Exhibit 10-1
SUCCESSORIES, INC.
FRANCHISE AGREEMENT
EXHIBIT C TO THE OFFERING CIRCULAR
TABLE OF CONTENTS
APPOINTMENT AND FRANCHISE FEE................................................3
TERM AND RENEWAL.............................................................5
FACILITY LOCATION............................................................6
TRAINING AND ASSISTANCE......................................................9
PROPRIETARY MARKS...........................................................11
CONFIDENTIAL OPERATIONS MANUAL..............................................12
CONFIDENTIAL INFORMATION....................................................13
MODIFICATION OF THE SYSTEM..................................................14
ADVERTISING.................................................................14
CONTINUING SERVICES AND ROYALTY FEE.........................................17
ACCOUNTING AND RECORDS......................................................19
STANDARDS OF QUALITY AND PERFORMANCE........................................20
FRANCHISOR'S OPERATIONS ASSISTANCE..........................................24
INSURANCE...................................................................26
COVENANTS...................................................................28
DEFAULT AND TERMINATION.....................................................30
RIGHTS AND DUTIES OF PARTIES UPON EXPIRATION OR TERMINATION.................32
TRANSFERABILITY OF INTEREST.................................................34
DEATH OR INCAPACITY OF FRANCHISEE...........................................38
RIGHT OF FIRST REFUSAL......................................................39
OPERATION IN THE EVENT OF ABSENCE, DISABILITY OR DEATH......................39
INDEPENDENT CONTRACTOR......................................................40
NON-WAIVER..................................................................41
NOTICE .....................................................................41
COST OF ENFORCEMENT OR DEFENSE..............................................43
ENTIRE AGREEMENT............................................................43
SEVERABILITY AND CONSTRUCTION...............................................43
APPLICABLE LAW..............................................................44
ARBITRATION.................................................................45
"FRANCHISEE" DEFINED AND GUARANTY...........................................45
FORCE MAJEURE...............................................................46
CAVEAT .....................................................................46
ACKNOWLEDGEMENTS............................................................46
EXHIBITS
A. Guaranty and Assumption of Obligations
B. Refunds and Cancellation
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SUCCESSORIES, INC.
FRANCHISE AGREEMENT
This Franchise Agreement ("this Agreement"), made this _____day of
____________, 19__ , by and between SUCCESSORIES, INC., a corporation formed
and operating under the laws of the State of Illinois and having its
principal place of business at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
("Franchisor"), and
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________("Franchisee").
WITNESSETH:
WHEREAS, Franchisor and its subsidiaries, over a period of time and as
the result of the expenditure of time, skill, effort and money, (a) have
developed and own a unique system (the "System"), identified by the ▇▇▇▇
"SUCCESSORIES", relating to the establishment, development and operation of
businesses for the sale of products through a retail facility, direct sales and
catalog sales with a self-improvement/success theme offering the following
categories of products and such other products as Franchisor may incorporate as
part of the System: (i) the SUCCESSORIES gift and wall decor line for individual
and corporate use such as conventions, sales meetings, customer gifts and
corporate promotions; (ii) self help books, audio tapes and video tapes and
(iii) personalized gifts and awards; and (b) has developed specifications and
standards and marketing and advertising techniques for such products and
merchandise, all of which may be changed, improved or further developed by
Franchisor from time to time; and
WHEREAS, the distinguishing characteristics of the System include,
without limitation, distinctive exterior and interior design, decor, layout and
color scheme; exclusively designed signage, decorations, furnishings and
materials; specialized retail store operating procedures and sales methods;
unique techniques and methods for merchandising activities; the SUCCESSORIES
Confidential Operations Manual; the SUCCESSORIES Proprietary or Trademarked
Product Lines, distinct procedures for purchasing inventory and merchandise; the
SUCCESSORIES catalog; other confidential operations procedures; and methods and
techniques for inventory and cost controls, record keeping and reporting,
personnel management, purchasing, sales promotion, marketing and advertising;
all of which may be changed, improved and further developed by Franchisor from
time to time; and
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WHEREAS, Franchisor is the owner of the right, title and interest
together with all the goodwill connected thereto in and to the trade name,
trademarks and service marks "SUCCESSORIES" and "SUCCESSORIES, plus the design",
the slogan, "SUCCESSORIES", associated logos and commercial symbols, and such
other trade names, trademarks and service marks, logos, commercial symbols as
are now and may in the future be designated by Franchisor as an integral part of
the System (the "▇▇▇▇(s)"); and
WHEREAS, Franchisor grants to qualified persons franchises to own and
operate SUCCESSORIES retail facilities selling and distributing self-help books,
audio tapes, video-tapes and personalized gifts and awards, the SUCCESSORIES
gift and wall decor line, the SUCCESSORIES Proprietary or Trademarked Product
Lines, other merchandise and products and providing services authorized and
approved by Franchisor and utilizing the System and Marks. Franchisee desires to
operate a SUCCESSORIES retail facility under Franchisor's System and using the
Marks and has applied for a franchise and such application has been approved by
Franchisor in reliance upon all of the representations made therein; and
WHEREAS, Franchisee understands and acknowledges the importance of
Franchisor's high and uniform standards of quality, operations, and service and
the necessity of operating the SUCCESSORIES retail facility in strict conformity
with Franchisor's standards and specifications; and
WHEREAS, Franchisor expressly disclaims the making of and Franchisee
acknowledges that it has not received nor relied upon any warranty or guaranty,
express or implied, as to the revenues, profits or success of the business
venture contemplated by this Agreement. Franchisee acknowledges that it has read
this Agreement and Franchisor's Uniform Franchise Offering Circular and that it
has no knowledge of any representations by Franchisor, or its officers,
directors, shareholders, employees or agents that are contrary to the statements
made in Franchisor's Uniform Franchise Offering Circular or to the terms herein.
NOW, THEREFORE, the parties, in consideration of the undertakings and
commitments of each party to the other set forth in this Agreement hereby agree
as follows:
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I. APPOINTMENT AND FRANCHISE FEE
A. Franchisor hereby grants to Franchisee, upon the terms and
conditions herein contained, the right, license and privilege to use the Marks,
and Franchisee undertakes the obligation to operate a SUCCESSORIES retail
facility for the sale and distribution of self-help books, audio tapes,
video-tapes and personalized gifts and awards, the SUCCESSORIES gift and wall
decor line and related merchandise and products ("Franchised Retail Business")
and to use solely in connection therewith Franchisor's System, as it may be
changed, improved and further developed from time to time, at one location only,
such location to be:
1). ___________________________________________________________________________
_______________________________________________________________________________
__________________________________________
or
2). At a location to be designated, as provided in Paragraph III hereof within
the following area: ___________________________________________________________
_______________________________________________________________________________
_______________________________________.
Provided, however, that when a location has been designated and approved by
the parties, said location shall become Paragraph I.A.1., as if originally
incorporated therein. Franchisee shall not relocate its facility without the
prior written approval of Franchisor.
B. All rights of Franchisee to operate a Franchised Retail Business are
specifically limited to the location of said Franchised Retail Business.
Franchisee acknowledges and agrees that no territorial exclusivity is granted
pursuant to this or any other agreement and that Franchisee is specifically
prohibited from distributing products in any manner other than through retail
store sales.
C. Franchisor and its subsidiaries retain the following rights for all
areas outside of the location of Franchisee's Franchised Retail Business:
(i) to sell the System products through various channels of
distribution including, without limitation, through SUCCESSORIES retail
locations, wholesale sales, direct mail, catalogs, bookstores, office
supply stores, department stores, and telemarketing and other types of
direct sales solicitation;
(ii) to sell System products to customers who contact Franchisor or
its subsidiaries as the result of advertisements in magazines or other
publications;
(iii) to sell to customers who phone in orders to the SUCCESSORIES
toll free number;
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(iv) to acquire mailing lists and send catalogs and promotional
materials to potential customers on such lists, some or all of whom
may also be customers of Franchisee's Franchised Retail Business;
(v) to allow third parties to sell product and fulfill orders
through catalogs distinct from catalogs published by Franchisor or
its subsidiaries without incurring any obligation to advise Franchisee
as discussed below;
(vi) to allow ad specialty houses to sell System products embossed
with the customer's name, logo or message; and
(vii) to allow the sale of System products, under the same of
different trademarks, through wholesale channels of distribution
and/or direct sales groups.
If a sales effort of Franchisor or its subsidiaries results in
the establishment of a customer located in close proximity to Franchisee's
Franchised Retail Business, Franchisor will attempt to advise such customer of
the existence and location of the retail facility operated by Franchisee.
Franchisor retains the right to grant such other franchises as
Franchisor, in its sole and exclusive discretion, deems appropriate. Further,
Franchisor reserves the right to offer and sell at wholesale or retail (or any
other species of retail vendor whatsoever) products and services which do not
comprise a part of the System. Those products and services which comprise a part
of the System are delineated and set forth in detail in the SUCCESSORIES
Confidential Operations Manual ("Confidential Operations Manual"), which
Confidential Operations Manual may be amended from time to time to reflect
additions to, deletions from and modifications to the specification of those
services and products which comprise a part of the System.
D. In consideration of the Franchise granted herein, Franchisee shall
pay to Franchisor the sum of $35,000 upon execution of the Agreement. In the
event Franchisee wishes to open additional Franchised Retail Businesses pursuant
to separate, subsequent, individual franchise agreements, Franchisee shall pay
franchise fees to Franchisor in an amount equal to $25,000 for each additional
Franchised Retail Business. All such fees shall be deemed fully earned and
non-refundable upon execution of this Agreement as consideration for expenses
incurred by Franchisor in furnishing assistance and services to Franchisee and
for Franchisor's lost or deferred opportunity to franchise others, except as may
be specifically provided in this Agreement or any Exhibit attached hereto.
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E. Franchisee acknowledges that because complete and detailed
uniformity under many varying conditions may not be possible or practical,
Franchisor specifically reserves the right and privilege, at its sole discretion
and as it may deem in the best interests of all concerned in any specific
instance, to vary standards for any System franchisee based upon the
peculiarities of the particular site or circumstance, density of population,
business potential, population of trade area, existing business practices or any
other condition which Franchisor deems to be of importance to the successful
operation of such franchisee's business. Franchisee shall not be entitled to
require Franchisor to disclose or grant to franchisee a like or similar
variation hereunder.
II. TERM AND RENEWAL
A. This Agreement shall be effective and binding from the date of its
execution for an initial term of 5 years.
B. Franchisee shall have the right to renew this franchise before the
expiration of the initial term of the Franchise for 3 additional successive
terms of 5 years each, providing all of the conditions hereinafter set forth
have been fulfilled:
1. Franchisee has, during the entire term of this Agreement,
complied with all its provisions;
2. Franchisee maintains possession of the premises of the
Franchised Retail Business and by the expiration date of this Agreement has
brought the Franchised Retail Business into full compliance with the
specifications and standards then applicable for new or renewing SUCCESSORIES
facilities and presents evidence satisfactory to Franchisor that it has the
right to remain in possession of the premises of the Franchised Retail
Business for the duration of any renewal term; or, in the event Franchisee is
unable to maintain possession of the premises, or if in the judgment of
Franchisor, the Franchised Retail Business should be relocated, Franchisee
secures substitute premises approved by Franchisor and has furnished, stocked
and equipped such premises to bring the Franchised Retail Business at its
substitute premises into full compliance with the then-current specifications
and standards by the expiration date of this Agreement;
3. Franchisee has given notice of renewal to Franchisor as
provided below;
4. Franchisee has satisfied all monetary obligations owed by
Franchisee to Franchisee's suppliers, Franchisor and its subsidiaries and
affiliates, if any, and has timely met these obligations throughout the term of
this Agreement;
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5. Franchisee has executed upon renewal Franchisor's
then-current form of Franchise Agreement (with appropriate modifications to
reflect the fact that the agreement relates to the grant of a renewal
Franchise), which agreement shall supersede in all respects this Agreement, and
the terms of which may differ from the terms of this Agreement, including,
without limitation, a different percentage Continuing Services and Royalty Fee,
advertising contribution and/or a different territory; provided, however,
Franchisee shall not be required to pay the then-current initial franchise fee
or its equivalent;
6. Franchisee has complied with Franchisor's then-current
qualification and training requirements; and
7. Franchisee has executed a general release, in a form
prescribed by Franchisor, of any and all claims against Franchisor and its
subsidiaries and affiliates, if any, and their respective officers, directors,
agents and employees.
C. If Franchisee desires to renew this franchise at the expiration of
this Agreement or any renewal period, Franchisee shall give Franchisor written
notice of its desire to renew at least 6 months, but not more than 12 months,
prior to the expiration of the initial term of this Agreement. Within 90 days
after its receipt of such timely notice, Franchisor shall furnish Franchisee
with written notice of: (i) reasons which could cause Franchisor not to grant a
renewal to Franchisee, including any deficiencies which require correction and a
schedule for correction thereof by Franchisee; and (ii) Franchisor's
then-current requirements relating to the image, appearance, decoration,
furnishing, equipping and stocking of SUCCESSORIES facilities, and a schedule
for effecting such upgrading or modifications in order to bring the Franchised
Retail Business in compliance therewith, as a condition of renewal. Renewal of
the franchise shall be conditioned upon Franchisee's compliance with such
requirements and continued compliance with all the terms and conditions of this
Agreement up to the date of termination of the initial term, provided, however,
that in the event Franchisee is curing any deficiencies as required by
Franchisor, the term of this Agreement shall be extended for a period of time
equal to the number of days required to cure such deficiency, not to exceed the
initial term of this Agreement.
