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EXHIBI 10.13
ZLAND GMBH
BUSINESS PROGRAM FRANCHISE AGREEMENT (GERMANY)
This ZLAND GmbH BUSINESS PROGRAM FRANCHISE AGREEMENT (hereinafter referred to as
the "Agreement") is dated as of ______________, 2000, and is between
ZLand GmbH,
a German corporation whose principal office is located at
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ b
D - 81671 Munchen
Germany
- hereinafter referred to as "ZLand" -
and
- hereinafter referred to as "Franchisee" -
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whose address for purposes of this Agreement is:
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WHEREAS,
ZLand and its parent company, ▇▇▇▇▇.▇▇▇, Inc., a Delaware corporation, have
devised and continued to develop strategic internet products and services.
ZLand, Inc. is the holder of intellectual property rights in certain valuable
trade names, service marks and trademarks, including, without limitation, the
trade names ▇▇▇▇▇.▇▇▇ (TM) and ZLand , proprietary rights in software and
proprietary rights to information relating to methods of doing business.
▇▇▇▇▇.▇▇▇ has developed strategic internet products and services, particularly
the ▇▇▇▇▇.▇▇▇ (TM) product line of business applications, business methods,
technical knowledge, commercial ideas, advertising material, marketing
strategies, administrative procedures, business forms, employee training
techniques, which, taken together, provide the basis for the operation of a
proprietary business offering customers the ability to conduct commerce and
other business activities on the internet with minimal investment and low
monthly costs. ▇▇▇▇▇.▇▇▇ has expended time, effort and money in developing the
know-how and the method for this ZLand Business which today enjoys remarkable
goodwill in the United States of America. ZLand has the right to authorize the
adoption and use of the ZLand System in Germany and, thus, also in the
Territory.
WHEREAS,
Franchisee intends to adopt and use the ZLand System in the Territory. For this
purpose, Franchisee desires to use the ZLand System in the conduct of the ZLand
Business, including the ZLand Marks, advertising, marketing and sales programs
and techniques. Franchisee is aware of the fact that the foundation of the ZLand
System and the essence of this Agreement is Franchisee's adherence to ZLand's
standards and policies which provide for uniform operation and service of all
ZLand Franchisees through the ZLand System including, but not limited to,
selling only approved products and services; the use of only prescribed or
approved advertising; and strict compliance with established customer service
policies. Franchisee is aware that Franchisee's compliance with the foregoing
standards and policies, set forth herein and in the ZLand Business Manuals, in
conjunction with the ZLand Marks provides the basis for the valuable goodwill of
the ZLand System. Franchisee is furthermore willing to establish and maintain a
close personal working relationship with ZLand in the conduct of Franchisee's
ZLand Business and to perform the obligations contained in this Agreement.
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NOW, THEREFORE, the parties agree as follows:
1. Definitions
a) "BUSINESS MANUALS" shall mean the manual or manuals (including
the "Confidential Operations Manual" and others regardless of
title) containing policies and procedures to be adhered to by
Franchisee in performing under this Agreement. The Business
Manuals contain detailed information including:
(1) required operational procedures;
(2) sales methods;
(3) book keeping and accounting procedures and required
reports;
(4) business practices and policies; and
(5) other management and advertising policies.
A copy of the Business Manuals, particularly the Confidential
Operations Manual, with the presently valid text is attached to
this Agreement as Exhibit 1.
b) "GROSS SALES" means the total Dollar amount of all sales
(including but not limited to one time, recurring or any other
types of fees) by Franchisee or any similar business.
c) "MUTUAL ADJUSTMENT" means an adjustment to any fee or charge
specified under this Agreement, arrived at through good faith
negotiations between the parties, and reflecting a change of
more than 5 % in the general average living costs (as calculated
and published from time to time by the Statistisches Bundesamt)
from the Effective Date of this Agreement, or from the date of
the last adjustment to the fees and charges.
d) "PREMISES" means a business location acceptable to ZLand and
located in the "Territory", from which Franchisee conducts the
ZLand Business.
e) "TERRITORY" means the territory or territories described in
Exhibit 2 attached to this Agreement.
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f) "ZLAND BUSINESS" means strategic internet products and services
including the ▇▇▇▇▇.▇▇▇ (TM) product line of business
applications, business methods, technical knowledge, commercial
ideas, advertising material, marketing strategies,
administrative procedures, business forms, employee training
techniques, which, taken together, provide the basis for the
operation of a proprietary business offering customers the
ability to conduct commerce and other business activities on the
internet with minimal investment and low monthly costs.
g) "ZLAND MARKS" means the trade names, trademarks and service
marks, including marks that enjoy trade dress (get-up)
protection that ZLand designates, from to time, to be part of
the ZLand System. Copies of the current ZLand Marks are attached
to this Agreement as Exhibit 3.
h) "ZLAND SYSTEM" means an interdependent network composed of
ZLand, Franchisee, and any other people or companies that ZLand
has licensed to use any of the ZLand Marks and/or ZLand System.
ZLand System is a comprehensive marketing and operational system
prescribed by ZLand to be used in the conduct of the ZLand
Business, as set forth in this Agreement and the Business
Manuals, as amended from to time. The ZLand System shall
include, among other things, the ZLand Marks, advertising,
marketing and sales programs and techniques, training programs
and materials, artwork, graphics, lay-outs, slogans, names,
titles, text and other intellectual property that ZLand makes
available to Franchisee. ZLand may improve and/or change the
ZLand System from to time, including but not limited to, adding,
deleting or modifying elements of the ZLand System, establishing
categories or classifications of Franchisees and amending the
Business Manuals for the intended purpose of making the ZLand
System more effective, efficient, economical or competitive
and/or better serving the public.
