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EXHIBIT 10.47
FRANCHISE AGREEMENT
BY AND BETWEEN
REMEDY INTELLIGENT STAFFING, INC.
AND
--------------
DATED
__________ __, 20__
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TABLE OF CONTENTS
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PAGE
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1. DEFINITIONS.
1
2. GRANT OF FRANCHISE.
7
3. TERRITORIAL RIGHTS.
7
4. TERM AND RENEWAL.
10
5. FEES.
11
6. COMMENCEMENT AS A
REMEDY FRANCHISEE.
16
7. TRAINING.
16
8. EMPLOYMENT,
BILLING, COLLECTION AND PAYMENT OF TEMPORARY EMPLOYEE EXPENSES.
17
9. ADDITIONAL SERVICES
TO BE PROVIDED BY FRANCHISOR.
19
10. MARKS.
20
11. RELATIONS.
22
12. INDEMNIFICATION.
23
13. CONFIDENTIAL INFORMATION.
24
14. MINIMUM PERFORMANCE STANDARDS AND OFFICE DEVELOPMENT
REQUIREMENTS.
26
15. IMAGE AND OPERATING STANDARDS.
27
16. INSURANCE.
29
17. STRATEGIC NATIONAL ACCOUNT CUSTOMERS.
30
18. ADVERTISING AND BRAND DEVELOPMENT.
31
19. ACCOUNTING, REPORTS, FINANCIAL STATEMENTS.
34
20. PERIODIC REVIEWS, INSPECTIONS AND AUDITS.
35
21. COMPUTERIZED MANAGEMENT AND OPERATIONAL SYSTEM.
36
22. TRANSFER.
37
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23. TERMINATION.
41
24. RIGHTS AND OBLIGATIONS AFTER TERMINATION OR EXPIRATION.
44
25. ENFORCEMENT.
45
26. NOTICES AND PAYMENTS.
49
27. ACKNOWLEDGMENTS.
50
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EXHIBIT "A" FRANCHISE LOCATIONS
EXHIBIT "B" TERRITORY
EXHIBIT "C" MINIMUM PERFORMANCE STANDARDS
EXHIBIT "D" OFFICE DEVELOPMENT REQUIREMENTS SCHEDULE
EXHIBIT "E" GUARANTY, INDEMNIFICATION AND ACKNOWLEDGMENTS
EXHIBIT "F" SOFTWARE LICENSE AGREEMENT
EXHIBIT "G" GROSS MARGIN SCHEDULE
ii
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REMEDY INTELLIGENT STAFFING, INC.
FRANCHISE AGREEMENT
This
Franchise Agreement (this "AGREEMENT"), is made effective as of
_____________, 200__, ("EFFECTIVE DATE"), through ________, 20__,
by and between
Remedy Intelligent Staffing, Inc., a California corporation and
wholly-owned
subsidiary of RemedyTemp, Inc., having its principal place of
business at 101
Enterprise, Aliso Viejo, California 92656 ("FRANCHISOR"), and
______________________________________________________________________
_____________________________________, (residing at / having its
principal place
of business at) __________________________________ ("FRANCHISEE")
with reference
to the following facts:
RECITALS
WHEREAS,
Franchisor owns a unique format and system relating to the
establishment and operation of personnel and employment staffing
and placement
businesses utilizing the Marks (hereinafter defined) (the
"System");
WHEREAS,
Franchisor identifies the System by means of the Marks, and
Franchisor, through its advertising and marketing programs, its
high-quality
service, and the System, has established a national reputation and
a demand for
the personnel and employment-related services it makes available to
business and
industry under the Marks;
WHEREAS,
Franchisee desires to obtain the benefits of the System and the
right to operate a Franchised Business (hereinafter defined) using
the Marks
designated by Franchisor, upon the terms and conditions herein set
out; and
WHEREAS,
Franchisee understands and acknowledges the importance of
Franchisor's high standards of quality and service and the
necessity of
operating the Franchised Business in conformity with Franchisor's
standards and
specifications.
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" means Franchisor's monthly accounting period,
which
currently generally varies from twenty-eight (28) to thirty-five
(35) days (but
may be as long as forty-two (42) 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
shall be the portion of Franchisor's monthly accounting period
which ends with
the term of this Agreement.
<PAGE>
"ADJUSTED
GROSS MARGIN DOLLARS" means Gross Temporary Employment Billings
minus all Temporary Employee Expenses attributable to Temporary
Employees for a
given time period.
"AFFILIATE" means any company directly or indirectly owned or
controlled
by or under common control with Franchisor.
"APPROPRIATE FRANCHISEE" means, with respect to any customer,
the
franchisee operating a Remedy franchised business within whose
protected
geographic area that customer's business is situated.
"CALCULATION YEAR" means, for the first Calculation Year, the
twelve (12)
fiscal month period beginning on the first day of the first fiscal
month in
which Franchisee commences operations of the Franchised Business,
and, for
subsequent Calculation Years, each consecutive twelve (12) month
period
thereafter during the term of this Agreement.
"COMPUTER
SYSTEM" means (a) the computer hardware required by Franchisor
for the operation of the Franchised Business and use of the
Software, (b) data,
audio, video, and voice storage, retrieval, and transmission
systems for use at
the Franchised Business; (c) printers and other peripheral devices;
and (d)
archival back-up systems.
"CONFIDENTIAL INFORMATION" means all customer and associate lists,
sales
and promotional information, employee lists, financial information
furnished or
disclosed to Franchisee by Franchisor, certain software and data
contained
therein, the Remedy Operating Manual, Websites, and all other
information that
Franchisor deems to be confidential or proprietary with respect to
Franchisor,
the System, or 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 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 proprietary
information of
Franchisor.
"COVERED
BUSINESS" means Temporary Employment services or Direct-Hire
Employment services or similar businesses.
"DIRECT-HIRE BILLINGS" means for a given time period the amounts
received,
directly or indirectly, from or in connection with all Direct-Hire
Employment
services, consultation, assistance or sales provided from, through,
or
attributable to the Franchised Business regardless of where or to
whom provided,
including bona fide refunds and adjustments.