D. Franchisor shall give Franchisee written notice of its election to
renew the franchise 2 months prior to the expiration of the initial term of this
Agreement.
III. FACILITY LOCATION
A. Franchisee may operate the Franchised Retail Business only at the
location specified in Paragraph I hereof. If the lease for the site of the
Franchised Retail Business expires or terminates without fault of Franchisee, or
if the site is destroyed, condemned or otherwise rendered unusable, as otherwise
may
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be agreed upon in writing by Franchisor and Franchisee, Franchisor will
grant permission for relocation of the Franchised Retail Business at a location
and site acceptable to Franchisor. Any such relocation shall be at Franchisee's
sole expense and Franchisor shall have the right to charge Franchisee for any
costs incurred by Franchisor, and a reasonable fee for its services, in
connection with any such relocation of the Franchised Retail Business.
B. Concurrently with the execution of the Franchise Agreement,
Franchisee may enter into a lease or sublease identified with Franchisor if an
acceptable site has been identified and Franchisor is or will be the owner or
master lessee of such site. However, unless Franchisor has agreed in a separate
written agreement to purchase or acquire by leasing the property in which the
Franchised Retail Business is to be located, Franchisor shall have no obligation
to enter into a lease or sublease with Franchisee and shall only be obligated to
act in an advisory capacity to assist Franchisee in acquiring a location.
Franchisor shall provide, in its sole discretion, reasonable assistance to
Franchisee to enable Franchisee to obtain any required financing. Any real
estate and improvement costs associated with the development of the location of
the Franchised Retail Business shall be the responsibility of Franchisee and may
be included in determining the lease or sublease rental payments.
C. Except as provided for in Paragraph III.B. above, Franchisee will be
responsible for purchasing or leasing a suitable site for the Franchised Retail
Business. Prior to the acquisition by lease or purchase of any site for the
premises of the Franchised Retail Business, Franchisee shall submit a
description of the proposed site to Franchisor, together with a letter of intent
or other evidence satisfactory to Franchisor which confirms Franchisee's
favorable prospects for obtaining the proposed site. Franchisor shall provide
Franchisee written notice of approval or disapproval of the proposed site within
30 days after receiving Franchisee's written proposal.
D. After receiving Franchisor's written approval of the location of the
Franchised Retail Business as provided in Paragraph III.C. hereof, Franchisee
shall execute a lease (if the premises are to be leased) or a binding agreement
to purchase the site, the terms of which have been previously approved by
Franchisor. Franchisor's approval of the lease shall be conditioned upon
inclusion in the lease of terms acceptable to Franchisor and, at Franchisor's
option, the lease shall contain such provisions as Franchisor may reasonably
require, including, but not limited to:
1. A provision reserving to Franchisor the right, at
Franchisor's election, to receive an assignment of the leasehold interest upon
termination or expiration of the franchise grant;
2. A provision which expressly permits the lessor of the
premises to provide Franchisor all sales and other information it may have
related to the operation of the Franchised Retail Business, as Franchisor may
request;
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3. A provision which requires the lessor concurrently to
provide Franchisor with a copy of any written notice of deficiency under the
lease sent to Franchisee and which grants to Franchisor, in its sole discretion
and sole option, the right (but no obligation) to cure any deficiency under the
lease should Franchisee fail to do so within 15 days after the expiration of the
period in which Franchisee may cure the default;
4. A provision which evidences the right of Franchisee to
display the Marks in accordance with the specifications required by the
Confidential Operations Manual, subject only to the provisions of applicable
law;
5. A provision that the premises shall be used only for the
operation of the Franchised Retail Business;
6. A provision which expressly states that any default under
the lease shall constitute a default under this Agreement, and any default under
this Agreement shall constitute a default under the lease; and
7. A provision which states that upon default of this
Agreement and in accordance with this Agreement, Franchisor can take possession
of the franchised premises and operate the Franchised Retail Business.
E. If the location is not designated above, Franchisor shall use
reasonable efforts to help analyze Franchisee's market area, to help determine
site feasibility, and to assist in the designation of the location, which must
be approved by Franchisor; provided however, that Franchisor will not conduct
site selection activities on Franchisee's behalf. While Franchisor shall utilize
its experience and expertise in a designation of location, nothing contained
herein shall be interpreted as a guarantee of success for said location nor
shall any site recommendation or approval made by Franchisor be deemed a
representation that any particular site is available for use as a SUCCESSORIES
facility. It shall be the sole responsibility of Franchisee to undertake site
selection activities and otherwise secure premises for Franchisee's Franchised
Retail Business.
F. In the event no acceptable site is found and approved by the parties
within 6 months from the date of this Agreement, then and in that event, upon
written application from either party, this contract shall be terminated and
deposits received by Franchisor shall be returned to Franchisee. Provided,
however, that in the event Franchisor has within the aforesaid time submitted in
writing to Franchisee 2 or more sites which are acceptable to Franchisor, and
Franchisee has refused to accept same, then Franchisee, upon termination, shall
forfeit to Franchisor the sum of $10,000 as liquidated damages in payment for
Franchisor's
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expenses in its site evaluation and selection activities. Franchisee and
Franchisor agree that the amount set forth to wit, $10,000 as liquidated damages
is a reasonable amount and that due to the nature of the subject matter, it will
be impossible to ascertain the exact amount of damages sustained by the
recipient therefore.
G. Franchisor may require Franchisee to provide all of the following
promptly upon obtaining possession of the site for the Franchised Retail
Business: (i) cause to be prepared and submit for approval by Franchisor a site
survey and any modifications to Franchisor's basic architectural requirements
and specifications (not for construction) for a SUCCESSORIES facility (including
requirements for dimensions, exterior design, materials, and work area design
and layout, equipment, fixtures, furniture, signs and decorating) required for
the development of a SUCCESSORIES facility at the site leased or purchased
therefor, provided that Franchisee may modify Franchisor's basic plans and
specifications only to the extent required to comply with all applicable
ordinances, building codes and permit requirements and with prior notification
to and approval by Franchisor; (ii) obtain all required zoning changes; all
required building, utility, health, sanitation, and sign permits and licenses
and any other required permits and licenses; (iii) purchase or lease equipment,
fixtures, furniture and signs as provided herein; (iv) complete the construction
and/or remodeling, equipment, fixture, furniture and sign installation and
decorating of the Franchised Retail Business in full and strict compliance with
plans and specifications previously approved by Franchisor and all applicable
ordinances, building codes and permit requirements; (v) obtain all customary
contractors' sworn statements and partial and final waivers of lien for
construction, remodeling, decorating and installation services; and (vi)
otherwise complete development of and have the Franchised Retail Business ready
to open and commence the conduct of its business in accordance with Paragraph
XII hereof.
H. Franchisee shall be required to periodically make reasonable capital
expenditures to remodel, modernize and redecorate the premises of the Franchised
Retail Business so that the Franchised Retail Business will reflect the
then-current image intended to be portrayed by SUCCESSORIES facilities. All
remodeling, modernization, or redecoration of the Franchised Retail Business and
its premises must be done in accordance with the standards and specifications as
prescribed by Franchisor from time to time and with the prior written approval
of Franchisor. All replacements must conform to Franchisor's then-current
quality standards and specifications and must be approved by Franchisor in
writing. Franchisee shall not be required to remodel, modernize and redecorate
the Franchised Retail Business and its premises more than once during the
initial term of this Agreement requiring expenditures in excess of $15,000 each
instance, however, maintenance of the premises of the Franchised Retail Business
may exceed this amount, and maintenance costs may not be credited to remodeling,
modernization, or redecoration expenditures. If the lease for the premises of
the Franchised Retail Business requires expenditures for remodeling,
modernization and redecoration, such an amount shall be credited to amounts
required by Franchisor.
IV. TRAINING AND ASSISTANCE
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A. Franchisor shall make training available to Franchisee and
Franchisee's designated manager. Franchisee and Franchisee's designated manager
shall attend and successfully complete the initial training program which shall
last a minimum of 7 days (and a maximum of 10 days) to be conducted at
Franchisor's headquarters, a SUCCESSORIES unit or at such other place as
Franchisor shall designate. There are two phases to the initial training program
which may or may not be held together. Phase one involves sales and product
knowledge and phase two involves store operation. The initial training program
shall cover all material aspects of the operation of a SUCCESSORIES franchise,
including: an understanding of SUCCESSORIES conceptual plans; financial
controls; promotion and merchandising, methods, techniques and procedures;
buying procedures; other retail facility management and operational techniques;
marketing and advertising techniques; deployment of labor; and maintenance of
quality standards. All expenses incurred by Franchisee and its employees in
attending such program, including, without limitation, travel costs, room and
board expenses, and employees' salaries shall be the sole responsibility of
Franchisee.
B. For a minimum of 5 (and a maximum of 10 days) prior to the
commencement of operation or during the first month of operation of Franchisee's
Franchised Retail Business, Franchisor will furnish to Franchisee, at
Franchisee's premises and at Franchisor's expense, 1 of Franchisor's
representatives for the purpose of facilitating the opening of Franchisee's
Franchised Retail Business. During this period, such representative will also
assist Franchisee in establishing and standardizing procedures and techniques
essential to the operation of a SUCCESSORIES facility and shall assist in
training personnel. Should Franchisee request additional assistance from
Franchisor in order to facilitate the opening of the Franchised Retail Business,
and should Franchisor deem it necessary and appropriate, Franchisee shall
reimburse Franchisor for the expense of Franchisor providing such additional
assistance.
C. If Franchisor determines, in its sole discretion, that Franchisee is
unable to satisfactorily complete the initial training program, Franchisor shall
have the right to terminate this Agreement in the manner herein provided. If
this Agreement is terminated pursuant to this Paragraph, Franchisor shall return
to Franchisee the franchise fees paid by Franchisee to Franchisor minus the
expenses incurred by Franchisor as of such date for providing training to
Franchisee and other expenses incurred by Franchisor. The amount retained by
Franchisor shall not exceed $10,000. Upon return of said amount, Franchisor
shall be fully and forever released from any claims or causes of action
Franchisee may have under or pursuant to this Agreement and Franchisee shall
have no further right, title or interest in the Marks and the System.
D. If Franchisee designates new or additional managers after the
initial training program, Franchisor shall provide training to such managers to
the extent that Franchisor can reasonably accommodate such managers in
Franchisor's regularly scheduled training course. Franchisor shall provide such
training at the then-current published rates. In no event will Franchisor be
under any obligation to provide individual training to Franchisee's managers.
▇▇
▇. ▇▇▇▇▇▇▇▇▇▇ from time to time may provide and may require that
previously-trained and experienced franchisees or their managers or employees
attend and successfully complete refresher training programs or seminars to be
conducted within Franchisor's Metropolitan Statistical Area ("MSA") as that term
is defined by the United States Census Bureau, at such location as may be
designated by Franchisor. Attendance at such refresher training programs or
seminars shall be at Franchisee's sole expense; provided, however, that
attendance will not be required at more than 2 such programs in any calendar
year and shall not collectively exceed 4 business days in duration.
V. PROPRIETARY MARKS
A. Franchisee acknowledges that Franchisor is the owner of all right,
title and interest together with all the goodwill of the Marks. 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, specifications, and operating procedures
prescribed by Franchisor from time to time during the term of the franchise. Any
unauthorized use of the Marks by Franchisee is a breach of this Agreement and an
infringement of the rights of Franchisor in and to the Marks. Franchisee
acknowledges that all usage of the Marks by Franchisee and any goodwill
established by Franchisee's use of the Marks shall inure to the exclusive
benefit of Franchisor and that this Agreement does not confer any goodwill or
other interests in the Marks upon Franchisee. Franchisee shall not, at any time
during the term of this Agreement or after its termination or expiration,
contest the validity or ownership of any of the Marks or assist any other person
in contesting the validity or ownership of any of the Marks. All provisions of
this Agreement applicable to the Marks apply to any additional trademarks,
service marks, and commercial symbols authorized for use by and franchised to
Franchisee by Franchisor after the date of this Agreement.
B. Franchisee shall not use any ▇▇▇▇ or portion of any of the Marks as
part of any corporate or trade name, or with any prefix, suffix, or other
modifying words, terms, designs, or symbols, or in any modified form. Franchisee
shall not use any Marks in connection with the sale of any unauthorized product
or service or in any other manner not expressly authorized in writing by
Franchisor. Franchisee shall give such notices of trademark and service ▇▇▇▇
registrations as Franchisor specifies and obtain such fictitious or assumed name
registrations as may be required under applicable law.
C. Any licenses or rights to use the Marks granted herein are
specifically limited to use of the Marks in connection with the operation of a
retail location only. All licenses, rights and interests in and to the Marks and
their elements and parts not specifically granted to Franchisee hereunder shall
be, and are specifically and entirely, reserved to Franchisor and may be fully
exploited without regard to the extent to which such rights may be competitive
with this Agreement or the rights granted hereunder. Such reserved
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rights include, but are not limited to, all rights of Franchisor to use the
Marks in connection with InterNet and other types of computer marketing and
information services.
D. Franchisee shall promptly notify Franchisor of any claim, demand, or
cause of action based upon or arising from any attempt by any other person, firm
or corporation to use the Marks or any colorable imitation thereof. Franchisee
shall also notify Franchisor of any action, claim or demand against Franchisee
relating to the Marks within 10 days after Franchisee receives notice of said
action, claim or demand. Upon receipt of timely notice of an action, claim or
demand against Franchisee relating to the Marks, Franchisor shall have the sole
right to defend any such action. Franchisor shall have the exclusive right to
contest or bring action against any third party regarding the third party's use
of any of the Marks and shall exercise such right in its sole discretion. In any
defense or prosecution of any litigation relating to the Marks or components of
the System undertaken by Franchisor, Franchisee shall cooperate with Franchisor
and execute any and all documents and take all actions as may be desirable or
necessary in the opinion of Franchisor's counsel, to carry out such defense or
prosecution. Both parties will make every effort consistent with the foregoing
to protect, maintain, and promote the Marks as identifying the System and only
the System. FRANCHISOR MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
AS TO THE USE, EXCLUSIVE OWNERSHIP, VALIDITY OR ENFORCEABILITY OF THE MARKS.
