PAK MAIL CENTERS OF AMERICA, INC.
FRANCHISE AGREEMENT
Franchisee:
Date:
Franchised Location:
PAK MAIL CENTERS OF AMERICA, INC.
FRANCHISE AGREEMENT
TABLE OF CONTENTS
1. PURPOSE................................................................ 1
2. GRANT OF FRANCHISE..................................................... 1
2.1. Grant of Franchise....................................... 1
2.2. Scope of Franchise Operations............................ 1
3. FRANCHISED LOCATION AND TERRITORIAL RIGHTS............................. 2
3.1. Franchised Location...................................... 2
3.2. Protected Territory...................................... 2
3.3. Limitation on Franchise Rights........................... 2
3.4. A.M. P.M. MOVERS Program. .............................. 2
3.5. Franchisor's Reservation of Rights....................... 2
4. INITIAL FRANCHISE FEE.................................................. 3
4.1. Initial Franchise Fee.................................... 3
5. DEVELOPMENT OF FRANCHISED LOCATION..................................... 3
5.1. Approval of Franchised Location.......................... 3
5.2. Approval of Lease........................................ 3
5.3. Conversion and Design.................................... 4
5.4. Signs.................................................... 4
5.5. Equipment................................................ 4
5.6. Permits and Licenses..................................... 5
5.7. Commencement of Operations............................... 5
6. TRAINING............................................................... 5
6.1. Initial Training Program................................. 5
6.2. Length of Training....................................... 6
6.3. Additional Training...................................... 6
7. DEVELOPMENT ASSISTANCE ............................................... 6
7.1. Franchisor's Development Assistance...................... 6
8. OPERATIONS MANUAL...................................................... 7
8.1. Operations Manual........................................ 7
8.2. Confidentiality of Operations Manual Contents............ 8
8.3. Changes to Operations Manual............................. 8
9. OPERATING ASSISTANCE................................................... 8
9.1. Franchisor's Services.................................... 8
9.2. Additional Franchisor Services........................... 9
10. FRANCHISEE'S OPERATIONAL COVENANTS.................................... 9
10.1. Business Operations...................................... 9
11. ROYALTIES............................................................. 11
11.1. Monthly Royalty.......................................... 11
11.2. Royalty Based Revenues................................... 11
11.3. Royalty Payments......................................... 11
11.4. Application of Payments.................................. 12
12. ADVERTISING........................................................... 12
12.1. Approval of Advertising.................................. 12
12.2. Marketing Material Beginning Inventory................... 13
12.3. Advertising Contribution................................. 13
12.4. Regional Advertising Programs............................ 15
13. QUALITY CONTROL....................................................... 15
13.1. Compliance with Operations Manual........................ 15
13.2. Standards and Specifications............................. 15
13.3. Inspections.............................................. 16
13.4. Restrictions on Services and Products.................... 16
13.5. Approved Suppliers....................................... 16
13.6. Request to Approve Supplier.............................. 16
13.7. Shopping Service......................................... 17
14. MARKS, TRADE NAMES AND PROPRIETARY INTERESTS.......................... 17
14.1. Marks.................................................... 17
14.2. No Use of Other Marks.................................... 17
14.3. System................................................... 17
14.4. Xxxx Infringement........................................ 18
14.5. Franchisee's Business Name............................... 18
14.6. Change of Marks.......................................... 18
15. REPORTS, RECORDS AND FINANCIAL STATEMENTS............................. 18
15.1. Franchisee Reports....................................... 18
15.2. Verification............................................. 19
15.3. Books and Records........................................ 19
15.4. Audit of Books and Records............................... 19
16. TRANSFER.............................................................. 20
16.1. Transfer by Franchisee................................... 20
16.2. Pre-Conditions to Franchisee's Transfer.................. 20
16.3. Franchisor's Approval of Transfer........................ 21
16.4. Right of First Refusal................................... 21
16.5. Specific Types of Transfers.............................. 22
16.6. Assignment by the Franchisor............................. 23
16.7. Franchisee's Death or Disability......................... 23
17. TERM AND EXPIRATION................................................... 23
17.1. Term..................................................... 23
17.2. Rights Upon Expiration................................... 23
17.3. Exercise of Option for Successor Franchise............... 24
17.4. Conditions of Refusal.................................... 24
18. DEFAULT AND TERMINATION............................................... 24
18.1. Termination by Franchisee................................ 24
18.2. Termination by Franchisor - Effective Upon Notice........ 25
18.3. Termination by Franchisor - Thirty Days Notice........... 26
18.4. Right to Purchase........................................ 27
18.5. Obligations of Franchisee Upon Termination or Expiration. 28
18.6. Acknowledgement.......................................... 29
18.7. State and Federal Law.................................... 29
19. BUSINESS RELATIONSHIP................................................. 30
19.1. Independent Businesspersons.............................. 30
19.2. Payment of Third Party Obligations....................... 30
19.3. Indemnification.......................................... 30
20. RESTRICTIVE COVENANTS................................................. 30
20.1. Non-Competition During Term.............................. 30
20.2. Post-Termination Covenant Not to Compete................. 31
20.3. Confidentiality of Proprietary Information............... 32
20.4. Confidentiality Agreement................................ 32
21. INSURANCE............................................................. 32
21.1. Insurance Coverage....................................... 32
21.2. Proof of Insurance Coverage.............................. 32
22. MISCELLANEOUS PROVISIONS ............................................. 33
22.1. Governing Law/Consent to Venue and Jurisdiction.......... 33
22.2. Modification............................................. 33
22.3. Entire Agreement......................................... 33
22.4. Delegation by the Franchisor............................. 34
22.5. Effective Date........................................... 34
22.6. Review of Agreement...................................... 34
22.7. Attorneys' Fees.......................................... 34
22.8. Injunctive Relief........................................ 34
22.9. No Waiver................................................ 34
22.10. No Right to Set Off...................................... 34
22.11. Invalidity............................................... 34
22.12. Notices.................................................. 35
22.13. Acknowledgement.......................................... 35
EXHIBITS
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I. Addendum to Franchise Agreement - Location Approval
II. Guaranty and Assumption of Franchisee's Obligations
III. Statement of Ownership
IV. Authorization Agreement for Prearranged Payments
PAK MAIL CENTERS OF AMERICA, INC.
FRANCHISE AGREEMENT
---------------------------------
THIS AGREEMENT (the "Agreement") is made this ____ day of ________, 199__,
by and between PAK MAIL CENTERS OF AMERICA, INC., a Colorado corporation,
located at 0000 X. Xxxxxx Xxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000 (the
"Franchisor") and
------------------------------------------------------------------- , located at
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(the "Franchisee"), who, on the basis of the following understandings and
agreements, agree as follows:
1. PURPOSE
1.1. The Franchisor has developed methods for establishing, operating
and promoting stores offering a variety of packaging, shipping, crating, freight
forwarding, mailing, communications and information services ("PAK MAIL Centers"
or "Centers") which use the service xxxx "PAK MAIL" and related trade names and
trademarks ("Marks") and the Franchisor's proprietary methods of doing business
("System").
1.2. The Franchisor grants the right to others to develop and operate a PAK
MAIL Center, under the Marks and pursuant to the System.
1.3. The Franchisee desires to establish a PAK MAIL Center at a location
identified herein or to be later identified, and the Franchisor desires to grant
the Franchisee the right to operate a PAK MAIL Center at such location under the
terms and conditions which are contained in this Agreement.
2. GRANT OF FRANCHISE
2.1. Grant of Franchise. The Franchisor grants to the Franchisee, and the
Franchisee accepts from the Franchisor, the right to use the Marks and System in
connection with the establishment and operation of a PAK MAIL Center, at the
location described in Article 3 of this Agreement. The Franchisee agrees to use
the Marks and System, as they may be changed, improved, and further developed by
the Franchisor from time to time, only in accordance with the terms and
conditions of this Agreement.
2.2. Scope of Franchise Operations. The Franchisee agrees at all times to
faithfully, honestly and diligently perform the Franchisee's obligations
hereunder, and to continuously use best efforts to promote the PAK MAIL Center.
The Franchisee agrees to utilize the Marks and System to operate all aspects of
the business franchised hereunder in accordance with the methods and systems
developed and prescribed from time to time by the Franchisor, all of which are a
part of the System. The Franchisee's PAK MAIL Center shall offer all products
and services as the Franchisor shall designate and shall be restricted from
offering or selling any products and services not previously approved by the
Franchisor in writing.
3. FRANCHISED LOCATION AND TERRITORIAL RIGHTS
3.1. Franchised Location. The Franchisee is granted the right and franchise
to own and operate a PAK MAIL Center at the address and location which shall be
set forth in Exhibit I, attached hereto ("Franchised Location"). If, at the time
of execution of this Agreement, the Franchised Location cannot be designated as
a specific address because a location has not been selected and approved, then
the Franchisee shall promptly take steps to choose and acquire a location for
its PAK MAIL Center within the Designated Area, set forth in Exhibit I. In such
circumstances, the Franchisee shall select and propose to the Franchisor for the
Franchisor's prior approval a specific location for the Franchised Location
which, once approved by the Franchisor, shall hereinafter be set forth in the
rider to Exhibit I.
3.2. Protected Territory. So long as the Franchisee is in compliance with
this Agreement, the Franchisor shall not establish or license another person or
entity to establish a PAK MAIL Center within a certain geographic area as set
forth in Exhibit I ("Protected Territory").
3.3. Limitation on Franchise Rights. The rights that are granted to the
Franchisee are for the specific Franchised Location and Protected Territory and
cannot be transferred to an alternative Franchised Location or Protected
Territory, or any other location, without the prior written approval of the
Franchisor, which approval shall not be unreasonably withheld. The Franchisee
shall not operate another Center or offer services which are part of the System
at any site other than the Franchised Location without the Franchisor's prior
written approval, which approval can be withheld for any reason, in the
Franchisor's sole discretion.
3.4. A.M. P.M. MOVERS Program. The Franchisor may offer the Franchisee the
opportunity to participate in the "A.M. P.M. MOVERS Program," whereby local
moving services for individuals and small business customers are either provided
by the Franchisee or arranged by the Franchisee with a third party using the
A.M. P.M. MOVERS Xxxx. The Franchisee may not participate in the A.M. P.M.
MOVERS Program without the Franchisor's prior written permission, which will be
given when the Franchisor and the Franchisee sign the Franchisor's then current
A.M. P.M. MOVERS Program Amendment to this Agreement.
3.5. Franchisor's Reservation of Rights. The Franchisee acknowledges that
its franchise rights as granted are non-exclusive and that the Franchisor
retains the rights, among others: (1) to use, and to license others to use, the
Marks and System in connection with the operation of a Pak Mail Center, at any
location other than in the Protected Territory; (2) to use the Marks to identify
other services and products other than those which the Franchisee sells,
promotional and marketing efforts or related items, or to identify services and
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products similar to those which the Franchisee sells, made available through
alternative channels of distribution, at any location; and (3) to use and
license the use of other proprietary marks or methods in connection with the
sale of products and services similar to those which the Franchisee will sell,
whether in alternative channels of distribution or in connection with the
operation of packaging and mailing businesses at any location, which businesses
are the same as, or similar to, or different from PAK MAIL Centers, on any terms
and conditions as the Franchisor deems advisable.
4. INITIAL FRANCHISE FEE
4.1. Initial Franchise Fee. In consideration for the right to develop and
operate one PAK MAIL Center, the Franchisee agrees to pay to the Franchisor an
initial franchise fee of $23,950 as of the date of execution of this Agreement.
The Franchisee acknowledges and agrees that the initial franchise fee represents
payment for the initial grant of the rights to use the Marks and System, that
the Franchisor has earned the initial franchise fee upon receipt thereof and
that the fee is under no circumstances refundable to the Franchisee after it is
paid, unless otherwise specifically set forth in this Agreement.
