[Ecomat Letterhead]
January 26, 1996
Xxxxxx Xxxxxxxxx, Esq.
c/o Palatin A.G.
Xxxxxxxxxxxxxxxx 00
Xxxxxxxx 0000
XX-0000 Xxxxxx
Re: Master Franchise Agreement
Dear Xx. Xxxxxxxxx:
We are entering into this Master Franchise Agreement, as
Ecofranchising, Inc. ("ecomat"). We have discussed with you the
development of ecomat laundry and cleaning facilities in the countries
described in Exhibit A to this letter ("Territory"). ecomat has agreed
for you to be licensed, as a master franchisee of ecomat, to use
ecomat's trademarks and service marks ("Marks") and its franchise
system, to develop retail laundry and cleaning facilities ("Cleaning
Facilities") in the Territory.
This letter sets forth our understanding of the major and important
terms of this Master Franchise Agreement.
1. Parties Territory; and Rights to be Granted. ecomat and you
("Master Franchisee") are entering into a Master Franchise Agreement
("Agreement"). ecomat has prepared this Agreement which grants the Master
Franchisee the right in the Territory to (a) establish and operate
Cleaning Facilities, through affiliates of the Master Franchisee
("Affiliated Franchisees"), and (b) license other unaffiliated parties
("Unaffiliated Franchisees") to establish and operate Cleaning
Facilities. (Affiliated Franchisees and Unaffiliated Franchisees are
referred to as "FRANCHISEES".) Master Franchisee also has the right to
enter into a Development Agreement with Franchisees to develop a Cluster
of Cleaning Facilities in an entire country or portion of a country,
according to a development schedule. ecomat reserves the right to
approve each Franchisee or Developer, and such approval will not be
unreasonably withheld. An affiliate is any legal entity controlling,
controlled by, or under common control with, the Master Franchisee.
Terms of the Franchise Agreement and Development Agreement will be based
on ecomat's U.S. Agreements.
2. Manual: Training: Site Selection. ecomat will loan to the
Master Franchisee, the ecomat Manual used in the United States; Master
Franchisee will translate and adapt the Manual for use in the Territory.
ecomat will furnish training for up to six (6) employees of Master
Franchisee in the United States, and such employees of Affiliated
Franchisees as ecomat designates, at no charge.
Training of any additional employees of Master Franchisee or any
affiliated Franchisee shall be at the then-current rate established for
such training in the Manual. ecomat shall require training of
Master Franchisee's employees in the United States until ecomat is
satisfied that Master Franchisee can furnish all such training. The
Master Franchisee and franchisee will bear all expenses related to the
training of their employees in the United States. ecomat reserves the
right to approve the site for each Cleaning Facility, based on such
information as Master Franchisee furnishes to ecomat at its request, and
reserves the right to inspect each site prior to such approval.
3. ecomat In-country Assistance. Within the first 6 months after
the date of the Agreement, ecomat will furnish to Master Franchisee
in-country assistance for a minimum of 30 days, which may not be
consecutive, at Master Franchisee's sole cost and expense. After the
first 6 months from the Agreement, and for each subsequent twelve month
period thereafter (upon Master Franchisee's request), ecomat will
furnish a management person at least 5 work-days at Master Franchisee's
expense. Any such additional assistance provided thereafter will be at
the rate described in the ecomat operations manual ("Manual") plus
expenses. ecomat will pay the salary and Master Franchisee will pay the
reasonable living and travel expenses of ecomat's employees as described
above.
4. Territory: Development Schedule/Term/Exclusivity. The
Territory will consist of the countries of Austria, Switzerland and
Germany, which shall be the "Core Countries" and all other countries in
the Territory shall be "Non-core Countries." Affiliated Franchisees only
will have the right to open the first 18 Cleaning Facilities in the Core
Countries within 18 months from the date of the Agreement. Thereafter,
Cleaning Facilities shall be opened and operating, either by Affiliated
Francisees or Unaffiliated Franchisees, according to the following
minimum development schedule:
Year Year Year Year Year Year Year Country
1 2 3 4 5 6 7 Total
_____________________________________________________________________________
Austria 0 4 8 8 8 8 8 44
_____________________________________________________________________________
Germany 0 12 18 18 18 18 18 102
_____________________________________________________________________________
Switzerland 1 6 6 6 6 6 6 37
_____________________________________________________________________________
Non-core
Countries 0 6 12 18 24 24 24 108
_____________________________________________________________________________
Total by End
of Period 1 28 44 50 56 56 56 291
_____________________________________________________________________________
The Agreement will end when the last Franchise Agreement executed
pursuant to the development schedule expires or terminates. Each
Franchise Agreement shall consist of an initial term of ten years and 3
renewal terms of 5 years each.