2. Franchise Grant and Term
a) Basic Grant
ZLand grants to Franchisee, for the term stated in this
Agreement, the right, license and privilege to operate as a
ZLand Franchisee, which includes the following rights, licenses
and privileges:
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(i) to adopt and use the ZLand System in the Territory in
connection with the sale of those products and in
connection with those services which have been
designated by ZLand;
(ii) to advertise to the public that Franchisee is a
Franchisee of ZLand;
(iii) to operate the Territory under the ZLand System from the
premises.
ZLand shall not operate, nor authorize any other ZLand
franchisee to operate, at premises physically situated within
the Territory.
ZLand shall not actively sell, nor authorize any other ZLand
franchisee to actively sell, to accounts physically situated
within the Territory. ZLand and other ZLand franchisees shall,
however, be able to sell to accounts located within the
Territory, if, and inasfar as ZLand respectively other ZLand
franchisees are not actively selling to such accounts.
Franchisee shall not operate from any premises other than the
premises that have been approved by ZLand in writing.
Franchisee has received international disclosure documentation
from ZLand describing the franchise and ZLand System, and has
conducted its own review of the feasibility of the franchise in
the Territory.
Franchisee acknowledges its understanding of ZLand's basic
business policy that ZLand will grant franchises only to those
individuals who will work full time (or hire an acceptable full
time manager) in the operation of their franchised ZLand
Business. Thus, Franchisee shall either by herself/himself work
full time or hire an acceptable full time manager in the
operation of their franchised ZLand Business.
b) Term
The term of this Agreement shall begin on the Commencement Date.
The Commencement Date will be the date when Franchisee
satisfactorily completes the initial training session referred
to in Paragraph 6 of this Agreement. Furthermore, both parties
must have signed this Agreement.
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This Agreement shall continue for 5 years unless terminated
prior thereto by either party pursuant to the provisions hereof.
3. ZLand Marks
a) Grant of Trademark License
ZLand hereby grants to Franchisee the right during the term
hereof to use and display the ZLand Marks in accordance with the
provisions contained herein and in the Confidential Operations
Manual, solely in connection with the operation of the
franchised business. Franchisee shall not use or display the
ZLand Marks in connection with the performance of any other
service or the conduct of any activity outside the scope of the
franchised business.
Franchisee acknowledges that ZLand prescribes minimum standards
respecting the nature and quality of the goods and services used
by Franchisee in connection with which the ZLand Marks are used.
Franchisee agrees that as between ZLand and Franchisee, the
ZLand Marks are the exclusive property of ZLand. Franchisee now
asserts no claim and will hereafter assert no claim to any
goodwill, reputation or ownership thereof by virtue of
Franchisee's franchised or licensed use thereof or otherwise. It
is expressly understood and agreed that ownership and title of
the ZLand Marks and ZLand's manuals, bulletins, instruction
sheets, forms, methods of operation and goodwill are and, as
between ZLand and Franchisee, shall remain vested solely in
ZLand, and the use thereof is only co-extensive with the term of
this Agreement.
Franchisee acknowledges that the material and information now
and hereafter provided and/or revealed to Franchisee pursuant to
this Agreement (including in particular, but without limitation,
the contents of the Confidential Operations Manual) are
confidential trade secrets of ZLand and are revealed in
confidence, and Franchisee expressly agrees to keep and respect
the confidences so reposed, both during the term of this
Agreement and thereafter inasfar and as long as the material and
information will not become part of the public domain for which
Franchisee will bear the burden of proof.
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b) Use of other trademarks
Franchisee shall not use or display or permit the use or display
of trademarks, trade names, service marks, insignias or logo
types other than the ZLand Marks that have been approved for use
by ZLand in writing
(i) in any advertisement that contains the words "ZLand" or
any other ZLand Marks,
(ii) in or on any Premises or place of business of Franchisee
in any manner that is reasonably visible from outside
such Premises or place of business,
(iii) in any computer system used at any Premises or place of
business of Franchisee,
(iv) in answering telephones at the Premises or otherwise in
connection with the Franchise Business,
except as otherwise expressly permitted herein or in the
Confidential Operations Manual.
c) Infringement Claims and Defense of ZLand Marks
If Franchisee receives notice or otherwise becomes aware of any
claim, suit or demand against it by any party other than ZLand
on account of any alleged infringement, unfair competition or
similar matter arising from its use of any of the ZLand Marks in
accordance with the terms of this Agreement, Franchisee shall
promptly notify ZLand of any such claim, suit or demand.
Franchisee shall have no power, right or authority to settle or
compromise any such claim, suit or demand by a third party
without the prior written consent of ZLand.
ZLand is obligated to protect and defend the integrity of the
ZLand Marks, including the right of Franchisee to conduct the
Franchise Business under the ZLand marks. In its sole
discretion, ZLand shall determine whether to defend, compromise
or settle any such claim, suit or demand at ZLand's cost and
expense. Franchisee agrees to cooperate fully in such matter, at
no cost or ex-
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pense to Franchisee, except if the claim, suit or demand arises
as a result of action or inaction or default of Franchisee.
ZLand shall have the sole discretion to decide whether any
action will be undertaken against any third party using any
trademark similar to any of the ZLand Marks.
4. Location of Premises, Disclaimer
ZLand does not provide assistance in actual site selection for Premises.