E. If it becomes advisable at any time in Franchisor's sole discretion,
for Franchisor and/or Franchisee to modify or discontinue use of any of the
Marks, and/or use one or more additional or substitute trade names, trademarks,
service marks, or other commercial symbols, Franchisee shall comply with
Franchisor's directions within a reasonable time after notice to Franchisee by
Franchisor, and Franchisor shall have no liability or obligation whatsoever with
respect to Franchisee's modification or discontinuance of any ▇▇▇▇.
F. In order to preserve the validity and integrity of the Marks and
copyrighted materials franchised herein and to assure that Franchisee is
properly employing the same in the operation of its Franchised Retail Business,
Franchisor or its agents shall have the right of entry and inspection of
Franchisee's premises at all reasonable times and, additionally, shall have the
right to observe the manner in which Franchisee is rendering its SUCCESSORIES
services and conducting its operations, to confer with Franchisee's employees
and customers, and to select and inspect the products and merchandise sold
through the Franchised Retail Business for test and content and evaluation
purposes to make certain that the products and merchandise are satisfactory and
meet the quality control provisions and performance standards established by
Franchisor.
VI. CONFIDENTIAL OPERATIONS MANUAL
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A. Franchisor will loan to Franchisee during the term of the franchise
1 or more copies of a Confidential Operations Manual containing reasonable,
mandatory and suggested specifications, standards, operating procedures and
rules prescribed from time to time by Franchisor for SUCCESSORIES facilities and
information relative to other obligations of Franchisee hereunder and the
operation of its Franchised Retail Business. Franchisor shall have the right to
add to and otherwise modify the Confidential Operations Manual from time to time
to reflect changes in the specifications, standards, operating procedures and
rules prescribed by Franchisor for SUCCESSORIES facilities, provided that no
such addition or modification shall alter Franchisee's fundamental status and
rights under this Agreement.
B. The Confidential Operations Manual shall at all times remain the
sole property of Franchisor and shall promptly be returned upon the expiration
or other termination of this Agreement. Franchisee shall not make any
disclosure, duplication or other unauthorized use of any portion of the
Confidential Operations Manual.
C. The Confidential Operations Manual contains proprietary information
of Franchisor and shall be kept confidential by Franchisee both during the term
of the franchise and subsequent to the expiration or termination of the
franchise. Franchisee shall at all times insure that its copy of the
Confidential Operations Manual be available at the Franchised Retail Business
premises in a current and up-to-date manner. At all times that the Confidential
Operations Manual is not in use by authorized personnel, Franchisee shall
maintain the Confidential Operations Manual in a locked receptacle at the
premises of the Franchised Retail Business, and shall only grant authorized
personnel, as defined in the Confidential Operations Manual, access to the key
or lock combination of such receptacle. In the event of any dispute as to the
contents of the Confidential Operations Manual, the terms of the master copy of
the Confidential Operations Manual maintained by Franchisor at Franchisor's home
office shall be controlling.
VII. CONFIDENTIAL INFORMATION
A. Franchisee acknowledges that its entire knowledge of the operation
of a SUCCESSORIES facility including the knowledge or know-how regarding the
specifications, standards and operating procedures of a SUCCESSORIES facility,
is derived from information disclosed to Franchisee by Franchisor and that
certain of such information is proprietary, confidential and a trade secret of
Franchisor. Franchisee shall maintain the absolute confidentiality of all such
proprietary information during and after the term of the franchise and shall not
use any such information in any other business or in any manner not specifically
authorized or approved in writing by Franchisor.
B. Franchisee shall divulge such confidential information only to the
extent and only to such of its employees as must have access to it in order to
operate the Franchised Retail Business. Any and all
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information, knowledge and know-how, including, without limitation, drawings,
materials, equipment, retail facility systems and methods, direct sales
techniques, telemarketing techniques, merchandising techniques and procedures
and other data, which Franchisor designates as confidential shall be deemed
confidential for purposes of this Agreement, except information which Franchisee
can demonstrate lawfully came to its attention prior to disclosure thereof by
Franchisor; or which, at the time of disclosure by Franchisor to Franchisee, had
lawfully become a part of the public domain, through publication or
communication by others; or which, after disclosure to Franchisee by Franchisor,
lawfully becomes a part of the public domain, through publication or
communication by others.
C. Due to the special and unique nature of the confidential
information, Marks, and Confidential Operations Manual of Franchisor, Franchisee
acknowledges that Franchisor shall be entitled to immediate equitable remedies,
including but not limited to, restraining orders and injunctive relief in order
to safeguard such proprietary, confidential, unique, and special information of
Franchisor and that money damages alone would be an insufficient remedy with
which to compensate Franchisor for any breach of the terms of Paragraphs V, VI,
and VII of this Agreement. Furthermore, all employees of Franchisee having
access to the confidential and proprietary information of Franchisor shall be
required to execute confidential information agreements in a form acceptable to
Franchisor.
VIII. MODIFICATION OF THE SYSTEM
Franchisee recognizes that from time to time hereafter Franchisor may
change or modify the System presently identified by the Marks including, without
limitation, the adoption and use of new or modified trade names, trademarks,
service marks or copyrighted materials, new computer programs and systems, new
types or brands of merchandise and products, new inventory requirements, new
equipment or new techniques and that Franchisee will accept, use and display for
the purpose of this Agreement any such changes in the System, as if they were
part of this Agreement at the time of execution hereof. Franchisee will make
such expenditures as such changes or modifications in the System may reasonably
require. Franchisee shall not change, modify or alter in any way the System.
IX. ADVERTISING
Recognizing the value of advertising and the importance of the
standardization of advertising and promotion to the furtherance of the goodwill
and the public image of SUCCESSORIES facilities, Franchisee agrees as follows:
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A. Franchisee will submit to Franchisor or its designated agency, for
its prior approval, all promotional materials and advertising to be used by
Franchisee, including, but not limited to, newspapers, radio and television
advertising, other electronic media whether now known or developed in the
future, specialty and novelty items, signs, containers and boxes. In the event
written disapproval of said advertising and promotional material is not given by
Franchisor to Franchisee within 30 days from the date such material is received
by Franchisor, said materials shall be deemed approved. Failure by Franchisee to
conform with the provisions herein and subsequent nonaction by Franchisor to
require Franchisee to cure or remedy this failure and default shall not be
deemed a waiver of future or additional failures and defaults of any other
provision of this Agreement. The submission of advertising to Franchisor for
approval shall not affect Franchisee's right to determine the prices at which
Franchisee sells its products or services.
B. At such time as Franchisor develops it, Franchisee shall contribute
to the SUCCESSORIES Advertising and Development Fund ("Fund") an amount equal to
1% of Franchisee's Gross Sales, as defined in Paragraph X. Franchisee's required
payments to the Fund shall be made at the same time and in the same manner as,
and in addition to, the Continuing Services and Royalty Fee provided in
Paragraph X herein. Such payment shall be made in addition to and exclusive of
any sums that Franchisee may be required to spend on local advertising and
promotion. The fund shall be maintained and administered by Franchisor or its
designee, as follows:
1. Franchisor shall direct all Fund expenditures. Generally,
the Fund will be used to cover production of marketing materials, promotional
expenses, mass media, public relations activities and other related marketing
expenses. Fund expenditures will be made for the benefit of all franchisees.
However, Franchisor cannot and does not ensure any particular franchisee
benefits directly pro rata from the placement of advertising or other
expenditures of Fund contributions. In addition, Franchisor retains the right to
use Fund contributions to place advertisements for catalogs in regional or
national publications. Any sales generated through such catalog sales shall be
treated as set forth in Paragraph I.C.
2. Franchisor shall, for each of its company-owned
SUCCESSORIES businesses offering products and services similar to the Franchised
Retail Business, make contributions to the Fund equivalent to the contributions
required of Franchised Retail Businesses within the System.
3. The funds may be used to meet any and all costs of
maintaining, administering, directing and preparing advertising and related
marketing materials. All sums paid by Franchisee to the Fund shall be maintained
in a separate account from the other funds of Franchisor and shall not be used
to defray any of Franchisor's general operating expenses, except for such
reasonable administrative costs and overhead, if any, as Franchisor may incur in
activities reasonably related to the administration or direction of the Fund and
advertising programs including, without limitation, conducting market research,
preparing marketing and advertising materials, and collecting and accounting for
assessments for the Fund.
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4. It is anticipated that all contributions to the Fund shall
be expended for advertising and promotional purposes during Franchisor's fiscal
year within which contributions are made. If, however, excess amounts remain in
the Fund at the end of such fiscal year, all expenditures in the following
fiscal year(s) shall be made first out of any current interest or other earnings
of the Fund, next out of any accumulated earnings, and finally from principal.
5. Although Franchisor intends the Fund to be of perpetual
duration, Franchisor maintains the right to terminate the Fund. The Fund shall
not be terminated, however, until all monies in the Fund have been expended for
advertising and promotional purposes.
6. An accounting of the operation of the Fund shall be
prepared annually and shall be made available to Franchisee upon request.
Franchisor reserves the right, at its option, to require that such annual
accounting include an audit of the operation of the Fund prepared by an
independent certified public accountant selected by Franchisor and prepared at
the expense of the Fund.
7. If at any time, 50% or more of the existing SUCCESSORIES
franchisees elect to raise the percentage advertising contribution level to the
Fund, participation will be required of all franchisees, but in no event will
Franchisee's contribution (for combined Fund and local advertising) exceed 5% of
Franchisee's Gross Sales.
C. Franchisee shall be required to spend a minimum of $2,000 and a
maximum of $3,000 on newspaper, direct mail, advertising or promotional items
through other media during Franchisee's initial 4 months of operation of the
Franchised Retail Business depending on the market area where the Franchised
Retail Business is located. Such advertising and promotional items are to be
designated as "Grand Opening" advertising and promotion and shall be conducted
in accordance with Franchisor's standards and specifications. Guidelines for
Grand Opening promotions will be provided to Franchisee prior to or during the
initial training program.
D. Franchisee shall spend each calendar month 3% of Franchisee's Gross
Sales for the preceding calendar month on local advertising and promotion. This
requirement takes effect after Franchisee has been in operation 4 months. Such
expenditures shall be made directly by Franchisee. Franchisor shall provide
guidelines for local advertising and any deviation from such guidelines must be
approved in advance by Franchisor or Franchisor's designated advertising agency.
Within 30 days of the end of each month, Franchisee shall furnish to Franchisor,
in a manner approved by Franchisor, an accurate accounting of Franchisee's
expenditures on local advertising and promotion for the preceding month just
ended.
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E. From time to time Franchisor may designate a local, regional or
national advertising coverage area in which Franchisee's business and at least 1
other SUCCESSORIES franchise is located for purposes of developing a cooperative
advertising or promotional program. Franchisee agrees to participate in and
contribute its share to such cooperative advertising and promotional programs in
Franchisee's advertising coverage areas. The cost of the program shall be
allocated among locations in such area and each Franchisee's share shall be in
proportion to its sales during the preceding 12 month period, or portion of said
period, but the aggregate of such additional contribution by Franchisee during
any 3 month period shall not exceed the amounts required pursuant to Paragraph
IX.D. of this Agreement. Said contributions to cooperative advertising
promotional programs will be credited toward the local advertising and
promotional expenditure required by Paragraph IX.D. "Advertising coverage area"
shall be defined as the area covered by the particular advertising medium
(television, radio, or other medium) as recognized in the industry. At the time
a program is submitted, Franchisor shall submit a list to Franchisee of all
operating SUCCESSORIES facilities within the advertising coverage area.
F. Franchisor may, from time to time, develop and market special
catalogs, brochures and other promotional items which will be made available to
Franchisee at the then current price established by Franchisor for such items.
Franchisor agrees that the prices charged to Franchisee for such items will be
consistent with the most favorable pricing charged to other similarly situated
franchisees for the same items and will be based upon Franchisor's fully
absorbed cost for such items plus a ▇▇▇▇ up of 10%. Franchisee agrees to
maintain a representative inventory of such promotional items to meet public
demand. For purposes of this Agreement, franchisees will be considered
"similarly situated" based upon sales, product purchases, shipping distances and
other factors reasonably communicated to Franchisee from time to time and "fully
absorbed cost" shall include all fixed and variable manufacturing costs, as well
as all direct and indirect costs incurred in the factory or production process.
Franchisee acknowledges that all such purchases from Franchisor may inclucde a
profit to Franchisor. This is in addition to the catalog requirement of
Paragraph XII.Q. Further, Franchisor agrees that with regard to Franchisee
developing local marketing pieces, Franchisee may purchase digitized files and
other graphic pieces from Franchisor at the same cost structure identified
immediately above in this section F. The purchase and use of said materials
shall be subject to any limitations, conditions or covenants provided for in any
existing agreements Franchisor may have with third parties. Franchisee
acknowledges and agrees that all such local marketing pieces shall be subject to
review and final approval of Franchisor, which approval shall not be
unreasonably withheld.
G. Franchisee shall not advertise or use in advertising or any other
form of promotion, the trademarks, service marks or commercial symbols of
Franchisor without appropriate -C- or -Registered Trademark- copyright
and registration marks or the designation TM or SM where applicable.
