FRANCHISE AGREEMENT
ITEX CORPORATION
0000 XXXXX, Xxxxx 000
XXX XXXXX, XXXXXX 00000
(000) 000-0000
T A B L E O F C O N T E N T S
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1 GRANT OF FRANCHISE
1.1 Grant of Franchise
1.2 One Location for Franchise Premises
1.3 Assistance in Site Location
1.4 Franchise Premises Development
1.5 Relocation of the Franchise Premises
1.6 You Will Not Advertise Outside Market Area
1.7 "You" Includes
1.8 Existence of Divergent Forms of Franchise Contracts
1.9 Rights We Reserve
1.10 Nonexclusive
2 PAYMENT OF FEES AND OTHER FINANCIAL REQUIREMENTS
2.1 Initial Franchise Fee
2.2 Revenue Sharing Payment
Schedule
2.3 Deductions
2.4 Use of Marketing Fee and Advertising
2.5 You Will Pay Taxes and Indebtedness
2.6 Sums To Be Paid Promptly
2.7 Records
2.8 Audits
2.9 You are to Pay all Franchise Costs
2.10 Attendance at Conventions
3 TRAINING
3.1 Mandatory Training
3.2 Supplemental Training
4 COMMENCEMENT OF OPERATIONS
4.1 Time to Complete Training and Commence Operation
4.2 You Are to Obtain Permits and Licenses
4.3 Lease Assumption and Real Property Security Assignments
5 FRANCHISE STANDARDS OF OPERATION
5.1 Operations Manual, Trade Exchange Rules, Supplies, Plans and Specifications and Public Relations
5.2 Standards to Be Maintained
5.3 Service Marks, Operations Manual, and Method of Operation Are Our Exclusive Property
5.4 You Will Not to Use Names or Marks in Combination
5.5 Service Marks, Operations Manual, and Method of Operation May Be Changed
5.6 You Will Not Communicate Confidential Information
5.7 Conflicting or Competing Interests
5.8 Computer Systems
5.9 Working Capital Requirements
6 RENEWAL, TERMINATION AND STEP-IN RIGHTS
6.1 Renewal of Franchise
6.2 Termination by You
6.3 Termination by Us
6.4 Time Frames Subject to Applicable Law
6.5 You Will Discontinue Use of Service Marks, Operations Manual, and Method of Operation on
Termination of Agreement
6.6 Our Step-In Rights
6.7 You and your Owners Not to Compete on Expiration, Termination or Transfer of Agreement
7 TRANSFER
7.1 Sale or Assignment
7.2 Your Death or Disability
7.3 First Right of Purchase
7.4 First Right of Refusal
8 INDEMNITY, INSURANCE, CONDEMNATION AND CASUALTY
8.1 Indemnity
8.2 Insurance
9 NOTICE AND MISCELLANEOUS
9.1 Notices
9.2 Business Name
9.3 We and you Are Not Joint Venturers, Partners, or Agents
9.4 Waiver
9.5 Time Is of the Essence
9.6 Credit Line
9.7 Documents
9.8 Construction
9.9 Enforcement
9.10 Other Agreements
9.11 Agreement Binding on Successors and Assigns
9.12 Execution in Counterparts and Our Acceptance
9.13 Approval by Shareholders, Members or Partners
9.14 Personal Guarantee
9.15 Receipt of Disclosure Documents
9.16 Representation
9.17 Acknowledgments
10 SIGNATURES
Schedule A - Business Address Of Authorized Location.
Schedule B - List Of Clients To Be Assigned
Exhibit D - Conditional Assignment of Phone Number
Exhibit E - Relinquishment of Business Name
Exhibit F - State Law Addendum
Exhibit G - Trademark Filing Information
Exhibit H - Checklist for Start-up
Exhibit I - List Of Clients To Be Assigned
F R A N C H I S E A G R E E M E N T
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THIS AGREEMENT has been entered this _____day of ,_____ 200 . It is by and
between ITEX CORPORATION, a Nevada corporation, ("We, Us") and ________________,
("You").
We have certain rights to, have registered in various jurisdictions, and intend
to continue to develop names, trademarks, service marks, logos, commercial
symbols and styles. These include, but are not limited to, "ITEX" and the ITEX
logo (the "Service Marks"). We own valuable goodwill and have valuable
expertise, confidential information, methods, procedures, techniques, uniform
standards, operations manuals, trade exchange control guidelines, systems,
reporting systems, merchandise, and materials. These are connected with the
operation, promotion, and advertising of a system of retail barter trade
exchange brokerages that offer the trading of goods and services, a system for
computer record keeping of trade transactions and a framework for principal
party and trade transactions, both in the United States and internationally (the
"ITEX System").
We offer franchises to qualified persons to own and operate an ITEX brokerage
office. The franchises are nonexclusive and we retain the right to own, operate,
license or franchise the ITEX System throughout the United States and
internationally. You desire to operate an ITEX brokerage office for retail and
corporate trade services using the ITEX System and Service Marks (the "Method of
Operation").
You acknowledge that this Agreement was accompanied by a Uniform Franchise
Offering Circular, which you received at the earlier of (1) the first personal
meeting with us; (2) ten business days prior to the signing of any franchise or
related agreement; or (3) ten business days before any payment from you. In
addition, you acknowledge receipt of this Agreement containing all substantive
terms at the time of delivery of the Uniform Franchise Offering Circular. You
have read this Agreement and our Uniform Franchise Offering Circular. You
understand and accept the terms, conditions and covenants contained in this
Agreement. They are necessary to maintain our high standards of quality, service
and uniformity at all franchises. They protect and preserve the goodwill of the
Service Marks and the confidentiality and value of the Method of Operation.
You realize that entering into this Agreement will obligate you to operate your
franchised business in strict accordance and conformity with the standards,
specifications and procedures as set forth in the Operations Manual that we will
loan to you. You furthermore realize that there is a risk in owning any business
venture including this one and that running a business can be very hard work. If
you operate your ITEX brokerage below the standards we require, ITEX trade
clients will be less likely to remain in the ITEX System. This would damage the
business of others. It will be difficult for us to obtain new franchisees for
ITEX brokerages if a prospective purchaser observes that you do not maintain the
required standards.
THEREFORE, in consideration of the mutual promises and covenants contained in
this Agreement, the parties agree as follows:
1 GRANT OF FRANCHISE AND FRANCHISE TERRITORY
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1.1 Grant of Franchise. We grant to you, and you accept from us, the
franchise, license and privilege to use the Service Marks, the Method of
Operation, and merchandise bearing the Service Marks, for 5 years from the date
of this Agreement. This grant solely is for the operation by you of one ITEX
trade brokerage at the location identified in the attached Exhibit A ("xxx
Xxxxxxxxx Premises").
A. You will have the right to:
1. Participate as a franchisee/broker in the ITEX System (as set
forth in the Operations Manual and our Trading Rules) and to
indicate to the public that your independent business is part
of the ITEX System;
2. Open one brokerage office under a name that is approved in
advance and in writing by us with the primary responsibility
of engaging in the Trade Brokerage Business; and
3. Receive assistance from us in the implementation and operation
of the ITEX System.
B. Assignment of Clients. Clients you enroll in the future will be
deemed assigned to you. At our discretion, we may assign additional Clients to
you if a Client requests a reassignment from another Broker or for other
reasons. A Client will not be reassigned from you unless that Client requests
reassignment in writing, you request reassignment in writing, or we determine
reassignment is in the best interest of the ITEX System or the Client or us.
1.2 One Location for Franchise Premises. You will operate the Franchise
at only one location. All land, buildings and improvements at the location,
including parking, are part of the "Franchise Premises." Relocation of the
Franchise Premises will require our prior written approval. You may not
establish or operate any other ITEX brokerage or related business without
executing a separate Franchise Agreement for that facility.
1.3 Assistance in Site Location. You are responsible for finding the
location of the Franchise Premises. If you request assistance in selecting a
site for the Franchise Premises, we will provide reasonable assistance in
finding a location acceptable to you. We do not guarantee success for any
location you select. We will not be liable for any consequences of your choice
of any franchise site. Any site recommendation or approval we make is not a
representation that any particular site is available or legally appropriate for
use as a franchise site. It is your responsibility to investigate all applicable
zoning, licensing, leasing and other requirements for any proposed site. You
must ensure that the site you select complies with these requirements.
Before you enter a lease or purchase agreement for the Franchise Premises, you
will submit the lease or purchase documents to us for approval. Lease documents
must include an assignment of the lease in a form we approve, pursuant to which
we may assume the lease as provided in Section 4, below.
1.4 Franchise Premises Development. You will be responsible to
construct, remodel, furnish, decorate and equip the Franchise Premises.
A. You will comply with the standards and specifications we
establish for architectural design, office layout, equipment, furnishings and
fixtures, among other things. Modifications or variations require our prior
written consent.
B. All computer equipment will conform to our equipment
specifications as adopted from time to time. If we require any changes in or
additions to equipment, you will modify, replace or add to your existing
equipment at your sole expense.
1.5 Relocation of the Franchise Premises. If your lease of the
Franchise Premises terminates or expires and cannot be renewed during the term
of this Agreement, or if you reasonably decide to relocate the Franchise
Premises for cause, you may relocate the Franchise Premises to another available
site, if:
A. you are not in breach of this Agreement;
B. your lease was not ended by the lessor because of your breach
of the lease agreement;
C. you evidence to our satisfaction your ability to obtain and
commence operations at the new location within a reasonable
period after you vacate the original location;
D. you develop, construct, remodel, furnish, decorate and equip,
at your sole expense, the new location according to our then
current specifications and standards;
E. you pay all reasonable out-of-pocket expenses we incur because
of the relocation. The term "Franchise Premises" will include
the relocated business site; and
F. you satisfy our then current franchise placement and
demographics criteria, as expressed in the Operations Manual.
1.6 You Will Not Advertise Outside Market Area. Except with our prior
written permission, you will not place under any circumstances advertisements
using the Service Marks in or originating from any other area other than the
market area immediately surrounding the Franchise Premises, as outlined in the
Operations Manual. All Internet marketing is part of our multi-area marketing
programs described in the Operations Manual and defined below, and must be
coordinated through us and approved by us. You may not market independently on
the Internet or acquire an independent Internet domain name or web site. For the
purposes of this Agreement, "Internet" means any one or more local or global
interactive domain names. Unless the context otherwise indicates, Internet
includes methods of accessing limited access electronic networks, such as
Intranets, Extranets, and WANs.
1.7 "You" Includes. For purposes of this Agreement "you" may be an
individual, corporation, partnership, limited liability company or other legal
entity. "You" includes any corporation, partnership, limited liability company,
individual, combination of individuals, or other legal entity that owns a
majority interest of you, or in which you own a majority interest. The term
"you" will include all persons who succeed to your interest by transfer or by
operation of law.
1.8 Existence of Divergent Forms of Franchise Contracts. You
acknowledge that we have offered ITEX brokerages to others in the past the terms
of which may have varied materially from those set forth in this Agreement.
1.9 Rights We Reserve. Except as otherwise provided in this Agreement,
we retain the right, in our sole discretion and without granting any right to
you to market to and service accounts that have not otherwise been assigned to
you, for services irrespective of where the client is located or the trade is
taking place. We operate a business using the ITEX System and intend to continue
providing services throughout the United States and internationally.
1.10 Nonexclusive. To encourage the unrestricted and ongoing
development and possible expansion of the ITEX System and to increase market
share/presence, greater client awareness, convenience to clients, possible
increased advertising, leadership in establishing new systems, services and
markets, and placing ITEX System franchises in a superior position with respect
to competition in the industry, you are not granted any "exclusive territory" or
any "exclusive", "protected" or "reserved" territorial or other rights. There is
no limitation on our right to locate or consent to the location of other ITEX
System franchises, businesses or other forms of distribution for any product or
service of any type, regardless of the distance from, impact on or vicinity of,
your business operations or the number of ITEX System businesses in an area or
market.
Because growth and diversification of the ITEX System is intended to benefit
both parties by enhancing the recognition, availability and goodwill of the ITEX
System and the Service Marks, the lack of territorial rights is not deemed to be
unfair to you or reflecting bad faith by us.
We reserve the right to market, solicit sales, and sell, lease, rent or
otherwise dispose of ITEX products and services to any person or customer we
want. These include national accounts, commercial customers, brokers,
franchisees, end users or any other customer we may select. We may exercise our
right directly or indirectly by or through independent contractors that may
include franchisees, dealers, and brokers. You acknowledge that we have made no
representation concerning exclusivity in any geographic territory or for any
customer segment.