However, ZLand reserves the right to approve any site where ZLand
Business is conducted. Franchisee acknowledges and agrees that ZLand's
approval of the Premises and any other of Franchisee's ZLand Business
locations
(i) is no more than confirmation that the location meets ZLand's own
minimum criteria,
(ii) does not constitute a representation that the ZLand Business
will be profitable and
(iii) does not impose any liability or obligation on ZLand.
5. Successor Franchise
a) Successor Franchise for a further two-year-period
Franchisee shall have the right to a successor franchise for the
Territory as described in this Agreement for a further
two-year-period provided Franchisee meets all the requirements
set forth in this Section below. Franchisee understands and
acknowledges that any such successor franchise shall be on the
then-current terms set forth in the then-current standard ZLand
Franchise Agreement, which may be substantially different from
the terms contained herein. Franchisee must give written notice
that it wishes to apply for a successor ZLand Franchise not less
than 6 months, but not more than 12 months, prior of the
expiration of this Agreement.
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A successor franchise for a further two-year-period shall be
granted to Franchisee if Franchisee meets all of the conditions
and requirements set forth below:
(i) bring the Premises and Territory and Franchisee's
operation into full compliance with this Agreement and
the specifications and standards then applicable for new
ZLand franchisees and present evidence satisfactory to
ZLand thereof;
(ii) satisfy all monetary obligations owed to ZLand;
(iii) execute a mutual release with ZLand as to all claims,
liabilities and/or obligations, of any nature
whatsoever, however arising, known or unknown, relating
to the Territory or any other franchise territory or
contract with ZLand;
(iv) comply with ZLand's then-current qualification and
training requirements for which Franchisee shall be
responsible for all retraining costs, travel, meals,
lodging and other expenses of Franchisee's personnel;
and
(v) upon approval of Franchisee's application for successor
franchise, sign the then-current ZLand Franchise
Agreement.
b) Successor Franchise for a further five-year-period
If Franchisee has exercised the option listed under Paragraph 5
a) of this Agreement and if Franchisee and ZLand are doing
business under the successor franchise for the further
two-year-period as listed under Paragraph 5 a) of this
Agreement, Franchisee shall furthermore have the right to a
further successor franchise for the Territory as described in
this Agreement for another five-year-period provided Franchisee
meets all the requirements set forth in this Section below.
Franchisee understands and acknowledges that any such successor
franchise for a further five-year-period shall be on the
then-current terms set forth in the then-current standard ZLand
franchise agreement, which may be substantially different from
the terms contained herein. Franchisee must give written notice
that it wishes to apply for a successor ZLand franchise not less
than 6 months, but not more than 12 months, prior to the
expiration of the preceding two-year franchise agreement.
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A successor franchise for a further five-year-period - following
the preceding successor franchise for a further two-year-period -
shall be granted to Franchisee if Franchisee meets all of the
conditions and requirements set forth below:
(i) pay a fee equal to 25 % of the then-current Franchise
Fee or U.S. $ 7,500, whichever is greater, along with
the notice and application for the successor franchise.
In the event that the successor franchise is not
granted, this fee will be returned, less any costs
associated with processing the application;
(ii) bring the Premises and Territory and Franchisee's
operation into full compliance with this Agreement and
the specifications and standards then applicable for new
ZLand franchisees and present evidence satisfactory to
ZLand thereof;
(iii) satisfy all monetary obligations owed to ZLand;
(iv) execute a mutual release with ZLand as to all claims,
liabilities and/or obligations, of any nature
whatsoever, however arising, known or unknown, relating
to the Territory or any other franchise territory or
contract with ZLand;
(v) comply with ZLand's then-current qualification and
training requirements for which Franchisee shall be
responsible for all retraining costs, travel, meals,
lodging and other expenses of Franchisee's personnel;
and
(vi) upon approval of Franchisee's application for a further
five-year successor franchise, following a preceding
two-year franchise, sign the then-current ZLand
Franchise Agreement.
6. Initial Training Session
Franchisee shall satisfactorily complete an initial training session
before the beginning of the term of this Agreement and before the start
of the operation of the Territory. Franchisee shall not begin operation
until satisfactory completion of the initial training session.
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7. General Services of ZLand
ZLand shall advise and consult with Franchisee periodically in
connection with the operation of the Territory and also, upon
Franchisee's request, at other reasonable times. ZLand shall communicate
to Franchisee its know-how, new developments, techniques and
improvements in areas of sales, product development and services that
are pertinent to the operation of a Territory using the ZLand System.
The communications shall be accomplished via online, telephonic or
face-to-face discussions, online reports, seminars or mailings, and
training sessions. ZLand shall also make available to Franchisee all
additional services, facilities, rights and privileges relating to the
operation of the Territory, which ZLand makes generally available, from
time to time, to all its franchisees operating Territories.
8. Customer Billing Services of ZLand
ZLand provides a centralized billing service. The participation in
ZLand's centralized billing service is optional for Franchisee. If
Franchisee decides to participate in ZLand's centralized customer
billing service, the products and services offered or otherwise provided
by Franchisee will be billed in the name of Franchisee. In administering
this optional centralized billing service, ZLand will respect
Franchisee's individual pricing policies; Franchisee is free in
determine the price of any products sold by Franchisee or of any
services rendered by Franchisee.
9. Sales outside of Franchisee's Territory
Franchisee shall not actively sell to any accounts physically located
outside of the Territory to which this Agreement refers.
10. Sales and Service of Major Accounts
Franchisee shall not actively sell to Major accounts, notwithstanding
whether such Major accounts are located inside or outside of
Franchisee's Territory. Major accounts are defined as accounts in which
the customer employs more than 500 employees. Due to the nature of these
accounts, Franchisee must apply to ZLand to get authorization to
actively sell and service to such an account in order to ensure that
quality services are provided to such account.