"DIRECT-HIRE EMPLOYEE" means an individual placed into a
Direct-Hire
Employment position by the Franchised Business.
2
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"DIRECT-HIRE EMPLOYMENT" means placement of an individual for
employment
directly with a company or firm during which time such individual
is not an
employee of Franchisor or Franchisee.
"FRANCHISED BUSINESS" means the business franchised under, and
conducted
in accordance with, this Agreement.
"FRANCHISEE'S SHARE" means an amount of money determined in
accordance
with Section 5.2. Franchisee's Share shall be calculated during
each Accounting
Period beginning with the Accounting Period in which Franchisee
commences
operations of the Franchised Business.
"FRANCHISEE'S SPLIT" means a percentage of Adjusted Gross Margin
Dollars
and Subcontractor Profit determined in the Gross Margin Schedule
used to
calculate Franchisee's Share (before any of the deductions set
forth in Section
5.2 hereof).
"FRANCHISOR'S SHARE" shall be an amount of money, paid to
Franchisor,
equal to the sum of (i) Franchisor's Split of the Adjusted Gross
Margin Dollars,
determined according to the Gross Margin Schedule set forth in
Section 5.6, (ii)
ten percent (10%) of Direct-Hire Billings during an Accounting
Period, (iii)
Franchisor's Split of Subcontractor Profit during an Accounting
Period, and (iv)
ten percent (10%) of Temporary-to-Hire Conversion Fees during an
Accounting
Period.
"FRANCHISOR'S SPLIT" means a percentage of Adjusted Gross Margin
Dollars
and Subcontractor Profit as set forth in the Gross Margin Schedule
used to
calculate Franchisor's Share.
"GENERAL
APPROVED SERVICES" means the services indicated below, by
checking the appropriate box [ONLY ONE BOX SHOULD BE CHECKED], that
Franchisee
is approved to offer to customers from the Franchised Business
under the Marks
in accordance with the terms of this Agreement:
[ ]
General Clerical
Employment Services
[ ]
General Light
Industrial Employment Services
[ ]
Both General
Clerical Employment Services and General Light
Industrial Employment Services
"GENERAL
CLERICAL EMPLOYMENT SERVICES" means general clerical and
administrative Temporary Employment services, including such
services as
Franchisor shall from time to time designate in the Remedy
Operating Manual, or
otherwise in writing, as General Clerical Employment Services.
"GENERAL
LIGHT INDUSTRIAL EMPLOYMENT SERVICES" means general light
industrial and logistics Temporary Employment services, including
such services
as Franchisor shall from time
3
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to time designate in the Remedy Operating Manual, or otherwise in
writing, as
General Light Industrial Employment Services.
"GROSS
TEMPORARY EMPLOYMENT BILLINGS" means the total amount of Gross
Billings received or receivable from the placement of Temporary
Employees with
customers through the Franchised Business, including bona fide
refunds and
adjustments, during a particular time period.
"GROSS
BILLINGS" means 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 provided, including, without
limitation, services
of Temporary Employees and Direct-Hire Employees, including bona
fide refunds
and adjustments.
"GROSS
MARGIN FLOOR" means a Gross Margin Percentage of twenty-one
percent
(21%).
"GROSS
MARGIN PERCENTAGE" means the percentage obtained by dividing
Adjusted Gross Margin Dollars for a given time period by Gross
Temporary
Employment Billings for that period. For example, if Adjusted Gross
Margin
Dollars for a given time period are $250,000 and Gross Temporary
Employment
Billings for that time period are $1,000,000, then the Gross Margin
Percentage
is 25%.
"GROSS
MARGIN SCHEDULE" means the schedule of Gross Margin Tiers,
dollar
amounts, and Franchisor's Split and Franchisee's Split as set forth
in Exhibit G
hereto.
"INITIAL
FRANCHISE FEE" means a franchise fee of Twenty-Five Thousand
Dollars ($25,000.00) for each Territory. 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" means a fifteen (15) year period beginning on the
Effective
Date, as further described in Section 4.1.
"LOCATION"
means the office or location 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. Franchisee may request, and
Franchisor may
approve, additional Location(s) for the operation of the Franchised
Business
within the Territory, and in such circumstances Exhibit A shall be
amended to
include the address(es) of such additional Location(s).
"MANAGER"
means 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.
4
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"MARKS"
means such trademarks, service marks, trade names, logotypes,
or
other commercial symbols, including but not limited to the marks
"REMEDY" and
"REMEDY INTELLIGENT STAFFING", and such other trademarks, service
marks, trade
names, logotypes, or other commercial symbols as are now designated
(and may
hereinafter be designated by Franchisor in writing) for use in
connection with,
and in identifying, the System. Franchisee acknowledges that the
Marks do not
include the trademarks, service marks, trade names, logotypes, or
other
commercial symbols used in connection with Non-Mark Businesses.
"MINIMUM
PERFORMANCE STANDARDS" means the minimum required amount of
Adjusted Gross Margin Dollars specified in Exhibit C attached
hereto and
incorporated herein by this reference.
"NATIONAL
BUSINESS CONFERENCE" means a meeting of Franchisor's
franchisees
to be held from time to time at Franchisor's discretion.
"NON-MARK
BUSINESSES" means Temporary Employment and Direct-Hire
Employment service businesses, or any other business, that are not
operated
using the Marks, and that operate under other trademarks, service
marks, trade
names, logotypes, or commercial symbols including, but not limited
to the mark,
"RemX".
"PROTECTED
CUSTOMER" means a customer situated within the geographic area
that has been granted to another franchisee of Franchisor under a
franchise
agreement with Franchisor for all business other than Direct-Hire
Employment
services.