X. CONTINUING SERVICES AND ROYALTY FEE
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A. Franchisee shall pay without offset, credit or deduction of any
nature, to Franchisor, so long as this Agreement shall be in effect, a monthly
Continuing Services and Royalty Fee equal to 2% of the Gross Sales derived from
the Franchised Retail Business. Said Continuing Services and Royalty Fee shall
be paid monthly in the manner specified below or as otherwise prescribed in the
Confidential Operations Manual.
1. On the 15th day of each month, Franchisee will submit via
facsimile to Franchisor on a form approved by Franchisor, a correct statement,
signed by Franchisee, of Franchisee's Gross Sales for the preceding month just
ended. The Continuing Services and Royalty Fee payment shall be mailed to
Franchisor at such time or Franchisor may require Franchisee to submit proof
that such payment was made via electronic funds transfer. Franchisee will make
available to Franchisor for reasonable inspection at reasonable times by
Franchisor, all original books and records that Franchisor may deem necessary to
ascertain Franchisee's Gross Sales.
2. The term "Gross Sales", as used herein and throughout this
Agreement, shall mean and include the total of all sales of all merchandise,
products or services to customers of Franchisee, (including deposits or interim
deposits) whether or not sold or performed at or from the SUCCESSORIES
Franchised Retail Business, less sales, use or service taxes collected and paid
to the appropriate taxing authority and customer refunds and adjustments.
B. All Continuing Services and Royalty Fees, advertising contributions,
amounts due for purchases by Franchisee from Franchisor, or its subsidiaries,
shall bear interest after due date at the lower of 18% per annum or the highest
applicable legal rate for open account business credit. Franchisee acknowledges
that this Paragraph shall not constitute agreement by Franchisor or its
subsidiaries to accept such payments after same are due or a commitment by
Franchisor to extend credit to, or otherwise finance Franchisee's operation of,
the Franchised Retail Business. Further, Franchisee acknowledges that its
failure to pay all amounts when due shall constitute grounds for termination of
this Agreement, as provided in Paragraph XVI hereof, notwithstanding the
provisions of this Paragraph.
C. Notwithstanding any designation by Franchisee, Franchisor shall have
the sole discretion to apply any payments by Franchisee to any past due
indebtedness of Franchisee for Continuing Services and Royalty Fees, advertising
contributions, purchases from Franchisor, interest or any other indebtedness.
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XI. ACCOUNTING AND RECORDS
A. Franchisee shall establish and maintain a bookkeeping, accounting
and record keeping system conforming to the requirements prescribed by
Franchisor, including, without limitation, the use and retention of sales
tickets, purchase orders, invoices, payroll records, check stubs, sales tax
records and returns, cash receipts and disbursements, journals and general
ledgers. Franchisee shall preserve for a period of not less than 3 years, during
the term of this Agreement and for not less than 3 years following the term of
this Agreement, all accounting records and supporting documentation relating to
the Franchised Retail Business.
B. Franchisee will supply to Franchisor on or before the 20th day after
the term of each calendar quarter, in the form approved by Franchisor, a profit
and loss statement and balance sheet for the last preceding calendar quarter.
Additionally, Franchisee shall, at its expense, submit to Franchisor within 90
days of the end of each fiscal year during the term of this Agreement, an income
statement for such fiscal year and a balance sheet for the last date of such
year. Such annual statements shall be prepared in accordance with generally
accepted accounting principles applied on a consistent basis. Franchisor
reserves the right to require Franchisee to submit financial statements which
are either audited or reviewed by a Certified Public Accountant.
C. Franchisee shall submit to Franchisor such other periodic reports,
forms and records as specified, and in the manner and at the time as specified
in the Confidential Operations Manual or otherwise in writing.
D. Franchisor or its designated agents shall have the right at all
reasonable times to examine and copy, at its expense, the books, records, and
tax returns of Franchisee. Franchisor shall also have the right, at any time, to
have an independent audit made of the books of Franchisee. If an inspection
should reveal that any payments to Franchisor have been understated in any
report to Franchisor, then Franchisee shall immediately pay to Franchisor the
amount understated upon demand, in addition to interest from the date such
amount was due until paid, at the lower of 18% per annum or the maximum rate
permitted by law. If an inspection discloses an understatement in any report of
2% or more, Franchisee shall, in addition, reimburse Franchisor for any and all
costs and expenses connected with the inspection (including, without limitation,
reasonable accounting and attorneys' fees). The foregoing remedies shall be in
addition to any other remedies Franchisor may have.
E. Franchisee acknowledges that nothing contained herein constitutes
Franchisor's agreement to accept any payments after same are due or a commitment
by Franchisor to extend credit to or otherwise finance Franchisee's operation of
the Franchised Retail Business. Further, Franchisee acknowledges that its
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failure to pay all amounts when due shall constitute grounds for termination of
this Agreement, as herein provided.
XII. STANDARDS OF QUALITY AND PERFORMANCE
Franchisee shall comply with all requirements set forth in this
Agreement, the Confidential Operations Manual and other written policies
supplied to Franchisee by Franchisor. Mandatory specifications, standards,
operating procedures and rules prescribed from time to time by Franchisor in
the Confidential Operations Manual or otherwise communicated to Franchisee in
writing, shall constitute provisions of this Agreement as if fully set forth
herein and shall be reasonably and uniformly applied to all franchisees. All
references herein to this Agreement shall include all such mandatory
specifications, standards and operating procedures and rules. Franchisee
shall comply with the entire System including, but not limited to:
A. Franchisee shall commence operation of the retail store of the
Franchised Retail Business not later than nine (9) months after the execution of
this Agreement or as otherwise approved by Franchisor. Prior to such opening,
Franchisee shall have complied with all Franchisor's pre-opening standards and
specifications. If Franchisee for any reason fails to commence operation as
herein provided, such failure shall be considered a default and Franchisor may
terminate this Agreement as herein provided.
B. Franchisee shall maintain the condition and appearance of the
premises of the Franchised Retail Business consistent with Franchisor's
standards. Franchisee shall maintain the premises of the Franchised Retail
Business as is from time to time required to maintain or improve the appearance
and efficient operation of the Franchised Retail Business, including, but not
limited to, replacement of worn out or obsolete fixtures and signs, and repair
of the exterior and interior of the Franchised Retail Business. If at any time
in Franchisor's judgment the general state of repair or the appearance of the
premises of the Franchised Retail Business or its equipment, fixtures, signs or
decor does not meet Franchisor's standards therefor, Franchisor shall so notify
Franchisee, specifying the action to be taken by Franchisee to correct such
deficiency. If Franchisee fails or refuses to initiate within 30 days after
receipt of such notice, and thereafter continue, a bona fide program to complete
any required maintenance, Franchisor shall have the right, in addition to all
other remedies, to enter upon the premises of the Franchised Retail Business and
effect such maintenance on behalf of Franchisee and Franchisee shall pay the
entire costs thereof on demand.
C. Franchisee shall make no material alterations to the premises of the
Franchised Retail Business nor shall Franchisee make material replacements of or
alterations to the equipment, fixtures or signs of the Franchised Retail
Business without the prior written approval by Franchisor.
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D. Franchisee shall offer for sale at the Franchised Retail Business
all types and mix of corporate gifts, wall decor, self-help books, audio tapes,
video tapes, personalized gifts and awards that Franchisor from time to time
authorizes and will not offer for sale at the Franchised Retail Business or the
premises which it occupies any other category of merchandise or products or use
such premises for any purpose other than the operation of a Franchised Retail
Business in full compliance with this Agreement.
E. From time to time, Franchisor shall provide to Franchisee a list of
approved manufacturers, suppliers, and distributors authorized for the
Franchised Retail Business ("Approved Suppliers List") and a list of approved
inventory products, fixtures, furniture, equipment, signs, stationery,
suppliers, and other items or services necessary to operate the Franchised
Retail Business ("Approved Supplies List"). Franchisor may revise the Approved
Supplies List and Approved Suppliers List from time to time in its sole
discretion. If Franchisee proposes to offer for sale or use at the Franchised
Retail Business any brand of product, or other material or supply which is not
on the Approved Supplies List or to purchase any product from a supplier that is
not on the Approved Suppliers List, Franchisee shall first notify Franchisor and
shall upon request by Franchisor submit samples and such other information as
Franchisor requires for examination and/or testing or to otherwise determine
whether such product, material or supply, or such proposed supplier meets its
specifications and quality standards. A charge not to exceed the reasonable cost
of the inspection and evaluation and the actual cost of the test shall be paid
by Franchisee or the supplier. Franchisor reserves the right to re-inspect the
facilities and products of any supplier of an approved item and to revoke its
approval of any item or supplier which fails to continue to meet any of
Franchisor's criteria.
F. Franchisee acknowledges that an essential element of the System is
the line of proprietary products developed by Franchisor and Franchisor's
subsidiaries (the "Proprietary or Trademarked Product Lines"). At all times
during the term of this Agreement, Franchisee shall carry an adequate supply and
maintain a representative inventory, as may be defined by Franchisor in the
Confidential Operations Manual, of such Proprietary or Trademarked Product
Lines, and Franchisee shall maintain, carry and promote such Proprietary or
Trademarked Product Lines for the sale to the general public in order to meet
customer demand as designated by Franchisor. Franchisee shall be required to
purchase the Proprietary or Trademarked Product Lines from Franchisor,
Franchisor's subsidiaries or designated supplier of Franchisor at the then
current price established by Franchisor for such products. Franchisee
acknowledges that all such purchases from Franchisor or its affiliates may
include a profit to Franchisor or its affiliates.
G. All inventory, products and materials, and other items and supplies
used in the operation of the Franchised Retail Business which are not
specifically required to be purchased in accordance with Franchisor's Approved
Supplies List and Approved Suppliers List shall conform to the specifications
and quality standards established by Franchisor from time to time.
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H. Franchisee shall secure and maintain in force all required licenses,
permits and certificates relating to the operation of the Franchised Retail
Business and shall operate the Franchised Retail Business in full compliance
with all applicable laws, ordinances and regulations, including without
limitation all government regulations relating to occupational hazards and
health, consumer protection, trade regulation, worker's compensation,
unemployment insurance and withholding and payment of Federal and State income
taxes and social security taxes and sales, use and property taxes. Franchisee
shall refrain from any merchandising, advertising or promotional practice which
is unethical or may be injurious to the business of Franchisor and/or other
franchised businesses or to the goodwill associated with the Marks.
I. Franchisee shall in the operation of the Franchised Retail Business
use only displays, labels, forms and other products and documentation imprinted
with the Marks and colors as prescribed from time to time by Franchisor.
J. Prior to commencement of operation of the Franchised Retail
Business, Franchisee shall adequately supply the Franchised Retail Business with
a representative inventory as prescribed by Franchisor of an assortment of
corporate gifts, wall decor, self-help books, audio tapes, video tapes,
personalized gifts and awards, products and merchandise of the type, quantity
and quality as specified by Franchisor. Franchisee shall maintain levels of
inventory that will permit operation of the Franchised Retail Business at
maximum capacity.
K. The Franchised Retail Business shall at all times be under the
direct, on-premises supervision of Franchisee (or a trained and competent
employee acting as full-time manager). In the event Franchisee operates more
than 1 franchise, or in the event Franchisee does not devote its full time to
conducting the Franchised Retail Business, at least 1 trained and competent
employee referred to above shall act as full-time manager. Franchisee shall keep
Franchisor informed at all times of the identity of any employee(s) acting as
manager(s) of the Franchised Retail Business. Franchisor shall make training
available, as is reasonable and necessary, for all managers designated by
Franchisee. Franchisor shall provide such training at the then-current published
rates. Franchisee shall, at all times, faithfully, honestly and diligently
perform its obligations hereunder and shall not engage in any business or other
activities that will conflict with its obligations hereunder.
L. Franchisee shall not install or maintain on the premises of the
Franchised Retail Business any telephone booths, newspaper racks, video games,
juke boxes, gum machines, games, rides, vending machines or other similar
devices without the written approval of Franchisor.
M. Franchisee shall notify Franchisor in writing within 5 days of the
commencement of any action, suit, or proceeding, and of the issuance of any
order, writ, injunction, award, or decree of any court,
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agency, or other governmental instrumentality, which may adversely affect the
operation or financial condition of the Franchised Retail Business.
N. Franchisee shall maintain a current listing of the names and
addresses of all customers of the Franchised Retail Business. Franchisee must
provide Franchisor a quarterly update of the lists. Said customer list shall be
the sole property of Franchisor.
O. Franchisee shall comply with all Franchisor's standards and
specifications regarding the use of computer systems as an integral part of the
System, including the purchasing/leasing of computer hardware and software and
updates. Franchisor has approved a computer system which provides accounting,
inventory and point-of-sale functions. Franchisor will provide training to
Franchisee on such computer system. If Franchisee wishes to utilize an
alternative computer system such system must meet Franchisor's standards and
specifications, be approved by Franchisor in accordance with Paragraph XII.E.;
be compatible with the computer system(s) in use throughout the network of
SUCCESSORIES businesses and allow Franchisor direct access by telephone modem.