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Presently, the accounts located in Franchisee's Territory listed in
Exhibit 4 to this Agreement are Major accounts in the sense of this
Paragraph 10 of the Agreement. In order to proceed with the active sales
or services to such an account, Franchisee must submit a marketing plan,
the format of which is detailed in the Business Manuals, which will set
forth the terms and conditions under which Franchisee propose to provide
customer with service. ZLand will review the marketing plan and
determine whether to approve, modify or disapprove it. ZLand will make
its determination based on the quality of service Franchisee can
reasonably provide the customer, the effect such services would have on
the franchise channel, and the history of Franchisee's previously
submitted plans. In the event that ZLand do not approve Franchisee's
marketing plan and Franchisee wish to contest such a decision, the
matter will be brought before the Franchise Advisory Board for final
determination.
11. Business Manuals
Franchisee shall use a standard chart of accounts as provided in the
Business Manuals. ZLand shall provide Franchisee with the Business
Manuals prepared by ZLand for use by franchisees of ZLand territories
similar to the Territory. Such manuals may be provided via hard copies
or on-line files, at ZLand's discretion. Franchisee agrees to promptly
adopt and use exclusively the practices, methods and policies contained
in the Business Manuals, now and as they may be modified by ZLand from
time to time. Franchisee acknowledges that ZLand is the owner of all
proprietary rights in and to the ZLand System and that information
revealed in the Business Manuals, in their entirety, constitutes
confidential trade secrets. Without the prior written consent of ZLand,
Franchisee shall not disclose the contents of the Business Manuals to
any person, except employees of Franchisee, who have signed a
nondisclosure agreement regarding such information, for purposes related
solely to the operation of the Territory, nor shall Franchisee reprint
or reproduce the manuals in whole or in part for any purpose except in
connection with instruction of employees in the operation of the
Territory. Such manuals, as modified by ZLand from time to time, and the
policies contained therein, are incorporated in this Agreement by
reference.
12. Improvements
Any improvements to the ZLand System or the ZLand products or services
conceived, developed or acquired by Franchisee shall be promptly
disclosed in writing to ZLand,
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and Franchisee agrees to immediately thereon assign, and hereby does
assign, its entire right, title, and interest in, to, and under such
improvements including, without limitation, all intellectual property
rights therein, to ZLand. Franchisee shall not implement or use any such
improvements unless and until authorized to do so in writing by ZLand.
Additionally, until such authorization to implement and use is given by
ZLand Franchisee shall maintain the Improvements in strict confidence.
Franchisee shall be entitled to adequate compensation in return for any
assignment of improvements under this Paragraph 12.
13. Advertising
Franchisee shall use only advertising and promotional materials and
programs provided by ZLand or approved in advance, in writing, by ZLand.
All such materials must be submitted to ZLand at least two weeks prior
to their intended publication or use. The approval by ZLand of
Franchisee's advertising and promotional material or the providing of
such material by ZLand to Franchisee shall not, directly or indirectly,
require ZLand to pay for such advertising or promotion.
For local and regional advertising, Franchisee shall expend a minimum of
U.S. $ 2,500, subject to Mutual Adjustment, each month on local
advertising during their first year of operation of the Territory. For
each annual period thereafter, Franchisee shall spend each month at
least the greater of (i) 5 % of Franchisee's monthly Gross Sales or (ii)
U.S. $ 1,000, subject to Mutual Adjustment. Amounts paid out in excess
of the minimum requirement in one month may be applied to the subsequent
month's minimum requirement. Franchisee shall submit quarterly reports
on the expenditure of such funds although the funds must be expended as
required monthly. ZLand may in the future institute a Regional Marketing
Coop. Until such Regional Marketing Coop is instituted, Franchisee's
expenditures of a regional nature shall be counted against their local
advertising requirements.
ZLand may in the future institute a national advertising, publicity and
marketing fund (the "National Marketing Fund") for such advertising,
advertising-related, marketing and/or public relations program, services
and/or materials as ZLand, in its sole discretion, deem necessary or
appropriate. When instituted, the National Marketing Fund may be
combined with any marketing fund otherwise established for ZLand
franchisees and the funds merged for use in accordance with this
Agreement. ZLand shall have the right to use funds for regional
advertising if, in its sole discretion, ZLand de-
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termines that such funds will be more effectively used in this manner.
Any funds so diverted to regional advertising shall be diverted to
regional advertising in the region from which they were received. For
national advertising, Franchisee shall contribute each month the greater
of (i) 1 % of Gross Sales or (ii) U.S. $ 500, subject to Mutual
Adjustment. Until such time as ZLand institutes a National Marketing
Fund, in addition to and under the same terms as the amounts required by
the second subparagraph of this paragraph 13 above, Franchisee shall be
required to spend each month on local advertising the greater of (i) 1 %
of Gross Sales or (ii) U.S. $ 500, subject to Mutual Adjustment. By the
15th day of each calendar quarter, Franchisee shall submit reports on
the monthly expenditure of such funds during the prior three months.
All advertising under this Paragraph 13 will not affect Franchisee's
individual pricing policy and will comply with applicable provisions of
the German laws regarding advertising and pricing.