"REMEDY
OPERATING MANUAL" means the Franchisor's confidential
operations
manual containing the Confidential Information, specifications,
standards and
procedures, as amended from time to time by Franchisor, by which
the Franchisee
shall conduct the Franchised Business. Franchisor shall have the
right to
provide the Remedy Operating Manual, including Franchisor's
confidential
automated library, procedural help system as well as any hardcopy
operating
manuals, in any format it chooses (including, but not limited to,
hard copy, CD,
or online).
"RENEWAL
AGREEMENT" means 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 ten (10) years.
"SOFTWARE"
means such computer software designated from time to time by
Franchisor for use in connection with the Franchised Business.
"SPECIAL
SERVICES" means such Temporary Employment services, which may
be
some (but not all) of the services encompassed within, or services
in addition
to, General Clerical Employment Services or General Light
Industrial Employment
Services.
"STRATEGIC
NATIONAL ACCOUNT CUSTOMERS" means any customer designated as
such by Franchisor, based upon Franchisor's sole determination
that, because
such customer conducts its business at multiple locations and is
deemed of
strategic importance by Franchisor, the account,
5
<PAGE>
services and pricing of such customer shall be negotiated and
secured either (i)
by Franchisor or (ii) with Franchisor's assistance, approval and
oversight.
"SUBCONTRACTOR PROFIT" means all amounts billed for a given time
period to
a customer for services provided to the customer by subcontractors,
minus the
amounts paid to subcontractors for the provision of Temporary
Employee services
to such customer through the Franchised Business.
"TECHNOLOGY FEE" means a monthly fee paid to Franchisor each
Accounting
Period in the amount of Three Hundred Dollars ($300) for the first
Location of
the Franchised Business, and One Hundred Fifty Dollars ($150) for
each
additional Location of the Franchised Business.
"TEMPORARY
EMPLOYEE" means an employee placed into a Temporary Employment
position by the Franchised Business.
"TEMPORARY
EMPLOYEE EXPENSES" means all wages, payroll taxes, workers'
compensation insurance premiums or accruals, expenses and related
charges,
longevity pay, sick pay, holiday pay, state employment charges,
accruals 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, and any other costs and
expenses
attributable to Temporary Employees.
"TEMPORARY
EMPLOYMENT" means employment with a company or firm other than
for a Direct-Hire Employment position, during which time such
employee remains
the employee of Franchisor.
"TEMPORARY-TO-HIRE CONVERSION FEES" means for a given time period
the
amounts received, directly or indirectly, in connection with the
conversion of
employees from Temporary Employment positions to Direct-Hire
Employment
positions with the same customer through the Franchised Business,
including bona
fide refunds and adjustments.
"TERRITORY" means the protected geographic area, described or
identified
in Exhibit B to this Agreement and incorporated herein by this
reference, within
which the license granted under this Agreement is exclusive to the
Franchisee.
"TERRORISM
LAWS" means Executive Order 13224 issued by the President of
the United States, the Terrorism Sanctions Regulations (Title 31,
Part 595 of
the U.S. Code of Federal Regulations), the Foreign Terrorist
Organizations
Sanctions Regulations (Title 31, Part 597 of the U.S. Code of
Federal
Regulations), the Cuban Assets Control Regulations (Title 31, Part
515 of the
U.S. Code of Federal Regulations), the USA PATRIOT Act, and all
other present
and future federal, state and local laws, ordinances, regulations,
policies,
lists and any other requirements of any governmental authority
(including,
without limitation, the United States
6
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Department of Treasury Office of Foreign Assets Control) addressing
or in any
way relating to terrorist acts and acts of war.
"UNCOLLECTIBLE AMOUNTS" means all gross amounts receivable by
Franchisor
and due from a customer of the Franchised Business, which amounts
remain
uncollected for a period of one hundred twenty (120) days or more,
or such other
period of time as Franchisor may specify in the Remedy Operating
Manual.
"WEBSITE"
means a group of related documents that can be accessed through
a common internet address.
2. GRANT OF FRANCHISE.
Franchisor
hereby grants to Franchisee the right, and Franchisee hereby
accepts the obligation, to establish and operate a Franchised
Business according
to the terms and conditions in this Agreement, and to use, solely
in connection
therewith, the Marks and the System, as they may be changed,
improved, and
further developed from time to time.
3. TERRITORIAL RIGHTS.
3.1.
LOCATION. Franchisee shall conduct the Franchised Business from
the
Location. 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 the Location is leased to the Franchisee, such lease must be
fully assignable
to Franchisor, at Franchisor's option, upon termination or
expiration of this
Agreement, and Franchisee shall provide copies of the executed
lease to
Franchisor. Franchisee shall commence operations at and from the
Location within
ninety (90) days after the date of this Agreement.
3.2.
TERRITORY. During the term of this Agreement, Franchisee shall
have
the right to provide General Approved Services within the Territory
under the
Marks and System. During the term of this Agreement Franchisor
shall not: (a)
establish, nor license any other person to establish, another
Remedy franchise
or license from a location within the Territory providing all
General Approved
Services (although certain General Clerical Employment Services and
General
Light Industrial Employment Services may be provided); (b) conduct,
or license
any other person to conduct, all General Approved Services
(although certain
General Clerical Employment Services and General Light Industrial
Employment
Services may be provided) within the Territory under any marks or
system,
including the Marks and System; or (c) conduct, or license any
other person to
conduct, Special Services under the Marks; in each case except as
otherwise
provided in this Agreement.
3.3.
RESTRICTIONS.
3.3.1. TEMPORARY EMPLOYEES. Franchisee's license under this
Agreement with respect to Temporary Employees is limited to
providing only
General Approved Services (and, if approved, Special Services)
within the
Territory. Franchisee may, upon receiving prior written approval
from
Franchisor, provide General Approved Services (and, if approved,
Special
7
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Services) for Temporary Employees outside the Territory, subject to
the
provisions of Sections 3.3.2 and 3.3.3 below. Franchisee shall not
provide
Temporary Employment services to any customer located in a
geographic area
granted to another franchisee of Franchisor.
