.
C
Franchisor may provide and may require that previously
trained
and experienced
Franchisees
or their managers or employees
attend and successfully complete refresher training
programs
or seminars; provided online or in-house.
VI.
USE OF SYSTEM AND MARKS
-----------------------
A
Franchisee
acknowledges
that the
name "REZcity.com" and
"REZconnect.com""
and the Marks licensed
hereunder are owned by
Franchisor and
Franchisee further
acknowledges that valuable goodwill is attached to such
trade
names, trademarks and service marks and
that Franchisee
will use same only
in
the manner and to the extent
specified by this Agreement.
B
Franchisee acknowledges, and will not c ontest, Franchisor's
or
any affiliate's exclusive ownership and rights to each and
every aspect of the
System. Franchisee's right to market the System and
establish the
Franchised
Businesses is specifically limited to the Territory, and is subject to the
supervision and control of Franchisor as provided herein. Said right shall
terminate upon the expiration
or termination of this Agreement.
C
Franchisee
acknowledges that
Franchisor's
Marks constitute
a
significant aspect of the System. Without Franchisor's written approval,
Franchisee agrees that such Marks will not be
used as the name, or
part of any
name, of any corporation, partnership or any entity of proprietorship under
which Franchisee transacts business. Franchisee's use of the Marks are
subject
to the control and approval
of Franchisor in every other respect.
D If
a claim is
asserted by others of a prior use of the
Marks
with respect to a similar
business within the Territory, Franchisor may require
Franchisee to participate in the defense of such claims, at Franchisor's
expense. Franchisee shall
give written notice to Franchisor within five (5) days
of acquiring knowledge
concerning the use by
others within the Territory of the
same or confusingly similar
names and Marks.
E If
Franchisor
at any time, in its
sole discretion,
determines
that it is advisable for
Franchisee to modify or discontinue use of any Marks,
and/or use one or more additional or substantive trade names, trademarks,
service marks or other
commercial symbols, Franchisee agrees to comply
therewith
within a reasonable time
after notice thereof by Franchisor.
F
Franchisee shall
not establish a Website on the
Internet using
any domain name containing the words "REZconnect.com,"
"RezCity.com,"
"Ezdropoff.com" or any variation thereof without prior written consent from
Franchisor. Franchisor retains the sole right to
advertise on the Internet and
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create a Website using the RezCity domain names (Including: rezcity.com,
rezity.biz, rezcity.net,
rezcity.tv). Franchisee acknowledges that Franchisor is
the owner of all right, title and interest in and to such domain names as
Franchisor shall designate in the Manual. Franchisor retains the right to
pre-approve Franchisee's use of linking and framing between
Franchisee's
Web
pages and all other
Websites. If requested by Franchisor, Franchisee shall,
within five (5) days,
dismantle any frames
and links between
Franchisee's
Web
pages and any other
Websites.
G If
you are a REZcity Plus Franchisee, you cannot own an
auction site from eBAY or any
other provider or sell
goods on behalf of a third
party under any condition. Violation of this prohibition will be grounds for
immediate termination of the
Franchise Agreement.
VII.
OPERATIONS MANUAL
-----------------
A
While this
Agreement is
in effect, Franchisor will loan to
Franchisee one (1) copy of the Manual containing mandatory and suggested
specifications, standards, operating procedures and rules
prescribed from time
to time by Franchisor for a Franchised Business and information relative to
other obligations of Franchisee.
Franchisor shall have
the right to add to and
otherwise modify the Manual from time to time to reflect changes in the
specifications, standards, operating procedures and rules prescribed by
Franchisor for a Franchised Business, provided that no such addition or
modification shall alter
Franchisee's
fundamental status and
rights under this
Agreement. Franchisor may make such additions or
modifications
without
prior
notice to Franchisee.
Franchisee shall
immediately, upon notice, adopt any such
changes.
B
The Manual shall,
at all times, remain the sole property of
Franchisor and shall promptly be returned
upon the expiration or termination of
this Agreement. Franchisee shall not make any
disclosure,
duplication or other
unauthorized use of manner
any portion of the Manual.