14. Training
Franchisee acknowledges the importance of uniform quality of business
operations among all territories in the ZLand System and agrees to
enroll Franchisee (or the general manager), Franchisee's sales staff,
and Franchisee's production staff, present and future, in ZLand "Basic
Training", which consists of the basic training required to establish
such persons as qualified for their respective positions. ZLand shall
make available to Franchisee the services of its training staff for
Basic Training at no charge for the first year Franchisee operates the
Territory. ZLand shall bear the cost of maintaining the training center,
including the overhead costs of training, staff salaries, and training
materials and agrees to provide to Franchisee both basic and advanced
instruction for the operation of a ZLand System territory. Franchisee
shall pay all traveling, living, compensation or other expenses incurred
by Franchisee and Franchisee's employees in connection with attendance
to such training.
15. Performance Standard
Every six months, beginning 12 months after the Commencement Date, ZLand
will compare (i) Franchisee's Gross Sales with (ii) the then-current
average Gross Sales of other franchisees who have a substantially
similar territory as to market ("Market Type Territory"). Such
then-current average Gross Sales of such Market Type Territory will be
the "Applicable Standard", and this will be updated every six months. If
Franchi-
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see's Gross Sales do not equal at least 50 % of the Applicable Standard
at the end of any six months period, Franchisee shall be notified that
it has not met the Applicable Standard and it shall have six months in
which to correct the situation and meet the next Applicable Standard as
determined six months later. If Franchisee does not meet the next
Applicable Standard, ZLand may terminate this Agreement for
nonperformance.
16. Payments
a) Initial Fee
Franchisee shall pay to ZLand for the initial grant of this
Territory and Agreement an Initial Fee of U.S. $ 30,000 for each
Territory, as specified in Exhibit 2 to this Agreement. The
Initial Fee shall become due 14 days after the signing of this
Agreement by both parties. The duty of Franchisee to pay the
Initial Fee shall laps in case Franchisee, or Franchisee's
designated general manager, has not successfully completed
ZLand's Basic Training. In such case, Franchisee shall be
refunded the Initial Fee minus ZLand's costs for such training,
and this Agreement will be terminated by ZLand with no further
obligation by either party.
b) Royalties
In addition, Franchisee shall pay ZLand monthly royalties in the
amount of ___ % of Franchisee's Gross Sales (excluding VAT).
Royalties shall be paid on or before the ___ day of each month
and shall be based upon sales of the preceding calendar month.
The payment of royalties shall be accompanied by Franchisee's
statement of his Gross Sales during the aforesaid calendar
month.
17. Reports
By the close of business every Friday, Franchisee shall
coordinate/replicate those databases described in the Business Manuals
with the ZLand System master databases, in the manner specified by ZLand
in the Business Manuals. Franchisee shall submit the reports relating to
the above databases specified by ZLand in the Business Manuals. On or
before the 15th day of the month following the quarter end, Franchisee
shall submit, in such form as ZLand shall reasonably require from time
to time and as de-
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scribed in the Business Manuals, the financial reports showing the
income and expenses of the Territory. Franchisee shall keep and preserve
full and complete records of Gross Sales for at least three years in a
manner and form satisfactory to ZLand and shall also deliver such
additional financial, operating and other information and reports as
ZLand may reasonably request on the forms and in the manner described by
ZLand. Franchisee further agrees to submit within 90 days following the
close of each fiscal year of the Territory operation, a profit and loss
statement covering operations during such fiscal year and a balance
sheet taken as of the close of such fiscal year, all prepared in
accordance with generally accepted accounting principles and ZLand
requirements as described in the Business Manuals. If ZLand shall
request certification, a public accountant shall certify the profit and
loss statement and the balance sheet, if any, and consult with ZLand
concerning such statement and balance sheet. The original of each such
report required by this Paragraph 17 shall be mailed to ZLand at the
address indicated in Paragraph 31 herein.
ZLand shall have the right, at its expense, to inspect and/or audit
Franchisee's accounts, books, database data, records and tax returns at
all times to ensure that Franchisee is complying with the terms of this
Agreement. Franchisee shall have the right, at its expense and at any
time, to inspect or cause to be inspected any and all records of their
Territory, which are stored on-line at ZLand's, if ZLand provides
customer billing service for Franchisee. In such case, Franchisee shall
also have the right, at its expense and at any time during business
hours, to inspect and audit, or cause to be inspected and audited,
accounting and sales records which relate to the operation of their
Territory.
If such inspection of ZLand discloses that Gross Sales actually exceeded
the amount reported by Franchisee as Gross Sales by an amount equal to 5
% or more of Gross Sales originally reported to ZLand, Franchisee shall
bear the cost of such inspection and audit. If such inspection of
Franchisee discloses that Gross Profits actually exceeded the amount
reported by ZLand to Franchisee by an amount equal to 5 % or more of
Gross Profits originally reported to Franchisee, ZLand shall bear the
cost of such inspection and audit.
18. Restrictions
During the term of this Agreement, Franchisee shall not enter into
competition with ZLand.
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Unless such information is publicly available, Franchisee shall not
disclose or reveal any portion of the ZLand System to a non-Franchisee
other than to Franchisee's employees as an incident of their training.
19. Compliance with Entire System
Franchisee acknowledges that every component of the ZLand System is
important to ZLand and to the operation of the Territory as a ZLand
franchise, including a designated product list, uniformity of service,
sales methods, and quality of service.
ZLand shall have the right to inspect the Territory at all reasonable
times to ensure that Franchisee's operation thereof is in compliance
with the standards and policies of the ZLand System.