2. PAYMENT OF FEES AND OTHER FINANCIAL REQUIREMENTS
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2.1 Initial Franchise Fee. The Initial Franchise Fee is $10,000. It is
paid in consideration of our sales expenses, administrative overhead, return on
investment, and start-up costs related to the execution of this Agreement and
the opening of the Franchise and for our lost or deferred opportunity to sell
franchises in your market area to others. Contemporaneously with the execution
of this Agreement, you have paid to us 25 percent of the Initial Franchise Fee.
The remaining balance will be paid when you attend the mandatory training course
described in Section 3.1, below.
As provided in Section 3, 75 percent of the Initial Franchise Fee is refundable
if you do not pass the mandatory training program to our exclusive satisfaction.
2.2 Revenue Sharing Payment Schedule. We will share revenue on payments
made by Clients assigned to you, based upon payment amounts, schedules and
processes outlined in the operations manual, as follows:
We will pay you $8 of the cash Association Fees actually collected from Clients
assigned to you and $3 in ITEX Trade Dollars of the trade dollar portion of
Association Fees actually collected from Clients assigned to you.
We will pay you 75 percent of cash received from Client Purchase/Client Sales
Transaction Fees that is actually collected from Clients assigned to you.
We will pay you 50 percent of ITEX Trade Dollars received from Client
Purchase/Client Sales Transaction Fees that is actually collected from Clients
assigned to you.
You will be paid an additional 5 percent of collected cash Client
Purchase/Client Sales Fees actually collected from Clients assigned to you for
those 4-week cycles in which you increase your total number of clients from the
prior Cycle by 25 clients.
You will retain 100 percent of the enrollment fee you charge to Clients, subject
to the set-up fee you are to pay us as outlined below.
We reserve the right to change Client fees from time to time in our sole
discretion. Any change in fees will not affect your Commissions schedule, unless
you agree in writing.
We will pay you the cash Commissions due, less any cash fees and obligations you
then owe to us and less any of the deductions listed in Section 2.3, below, no
later than the 35th day after the close of the 4-week cycle in which we receive
the relevant Client cash fees. You will qualify for an advance payment on
Commissions to become due if 70 percent or more of the Clients assigned to you
are participating in the AutoPay program. Advance checks are paid 20 days after
the close of each cycle.
You will not be entitled to any portion of any fee we change, which is not
explicitly identified in this section as being subject to the Commissions
payable to you.
You will not be paid any Commission on amounts due from Clients that are sent to
an outside collection agency or for which we or our assigns commence legal
action, arbitration proceeding or refereed mediation.
Your Collections Assistance.
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1. We will xxxx and collect fees due from Clients,
except the initial enrollment fees you charge. We at
our option may send accounts with cash balances
overdue for three consecutive cycles over to internal
collections or to a collection agency. You may not
refer any accounts of clients to a collection agency
or initiate an action against them without our
written consent and a written assignment of the
claims.
2. You will make collection calls on each Client whose
cash fees remain unpaid and overdue for a period of
time longer than 28 days from the date of billing
consistent with our collections policies. You will
make personal visits as necessary to attempt
collections from overdue Clients.
3. All funds you collect must be remitted immediately to
us for deposit.
4. We may maintain and administer a bad debt reserve
account for each broker area to defray and replace
losses to the ITEX System from uncollectible client
trade debts. The terms of the funds are set forth in
the ITEX Trade Rules and ITEX policy. You have no
interest in any bad debt reserve fund.
2.3 Deductions. Cash amounts payable to you will be reduced by the
---------- following charges:
A Marketing Fee of $1 per Client per cycle for each Client assigned to
you.
A Set-up Fee of $50 per Client for Clients who elect the AutoPay option
on enrollment, or, a Set-up Fee of $100 per Client if not enrolled on
AutoPay. The $50 fee for AutoPay clients is waived for the first 50 new
clients or first 120 days of your franchise operation.
Technology Fee will be assessed at the rate of $25 each cycle for every
cycle after the first six.
Cost of broker supplies you order from us which exceed the allowable
limits on free broker supplies as published from time to time in our
broker supplies price list.
Any expenses you incur that we pay, although we are not obligated to
pay any expenses for you.
These deductions may be increased or decreased as we reasonably specify in the
Operations Manual. Any modification will be made uniformly for all similarly
situated franchise brokers.
2.4 Use of Marketing Fee and Advertising. We may use all contributions
and any earnings from the Marketing Fee we receive from you in local, regional,
national, Internet, or international advertising:
to maintain, administer, research, direct and prepare advertising and
promotional activities (including, among other things, the costs of
preparing and conducting television, radio, magazine and newspaper
advertising campaigns);
direct mail and outdoor billboard advertising;
marketing research and development;
marketing surveys and public relations activities;
development and maintenance of any Internet or e-commerce programs;
marketing materials;
decor and promotional materials;
artwork; advertising services;
training related to marketing, customer service and sales augmentation;
production and distribution of periodic newsletters to provide you
with industry news, suggestions, and advice on franchise operations;
and
our reasonable salaries, accounting, collection, legal and other costs
related to all of the above.
Our internal artwork, advertising, promotion and newsletter production costs and
associated administrative costs are paid from the Marketing Fees. These will be
calculated at our cost as established from time to time.
We will use your Marketing Fee to place advertising in geographic areas, in
media, at times and using products and services we deem to be in the best
interest of our brokers, Clients and the ITEX System.
We will direct all regional and national advertising programs. We will have sole
discretion over the creative concepts, materials, endorsements, placement and
allocation of moneys for advertising. Marketing Fees also will be used to cover
our costs of collecting and administrating the Marketing Fees we collect from
our franchisees, including incurred legal fees.
We may create an advertising advisory board made up of independent ITEX
franchisee brokers. They will make recommendations on your behalf as to types of
advertising, promotion and public relations. We will use these and other
recommendations which we feel are appropriate when drafting an advertising
budget and program each year.
A. Ethical Advertising. You will insure that all of your advertisements
and promotions are completely factual and conform to the highest ethical
advertising standards and our corporate indemnity standards. You will refrain
from any advertising or promotions, which may be injurious to you or to us or to
the goodwill associated with the Service Marks and the ITEX System.
B. Your Advertising. You may develop and use advertisements at your
sole cost and expense. You will submit to us for prior approval (at least five
business days before intended use) all promotional materials and advertising you
intend to use including newspaper, radio and television advertising, specialty
and novelty items, signs, containers and clothing. Upon receipt of our written
approval, you may use the advertising and promotional material. If we do not
approve or disapprove of submitted material within five business days, that
material is deemed approved.
C. Optional Promotional Materials. We may, but are not required to,
provide standard promotional and operational materials, including application
forms, client transaction materials, magazines, brochures and other materials
for use by you and others. We may charge you for orders of promotional and
operational materials in excess of approved amounts. You are not required to
order any materials. However, you must use a form of application we have
approved.
D. Telephone and Listings. You will maintain a business telephone line
with a business listing in the local telephone directory. You must have a
business telephone with a full-time answering service. You must have an e-mail
address for the purposes of receiving and responding to e-mail from us.
E. We May Return Funds to You or Use Funds for Regional Co-op Programs.
We will have the right to expend all or any portion of the Marketing Fee for the
following purposes:
for regional or local co-op advertising or promotional
programs provided, however, that such programs will be
available to all similarly situated franchisees; and
if in our sole judgment, you or any other franchisee is
located in a geographic territory not adequately serviced by
our national or regional advertising programs, we may rebate
all or a portion of the Marketing Fee Payment paid by that
franchisee for use by that franchisee for local advertising.
Expenditures by that franchisee will be in addition to the
local advertising requirements set forth in this Agreement.
F. Establishment of Advertising Programs. At any time, we may create or
modify advertising regions for the purpose of establishing regional advertising,
marketing and promotional programs. We will promptly notify you and our other
franchisees, of the establishment, modification and geographical boundaries of
regional advertising regions. We may require all franchisees located within each
geographic region to meet periodically for the purpose of creating and
establishing regional advertising programs. Each franchise office and each
brokerage office we own and operate will be entitled to one vote at these
meetings. For the purpose of this subsection, each brokerage office we own will
be deemed to be a franchise.
If at any meeting of the franchisees in an advertising region, 75 percent of the
total number of franchisees in the region vote to contribute to a regional
advertising program, all franchisees within that region will be obligated to
make a contribution to a regional marketing fund in the amount established by
the vote (the "Regional Marketing Fund"). No advertising region may require any
franchisee in that region to make a contribution to a Regional Marketing Fund in
excess of 3 percent of that franchisee's Gross Revenue.
We will administer each Regional Marketing Fund in the same manner, and upon the
same terms and conditions as the Marketing Fee established above. Alternatively,
in the Operations Manual we may specify that each Regional Marketing Fund will
be administered by representatives elected by each region at a meeting we call
for this purpose.
G. Discount Programs. From time to time we may develop and market
special discount or free membership or other incentive programs. You will have
the right, but not the obligation, to participate in these programs. We will
notify you of the creation and provisions of a discount or coupon program.
Within five days after receipt of the notice, you will advise us whether or not
you wish to participate in that program. If you notify us that you wish to
participate, you will adhere to all provisions of the program. If you elect to
be excluded from a program, we will have the right to advise consumers, by
advertising, sales solicitation or otherwise, that you are not a participant.
You will not be entitled to the benefits of that program. We will establish the
discount or coupon programs in our sole discretion, and will not consult or
confer with you or any other of our franchisees with respect to the nature,
content or amount of any discount or coupon established pursuant to any program.
H. Your Obligation to Advertise Locally. In addition to your obligation
to contribute to the Marketing Fee each month, you will expend in your local
market at least 3 percent of your cash and trade gross revenue to advertise and
promote the franchise. All advertising, cash and trade, counts towards this
requirement. You will report the nature, extent and amount of these local
expenditures, in the form and at the times we require in the Operations Manual.
I. You May Use Local Advertising Materials We Supply. From time to
time, we may supply to you an Advertising Manual that will contain samples of
local advertisements we approve. You can use the advertising materials contained
in the Advertising Manual, and may not, without our prior written consent, place
any advertisement, in any media, which materially varies from the form and
content of the approved advertisements in the Advertising Manual.
J. Approval of Your Local Advertising and Website and E-Commerce. You
will submit to us all advertising copy and other advertising and promotional
materials before you use them in your local advertising program. You will not
use any advertising copy or other promotional material until we approve it
You specifically acknowledge and agree that any web site will be deemed
"advertising" under this Agreement and will be subject to (among other things)
our approval. (As used in this Agreement, the term "web site" means an
interactive electronic document, contained in a network of computers linked by
communications software, that you operate or authorize others to operate and
that refers to the franchised business, proprietary marks, us or the Method of
Operation. The term web site includes, but is not limited to, Internet and World
Wide Web home pages.) In connection to any web site, you agree to the following:
We will allow you to establish a web page as part of our web site.
You will not establish or use the web site without our prior written
approval.
Before establishing the web site, you will submit to us a sample of the
web site format and information in the form and manner we may
reasonably require.
In addition to any other applicable requirements, you will comply with
our standards and specifications for web sites as prescribed by us from
time to time in the Operations Manual or otherwise in writing or on a
franchisee forum intranet system. If required by us, you will establish
your web site as part of our web site and establish electronic links to
our web site. Currently, these standards and specifications include:
You will use your formal legal name followed by "an
independent franchised broker of ITEX Corporation" on your web
site. You may not identify your business with a geographic
location.
The link to our corporate home page may not appear in the
frame of the Franchisee. All of your pages must have the
following text clearly visible near the top of the page:
An independent brokerage office franchised by
ITEX Corporation
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If we become an Internet service provider, we will offer
"storage space" for the your home page if you do not have an
Internet service provider as a Client.
If you propose any material revision to the web site or any of the
information contained in the web site, you will submit the revision to
us for our prior written approval.
You will use only approved key words, meta tags and titles pertaining
to our industry. We will e-mail or respond via facsimile approved key
words, meta tags and titles upon your request by e-mail or facsimile.
An electronic link to our web site will be established and we will
provide a reciprocal electronic link to your web site five days after
approval or launching of your web site.
You may only offer approved products or services on your web site. Any
web site changes made without our approval will put you in default of
this Franchise Agreement.