3.3.2. PROTECTED CUSTOMERS. If Franchisee provides Temporary
Employment services to a customer located outside the Territory,
but in a
geographic area which subsequently becomes a geographic area
granted to another
franchisee of Franchisor, such customer shall become a Protected
Customer of the
other franchisee. If Franchisee sells Temporary Employment services
to a
Protected Customer, upon being notified thereof, Franchisee shall
immediately
relinquish all sales and service rights associated with such
Protected Customer
to the Appropriate Franchisee for such Protected Customer in the
manner provided
in Section 3.3.3 below.
3.3.3. PROTECTED CUSTOMER RELINQUISHMENT PROCEDURES. In the
event
Franchisee is notified that it is providing Temporary Employment
services to a
Protected Customer, Franchisee shall:
(i) Coordinate
the replacement 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 replacement on the Protected
Customer; and
(ii) Within ten (10)
days of notification, and prior to the
replacement, (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
replacement of temporary employees.
3.3.4. DIRECT-HIRE EMPLOYMENT. Franchisee may offer and sell
Direct-Hire Employment services to customers with physical
locations within the
Territory, or upon receipt of Franchisor's prior written consent,
outside the
Territory. Franchisee may not, however, provide to any customer
located in the
geographic territory of another franchisee of Franchisor, a
Direct-Hire Employee
who is already employed within such geographic area as a Temporary
Employee of
such other franchisee.
3.3.5. ADVERTISING AND PROMOTIONAL MATERIALS. In addition to
the
provisions of Section 18 in this Agreement regarding advertising
and promotional
materials, Franchisor and Franchisee agree, with respect to the
placement of
advertising and promotional materials:
(i) By
Franchisor. All advertising and promotional materials
created, placed, and/or distributed by Franchisor may
appear in media distributed in, or may be directed to
customers and associates and prospective customers and
associates located within, the Territory, including on
Franchisor's website or any related website.
8
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(ii) By Franchisee.
All advertising and promotional materials
created,
placed, and/or distributed in connection with
the Franchised Business shall be directed primarily
toward customers and associates or prospective customers
and associates located within the Territory, but may not
be placed and/or distributed to geographic areas outside
the Territory that have been granted to another
franchisee of Franchisor, or that are serviced by a
Franchisor-owned office offering Temporary Employment or
Direct-Hire Employment services.
3.4.
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, and license others to own and operate, any
businesses outside the Territory, including Temporary
Employment and Direct-Hire Employment service businesses,
under any marks and systems, including the Marks and System;
(ii) Own and operate,
and license others to own and operate,
businesses under other marks and other systems (including
Non-Mark Businesses and Special Services not under the Marks)
providing Temporary Employment and Direct-Hire Employment
services, which may be located within or outside the Territory
notwithstanding such businesses' proximity to the Location or
their actual or threatened impact on sales from the Franchised
Business; provided, however, that except as provided in
Section 3.4 (iv), Franchisor shall not provide all General
Approved Services within the Territory under any marks
(although certain General Clerical Employment Services and
General Light Industrial Employment Services may be provided);
(iii) Offer and sell, and license others to offer and sell,
Direct-Hire Employment services to customers located anywhere,
whether within or outside the Territory, under any marks and
systems, including the Marks and System;
(iv) after an
acquisition or merger by Franchisor or its Affiliate
of or with another business or entity, or after Franchisor or
its Affiliate is acquired by or merged or consolidated with
another entity, operate any business of any kind, whether
located within or outside the Territory, including businesses
offering and selling all General Approved Services under other
marks, notwithstanding the proximity of any such businesses to
any Location operated by Franchisee; provided, that neither
Franchisor
nor any successor shall conduct all General
Approved Services in the Territory under the Marks (although
certain General Clerical Employment Services and General Light
Industrial Employment Services may be provided);
9
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(v) Provide
billing, collecting, payroll, accounting services and
financing of receivables to other firms; and
(vi) Negotiate and
enter into contracts with Strategic National
Account Customers to provide services offered by the
Franchised Business, as further described in Section 17.
3.5.
FRANCHISEE'S RIGHTS TO SPECIAL SERVICES. If Franchisor develops
and
offers any Special Services under the Marks to be provided in the
Territory,
Franchisor shall offer Franchisee the right to offer and provide
such Special
Services from the Franchised Business. Franchisee acknowledges
that, in order to
provide Special Services, Franchisor may impose upon Franchisee,
among other
things, different financial, qualification, training, fee
structure, and other
terms from those with respect to Franchisee's provision of General
Clerical
Employment Services and General Light Industrial Employment
Services. Franchisee
shall not offer any Special Services (or individual Special
Services) unless and
until Franchisee has obtained Franchisor's prior written approval.
If Franchisee
rejects or fails to accept Franchisor's offer to provide Special
Services, then
Franchisee agrees that Franchisor may provide, or license others to
provide,
Special Services within the Territory under the Marks or otherwise.
The
provisions of this Section 3.5 shall not apply to Special Services
under marks
other than the Marks, which Special Services Franchisor shall have
the right to
offer, or to license others to offer, anywhere, including within
the Territory.
4. TERM AND RENEWAL.
4.1.
INITIAL TERM. The Initial Term shall commence on the Effective
Date
and, unless terminated sooner pursuant to the provisions of this
Agreement,
shall expire on the fifteenth (15th ) anniversary of the Effective
Date.
4.2.
RENEWAL TERMS - FRANCHISEE'S OPTION. Subject to the conditions
of
this Section 4, so long as Franchisee has complied to Franchisor's
satisfaction
with this Agreement throughout the Initial Term, and is in full
compliance with
this Agreement when the Initial Term expires, Franchisee shall have
the option
to enter into a Renewal Agreement. Franchisee's option to enter
into a Renewal
Agreement shall be contingent upon: (a) Franchisee's execution of
general
releases, in form satisfactory to Franchisor, of all claims against
Franchisor
and its Affiliates and each of their respective successors,
assigns, officers,
directors, employees and agents; (b) execution of personal
guarantees and
acknowledgements of the obligations contained in this Agreement by
shareholders
or equity owners of Franchisee, in form satisfactory to Franchisor;
and (c)
Franchisee's compliance with and satisfactory completion of
Franchisor's
then-current qualification and training requirements and standards
for new
franchisees under the System. The terms of the Renewal Agreement,
including,
without limitation, the financial terms and conditions which
provide for the
compensation to both Franchisor and Franchisee, shall be the same
as the terms
set forth in Franchisor's then-current form of franchise agreement
for a new
Remedy franchise, except that, under the Renewal Agreement, (i) the
provisions
applicable to further renewals shall not apply, (ii) no initial or
renewal
franchise fee shall be charged the Franchisee, and (iii) the
Territory shall
remain the same.