Franchisee shall comply with the entire ZLand System, including, but not
limited to, the following:
a) operate the Territory in a professional manner; comply with all
business policies, practices and procedures established by
ZLand; sell only the products and services now and hereafter
designated by ZLand; and maintain the quality of service in
compliance with designated standards as may be prescribed from
time to time by ZLand;
b) purchase computer hardware and software in accordance with the
equipment specifications designated by ZLand, and, promptly
after notice from ZLand that the Territory needs such equipment,
cause the installation thereof;
c) operate the Territory from the Premises, which must conform to
site requirements contained in the Business Manuals; and
d) have an answer on Franchisee's ZLand Business telephone lines
during all hours, business or non-business hours, as described
in the Business Manuals.
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20. Best Efforts
Franchisee shall diligently and fully exploit the rights granted in this
Agreement by personally devoting full time and best efforts. In the
event that Franchisee hires a general manager to operate the Territory
or more than one individual, a corporation, or a partnership has
executed this Agreement as Franchisee, then such general manager shall
personally devote full time and best efforts to the operation of the
Territory. Franchisee shall keep from conflicting enterprises or any
other activities that would be detrimental to or interfere with the
business of the Territory.
21. Franchise Owners Associations
ZLand Franchisees may establish one ore more associations and/or
sub-associations of ZLand franchisees, to be known collectively as the
ZLand Franchise Owners Association ("ZFOA"). ZFOA may adopt its own
rules, regulations and procedures, provided they do not conflict with
any provision of this Agreement.
22. Interference with Employment Relations of Others
During the term of this Agreement, Franchisee shall not employ or seek
to employ any person who is at the time employed by ZLand, any of its
subsidiaries, or by any person who is at the time operating a ZLand
franchise or otherwise induce, directly or indirectly, such person to
leave such employment. This Paragraph 22 shall not be violated if such
person has left the employment of any of the foregoing parties for a
period in excess of six months.
23. Assignment
Franchisee shall not assign or otherwise transfer in whole or in part
(whether voluntarily or by operation of law) directly, indirectly, or
contingently Franchisee's interest in this Agreement without the prior
written consent of ZLand, which consent shall not be withheld
unreasonably. In the event that ZLand grants such written consent, any
such assignment or transfer shall comply with the terms set forth below
in this Paragraph 20 and shall require payment to ZLand of a transfer
fee sufficient to cover ZLand's cost incurred in researching the
transfer effect on its interests. The transferee shall be responsible
for running the ZLand Business in accordance with this Agreement and
other applicable ZLand specifications, such as having the appropriate
train-
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ing for its personnel, at transferee's own cost. In no event will a
transfer to a competitor of ZLand be approved.
a) Death or Permanent Incapacity of Franchisee
Upon the death or permanent incapacity of Franchisee, the
interest of Franchisee in this Territory may be assigned either
pursuant to the terms of Sub-Paragraph b) herein or to one or
more of the following persons: Franchisee's spouse, heirs, or
nearest relatives by blood or marriage, subject to the following
conditions:
(i) such person shall meet the then-current requirements and
pass the then-current testing and interviewing process
for new franchise applicants, and
(ii) such person shall also execute an agreement by which the
person personally assumes full and unconditional
liability for and agrees to perform all the terms and
conditions of this Agreement to the same extent as the
original Franchisee.
If such person cannot meet the above conditions, ZLand shall
have the option to operate and/or manage the Territory on behalf
of Franchisee or of Franchisee's estate until the diseased or
incapacitated Franchisee's interest is transferred to another
party acceptable to ZLand in accordance with the terms and
conditions of this Agreement. However, in no event shall ZLand
operate and manage the Territory for a period in excess of 12
full calendar months without the consent of Franchisee or
Franchisee's estate. In the event that ZLand so operates and/or
manages the Territory, ZLand shall make a complete account to
and return the net income from such operation to the Franchisee
or to the Franchisee's estate, less a reasonable management fee
and expenses. If the disposition of the Territory to a party
acceptable to ZLand has not taken place within 12 months from
the date that ZLand has commenced the operation or management of
the Territory on behalf of the diseased or incapacitated
Franchisee, then ZLand shall have the option to purchase the
Territory at fair market value for cash or its common stock at
its option.
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b) Other Assignment
In addition to any assignments or contingent assignments
contemplated by the terms of Sub-Paragraph a) of this ▇▇▇▇▇▇▇▇▇
▇▇, ▇▇▇▇▇▇▇▇▇▇ shall not sell, transfer or assign this Territory
or Agreement to any person or persons without ZLand's prior
written consent. Such consent shall not be unreasonably
withheld. In the event that any transfer under this Section is
made to an existing ZLand franchisee, the transfer fee shall be
waived. In determining whether to grant or withhold such
consent, ZLand shall consider for each prospective transferee,
by way of illustration, the following:
(i) work experience and attitude,
(ii) financial background,
(iii) character
(iv) ability to personally devote full time and best efforts
to managing the Territory,
(v) residence in the locality of the Territory,
(vi) equity interest in the Territory,
(vii) conflicting interests,
(viii) willingness to sign the then-current Agreement, and
(ix) such other criteria and conditions as ZLand shall then
apply in the case of an application for a new franchise
to operate a ZLand franchise.
ZLand's consent shall also be conditioned upon each transferee's
execution of an agreement by which transferee personally assumes
full and unconditional liability for and agrees to perform from
the date of such transfer all obligations, covenants and
agreements contained in this Agreement to the same extent as if
transferee had been an original party to this Agreement.