You will turn ownership and control of the web site over to us upon
expiration or termination of this Agreement, regardless of the reason
for the expiration or termination.
We retain the sole right to market on the Internet, including
all use of web sites, domain names, URL's, linking, meta-tags,
advertising, auction sites, e-commerce, and co-branding
arrangements. You will provide us content for our Internet
marketing, and follow our Intranet and Internet usage
requirements. We also retain the sole right to use the Service
Marks on the Internet, including on web sites, as domain
names, directory addresses, meta-tags, and in connection with
linking, advertising, co-branding, and other arrangements. We
retain the right to approve any linking or other use of our
web site. You may not establish a presence on or market using
the Internet except as we may specify, and only with our prior
written consent. We intend that any franchisee web site be
accessed only through our home page.
If you want to independently advertise or promote in any media
(including the Internet), you must obtain our prior written
approval, except when using materials and media previously
approved by us.
The Operations Manual may be delivered to you by hard paper copy, computer
diskette, CD-ROM, via an Intranet or other downloading mechanism to your
computer or via another medium chosen at our discretion.
K. Trademark and Copyright Notices. You will use the Service Marks in
strict conformity to the Operations Manual and will include in any
advertisement, or promotional materials which use the Service Marks trademark
notices as are required by the Operations Manual. All copyrighted materials we
supply to you or otherwise used by you in connection with the Franchise will
contain copyright notices as required by the Operations Manual.
2.5 You Will Pay Taxes and Indebtedness. You will pay all taxes,
assessments, liens, encumbrances, accounts, and other debts, regardless of their
nature, assessed against you, the Franchise Premises, or inventory, materials,
fixtures, and equipment used in the Franchise. Payment will be made when due and
before delinquent except when being contested in good faith by appropriate
proceedings. If we are charged with any tax by the authorized taxing authority
of any state or political subdivision, including taxes on sales made to or
licenses granted to you, or sales made by you at the Franchise Premises, you
will pay these taxes.
2.6 Sums To Be Paid Promptly. You will not set off any claim for
damages or money due to you from us against any payments to be paid by you to us
under this Agreement or any related agreement between the parties. No
endorsement or statement on any check or payment of any sum less than the full
sum due from you to us will be construed as an acknowledgment of payment in full
or as an accord and satisfaction. We will have the right to accept any check or
payment without prejudice to our rights to recover the balance due or to pursue
any other remedy available to us. Nothing contained in this Agreement obligates
us to accept any payments after due or to commit to extend credit to or
otherwise finance your operation of the Franchise.
2.7 Records. You will keep a complete and accurate set of books and
records of the operation of your franchise, produce monthly financial statements
in accordance with generally accepted accounting principles and practices for
each calendar month and furnish copies of these statements to us within 30 days
after the end of each quarter.
You will furnish to us as outlined in the Operations Manual itemized reports of
your business activities. This report must be certified by you to be true and
correct. The report will be in the form and will include such supporting
documentation as we may reasonably demand from time to time.
You will keep records of all business done and revenue received through your
franchise. You will date, file in consecutive order, retain for a period of five
years, and make available to us for inspection and audit all of your records.
You will submit to us a list of all shareholders, members, partners or other
owners of your franchise business and the respective interests held by each as
of the end of each fiscal year. The required report will be submitted to us
within ninety days after the end of your fiscal year.
2.8 Audits. We may audit your reports, books, statements, business
records, cash control devices and tax returns at any time during normal business
hours. Audits will be conducted at our expense unless you understate by more
than 2 percent or you fail to deliver any required report or any required
financial statement. In the event of an understatement or failure to deliver,
you will reimburse us for all audit costs. These will include, among other
things, the charges of any independent accountant and the travel expenses, room,
board, and compensation of our employees incurred in connection with the audit.
2.9 You are to Pay all Franchise Costs. All the costs of the franchise,
including opening and operating costs, will be your sole obligation. We will
have no costs, liability or expense whatsoever with respect to your opening and
operation of your franchise. You will not use or employ the Service Marks in
performing any activity or incurring any obligation or indebtedness in a manner
that could result in making us liable for them.
2.10 Attendance at Conventions. We hold conventions for the independent
franchisee brokers and trade associates that make up the ITEX broker system. You
will attend the ITEX Annual Convention and any Regional Convention for the
region where you are located. These conventions may be held at a different
location each time. They include programs on sales and marketing techniques,
performance specifications, advertising programs, training suggestions, and
committee elections, among other things. Your attendance at each convention is
strongly encouraged. You will bear all expenses of attending, including travel,
lodging, meals and entertainment. For any annual convention that you do not
attend, we may deliver to you and you will pay us for video cassette recordings
of the activities of convention. The price for the video cassettes for each
convention will be established by us from time to time but will not be less than
$500.
3 TRAINING
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3.1 Mandatory Training. We will provide a mandatory training course for
you or your franchise manager at a location we will designate. This training
course will cover all aspects of the operation of the Franchise, including
financial controls, marketing techniques, service methods, deployment of labor,
and maintenance of quality standards. The training course will be not less than
four days long. This training will take place at our headquarters or another
location we chose. You or the manager will complete the course no later than two
weeks prior to opening the Franchise for business. You or the manager must
complete this mandatory training program to our exclusive satisfaction or we may
terminate this Agreement upon refunding 75 percent of the full Initial Franchise
Fee. You are encouraged to begin training before incurring any costs or expenses
related to the planned opening of the Franchise. We will not be liable for any
costs or expenses you incur if we terminate this Agreement because you or your
manager fails to satisfactorily complete the mandatory training course.
You will pay the transportation, board and lodging expenses you and your
employees incur related to this training.
If the Franchise is managed by any persons other than you, you will notify us of
these managers. Each manager you hire must successfully complete the mandatory
training program within one month after being hired. You will bear all costs of
the training, including a reasonable training fee at our then current rates.
Individuals:
If you will be operating your franchised business as an individual, you
must devote your full time and best efforts to the day to day operation
of your franchised business with no operational or management
commitments in other businesses except other franchises offered by us.
You may however, continue to operate such other businesses, (if any),
in which you are engaged as of the date of this Agreement, that are
family owned. If you continue to operate other businesses, you must
employ separate personnel for the businesses, market services under one
or more trading designations separate from the Service Marks, maintain
separate offices and customer reception space and have the personnel
related to such other businesses wear apparel that does not feature any
of the Service Marks.
Partnerships:
If you will be operating your franchised business as a partnership, one
or more partners must participate in the actual day to day operation of
your franchised business or you must have in your employ a manager who
runs your day to day operations. The partner or partners who are in
charge of running your franchised business or your manager must have
successfully completed our training course.
Corporations, Limited Liability Companies:
If you will be operating your franchised business as a corporation,
limited liability company or other legal entity, you must have in your
employ a general manager. This general manager can be you, any member
of your board, an officer of your corporation or member of your limited
liability company. The general manager who is in charge of running your
franchised business must have successfully completed our training
course.
Managers/Training:
No matter what form of business you decide to use, the person assigned
to running the day to day operations of the business must have
completed our training course. Anyone in your employ who is a manager
or crew leader of your franchise operations must also have completed
our required training course.
3.2 Supplemental Training. At your option and upon not less than 35
days' prior written notice to us, you may receive additional training at our
training center or at other agreed upon locations. All expenses of this training
will be borne by you, including but not limited to your travel, lodging, meals,
compensation, and our reasonable costs and expenses including a reasonable
training fee at our then current rates.
This additional training consists of visits to our franchises, office work
experience and observation of franchise operations. The duration of training is
negotiable depending upon your needs. You will not receive any compensation for
services rendered by the trainee during this or any other training.
From time to time we may provide refresher training programs or seminars and may
require that you or your managers attend and complete them to our satisfaction.
These programs and seminars will be held at locations we designate and will be
provided without charge to you. You may be exclusively responsible for paying
all travel, living and other expenses and compensation of attending these
programs and seminars. Each year, you or the designated managers of your
Franchise will be required to attend up to 40 hours of programs and seminars,
depending upon program and seminar availability.
4 COMMENCEMENT OF OPERATIONS
--------------------------
4.1 Time to Complete Training and Commence Operation. You will
immediately proceed with your best efforts, skills and diligence to open and
begin commercial operation of your ITEX independent trade broker franchise. You
or your manager will complete to our exclusive satisfaction the mandatory
training defined above and commence full and continuous operation of the
franchise within 120 days after execution of this Agreement. Prior to commencing
operation, you will procure all necessary licenses, permits, improvements and
ITEX business forms. Any failure to commence operation caused by a war or civil
disturbance, a natural disaster, a labor dispute, shortages or other events
beyond your reasonable control will be excused for a period of time that is
reasonable under the circumstances.
If this commencement of operation obligation is not fulfilled, we may terminate
this Agreement without any refund of the Initial Franchise Fee.
4.2 You Are to Obtain Permits and Licenses. Prior to commencing
business operations, you will obtain all local permits and licenses necessary to
operate the Franchise.
4.3 Lease Assumption and Real Property Security Assignments. Unless
otherwise agreed in writing, any lease you enter into will provide that you may
assign that lease to us without penalty or charge. The lease will further
provide that upon termination or expiration of this Agreement, we will have an
option, exercisable within thirty days after termination or expiration, to be
substituted for you in all respects under the lease and to sublease the premises
to another franchisee. You will deliver to us a true copy of the lease and any
additions or amendments to it promptly after they are executed.
Any lease or sublease of the Franchise Premises will contain substantially the
following provisions:
A. Anything contained in this lease to the contrary
notwithstanding, lessor agrees that without lessor's consent, this lease and
your right, title and interest, may be assigned by you to us or our designee,
without cost or penalty.
B. You agree that lessor may, upon our written request
disclose to us, all reports, information or data in lessor's possession
respecting sales made in, upon or from the leased premises.
X. Xxxxxx will give written notice to us (concurrently with
the giving of notice to you) of any breach by you under the lease. We will have
the right, in our sole discretion, to cure any breach at your expense. Notice
will be sent to the address we may, from time to time, specify in writing to
lessor.
If we cure any breach by you under the lease or sublease, the total amount of
all costs and payments we incur in effecting the cure will be immediately due
and owing by you to us.
5 FRANCHISE STANDARDS OF OPERATION
--------------------------------
5.1 Operations Manual, Trade Exchange Rules, Supplies, Plans and
Specifications, and Public Relations. Continuous efforts to maintain, update and
improve the Method of Operation are essential. The developments we will make for
the benefit of the ITEX System and our independent trade broker network are
contemplated throughout the term of this Agreement. The continuous development
of the Method of Operation in this manner is an important and beneficial aspect
of the relationship you want to have with us. We agree to lend to you a copy of
the ITEX Operations Manual once you have paid to us the Initial Franchise Fee,
in full. The Operations Manual describes the Method of Operation, including
specifications, standards, operating procedures, accounting and bookkeeping
methods, marketing ideas, trade exchange requirements and control techniques,
plans and specifications, fixture and decor requirements, co-branding
requirements, public relations suggestions and other rules that we may prescribe
from time to time. The Operations Manual is and will remain confidential and our
exclusive property. You will not disclose, copy or duplicate any part of the
Operations Manual for any reason. The Operations Manual, in part, may consist of
confidential:
(i) manual or manuals, and
(ii) any Intranet or password protected portion of an Internet site,
and
(iii) any other embodiment of the Methods of Operation, including
notices of new standards and techniques, and
(iv) any amendments, supplements, derivative works, and replacements;
whether embodied in electronic or other media.
We develop minimum requirements for barter transactions, supplies, stationery,
business forms, advertising, office layout, plans and specifications, materials,
fixtures and signs, among other things. These requirements are outlined in the
Operations Manual. From time to time we may amend the Operations Manual,
including changes which may affect minimum requirements for your franchise
operations. You will strictly adhere to the requirements of the Operations
Manual as we amend it from time to time. You will implement immediately all
changes at your cost, unless we otherwise specify. We reasonably may restrict
you from producing, stocking, and selling certain goods and services as
specified in the Operations Manual.
You must purchase items that bear the Service Marks from us or suppliers we
approve. Proprietary items and supplies may be private labeled by us. We retain
the right to make a reasonable profit on any items, supplies and materials you
buy from us. We may also make a reasonable profit on supplies we purchase in
bulk quantities and sell to you. We may obtain money, goods, services, or other
benefits from persons and entities with whom you do business, on account of that
business with you. These may include rebates, refunds, commissions, co-operative
payments or discounts.