C
The Manual contains
proprietary
information of
Franchisor
and
shall be kept confidential by Franchisee both during the term
of the franchise
and subsequent to the
expiration or
termination of this
Agreement.
Franchisee
shall at all times ensure that its copy of the Manual be available on the
Premises in a current and
up-to-date manner. At all times that the Manual is not
in use by authorized
personnel, Franchisee shall maintain the Manual in a
locked
receptacle on the Premises, and shall only grant authorized personnel, as
defined in the Manual,
access to the key or
combination of such receptacle. In
the event of any dispute as to the contents of the Manual, the terms of the
master copy of the Manual
maintained by Franchisor at Franchisor's headquarters
shall be
controlling.
VIII.
CONFIDENTIAL INFORMATION
------------------------
A
Franchisor
possesses
certain
proprietary
confidential
information consisting of methods, techniques, formats, specifications,
procedures, information, systems, methods of business management, sales and
promotion techniques,
and knowledge of and
experience in operating a Franchised
Business (the "Confidential Information"). Franchisor shall disclose the
Confidential Information in the training
program, the Manual,
and in
guidance
furnished to Franchisee during this Agreement's term. Franchisee shall not
acquire any interest in the
Confidential
Information,
other than the right
to
utilize it in performing its duties during the term of this Agreement, and
Franchisee acknowledges that the use or duplication of the Confidential
Information in any other
business venture would
constitute an unfair
method of
competition. Franchisee acknowledges and agrees that the Confidential
Information is proprietary, includes Franchisor's trade secrets, and is
disclosed to Franchisee solely on the condition that Franchisee (and its
shareholders, partners, members and managers, if Franchisee is a
corporation,
partnership or limited
liability company) does hereby agree that
it: (a) shall
not use the Confidential Information in any other business or capacity; (b)
shall maintain the absolute confidentiality of the Confidential Information
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during and after the term of this
Agreement;
(c) shall not make
unauthorized
copies of any portion of the
Confidential
Information
disclosed in written
or
other tangible form; and (d)
shall adopt and implement all reasonable procedures
prescribed from time to time by Franchisor to prevent unauthorized use or
disclosure of the
Confidential Information. All ideas, concepts, techniques or
materials concerning the Franchised Business, whether or not protectable
intellectual property and whether created by or
for Franchisee or its owners or
employees, must be promptly disclosed to Franchisor and will be deemed
Franchisor's sole and exclusive property, part of the System and works
made-for-hire for Franchisor.
To the extent any item does not qualify as a "work
made-for-hire" for Franchisor, Franchisee shall assign ownership
of that item,
and all related rights to that item, to Franchisor and must sign whatever
assignment or other documents
Franchisor
requests to show
ownership or to help
Franchisor obtain
intellectual property rights in the item.
B
Franchisor reserves
the right to
require Franchisee to have
each of its shareholders,
officers, directors, partners, employees, members, and
managers, and, if Franchisee is an
individual,
Franchisee's spouse,
execute a
non-disclosure and
non-competition agreement in a form approved by
Franchisor.
IX.
MODIFICATION OF THE SYSTEM
--------------------------
Franchisee recognizes that from time to time hereafter,
Franchisor
may
change or modify the System
including, without
limitation, the adoption and use
of new or modified Marks or
copyrighted
materials,
new computer
hardware
and
software, equipment or new techniques and
that Franchisee
will accept and
use
for the purpose of this
Agreement any such changes in the System as if they were
part of this Agreement at the time of execution
hereof. Franchisee will make
such expenditures as such changes or
modifications in the System may reasonably
require. Franchisee shall not change the System in any way without written
permission of
Franchisor.
X.
ADVERTISING
-----------
A If
you are an individual Franchisee, you have the option to
make expenditures on advertising
within your
territory.