5. DEVELOPMENT OF FRANCHISED LOCATION
5.1. Approval of Franchised Location. The Franchisee shall follow the
Franchisor's site selection procedures in locating a Franchised Location for the
PAK MAIL Center. The Franchisee shall seek the Franchisor's approval of any site
proposed as a Franchised Location, by submitting a complete site submittal
package, including demographics and other materials requested by the Franchisor,
containing all information reasonably required by the Franchisor to assess a
proposed Franchised Location. The Franchisor will not unreasonably withhold
approval of a proposed site that meets all of the Franchisor's site selection
criteria.
5.2. Approval of Lease. The Franchisee shall obtain the Franchisor's prior
written approval before executing any lease or purchase agreement for the
Franchised Location. Any lease for the Franchised Location shall, at the option
of the Franchisor, contain a provision: (1) allowing for assignment of the lease
to the Franchisor in the event that this Agreement is terminated or not renewed
for any reason; (2) giving the Franchisor the right to cure any default by the
Franchisee under such lease; and (3) providing the Franchisor with the right,
exercisable upon and as a condition of the approval of the Franchised Location,
to execute the lease agreement or other document providing entitlement to the
use of the Franchised Location in its own name or jointly with the Franchisee as
lessee and, upon the exercise of such option, the Franchisor shall provide the
Franchisee with the right to use the premises as its sublessee, assignee, or
other similar capacity upon the same terms and conditions as obtained by the
Franchisor. The lease shall be collaterally assigned to the Franchisor as
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security for the Franchisee's timely performance of all obligations under this
Agreement; the Franchisee shall obtain the lessor's consent to such collateral
assignment. The Franchisee shall deliver a copy of the signed lease for the
Franchised Location to the Franchisor within 15 days of its execution. The
Franchisee acknowledges that approval of a lease for the Franchised Location by
the Franchisor does not constitute a recommendation, endorsement or guarantee by
the Franchisor of the suitability or profitability of the location or the lease
and the Franchisee should take all steps necessary to ascertain whether such
location and lease are acceptable to the Franchisee.
5.3. Conversion and Design. The Franchisee acknowledges that the layout,
design, decoration and color scheme of PAK MAIL Centers are an integral part of
the Franchisor's proprietary System and accordingly, the Franchisee shall
convert, design and decorate the Franchised Location in accordance with the
Franchisor's plans and specifications and with the assistance of contractors and
suppliers designated by or otherwise approved by the Franchisor. The Franchisee
shall obtain the Franchisor's written consent to any conversion, design or
decoration of the premises before remodeling or decorating begins, recognizing
that any related costs are the Franchisee's sole responsibility. It shall be the
Franchisee's responsibility to have prepared all required construction plans and
specifications to suit the shape and dimensions of the Franchised Location and
to insure compliance with applicable laws and the lease.
5.4. Signs. The Franchisee shall purchase or otherwise obtain for use at
the Franchised Location and in connection with the PAK MAIL Center signs which
comply with the standards and specifications of the Franchisor as set forth in
the Operations Manual, as that term is defined in Section 8.1. It is the
Franchisee's sole responsibility to insure that any signs comply with applicable
local ordinances, mall regulations, building codes and zoning regulations. Any
modifications to the Franchisor's standards and specifications for signs which
must be made due to local ordinances, codes or regulations shall be submitted to
the Franchisor for prior written approval. The Franchisee acknowledges the
Marks, or any other name, symbol or identifying marks on any signs shall only be
used in accordance with the Franchisor's standards and specifications and only
with the prior written approval of the Franchisor.
5.5. Equipment. The Franchisee shall purchase or otherwise obtain for use
at the Franchised Location equipment of a type and in an amount which complies
with the standards and specifications of the Franchisor. The Franchisee
acknowledges that the type, quality, configuration, capability and/or
performance of the equipment are all standards and specifications which are a
part of the System and therefore such equipment must be purchased, leased, or
otherwise obtained in accordance with the Franchisor's standards and
specifications and only from sources approved by the Franchisor. The Franchisee
shall equip the Center with point-of-sale systems, computer hardware and
software, copiers, facsimile machines and other designated equipment as are
consistent with the standards and specifications of the Franchisor.
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5.6. Permits and Licenses. The Franchisee agrees to obtain all such permits
and certifications as may be required for the lawful construction and operation
of the PAK MAIL Center together with all certifications from government
authorities having jurisdiction over the site that all requirements for
construction and operation have been met, including without limitation, zoning,
access, sign, health, safety requirements, building and other required
construction permits, licenses to do business and fictitious name registrations,
sales tax permits, health and sanitation permits and ratings and fire
clearances. The Franchisee agrees to obtain all customary contractors' sworn
statements and partial and final lien waivers for construction, remodeling,
decorating and installation of equipment at the Franchised Location. Copies of
all subsequent inspection reports, warnings, certificates and ratings issued by
any governmental entity during the term of this Agreement in connection with the
conduct of the PAK MAIL Center which indicates the Franchisee's failure to meet
or maintain the highest governmental standards, or less than full compliance by
the Franchisee with any applicable law, rule or regulation, shall be forwarded
to the Franchisor within five days of the Franchisee's receipt thereof.
5.7. Commencement of Operations. Unless otherwise agreed to in writing by
the Franchisor and the Franchisee, the Franchisee has 180 days from the date of
this Agreement within which to: (1) secure all necessary financing for the
Center; (2) complete the initial training program described in Section 6.1 of
this Agreement; (3) select, lease and develop the Franchised Location; (4)
purchase an opening inventory of materials and supplies; (5) obtain and provide
evidence of insurance as described in Section 21.1 below; and (6) commence
operation of the PAK MAIL Center. The Franchisor will extend the time in which
the Franchisee has to commence operations for a reasonable period of time in the
event factors beyond the Franchisee's reasonable control prevent the Franchisee
from meeting this development schedule, so long as the Franchisee has made
reasonable and continuing efforts to comply with such development obligations
and the Franchisee requests, in writing, an extension of time in which to have
its PAK MAIL Center established before such development period lapses. The
Franchisee shall obtain the Franchisor's approval prior to opening the Center
for business.
6. TRAINING
6.1. Initial Training Program. The Franchisee or, if the Franchisee is not
an individual, the person designated by the Franchisee to assume primary
responsibility for the management of the PAK MAIL Center ("Principal Operator"),
is required to attend and successfully complete the initial training program
which is offered by the Franchisor at one of the Franchisor's designated
training facilities. Up to two individuals are eligible to participate in the
Franchisor's initial training program without charge of a tuition or fee. The
Franchisee shall be responsible for any and all traveling and living expenses
incurred in connection with attendance at the training program. At least one
individual must successfully complete the initial training program prior to the
Franchisee's commencement of operation of its PAK MAIL Center.
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6.2. Length of Training. The initial training program shall consist of
a total of 12 days, nine of which shall be classroom instruction at a location
designated by the Franchisor and three of which shall be on-site at the
Franchised Location at or around the time the Center opens for business. The
Franchisee, and if applicable, the Principal Operator, shall attend the on-site
training at the Franchised Location. The Franchisor reserves the right to waive
a portion of the training program or alter the training schedule, if in the
Franchisor's sole discretion, the Franchisee or Principal Operator has
sufficient prior experience or training.
6.3. Additional Training. From time to time, the Franchisor may present
seminars, conventions or continuing development programs or conduct meetings for
the benefit of the Franchisee. The Franchisee or its Principal Operator shall be
required to attend any ongoing mandatory seminars, conventions, programs or
meetings as may be offered by the Franchisor. The Franchisor shall give the
Franchisee at least 30 days prior written notice of any ongoing seminar,
convention or program which is deemed mandatory. The Franchisor shall not
require that the Franchisee attend any ongoing training more often than once a
year. All mandatory training will be offered without charge of a tuition or fee;
provided, however, the Franchisee will be responsible for all traveling and
living expenses which are associated with attendance at the same.
7. DEVELOPMENT ASSISTANCE
7.1. Franchisor's Development Assistance. The Franchisor shall provide the
Franchisee with assistance in the initial establishment of the PAK MAIL Center
as follows:
a. Provision of the initial training program to be conducted at the
Franchisor's designated training facilities or at another location
designated by the Franchisor, as described in Article 6 above.
b. Provision of written specifications for a Franchised Location which
shall include, without limitation, specifications for space requirements,
build out and the demographics and character of the surrounding market
area. The Franchisee acknowledges that the Franchisor shall have no other
obligation to provide assistance in the selection and approval of a
Franchised Location other than the provision of such written specifications
and approval or disapproval of a proposed Franchised Location, which
approval or disapproval shall be based on information submitted to the
Franchisor in a form sufficient to assess the proposed location as may be
reasonably required by the Franchisor.
c. Directives regarding the required conversion, design and decoration
of the PAK MAIL Center premises, plus specifications concerning signs,
decor, color, equipment, machines, uniforms and equipment.
d. Information regarding the selection of suppliers of equipment,
items and materials used and inventory and services offered for sale in
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connection with the PAK MAIL Center. After execution of this Agreement, the
Franchisor will provide the Franchisee with a list of approved suppliers,
if any, of such equipment, items, materials, inventory and services and, if
available, a description of any national or central purchase and supply
agreements offered by such approved suppliers for the benefit of PAK MAIL
franchisees.
e. Provision of an operations manual in accordance with Section 8.1
below.
f. The Franchisor will make available to the Franchisee at or around
the commencement of operations of the Franchisee's PAK MAIL Center a
representative to be present for three days during the initial operation of
the Franchisee's PAK MAIL Center. The representative will assist the
Franchisee's employees in the initial operation of the Center at a time
scheduled by the Franchisor, unless in the Franchis- or's determination,
the Franchisee or the Principal Operator have had sufficient prior training
or experience.
g. The Franchisor will grant the Franchisee a nonexclusive,
nontransferable license to use certain proprietary computer programs and
related materials developed for use in the operation of Pak Mail Centers
("Program") in accordance with the terms of the Franchisor's standard
Software License Agreement ("Software License Agreement"). The Franchisee
will use the Program in accordance with the terms of the Software License
Agreement, including using certain computer equipment designated by the
Franchisor as meeting its specifications ("Designated Equipment").
8. OPERATIONS MANUAL
8.1. Operations Manual. The Franchisor agrees to provide to the Franchisee
one or more manuals, technical bulletins, or other written materials
(collectively referred to as "Operations Manual") covering certain standards and
specifications for packaging, shipping, crating, freight forwarding, mailing and
communications services and other operating and marketing techniques for the PAK
MAIL Center. The Franchisee agrees that it shall comply with the Operations
Manual as an essential aspect of its obligations under this Agreement and
failure by the Franchisee to substantially comply with the Operations Manual may
be considered by the Franchisor to be a breach of this Agreement.
8.2. Confidentiality of Operations Manual Contents. The Franchisee agrees
to use the Marks and System only as specified in the Operations Manual. The
Operations Manual is the sole property of the Franchisor and shall be used by
the Franchisee only during the term of this Agreement and in strict accordance
with the terms and conditions hereof. The Franchisee shall not duplicate the
Operations Manual nor disclose its contents to persons other than its employees
or officers who have signed a confidentiality and noncompetition agreement in a
form approved by the Franchisor. The Franchisee shall return the Operations
Manual to the Franchisor upon the expiration, termination or assignment of this
Agreement.
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8.3. Changes to Operations Manual. The Franchisor reserves the right to
revise the Operations Manual from time to time as it deems necessary to update
or change operating and marketing techniques or standards and specifications.
The Franchisee, upon receipt of any updated information, shall update its copy
of the Operations Manual as instructed by the Franchisor and shall conform its
operations with the updated provisions within a reasonable time thereafter. The
Franchisee acknowledges that a master copy of the Operations Manual maintained
by the Franchisor at its principal office shall be controlling in the event of a
dispute relative to the content of any Operations Manual.