There are no required quotas as to quantity of purchases you must make from us
or from approved vendors. You must only have enough supplies on hand to meet
customer demand. If you elect to purchase equipment, inventory, and supply items
from us at our then current prices, payment must be made when you place your
order. The items we offer may include among other things equipment, merchandise,
and supplies that bear the Service Marks.
Any products and goods sold, licensed, or leased by or through us to you will be
sold, licensed, or leased in accordance with the terms expressly set forth in
the Operations Manual or as otherwise provided for in writing by us or the
manufacturer of the products and goods. EXCEPT AS EXCLUSIVELY SET FORTH IN
WRITING AND SIGNED BY US, WE MAKE NO EXPRESS OR IMPLIED WARRANTIES WITH RESPECT
TO THE PRODUCTS AND GOODS, AND ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT
NOT RESTRICTED TO, THE IMPLIED WARRANTY OF TITLE AND THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE EXPRESSLY DISCLAIMED.
UNDER NO CIRCUMSTANCES WILL OUR LIABILITY IN CONNECTION WITH ANY PRODUCTS OR
GOODS EXCEED THE DOLLAR AMOUNT OF THE PURCHASE PRICE OR LICENSE FEE PAID BY YOU
FOR THE PRODUCTS OR GOODS. IN NO EVENT WILL WE BE LIABLE TO ANY PARTY, INCLUDING
BUT NOT LIMITED TO, YOU AND YOUR CUSTOMERS, FOR ANY TORT DAMAGES OR INDIRECT,
SPECIAL, GENERAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT
LIMITED TO, LOSS OF PROFITS OR ANTICIPATED PROFITS AND LOSS OF GOODWILL, ARISING
IN CONNECTION WITH THE USE (OR INABILITY TO USE) THE PRODUCTS OR GOODS FOR ANY
PURPOSE WHATSOEVER, EVEN IF WE ARE AWARE OR HAVE BEEN ADVISED OF THE POSSIBILITY
OF POTENTIAL LOSS OR DAMAGES.
--------------------------------------------------------------------------------
We will not be liable to you if we are unable to deliver equipment, inventory or
supply items to you because of any loss, damage, or delay caused by strikes,
riots, fire, insurrection, war, elements, embargoes, failure of carriers,
inability to obtain transportation facilities, forces majeure, acts of God or of
the public enemy, or any other cause beyond our control.
You will purchase all products, supplies and materials required for the
operation of your franchise from manufacturers, suppliers or distributors
approved by us. All specifications that we require of you and lists of approved
suppliers will be included in the Operations Manual. We will use our best
judgment to set and modify specifications in order to maintain the integrity and
quality of the ITEX franchise system.
You must sell, offer for sale, distribute or deliver only such services and
products that meet the specifications and standards of quality and quantity in
the Operations Manual. You must sell or offer to sell all approved items and
services. You must refrain from deviating from our standards and specifications
and must discontinue selling or offering for sale any such items or services as
we may, in our discretion, disapprove in writing at any time.
With advance written notice, you may request our approval to obtain products,
supplies or materials from sources that we have not previously approved. We may
require you to give us sufficient information, photographs, drawings, samples
and other data to allow us to determine whether the items from these other
sources meet our specifications and standards, as established from time to time.
These specifications and standards will relate to quality, texture, composition,
strength, finish and appearance, and the suppliers' capacity and facility to
supply your needs in the quantities, at the times, and with the reliability
necessary for efficient operation. We may require that samples from any supplier
be delivered to a designated independent testing laboratory for testing prior to
approval and use. You will reimburse us for the actual cost of the tests. We
will license any supplier, that can meet or exceed our quality control and
confidential formula requirements and standards, for a reasonable license fee,
to produce and deliver products to you but to no other person. Our confidential
manufacturing requirements, equipment, designs, systems and formulas will be
disclosed to potential suppliers only after we have received reasonable evidence
that the proposed supplier is trustworthy and reputable; has the capacity to
consistently adhere to our standards, requirements and testing procedures; will
maintain the confidentiality of the designs, systems and formulas; and will
adequately supply your reasonable needs. We may require a Confidentiality and
Non-Disclosure Agreement signed by the proposed supplier prior to release of any
confidential information. We will not unreasonably withhold approval of a
supplier you propose. We will notify you in writing of the approval or
disapproval of any supplier you propose.
From time to time we or our agents may inspect any proposed or approved
manufacturer's, supplier's or distributor's facilities and products to assure
proper production, processing, packaging, storing, and transportation.
Permission for inspection will be a condition of our continued approval of any
manufacturer, supplier or distributor. Should we determine from any inspection
that a manufacturer, supplier or distributor fails to meet our specifications
and standards, we will give written notice describing this failure to you and to
the manufacturer, supplier or distributor, together with a notice that unless
the failure or deficiency is corrected within thirty days, the manufacturer,
supplier or distributor will no longer be approved.
Pursuant to the Method of Operation, we will:
1. Record, track and account for all trade transactions among
ITEX clients and brokers through a computerized system of
record keeping.
2. Provide you access to our national directory of clients by
means of the ITEX OnlineSM System.
3. Provide a toll free line for clients to secure transaction
authorizations for proposed trade transactions.
4. Provide a clearinghouse function for international
transactions involving a seller or buyer outside of the U.S.
We have pre-set credit lines on clearing accounts for
international licenses. A transaction may be declined if
these limits are exceeded even if an individual ITEX
client's account is in good standing.
5. Regulate quality standards for products and services
provided throughout the ITEX trade exchange.
6. Maintain proper administrative, accounting, and inventory
controls to support the ITEX trade exchange.
7. Conduct or facilitate ongoing research and development of
new training programs, procedures, products, techniques, and
other enhancements to the ITEX System.
5.2 Standards to Be Maintained. You will follow the Method of Operation and
maintain standards of service that we prescribe.
A. You will operate the Franchise in a clean, orderly, and respectable
manner in strict compliance with this Agreement and the Operations Manual. The
Franchise Premises will be used only as a ITEX brokerage office. You will only
use signs, fixtures, equipment, materials, products, decor, plans and services
that conform to our specifications to conduct the Franchise. Among other things,
you will:
1. Sell ITEX services to your clients and to aggressively
promote, facilitate and encourage trade activity among all
ITEX clients.
2. At all times, your employees must be under the direct, on
location supervision of you or a trained and competent
broker acting as a full-time manager.
3. Maintain the accuracy of the ITEX computer directory system
to provide up-to-date information on the clients assigned to
you. You will produce directories of your clients for the
use of all clients of the ITEX System upon the reasonable
request of any client. You will identify all trade accounts
you control. Your accounts will not exceed ten percent of
your total client accounts.
4. Insure that all of your employees are adequately trained in
the use of the ITEX System and remain competent,
conscientious and qualified to render services to your
clients;
5. Work with all ITEX Clients in a professional, courteous and
responsible manner, and not engage in any behavior nor make
any representations we reasonably determine to reflect
negatively on us or our good will.
6. Provide services and other business information to us in the
format we request. All information provided must be, to the
best of the your knowledge, complete, trustworthy and
accurate.
7. Offer education programs for your assigned clients, such as
regular educational meetings, monthly breakfast meetings,
orientation meetings and other forums for client education.
8. Assist clients to obtain and complete trade transactions
regardless of the location and assist in locating ITEX
brokers, as appropriate, to facilitate the trades. You will
facilitate reciprocal trade with other ITEX brokers whose
clients wish to trade with clients assigned to you.
9. Advise all clients that trade transactions are taxable and
clients should seek appropriate legal, accounting and tax
services for advice of the tax treatment of trade
transactions. You acknowledge that all trade transactions
and Commissions earned on transactions are subject to income
taxation.
10. Not sell, assign, give or transfer ITEX Trade Dollars to any
person or entity, which is not an ITEX Client, International
Client or broker. We will not honor ITEX Trade Dollars
transferred in violation of this requirement.
11. Not, for any reason, use, buy, sell or in any way transact
business through a Client account other than the one we
assign to you unless the Client owning the account appoints
you as the Client's attorney-in-fact pursuant to a power of
attorney valid in the jurisdiction where the Client resides.
A copy of that power of attorney must be provided to us
before you trade pursuant to the power of attorney.
12. Strictly comply with the Trading Rules of the ITEX Retail
Trade Exchange when trading on your own account. You will
disclose that you are acting as a Client when trading for
your own account.
B. You will maintain signs approved by us on the Franchise Premises.
These signs must comply with local sign ordinances, regulations, and bylaws. The
signs will describe the premises only as an ITEX brokerage.
C. We may enter upon the Franchise Premises at reasonable times to
verify your compliance with the terms of this Agreement. To do so, we may:
1. Inspect the Franchise Premises;
2. Observe your operation of the franchise business for any
consecutive or intermittent periods we deem necessary;
3. Interview your personnel and customers; and
4. Inspect and copy any books, records and documents related to
the operation of the franchise and any other franchise
information we may require.
You will cooperate fully with us and our agents in connection with these
inspections, observations and interviews.
D. You will comply with all applicable ordinances, regulations, bylaws,
laws and statutes. You will not permit unlawful activities on the Franchise
Premises and will not sell, exchange, offer, hold, show, rent, or permit to be
sold, exchanged, offered, held, shown, or rented any material or service you
know or reasonably suspect to have been obtained in violation of law or to be
otherwise illegal.
You will secure and maintain in force all required licenses, permits and
certificates relating to the operation of the Franchised Business and will
operate the Franchised Business in full compliance with all applicable
ordinances and regulations, including without limitation, all government laws
and regulations relating to occupational hazards and health, EEOC laws,
Americans with Disabilities Act, copyright laws protecting owners of artistic
works, consumer protection, trade regulations, workers compensation,
unemployment insurance and withholding, and payment of federal and state income
taxes, social security taxes and sales, use and property taxes.
E. You will not install or use any vending machines, juke boxes games
or musical devices on the Franchise Premises without our prior written approval.
F. You will not sell or dispense any products or services or activities
other than those we specifically recognize and approve in writing.
G. We may employ professional shopping services to monitor your
compliance with this Agreement.
H. You, at your expense, will maintain the interior and exterior of the
Franchise Premises and equipment and furnishings in good repair, attractive
appearance and sound operating condition in compliance with the Operations
Manual. At our request, you will make necessary repairs to the Franchise
Premises in order to maintain uniform appearance and to protect the reputation
of the Service Marks. You will commence all repairs and changes within a
reasonable time after notice from us, and you will proceed with due diligence
until completion.
If you do not maintain the Franchise Premises as required, after notice to you,
we at our option, may make the necessary maintenance and repairs and charge the
cost to you. If we make or direct the making of repairs, we will not incur any
liability to you, including but not limited to, liability for interruption of
your business during the course of making the maintenance and repairs.
I. You will keep your franchise open Monday through Friday during
normal business hours, except holidays we designate, during the hours specified
or approved in writing by us or required by the lease of the premises on which
the Franchise is operated. We may change these requirements from time to time as
designated in the Operations Manual.
J. At all times you will insure that your copy of the Operations Manual
and any other manuals given to you are kept current and up to date. In the event
of any dispute as to the contents of the Operations Manual, the terms of our
master copies maintained at our principal place of business will be controlling.
K. You are aware that ITEX Corporation is a publicly traded
corporation. You, your affiliates and your employees, will not purchase or sell
any shares of common stock of ITEX Corporation in the open market as long as you
possess material information not previously disclosed to the public.
5.3 Service Marks, Operations Manual, and Method of Operation Are Our
Exclusive Property. You agree that the Service Marks, Operations Manual, and
Method of Operation are our sole and exclusive property. Nothing in this
Agreement or any other agreement will give you or others any right, title, or
interest whatsoever in or to the Service Marks, Operations Manual, or Method of
Operation. Your license to use the Service Marks is non-exclusive. We, in our
sole discretion, may operate under the Service Marks and may grant licenses to
others to use the Service Marks on any terms and conditions we deem appropriate.
We will make reasonable efforts to protect your rights to use the Service Marks.
In those states and nations where applicable, You agree to execute on request
all documents necessary to record you as a registered user of the Service Marks.
You will not use the Service Marks as part of any electronic mail address or in
any electronic mail message except in accordance with the Operations Manual and
only for purposes of the Franchise.