Franchisee-transferor shall continue to remain personally liable
for all affirmative obligations, covenants and agreements
contained herein for the full term of this Agreement.
c) First Option to Purchase
At least 20 days prior to the proposed effective date,
Franchisee or Franchisee's representative shall give ZLand
written notice of intent to sell or otherwise transfer this
Territory or Agreement pursuant to Sub-Paragraph b) of this
Paragraph 23. The notice shall set forth the name and address of
the proposed pur-
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chaser and all the terms and conditions of any offer. ZLand
shall have the first option to purchase the Territory by giving
written notice to Franchisee of its intention to purchase on the
same terms as the offer within ten days following ZLand's
receipt of such notice. However, if ZLand fails to exercise its
option and the Territory is not subsequently sold to the
proposed purchaser for any reason, ZLand shall continue to have,
upon the same conditions, a first option to purchase the
Territory upon the terms and conditions of any subsequent offer.
24. Franchisee not an Agent of ZLand
It is expressly agreed that the relationship between ZLand and
Franchisee (an independently owned and operated business) shall be a
relationship of franchisor and franchisee. Franchisee shall have no
authority, express or implied, to act as agent of ZLand or any of its
affiliates for any purpose. Franchisee is an independent contractor.
Further, Franchisee and ZLand are not partners, associates, or joint
employers in any way. ZLand shall not be construed to be jointly liable
for any acts or omissions of Franchisee under any circumstances. All
employees or agents hired or engaged by or working for Franchisee shall
be only the employees or agents of Franchisee and shall not for any
purpose be deemed employees or agents of ZLand nor subject to ZLand's
control.
25. Insurance
Franchisee shall, at all times during the term of this Agreement
maintain insurance to protect ZLand, related companies ("verbundene
Unternehmen" as defined by Sections 15 ff. of the German Stock
Corporation Act) inasfar as these related companies form part of the
ZLand System and their successors in law from the claims, losses and
liabilities for which Franchisee is obligated to protect, defend, hold
harmless, and indemnify ZLand and its successors pursuant to this
Agreement including, but not limited to,
(i) claims for damages because of bodily injury of any person which
arises out of any act or omission by Franchisee, Franchisee's
employees or agents;
(ii) claims for damages because of injury to or destruction of
tangible property, including loss of use resulting therefrom,
which arise out of any act or omission of Franchisee,
Franchisee's employees or agents; and
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(iii) product liability claims arising out of Franchisee's
manufacture, marketing, use, distribution or sale of any
products or services.
The insurance maintained by Franchisee shall include a general liability
insurance policy in an amount of at least U.S. $ 1,000,000 or in such
greater amounts as ZLand may from time to time reasonably require. Such
policies shall name ZLand as an additional insured. Such policies shall
provide that the same may not be canceled or modified without 30 days
prior notice to ZLand. Each time any such policy is issued or renewed,
Franchisee shall furnish ZLand with a certificate of insurance showing
ZLand as an additional insured and indicating that such policy may not
be canceled or modified without 30 days prior notice to ZLand. In
addition, if requested by ZLand, Franchisee shall furnish ZLand with a
complete copy of each such policy.
ZLand shall, for the duration of this Agreement, maintain a general
business liability insurance policy in the amount of at least U.S. $
1,000,000 or in a greater amount as ZLand may from time to time consider
necessary. This Paragraph 25 shall neither affect ZLand's liability for
fault nor any product liability of ZLand.
26. Termination by Franchisee
Franchisee may terminate this Agreement for cause after first notifying
ZLand and requesting that ZLand cure the default. If the default remains
uncured after 30 days, Franchisee may terminate this Agreement.
27. Termination by ZLand
ZLand may terminate this Agreement for cause after first notifying
Franchisee in writing and requesting that Franchisee cure the default.
If the default remains uncured after 30 days, ZLand may terminate this
Agreement. Good cause for termination is given
(i) if Franchisee defaults in payment of royalties or other fees
stipulated in this Agreement, or
(ii) if Franchisee fails to submit the records provided herein after
notification thereof;
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(iii) if Franchisee ceases the active conduct of its business;
(iv) if Franchisee fails to maintain the standards as set forth in
this Agreement and in the Business Manuals.
Repeating non-compliance with the terms and conditions of this Agreement
may also constitute a reason to terminate without notice even though the
individual case of non-compliance is a minor one.
28. Effect of Termination by ZLand
Upon termination or expiration of this Agreement, Franchisee shall
forthwith return to ZLand any copies of the Business Manuals in
Franchisee's possession, together with all other material containing
trade secrets, operating instructions or business practices; discontinue
the use of the ZLand System and its associated trade names, service
marks and trademarks or the use of any and all signs, printed or online
advertising bearing the name and marks, or any reference to them; not
disclose, reveal or publish all or any portion of the ZLand System; and
Franchisee shall not thereafter use any trade name, service ▇▇▇▇ or
trademark similar to or likely to be confused with those of ZLand.
29. Effect of Waivers
No waiver by ZLand or any breach or a series of breaches of this
Agreement shall constitute a waiver of any subsequent breach or waiver
of the terms of this Agreement.
30. No Scientology Church Affiliation
Neither ZLand nor any of its Directors are working with the methods of
L. ▇▇▇ ▇▇▇▇▇▇▇, nor are ZLand or any of its Directors a member of the
WISE Organization.
31. Notices
Any notice hereunder shall be in writing and shall be delivered by
telefax or by German certified or registered mail, with postage prepaid,
addressed to Franchisee at the Premises or to ZLand at ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇ ▇, ▇-▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇. Either party, by a similar
written notice, may change the address to which notices shall
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be sent, provided, however, that the address is within the Federal
Republic of Germany.