9. OPERATING ASSISTANCE
9.1. Franchisor's Services. The Franchisor agrees that, during the
Franchisee's operation of the PAK MAIL Center, the Franchisor shall make
available to the Franchisee the following services:
a. Upon the reasonable request of the Franchisee, consultation by
telephone, facsimile or electronic mail, regarding the continued operation
and management of a PAK MAIL Center and advice regarding the packaging and
shipping services, quality control, inventory issues, customer and supplier
relations issues and similar advice.
b. Access to advertising and promotional materials as may be developed
by the Franchisor, the cost of which may be passed on to the Franchisee, at
the Franchisor's option.
c. On-going updates of information and programs regarding the
packaging and shipping industry, the competition, the PAK MAIL concept and
the System, including, without limitation, information about special or new
products which may be developed and made available to PAK MAIL franchisees
as a part of the System.
d. The Franchisor shall make the initial training program available to
replacement or additional Principal Operators during the term of this
Agreement. The Franchisee shall be responsible for all travel and living
expenses incurred by its personnel during the training program. The
availability of the training programs shall be subject to space
considerations and prior commitments to new PAK MAIL franchisees.
9.2. Additional Franchisor Services. Although not obligated to do so, the
Franchisor may make its employees or designated agents available to the
Franchisee for on-site advice and assistance in connection with the on-going
operation of the PAK MAIL Center governed by this Agreement.
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10. FRANCHISEE'S OPERATIONAL COVENANTS
10.1. Business Operations. The Franchisee acknowledges that it is solely
responsible for the successful operation of its PAK MAIL Center and that the
continued successful operation thereof is, in part, dependent upon the
Franchisee's compliance with this Agreement and the Operations Manual. In
addition to all other obligations contained in this Agreement and in the
Operations Manual, the Franchisee covenants that:
a. The Franchisee shall maintain clean, efficient and high quality PAK
MAIL Center operations and shall operate the business in accordance with
the Operations Manual and in such a manner as not to detract from or
adversely reflect upon the name and reputation of the Franchisor and the
goodwill associated with the PAK MAIL name and Marks.
b. The Franchisee will conduct itself and operate its PAK MAIL Center
in compliance with all applicable laws, health department regulations and
other ordinances and in such a manner so as to promote a good public image
in the business community. In connection therewith, the Franchisee will be
solely and fully responsible for obtaining any and all licenses to carry on
business at the PAK MAIL Center.
c. The Franchisee acknowledges that proper management of the PAK MAIL
Center is important and shall insure that the Franchisee or a designated
Principal Operator who has completed the Franchisor's initial training
program be responsible for the management of the PAK MAIL Center.
d. The Franchisee shall offer only products and services through its
Center which meet or exceed the minimum standards and specifications
established by the Franchisor more fully described in the Operations
Manual. The Franchisee shall offer all types of products and services as
from time to time may be prescribed by the Franchisor and shall refrain
from offering any other types of products or services, or operating or
engaging in any other type of business or profession, from or through the
PAK MAIL Center.
e. The Franchisee will pay on a timely basis all amounts due and owing
to the Franchisor pursuant to any separate agreements between the
Franchisee and the Franchisor and all amounts due and owing by the
Franchisee to all third parties, including national vendors and taxing
authorities, with whom the Franchisee does business at or through the
Center. In connection with any amounts due and owing by the Franchisee to
third parties, the Franchisee expressly acknowledges that a default by the
Franchisee with respect to such indebtedness may be considered a default
hereunder and the Franchisor may avail itself of all remedies provided for
herein in the event of default.
f. The Franchisee shall comply with all agreements with third parties
related to the PAK MAIL Center including, in particular, all provisions of
any premises lease and the Software License Agreement.
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g. The Franchisee and all employees of the Franchisee shall present a
professional appearance, as described in the Operations Manual, and shall
render competent and courteous service to customers of the PAK MAIL Center
while working at the Franchised Location. The Franchisee is required, at
the Franchisee's expense, to purchase specified wearing apparel from
suppliers approved by the Franchisor. All Principal Operators, employees of
the Franchisee, the Franchisee and its owners, shall wear the specified
uniform at all times while working at the Franchised Location. The
Franchisor has the right, in its sole and absolute discretion, to change or
modify such dress code guidelines.
h. The Franchisee agrees to renovate, refurbish, remodel or replace,
at its own expense, the real and personal property and equipment used in
the operation of the PAK MAIL Center, when reasonably required by the
Franchisor in order to comply with the image, standards of operation and
performance capability established by the Franchisor from time to time. If
the Franchisor changes its image or standards of operation, it shall give
the Franchisee a reasonable period of time within which to comply with such
changes.
i. The Franchisee shall be responsible for training all of its
employees who work in any capacity in the PAK MAIL Center and shall be
fully responsible for all employees' compliance with the operational
standards which are part of the System. The Franchisee must conduct its
employee training in the manner and according to the standards as
prescribed in the Operations Manual. Any employee who does not
satisfactorily complete the training shall not work in any capacity in the
Franchisee's PAK MAIL Center.
j. The Franchisee shall at all times during the term of this Agreement
own and control the PAK MAIL Center authorized hereunder. Upon request of
the Franchisor, the Franchisee shall promptly provide satisfactory proof of
such ownership to the Franchisor. The Franchisee represents that the
Statement of Ownership, attached hereto as Exhibit III and by this
reference incorporated herein, is true, complete, accurate and not
misleading, and, in accordance with the information contained in the
Statement of Ownership, the controlling ownership of the PAK MAIL Center is
held by the Franchisee. The Franchisee shall promptly provide the
Franchisor with a written notification if the information contained in the
Statement of Ownership changes at any time during the term of this
Agreement and shall comply with the applicable transfer provisions
contained in Article 16 herein. In addition, if the Franchisee is an
entity, all of the owners of the Franchisee shall sign the Personal
Guaranty attached hereto as Exhibit II.
k. The Franchisee shall at all times during the term of this Agreement
keep its PAK MAIL Center open during the business hours as may be
designated by the Franchisor from time to time in the Operations Manual and
shall maintain sufficient supplies of products and employ adequate
personnel at all times so as to operate the Center at its maximum capacity
and efficiency.
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11. ROYALTIES
11.1. Monthly Royalty. The Franchisee agrees to pay to the Franchisor a
monthly royalty ("Royalty") equal to 5% of the total amount of its "Royalty
Based Revenues" (defined in Section 11.2 below) for the first $200,000 of the
Center's Royalty Based Revenues, 4 1/2% for the next $50,000 of the Center's
Royalty Based Revenues, 4% for the next $50,000 of the Center's Royalty Based
Revenues, 3 1/2% for the next $50,000 of the Center's Royalty Based Revenues,
and 3% for all subsequent Royalty Based Revenues of the Center received in that
calendar year.
11.2. Royalty Based Revenues. "Royalty Based Revenues" shall mean and
include the aggregate amount of all sales of services, products or merchandise
of every kind or nature performed, sold from, at or in connection with the
operation of the Center or arising out of the operation or conduct of business
by the Center, including sales made at or away from the Center, whether for cash
or credit, but excluding all: (i) federal, state or municipal sales or service
taxes collected from customers and paid to the appropriate taxing authority;
(ii) income generated from the sale of postage stamps; (iii) key deposits; and
(iv) other exclusions as may be authorized in writing by the Franchisor.
11.3. Royalty Payments. Royalty payments shall be made monthly and sent to
the Franchisor by electronic funds transfer no later than the 10th day of each
month or such other day which the Franchisor will designate from time to time
("Due Date") based on Royalty Based Revenues for the immediately preceding
month. At the Franchisor's request and in no event later than 30 days prior to
the opening of the Center, the Franchisee shall execute an Authorization
Agreement for Prearranged Payment of Royalties by electronic transfer of funds
from the Franchisee's bank account to the Franchisor's bank account, in the form
attached to this Agreement as Exhibit IV. No later than the Due Date of each
month, the Franchisee shall report to the Franchisor by electronic means or in
written form, as may be reasonably directed by the Franchisor, in a manner more
fully described in Section 15.1 below, with such information and pursuant to
such standard transmittal procedures regarding the Franchisee's Royalty Based
Revenues and such additional information as may be requested by the Franchisor.
The Franchisor reserves the right to require Royalty payments be made on a
weekly or bi-weekly basis if the Franchisee does not timely or fully submit the
required payments or reports. The Franchisor shall have the right to verify such
Royalty payments from time to time as it deems necessary, in any reasonable
manner. In the event that the Franchisee fails to have sufficient funds in its
account or otherwise fails to pay any Royalties as of the Due Date, the
Franchisee shall owe, in addition to such Royalties, interest after the Due Date
at the highest applicable legal rate for open account business credit, not to
exceed 1 1/2% per month. The Franchisee acknowledges that this Section 11.3
shall not constitute the Franchisor's or its affiliates' agreement to accept
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such payments after they are due or a commitment to extend credit to or
otherwise finance operation of the Center. The Franchisor reserves the right to
automatically assess a monthly $50 late charge for any report and/or financial
statement required under Section 15.1 below which is not timely filed by the
Franchisee. Such late charge shall continue to accrue each month that said
report(s) and financial statement(s) remain unfiled, and shall be due and
payable in full upon demand by the Franchisor. In the event such late charge(s)
is/are not paid upon demand, the Franchisor may elect to pursue its remedies as
further set forth in this Agreement. In no event shall the Franchisee be
required to pay a late payment and/or interest at a rate greater than the
maximum interest rate permitted by applicable law.
11.4. Application of Payments. Notwithstanding any designation by the
Franchisee, the Franchisor shall have sole discretion to apply any payments by
the Franchisee, and any credits received by the Franchisor on the Franchisee's
behalf from third party vendors, to any of Franchisee's past due indebtedness to
Franchisor for Royalties, Advertising Contributions, purchases from the
Franchisor or its affiliates, interest or any other indebtedness.
12. ADVERTISING
12.1. Approval of Advertising. The Franchisee shall obtain the Franchisor's
prior written approval of all written advertising or other marketing or
promotional programs regarding the PAK MAIL Center, including, without
limitation, "Yellow Pages" advertising, newspaper ads, flyers, brochures,
coupons, direct mail pieces, Internet advertising, including on the World Wide
Web, specialty and novelty items and radio and television advertising. The
Franchisee shall also obtain the Franchisor's prior written approval before
using any promotional materials as may be provided by vendors. The proposed
written advertising or a description of the marketing or promotional program
shall be submitted to the Franchisor at least 30 days prior to publication,
broadcast or use. The Franchisee acknowledges that advertising and promoting the
PAK MAIL Center in accordance with the Franchisor's standards and specifications
is an essential aspect of the System, and the Franchisee agrees to comply with
all advertising standards and specifications. The Franchisee shall display all
required promotional materials, signs, point of purchase displays and other
marketing materials in its PAK MAIL Center and in the manner prescribed by the
Franchisor.
12.2. Marketing Material Beginning Inventory. If this Agreement governs the
first Center to be opened and operated by the Franchisee, then the Franchisee
shall pay to the Franchisor and other suppliers a nonrefundable, nonrecurring
fee for marketing material beginning inventory ("Marketing Material Beginning
Inventory") in an amount between $571 and $890 for Franchisor's provision of a
beginning inventory of marketing material for the Franchisee's PAK MAIL Center.
The exact amount payable for the Marketing Material Beginning Inventory fee
shall be determined by the Franchisee. All or a part of that amount will be due
and payable to the Franchisor and other suppliers by the Franchisee on or before
the Franchisee's commencement of the initial training program. The Marketing
Material Beginning Inventory will be provided by the Franchisor and other
suppliers at or around the opening of the Franchisee's Center.