P. Franchisee shall participate actively in a SUCCESSORIES Regional
Advisory Franchisee Council ("Council") and participate in all Council programs
approved by Franchisor for Franchisee's particular Council. The purposes of the
Council(s) include, but are not limited to, exchanging ideas and problem solving
methods, advising Franchisor on expenditures for regional advertising, providing
back-up support and staffing for political influence, and coordinating System
franchisee efforts. Franchisee shall pay all Council assessments levied by the
Council, and Franchisor has the right to enforce this obligation. Amounts and
expenditures may vary from time to time and due to variations in Council
participation and costs as determined by a particular Council and as approved by
Franchisor. Although Franchisee shall pay such Council assessments, such
assessments shall in no way diminish Franchisee's rights and the benefit of the
bargain under this Agreement. Such Council(s) may be formed by Franchisor at
such time that more than 1 franchisee conducts a SUCCESSORIES Franchised Retail
Business in any given region, the boundaries of such region to be determined in
the sole and unfettered discretion of Franchisor.
Q. Franchisee shall be required to purchase from Franchisor or its
designee and distribute through the Franchised Retail Business a representative
inventory of the SUCCESSORIES catalogs. Franchisor agrees that the prices
charged to Franchisee for such catalogs will be consistent with the most
favorable pricing charged to other similarly situated franchisees for the same
catalogs and will be based upon Franchisor's fully absorbed cost for such
catalogs plus a ▇▇▇▇-up of 10%. Franchisee acknowledges that all such purchases
from Franchisor may include a profit to Franchisor.
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XIII. FRANCHISOR'S OPERATIONS ASSISTANCE
A. Franchisor may from time to time advise or offer guidance to
Franchisee relative to prices for corporate gifts, wall decor, self-help books,
audio tapes, video tapes, personalized gifts and awards and related products and
merchandise offered for sale by the Franchised Retail Business that in
Franchisor's judgment constitute good business practice. Such guidance will be
based on the experience of Franchisor and/or its franchisees in operating
franchised businesses and an analysis of the costs of such services, activities,
merchandise, supplies and products and prices charged for competitive inventory
and products. Franchisee shall not be obligated to accept any such advice or
guidance and shall have the sole right to determine the prices to be charged
from time to time by the Franchised Retail Business and no such advice or
guidance shall be deemed or construed to impose upon Franchisee any obligation
to charge any fixed, minimum or maximum prices for any product offered for sale
by the Franchised Retail Business.
B. Upon commencement and during operation of the Franchised Retail
Business, Franchisor shall do the following:
1. Provide to Franchisee a comprehensive list of established
sources of suppliers of corporate gifts, wall decor, self-help books, audio
tapes, video tapes, personalized gifts and awards and other merchandise and
products, equipment, fixtures and supplies necessary for the operation of the
Franchised Retail Business and provide specifications for such products.
However, Franchisor makes no representation or warranty that any particular
approved supplier will be willing or able to sell to all franchisees;
2. As Franchisor deems necessary, negotiate supply contracts
to maximize cost savings;
3. As Franchisor deems necessary, attempt to coordinate
equipment, product and supplies distribution for local, regional and national
suppliers;
4. Regulate quality standards and products in conformance with
the System specifications throughout the network of franchised businesses;
5. Provide ongoing training and support in operating store
design, merchandising, product knowledge and customer service; and
6. Coordinate System-wide advertising.
C. Franchisor shall advise Franchisee of problems arising out of the
operation of the Franchised Retail Business as disclosed by reports submitted to
Franchisor by Franchisee or by inspections conducted
24
by Franchisor of the Franchised Retail Business. Franchisor may furnish
Franchisee with such assistance in connection with the operation of the
Franchised Retail Business as is reasonably determined to be necessary by
Franchisor from time to time. Operations assistance may consist of advice and
guidance with respect to:
1. Proper utilization of procedures developed for a
SUCCESSORIES facility with respect to products and related business services as
approved by Franchisor;
2. Additional equipment, merchandise, products and services
authorized for SUCCESSORIES facilities;
3. Procedures and methods concerning the use of an approved
computer system in the operation of the Franchised Retail Business;
4. The institution of proper administrative, bookkeeping,
accounting, inventory control, supervisory and general operating procedures for
the effective operation of a SUCCESSORIES facility; and
5. Advertising, displays and other promotional programs.
D. Franchisor or Franchisor's representative shall make periodic visits
to the Franchised Retail Business for the purposes of consultation, assistance,
and guidance of Franchisee in all aspects of the operation and management of the
Franchised Retail Business. Franchisor, and Franchisor's representatives, who
attend at the Franchised Retail Business will prepare, for the benefit of both
Franchisor and Franchisee, written reports in respect to such visits outlining
any suggested changes or improvements in the operations of the Franchised Retail
Business and detailing any defaults in such operations which become evident as a
result of any such visit, and a copy of each such written report shall be
provided to both Franchisor and Franchisee. Franchisor shall advise Franchisee
of problems arising out of the operation of the Franchised Retail Business as
disclosed by reports submitted to Franchisor by Franchisee or by inspections
conducted by Franchisor of the Franchised Retail Business.
E. All of the specifications, Approved Suppliers Lists, Approved
Supplies Lists, training and operations manuals to be provided by Franchisor to
Franchisee pursuant to this Agreement shall be delivered at the initial training
program.
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XIV. INSURANCE
A. Franchisee shall procure at its expense and maintain in full force
and effect during the term of this Agreement, an insurance policy or policies
protecting Franchisee and Franchisor, and their officers, directors and
employees against any loss, liability, personal injury, death, or property
damage or expense whatsoever arising or occurring upon or in connection with the
Franchised Retail Business, as Franchisor may reasonably require for its own
protection. Franchisor shall be named an additional insured in such policy or
policies.
B. Such policy or policies shall be written by an insurance company
licensed in the state in which Franchisee operates and having at least an "A"
Rating Classification as indicated in Best's Key Rating Guide (or comparable
industry designation) in accordance with standards and specifications set forth
in the Confidential Operations Manual or otherwise in writing, and shall
include, at a minimum (except as different coverages and policy limits may
reasonably be specified for all franchisees from time to time by Franchisor in
the Confidential Operations Manual or otherwise in writing) the following:
1. All risks coverage insurance on the Franchised Retail
Business and all fixtures, equipment, supplies, products and other property used
in the operation of the Franchised Retail Business (which coverage may include
flood and/or earthquake coverage where applicable, and theft insurance) for full
repair and replacement value without any applicable co-insurance clause, except
that an appropriate deductible clause shall be permitted.
2. Worker's compensation and employer's liability insurance as
well as such other insurance as may be required by statute or rule of the state
in which the Franchised Retail Business is located and operated.
3. Commercial general liability insurance and product
liability insurance including a per premises aggregate with the following
coverages: broad form contractual liability, personal injury; products/completed
operation; insuring Franchisor and Franchisee against all claims, suits,
obligations, liabilities and damages, including attorneys' fees, based upon or
arising out of actual or alleged personal injuries or property damage resulting
from, or occurring in the course of, or on or about or otherwise relating to the
Franchised Retail Business including General Aggregate coverage in the following
limits:
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Type of Insurance Limits of Liability
----------------- -------------------
Workmen's Compensation.........................................................Statutory
General Liability for bodily injury
and property damage including
products and non-owned automobiles..........................................$1,000,000 all inclusive
Motor vehicle insurance (business coverage)
for all liability theft, vehicles
including fire, property damage and
public lability and collisions..............................................$1,000,000 public
liability
Business interruption..........................................................As determined by the
Franchisor from time to
time
Franchisee's Legal Liability...................................................Replacement value of
contents of Authorized
Location
Fire and extended coverage for Authorized
Location, equipment furnishings,
fixtures, plate glass, inventory and
including burglary, holdup and vandalism....................................Full replacement value
The amounts required herein may be modified from time to time by
Franchisor to reflect inflation or future experience with claims.
C. The insurance afforded by the policy or policies respecting
liability shall not be limited in any way by reason of any insurance which may
be maintained by Franchisor. Within 90 days of the signing of this Agreement,
but in no event later than the date on which Franchisee acquires an interest in
the real property from which it will operate the Franchised Retail Business, a
Certificate of Insurance showing compliance with the foregoing requirements
shall be furnished by Franchisee to Franchisor for approval. Such certificate
shall state that said policy or policies will not be canceled or altered without
at least 20 days prior written notice to Franchisor and shall reflect proof of
payment of premiums. Maintenance of such insurance and the performance by
Franchisee of the obligations under this Paragraph shall not relieve Franchisee
of liability under the indemnity provision set forth in this Agreement. Minimum
limits as required above may be modified from time to time, as conditions
require, by written notice to Franchisee.
D. Should Franchisee, for any reason, not procure and maintain such
insurance coverage as required by this Agreement, Franchisor shall have the
right and authority (without, however, any obligation
27
to do so) immediately to procure such insurance coverage and to charge same to
Franchisee, which charges, together with a reasonable fee for expenses incurred
by Franchisor in connection with such procurement, shall be payable by
Franchisee immediately upon notice.
XV. COVENANTS
A. Unless otherwise specified, the term "Franchisee" as used in this
Paragraph XV shall include, collectively and individually, all officers,
directors, and holders of a beneficial interest of 5% or more of the securities
of Franchisee, and of any corporation directly or indirectly controlling
Franchisee, if Franchisee is a corporation; and the general partners and any
limited partner (including any corporation and the officers, directors, and
holders of a beneficial interest of 5% or more of securities, of a corporation
which controls, directly or indirectly, any general or limited partner), if
Franchisee is a partnership.
B. Franchisee covenants that during the term of this Agreement and any
renewals thereof, except as otherwise approved in writing by Franchisor,
Franchisee (if Franchisee is an individual), a shareholder of a beneficial
interest of 10% or more of the securities of Franchisee (if Franchisee is a
corporation), a general partner of Franchisee (if Franchisee is a partnership),
or Franchisee's full-time manager (approved by Franchisor) shall devote full
time, energy, and best efforts, to the management and operation of the
Franchised Retail Business.
C. Franchisee covenants that during the term of this Agreement and any
renewal thereof, except as otherwise approved in writing by Franchisor,
Franchisee shall not, either directly or indirectly, for himself, or through, on
behalf of, or in conjunction with any person, persons, partnership, or
corporation:
1. Divert or attempt to divert any business or customer of the
Franchised Retail Business to any competitor, by direct or indirect inducement
or otherwise, or do or perform, directly or indirectly, any other act injurious
or prejudicial to the goodwill associated with Franchisor's Marks and the
System.
2. Employ or seek to employ any person who is at that time
employed by Franchisor or by any other Franchisee of Franchisor, or otherwise
directly or indirectly induce or seek to induce such person to leave his or her
employment thereat.
3. Own, maintain, engage in, or have any interest in any
business (including any business operated by Franchisee prior to entry into this
Agreement) specializing, in whole or in part, in the wholesale or retail sale or
distribution of corporate gifts, wall decor, self-help books, audio tapes, video
28
tapes, personalized gifts and awards, or offering, selling or providing
merchandise or services the same as or similar to that offered, sold or provided
through the System.
D. Franchisee specifically acknowledges that, pursuant to this
Agreement, Franchisee will receive valuable training and confidential
information, including, without limitation, information regarding the
promotional, operational, sales, and marketing methods and techniques of
Franchisor and the System. Accordingly, Franchisee covenants that, except as
otherwise approved in writing by Franchisor, Franchisee shall not, for a period
of 2 years after the expiration or termination of this Agreement, regardless of
the cause of termination, either directly or indirectly, for himself, or
through, on behalf of, or in conjunction with any person, persons, partnership,
or corporation, own, maintain, engage in, or have any interest in any business
specializing, in whole or in part, in the wholesale or retail sale or
distribution of corporate gifts, wall decor, self-help books, audio tapes, video
tapes, personalized gifts and awards, or offering or providing any other
services or selling any merchandise or product the same as or similar to those
provided or sold through the SUCCESSORIES System:
1. Within the Metropolitan Statistical Area, as that term is
defined the U.S. Census Bureau (MSA) in which the Franchised Retail Business is
located; or
2. Within a radius of 10 miles of the Franchised Retail
Business; or
3. Within a radius of 10 miles of the location of any other
business using the System, whether franchised or owned by Franchisor.
E. The parties agree that each of the foregoing covenants shall be
construed as independent of any other covenant or provision of this Agreement.
The parties have reviewed and acknowledged that the foregoing covenants are
reasonable including but not limited to geographical and time limitations. If
all or any portion of a covenant in this Paragraph XV is held unreasonable or
unenforceable by a court or agency having valid jurisdiction in an unappealed
final decision to which Franchisor is a party, Franchisee shall be bound by any
lesser covenant subsumed within the terms of such covenant that imposes the
maximum duty permitted by law, as if the resulting covenant were separately
stated in and made a part of this Paragraph XV.
F. Franchisee understands and acknowledges that Franchisor shall have
the right, in its sole discretion, to reduce the scope of any covenant set forth
in Paragraphs XV.C. and XV.D. in this Agreement, or any portion thereof, without
Franchisee's consent, effective immediately upon receipt by Franchisee of
written notice thereof, and Franchisee shall comply forthwith with any covenant
as so modified, which shall be fully enforceable notwithstanding the provisions
of Paragraph XXVI.
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G. Franchisor shall have the right to require all of Franchisee's
personnel performing managerial or supervisory functions and all personnel
receiving special training from Franchisor to execute similar covenants in a
form satisfactory to Franchisor.
XVI. DEFAULT AND TERMINATION
A. If Franchisee is in substantial compliance with this Agreement and
Franchisor materially breaches this Agreement and fails to cure such breach
within a reasonable time after written notice thereof is delivered to
Franchisor, Franchisee may terminate this Agreement. Such termination shall be
effective 30 days after delivery to Franchisor of notice that such breach has
not been cured and Franchisee elects to terminate this Agreement. A termination
of this Agreement by Franchisee for any reason other than breach of this
Agreement by Franchisor and Franchisor's failure to cure such breach within a
reasonable time after receipt of written notice thereof shall be deemed a
termination by Franchisee without cause.