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4.3.
RENEWAL TERMS - PROCEDURES. Franchisee shall notify Franchisor
in
writing of its desire to enter into a Renewal Agreement no earlier
than three
hundred sixty (360) days and no later than two hundred seventy
(270) 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 Renewal
Agreement.
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, and all other agreements between
Franchisee and
Franchisor and its Affiliates, to Franchisor's satisfaction. If so,
Franchisor
shall then deliver to Franchisee (a) a Renewal Agreement (which may
consist of a
standard franchise agreement, together with a renewal addendum);
(b) general
release forms; (c) personal guarantee and acknowledgement forms;
and (d) any
ancillary agreements and documents then customarily used by
Franchisor in
granting Remedy franchises of the same or similar type granted by
this
Agreement.
4.3.2. FRANCHISEE'S RESPONSIBILITIES. Franchisee shall execute
or
have executed the agreements, releases, and guarantees and
acknowledgements
described in Section 4.3.1 and deliver the executed documents to
the Franchisor
within thirty (30) days of Franchisee's receipt thereof.
Franchisee's failure to
execute and deliver the agreements, releases, and guarantees
and
acknowledgements within such thirty (30) day period shall
constitute
Franchisee's election not to enter into a Renewal Agreement.
4.4. NO
RENEWAL AGREEMENT. In the event that Franchisee does not enter
into a Renewal Agreement, Franchisee shall comply with all
provisions of this
Agreement that apply upon expiration, including, without
limitation, the
provisions of Sections 13.2 and 24 hereof.
5. FEES.
5.1.
INITIAL FRANCHISE FEE. Upon execution of this Agreement,
Franchisee
shall pay Franchisor the Initial Franchise Fee. Except as provided
in Section
7.3 below, the Initial Franchise Fee shall be non-refundable in
consideration of
administrative and other expenses incurred by Franchisor in
granting this
franchise and for Franchisor's lost or deferred opportunity to
franchise others.
5.2.
FRANCHISEE'S SHARE, UNCOLLECTIBLE AMOUNTS, AND COLLECTION
EXPENSES.
Following the end of each Accounting Period, Franchisee's Share
shall be the sum
of (i) Adjusted Gross Margin Dollars, (ii) Direct-Hire Billings,
(iii)
Subcontractor Profit, and (iv) Temporary-to-Hire Conversion Fees
less the
following amounts:
(i) The
Franchisor's Share;
(ii) The Technology
Fee;
(iii) All Uncollectible Amounts (plus interest as provided in
Section 5.4 below) under the Credit Limit (as defined in
Section 8.2.2) on a pro-rata basis in
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<PAGE>
accordance with Franchisee's Split, and all Uncollectible
Amounts (plus interest as provided in Section 5.4 below) over
the Credit Limit in total;
(iv) Franchisee's
share of all legal and other out-of-pocket
collection expenses incurred by Franchisor related to the
Franchised Business billings;
(v) the Brand
Development Fund contribution as set forth in
Section 18 below; and
(vi) at Franchisor's
discretion, any other amounts owed by
Franchisee to Franchisor or any of its Affiliates under this
Agreement or otherwise.
The
amounts described above are owed by Franchisee to Franchisor. To
the
extent that any payments are received from a customer during the
Accounting
Period on account of receivables previously deemed Uncollectible
Amounts,
Franchisee's Share shall be increased accordingly, and such
payments shall be
applied first to all Uncollectible Amounts for such customer up to
and including
the Credit Limit, and then to all Uncollectible Amounts for such
customer over
the Credit Limit.
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, or a customer
serviced by the Franchised Business, to Franchisor or any Affiliate
of
Franchisor under this Agreement or otherwise is not paid within
sixty (60) days
after due, Franchisor shall be entitled, in addition to the amount
due, to
payment of an amount equal to the lesser of one and one-half
percent (1.5%) 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.
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 AND FRANCHISEE'S SHARE.
Franchisor's Share and Franchisee's Share shall be calculated in
accordance with
the Gross Margin Schedule. The dollar amounts in the Gross Margin
Schedule, the
amount of the Technology Fee, the $1,000 annual limit on additional
software
system fees set forth in Section 5.8, and the amount of the
Screening Software
fee set forth in Section 5.10 shall be adjusted annually, in
January of each
calendar year of this Agreement, beginning in January 2007, based
on the United
States ECI (employment cost index) published by the United States
Department of
Labor, Bureau of Labor Statistics (All Industries, June
1989=100).
12
<PAGE>
5.6.1. DETERMINATION OF ADJUSTED GROSS MARGIN DOLLARS. The
Franchisor's Split and Franchisee's Split at the end of each
Accounting Period
shall be determined according to the Gross Margin Schedule by
applying the sum
of (1) the total Adjusted Gross Margin Dollars earned during that
Accounting
Period; plus (2) the total Adjusted Gross Margin Dollars earned
during all
previous Accounting Periods (if any) during the same Calculation
Year (the
"CUMULATIVE GROSS MARGIN CALCULATION").