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12.3. Advertising Contribution. The Franchisee shall contribute to an
advertising fund established by the Franchisor ("Advertising Fund") a fee equal
to 2% of the total amount of the Franchisee's Royalty Based Revenues
("Advertising Contribution"). The Advertising Contribution shall be paid to the
Franchisor in addition to Royalties and the following terms and conditions shall
apply:
a. The Advertising Contribution shall be payable to "Pak Mail National
Ad Fund" and made concurrently with the payment of the Royalties by
electronic transfer of funds from the Franchisee's bank account to a bank
account designated by the Franchisor, no later than the 10th day of each
month, for the Advertising Contribution based on the Royalty Based Revenues
of the immediately preceding month.
b. The Advertising Contributions will be subject to the same late
charges as the Royalties, in an amount and manner set forth in Section 11.3
above.
c. Upon the request of the Franchisee, the Franchisor will make
available to the Franchisee, no later than 30 days after the end of each
fiscal quarter, an unaudited financial statement which indicates how the
Advertising Fund has been spent.
d. The Franchisor shall direct all advertising and marketing programs
financed by the Advertising Fund, with sole discretion over the creative
concepts, materials and endorsements used therein, geographic, market and
media placement and allocation, and the administration thereof. The
Franchisee agrees that the Advertising Fund may be used to pay the costs of
preparing and producing video and audio and written advertising materials;
administering multi-regional advertising programs, including, without
limitation, purchasing direct mail and other media advertising and
employing advertising agencies and staff to assist therewith; and
supporting public relations, market research and other advertising and
marketing activities.
e. The Advertising Fund shall be accounted for separately from the
Franchisor's other funds and shall not be used to defray any of the
Franchisor's general operating expenses, except for such reasonable
administrative costs, salaries and overhead as the Franchisor may incur in
activities related to the administration of the Advertising Fund and its
marketing programs, including, without limitation, conducting market
research, preparing material, incurring related accounting and legal
expenses, collecting and accounting for Advertising Fund contributions and
all costs and expenses related to the Franchise System Advisory Council.
The Franchisor may spend in any fiscal year an amount greater or less than
the aggregate contribution of all PAK MAIL Centers to the Advertising Fund
in that year and the Advertising Fund may borrow from the Franchisor or
other lenders to cover deficits or cause the Advertising Fund to invest any
surplus for future use. All interest earned on monies contributed to the
Advertising Fund will be first used to pay costs. The Advertising Fund may
be incorporated or operated through an entity separate from the Franchisor
at such time as the Franchisor deems appropriate, and such successor entity
shall have all rights and duties of the Franchisor pursuant to this Section
12.3.
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f. The Franchisee understands and acknowledges that the Advertising
Fund is intended to maximize recognition of the Marks and patronage of PAK
MAIL Centers. Although the Franchisor will endeavor to utilize the
Advertising Fund to develop advertising and marketing materials and
programs and to place advertising that will benefit all PAK MAIL Centers,
the Franchisor undertakes no obligation to ensure that expenditures by the
Advertising Fund in or affecting any geographic area are proportionate or
equivalent to the contributions by PAK MAIL Centers operating in that
geographic area or that any PAK MAIL Center will benefit directly or in
proportion to its contribution from the development of advertising and
marketing materials or the placement of advertising. Except as expressly
provided in this Section 12.3, the Franchisor assumes no direct or indirect
liability or obligation to the Franchisee with respect to the maintenance,
direction or administration of the Advertising Fund.
g. The Franchisor reserves the right to terminate the Advertising
Fund, upon 30 days' written notice to the Franchisee. All unspent monies on
the date of termination shall be distributed to the Franchisor's
franchisees in proportion to their respective contributions to the
Advertising Fund during the preceding 12 month period. The Franchisor shall
have the right to reinstate the Advertising Fund upon the same terms and
conditions set forth herein upon 30 days' prior written notice to the
Franchisee.
12.4. Regional Advertising Programs. The Franchisor reserves the right,
upon 30 days prior written notice to the Franchisee, to create a regional
advertising association ("Association") for the benefit of PAK MAIL franchisees
located within a particular geographic area. If an Association is established
for the area where the Franchisee is located, the Franchisee will be required to
participate in the Association for the purpose of selecting and participating in
regional marketing and promotion programs for PAK MAIL Centers. The Franchisor,
in its sole discretion, may contribute up to one-half of the Advertising Fund
payments received by the Franchisor from franchisees in the Association for such
marketing and advertising programs. The Franchisee will be required to remain a
member of and be bound by the decisions of the majority of the members of the
Association regarding expenditures, assessments and dues of the Association, to
the extent that they are approved by the Franchisor. Each Association has the
right, by majority vote, to require its members to pay additional monthly dues
to the Association. The failure of the Franchisee to participate in the
Association or pay any dues required by the Association, may, at the option of
the Franchisor, be deemed to be a breach of this Agreement. The Franchisor has
the right, in its sole discretion, to form and terminate all Associations and to
determine the composition of all geographic territories and market areas for the
implementation of such regional advertising and promotion campaigns and to
require that the Franchisee participate in such regional advertising programs as
and when they may be established by the Franchisor. If a regional advertising
program is implemented on behalf of a particular region by the Franchisor, the
Franchisor, to the extent reasonably calculable, will only use contributions
from PAK MAIL franchisees within such region for the particular regional
advertising program. The Franchisor also reserves the right to establish an
Association in the form of a cooperative for a particular region and enable the
cooperative Association to self-administer the regional advertising program.
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13. QUALITY CONTROL
13.1. Compliance with Operations Manual. The Franchisee agrees to maintain
and operate the PAK MAIL Center in compliance with this Agreement and the
standards and specifications contained in the Operations Manual, as the same may
be modified from time to time by the Franchisor.
13.2. Standards and Specifications. The Franchisor will make available to
the Franchisee standards and specifications for products and services offered at
or through the PAK MAIL Center and for decor, displays, uniforms, materials,
forms, items, supplies and services used in connection with the Center. The
Franchisor reserves the right to change standards and specifications for
services and products offered at or through the PAK MAIL Center and for the
decor, displays, uniforms, materials, forms, items, supplies and services used
in connection with the Center, upon 30 days prior written notice to the
Franchisee. The Franchisee shall, throughout the term of this Agreement, remain
in compliance and strictly adhere to all of the Franchisor's current standards
and specifications for the PAK MAIL Center as prescribed from time to time.
13.3. Inspections. The Franchisor shall have the right to examine the
Franchised Location, including the inventory, products, equipment, materials,
supplies or services used or sold there, to ensure compliance with all standards
and specifications set by the Franchisor. The Franchisor shall conduct such
inspections during regular business hours and the Franchisee may be present at
such inspections. The Franchisor, however, reserves the right to conduct the
inspections without prior notice to the Franchisee.
13.4. Restrictions on Services and Products. The Franchisee is prohibited
from offering or selling any products or services not authorized by Franchisor
as being a part of the System. However, if the Franchisee proposes to offer,
conduct or utilize any products, services, materials, forms, items, supplies or
services for use in connection with or sale through the PAK MAIL Center which
are not previously approved by the Franchisor as meeting its specifications, the
Franchisee shall first notify the Franchisor in writing requesting approval. The
Franchisor may, in its sole discretion, for any reason whatsoever, elect to
withhold such approval; however, in order to make such determination, the
Franchisor may require submission of specifications, information, or samples of
such products, services, materials, forms, items or supplies. The Franchisor
will advise the Franchisee within a reasonable time whether such products,
services, materials, forms, items or supplies meet its specifications.
13.5. Approved Suppliers. The Franchisee shall purchase all products,
services, supplies and materials required for the operation of the PAK MAIL
Center from suppliers designated or approved by the Franchisor or, if there is
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no designated or approved supplier for a particular product, service, supply or
material, from such other suppliers who meet all of the Franchisor's
specifications and standards as to quality, composition, finish, appearance and
service, and who shall adequately demonstrate their capacity and facilities to
supply the Franchisee's needs in the quantities, at the times, and with the
reliability requisite to an efficient operation of the PAK MAIL Center.
13.6. Request to Approve Supplier. In the event the Franchisee desires to
purchase or use products, services, supplies or materials from suppliers other
than those previously approved by the Franchisor, the Franchisee shall, prior to
purchasing from or otherwise utilizing any supplier give the Franchisor a
written request to approve the supplier. In the event the Franchisor rejects the
Franchisee's requested new supplier, the Franchisor must, within 60 days of the
receipt of the Franchisee's request to approve the supplier notify the
Franchisee in writing of its rejection. The Franchisor may continue from time to
time to inspect any suppliers' facilities and products to assure compliance with
the Franchisor's standards and specifications. Permission for such inspection
shall be a condition of the continued approval of such supplier. The Franchisor
may at its sole discretion, for any reason whatsoever, elect to withhold
approval of the supplier; however, in order to make such determination, the
Franchisor may require that samples from a proposed new supplier be delivered to
the Franchisor for testing prior to approval and use. A charge not to exceed the
actual cost of the test may be made by the Franchisor and shall be paid by the
Franchisee.
13.7. Shopping Service. The Franchisor reserves the right to use third
party shopping services from time to time to evaluate the conduct of the
Franchisee's PAK MAIL Center, including such things as customer service,
cleanliness, merchandising and proper use of registers. Franchisor may use such
shopping services to inspect the Franchisee's PAK MAIL Center at any time at the
Franchisor's expense, without prior notification to the Franchisee. The
Franchisor may make the results of any such service evaluation available to the
Franchisee, in the Franchisor's sole discretion.
14. MARKS, TRADE NAMES AND PROPRIETARY INTERESTS
14.1. Marks. The Franchisee acknowledges that the Franchisor has the sole
right to own, license and control the Franchisee's use of the PAK MAIL service
xxxx and other of the Marks, and that such Marks shall remain under the sole and
exclusive ownership and control of the Franchisor. The Franchisee acknowledges
that it has not acquired any right, title or interest in such Marks except for
the right to use such marks in the operation of its PAK MAIL Center as it is
governed by this Agreement. Except as may be permitted in the Operations Manual,
the Franchisee agrees not to use any of the Marks as part of an electronic mail
address or on any sites on the Internet or the World Wide Web and the Franchisee
agrees not to use or register any of the Marks as a domain name on the Internet.
14.2. No Use of Other Marks. The Franchisee agrees that no service xxxx
other than "PAK MAIL" or such other Marks as may be specified by the Franchisor
shall be used in the identification, marketing, promotion or operation of the
PAK MAIL Center.
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14.3. System. The Franchisee acknowledges that the Franchisor owns and
controls the distinctive plan for the establishment, operation and promotion of
the PAK MAIL Center and all related licensed methods of doing business,
previously defined as the "System", which include, but are not limited to,
methods for shipping, crating, freight forwarding, mailing, communications,
inventory type and control, technical equipment standards, customer relations,
marketing techniques, written promotional materials, advertising, and accounting
systems, all of which constitute confidential trade secrets of the Franchisor,
and the Franchisee acknowledges that the Franchisor has valuable rights in and
to such trade secrets. The Franchisee further acknowledges that it has not
acquired any right, title or interest in the System except for the right to use
the System in the operation of the PAK MAIL Center as it is governed by this
Agreement and that it is obligated to maintain the confidentiality of the System
in accordance with Section 20.3 below.
14.4. Xxxx Infringement. The Franchisee agrees to notify the Franchisor in
writing of any possible infringement or illegal use by others of a trademark the
same as or confusingly similar to the Marks which may come to its attention. The
Franchisee acknowledges that the Franchisor shall have the right, in its sole
discretion, to determine whether any action will be taken on account of any
possible infringement or illegal use. The Franchisor may commence or prosecute
such action in the Franchisor's own name and may join the Franchisee as a party
to the action if the Franchisor determines it to be reasonably necessary for the
continued protection and quality control of the Marks and System. The Franchisor
shall bear the reasonable cost of any such action, including attorneys' fees.
The Franchisee agrees to fully cooperate with the Franchisor in any such
litigation.
14.5. Franchisee's Business Name. The Franchisee acknowledges that the
Franchisor has a prior and superior claim to the "PAK MAIL" trade name. The
Franchisee shall not use the words "PAK MAIL" in the legal name of its
corporation, partnership or any other business entity used in conducting the
business provided for in this Agreement. The Franchisee also agrees not to
register or attempt to register a trade name using the word "PAK MAIL" in the
Franchisee's name or that of any other person or business entity, without prior
written consent of the Franchisor. The Franchisee shall not identify itself as
being "Pak Mail Centers of America, Inc." or as being associated with the
Franchisor in any manner other than as a franchisee or licensee. The Franchisee
further agrees that in all advertising and promotion and promotional materials
it will display its business name only in obvious conjunction with the phrase
"PAK MAIL Licensee" or "PAK MAIL Franchisee" or with such other words and in
such other phrases to identify itself as an independent owner of the PAK MAIL
Center, as may from time to time be prescribed in the Operations Manual.