You will immediately notify us of any infringement of, or challenge to, your use
of the Service Marks. We will have sole discretion to take or not to take
action, as we deem appropriate. If we undertake the defense or prosecution of
any litigation involving you or any litigation involving the Service Marks, you
agree to execute any and all documents and to do all acts and things, that in
the opinion of our counsel are necessary or advisable to carry out the defense
or prosecution. This may be done either in our name or in your name, as we will
elect. you will modify or discontinue use of any franchise names or Service
Marks, or will use one or more substitute names or marks, if we so direct in
writing at any time. Our sole obligation in this event will be to reimburse you
for your tangible costs in complying with our direction (i.e., cost of changing
signs, stationery, etc.). Under no circumstances will we be liable to you for
any other damages, costs, losses, rights, or detriments related to any
modification, discontinuance, or substitution. All obligations or requirements
imposed upon you relating to the Service Marks will apply with equal force to
any modified or substituted names or marks.
You will not contest, directly or indirectly: our ownership, title, right, or
interest in the Service Marks, the Operations Manual, or the Method of
Operation; or our exclusive right to register, use, or license others to use the
Service Marks, Operations Manual, and Method of Operation. You will not
advertise or use the Service Marks without following our then current guidelines
and requirements. These may include, but will not be limited to, the placement
of appropriate (C) or (R) copyright and registration marks or the designations
TM or SM, where applicable.
Any and all goodwill associated with the Service Marks, including any goodwill
that might be deemed to have arisen through your activities, will accrue
directly and exclusively to our benefit, except as otherwise provided by
applicable law. You appoint us as your agent and attorney-in-fact to amend or
cancel any Registered User or Business Name filings obtained by you or on your
behalf that involve or pertain to the Service Marks.
You will not use the Service Marks on products or services that come from any
source other than us or sources we approve in writing except for products you
prepare or produce pursuant to the Operations Manual and the Method of
Operation.
5.4 You Will Not Use Names or Marks in Combination. Except as provided
in this Agreement, you will not use or give others permission to use the Service
Marks, or any colorable imitation of them, combined with any other words or
phrases. You and your owners, officers, and agents will not form or participate
in the formation of any company, firm, corporation or other entity having a name
containing the words of the Service Marks. You may not combine or associate any
name or symbol of the Service Marks with any other name or word in any
advertising or sign. The Service Marks must be used in exact conformity with
specifications we set in the Operations Manual.
5.5 Service Marks, Operations Manual, and Method of Operation May Be
Changed. You acknowledge that the Service Marks, Operations Manual and Method of
Operation, including any future amendments or modifications to them, have
substantial value, and that the conditions, restrictions, covenants not to
compete, and other limitations imposed by this Agreement are necessary,
equitable, and reasonable for the general benefit of you, us, and others
enjoying any lawful economic interest in the Service Marks, Operations Manual,
and Method of Operation.
We may change or modify any part of the Service Marks, Operations Manual, or
Method of Operation from time to time at our sole discretion. You will accept,
use, and protect, for the purposes of this Agreement, all changes and
modifications as if they were a part of the Service Marks, Operations Manual,
and Method of Operation at the time this Agreement is executed. You will bear
all costs and expenses which may be reasonably necessary as a result of such
changes or modifications. Under no circumstances will we be liable to you for
any damages, costs, losses, or detriments related to of these changes or
modifications.
Complete and detailed uniformity of the Service Marks, Operations Manual, and
Method of Operation under the varying conditions to be experienced by our
franchisees may not be possible or practicable. Therefore we reserve the right,
at our discretion, to accommodate your special needs, or those of any other of
our franchisees. These needs may result from the peculiarities of a particular
site or location, density of population, business potential, populations of
trade area, existing business practices, requirements of local law or local
customers, landlord requirements, or any other condition which we deem to be
important to the successful operation of the franchisee's business. From time to
time, we may allow certain franchisees to depart from normal system standards
and routines to experiment with or test new products, equipment, designs and
procedures. In no event will any variance or testing be deemed a waiver of any
of our rights, or an excuse for you to not perform any of your duties under this
Agreement. We may require you at any time to commence full compliance with the
Operations Manual and the Method of Operation. We will not be required to grant
any variance to you under any circumstances.
5.6 You Will Not Communicate Confidential Information. You specifically
acknowledge that you will receive valuable specialized and confidential
information, including information regarding our operational, sales, promotional
and marketing methods and techniques and the Method of Operation. You agree not
to copy, download to internet, intranet, modem, fax, e-mail, mail or send any
confidential material or divulge any material directly or indirectly to any
other person or enterprise outside of the ITEX System. During the term of this
Agreement and after it expires or is terminated, you will never communicate,
fax, e-mail, post on an internet electronic bulletin board, divulge or use in
any other manner, either for your benefit or the benefit or any other person,
persons, partnerships, associations, companies or corporations any confidential
or proprietary information, knowledge or know-how concerning the Method of
Operation or any information we have communicated to you in written, verbal or
electronic form, including intranet passwords, for the operation of your
franchised business.
The Method of Operation includes valuable confidential information. You agree to
not communicate or divulge the contents of our Operations Manuals or any other
information related to the Method of Operation or to the operation of the
Franchise or our franchise system to any person or entity except those we
authorize in writing to receive the information. You agree that these contents
and information are confidential. They include information that is our exclusive
property, and you may only use them in the Franchise subject to the provisions
and duration of this Agreement. You agree to fully and strictly adhere to all
security procedures we prescribe for maintaining the secrecy of the information.
You agree to disclose information to your employees only to the extent necessary
to perform the franchise business.
The Method of Operation is a technologically advanced program of accounting,
identification procedures, management systems, techniques and business
operations and systems that would, if used by other persons, firms or entities,
give a substantial competitive advantage which we presently enjoy. Any and all
information, knowledge and know how, not generally known about the Method of
Operation and our products, services, standards, specifications, systems,
procedures and techniques, and any other information or material that we may
designate as confidential, will be deemed confidential for purposes of this
Agreement. This will not apply to information which you can demonstrate came to
your attention prior to disclosure by us, or which is or has become a part of
the public domain through publication or communication by others.
You will require as a condition of the employment of your employees that they
maintain and protect our confidential and proprietary information, including the
signing of a confidentiality agreement. You must follow our security procedures,
which may include the execution of approved nondisclosure agreements, and
Intranet and Internet usage agreements. You will be responsible to enforce these
covenants and agreements by your employees. These covenants are for the benefit
of us and the ITEX franchise system and are enforceable by us. If you become
aware of any actual or threatened violations of these covenants by any of your
employees, you will promptly and fully advise us in writing of all related facts
known to you. You will cooperate with us in all ways we reasonably request to
prevent or stop any violation. This may include institution or permitting to be
instituted in your name any demand, suit or action that we determine is
advisable. The demand, suit or action may be maintained and prosecuted by you
and us at your expense.
You will obtain legally enforceable written agreements, in a form we approve,
from or otherwise assure that you and all your agents, employees, consultants,
partners, owners, members, officers, directors, and shareholders and other
persons in your control, to whom any information is communicated, keep,
preserve, and protect all confidential information.
This section contains prohibitions based upon an understanding that you, your
key employees, your officers, your partners, your employees, members and
stockholders (as applicable) will possess knowledge of business and operating
methods and confidential information, disclosure of which would prejudice our
interests and our other franchisees.
If you engage in any barter or trade exchange within two years of the
expiration, termination or transfer of this Agreement, you will prove to us that
you have not used our confidential information in that business. This two-year
period is not intended to limit the duration of your obligation to preserve the
confidentiality of the information and to not use the information after
expiration, termination or transfer of this Agreement.
5.7 Conflicting or Competing Interests. You will diligently,
faithfully, and honestly perform your obligations pursuant to this Agreement.
You will use your best efforts to develop, promote and enhance your ITEX
franchise. You will not engage in any activity or business enterprise that
conflicts with these obligations.
During the term of this Agreement, neither you nor your owners, shareholders,
members, partners, directors, officers, employees, consultants, distributors, or
agents, nor the members of your or their immediate families or households (who
have access to or knowledge of the Operations Manual or Method of Operation),
will directly or indirectly participate as an owner, shareholder, member,
partner, director, officer, employee, consultant, franchisor, franchisee,
distributor, advisor or agent, or serve in any other capacity in any business
engaged in the sale or rental at wholesale or retail or on the Internet of
retail trade, barter transactions or any form of trade or barter membership
system products or services or any business that offers products or services
that are essentially the same as, or substantially similar to, the products and
services that are part of the Method of Operation. We may waive this covenant
only in writing.
You will assure that you and your owners, directors, officers, partners,
shareholders, members, employees, consultants, and agents, during the term of
this Agreement and for a period of two years after expiration or termination of
this Agreement do not:
divert or directly or indirectly attempt to divert any of our business or
any ITEX client to any competing establishment;
undertake or attempt to solicit or otherwise agree privately with clients
or international clients to provide consultation or support related to any
trade, barter or alternative currency program, other than through the ITEX
System or otherwise attempt to circumvent the ITEX System;
employ or seek to employ any person we employ or any other person who is at
that time operating or employed by or at any of our franchises or otherwise
directly or indirectly induce these persons to leave their employment; nor
do or perform, directly or indirectly, any other act injurious or
prejudicial to our goodwill associated with the Service Marks and Method of
Operation
If, for any reason, any provision set forth in this Subsection is determined to
exceed any lawful scope or limit as to duration, geographic coverage, or
otherwise, it is agreed that the provision will nevertheless be binding to the
full scope or limit allowed by law or by a court of law. The duration,
geographic coverage and scope allowable by law or court of law shall apply to
this Agreement.
The provisions relating to interests in any other business will not apply to
your ownership of outstanding securities of any corporation whose securities are
publicly held and traded. Provided that you hold these securities for investment
purposes only and that your total holdings do not constitute more than five
percent (5%) of the outstanding securities of the corporation.
You will obtain written covenants from your owners, shareholders, members,
partners, directors, officers, employees, consultants, distributors, and agents
in a form satisfactory to us that these persons will comply with the provisions
of this Section.
5.8 Computer Systems. You will obtain computer equipment compatible
with our computer technology. You will use it to integrate Clients' accounts by
using the accounting system software and procedures provided and established by
us. You will communicate with us and with other ITEX brokers and Clients within
the ITEX System using our established communication guidelines and forms.
A. You are granted a non-exclusive license to use our software programs and
related procedures during the term of this Agreement. All software programs and
related procedures remain our property. They include trade secret and
confidential information, which you must maintain in strict confidence.
B. You will not use the procedures or software for any purpose or party
other than those associated with us, the ITEX System and your trade brokerage
business.
C. You will execute and be bound by all software licenses we require. We,
in our sole discretion, may charge a license fee for some or all of the licenses
we grant. A list of all licenses and any license fees in connection therewith is
found in the Operations Manual.
E-PROBLEM DISCLAIMER: Computer systems are vulnerable in varying degrees to
computer viruses, bugs, power disruptions, communication line disruptions,
Internet access failures, Internet content failures, the Year 2000 problem and
similar date-related problems, and attacks by hackers and other unauthorized
intruders ("E-Problems'). We have taken reasonable steps so that E- Problems
will not materially affect our business. We do not guarantee that information or
communication systems that we or others supply will not be vulnerable to
E-Problems. It is your responsibility to protect yourself from E-Problems. You
should also take reasonable steps to verify that your suppliers, lenders,
landlords, customers, and governmental agencies on which you rely, have
reasonable protection from E-problems. This may include taking reasonable steps
to secure your systems (including firewalls, password protection, and anti-virus
systems), and to provide backup systems.
5.9 Working Capital Requirements. At all times during the term of this
Agreement, you will maintain and employ as much working capital as may be
required to enable you to properly and fully perform all your duties,
obligations, and responsibilities.
6 RENEWAL, TERMINATION AND STEP-IN RIGHTS
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6.1 Renewal of Franchise.
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A. If you are not in breach, you may renew the Franchise for periods of
5 years under the terms of our then current Franchise Agreement forms.
"Then-current," as used in this Agreement and applied to our Uniform Franchise
Offering Circular will mean the form then currently provided to prospective
franchisees or area developers, or if not then being provided, then the form we
select in our sole discretion which previously has been delivered to and
executed by a franchisee of ours. You will exercise your renewal option by
giving written notice to us. The notice must be given at least three months, but
no earlier than six months, before the end of the franchise term established by
this Agreement.