The
initial Franchisor's Split during Franchisee's first Calculation
Year
will be forty percent (40%), and the initial Franchisee's Split
during
Franchisee's first Calculation Year will be sixty percent (60%),
until such time
that the Cumulative Gross Margin Calculation during such
Calculation Year
warrants a change to a different tier ("TIER") of the Gross Margin
Schedule
granting Franchisor and Franchisee a different split percentage of
Adjusted
Gross Margin Dollars. Commencing in the first Accounting Period of
Franchisee's
second Calculation Year, and in the first Accounting Period of each
subsequent
Calculation Year, the Franchisor's Split and Franchisee's Split as
of the end of
the prior Calculation Year shall be the percentages of Adjusted
Gross Margin
Dollars used to begin each Calculation Year. Such percentage shall
remain in
effect during a Calculation Year until such time that the
Cumulative Gross
Margin Calculation during such Calculation Year warrants a change
to a different
Tier of the Gross Margin Schedule. Franchisee's Share payments for
an Accounting
Period will be cumulative for the Calculation Year, less any
payments previously
made to Franchisee for such Calculation Year.
EXAMPLE
1
For
example, assuming, immediately following the tenth Accounting
Period
of a Calculation Year, Gross Temporary Employment Billings for the
Calculation
Year are $5,000,000, Temporary Employee Expenses are $3,900,000 and
previous
payments of Franchisee's Share for such Calculation Year equal
$700,000. In this
example, Adjusted Gross Margin Dollars equal $1,100,000, and Gross
Margin
Percentage equals 22%. The $1,100,000 amount falls in Tier 9 of the
Gross Margin
Schedule, which provides that Franchisee's Split will be 68% of
Adjusted Gross
Margin Dollars (or $748,000), and Franchisor's Split will be 32% of
Adjusted
Gross Margin Dollars (for a Franchisor's Share of $352,000). The
tenth
Accounting Period Payment to Franchisee for this Calculation Year
would be
$748,000 less (i) any adjustments pursuant to Section 5.2 or
otherwise (assume
$20,000 for this example) and (ii) $700,000 of previous payments of
Franchisee's
Share for such Calculation Year, which equals a Franchisee's Share
payment
during that Accounting Period of $28,000.
Using the
example above, if during the tenth Accounting Period, any
Direct-Hire Billings, Temporary-to-Hire Conversion Fees or
Subcontractor Profit
from the Franchised Business were received, then Franchisor's Share
would be
increased by ten percent (10%) of any such Direct-Hire Billings
and
Temporary-to-Hire Conversion Fees, and by the applicable
Franchisor's Split of
the Subcontract Profit. Therefore, if during the tenth Accounting
Period
Direct-Hire Billings received were $25,000, and Subcontractor
Profit received
was $15,000, then Franchisor's Share would be increased by $2,500
(10% of
$25,000) and $4,800 (32% of $15,000), for a total Franchisor's
Share of
$359,300, and Franchisee's Share would be increased
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<PAGE>
by $22,500 (90% of $25,000) and $10,200 (or 68% of $15,000), for a
total
Franchisee's Share of $60,700.
5.6.2.
FRANCHISEE SPLIT BONUS. If Franchisee's Gross Margin Percentage
for
a Calculation Year reaches certain levels as set forth in the chart
below,
Franchisee's Split shall be increased by the bonus percentage as
set forth in
the chart. For example, if Franchisee's Adjusted Gross Margin
Dollars are in
Tier 4 of the Gross Margin Schedule, entitling Franchisee to a
Franchisee Split
of 63%, and if the Gross Margin Percentage is 27%, then
Franchisee's Split shall
be increased according to the bonus chart below by 2%, for a total
Franchisee
Split of 65%. Notwithstanding the foregoing, or anything herein to
the contrary,
under no circumstances shall Franchisee's Split be greater than
seventy percent
(70%).
<TABLE>
<CAPTION>
GROSS MARGIN
PERCENTAGE
BONUS ON FRANCHISEE'S SPLIT
<S>
<C>
23%
1%
27%
2%
31%
3%
</TABLE>
5.6.3. GROSS MARGIN FLOOR. Notwithstanding anything herein to
the
contrary (except with respect to Strategic National Accounts
described in
Section 5.6.4 below), Franchisor's Share shall be calculated in the
Gross Margin
Schedule using the actual Gross Margin Percentage, so long as the
Gross Margin
Percentage is equal to or greater than the Gross Margin Floor. If
the Gross
Margin Percentage is less than the Gross Margin Floor, then the
Gross Margin
Floor shall be used for purposes of calculating Franchisor's Share,
and
Franchisee's Share will be calculated by subtracting Franchisor's
Share
(calculated using the Gross Margin Floor), and the amounts set
forth in Section
5.2 above, from Adjusted Gross Margin Dollars.
EXAMPLE
2
For
example, assuming Gross Billings for the Calculation Year are
$5,000,000 and Temporary Employee Expenses are $4,200,000, then
Adjusted Gross
Margin Dollars equal $800,000, and Gross Margin Percentage equals
16% (i.e.,
less than the Gross Margin Floor of 21%). The $800,000 amount falls
in Tier 6 of
the Gross Margin Schedule, which provides that Franchisor's Split
will be 35% of
Adjusted Gross Margin Dollars, for a Franchisor's Share of
$280,000. However,
because the Gross Margin Percentage is less than the Gross Margin
Floor,
Franchisor's Share will be calculated using the Gross Margin Floor
(21% of Gross
Billings of $5,000,000 or $1,050,000). Therefore, applying the Tier
6
Franchisor's Split of 35%, Franchisor's Share will be $367,500.
Franchisee's
Share then will be calculated by deducting, among other things (as
described in
Section 5.2), Franchisor's Share ($367,500) from the actual
Adjusted Gross
Margin Dollars of $800,000. The amount to be paid to Franchisee
shall be as
described in Section 5.6.1 above.
5.6.4. STRATEGIC NATIONAL ACCOUNT CUSTOMERS. All Adjusted Gross
Margin Dollars attributable to Strategic National Account Customers
will be
included in the determination of the applicable Tier of the Gross
Margin
Schedule. For all Gross Billings
14
<PAGE>
attributable to Strategic National Account Customers, if including
such amounts
with respect to the Strategic National Account Customer would have
the effect of
lowering Franchisee's cumulative Gross Margin Percentage, such
amounts will not
be included in calculating Franchisee's Gross Margin Percentage. If
including
such amounts would have the effect of raising Franchisee's
cumulative Gross
Margin Percentage, or not changing Franchisee's cumulative Gross
Margin
Percentage, then such amounts shall be included in calculating
Franchisee's
Gross Margin Percentage.