14.6. Change of Marks. In the event that the Franchisor, in its sole
discretion, shall determine it necessary to modify or discontinue use of any
proprietary Marks, or to develop additional or substitute marks, the Franchisee
shall, within a reasonable time after receipt of written notice of such a
modification or discontinuation from the Franchisor, take such action, at the
Franchisee's sole expense, as may be necessary to comply with such modification,
discontinuation, addition or substitution.
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15. REPORTS, RECORDS AND FINANCIAL STATEMENTS
15.1. Franchisee Reports. The Franchisee shall establish and maintain, at
its own expense, bookkeeping, accounting and data processing systems which
conform to the specifications which the Franchisor may prescribe from time to
time (including, without limitation, requirements for timely entry of
information into data bases of the Program, periodic printouts of reports
generated by the Program and the Franchisor's access to all Program data by
modem). Each transaction of the Center shall be processed on the Program in the
manner prescribed by the Franchisor. The Franchisor shall have the right of
access to the Program and all data processed thereon with respect to the Center.
The Franchisee shall provide access to the Franchisor at any time by installing
a modem which meets the Company's standards and specifications. The Franchisee
shall supply to the Franchisor such types of reports in a manner and form as the
Franchisor may from time to time reasonably require, including:
a. within 10 days after the end of each calendar month (or weekly if
the Franchisor requires the Franchisee to pay the Royalty described in
Section 5.B. hereof on a weekly basis), a report on the Center's Royalty
Based Revenues for such calendar month (or week);
b. within 90 days after the end of the Franchisee's fiscal year, a
balance sheet and profit and loss statement for the Center for such year
(or monthly or quarterly if required by the Franchisor, in which case such
statements shall also reflect year-to-date information); and
c. upon request of the Franchisor, within 10 days after such returns
are filed, exact copies of federal and state income, sales and any other
tax returns and such other forms, records, books and other information as
the Franchisor may periodically require.
The Franchisor reserves the right to require that the Franchisees submit
financial statements on a quarterly or monthly basis and within such time
periods as may be reasonable under the circumstances. The Franchisor also
reserves the right to disclose data derived from such reports, without
identifying the Franchisee, except to the extent identification of the
Franchisee is required by law. The Franchisee consents to the Franchisor
obtaining financial and account information regarding the Center and its
operations from third parties with whom the Franchisee does business, as and
when deemed necessary by the Franchisor.
15.2. Verification. Each report and financial statement to be submitted to
the Franchisor pursuant to this Agreement shall be signed and verified by the
Franchisee.
15.3. Books and Records. The Franchisee shall maintain all books and
records for its PAK MAIL Center in accordance with generally accepted accounting
principles, consistently applied, and in a manner as reasonably prescribed by
the Franchisor, and shall preserve these records for at least five years after
the fiscal year to which they relate.
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15.4. Audit of Books and Records. The Franchisee shall permit the
Franchisor to inspect and audit the books and records of the PAK MAIL Center at
any reasonable time, at the Franchisor's expense. If any audit discloses a
deficiency in amounts for payments owed to the Franchisor pursuant to this
Agreement, then such amounts shall become immediately payable to the Franchisor
by the Franchisee, with interest from the date such payments were due at the
lesser of 1 1/2% per month or the maximum rate allowed by law. In the event such
inspection or audit is made necessary by the Franchisee's failure to furnish
required reports, supporting records or other information, or to furnish such
information on a timely basis for two or more consecutive reporting periods, or
if the Franchisee has received advance notice from the Franchisor and fails to
have the books and records available for such audit or otherwise fails to
cooperate therewith or if an understatement of Royalty Based Revenues for the
period of any audit is determined by any such audit or inspection to be greater
than 5%, the Franchisee shall reimburse the Franchisor for the cost of such
audit or inspection, including, without limitation, the charges of attorneys and
any independent accountants and the travel expenses, room and board and
compensation of the Franchisor's employees.
16. TRANSFER
16.1. Transfer by Franchisee. The franchise granted herein is personal to
the Franchisee and, except as stated below, the Franchisor shall not allow or
permit any transfer, assignment, subfranchise or conveyance of this Agreement or
any interest hereunder. As used in this Agreement, the term "transfer" shall
mean and include the voluntary, involuntary, direct or indirect assignment,
sale, gift or other disposition by the Franchisee (or any of its owners) of any
interest in: (1) this Agreement; (2) the ownership of the Franchisee; or (3) the
Center or any assets of the Center. An assignment, sale, gift or other
disposition shall include a transfer resulting from a divorce, insolvency,
corporate or partnership dissolution proceeding or otherwise by operation of law
or, in the event of the death of the Franchisee, or an owner of the Franchisee
by will, declaration of or transfer in trust or under the laws of intestate
succession.
16.2. Pre-Conditions to Franchisee's Transfer. The Franchisee shall not
transfer its rights under this Agreement or any interest in it, or any part or
portion of any business entity that owns it or all or a substantial portion of
the assets of the PAK MAIL Center, unless the Franchisee obtains the
Franchisor's written consent and complies with the following requirements:
a. Payment of all amounts due and owing pursuant to this Agreement by
the Franchisee to the Franchisor or its affiliates or to third parties
holding a security interest in any asset of the franchised business;
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b. Agreement by the proposed transferee to satisfactorily complete the
initial training program described in this Agreement, which training may be
completed by the transferee either prior to or immediately after assignment
of this Agreement;
c. Execution of a Franchise Agreement in a form then currently offered
by the Franchisor, which shall supersede this Agreement in all respects. If
a new Franchise Agreement is signed, the terms thereof may differ from the
terms of this Agreement; provided, however, the transferee will not be
required to pay any additional initial franchise fee;
d. Provision by the Franchisee of written notice to the Franchisor 30
days' prior to the proposed effective date of the transfer, such notice to
contain information reasonably detailed to enable the Franchisor to
evaluate the terms and conditions of the proposed transfer;
e. The proposed transferee shall have provided information to the
Franchisor sufficient for the Franchisor to assess the proposed
transferee's business experience, aptitude and financial qualification, and
the Franchisor shall have ascertained that the proposed transferee meets
such qualifications;
f. Execution by Franchisee of a general release, in a form
satisfactory to the Franchisor, of any and all claims against the
Franchisor, its affiliates and their respective officers, directors,
employees and agents;
g. Payment by the Franchisee or the proposed transferee of $2,500; and
h. Agreement by the Franchisee to abide by the post-termination
covenant not to compete set forth in Section 20.2 below.
16.3. Franchisor's Approval of Transfer. The Franchisor has 30 days from
the date of the written notice of the proposed transfer to approve or disapprove
in writing, of the Franchisee's proposed transfer. The Franchisee acknowledges
that the proposed transferee shall be evaluated for approval by the Franchisor
based on the same criteria as is currently being used to assess new franchisees
of the Franchisor and that such proposed transferee shall be provided, if
appropriate, with such disclosures as may be required by state or federal law.
The Franchisor shall have the right to approve the material terms and conditions
of the transfer, including, without limitation, the right to confirm that the
price and terms of payment are not so burdensome as to affect adversely the
transferee's operation of the Center. If the Franchisee (and/or the transferring
owners) finance any part of the sale price of the transferred interest, if any,
unless waived in writing by the Franchisor, the Franchisee and/or its owners
must agree that all obligations of the transferee under or pursuant to any
promissory notes, agreements or security interests reserved by the Franchisee or
its owners in the assets of the Center or the Franchised Location shall be
subordinate to the transferee's obligations to pay royalty fees, Advertising
Contributions and other amounts due to the Franchisor and its affiliates and to
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otherwise comply with this Agreement. If the Franchisee and the proposed
transferee comply with all conditions for assignment set forth herein and the
Franchisor has not given the Franchisee notice of its approval or disapproval
within the 30 day period, approval is deemed granted.
16.4. Right of First Refusal. In the event the Franchisee wishes to
transfer its rights under this Agreement or any interest in it, or any part or
portion of any business entity that owns it, or all or a substantial portion of
the assets of the PAK MAIL Center, the Franchisee agrees to grant to the
Franchisor a 30 day right of first refusal to purchase such rights, interest or
assets on the same terms and conditions as are contained in the written offer to
purchase submitted to the Franchisee by the proposed purchaser; provided,
however, the following additional terms and conditions shall apply:
a. The Franchisee shall notify the Franchisor of such offer by sending
a written notice to the Franchisor (which notice may be the same notice as
required by Section 16.2(d) above), enclosing a copy of the written offer
from the proposed purchaser;
b. The 30 day right of first refusal period will run concurrently with
the period in which the Franchisor has to approve or disapprove the
proposed transferee;
c. Such right of first refusal is effective for each proposed transfer
and any material change in the terms or conditions of the proposed transfer
shall be deemed a separate offer on which a new 30 day right of first
refusal shall be given to the Franchisor;
d. If the consideration or manner of payment offered by a third party
is such that the Franchisor may not reasonably be required to furnish the
same, then the Franchisor may purchase the interest which is proposed to be
sold for the reasonable cash equivalent. If the parties cannot agree within
a reasonable time on the cash consideration, an independent appraiser shall
be designated by the Franchisor, whose determination will be binding upon
the parties. All expenses of the appraiser shall be paid for equally
between the Franchisor and the Franchisee; and
e. If the Franchisor chooses not to exercise its right of first
refusal, the Franchisee shall be free to complete the sale, transfer or
assignment, subject to compliance with Sections 16.2 and 16.3 above.
Absence of a reply to the Franchisee's notice of a proposed sale within the
30 day period is deemed a waiver of such right of first refusal.
16.5. Specific Types of Transfers. The Franchisee acknowledges that the
Franchisor's right to approve or disapprove of a proposed sale or transfer, and
all other requirements and rights related to such proposed sale or transfer, as
provided for above, shall apply (1) if the Franchisee is a partnership or other
business association, to the addition or deletion of a partner or members of the
association or the transfer of any partnership or membership among existing
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partners or members; (2) if the Franchisee is a corporation, to any proposed
transfer or assignment of 25% or more of the stock of the corporate Franchisee,
whether such transfer occurs in a single transaction or several transactions;
and (3) if the Franchisee is an individual, to the transfer from such individual
or individuals to a corporation controlled by them, in which case the
Franchisor's approval will be conditioned upon: (i) the continuing personal
guarantee of the individual (or individuals) for the performance of obligations
under this Agreement; (ii) the issuance and/or transfer of shares which would
affect a change in ownership of 25% or more of the stock in the corporation
being conditioned on the Franchisor's prior written approval; (iii) a limitation
on the corporation's business activity to that of operating the PAK MAIL Center
and related activities; and (iv) other reasonable conditions. With respect to a
proposed transfer as described in subsection (1) and (3) of this Section, the
Franchisor's right of first refusal to purchase, as set forth above, shall not
apply and the Franchisor will waive any transfer fee chargeable to the
Franchisee for a transfer under these circumstances.
16.6. Assignment by the Franchisor. This Agreement is fully assignable by
the Franchisor and shall inure to the benefit of any assignee or other legal
successor in interest, and the Franchisor shall in such event be fully released
from the same.