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ecomat will not establish or operate, nor license any other party to
establish or operate ecomat Cleaning Facilities in any (i) Core Country
until the end of the Development Schedule as long as Master Franchisee
is in compliance with the development schedule for such county (but in
no event in less than 3 years for any such country,) or (ii) Non-Core
Country until the end of the Development Schedule, as long as Master
Franchisee has operating in such Non-Core Country at least 10% of all
Cleaning Facilities required to be operating in the Non-core Countries.
Thirty-six months after the Agreement ecomat shall have the right to
repurchase the franchise rights in any of the following countries, if
Master Franchisee has not met the Development Schedule for such country,
by multiplying the master franchisee fee by a fraction, the numerator
of which will be the population of such country and the denominator of
which will be the total population for the following countries: Austria,
Switzerland, Germany, Czech Republic, Slovak Republic, Hungary, Poland,
and Romania by year 5, above.
5. Fee The fees that the Master Franchisee will be required to
pay ecomat are:
(a) a $95,000 (US) deposit, receipt of which is hereby
acknowledged. (Except as described in 8 below, this fee is
non-refundable.).
(b) Under the Agreement:
i) a non-refundable master franchise fee of $120,000
(US) (with a credit for the deposit), which Master
Franchisee will pay to ecomat upon execution of this
Agreement.
ii) an ongoing, monthly royalty fee in the amount of one
and one half percent of the gross sales from all
Cleaning Facilities operating in the Territory.
iii) Twenty-five percent (25%) of the development fee
charged to each unaffiliated Developer under a
Development Agreement and twenty-five (25%) percent
of the intial franchise fee charged to each Unaffiliated
Franchisee for each Facility opened. There will be no
initial franchise fee payable to ecomat for Cleaning
Facilities established by Affiliated Franchisees.
iv) Master Franchisees and all Franchisees must expend a
minimum of three percent (3%) of Gross Sales of each
Cleaning Facility on local advertising. ecomat reserves
the right to require the Master Franchisee to pay ecomat
up to $25,000 per year for advertising using the Internet
or other electronic media in the Territory in the future.
v) All fees will be paid net any withholding taxes
imposed by any country in the Territory.
6. Marks. ecomat will apply for trademark protection for the
ecomat mark(s) in the countries of Austria, Germany and Switzerland, and
the countries of the European Union
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(EU). ecomat will apply for protection for the ecomat marks in Non-core
Countries in the Territory, at Master Franchisee's cost and expense,
when Master Franchisee advises ecomat that Master Franchisee will enter
into a Development Agreement or a Franchise Agreement in such country.
(You and your affiliates agree (a) not to seek to register any trademark
or service mark using the words "ecomat" or any ecomat logos in the
Territory or any other country at any time, and (b) to assign ecomat any
applications for such marks which may have been made prior to execution
of this letter.)
7. Advertising/Software/Equipment. ecomat reserves the right to
approve all advertising campaigns. Master Franchisee will have the
right to establish advertising cooperatives, but not advertising, within
the Territory. Master Franchisee and Franchisees must use ecomat's
computer software. All cleaning equipment used must be in accordance
with ecomat's standards and specifications.
Kindly indicate in your agreement to the terms of this
letter below. Please sign both copies and return one to us.
Ecofranchising, Inc. Palatin A.G.
/s/ Xxxxx Xxxxxx /s/ Xxxxxx Xxxxxxxxx
___________________ ______________________
Xxxxx Xxxxxx Xxxxxx Xxxxxxxxx
Ecofranchising, Inc. Xxxxxxx, A.G.
4
EXHIBIT A
LIST OF COUNTRIES IN TERRITORY
Core Countries
--------------
England
Ireland
Scotland
France
Germany
Spain
Italy
Holland
Belgium
Luxemburg
Sweden
Norway
Finland
Austria
Switzerland
Portugal
Non-Core Countries
------------------
Czech Republic
Slovak Republic
Hungary
Poland
Romania
Bulgaria
Albania
Countries of the Former Soviet Union
5