5.7.
AGGREGATION OF ADJUSTED GROSS MARGIN DOLLARS OF OTHER BUSINESSES.
The
cumulative amount of Adjusted Gross Margin Dollars for purposes of
this Section
shall be the aggregate of such amounts for the Franchised Business
and other
Remedy Temporary Employment services businesses owned by
Franchisee, if any,
provided that, if Franchisee is a partnership, a corporation, or
limited
liability company, all of the partners, shareholders, or members,
as applicable,
of such other franchises must constitute all of the partners,
shareholders, or
members of Franchisee under this Agreement.
5.8.
TECHNOLOGY FEE. Franchisee shall be required to pay the
Technology
Fee to Franchisor each Accounting Period. The Technology Fee shall
be used to
compensate Franchisor for providing the Software updates and
support as further
described in Section 21.2 below. The Technology Fee shall be
deducted from
Franchisee's Share in accordance with Section 5.2. In addition, if
Franchisor
purchases or develops additional software systems for use in
connection with the
Franchised Business, Franchisor may charge, and Franchisee shall be
required to
pay, an additional fee for such systems; provided, however, that
during the
Initial Term, additional fees for such systems shall be limited to
a total of
One Thousand Dollars ($1,000) during each Calculation Year.
5.9.
ALLOCATION OF CERTAIN 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, Temporary Employees
furnished by
other Remedy Temporary Employment services businesses, and/or other
Non-Mark
Businesses. Franchisor shall have the right to allocate to
Franchisee a portion
of the premiums for such insurance in Franchisor's sole discretion,
based on the
workers' compensation claims history of Temporary Employees
furnished by the
Franchised Business during the term of this Agreement in relation
to the
workers' compensation claims history of Temporary Employees
furnished by other
Remedy Temporary Employment services businesses or other Non-Mark
Businesses
covered by such blanket policy of insurance. Franchisor may
similarly allocate
state unemployment insurance premiums in its sole discretion, based
on
unemployment claim experience of Temporary Employees furnished by
the Franchised
Business during the term of this Agreement in relation to such
claims from other
Remedy Temporary Employment services businesses or other Non-Mark
Businesses in
the state in which the Territory is situated.
5.10.
SCREENING SOFTWARE. If Franchisee offers General Clerical
Employment
Services from the Franchised Business, Franchisee will be required
to obtain
access to the Remedy employee-screening software (the "SCREENING
SOFTWARE"). The
fees for access to the Screening Software will include a one-time
initial fee
and an annual license fee, in each case, at
15
<PAGE>
the then-current rate. Franchisee shall be required to pay separate
Screening
Software initial license fees and annual license fees for each
Location operated
by the Franchised Business. If Franchisee offers General Light
Industrial
Employment Services from the Franchised Business, and if Franchisor
elects to
require employee-screening software in connection with General
Light Industrial
Employment Services, Franchisee may be required to obtain access to
such
software and pay fees (in addition to the fees described above with
respect to
the Screening Software) associated therewith.
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;
(iii) Obtain all required licenses and 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 AND CONTINUING TRAINING.
7.1.1. Franchisor shall furnish for Franchisee and the 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. 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. The
training shall
include extensive classes in all aspects of the Franchised
Business, and shall
take place at Franchisor's corporate headquarters, or such other
location or
additional places as may be designated by Franchisor.
7.1.2. After the initial training program, Franchisee will
provide
continuing training to its employees at its cost to ensure that
Franchisee's
employees can satisfactorily operate under the System.
16
<PAGE>
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 Business.
The parties hereby expressly recognize and acknowledge that only
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, and refund to
Franchisee the
amount of the Initial Franchise Fee paid to Franchisor, less a
non-refundable
training fee of Seven Thousand Five Hundred Dollars
($7,500.00).
7.4.
TRAINING MATERIALS. Franchisor shall make available to
Franchisee
from time to time, at Franchisor's expense, certain training and
related
materials for use in the operation of the Franchised Business. If
Franchisee
prepares or proposes to prepare any training or related materials
for use in
connection with the Franchised Business (whether for colleagues,
associates,
customers or otherwise), Franchisee shall submit samples of such
materials to
Franchisor for Franchisor's review and prior written approval.
Franchisee shall
not use any such materials without obtaining Franchisor's prior
written
approval. Once approved by Franchisor, any training and related
materials shall
become and remain the sole property of Franchisor, and must be used
at all times
in the form and manner as Franchisor may specify.
7.5.
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, and 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
Franchisor, and
Franchisor shall pay all Temporary Employee Expenses. Franchisee
understands
that all such Temporary Employee Expenses will be deducted from
Gross Temporary
Employment Billings to calculate Adjusted Gross Margin Dollars.
17
<PAGE>
8.1.2. BILLINGS AND COLLECTIONS. Franchisor shall bill
customers,
and collect all payments made by customers, for all Direct-Hire
Employment and
Temporary Employment placement services, including pre-employment
testing and
other services, provided by the Franchised Business (including
all
Temporary-to-Hire Conversion Fees). Franchisee shall not bill or
collect any
amounts from customers, but shall, at Franchisor's direction,
actively assist
and cooperate with Franchisor in Franchisor's billing and
collections efforts.
Franchisor shall endeavor in good faith to collect all billings
made by
Franchisor to customers of the Franchised Business. The payments
and accounts
receivable that arise from all Direct-Hire Employee and Temporary
Employee
placement services provided by the Franchised Business shall be the
property of
Franchisor.
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, and in
compliance
with Franchisor's policies and procedures. Prior to placement of
any Temporary
Employee through the Franchised Business, Franchisee shall obtain
from such
Temporary Employee a current application and required documentation
for
employment in a form satisfactory to Franchisor. Franchisee shall
maintain the
original application and required documentation 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
and required
documentation on request. Without the prior written consent of
Franchisor,
Franchisee shall not use Temporary Employees to operate
Franchisee's business.