32. Dispute Resolution
a) Both parties agree to resolve any and all claims, disputes and
disagreements in the following manner:
(i) First, the matter will be discussed in a face-to-face
meeting between the parties. This meeting will be held
at a location reasonably convenient to Franchisee and
within 30 days after either party gives written notice
to the other proposing such a meeting.
(ii) If the matter is not successfully resolved, it will be
resolved by submission for binding arbitration in
Munchen, Germany before the International Chamber of
Commerce in accordance with the arbitration rules set
out in the German Code of Civil Procedure. The fees and
expenses of the arbitrator(s) and/or arbitration
organization shall be paid by the ultimately
unsuccessful party or in such other manner as the
tribunal may decide. In each case, the parties to the
arbitration will execute appropriate confidentiality
agreements, excepting only such public disclosures and
filings required by law. Each participant must submit or
file any claim that would constitute a compulsory
counterclaim within the same proceeding as the claim to
which it relates. Any such claim that is not submitted
or filed in such proceeding will be forever barred.
(iii) Each party knowingly waives all rights to trial by an
ordinary court, understanding that arbitration may be
less formal than a court trial, may use different rules
of procedure and evidence and that appeal is generally
less available, still strongly preferring arbitration to
resolve any disputes, except as provided in Subsection
(iv) above. Each party also waives all rights to any
claims for (whether by claim, counter-claim, offset, way
of defense or otherwise), punitive, mental distress,
incidental, consequential, special, lost income and/or
profits and/or similar damages under any theory
whatsoever, both parties agreeing that such claims are
inherently speculative and subject to abuse.
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(iv) If either party institutes any action against the other
party to secure or protect their rights under the terms
of this Agreement, in addition to any judgment entered
in its favor, that party shall be entitled to recover
such reasonable attorneys' fees as may be allowed by the
arbitrator together with arbitration costs and expenses
of such action.
b) The aforementioned regulations in this paragraph 32 (a) do not
exclude the possibility of either party to safeguard any of
their claims against the other party by means of an attachment
proceeding with an ordinary court or to enforce claims for
injunctive relief and abatement by means of preliminary
injunction proceedings with an ordinary court pursuant to
Sections 916 ff. of the German Rules of Civil Procedure (ZPO).
33. Indemnification
a) If ZLand is subject to any claim, demand or penalty or becomes a
party to any suit or other judicial or administrative proceeding
by reason of any claimed act or omission by Franchisee,
Franchisee's employees or agents, or by reason of any act
occurring on the Premises, Franchisee shall indemnify and hold
ZLand harmless against all judgements, settlements, penalties
and expenses, including attorneys' fees, court costs and other
expenses, incurred by or imposed on ZLand in connection with the
investigation or defense relating to such claim or litigation or
administrative proceeding and, at the election of ZLand.
ZLand themselves shall indemnify and hold Franchisee harmless
from all fines, suits, proceedings, claims, demands, actions,
loss, damages, costs, fees, including attorneys' fees and
related expenses arising, growing out of or otherwise connected
with the sale of any products and services to Franchisee by
ZLand to the extent that those products and services are in
violation of ZLand's warranty of such items. Additionally, ZLand
will indemnify and hold Franchisee harmless from all fines,
suits, proceedings, claims, demands, actions, loss, damages,
costs, fees (including attorneys' fees and related expenses)
arising, growing out of or otherwise connected with and related
to the use of ZLand's patents, trademarks, trade name and
service marks, provided Franchisee is and has been at all
relevant times in compliance with ZLand's standards regarding
the use of such items.
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34. Construction and Severability
All references in this Agreement to the singular shall include the
plural where applicable.
If any part of this Agreement for any reason shall be declared invalid,
such decision shall not affect the validity of any remaining portion,
which shall remain in full force and effect. In the event that any
material provision of this Agreement shall be stricken or declared
invalid, either party shall have the right to terminate this Agreement.
35. Scope and Modification of Agreement
This Agreement, including the Exhibits to this Agreement, constitutes
the entire Agreement between the parties and supersedes all prior and
contemporaneous oral or written, agreements or understandings of the
parties. No interpretation, change, termination or waiver of any of the
provisions hereof shall be binding upon ZLand unless in writing and
unless the paper is specifically identified as an amendment hereto. No
modification, waiver, termination, rescission, discharge or cancellation
of this Agreement shall affect the right of any party hereto to enforce
any claim or right hereunder, whether or not liquidated, which occurred
prior to the date of such modification, waiver, termination, rescission,
discharge or cancellation.
36. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the Federal Republic of Germany.
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IN WITNESS WHEREOF,
each of the undersigned has hereunto affixed his or her signature:
----------------, ------------ ----------------, ------------
[Place, Date] [Place, Date]
-------------------------------- --------------------------------
Franchisee ZLand
by: [Print name]
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Acknowledgement of Right to Revoke Agreement
Franchisee is aware of the fact that he may, pursuant to Section 7 of the German
Consumer Credit Act, revoke this Agreement in writing in between a period of one
week. In order to meet this deadline, that starts running on the day following
the day when this deed has been handed over to Franchisee, the ___________, it
is sufficient that the revoke will be dispatched and mailed on time. The revoke
shall be declared to ZLand, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇, ▇-▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇.
Franchisee herewith confirms that he has received a complete set of this deed
from ZLand.
----------------, ------------
[Place, Date]
--------------------------------
Franchisee
by: [Print name]
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EXHIBIT 1
(Confidential Operation Manual
Business Manual)
30
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EXHIBIT 2
Territory
31
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EXHIBIT 3
ZLand Marks
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EXHIBIT 4
Major accounts