You may use your
own
advertising materials subject
to the approval of the Franchisor. Franchisor may
provide guidelines for conducting local
advertising and
promotional
programs,
and any deviations from such guidelines shall be approved by Franchisor in
writing prior to
use.
B As
a REZcity Plus
Franchisee,
you must contribute 1% of your
gross revenue to the
REZcity.com National Advertising Fund. There are no
REZcity
Plus Franchisees in the
network that do not contribute to this Fund. We estimate
that during the coming
fiscal year,
about 35% of the Funds
money will be spent
on media, 20% on the production of advertising materials, 20% on public
relations, 10% on sponsorships and 15% on administration. REZcity Corporate
Headquarters does not have to
spend a specified amount of Advertising Fund money
on advertising in your
geographic area. We will prepare an annual accounting
for
the Fund. You may review upon request once a year. The report will not be
audited. Most of the money in
the Advertising Fund will be spent during the year
in which it is contributed. Any unspent money will be retained in the
account
for use during the following
year. This goes into the OC at Item 11 not here.
C
Franchisee is
required to advertise continuously
in the
classified or Yellow Pages of
the local telephone directory. Franchisee shall do
so under the listings "Internet Services" or such other listings as deemed
appropriate by Franchisor.
When more than one (1)
Franchised Business
serves a
metropolitan area, classified advertisements shall list all Franchised
Businesses operating within the distribution area of such classified
directories. Each franchisee shall contribute its equal share in the
cost of
such advertisement. If required, Franchisee agrees to execute an agreement
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assigning such directory
listing to Franchisor,
utilizing a form
prescribed by
Franchisor, which shall become effective upon
termination or expiration of this
Agreement.
D
With respect
to any promotional materials or advertising
permitted hereunder, Franchisee shall not use in
advertising or any other form
of promotion, the copyrighted
materials, trademarks,
copyrights, service
marks
or commercial symbols of
Franchisor without
appropriate (C) or (R) registration
marks or the designations TM
or SM where applicable.
XI.
PAYMENTS TO FRANCHISEE
----------------------
A
Unless
Franchisor and
Franchisee agree in
writing
otherwise
for a specific account,
Franchisor shall pay to Franchisee, within fifteen (15)
days after the end of each
calendar month and according to the schedule as
contained in Exhibit B to
this Agreement,
fees for the sale of
each Service or
other Internet advertising services which are actually
received by
Franchisor
from each franchisee,
Sales Consultant or
directly from the end user based upon
sales within Franchisee's Territory (as delineated in Exhibit A) ("Sales
Commissions").
Notwithstanding the foregoing:
1. If Franchisee has
failed to perform in any material
respect
any material requirements under the terms of this Agreement,
Franchisee
shall
not be entitled to receive
Sales Commissions
until such
deficiencies have been
corrected to Franchisor's
reasonable satisfaction.
2.
Franchisee shall not
be entitled to share in or receive any
Sales Commissions based upon fees paid to Franchisor
in the Territory prior to
the time Franchisee
completes the initial
training program and commences
full
operations of the Franchised
Business.
B
All payments
under
this
Paragraph
shall immediately and
permanently cease after the expiration or termination of this Agreement,
although Franchisee shall receive all amounts which
have accrued to Franchisee
as of the effective date of
expiration or termination.
C
Franchisor's payments
to Franchisee shall be based on amounts
actually collected, not on payments accrued, due or owing. Franchisor shall
apply any payments received
from to any past due indebtedness owed to Franchisor
or its affiliates.
D.
Franchisee shall
not be allowed to set off amounts owed to
Franchisor for fees or
other amounts
due under this
Agreement
against any monies owed to Franchisee by Franchisor, which right
of set off is hereby expressly waived by Franchisee. Franchisor
shall be allowed to set off against amounts owed to Franchisee
for Sales Commissions
or other amounts due
under this Agreement
any monies owed to Franchisor.
E.
All Merchant fees and any third party charges to handle billing
are deductible from
monies owed franchisee
based on
reasonable
industry
standards.
XII.