B. This Agreement shall terminate automatically upon delivery of notice
of termination to Franchisee, if Franchisee or its owner(s), officer(s), or
manager(s):
1. Fails to satisfactorily complete the training program as
provided in Paragraph IV of this Agreement;
2. Has made any material misrepresentation or omission in its
application for the franchise;
3. Is convicted of or pleads no contest to a felony or other
crime or offense that is likely to adversely affect the reputation of Franchisee
or the SUCCESSORIES Franchised Retail Business;
4. Makes any unauthorized use, disclosure or duplication of
any portion of the Confidential Operations Manual or duplicates or discloses or
makes any unauthorized use of any trade secret or confidential information
provided to Franchisee by Franchisor;
5. Abandons or fails or refuses to actively operate the
Franchised Retail Business for two (2) business days in any 12 month period,
unless the Franchised Retail Business has been closed for a purpose approved by
Franchisor, or fails to relocate to an approved premises within an approved
period of time following expiration or termination of the lease for the premises
of the Franchised Retail Business;
6. Surrenders or transfers control of the operation of the
SUCCESSORIES Franchised Retail Business, makes an unauthorized direct or
indirect assignment of the franchise or an ownership
30
interest in Franchisee or fails or refuses to assign the franchise or the
interest in Franchisee of a deceased or disabled controlling owner thereof as
herein required;
7. Submits to Franchisor on 3 or more separate occasions at
any time during the term of the franchise any reports or other data, information
or supporting records which understate by more than 3% the Continuing Services
and Royalty Fees owed to Franchisor for any period of, or periods aggregating, 3
or more weeks, and Franchisee is unable to demonstrate that such understatements
resulted from inadvertent error;
8. If Franchisee shall become insolvent or make a general
assignment for the benefit of creditors, or if a petition in bankruptcy is filed
by Franchisee or such a petition is filed against and consented to by
Franchisee, or if Franchisee is adjudicated a bankrupt, or if a ▇▇▇▇ in equity
or other proceeding for the appointment of a receiver of Franchisee or other
custodian by Franchisee, or if a receiver or other custodian (permanent or
temporary) of Franchisee's assets or property, or any part thereof, is appointed
by any court of competent jurisdiction, or if proceedings for a composition with
creditors under any state or federal law should be instituted by or against
Franchisee, or if a final judgment remains unsatisfied or of record for 30 days
or longer (unless supersedeas bond is filed), or if execution is levied against
Franchisee's Franchised Retail Business or property, or suit to foreclose any
lien or mortgage against the premises or equipment is instituted against
Franchisee and not dismissed within 30 days , or if the real or personal
property of Franchisee's Franchised Retail Business shall be sold after levy
thereupon by any sheriff, marshall, or constable.
9. Materially misuses or makes an unauthorized use of the
Marks or commits any act which can reasonably be expected to materially impair
the goodwill associated with any Marks;
10. Fails on 2 or more separate occasions within any period of
12 consecutive months to submit when due reports or other information or
supporting records, to pay when due the Continuing Services and Royalty Fees,
advertising contributions, amounts due for purchases from Franchisor or other
payments due to Franchisor, or otherwise fails to comply with this Agreement,
whether or not such failures to comply are corrected after notice thereof is
delivered to Franchisee; or
C. This Agreement shall terminate without further action by Franchisor
or notice to Franchisee if Franchisee or Franchisee's owner:
1. Fails or refuses to make payments of any amounts due
Franchisor for Continuing Services and Royalty Fees, advertising contributions,
purchases from Franchisor or any other amounts due to Franchisor, and does not
correct such failure or refusal within 10 days after written notice of such
failure is delivered to Franchisee;
31
2. Fails or refuses to comply with any other provision of this
Agreement, or any mandatory specification, standard or operating procedure
prescribed in the Confidential Operations Manual or otherwise in writing, and
does not correct such failure within 30 days (or provide proof acceptable to
Franchisor that it has made all reasonable efforts to correct such failure and
will continue to make all reasonable efforts to cure until a cure is effected if
such failure cannot reasonably be corrected within 30 days) after written notice
of such failure to comply is delivered to Franchisee.
D. To the extent that the provisions of this Agreement provide for
periods of notice less than those required by applicable law, or provide for
termination, cancellation, non-renewal or the like other than in accordance with
applicable law, such provisions shall, to the extent such are not in accordance
with applicable law, not be effective, and Franchisor shall comply with
applicable law in connection with each of these matters.
E. In addition to Franchisor's right to terminate this Agreement, and
not in lieu of such right or any other rights against Franchisee, Franchisor, in
the event that Franchisee shall not have cured a default under this Agreement
within the 20 days after receipt of the written "Notice to Cure" from
Franchisor, may, at its option, enter upon the premises of the SUCCESSORIES
Franchised Retail Business and exercise complete authority with respect to the
operation of said business until such time as Franchisor determines that the
default of Franchisee has been cured and that there is compliance with the
requirements of this Agreement. Franchisee acknowledges that a designated
representative of Franchisor may take over, control, and operate said business,
and that Franchisee shall pay Franchisor a service fee of not less than $500 per
day plus all travel expenses, room and board and other expenses reasonably
incurred by such representative so long as it shall be required by the
representative to enforce compliance herewith. Franchisee further acknowledges
that if, as herein provided, Franchisor temporarily operates for Franchisee the
business franchised herein, Franchisee shall indemnify and hold harmless
Franchisor and any representative of Franchisor who may act hereunder,
respecting any and all acts and omissions which Franchisor may perform, or fail
to perform as regards the interests of Franchisee or third parties.
XVII. RIGHTS AND DUTIES OF PARTIES UPON EXPIRATION OR TERMINATION
Upon termination or expiration, this Agreement and all rights granted
hereunder to Franchisee shall forthwith terminate, and:
A. Franchisee shall immediately cease to operate the Franchised Retail
Business under this Agreement, and shall not thereafter, directly or indirectly,
represent to the public or hold itself out as a present or former Franchisee of
Franchisor.
32
B. Upon demand by Franchisor, Franchisee shall assign to Franchisor
Franchisee's interest in any lease then in effect for the Franchised Retail
Business premises, and Franchisee shall furnish Franchisor with evidence
satisfactory to Franchisor of compliance with this obligation within 30 days
after termination or expiration of this Agreement.
C. Franchisee shall immediately and permanently cease to use, by
advertising or in any other manner whatsoever, any confidential methods,
procedures and techniques associated with the System; the Marks; and any
distinctive form, signs, symbols, logos or devices associated with the System.
In particular, Franchisee shall cease to use, without limitation, all signs,
advertising materials, stationery, forms, and any other articles which display
the Marks associated with the System.
D. Franchisee shall take such action as may be necessary to cancel or
assign to Franchisor or Franchisor's designee, at Franchisor's option, any
assumed name or equivalent registration which contains the name "SUCCESSORIES"
or any ▇▇▇▇ of Franchisor, and Franchisee shall furnish Franchisor with evidence
satisfactory to Franchisor of compliance with this obligation within 30 days
after termination or expiration of this Agreement.
E. Franchisee shall, in the event it continues to operate or
subsequently begins to operate any other business, not use any reproduction,
counterfeit, copy or colorable imitation of the Marks either in connection with
such other business or the promotion thereof, which is likely to cause
confusion, mistake or deception, or which is likely to dilute Franchisor's
exclusive rights in and to the Marks. Franchisee shall not utilize any
designation of origin or description or representation which falsely suggests or
represents an association or connection with Franchisor so as to constitute
unfair competition. Franchisee shall make such modifications or alterations to
the premises of the Franchised Retail Business (including, without limitation,
the changing of the telephone number) immediately upon termination or expiration
of this Agreement as may be necessary to prevent any association between
Franchisor or the System and any business thereon subsequently operated by
Franchisee or others, and shall make such specific additional changes thereto as
Franchisor may reasonably request for that purpose, including, without
limitation, removal of all distinctive physical and structural features
identifying the System. In the event Franchisee fails or refuses to comply with
the requirements of this Paragraph XVII, Franchisor shall have the right to
enter upon the premises where Franchisee's Franchised Retail Business was
conducted, without being guilty of trespass or any other tort, for the purpose
of making or causing to be made such changes as may be required at the expense
of Franchisee, which expense Franchisee shall pay upon demand.
F. Franchisee shall promptly pay all sums owing to Franchisor. In the
event of termination for any default of Franchisee, such sums shall include all
damages, costs, and expenses, including reasonable attorneys' fees, incurred by
Franchisor as a result of the default.
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G. Franchisee shall pay to Franchisor all damages, costs and expenses,
including reasonable attorneys' fees, incurred by Franchisor subsequent to the
termination or expiration of the franchise herein granted in obtaining
injunctive or other relief for the enforcement of any provisions of this
Paragraph XVII or Paragraph XV.
H. Franchisee shall immediately turn over to Franchisor all manuals,
including the Confidential Operations Manual, customer lists, records, files,
instructions, brochures, agreements and any and all other materials provided by
Franchisor to Franchisee relating to the operation of the Franchised Retail
Business (all of which are acknowledged to be Franchisor's property).
I. Franchisor shall acquire right, title and interest to any sign or
sign faces bearing Franchisor's Marks. Franchisee hereby acknowledges
Franchisor's right to access the premises of the Franchised Retail Business
should Franchisor elect to take possession of any said sign or sign faces
bearing Franchisor's Marks.
J. Franchisor shall have the right (but not the duty), to be exercised
by notice of intent to do so within 30 days after termination or expiration, to
purchase for cash, except as provided in Paragraph XVII.I, any or all equipment,
supplies, and other inventory, advertising materials, and all items bearing
Franchisor's Marks, at Franchisee's cost or fair market value, whichever is
less. If the parties cannot agree on fair market value within a reasonable time,
the determination of fair market value shall be submitted to arbitration in
accordance with Paragraph XXIX. If Franchisor elects to exercise any option to
purchase herein provided, it shall have the right to set off all amounts due
from Franchisee under this Agreement against any payment therefor.
K. Franchisee shall comply with the covenants contained in Paragraph XV
of this Agreement, and shall refrain from soliciting any customers.
L. All obligations of Franchisor and Franchisee which expressly or by
their nature survive the expiration or termination of this Agreement shall
continue in full force and effect subsequent to and notwithstanding its
expiration or termination and until they are satisfied or by their nature
expire.
XVIII. TRANSFERABILITY OF INTEREST
A. This Agreement and all rights hereunder may be assigned and
transferred by Franchisor and, if so, shall be binding upon and inure to the
benefit of Franchisor's successors and assigns.
34
B. This Agreement and all rights hereunder may be assigned and
transferred by Franchisee and, if so, shall be binding upon and inure to the
benefit of Franchisee's successors and assigns, subject to the following
conditions and requirements, and Franchisor's right of first refusal as set
forth herein:
1. No Franchisee, partner of Franchisee, (if Franchisee is a
partnership), or shareholder of Franchisee (if Franchisee is a corporation),
without Franchisor's prior written consent, by operation of law or otherwise
shall sell, assign, transfer, convey, give away, or encumber to any person,
firm, or corporation, all or any part of its interest in this Agreement or its
interest in the franchise granted hereby or its interest in any proprietorship,
partnership or corporation which owns any interest in the franchise, nor offer,
permit, or suffer the same to be sold, assigned, transferred, conveyed, given
away, or encumbered in any way to any person, firm, or corporation. Franchisee
may not, without the prior written consent of Franchisor, fractionalize any of
the rights of Franchisee granted pursuant to this Agreement. Any purported
assignment of any of Franchisee's rights herein not having the aforesaid consent
shall be null and void and shall constitute a material default hereunder.
2. Franchisor shall not unreasonably withhold its consent to any
transfer referenced in Paragraph XVIII.B.1. of this Agreement when requested;
provided, however, that the following conditions and requirements shall first be
met to the full satisfaction of Franchisor.
a. If Franchisee is an individual or partnership and desires
to assign and transfer its rights to a corporation:
(1) Said transferee corporation shall be newly organized
and its charter shall provide that its activities are confined exclusively to
acting as a SUCCESSORIES Franchisee as franchised under this Agreement;
(2) Franchisee shall be and shall remain the owner of the
majority stock interest of the transferee corporation;
(3) The individual Franchisee (or, if Franchisee is a
partnership, one of the partners) shall be and shall remain the principal
executive officer of the corporation;
(4) The transferee corporation shall enter into a written
assignment (in a form satisfactory to Franchisor), in which the transferee
corporation assumes all of Franchisee's obligations hereunder;
35
(5) All shareholders of the transferee corporation shall
enter into a written agreement, in a form satisfactory to Franchisor, jointly
and severally guaranteeing the full payment and performance of the transferee
corporation's obligations to Franchisor under this Agreement;
(6) Each stock certificate of the transferee corporation
shall have conspicuously endorsed upon it a statement that it is held subject
to, and that further assignment or transfer thereof is subject to, all
restrictions imposed upon assignments by this Agreement;
(7) No new shares of common or preferred voting stock in
the transferee corporation shall be issued to any person, partnership, trust,
foundation, or corporation without obtaining Franchisor's prior written consent
and then only upon disclosure of the terms and conditions contained herein being
made to the prospective new holders of the stock;
(8) All accrued money obligations of Franchisee to
Franchisee's suppliers, Franchisor, its subsidiaries or assignees, shall be
satisfied prior to assignment or transfer.
b. If the transfer, other than such transfer as is authorized
under Paragraph XVIII.B.2.a. of this Agreement, if consummated alone or together
with other related previous, simultaneous, or proposed transfers, would have the
effect of transferring control of the franchise licensed herein to someone other
than an original signatory of this Agreement:
(1) The transferee(s) shall be of good moral character and
reputation and shall have a good credit rating and competent business
qualifications reasonably acceptable to Franchisor. Franchisee shall provide
Franchisor with such information as Franchisor may require to make such
determination concerning each such proposed transferee(s).