Franchisee shall be subject to the indemnification provisions of
Section 12
hereof for any failure by Franchisee to comply with applicable
employment law,
or with Franchisor's employment policies and procedures.
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
customer and to set
credit limitations for customers (a "CREDIT LIMIT"). Franchisee
shall not
provide services to customers deemed uncreditworthy or customers
whose accounts
Franchisor has deemed delinquent and shall not extend credit to any
customer in
any amount exceeding the Credit Limit set by Franchisor for such
customer. All
Uncollectible Amounts up to and including the Credit Limit shall be
allocated
pro-rata among Franchisor and Franchisee in accordance with
applicable
Franchisor's Split and Franchisee's Split. In the event that
Franchisor incurs
collection expenses or any other losses or Uncollectible Amounts in
connection
with any customer or account for which Franchisee has failed to
adhere to
Franchisor's credit policies and practices and/or exceeded the
Credit Limit,
Franchisor shall be entitled to deduct all such expenses, losses
or
Uncollectible Amounts solely from Franchisee's Share pursuant to
Section 5.2. In
addition, all of Franchisee's owners required by Franchisor to
execute the
Guaranty, Indemnification and Acknowledgment attached hereto as
Exhibit E shall
be personally and individually responsible for all losses or
Uncollectible
Amounts beyond the Credit Limit.
18
<PAGE>
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 customer 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 billings made by
Franchisor.
8.3.
NATURE OF COLLECTIONS RELATIONSHIP. Franchisor shall endeavor in
good
faith to collect all billings made by Franchisor for accounts of
the Franchised
Business, 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 or the provision of any advice or guidance to
Franchisee.
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.
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 to at least five hundred (500) businesses
prior to and upon
commencement of the Franchised Business and an opening press
release.
9.2.
MANAGEMENT ASSISTANCE. Franchisor shall provide the services of
a
Franchisor representative or another franchisee authorized by
Franchisor to
assist Franchisee in learning to manage 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
Confidential Information, absent written approval from Franchisor,
Franchisee is
prohibited from retaining outside operations and marketing
consultants, other
than legal and accounting counsel.
9.3.
GUIDANCE BY FRANCHISOR. 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 marketing methods; (c) operating
procedures used by
Remedy franchisees; (d) acquisition of supplies, insurance and
other products
and services; (e) administrative, bookkeeping, accounting and
general operating
and management procedures; (f) employee training; (g) use of the
Software; and
(h) such other matters as Franchisor deems necessary, appropriate
or advisable.
Franchisor may furnish guidance through Franchisor's confidential
Remedy
Operating Manual, bulletins, written correspondence, meetings, or
personal
consultations with Franchisee. Upon Franchisee's reasonable
request, Franchisor
may furnish
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additional guidance with respect to the operation of the Franchised
Business.
Franchisor shall in no case be considered an agent, consultant or
advisor of
Franchisee by reason of any guidance provided to Franchisee, and no
such
guidance will be deemed a representation or warranty as to the
future or
potential business success 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.
REMEDY OPERATING MANUAL.
9.5.1. CONFIDENTIAL NATURE. Franchisor's confidential Remedy
Operating Manual contains Confidential Information related to the
operation of
Franchisor's business, the Franchised Business, and other Remedy
franchisees,
and Franchisee is strictly prohibited from (a) disclosing the
Remedy Operating
Manual or any part thereof to any person or entity other than
Franchisee's
employees or (b) using the Remedy Operating Manual or any part
thereof for any
purpose other than in connection with operating the Franchised
Business, in each
case without Franchisor's prior express written consent. Any such
disclosure or
use shall be deemed to constitute a material breach of this
Agreement and shall
constitute cause to exercise any remedies for breach of this
Agreement by
Franchisee, including without limitation, termination of this
Agreement by the
Franchisor pursuant to Section 23.2 of this Agreement.
9.5.2. CONTENTS. The Remedy 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 Franchisee and the operation of the Franchised
Business. The
Remedy 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 Remedy Operating Manual from
time to time
to reflect changes in the various attributes associated with or
constituting
part of the 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 Remedy Operating Manual, as modified by Franchisor from time to
time.
Franchisor may deduct a fee for reimbursement of expenses from
Franchisee's
Share for any failure to strictly comply with the Remedy Operating
Manual in
order to compensate Franchisor for investigating and remedying any
such
non-compliance.
10. MARKS.
10.1.
OWNERSHIP. Franchisee acknowledges that Franchisee's right to
use
the Marks is derived solely from this Agreement and is limited to
the conduct of
business by Franchisee pursuant to and in compliance with this
Agreement and all
applicable standards,
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specifications, and operating procedures prescribed by Franchisor
from time to
time. 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. In the
event that Franchisor authorizes and licenses Franchisee to use
other
trademarks, service marks, trade names, logotypes, or other
commercial symbols
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,
products, invoices, and materials and in connection with
advertising and
marketing of the Franchised Business pursuant to the
specifications, standards
and operating procedures set forth in the Remedy 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.
(c) Franchisee acknowledges that the goodwill of the Marks is
dependent on exceptional 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
the brand
standards of the System.
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 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. Franchisee shall
obtain such
fictitious or assumed name registrations as applicable law
requires
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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, or as
Franchisor may request.
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. If it becomes advisable at any time, in
Franchisor's sole discretion, for Franchisor to modify or
discontinue use of any
or all of the Marks, and/or use one or more additional or
substitute trademarks,
service marks, trade names, logotypes, or other commercial symbols,
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
liability or obligation whatsoever with respect to Franchisee's
modification or
discontinuance of any Mark, or the costs associated with changing
any materials
in connection with 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 Remedy 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 a party,
provided
Franchisor receives timely written notice of any such claim from
Franchisee, has
the right to fully control the defense, settlement or compromise 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
othe