16.7. Franchisee's Death or Disability. Upon the death or permanent
disability of the Franchisee (or the Franchisee's individual controlling the
Franchisee entity), the executor, administrator, conservator, guardian or other
personal representative of such person shall transfer the Franchisee's interest
in this Agreement or such interest in the Franchisee entity to an approved third
party. Such disposition of this Agreement or such interest (including, without
limitation, transfer by bequest or inheritance) shall be completed within a
reasonable time, not to exceed 120 days from the date of death or permanent
disability, and shall be subject to all terms and conditions applicable to
transfers contained in this Article 16. Provided, however, that for purposes of
this Section 16.7, there shall be no fee charged by the Franchisor for the
initial training program offered to the transferee. Failure to transfer the
interest in this Agreement or such interest in the Franchisee entity within said
period of time shall constitute a breach of this Agreement. For the purposes
hereof, the term "permanent disability" shall mean a mental or physical
disability, impairment or condition that is reasonably expected to prevent or
actually does prevent the Franchisee or the owner of a controlling interest in
the Franchisee entity from supervising the management and operation of the PAK
MAIL Center for a period of 120 days from the onset of such disability,
impairment or condition.
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17. TERM AND EXPIRATION
17.1. Term. The term of this Agreement is for a period of 10 years from the
date of this Agreement, unless sooner terminated as provided herein.
17.2. Rights Upon Expiration. At the end of the initial term hereof the
Franchisee shall have the option to renew its franchise rights for an additional
term, by acquiring successor franchise rights, if the Franchisor does not
exercise its right not to offer a successor franchise in accordance with Section
17.4 below and if the Franchisee:
a. At least 30 days prior to expiration of the term, executes the form
of Franchise Agreement then in use by the Franchisor;
b. Has complied with all provisions of this Agreement during the
current term, including the payment on a timely basis of all Royalties and
other fees due hereunder. "Compliance" shall mean, at a minimum, that the
Franchisee has not received any written notification from the Franchisor of
breach hereunder more than four times during the term hereof;
c. Upgrades and/or remodels the PAK MAIL Center and its operations at
the Franchisee's sole expense (the necessity of which shall be in the sole
discretion of the Franchisor) to conform with the then current Operations
Manual;
d. Executes a general release, in a form satisfactory to the
Franchisor, of any and all claims against the Franchisor and its
affiliates, and their respective officers, directors, employees and agents
arising out of or relating to this Agreement; and
e. Pays a successor franchise fee of $2,500.
17.3. Exercise of Option for Successor Franchise. The Franchisee may
exercise its option for a successor franchise by giving written notice of such
exercise to the Franchisor not later than 180 days prior to the scheduled
expiration of this Agreement. The Franchisee's successor franchise rights shall
become effective by signing the Franchise Agreement then currently being offered
to new franchisees of the Franchisor.
17.4. Conditions of Refusal. The Franchisor shall not be obligated to offer
the Franchisee a successor franchise upon the expiration of this Agreement if
the Franchisee fails to comply with any of the above conditions of renewal. In
such event (except for failure to execute the then current Franchise Agreement
or pay the successor franchise fee) the Franchisor shall give notice of
expiration at least 180 days prior to the expiration of the term, and such
notice shall set forth the reasons for such refusal to offer successor franchise
rights. Upon the expiration of this Agreement, the Franchisee shall comply with
the provisions of Section 18.5 below.
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18. DEFAULT AND TERMINATION
18.1. Termination by Franchisee. If the Franchisee and its owners are
in compliance with this Agreement and the Franchisor fails to comply with this
Agreement and fails to correct such failure within 30 days after written notice
of failure to comply is delivered to the Franchisor, the Franchisee may
terminate this Agreement effective 10 days after delivery to the Franchisor of
notice of termination. A termination of this Agreement by the Franchisee for any
other reason, or without notice and right to cure, shall be deemed a termination
by the Franchisee without cause and in no way shall release the Franchisee from
the terms and conditions of this Agreement.
18.2. Termination by Franchisor - Effective Upon Notice. The Franchisor
shall have the right, at its option, to terminate this Agreement and all rights
granted the Franchisee hereunder, without affording the Franchisee any
opportunity to cure any default (subject to any state laws to the contrary,
where state law shall prevail), effective upon receipt of notice by the
Franchisee, addressed as provided in Section 22.12, upon the occurrence of any
of the following events:
a. Abandonment. If the Franchisee ceases to operate the PAK MAIL
Center or otherwise abandons the PAK MAIL Center for a period of three
consecutive days, or any shorter period that indicates an intent by the
Franchisee to discontinue operation of the PAK MAIL Center, unless and only
to the extent that full operation of the PAK MAIL Center is suspended or
terminated due to fire, flood, earthquake or other similar causes beyond
the Franchisee's control and not related to the availability of funds to
the Franchisee;
b. Insolvency; Assignments. If the Franchisee becomes insolvent or is
adjudicated a bankrupt; or any action is taken by the Franchisee, or by
others against the Franchisee under any insolvency, bankruptcy or
reorganization act, (this provision may not be enforceable under federal
bankruptcy law, 11 U.S.C. xx.xx. 101 et seq.), or if the Franchisee makes
an assignment for the benefit of creditors, or a receiver is appointed by
the Franchisee;
c. Unsatisfied Judgments; Levy; Foreclosure. If any material judgment
(or several judgments which in the aggregate are material) is obtained
against the Franchisee and remains unsatisfied or of record for 30 days or
longer (unless a supersedeas or other appeal bond has been filed); or if
execution is levied against the Franchisee's business or any of the
property used in the operation of the PAK MAIL Center and is not discharged
within five days; or if the real or personal property of the Franchisee's
business shall be sold after levy thereupon by any sheriff, xxxxxxxx or
constable;
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d. Criminal Conviction. If the Franchisee is convicted of a felony, a
crime involving moral turpitude, or any crime or offense that is reasonably
likely, in the sole opinion of the Franchisor, to materially and
unfavorably affect the System, Marks, goodwill or reputation thereof;
e. Failure to Make Payments. If the Franchisee fails to pay any
amounts due the Franchisor or affiliates, including any amounts which may
be due as a result of any subleases or lease assignments between the
Franchisee and the Franchisor, within 10 days after receiving notice that
such fees or amounts are overdue;
f. Misuse of Marks. If the Franchisee misuses or fails to follow the
Franchisor's directions and guidelines concerning use of the Franchisor's
Marks and fails to correct the misuse or failure within ten days after
notification from the Franchisor;
g. Unauthorized Disclosure. If the Franchisee intentionally or
negligently discloses to any unauthorized person the contents of or any
part of the Franchisor's Operations Manual or any other trade secrets or
confidential information of the Franchisor;
h. Repeated Noncompliance. If the Franchisee has received two previous
notices of default from the Franchisor and is again in default of this
Agreement within a 12 month period, regardless of whether the previous
defaults were cured by the Franchisee; or
i. Unauthorized Transfer. If the Franchisee sells, transfers or
otherwise assigns the Franchise, an interest in the Franchise or the
Franchisee entity, this Agreement, the PAK MAIL Center or a substantial
portion of the assets of the PAK MAIL Center owned by the Franchisee
without complying with the provisions of Article 16 above.
18.3. Termination by Franchisor - Thirty Days Notice. The Franchisor shall
have the right to terminate this Agreement (subject to any state laws to the
contrary, where state law shall prevail), effective upon 30 days written notice
to the Franchisee, if the Franchisee breaches any other provision of this
Agreement and fails to cure the default during such 30 day period. In that
event, this Agreement will terminate without further notice to the Franchisee,
effective upon expiration of the 30 day period. Defaults shall include, but not
be limited to, the following:
a. Failure to Maintain Standards. The Franchisee fails to maintain the
then current operating procedures and adhere to the specifications and
standards established by the Franchisor as set forth herein or in the
Operations Manual or otherwise communicated to the Franchisee;
b. Deceptive Practices. The Franchisee engages in any unauthorized
business or practice or sells any unauthorized product or service under the
Franchisor's Marks or under a name or xxxx which is confusingly similar to
the Franchisor's Marks;
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c. Failure to Obtain Consent. The Franchisee fails, refuses or
neglects to obtain the Franchisor's prior written approval or consent as
required by this Agreement;
d. Failure to Comply with Manual. The Franchisee fails or refuses to
comply with the then-current requirements of the Operations Manual; or
e. Breach of Related Agreement. The Franchisee defaults under any term
of the sublease or lease assignment for the Franchised Location, any other
agreement material to the PAK MAIL Center or any other Franchise Agreement
between the Franchisor and the Franchisee and such default is not cured
within the time specified in such sublease, other agreement or other
Franchise Agreement.
Notwithstanding the foregoing, if the breach is curable, but is of a nature
which cannot be reasonably cured within such 30 day period and the Franchisee
has commenced and is continuing to make good faith efforts to cure the breach
during such 30 day period, the Franchisee shall be given an additional
reasonable period of time to cure the same, and this Agreement shall not
automatically terminate without written notice from the Franchisor.
18.4. Right to Purchase. Upon termination or expiration of this Agreement
for any reason, the Franchisor shall have the option to purchase the PAK MAIL
Center or a portion of the assets of the Center, which may include, at the
Franchisor's option, all of the Franchisee's interest, if any, in and to the
real estate upon which the PAK MAIL Center is located, and all buildings and
other improvements thereon, including leasehold interests, at fair market value,
less any amount apportioned to the goodwill of the PAK MAIL Center which is
attributable to the Franchisor's Marks and System, and less any amounts owed to
the Franchisor by the Franchisee. The following additional terms shall apply to
the Franchisor's exercise of this option:
a. The Franchisor's option hereunder shall be exercisable by providing
the Franchisee with written notice of its intention to exercise the option
given to the Franchisee no later than the effective date of termination, in
the case of termination, or at least 90 days prior to the expiration of the
term of the franchise, in the case of non-renewal.
b. The Franchisor and the Franchisee agree that the terms and
conditions of this right and option to purchase may be recorded, if deemed
appropriate by the Franchisor, in the real property records and the
Franchisor and the Franchisee further agree to execute such additional
documentation as may be necessary and appropriate to effectuate such
recording.
c. The Franchisor shall set the closing for the purchase of the PAK
MAIL Center to take place no later than 60 days after the termination or
nonrenewal date. The Franchisor will pay the purchase price in full at the
closing, or, at its option, in five equal consecutive monthly installments
with interest at a rate of ten percent per annum. The Franchisee must sign
all documents of assignment and transfer as are reasonably necessary for
purchase of the PAK MAIL Center or its assets by the Franchisor.
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d. During the time after the Franchisor notifies the Franchisee of the
exercise of the option but before the closing ("Interim Period"), the
Franchisor has the right to obtain an independent appraisal of the fair
market value of the assets being purchased and, if such an appraisal is
obtained, the appraisal shall be binding on both parties. The obligation of
the Franchisor to close shall be contingent on the appraisal being
acceptable to the Franchisor.
In the event that the Franchisor does not exercise the Franchisor's right to
purchase the Franchisee's PAK MAIL Center as set forth above, the Franchisee
will be free to keep or to sell, after such termination or expiration, to any
third party, all of the physical assets of its PAK MAIL Center; provided,
however, that all appearances of the Marks are first removed in a manner
approved in writing by the Franchisor.