(2) The transferee(s) or such other individual(s) as shall
be the actual manager of the franchise shall have successfully completed and
passed the training course then in effect for franchisees, or otherwise
demonstrated to Franchisor's satisfaction, sufficient ability to operate the
unit being transferred.
(3) The transferee(s), including all shareholders,
officers, directors and partners of the transferee(s), shall jointly and
severally execute any or all of the following, at Franchisor's sole discretion
and as Franchisor shall direct:
aa. A Franchise Agreement and other standard ancillary
agreements with Franchisor on the current standard forms being used by
Franchisor, except that an additional franchise fee shall not be charged; and/or
36
bb. A written assignment from Franchisee in a form
satisfactory to Franchisor, wherein transferee shall assume all of Franchisee's
obligations hereunder.
(4) Approval by Franchisor of any transfer by Franchisee of
the franchise herein granted or any of Franchisee's rights under this Agreement
shall in no way be deemed a release by Franchisor of Franchisee's obligations
pursuant to this Agreement. Consent by Franchisor to a transfer of the franchise
shall not constitute or be interpreted as consent for any future transfer
thereof.
(5) The term of said agreements required pursuant to
Paragraph XVIII.B.2.b.(3) shall be for the unexpired term of this Agreement and
for any extensions or renewals as provided herein.
(6) If transferee is a corporation:
aa. Each stock certificate of the transferee
corporation shall have conspicuously endorsed upon it a statement that it is
held subject to, and that further assignment or transfer thereof is subject to,
all restrictions imposed upon assignments by this Agreement; and
bb. No new shares of common or preferred voting stock
in the transferee corporation shall be issued to any person, partnership, trust,
foundation, or corporation without obtaining Franchisor's prior written consent,
and then only upon disclosure of the terms and conditions contained herein being
made to the prospective new holders of the stock; and
cc. All shareholders of the transferee corporation
shall enter into a written agreement, in a form satisfactory to Franchisor,
jointly and severally guaranteeing full payment and the performance of the
transferee corporation of all obligations under this Agreement.
(7) All accrued money obligations of Franchisee to
Franchisor, its subsidiaries, affiliates or assignees, shall be satisfied prior
to assignment or transfer, and Franchisee shall not be in default under the
terms of this Agreement.
(8) Franchisee, prior to the transfer, shall execute a general
release, in a form prescribed by Franchisor, of any and all existing claims
against Franchisor and its subsidiaries and affiliates, if any, and their
respective officers, directors, agents and employees, except such claims as are
not permitted to be waived under applicable law.
3. Franchisee shall have fully paid and satisfied all of
Franchisee's obligations to Franchisor, and the transferee or Franchisee
shall have fully paid to Franchisor a transfer fee equal to one-
37
half (1/2) of the then-current initial franchise fees charged by Franchisor for
the training, supervision, administrative costs, overhead, counsel fees,
accounting and other Franchisor expenses in connection with the transfer. This
transfer fee does not apply to an assignment of interest to a corporation under
Paragraph XVIII.B.2.a. of this Agreement.
4. No sale, assignment, transfer, conveyance, encumbrance, or
gift of any interest in this Agreement or in the franchise granted thereby,
shall relieve Franchisee and the shareholders or partners participating in any
transfer, of the obligations of the covenants contained in Paragraph XV, except
where Franchisor shall expressly authorize in writing.
C. Franchisee must give Franchisor 90 days written notice prior to any
sale or assignment by Franchisee. The purpose of this Paragraph is to enable
Franchisor to comply with any applicable state or federal franchise disclosure
laws. Franchisee shall indemnify and hold harmless Franchisor for Franchisee's
failure to comply with this Paragraph.
D. Franchisee must promptly ("promptly" herein defined as within 15
days of receipt of an offer to buy) give Franchisor written notice whenever
Franchisee has received an offer to buy Franchisee's franchise. Franchisee must
also give Franchisor written notice simultaneously with any offer to sell the
franchise made by, for, or on behalf of Franchisee. The purpose of this
Paragraph is to enable Franchisor to comply with any applicable state or federal
franchise disclosure laws or rules. Franchisee shall indemnify and hold harmless
Franchisor for Franchisee's failure to comply with this Paragraph.
E. Franchisee shall not, without prior written consent of Franchisor,
place in, on or upon the location of the Franchised Retail Business, or in any
communication media, any form of advertising relating to the sale of the
Franchised Retail Business or the rights granted hereunder.
XIX. DEATH OR INCAPACITY OF FRANCHISEE
A. In the event of the death or incapacity of an individual Franchisee,
or any partner of a Franchisee which is a partnership or any shareholder owning
50% or more of the capital stock of a franchise which is a corporation, the
heirs, beneficiaries, devisees, or legal representatives of said individual,
partner or shareholders shall, within 180 days of such event:
1. Apply to Franchisor for the right to continue to operate
the franchise for the duration of the term of this Agreement and any renewals
hereof, which right shall be granted upon the fulfillment of all of the
conditions set forth in Paragraph XVIII.B.2.b. of this Agreement (except that no
transfer fee shall be required); or
38
2. Sell, assign, transfer, or convey Franchisee's interest in
compliance with the provisions of Paragraphs XVIII.B. and XX of this Agreement;
provided, however, in the event a proper and timely application for the right to
continue to operate has been made and rejected, the 180 days to sell, assign,
transfer or convey shall be computed from the date of said rejection. For
purposes of this Paragraph, Franchisor's silence on an application through the
180 days following the event of death or incapacity shall be deemed a rejection
made on the last day of such period.
B. In the event of the death or incapacity of an individual Franchisee,
or any partner or shareholder of a Franchisee which is a partnership or
corporation, where the aforesaid provisions of Paragraph XVIII have not been
fulfilled within the time provided, all rights franchised to Franchisee under
this Agreement shall, at the option of Franchisor, terminate forthwith and
Franchisor shall have the option to purchase the Franchised Retail Business in
accordance with Paragraph XVII.J. of this Agreement.
XX. RIGHT OF FIRST REFUSAL
If Franchisee or its owners propose to sell the Franchised Retail
Business (or its assets) or part or all of the ownership of Franchisee,
Franchisee or its owners shall obtain and deliver a bona fide, executed written
offer to purchase same to Franchisor, which shall, for a period of 15 days from
the date of delivery of such offer, have the right, exercisable by written
notice to Franchisee or its owners, to purchase the Franchised Retail Business
(or its assets) or such ownership for the price and on the terms and conditions
contained in such offer, provided that Franchisor may substitute cash for any
form of payment proposed in such offer. If Franchisor does not exercise this
right of first refusal, the offer may be accepted by Franchisee or its owners,
subject to the prior written approval of Franchisor, as provided in Paragraph
XVIII hereof, provided that if such offer is not so accepted within 6 months of
the date thereof, Franchisor shall again have the right of first refusal herein
described. Should a transfer Franchisee assume the rights and obligations under
this Agreement, such transferee Franchisee shall likewise be subject to
Franchisor's right of first refusal under terms and conditions as set forth
herein.
XXI. OPERATION IN THE EVENT OF ABSENCE, DISABILITY OR DEATH
In order to prevent any interruption of the Franchised Retail Business
which would cause harm to said business and thereby depreciate the value
thereof, Franchisee authorizes Franchisor, in the event that Franchisee is
absent or incapacitated by reason of illness or death and is not, therefore, in
the sole judgment of Franchisor, able to operate the Franchised Retail Business,
to operate said business for so long as Franchisor deems necessary and
practical, and without waiver of any other rights or remedies Franchisor may
39
have under this Agreement. Nothing contained herein shall create an obligation
on the part of Franchisor, nor shall Franchisor's operation of the Franchised
Retail Business create an obligation on the part of Franchisor to so operate the
Franchised Retail Business. All monies from the operation of the business during
such period of operation by Franchisor shall be kept in a separate account and
the expenses of the business, including reasonable compensation and expenses for
Franchisor's representative, shall be charged to said account. If, as herein
provided, Franchisor temporarily operates for Franchisee the Franchised Retail
Business, Franchisee shall indemnify and hold harmless Franchisor and any
representative of Franchisor who may act hereunder, from any and all claims
arising from the acts and omissions of Franchisor and its representative.
XXII. INDEPENDENT CONTRACTOR
A. This Agreement does not create a fiduciary relationship between the
parties, nor does it constitute Franchisee as an agent, legal representative,
joint venturer, partner, employee, or servant of Franchisor for any purpose
whatsoever; and it is understood between the parties hereto that Franchisee
shall be an independent contractor and is in no way authorized to make any
contract, agreement, warranty or representation on behalf of Franchisor, or to
create any obligation, express or implied, on behalf of Franchisor.
B. During the term of this Agreement and any extension hereof,
Franchisee shall hold itself out to the public as an independent contractor
operating the business pursuant to a franchise from Franchisor. Franchisee shall
take such affirmative action as may be necessary to do so, including, without
limitation, exhibiting a notice of that fact in a conspicuous place on the
premises of the Franchised Retail Business, the content of which Franchisor
reserves the right to specify.
C. Franchisee shall defend at his own cost and indemnify and hold
harmless Franchisor, its shareholders, directors, officers, employees and
agents, from and against any and all loss, costs, expenses (including, without
limitation, reasonable accountants', attorneys', and expert witness fees, costs
of investigation and proof of facts, court costs, other litigation expenses and
travel and living expenses), damages and liabilities, however caused, resulting
directly or indirectly from or pertaining to the use, condition, or
construction, equipping, decorating, maintenance or operation of the Franchised
Retail Business, including the sale of any products, service or merchandise sold
from the Franchised Retail Business. Such loss, claims, costs, expenses, damages
and liabilities shall include, without limitation, those arising from latent or
other defects in the Franchised Retail Business, whether or not discoverable by
Franchisor, and those arising from the death or injury to any person or arising
from damage to the property of Franchisee or Franchisor, their agents or
employees, or any third person, firm or corporation, whether or not such losses,
claims, costs, expenses, damages, or liabilities were actually or allegedly
caused wholly or
40
in part through the active or passive negligence of Franchisor or any of its
agents or employees or resulted from any strict liability imposed on Franchisor
or any of its agents or employees. All such indemnification shall survive the
termination of this Agreement.
D. Franchisor shall not, by virtue of any approvals, advice or services
provide to Franchisee, assume responsibility or liability to Franchisee or any
third parties to which Franchisor would not otherwise be subject.
XXIII. NON-WAIVER
No failure of Franchisor to exercise any power reserved to it
hereunder, or to insist upon strict compliance by Franchisee with any obligation
or condition hereunder, and no custom or practice of the parties in variance
with the terms hereof, shall constitute a waiver of Franchisor's right to demand
exact compliance with the terms hereof. Waiver by Franchisor of any particular
default by Franchisee shall not be binding unless in writing and executed by the
party sought to be charged and shall not affect or impair Franchisor's right
with respect to any subsequent default of the same or of a different nature; nor
shall any delay, waiver, forbearance, or omission of Franchisor to exercise any
power or rights arising out of any breach or default by Franchisee of any of the
terms, provisions, or covenants hereof, affect or impair Franchisor's rights nor
shall such constitute a waiver by Franchisor of any right hereunder or of the
right to declare any subsequent breach or default. Subsequent acceptance by
Franchisor of any payment(s) due to it hereunder shall not be deemed to be a
waiver by Franchisor of any preceding breach by Franchisee of any terms,
covenants or conditions of this Agreement.
XXIV. NOTICE
Any and all notices required or permitted under this Agreement shall be
in writing and shall be personally delivered or mailed by certified mail, return
receipt requested, to the respective parties at the following addresses unless
and until a different address has been designated by written notice to the other
party:
Notices to Franchisor: Successories, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Copy to: _____________________________________________
_____________________________________________
41
Notices to Franchisee: At the address specified on Page 1 of this Agreement.
Copy to: ____________________________________________________
____________________________________________________
____________________________________________________
Any notice by certified mail shall be deemed to have been given at the date and
time of mailing.
42
XXV. COST OF ENFORCEMENT OR DEFENSE
In the event that either party to this Agreement is required to employ
legal counsel or to incur other expenses to enforce any obligation of the second
party hereunder, or to defend against any claim, demand, action, or proceeding
by reason of the second party's failure to perform any obligation imposed upon
the second party by this Agreement, and provided that legal action is filed and
such action or the settlement thereof establishes the second party's default
hereunder, then the first party shall be entitled to recover from the second
party the amount of all reasonable attorney's fees of such counsel and all other
expenses incurred in enforcing such obligation or in defending against such
claim, demand, action, or proceeding, whether incurred prior to, or in
preparation for, or in contemplation of the filing of such action or thereafter.
Nothing contained in this Paragraph shall relate to arbitration proceedings
pursuant to this Agreement.
XXVI. ENTIRE AGREEMENT
This Agreement, any Exhibit attached hereto, and the documents referred
to herein, shall be construed together and constitute the entire, full and
complete agreement between Franchisor and Franchisee concerning the subject
matter hereof, and supersede all prior agreements. No other representation has
induced Franchisee to execute this Agreement, and there are no representations,
inducements, promises, or agreements, oral or otherwise, between the parties not
embodied herein, which are of any force or effect with reference to this
Agreement or otherwise. No amendment, change or variance from this Agreement
shall be binding on either party unless executed in writing by both parties.