There is no fee for renewal of the Franchise. The renewed Franchise Agreement
will be evidenced by you signing the Franchise Agreement forms we then are
using. These forms may vary materially from this Agreement. Commissions,
Marketing Fees, Local Advertising Contributions and other fees will be set at
the then prevailing rates and terms. Your failure or refusal to execute the
Renewal Franchise Agreement forms within thirty days after delivery to you may
be regarded as an election by you not to renew. Upon renewal, the Franchise
Premises must remain located in the geographical territory designated in this
Agreement.
You will reimburse us for our reasonable out-of-pocket costs concerning the
renewal.
You must execute a general release, in a form we prescribe, following applicable
law, to release us from any claims you may have against us.
Before renewal, you or your designated manager will attend and successfully
complete any retraining program we prescribe in writing. This will be done at
your expense, including travel, meals, lodging, and our then current training
fee.
B. We may refuse to renew this Agreement if you fail to
satisfactorily comply with this Agreement. The determination of satisfactory
compliance will be within our exclusive discretion in good faith. If we refuse
to renew, you must continue to perform under this Agreement until its
expiration.
C. Continuation. If you continue to operate the Franchise with
our express or implied consent, following the expiration or termination of this
Agreement, the continuation will be a month-to-month extension of this
Agreement. This Agreement will then be terminable by either party upon 30 days
written notice. Otherwise, all provisions of this Agreement will apply while
operations continue.
6.2 Termination by You. You may terminate this Agreement at any time,
without cause, upon not less than 30 days prior written notice. You must comply
with all provisions of this Agreement related to termination.
6.3 Termination by Us.
A. The following provisions are in addition to all other remedies
available to us at law or in equity. We will have the option to cure your
breaches at your expense. If you breach or default in any of the terms of this
Agreement, we have the right to appoint a receiver to take possession, manage
and control assets, collect profits, and pay the net income for the operation of
the Franchise as ordered by a court of jurisdiction. The right to appoint a
receiver will be available regardless of whether waste or danger of loss or
destruction of the assets exists, and without the necessity of notice to you.
We may terminate this Franchise Agreement and any other related agreements
between the parties if you breach any term or provision of this Agreement and do
not cure the breach (or reasonably begin to cure and diligently pursue the cure
until the breach is remedied) within 30 days after receipt of our written
"Notice to Cure." Termination will occur immediately upon delivery to you of our
written declaration of termination for failure to cure within the allowed time
frame.
B. We immediately may terminate this Agreement and any other agreements
between the parties without other cause, and without giving you an opportunity
to cure, if you:
(1) Make an assignment for the benefit of creditors, make
a formal or informal proposal to creditors to
restructure debts because of insolvency, admit
inability to pay obligations as they become due, file
a voluntary petition of bankruptcy, do not obtain the
dismissal of involuntary bankruptcy proceedings
within thirty days of commencement, or are
adjudicated bankrupt or insolvent.
(2) Fail to operate the Franchise continuously and
actively for ten consecutive days or for any shorter
period after which it is reasonable under the facts
and circumstances to conclude that you do not intend
to continue the Franchise or maintain a suitable
Franchise location.
(3) Fail to comply with any requirement of this Agreement
or of any related agreement between the parties
within twelve months after having received two
Notices to Cure deficiencies in performance of the
same or any other requirement pursuant to Subsection
(A) above.
(4) On more than two occasions fail to report on time,
understate by more than 2 percent, or distort other
material information.
(5) Make or have made any material misrepresentation or
misstatement on the franchise application or with
respect to ownership of the Franchise. If you
misrepresented yourself and are a competitor of ours
or a competitor of an affiliate of ours, we may keep
all of your initial franchise fee, cancel training
and terminate this Agreement.
(6) Allow the Franchise or Franchise Premises to be
seized, taken over, or foreclosed by a creditor,
lienholder, or lessor; let a final judgment against
you to remain unsatisfied for thirty days (unless a
supersedeas or other appeal bond is filed); or allow
a levy of execution upon the Franchise or upon any
property used in the Franchise, that is not
discharged by means other than levy within five days
of the levy.
(7) Are convicted of a felony, or are convicted of any
criminal misconduct relevant to the operation of the
Franchise.
(8) Within a period of ten days after notification of
noncompliance, fail to comply with any federal, state
or local law or regulation applicable to the
operation of the Franchise.
(9) Fail to pay any amounts owed pursuant to this
Agreement within five days after receipt of written
notice that the fees or amounts are overdue.
(10) Operate the Franchise in a manner that creates an
imminent danger to public health or safety.
(11) Do not keep confidential information related to the
Franchise confidential except to employees or persons
authorized to know.
(12) Fail to obtain agreements from your employees to keep
confidential information confidential.
6.4 Time Frames Subject to Applicable Laws. The provisions of this
Agreement may state periods of notice less than those required by applicable
law. They may provide for termination, cancellation, nonrenewal or the like
other than according to applicable law. They will be extended or modified to
comply with applicable law.
6.5 You Will Discontinue Use of Service Marks, Operations Manual, and
Method of Operation on Termination of Agreement. Substantial damages that are
difficult to determine at the date of execution of this Agreement will accrue to
us if you do not comply with any of the following requirements upon expiration
or termination of this Agreement. Upon expiration or termination of this
Agreement, you will:
A. Immediately cease using the Service Marks (or any names or marks
deceptively similar to them), the Operations Manual and the Method of Operation.
B. Return to us all copies of the Operations Manual. Return to us all
records, files, instructions, correspondence, and materials in your possession
or control related to the Method of Operation. You will give us a complete and
accurate summary of your advertisers, customers and leads, including their
names, addresses, telephone numbers and related file records. You will assist us
in every way possible to bring about a complete and effective transfer of your
franchise business to us or to our designated franchisee.
C. Authorize telephone, Internet, email, electronic network, directory
and listing entities to transfer all numbers, addresses, domain names, locators,
directories and listings to us or our designee. Notify them of the termination
of your right to use the Franchise names and Service Marks. You authorize the
transfer of your telephone numbers and directory listings and Internet
addresses, domain names and locators to us or our designated franchisees. You
appoint us as your agent and attorney-in-fact to effect the transfer of these
telephone numbers and directory listings and domain names and Internet directory
listings to us. You agree that we will be treated as the subscriber for the
telephone numbers and directory listings. We will have full authority to
instruct the applicable telephone, directory and listing companies on the use
and disposition of the telephone listings and numbers. You release and indemnify
these companies from any damage or loss because they follow our instructions.
D. Make reasonable modifications to the interior and exterior of any
retained premises to reduce your identification as a part of our franchise
system. These modifications will include reasonable alterations to eliminate any
possibility of confusion between the Franchise Premises and any other ITEX
location. You will advise all customers or prospective customers coming to the
Franchise Premises or telephoning you that you are no longer associated with us.
E. Pay to us within seven days all sums you owe. These sums will
include all damages, costs and expenses, including reasonable attorneys fees and
collection costs, we incur because of your breach. These sums will include all
costs and expenses, including reasonable attorney fees, we incur in obtaining
injunctive, appellate, or other relief to enforce the provisions of this
Agreement.
F. Abide by all provisions of the restriction upon communication of
confidential information set forth above and the post-termination Covenant Not
to Compete set forth below.
G. Close your operating account which will automatically terminate
without notice. We may, in our sole discretion, allow you to maintain a client
account on a standard fee basis.
H. At our option, do some or all of the following:
(1) Remove all Franchise related equipment, furnishings,
and inventory from the Franchise Premises;
(2) Sell the equipment, furnishings, and inventory to us,
at the depreciated book value (straight line
depreciation over five years) for equipment and
furnishings and at your invoice cost for inventory
less a 10 percent restocking charge. We will not be
liable for payment to you for intangibles, including,
without limitation, goodwill;
(3) Assign to us the lease for the Franchise Premises and
ownership and control of any web site you own or
control;
(4) Sell to us your interest in the Franchise, the
Franchise Premises and all related equipment,
fixtures, signs, real estate leases, equipment leases
and personal property. Unless we state in writing
that we do not intend to exercise this right, the
parties must agree upon a purchase price and terms
within five business days after termination of this
Agreement. If not, a fair value and fair terms will
be determined in Las Vegas, Nevada by three
appraisers. Each party must select one appraiser. The
two appraisers chosen must then select a third
appraiser. The parties may then present evidence of
the value of the Franchise and fair terms for the
purchase. The appraisers must exclude from their
decision any amount or factor for the "goodwill" or
"going concern" value of the Franchise. The decision
of the majority of the appraisers will be conclusive.
Any time within thirty days after receiving the
appraisers' decision, at our option we may purchase
the Franchise and your assets at the price and upon
the terms determined by the appraisers.
I. Upon termination for any reason, you will return to us all
proprietary and confidential materials, including client lists, codes, signage,
advertising and marketing materials, service agreements and other forms, printed
files, clients lists and account information, security codes and the like as
described in the Operations Manual. If you fail to return or cease use of any of
these items, we may enter your business premises without being guilty of
trespass or any other tort to remove and retain the items. You will pay to us,
on demand, any expenses we incur in trying to remove or collect such items or in
attempting to have you cease use of them.
6.6 Our Step-In Rights. The parties want to prevent any interruption of
the franchise that would cause harm to the Franchise and to our franchise system
and lessen their value. Therefore, you authorize us to step in to operate the
Franchise for as long as we reasonably believe necessary and practical. We may
do so without waiving any other rights or remedies that we may have. Cause for
stepping-in may include our reasonable determination that: you are incapable of
operating the franchise; you are absent or incapacitated because of illness or
death; you have failed to pay when due any taxes or assessments against the
franchise or property used in the franchise; you have failed to pay when due any
liens or encumbrances placed upon or against your business property; or we
decide that significant operational problems require us to operate the Franchise
for a time. We may exercise our step-in rights if you are ill or disabled, you,
your lender, or the SBA requests our assistance or agrees to our proffered
support and supervision, directly or indirectly or through contract agents. If
you have a loan for the franchise that is guaranteed by the Small Business
Administration, our right to step-in will be limited to a 60 day period unless
otherwise requested or agreed with the lending bank at that time.
All revenue from our operation of the franchise will be for your exclusive
account. We will pay from that revenue all expenses, debts and liabilities we
incur during our operation of the franchise. This will include our personnel and
administrative costs, plus 15 percent to cover our overhead expenses. In
addition, we will have the option, but not the obligation, to pay for you any
claims owed by you to any creditor or employee of the franchise. You will
reimburse us upon demand, including at the rate set forth above for overdue
amounts.
We will keep in a separate account all revenue generated by the operation of the
franchise, less the expenses of operation.
We will have no obligation to retain any employee of the franchise nor to honor
any contractual employment commitments you previously made. If we elect to
retain any employee, employment will be pursuant to a new employment agreement
between us and the employee. Employment will commence on the first business day
on which we carry on business through the franchise. Any claim by an employee
for unpaid salary, vacation pay, or other benefits will be your responsibility.
Upon our exercise of these Step-In Rights, you agree to hold us harmless for all
acts, omissions, damages, or liabilities arising during operation.
Our operation of the franchise will not operate as an assignment to us of any
lease or sublease of franchise property. We will have no responsibility for
payment of any rent or other charges owing on any lease for franchise property,
except as the charges relate to the period of our operation of the franchise.
You agree to pay our reasonable legal and accounting fees and costs we incur
because of our exercise of these Step-In Rights.
6.7 You and Your Owners Not to Compete on Expiration, Termination or
Transfer of Agreement. This covenant will apply for 750 days after termination,
expiration or transfer of this Agreement. You will assure that you and your
owners, shareholders, partners, directors, officers, employees, and agents, and
the members of their immediate families or households (who have actual knowledge
of or access to the Operations Manual or Method of Operation), will not directly
or indirectly participate as an owner, shareholder, director, partner, officer,
employee, consultant, franchisor, franchisee, distributor, advisor or agent, or
serve in any other capacity in any business engaged directly or indirectly in
the offer, sale, rental, Internet dissemination, or promotion of retail trade,
barter transactions or any form of trade or barter membership system or any
business that offers products or services that are essentially the same as, or
substantially similar to, the products and services that are part of the Method
of Operation. You will not undertake or attempt to solicit or otherwise agree
privately with clients or international clients to provide consultation or
support related to any trade, barter or alternative currency program, other than
through the ITEX System or otherwise attempt to circumvent the ITEX System.
These covenants apply within 100 miles of the Franchise Premises and within 100
miles of any other ITEX office.