BILLING, ACCOUNTING AND RECORDS
-------------------------------
A
During the term of
this Agreement,
Franchisor or its
agent,
will handle all of the
billing and invoicing
for the advertising
services
and
sales of Services through the
Franchised Business.
Franchisor will exercise all
reasonable efforts as it considers
appropriate to collect
amounts due for
the
Services or sales of other
products or services
performed in conducting the
Franchised Business. Franchisor may, in its discretion,
compromise,
settle,
discount, factor, write-off, assign to collection agencies or pursue
through
9
<PAGE>
legal action, all amounts due for Services provided through the Franchised
Business. After applying amounts owed by Franchisee to
Franchisor,
Franchisor
will pay to Franchisee
the commissions as specified in this Agreement and
any
other agreement between
Franchisee and Franchisor on a monthly basis. Franchisor
will withhold amounts due it under this
Agreement (or any other agreement).
Franchisor will pay such amount to Franchisee
by the fifteenth (15th) day of
each month based on the
collections Franchisee
has received for the immediately
preceding month. The date shall automatically be extended until the next
business day if the fifteenth
(15th) day of the month is a holiday, Saturday or
Sunday. Franchisor will simultaneously send Franchisee financial reports
(electronically or otherwise)
detailing the revenues billed and the amounts that
are applied as a setoff. Although Franchisor will try to collect all
receivables, there is no assurance or guarantee
as to the timing of
collection
or the ultimate success of
collection. Franchisor shall have no obligation other
than to exercise its standard
procedures
for collection of amounts due. Some
accounts are more reputable
and creditworthy
than others.
Franchisor does
not
warrant the timing or collectability of any amounts owed by anyone even if
Franchisor originally offered
the account to Franchisee.
B
During the term of
this Agreement,
Franchisee shall maintain
and preserve for the time
period specified
in the Manual,
full, complete and
accurate books, records and accounts in accordance
with the standard accounting
system prescribed by Franchisor in the Manual or otherwise in writing.
Franchisee shall retain during the term of this
Agreement and for three (3)
years thereafter all books and records related to the Franchised Business
including, without
limitation, invoices, payroll records, check stubs, sales
tax
records and returns, cash
receipts and disbursement journals, general ledgers,
state and federal income tax
returns, and any other financial records designated
by Franchisor or as required
by law.
C
Franchisee shall
supply
to Franchisor, or its designated
agent, on or before the fifteenth (15th) day of the following calendar
month/quarter, in a form approved by Franchisor,
a balance sheet as of
the end
of the last preceding
calendar month/quarter and an income statement for
such
calendar month/quarter and Franchisee's fiscal year-to-date. Additionally,
Franchisee shall, at its expense,
submit to Franchisor
within forty-five
(45)
days of the end of each
fiscal year during the term of this Agreement, a profit
and loss statement for such fiscal year and a balance
sheet as of the last day
of such fiscal year, prepared on a accrual basis including all adjustments
necessary for fair
presentation of the financial statements.
D
Franchisor or its
designated agent(s)
shall have the right,
at
all reasonable times, to examine and copy, at its
expense, the books,
records
and tax returns of
Franchisee. In
addition, Franchisor
shall have the right to
interview clients,
employees,
vendors and/or
suppliers. Franchisor
shall also
have the right, at any time, to have an
independent audit made
of Franchisee's
books, at Franchisor's
expense.
XIII.
STANDARDS OF QUALITY AND PERFORMANCE
------------------------------------
A
Franchisee understands
every detail of the
operation of
the
Franchised Business is
important, not only to Franchisee, but to Franchisor and
other franchisees in order to (i) develop and maintain high and uniform
operating standards;
(ii) increase the
demand for the Services, other services
and products offered by
Franchised Businesses; and (iii) increase the viewership
and consumer awareness of
local sites within the RezCity.com home page.