XXVII. SEVERABILITY AND CONSTRUCTION
A. Each Paragraph, part, term and/or provision of this Agreement shall
be considered severable, and if, for any reason, any Paragraph, part, term
and/or provision herein is determined to be invalid and contrary to, or in
conflict with, any existing or future law or regulation, such shall not impair
the operation of or affect the remaining portions, sections, parts, terms and/or
provisions of this Agreement, and the latter will continue to be given full
force and effect and bind the parties hereto; and said invalid sections, parts,
terms and/or provisions shall be deemed not part of this Agreement.
B. Anything to the contrary herein notwithstanding, nothing in this
Agreement is intended, nor shall be deemed, to confer upon any person or legal
entity other than Franchisor or Franchisee and such of their respective
successors and assigns as may be contemplated by this Agreement, any rights or
remedies under or by reason of this Agreement.
C. Franchisee shall be bound by any promise or covenant imposing the
maximum duty permitted by law which is contained within the terms of any
provision hereof, as though it were separately
43
stated in and made a part of this Agreement, that may result from striking from
any of the provisions hereof any portion or portions which a court may hold to
be unreasonable and unenforceable in a final decision to which Franchisor is a
party, or from reducing the scope of any promise or covenant to the extent
required to comply with such a court order.
D. All captions herein are intended solely for the convenience of the
parties, and none shall be deemed to affect the meaning or construction of any
provision hereof.
E. This Agreement may be executed in triplicate, and each copy so
executed shall be deemed an original.
F. The recitals set forth in this Agreement are specifically
incorporated into the terms of this Agreement and hereby constitute a part
thereof.
XXVIII. APPLICABLE LAW
A. THIS AGREEMENT TAKES EFFECT UPON ITS ACCEPTANCE AND EXECUTION BY
FRANCHISOR IN ILLINOIS; AND SHALL BE INTERPRETED AND CONSTRUED UNDER THE LAWS
THEREOF, WHICH LAWS SHALL PREVAIL IN THE EVENT OF ANY CONFLICT OF LAW, EXCEPT TO
THE EXTENT GOVERNED BY THE UNITED STATES TRADEMARK ACT OF 1946 (▇▇▇▇▇▇ ▇▇▇, ▇▇,
U.S.C. SECTIONS 1051 ET SEQ).
B. FRANCHISEE ACKNOWLEDGES THAT THIS AGREEMENT IS ENTERED INTO IN
DUPAGE COUNTY, ILLINOIS AND THAT ANY ACTION SOUGHT TO BE BROUGHT BY EITHER
PARTY, EXCEPT THOSE CLAIMS REQUIRED TO BE SUBMITTED TO ARBITRATION SHALL BE
BROUGHT IN THE APPROPRIATE STATE OR FEDERAL COURT IN DUPAGE COUNTY, ILLINOIS,
AND THE PARTIES DO HEREBY WAIVE ALL QUESTIONS OF PERSONAL JURISDICTION OR VENUE
FOR THE PURPOSES OF CARRYING OUT THIS PROVISION.
C. NO RIGHT OR REMEDY CONFERRED UPON OR RESERVED TO FRANCHISOR OR
FRANCHISEE BY THIS AGREEMENT IS INTENDED TO BE, NOR SHALL BE DEEMED, EXCLUSIVE
OF ANY OTHER RIGHT OR REMEDY HEREIN OR BY LAW OR EQUITY PROVIDED OR PERMITTED,
BUT EACH SHALL BE CUMULATIVE OF EVERY OTHER RIGHT OR REMEDY.
44
D. NOTHING HEREIN CONTAINED SHALL BAR FRANCHISOR'S RIGHT TO OBTAIN
INJUNCTIVE RELIEF AGAINST THREATENED CONDUCT THAT WILL CAUSE IT LOSS OR DAMAGES,
UNDER THE USUAL EQUITY RULES, INCLUDING THE APPLICABLE RULES FOR OBTAINING
RESTRAINING ORDERS AND PRELIMINARY INJUNCTIONS.
XXIX. ARBITRATION
A. Any monetary claim arising out of or relating to this Agreement, or
any breach thereof, and any controversy regarding the establishment of the fair
market value of leasehold improvements and other Franchised Retail Business
assets pursuant to Paragraph XVII.J. hereof, shall be submitted to arbitration
in DuPage County, Illinois, in accordance with the rules of the American
Arbitration Association and judgment upon the award may be entered in any court
having jurisdiction thereof. Nothing contained herein shall, however, be
construed to limit or to preclude Franchisor from bringing any action in any
court of competent jurisdiction for injunctive or other provisional relief as
Franchisor deems to be necessary or appropriate to compel Franchisee to comply
with his obligations hereunder or to protect the Marks or other property rights
of Franchisor. In addition, nothing contained herein shall be construed to limit
or to preclude Franchisor from joining with any action for injunctive or
provisional relief all monetary claims that Franchisor may have against
Franchisee which arise out of the acts or omissions to act giving rise to the
action for injunctive or provisional relief. This arbitration provision shall be
deemed to be self-executing and in the event that Franchisee fails to appear at
any properly noticed arbitration proceeding, award may be entered against
Franchisee notwithstanding his failure to appear.
B. Nothing herein contained shall bar the right of either party to seek
and obtain temporary injunctive relief from a court of competent jurisdiction in
accordance with applicable law against threatened conduct that will cause loss
or damage, pending completion of the arbitration.
C. It is the intent of the parties that any arbitration between
Franchisor and Franchisee shall be of Franchisee's individual claim and that the
claim subject to arbitration shall not be arbitrated on a classwide basis.
XXX. "FRANCHISEE" DEFINED AND GUARANTY
As used in this Agreement, the term "Franchisee" shall include all
persons who succeed to the interest of the original Franchisee by permitted
transfer or operation of law and shall be deemed to include not only the
individual or entity defined as "Franchisee" in the introductory paragraph of
this Agreement but shall also include all partners of the entity that executes
this Agreement, in the event said entity is a
45
partnership, and all shareholders, officers and directors of the entity that
executes this Agreement, in the event said entity is a corporation. By this
signatures hereto, all partners, shareholders, officers and directors of the
entity that signs this Agreement as Franchisee acknowledges and accepts the
duties and obligations imposed upon each of them, individually, by the terms of
this Agreement. All partners of the entity that executes this Agreement, in the
event said entity is a partnership and all shareholders, officers and directors
of the entity that executes this Agreement, in the event said entity is a
corporation, shall execute the Guaranty and Assumption of Obligations attached
hereto as Exhibit C and made a part hereof.
XXXI. FORCE MAJEURE
Whenever a period of time is provided in this Agreement for either
party to do or perform any act or thing, except the payment of monies, neither
party shall be liable or responsible for any delays due to strikes, lockouts,
casualties, acts of God, war, governmental regulation or control or other causes
beyond the reasonable control of the parties, and in any event said time period
for the performance of an obligation hereunder shall be extended for the amount
of time of the delay. This clause shall not apply or not result in an extension
of the term of this Agreement.
XXXII. CAVEAT
The success of the business venture contemplated to be undertaken by
Franchisee by virtue of this Agreement is speculative and depends, to a large
extent, upon the ability of Franchisee as an independent businessman, and his
active participation in the daily affairs of the business as well as other
factors. Franchisor does not make any representation or warranty express or
implied as to the potential success of the business venture contemplated hereby.
XXXIII. ACKNOWLEDGEMENTS
A. Franchisee represents and acknowledges that it has received, read
and understood this Agreement and Franchisor's Uniform Franchise Offering
Circular; and that Franchisor has fully and adequately explained the provisions
of each to Franchisee's satisfaction; and that Franchisor has accorded
Franchisee ample time and opportunity to consult with advisors of its own
choosing about the potential benefits and risks of entering into this Agreement.
B. Franchisee acknowledges that it has received a copy of this
Agreement and the attachments thereto, at least five (5) business days prior to
the date on which this Agreement was executed. Franchisee further acknowledges
that Franchisee has received the disclosure document required by the Trade
Regulation Rule of the Federal Trade Commission entitled Disclosure Requirements
and Prohibitions Concerning
46
Franchising and Business Opportunity Ventures, at least 10 business days prior
to the date on which this Agreement was executed.
C. FRANCHISEE UNDERSTANDS AND ACKNOWLEDGES THAT ALL REPRESENTATIONS OF
FACT CONTAINED HEREIN ARE MADE SOLELY BY FRANCHISOR. ALL DOCUMENTS, INCLUDING
FRANCHISOR'S FRANCHISE AGREEMENT AND UNIFORM FRANCHISE OFFERING CIRCULAR AND ALL
EXHIBITS THERETO, HAVE BEEN PREPARED SOLELY IN RELIANCE UPON REPRESENTATIONS
MADE AND INFORMATION PROVIDED BY FRANCHISOR, ITS OFFICERS AND ITS DIRECTORS.
FRANCHISEE FURTHER AGREES TO RELEASE FROM LIABILITY AND INDEMNIFY AND HOLD
HARMLESS THE PREPARER OF ANY AND ALL SUCH FRANCHISE AGREEMENTS, OFFERING
CIRCULARS AND EXHIBITS THERETO FROM ANY AND ALL LOSS, COSTS, EXPENSES,
(INCLUDING ATTORNEYS' FEES), DAMAGES AND LIABILITIES RESULTING FROM ANY
REPRESENTATION AND/OR CLAIMS MADE BY FRANCHISOR IN SUCH DOCUMENTS.
47
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have duly executed, sealed and delivered this Agreement in triplicate
the day and year first above written.
SUCCESSORIES, INC.
By:
-------------------------------------
Its:
-------------------------------------
------------------------------------------
Franchisee
------------------------------------------
Franchisee
48
EXHIBIT A TO THE FRANCHISE AGREEMENT
GUARANTY AND ASSUMPTION OF OBLIGATIONS
THIS GUARANTY AND ASSUMPTION OF OBLIGATIONS is given this ____ day
of _________________, 19__, by________________________________________________
_________________________________________.
In consideration of, and as an inducement to, the execution of that
certain Franchise Agreement of even date herewith (the "Agreement") by
SUCCESSORIES, INC. ("Franchisor"), each of the undersigned hereby personally and
unconditionally (1) guarantees to Franchisor, and its successors and assigns,
for the term of the Agreement and thereafter as provided in the Agreement, that
_______________________________________________________________________________
("Franchisee") shall punctually pay and perform each and every undertaking,
agreement and covenant set forth in the Agreement; and (2) shall personally be
bound by, and personally liable for the breach of each and every provision in
the Agreement, both monetary obligations and obligations to take or refrain from
taking specific actions or to engage or refrain from engaging in specific
activities. Each of the undersigned waives: (1) acceptance and notice of
acceptance by Franchisor of the foregoing undertakings; (2) notice of demand for
payment of any indebtedness or non-performance of any obligations hereby
guaranteed; (3) protest and notice of default to any party with respect to the
indebtedness or non-performance of any obligations hereby guaranteed; (4) any
right he may have to require that an action be brought against Franchisee or any
other person as a condition of liability; and (5) any and all other notices and
legal or equitable defenses to which he may be entitled.
Each of the undersigned consents and agrees that: (1) his direct and immediate
liability under this guaranty shall be joint and several; (2) he shall render
any payment or performance required under the Agreement upon demand if
Franchisee fails or refuses punctually to do so; (3) such liability shall not be
contingent or conditioned upon pursuit by Franchisor of any remedies against
Franchisee or any other person; and (4) such liability shall not be diminished,
relieved or otherwise affected by any extension of time, credit or other
indulgence which Franchisor may from time to time grant to Franchisee or to any
other person, including without limitation the acceptance of any partial payment
or performance, or the compromise or release of any claims, none of which shall
in any way modify or amend this guaranty, which shall be continuing and
irrevocable during the term of the Agreement.
IN WITNESS WHEREOF, each of the undersigned has hereunto affixed his signature
on the same day and year as the Agreement was executed.
GUARANTOR(S) PERCENTAGE OF OWNERSHIP IN FRANCHISEE
%
---------------------------------------- ------------------------
%
---------------------------------------- ------------------------
%
---------------------------------------- ------------------------
49
EXHIBIT B TO THE FRANCHISE AGREEMENT
REFUNDS AND CANCELLATION
This entire contract is further conditioned upon Franchisor's
evaluation of the personal abilities, aptitudes and financial qualifications of
Franchisee, and Franchisee's manager, if applicable. In accordance therewith,
Franchisee, and, Franchisee's manager, if applicable, shall submit all data
requested and Franchisor shall have a reasonable time, not to exceed 15 business
days after submission of all data, to prepare its evaluations. If, for any
reason, Franchisor elects to cancel this Agreement after the aforesaid
evaluations, he shall notify Franchisee in writing of the cancellation within 15
days of Franchisor's receipt of the above data. Said notice shall be accompanied
by a refund to Franchisee of monies paid to Franchisor under the terms of this
Agreement less the amount stated below, and the notice and refund shall cause an
automatic cancellation of this Agreement without further notice.
In the event of a cancellation of this Agreement as set forth above,
Franchisor shall be entitled to a reasonable fee for its evaluation of
Franchisee and related preparatory work performed and expenses actually
incurred, but not to exceed the sum of $2,500. If Franchisee has paid franchise
fees in excess of the amount owed to Franchisor for Franchisor's evaluation,
Franchisor shall return such excess amount to Franchisee and Franchisor shall be
fully and forever released from any claims or causes of action the Franchisee
may have under or pursuant to the Franchise Agreement.
SUCCESSORIES, INC.
By:
--------------------------------
Its:
-------------------------------
------------------------------------
Franchisee
------------------------------------
Franchisee
50