If, for any reason, any provision set forth in this Subsection exceeds any
lawful scope or limit as to duration, geographic coverage, or otherwise, it is
agreed that the provision will nevertheless be binding to the full scope or
limit allowed by law or by a court of law. The duration, geographic coverage and
scope allowable by law or court of law shall apply to this Agreement.
7 TRANSFER
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7.1 Sale or Assignment.
-------------------
A. Your rights and obligations under this Agreement are exclusive to
you. Whether voluntarily or involuntarily, neither you, your owners, partners
nor others claiming an interest in the Franchise will sell, transfer, assign,
encumber, give, lease, or sublease, or allow any other person to conduct
business in or through (collectively called "transfer") the whole or any part
of: this Agreement, the Franchise Premises, substantial assets of the franchise
business, or ownership or control of you. Any attempted transfer without our
prior written consent will be a breach of the terms of this Agreement. Our
consent will not be unreasonably withheld. We need not consent to any transfer
before the date the franchise opens for business. Because we will have a strong
and vested interest in the financial viability and ongoing management abilities
of the transferee, we need not consent to any transfer if we reasonably believe
the purchase price is excessive. We need not consent to any transfer to a
competitor of ours.
We enter this Agreement, in part, in reliance upon the individual or collective
character, skill, attitude, business ability and financial capacity of you (or
your shareholders, members or partners, if you are a corporation, limited
liability company, partnership or other entity).
Before the effective date of a transfer we approve:
(1) The transferee must assume your franchise
obligations. You will remain bound by your covenants
in this Agreement to not disclose confidential
information and to not compete with us or our
franchisees.
(2) You will pay all ascertained or liquidated debts
concerning the franchise.
(3) You may not be in breach of this Agreement or any
other agreement between the parties. Our consent to
the transfer will not constitute a waiver of any
claims we may have against you.
(4) The transferee will pay for and complete to our
exclusive satisfaction the training programs we then
require of new franchisees or otherwise show to our
satisfaction sufficient ability to successfully
operate the franchise.
(5) You or the transferee will pay a Transfer Fee
according to our then current Transfer Fee Schedule.
This fee will reimburse us for our reasonable legal,
accounting, credit check and investigation expenses
that result from the transfer. The Transfer Fee is
$2,000.
(6) You will pay us a 10 percent commission on the gross
transfer price (excluding the price of real
property), if we obtain the transferee for you.
(7) The transferee will execute all documents we then
require of new franchisees. This includes a new
Franchise Agreement in the form we then are using.
The new Franchise Agreement may contain economic and
general terms that are materially different from
those contained in this Agreement.
(8) The transferee will meet our standards for quality of
character, financial capacity, and experience
required of a new or renewing franchisee. You will
provide information we require to prove the
transferee meets our standards.
(9) You and your owners, members, partners, officers, and
directors will execute a general release in our
favor. The release must be in a form we prescribe,
following applicable law, to release us from any
claims you may have against us.
(10) The entire Initial Franchise Fee must be paid in
full despite the due date for payment established by
this Agreement.
(11) If the lease or sublease for the Franchise Premise
requires, the lessor or sublessor must have consented
to the assignment or sublease of the Franchise
Premises to the transferee.
(12) You will enter into an agreement to subordinate, to
the transferee's obligations to us (including the
payment of all franchise fees), any obligations of
the transferee to make installment payments of the
purchase price to you. The form of this subordination
is subject to our approval.
B. You may transfer your rights and obligations under this Agreement to
a corporation or other entity in which you continuously own a majority of the
issued and outstanding shares of each class of stock or other evidence of
ownership. The entity must be newly organized with its activities confined
exclusively to act as the franchisee under this Agreement. The entity must
contemporaneously agree in writing to be bound by the terms of this Agreement.
You must contemporaneously agree in writing to guarantee the obligations of the
entity and to remain personally liable in all respects under this Agreement. You
will be in breach of this Agreement if you at any time dispose of any interest
sufficient to reduce your ownership in the entity to less than a majority of any
class of stock or other evidence of ownership.
From time to time, at our request, you will provide to us a current list of all
your owners, shareholders, members, directors, officers, partners, and
employees, with a summary of their respective interests in you.
C. We may transfer this Agreement. If we do, it will be binding upon
and inure to the benefit of our successors and assigns. Specifically, you agree
that we may sell our assets, the Service Marks, or the Method of Operation
outright to a third party, may go public, may engage in a placement of some or
all of our securities, may merge, acquire other entities or be acquired by other
entities, or may undertake a refinancing, recapitalization, re-organization,
leveraged buy out or other economic or financial restructuring. As for any or
all of these sales, assignments and dispositions, you waive any claims, demands
or damages arising from or related to the loss of the Service Marks (or any
variation of them) or the loss of association with or identification as part of
our franchise system.
We will not be required to remain in any particular form of business or to offer
to you products, whether or not bearing our Service Marks.
D. You may offer your securities or partnership interests to the
public, by private offering, or otherwise, only with our prior written consent.
Consent may not be unreasonably withheld. All materials required for the
offering by federal or state law will be submitted to us for review before
filing with any government agency. Any materials to be used in any exempt
offering will be submitted to us for review prior to their use. No offering by
you will imply (by use of the Service Marks or otherwise) that we are
participating in an underwriting, issuance, or offering of your securities. You
and all other participants in the offering must fully indemnify us concerning
the offering. For each proposed offering, you will pay to us the amount
necessary to reimburse us for our reasonable costs and expenses associated with
reviewing the proposed offering, including, legal and accounting fees. You will
give us at least 60 days written notice before the effective date of any
offering or other transaction covered by this subsection.
E. You may not grant a subfranchise or transfer less than all of your
rights under this Agreement.
F. Our consent to a proposed Transfer will not be a waiver of any
claims we may have against you (or your owners), nor will it be a waiver of our
right to demand exact compliance with this Agreement.
G. You will comply with and help us to comply with any laws that apply
to the Transfer, including state and federal laws governing the offer and sale
of franchises.
7.2 Your Death or Disability.
A. Besides the Step-In Rights described above, the following will apply
in case of your death or incapacity if you are an individual, or of any general
partner of you if you are a partnership, or of any member or shareholder owning
50 percent or more of you if you are a limited liability company or corporation
or other entity. Within one hundred eighty days of the event, the heirs,
beneficiaries, devisees or legal representatives of that individual, partner,
member or shareholder will:
(1) Apply to us for the right to continue to operate the
Franchise for the duration of the term of this
Agreement. The right to continue will be granted upon
the fulfillment of all of the conditions set forth in
Subsection (A) of the section entitled "Sale or
Assignment," above (except that no transfer fee will
be required). Or,
(2) Transfer your interest according to the provisions of
that Subsection. If a proper and timely application
for the right to continue to operate has been made
and rejected, the one hundred eighty days within
which to transfer will be computed from the date of
rejection. For purposes of this Subsection, on an
application for the right to continue to operate, our
silence through the one hundred eighty days following
the event of death or incapacity will be deemed an
acceptance made on the last day of the period.
(3) If a suitable transferee purchaser is not found
within one hundred eighty days from the date of death
or permanent incapacity, we may at our sole option
enter into a contract to purchase the Franchise.
Unless we state in writing that we do not intend to
exercise this right, the parties must agree upon a
purchase price and terms within twenty business days
after notice from us. If not, a fair value and fair
terms will be determined in Las Vegas, Nevada by
three appraisers. Each party must select one
appraiser. The two appraisers chosen must then select
a third appraiser. The parties may then present
evidence of the value of the Franchise and fair terms
for the purchase. The appraisers may include in their
decision a factor for the "goodwill" or "going
concern" value of the Franchise. The decision of the
majority of the appraisers will be conclusive. Any
time within thirty days after receiving the
appraisers' decision, at our option, it may purchase
the Franchise and your assets at the price and upon
the terms determined by the appraisers. Terms of
payment will be ten percent of the purchase price
payable upon contract signing, the balance payable in
sixty equal monthly payments of principal payments
with interest calculated at the prime rate, published
by your principal bank at time of each monthly
principal
B. If the provisions of this Subsection have not been fulfilled within
the time provided, at our option, all rights licensed to you under this
Agreement will immediately terminate and revert to us.
7.3 First Right of Purchase. You will give us the right of first
purchase before soliciting offers from a third party if you choose to sell your
franchise business. You agree to notify us in writing if you desire to sell or
transfer any interest in you or in your franchised business. We will elect to
exercise our option to purchase within 30 business days after our receipt of
your written notification. If we offer you an amount that you do not agree to,
you may try to sell to a third party. You are obligated before any transfer to a
third party to comply with all criteria set forth in the subsections entitled
"Sale or Assignment" and "First Right of Refusal."
7.4 First Right of Refusal. If you receive a bona fide offer from a
third party acting at arm's length to purchase the Franchise, a majority
interest in ownership of you, or substantially all of the assets of the
Franchise, which offer is acceptable to you or to your owners, we will have the
right to purchase at the bona fide price on the same terms and conditions as
offered to you. We may substitute cash for any other form of consideration
contained in the offer. At our option, we may pay the entire purchase price at
closing. Within six days after receipt by you of an acceptable bona fide offer,
you will notify us in writing of the terms and conditions of the offer. We may
exercise this right to purchase within 30 days after receipt of notice from you.
If we do not accept the offer within 30 days, you may make the proposed transfer
to a third party. The transfer will not be at a lower price nor on more
favorable terms than disclosed to us. Any transfer will be subject to our prior
written permission described in the section entitled "Sale or Assignment,"
above. If the Franchise is not transferred by you within six months from the
date it is offered to us, or if any material change is made in the terms of the
proposed sale, then you must reoffer to transfer to us before a transfer to a
third party.
8 INDEMNITY, INSURANCE, CONDEMNATION AND CASUALTY
-----------------------------------------------
8.1 Indemnity. You will indemnify and hold us harmless from all fines,
suits, proceedings, claims, demands, actions, losses, attorney fees and damages
arising out of or connected with the Franchise and the business activities, acts
or omissions of you and your employees and agents. We will not be liable to you
or to any other person because of your act, omission, neglect, or breach. You
will indemnify us for any loss, cost or expense, including attorneys' fees, that
may be sustained by us because of the acts or omissions of your vendors or
suppliers or arising out of the design or construction of the Franchise
Premises.
You will defend us at your own expense in any legal or administrative proceeding
subject to this Subsection. The defense will be conducted by attorneys we
approve. Our approval will not be unreasonably withheld. You will immediately
pay and discharge any liability rendered against us in any proceeding, including
any settlement that we approve in writing. You will not settle any claim against
us without our prior written approval. In our sole discretion, we may settle or
defend any claims against us at your expense, including attorney fees that we
pay or incur in settling or defending. Promptly upon demand, you will reimburse
us for any and all legal and other expenses we reasonably incur in
investigating, preparing, defending, settling, compromising or paying any
settlement or claim, including monies that we pay or incur in settling or
defending such proceeding.
All references in this Agreement that provide that you will indemnify or defend
us or that you will name us under any insurance policy will also mean that our
affiliates, directors, officers, and employees will be also and equally
indemnified, defended or named.
8.2 Insurance. Upon commencement of franchise operations, and during
the term of this Agreement, you will obtain and keep in force by advance payment
of premium appropriate fire and extended coverage, vandalism, malicious
mischief, general liability, food borne illness and products liability
insurance. This insurance will be in an amount sufficient to replace the
Franchise Premises and your personal property upon loss or damage. This
insurance will be written by an insurance company satisfactory to us in
accordance with our standards and specifications in the Operations Manual. The
insurance will include, at a minimum, the following:
A. Comprehensive general liability insurance, including food borne
illness and products liability, completed operations, Dram Shop or host liquor
liability (if alcoholic beverages are served), property damage, contractual
liability, independent contractors liability, owned and nonowned automobile
coverage, and personal injury coverage with a combined single limit of at least
$1,000,000.
B. Workers' compensation and employer's liability insurance, and other
insurance required by statute or rule of the state in which the franchise is
located and operated.
C. Business interruption insurance.
D. Employer Practice liability insurance.
The insurance will insure us, you, and our respective subsidiaries, owners,
officers, directors, partners, members, employees, servants, and agents against
any loss, liability, products liability, personal injury, death or property
damage that may accrue due to your operation of the Franchise. Your policies of
insurance will contain a separate endorsement naming us as an additional named
insured. The insurance will not be limited in any way because of any insurance
we maintain. The insurance will not be subject to cancellation except upon
twenty days' written notice to us. Certificates of your insurance policies will
be kept on deposit with us. Maintenance of the required insurance will not
diminish your liability to us under the indemnities contained in this Agreement.