B
Franchisee agrees to comply with all requirements set forth in
this Agreement, the Manual and other written
policies supplied to Franchisee by
Franchisor. Mandatory
specifications,
standards, operating procedures and rules
prescribed from time to time by Franchisor in the Manual or otherwise
communicated to Franchisee in writing shall constitute provisions of this
Agreement as if fully set
forth herein. All
references herein to this Agreement
10
<PAGE>
shall include all such mandatory specifications, standards and operating
procedures and rules.
Franchisee shall
comply with the entire System including,
but not limited to, the
provisions of this Paragraph XIII.
C
Franchisee
recognizes that the
operation of a RezCity.com
business involves heavy
emphasis on sales soliciting and marketing. In addition,
if Franchisee is a franchisee
operating in a
metropolitan
market, Franchisee
understands there is
additional emphasis on developing, managing and soliciting
Sales Consultants.
D
Franchisee shall
offer
for sale and use at the Franchised
Business all types of
advertising
and Internet
products and related
services
that Franchisor from time to time authorizes and shall not offer for sale
or
sell or provide through the Franchised Business or the Premises which it
occupies any other
category of
services, supplies, merchandise, products or
accessories or use such Franchised Business for any purpose other than the
operation of a RezCity.com Franchised Business in full compliance with this
Agreement and the
Manual.
E
The Franchised
Business
shall,
at all times, be under the
direct supervision of Franchisee.
Franchisee
understands
that the
Franchised
Business may be operated on a
part-time or full-time basis. Full-time means the
expenditure of at least
thirty-five
(35) hours per week,
excluding vacation,
sick leave, etc. I
F
Franchisee shall
secure
and maintain in force all required
licenses, permits and certificates
relating to the
operation of the Franchised
Business and shall operate
the Franchised
Business in full
compliance with all
applicable laws, ordinances
and regulations including, without limitation, all
government
regulations.
G
All advertising
and promotional activities by Franchisee
in
any medium shall be conducted in a dignified manner and shall accurately
promote, describe and otherwise
represent the type,
quality and other features
of the services and related
support activities.
H
Franchisee shall
use only such client forms, invoices and
standardized contracts,
as are approved by
Franchisor. Franchisee
shall obtain
such forms from Franchisor or
from suppliers Franchisor has approved. Copies of
all client contracts and invoices
issued by Franchisee shall be submitted to
Franchisor on a daily
basis.
I
Franchisee shall
notify Franchisor
in writing within five (5)
days of the commencement of
any action, suit or proceeding, and of the issuance
of any order, writ,
injunction,
award or decree of any
court, agency or
other
governmental instrumentality,
including
action
against
professional
services/credentials
of any employee associated with Franchisee, which may
adversely affect the operation or financial condition of the Franchised
Business.
XIV.
FRANCHISOR'S OPERATIONS ASSISTANCE
----------------------------------
A
Franchisor or
Franchisor's
representative shall
make
periodic
visits to the Franchised
Business for the
purposes of consultation, assistance
and guidance of Franchisee in
various aspects of the operation and management of
the Franchised Business at the request of the
Franchisee.
The fee
associated
with Franchisor visiting Franchisee is $150 per day plus
all travel
expenses.
Franchisor and Franchisor's
representatives
who visit the
Franchised
Business
may prepare, for the benefit
of both Franchisor and Franchisee, written reports
with respect to such visits
outlining any
suggested changes or
improvements in
the operations of the Franchised Business and detailing any
defaults in such
operations which become evident as a result of any such
visit. A copy of
any
such written report may be
provided to Franchisee.
11
<PAGE>
B
Franchisor may
conduct research and testing to determine the
feasibility of new programs, market trends and the marketability of new
programs. Franchisee agrees to cooperate and
participate in such
research and
testing programs by test marketing new
programs and/or services at Franchisee's
Franchised Business and by providing
Franchisor
with timely reports
and other
relevant information
regarding research and testing programs. Franchisee agrees
to make reasonable efforts to
sell any products and services comprising the new
program.
XV.
INSURANCE
---------
A
Franchisee shall
procure, at its sole
expense, and maintain
in
full force and effect during
the term of this Agreement, an insurance policy or
policies protec