18.5. Obligations of Franchisee Upon Termination or Expiration. The
Franchisee is obligated upon termination or expiration of this Agreement to
immediately:
a. Pay to the Franchisor all Royalties, Advertising Contributions,
other fees, and any and all amounts or accounts payable then owed the
Franchisor or its affiliates pursuant to this Agreement, or pursuant to any
other agreement, whether written or oral, including subleases and lease
assignments, between the parties;
b. Cease to identify itself as a PAK MAIL franchisee or publicly
identify itself as a former Franchisee or use any of the Franchisor's trade
secrets, signs, symbols, devices, trade names, trademarks, or other
materials.
c. Immediately cease to identify the Franchised Location as being, or
having been, associated with the Franchisor and, if deemed necessary by the
Franchisor, paint or otherwise change the interior and exterior of the
Center to distinguish it from a PAK MAIL Center and immediately cease using
any proprietary xxxx of the Franchisor or any xxxx in any way associated
with the PAK MAIL Marks and System;
d. Deliver to the Franchisor all items which bear the PAK MAIL Xxxx,
signs, sign-faces, advertising materials, forms and other materials bearing
any of the Marks or otherwise identified with the Franchisor and obtained
by and in connection with this Agreement;
e. Immediately deliver to the Franchisor the Operations Manual and all
other information, documents and copies thereof which are proprietary to
the Franchisor;
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f. Promptly take such action as may be required to cancel all
fictitious or assumed names or equivalent registrations relating to its use
of any Marks which are under the exclusive control of the Franchisor or, at
the option of the Franchisor, assign the same to the Franchisor;
g. Notify the telephone company and all telephone directory publishers
of the termination or expiration of the Franchisee's right to use any
telephone number and any regular, classified or other telephone directory
listings associated with any Xxxx and to authorize transfer thereof to the
Franchisor or its designee. The Franchisee acknowledges that, as between
the Franchisee and the Franchisor, the Franchisor has the sole rights to
and interest in all telephone, telecopy or facsimile machine numbers and
directory listings associated with any Xxxx. The Franchisee authorizes the
Franchisor, and hereby appoints the Franchisor and any of its officers as
the Franchisee's attorney-in-fact, to direct the telephone company and all
telephone directory publishers to transfer any telephone, telecopy or
facsimile machine numbers and directory listings relating to the PAK MAIL
Center to the Franchisor or its designee, should the Franchisee fail or
refuse to do so, and the telephone company and all telephone directory
publishers may accept such direction or this Agreement as conclusive of the
Franchisor's exclusive rights in such telephone numbers and directory
listings and the Franchisor's authority to direct their transfer;
h. Comply with all applicable provisions of the Software License
Agreement; and
i. Abide by all restrictive covenants set forth in Article 20 of this
Agreement.
18.6. Acknowledgement. In the event this Agreement is terminated by the
Franchisor prior to its expiration as set forth in Sections 18.2 and 18.3 above,
the Franchisee acknowledges and agrees that, in addition to all other available
remedies, the Franchisor shall have the right to recover lost future royalties
during any period in which the Franchisee fails to pay such royalties through
and including the remainder of the then current term of this Agreement.
18.7. State and Federal Law. THE PARTIES ACKNOWLEDGE THAT IN THE EVENT THAT
THE TERMS OF THIS AGREEMENT REGARDING TERMINATION OR EXPIRATION ARE INCONSISTENT
WITH APPLICABLE STATE OR FEDERAL LAW, SUCH LAW SHALL GOVERN THE FRANCHISEE'S
RIGHTS REGARDING TERMINATION OR EXPIRATION OF THIS AGREEMENT.
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19. BUSINESS RELATIONSHIP
19.1. Independent Businesspersons. The parties agree that each of them are
independent businesspersons, their only relationship is by virtue of this
Agreement and that no fiduciary relationship is created hereunder. Neither party
is liable or responsible for the other's debts or obligations, nor shall either
party be obligated for any damages to any person or property directly or
indirectly arising out of the operation of the other party's business authorized
by or conducted pursuant to this Agreement. The Franchisor and the Franchisee
agree that neither of them will hold themselves out to be the agent, employer or
partner of the other and that neither of them has the authority to bind or incur
liability on behalf of the other.
19.2. Payment of Third Party Obligations. The Franchisor shall have no
liability for the Franchisee's obligations to pay any third parties, including
without limitation, any product vendors, or any sales, use, service, occupation,
excise, gross receipts, income, property or other tax levied upon the
Franchisee, the Franchisee's property, the PAK MAIL Center or upon the
Franchisor in connection with the sales made or business conducted by the
Franchisee (except any taxes the Franchisor is required by law to collect from
the Franchisee with respect to purchases from the Franchisor).
19.3. Indemnification. The Franchisee agrees to indemnify, defend and hold
harmless the Franchisor, its subsidiaries and affiliates, and their respective
shareholders, directors, officers, employees, agents, successors and assignees,
(the "Indemnified Parties") against, and to reimburse them for all claims,
obligations and damages described in this Section 19.3, any and all third party
obligations described in Section 19.2 and any and all claims and liabilities
directly or indirectly arising out of the operation of the PAK MAIL Center or
arising out of the use of the Marks and System in any manner not in accordance
with this Agreement. For purposes of this indemnification, claims shall mean and
include all obligations, actual and consequential damages and costs reasonably
incurred in the defense of any claim against the Indemnified Parties, 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. The Franchisor shall have the right to
defend any such claim against it. This indemnity shall continue in full force
and effect subsequent to and notwithstanding the expiration or termination of
this Agreement.
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20. RESTRICTIVE COVENANTS
20.1. Non-Competition During Term. The Franchisee acknowledges that, in
addition to the license of the Marks hereunder, the Franchisor has also licensed
commercially valuable information which comprises and is a part of the System,
including without limitation, operations, marketing, advertising and related
information and materials and that the value of this information derives not
only from the time, effort and money which went into its compilation, but from
the usage of the same by all the franchisees of the Franchisor using the Marks
and System. The Franchisee therefore agrees that other than the PAK MAIL Center
licensed herein or authorized by separate agreement with the Franchisor, neither
the Franchisee nor any of the Franchisee's officers, directors, shareholders or
partners, nor any member of his or their immediate families, shall during the
term of this Agreement:
a. have any direct or indirect controlling interest as a disclosed or
beneficial owner in a "Competitive Business" as defined below;
b. perform services as a director, officer, manager, employee,
consultant, representative, agent or otherwise for a Competitive Business;
or
c. divert or attempt to divert any business related to, or any
customer or account of the PAK MAIL Center, the Franchisor's business or
any other PAK MAIL franchisee's business, by direct inducement or
otherwise, or divert or attempt to divert the employment of any employee of
the Franchisor or another franchisee licensed by the Franchisor to use the
Marks and System, to any Competitive Business by any direct inducement or
otherwise.
The term "Competitive Business" as used in this Agreement shall mean any
business operating, or granting franchises or licenses to others to operate, a
packaging, crating, freight forwarding and/or mailing business or any similar
business (excluding operating or granting franchises or licenses to others for
PAK MAIL Centers operated under franchise agreements with the Franchisor).
Notwithstanding the foregoing, the Franchisee shall not be prohibited from
owning securities in a Competitive Business if such securities are listed on a
stock exchange or traded on the over-the-counter market and represent 5% or less
of that class of securities issued and outstanding.
20.2. Post-Termination Covenant Not to Compete. Upon termination or
expiration of this Agreement for any reason, the Franchisee and its officers,
directors, shareholders, and/or partners agree that, for a period of two years
commencing on the effective date of termination or expiration, or the date on
which the Franchisee ceases to conduct business, whichever is later, neither
Franchisee nor its officers, directors, shareholders, and/or partners shall have
any direct or indirect interest (through a member of any immediate family of the
Franchisee or its Owners or otherwise) as a disclosed or beneficial owner,
investor, partner, director, officer, employee, consultant, representative or
30
agent or in any other capacity in any Competitive Business, defined in Section
20.1 above, located or operating within a 25 mile radius of the Franchised
Location or within 25 miles of any other franchised or company-owned PAK MAIL
Center. The restrictions of this Section shall not be applicable to the
ownership of shares of a class of securities listed on a stock exchange or
traded on the over-the-counter market that represent 5% or less of the number of
shares of that class of securities issued and outstanding. The Franchisee and
its officers, directors, shareholders, and/or partners expressly acknowledge
that they possess skills and abilities of a general nature and have other
opportunities for exploiting such skills. Consequently, enforcement of the
covenants made in this Section will not deprive them of their personal goodwill
or ability to earn a living.
20.3. Confidentiality of Proprietary Information. The Franchisee shall
treat all information it receives which comprises or is a part of the System
licensed hereunder as proprietary and confidential and will not use such
information in an unauthorized manner or disclose the same to any unauthorized
person without first obtaining the Franchisor's written consent. The Franchisee
acknowledges that the Marks and the System have valuable goodwill attached to
them, that the protection and maintenance thereof is essential to the Franchisor
and that any unauthorized use or disclosure of the Marks and System will result
in irreparable harm to the Franchisor.
20.4. Confidentiality Agreement. The Franchisor reserves the right to
require that the Franchisee cause each of its officers, directors, partners,
shareholders, and Principal Operator, and, if the Franchisee is an individual,
immediate family members, to execute a Nondisclosure and Noncompetition
Agreement containing the above restrictions, in a form approved by the
Franchisor.
21. INSURANCE
21.1. Insurance Coverage. The Franchisee shall procure, maintain and
provide evidence of (i) comprehensive general liability insurance for the
Franchised Location and its operations with a limit of not less than $1,000,000
combined single limit, or such greater limit as may be required as part of any
lease agreement for the Franchised Location; (ii) automobile liability insurance
covering all employees of the PAK MAIL Center with authority to operate a motor
vehicle in an amount not less than $1,000,000 or, with the prior written consent
of the Franchisor, such lesser amount as may be available at a commercially
reasonable rate, but in no event less than any statutorily imposed minimum
coverage; (iii) unemployment and worker's compensation insurance with a broad
form all-states endorsement coverage sufficient to meet the requirements of the
law; and (iv) all-risk personal property insurance in an amount equal to at
least 100% of the replacement costs of the contents and tenant improvements
located at the PAK MAIL Center. All of the required policies of insurance shall
name the Franchisor as an additional named insured and shall provide for a 30
day advance written notice to the Franchisor of cancellation.
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21.2. Proof of Insurance Coverage. The Franchisee will provide proof of
insurance to the Franchisor prior to commencement of operations at its PAK MAIL
Center. This proof will show that the insurer has been authorized to inform the
Franchisor in the event any policies lapse or are cancelled. The Franchisor has
the right to change the minimum amount of insurance the Franchisee is required
to maintain by giving the Franchisee prior reasonable notice, giving due
consideration to what is reasonable and customary in the similar business.
Noncompliance with the insurance provisions set forth herein shall be deemed a
material breach of this Agreement; in the event of any lapse in insurance
coverage, in addition to all other remedies, the Franchisor shall have the right
to demand that the Franchisee cease operations of the PAK MAIL Centers until
coverage is reinstated, or, in the alternative, pay any delinquencies in premium
payments and charge the same back to the Franchisee.
22. MISCELLANEOUS PROVISIONS
22.1. Governing Law/Consent to Venue and Jurisdiction. Except to the extent
governed by the United States Trademark Act of 1946 (Xxxxxx Act, 15 U.S.C.
Sections 1051 et seq.) or other federal law, this Agreement shall be interpreted
under the laws of the state of Colorado and any dispute between the parties
shall be governed by and determined in accordance with the substantive laws of
the state of Colorado, which laws shall prevail in the event of any conflict of
law. The Franchisee and the Franchisor have negotiated regarding a forum in
which to resolve any disputes which may arise between them and have agreed to
select a forum in order to promote stability in their relationship. Therefore,
if a claim is asserted in any legal proceeding involving the Franchisee, its
officers or directors (collectively, "Franchisee Affiliates") and the
Franchisor, its officers, directors or sales employees (collectively,
"Franchisor Affiliates") both parties agree that the exclusive venue for
disputes between them shall be in the state and federal courts of Colorado and
each waive any objection either may have to the personal jurisdiction of or
venue in the state and federal courts of Colorado. The Franchisor, the
Franchisor Affiliates, the Franchisee and the Franchisee Affiliates each waive
their rights to a trial by jury.
22.2. Modification. The Franchisor and/or the Franchisee may modify this
Agreement only upon execution of a written agreement between the two parties.
The Franchisee acknowledges that the Franchisor may modify its standards and
specifications and operating and marketing techniques set forth in the
Operations Manual unilaterally under any conditions and to the extent in which
the Franchisor, in its sole discretion, deems necessary to protect, promote, or
improve the Marks and the quality of the System, but under no circumstances will
such modifications be made arbitrarily without such determination.
22.3. Entire Agreement. This Agreement, including all exhibits and addenda,
contains the entire agreement between the parties and supersedes any and all
prior agreements concerning the subject matter hereof. The Franchisee agrees and
understands that the Franchisor shall not be liable or obligated for any oral
representations or commitments made prior to the execution hereof or for claims
of negligent or fraudulent misrepresentation and that no modifications of this
32
Agreement shall be effective except those in writing and signed by both parties.
The Franchisor does not authorize and will not be bound by any representation of
any nature other than those expressed in this Agreement. The Franchisee further
acknowledges and agrees that no representations have been made to it by the
Franchisor regarding projected sales volumes, market potential, revenues,
profits of the Franchisee's PAK MAIL Center, or operational assistance other
than as stated in this Agreement or in any disclosure document provided by the
Franchisor or its representatives.
22.4. Delegation by the Franchisor. From time to time, the Franchisor shall
have the right to delegate the performance of any portion or all of its
obligations and duties hereunder to third parties, whether the same are agents
of the Franchisor or independent contractors which the Franchisor has contracted
with to provide such services. The Franchisee agrees in advance to any such
delegation by the Franchisor of any portion or all of its obligations and duties
hereunder.
22.5. Effective Date. This Agreement shall not be effective until accepted
by the Franchisor as evidenced by dating and signing by an officer of the
Franchisor.
22.6. Review of Agreement. The Franchisee acknowledges that it had a copy
of this Agreement in its possession for a period of time not less than ten full
business days, during which time the Franchisee has had the opportunity to
submit same for professional review and advice of the Franchisee's choosing
prior to freely executing this Agreement.
22.7. Attorneys' Fees. In the event of any default on the part of either
party to this Agreement, in addition to all other remedies, the party in default
will pay the aggrieved party all amounts due and all damages, costs and
expenses, including reasonable attorneys' fees, incurred by the aggrieved party
in any legal action, arbitration or other proceeding as a result of such
default, plus interest at the highest rate allowable by law, accruing from the
date of such default.
22.8. Injunctive Relief. Nothing herein shall prevent the Franchisor or the
Franchisee from seeking injunctive relief to prevent irreparable harm, in
addition to all other remedies. If the Franchisor seeks an injunction, the
Franchisor will not be required to post a bond in excess of $500.
22.9. No Waiver. No waiver of any condition or covenant contained in this
Agreement or failure to exercise a right or remedy by the Franchisor or the
Franchisee shall be considered to imply or constitute a further waiver by the
Franchisor or the Franchisee of the same or any other condition, covenant,
right, or remedy.
22.10. No Right to Set Off. The Franchisee shall not be allowed to set off
amounts owed to the Franchisor for Royalties, fees or other amounts due
hereunder, against any monies owed to Franchisee, nor shall the Franchisee in
any event withhold such amounts due to any alleged nonperformance by the
Franchisor hereunder, which right of set off is hereby expressly waived by the
Franchisee.
33
22.11. Invalidity. If any provision of this Agreement is held invalid by
any tribunal in a final decision from which no appeal is or can be taken, such
provision shall be deemed modified to eliminate the invalid element and, as so
modified, such provision shall be deemed a part of this Agreement as though
originally included. The remaining provisions of this Agreement shall not be
affected by such modification.
22.12. Notices. All notices required to be given under this Agreement shall
be given in writing, by certified mail, return receipt requested, or by an
overnight delivery service providing documentation of receipt, at the address
set forth in the first Section of this Agreement or at such other addresses as
the Franchisor or the Franchisee may designate from time to time, and shall be
effectively given when deposited in the United States mails, postage prepaid, or
when received via overnight delivery, as may be applicable.
22.13. Acknowledgement. BEFORE SIGNING THIS AGREEMENT, THE
FRANCHISEE SHOULD READ IT CAREFULLY WITH THE ASSISTANCE OF LEGAL
COUNSEL. THE FRANCHISEE ACKNOWLEDGES THAT:
(A) THE SUCCESS OF THE BUSINESS VENTURE CONTEMPLATED HEREIN INVOLVES
SUBSTANTIAL RISKS AND DEPENDS UPON THE FRANCHISEE'S ABILITY AS AN
INDEPENDENT BUSINESS PERSON AND ITS ACTIVE PARTICIPATION IN THE DAILY
AFFAIRS OF THE BUSINESS, AND
(B) NO ASSURANCE OR WARRANTY, EXPRESS OR IMPLIED, HAS BEEN GIVEN AS TO
THE POTENTIAL SUCCESS OF SUCH BUSINESS VENTURE OR THE EARNINGS LIKELY TO BE
ACHIEVED, AND
(C) NO STATEMENT, REPRESENTATION OR OTHER ACT, EVENT OR COMMUNICATION,
EXCEPT AS SET FORTH IN THIS DOCUMENT, AND IN ANY OFFERING CIRCULAR SUPPLIED
TO THE FRANCHISEE IS BINDING ON THE FRANCHISOR IN CONNECTION WITH THE
SUBJECT MATTER OF THIS AGREEMENT.
34
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above set forth.
PAK MAIL CENTERS OF FRANCHISEE
AMERICA, INC.,
a Colorado corporation -------------------------------------------
(Print Name)
By:
---------------------------- -------------------------------------------
Individually
Name:
--------------------------
Title: Address:
------------------------- -----------------------------------
City:
-------------------------------------
State: Zip:
------------------- -----------
OR:
(if a corporation or partnership)
-------------------------------------------
Company Name
By:
----------------------------------------
Name:
--------------------------------------
Title:
------------------------------------
Address:
----------------------------------
City:
-------------------------------------
State: Zip:
------------------ -------------
(___/___/98)
35
EXHIBIT I TO
FRANCHISE AGREEMENT
ADDENDUM TO PAK MAIL CENTERS OF AMERICA, INC.
FRANCHISE AGREEMENT
1. Franchised Location and Protected Territory. The Franchised Location,
set forth in Section 3.1 of the Agreement shall be:
-------------------------------------------------------------------------------.
The Protected Territory described in Section 3.2 of the Agreement, shall be:
--------------------------------------------------------------------------------
OR
Designated Area. The Franchisor and the Franchisee acknowledge that the
Franchised Location cannot be designated in Section 1 above as a specific
address because the location has not been selected and approved; therefore,
within 90 days following the date of the Agreement, the Franchisee shall take
steps to choose and acquire a location for its PAK MAIL Center within the
following geographic area ("Designated Area"):
--------------------------------------------------------------------------------
-------------------------------------------------------------------------------.
2. Acknowledgement. By executing this Exhibit and/or the Rider hereto,
the Franchisee acknowledges that the Franchisor's approval of a site does not
constitute a representation or warranty of any kind, express or implied, as to
the suitability of the site for a PAK MAIL Center or for any other purpose and
that the Franchisee's acceptance of a franchise for the operation of a PAK MAIL
Center at the site is based on its own independent investigation of the
suitability of the site.
Fully executed this day of , 19 .
-------- ------------- ---
PAK MAIL CENTERS OF AMERICA, INC.
By:
------------------------------------------
Title:
----------------------------------------
FRANCHISEE
By:
-------------------------------------------
Title:
-----------------------------------------
EXHIBIT I-1
TO FRANCHISE AGREEMENT
RIDER TO ADDENDUM - LOCATION APPROVAL
1. Franchised Location. The Franchised Location, set forth in Section 3.1
of the Agreement shall be: .
----------------------------------------------------
2. Legal Address. The business address for any notices mailed pursuant to
Section 22.12 of the Agreement shall be changed to read as follows:
--------------------------------------------------------------------------------
-------------------------------------------------------------------------------.
3. Protected Territory. The Protected Territory described in Section 3.2 of
the Agreement, shall be:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Fully executed this day of , 19 .
------ ------------------ ----
PAK MAIL CENTERS OF AMERICA, INC.
By:
-----------------------------------------
Title:
---------------------------------------
FRANCHISEE
By:
------------------------------------------
Title:
---------------------------------------
EXHIBIT II
TO FRANCHISE AGREEMENT
GUARANTY AND ASSUMPTION OF FRANCHISEE'S OBLIGATIONS
---------------------------------------------------
In consideration of, and as an inducement to, the execution of the above
Franchise Agreement (the "Agreement") by Pak Mail Centers of America, Inc. (the
"Franchisor"), each of the undersigned hereby personally and unconditionally:
Guarantees to the Franchisor and its successors and assigns, for the term
of this Agreement, including renewals thereof, that the franchisee as that
term is defined in the Agreement ("Franchisee") shall punctually pay and
perform each and every undertaking, agreement and covenant set forth in the
Agreement; and
Agrees to be personally bound by, and personally liable for the breach of,
each and every provision in the Agreement.
Each of the undersigned waives the following:
1. Acceptance and notice of acceptance by the Franchisor of the foregoing
undertaking;
2. Notice of demand for payment of any indebtedness or nonperformance of
any obligations hereby guaranteed;
3. Protest and notice of default to any party with respect to the
indebtedness or nonperfor- xxxxx of any obligations hereby guaranteed;
4. Any right he or she may have to require that any 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
or she may be entitled.
Each of the undersigned consents and agrees that:
1. His or her direct and immediate liability under this guaranty shall be
joint and several;
2. He or she 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
the 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 the
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,
including renewals thereof.
IN WITNESS WHEREOF, each of the undersigned has affixed his or her
signature effective on the same day and year as the Agreement was executed.
WITNESS GUARANTOR(S)
---------------------------------- ----------------------------------------
---------------------------------- ----------------------------------------
---------------------------------- ----------------------------------------
---------------------------------- ----------------------------------------
EXHIBIT III
TO FRANCHISE AGREEMENT
STATEMENT OF OWNERSHIP
Franchisee:
---------------------------------------------------------------------
Trade Name (if different from above):
------------------------------------------
--------------------------------------------------------------------------------
Form of Ownership
(Check One)
Limited
______ Individual ______ Partnership ______ Corporation ______ Liability
Company
If a Partnership, provide name and address of each partner showing
percentage owned, whether active in management, and indicate the state in which
the partnership was formed.
If a Limited Liability Company, provide name and address of each member
and each manager showing percentage owned and indicate the state in which the
Limited Liability Company was formed.
If a Corporation, give the state and date of incorporation, the names and
addresses of each officer and director, and list the names and addresses of
every shareholder showing what percentage of stock is owned by each.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Franchisee acknowledges that this Statement of Ownership applies to the PAK
MAIL Center authorized under the Franchise Agreement.
Use additional sheets if necessary. Any and all changes to the above
information must be reported to the Franchisor in writing.
------------------------------- -----------------------------------------
Date Name
EXHIBIT IV
TO FRANCHISE AGREEMENT
AUTHORIZATION AGREEMENT FOR PREARRANGED PAYMENTS
(DIRECT DEBITS)
The undersigned depositor ("Depositor") hereby (1) authorizes Pak Mail Centers
of America, Inc. ("Company") to initiate debit entries and/or credit correction
entries to the undersigned's checking and/or savings account indicated below and
(2) authorizes the depository designated below ("Depository") to debit such
account pursuant to Company's instructions.
-------------------------------------- -------------------------------
Depository Branch
------------------------- ----------------------- ----------------------
City State Zip Code
----------------------- -------------------------
Bank Transit/ABA Number Account Number
This authority is to remain in full force and effect until Depository has
received joint written notification from Company and Depositor of the
Depositor's termination of such authority in such time and in such manner as to
afford Depository a reasonable opportunity to act on it. Notwithstanding the
foregoing, Depository shall provide Company and Depositor with 30 days' prior
written notice of the termination of this authority. If an erroneous debit entry
is initiated to Depositor's account, Depositor shall have the right to have the
amount of such entry credited to such account by Depository, if (a) within 15
calendar days following the date on which Depository sent to Depositor a
statement of account or a written notice pertaining to such entry or (b) 45 days
after posting, whichever occurs first, Depositor shall have sent to Depository a
written notice identifying such entry, stating that such entry was in error and
requesting Depository to credit the amount thereof to such account. These rights
are in addition to any rights Depositor may have under federal and state banking
laws.
-------------------------------------- -----------------------------------
DEPOSITOR (Print Name) DEPOSITORY (Print Name)
By: By:
----------------------------------- -------------------------------
Its: Its:
---------------------------------- -------------------------------
Date: Date:
--------------------------------- ------------------------------