We may require you to increase the minimum limits of coverage to keep pace with
regular business practice and prudent insurance custom.
If you fail to comply with any of the requirements of this Subsection, we may,
but are not obligated to, purchase insurance at your expense to protect our
interests. This insurance may, but need not, also protect your interest. The
coverage we obtain might not pay any claim you make or any claim made against
you. You may later cancel the insurance we obtain by providing evidence that you
have obtained proper coverage elsewhere. You are responsible for the cost of any
insurance purchased by us pursuant to this paragraph. This coverage may be
considerably more expensive than insurance you can obtain on your own and might
not satisfy your needs. You will pay us upon demand the premium cost of this
insurance with a late payment charge on the unpaid balance at the rate
established in this Agreement.
9 NOTICE AND MISCELLANEOUS
------------------------
9.1 Notices. All notices required by this Agreement will be in writing.
They may be sent by certified or registered mail, postage prepaid and return
receipt requested. They may be delivered personally and receipted. Notices will
be delivered to you at the Franchise Premises, to us at our headquarters in Las
Vegas, Nevada, or to other locations specified in writing. Notices sent by mail
will be deemed to have been delivered and received three business days following
the date of mailing or one business day after placement with Federal Express, or
other reputable air courier service, requesting delivery on the most expedited
basis available.
9.2 Business Name. You will execute any documents we may from time to
time direct, to be retained by us until this Agreement ends, to evidence that
you abandon, relinquish, and terminate your right or interest you may claim in
or to the Service Marks and the name ITEX.
9.3 We and You Are Not Joint Venturers, Partners, or Agents. You are
and will remain an independent contractor. You and we are not and will never be
considered joint venturers, partners, employees, or agents one for the other.
Neither will have the power to bind nor obligate the other except as otherwise
outlined in this Agreement. No representation will be made by either party to
anyone that would create any apparent agency, employment, or partnership. Each
will hold the other safe and harmless from each other's debts, acts, omissions,
liabilities, and representations. You acknowledge that you are not in a
fiduciary relationship with us.
In all public and private records, documents, relationships, and dealings, you
will show that you are an independent owner of the Franchise. You will
prominently indicate on your letterheads and business forms that you are our
licensed franchisee by using language saying that you operate an independently
owned Franchise.
You will maintain employee records to show clearly that you and your employees
are not our employees.
The liability of you and your owners, shareholders, members or partners will be
both joint and several. A breach of this Agreement by you or by any shareholder,
member or partner will be a breach by all of the shareholders, members or
partners and also by you.
9.4 Waiver. A waiver of any breach of any provision, term, covenant, or
condition of this Agreement will not be a waiver of any subsequent breach of the
same or any other provision, term, covenant, or condition.
Any waiver of any provision of this Agreement must be set forth in writing and
signed by the party granting the waiver. Any waiver we grant will not prejudice
any other rights we may have, and will be subject to our continuing review. We
may revoke any waiver, in our sole discretion, at any time and for any reason,
effective upon delivery to you of ten days prior written notice of revocation.
By written notice, we unilaterally may waive any obligation of you, your owners,
or the Guarantors.
Our consent, whenever required, may be arbitrarily withheld if you are in breach
of this Agreement.
9.5 Time Is of the Essence. Time and strict performance are of the
essence of this Agreement. ("Time is of the essence" is a legal term that
emphasizes the strictness of time limits. In this Agreement, it means it will be
a material breach of this Agreement to fail to perform any obligation within the
time required or permitted by this Agreement.)
9.6 Credit Line. We give you an initial credit line of $5,000 ITEX
Trade Dollars.
9.7 Documents. You and your partners, shareholders, members, officers,
and owners agree to execute and deliver any documents that may be necessary or
appropriate during the term and upon expiration or termination of this Agreement
to carry out the purposes and intent of this Agreement.
Any material violation or breach of any of these documents or of any other
Franchise or related agreement between the parties will be a material violation
of this Agreement and of all the other documents and agreements. The
non-breaching party may enforce or terminate this Agreement and any or all of
the other documents and agreements as provided for enforcement or termination of
this Agreement.
If you are a partnership, all general partners will sign the documents. If you
are a corporation or limited liability company or other entity, all shareholders
or members and all officers will personally guarantee your faithful performance.
You will assure that each of your owners, shareholders, general partners,
members, directors, officers, managers, employees, consultants, distributors and
agents will not compete with us; will not attempt to divert customers to
competing businesses; will not induce the employees of us or of our franchisees
to leave their employment; and will keep, preserve, and protect confidential
information as required by this Agreement.
9.8 Construction. This document is the entire agreement between the
parties. It supercedes all prior or contemporaneous agreements or
understandings, whether written or oral, with respect to the subject matter of
this Agreement. There are no other oral or implied understandings between the
parties with respect to the subject matter of this Agreement. Except as
expressly and otherwise provided in this Agreement, this Agreement may not be
modified, nor may any rights be waived or abridged, orally or by course of
dealing, but only by a written instrument signed by the parties. The words "this
Agreement" include any future modifications unless otherwise suggested by the
context. No salesperson, representative, or other person has the authority to
bind or obligate us in any way, except our president or a vice president at our
home office by an instrument in writing.
This document supersedes all communications and negotiations between the parties
that relate to the subject matter of this Agreement. No previous course of
dealing or usage in the trade not specifically set forth in this Agreement will
be admissible to explain, modify, or contradict this Agreement. The parties
intend to confer no benefit or right on any person or entity not a party to this
Agreement and no third party will have the right to claim the benefit of any
provision of this Agreement as a third party beneficiary of that provision.
All words in this Agreement include any number or gender as the context or sense
of this Agreement requires. The words "will" and "must" used in this Agreement
indicate a mandatory obligation. This Agreement has been prepared in the
"you/we" format to simplify it and to facilitate our compliance with state and
federal franchise disclosure laws.
All captions and headings are for reference purposes only and are not part of
this Agreement.
If, any part of this Agreement is declared invalid, that declaration will not
affect the validity of the remaining portion which will remain in full force and
effect as if this Agreement had been executed with the invalid portion omitted.
The parties declare their intention that they would have executed the remaining
portion of this Agreement without including any part, parts, or portions which
may be declared invalid in the future.
If a dispute arises between the Parties, the Parties agree to participate in at
least 6 hours of mediation in accordance with the Mediation Procedures of the US
Arbitration & Mediation Service or of any similar organization that specializes
in the mediation of commercial business disputes. The Parties agree to equally
share the costs of mediation.
You acknowledge that we have appointed and intend to appoint many franchisees
throughout the World on terms and conditions similar to those set forth in this
Agreement. It mutually benefits those franchisees, you and us if the terms and
conditions of these license agreements are uniformly interpreted. This Agreement
is accepted by us in the State of Nevada and will be governed by the substantive
laws of Nevada without regard to Nevada choice of law provisions. Nevada laws
will prevail, except to the extent governed by the United States Trademark Act
of 1946 (Xxxxxx Act, 15 U.S.C. Sections 1051, et seq.) and except in those
states whose franchise laws require exclusive application of those laws. This
choice of laws will not include and does not extend the scope of application of
any Nevada franchise or business opportunity laws except as they may otherwise
apply pursuant to their terms and definitions. No franchise or business
opportunity statute, law or regulation of Nevada or any other state is intended
to be made applicable to this Agreement unless it would otherwise apply. Any
portion of this Agreement that requires enforcement in any other state, and is
enforceable under the laws of that state but not of Nevada, will be construed
and enforced according to the laws of that state. All issues or disagreements
relating to this Agreement will be mediated, arbitrated, tried, heard, and
decided in Las Vegas, Nevada which you agree is the most convenient venue for
these purposes. You acknowledge and agree that this location for venue is
reasonable and the most beneficial to the needs of, and best meets the interest
of, all of the members of the ITEX franchise system.
9.9 Enforcement. From time to time there may be controversy about this
Agreement, its interpretation, or performance or breach by the parties. You
recognize the unique value and secondary meaning attached to the Method of
Operation, the Service Marks and our standards of operation and trade practices.
You agree that any noncompliance with the terms of this Agreement or any
unauthorized or improper use of the Method of Operation or the Service Marks
will cause irreparable damage to us and our franchisees. You agree that if you
engage in any unauthorized or improper use, during or after the period of this
Agreement, we will be entitled to both permanent and temporary injunctive relief
from any court of competent jurisdiction in addition to any other remedies
prescribed by laws.
No right or remedy conferred upon us is exclusive of any other right or remedy
in this Agreement or provided by law or equity. Each will be cumulative of every
other right or remedy.
We may employ legal counsel or incur other expense to collect or enforce your
obligations or to defend against any claim, demand, action or proceeding because
of your failure to perform your obligations. Legal action may be filed by or
against us and that action or the settlement of it may establish your breach of
this Agreement. If either event occurs, we may recover from you the amount of
our reasonable attorney fees and all other expenses we incur in collecting or
enforcing that obligation or in defending against that claim, demand, action or
proceeding.
The prevailing party in any arbitration, insolvency proceeding, bankruptcy
proceeding, suit, or action to enforce this Agreement will recover its
arbitration, proceeding, and court costs and reasonable attorney fees. These
will be set by the arbitration, proceeding or court, including costs and
attorney fees on appeal or review from the arbitration, proceeding, suit or
action.
You agree that the existence of any claims you may have will not constitute a
defense to the enforcement by us of any of the confidentiality requirements and
covenants not to compete described in this Agreement. You acknowledge that any
violation of the confidentiality requirements and covenants not to compete would
result in irreparable injury to us for which no adequate remedy at law may be
available and you accordingly consent to the issuance of an injunction
prohibiting any conduct by you in violation of the terms of the covenants not to
compete.
You agree that each of the confidentiality requirements and covenants not to
compete described in this Agreement will be constructed as independent of any
other covenant or provision. If all, parts or any portion of any covenant in
this Agreement is held unreasonable or unenforceable by a court or agency having
valid jurisdiction in an unappealed final decision to which we are a party, you
expressly agree to be bound by any lesser covenant subsumed within the terms of
that covenant that imposes the maximum duty permitted by law, as if the
resulting covenant were separately stated in this Agreement. Each of the
covenants described in this Agreement is a separate and independent covenant in
each of the separate counties and states in the United States in which we
transact business. To the extent that any covenant may be determined to be
judicially unenforceable in any county or state, that covenant will not be
affected with respect to any other county or state.
9.10 Other Agreements. If you or any of your shareholders, partners, or
officers violate any material provision of any other franchise or similar
agreement with us, that breach will be considered a breach of this Agreement and
of the other agreements. We then may terminate or otherwise enforce this
Agreement and the other agreements.
9.11 Agreement Binding on Successors and Assigns. This Agreement
benefits and binds the respective heirs, executors, administrators, successors,
and assigns of the parties.
9.12 Execution in Counterparts and Our Acceptance. This Agreement will
be binding upon you at the time you sign it and deliver it to us. This Agreement
will not be binding upon us until we accept it in writing by one of our
principal officers at our home office. If we do not accept it within sixty days,
this Agreement will no longer be binding upon you. This Agreement may be
executed in any number of counterparts, each of which, when so executed and
delivered, will constitute an original. Delivery of executed signature pages of
this Agreement by facsimile transmission will constitute effective and binding
execution and delivery of this Agreement.
9.13 Approval by Shareholders, Members or Partners. If you are a
corporation, limited liability company, partnership or other entity, we will not
be bound until your shareholders, members or partners read and approve this
Agreement, agree to the restrictions on them (including restrictions on the
transfer of their interest in the Franchise and the restrictions and limitations
on their ability to compete with us), and jointly and severally guarantee your
performance under this Agreement. We may request a copy of the Resolution
approved by your partners, members, shareholders, owners or directors as
confirmation of your fulfillment of this requirement and authorizing your
execution of this Agreement.
Your ownership certificates will have conspicuously endorsed upon them a
statement that they are subject to, and that further assignment or transfer of
them is subject to, the restrictions imposed upon assignments by this Agreement.
9.14 Personal Guarantee. The undersigned Guarantors are all of your
partners, members, shareholders or owners. They jointly, severally, irrevocably,
and unconditionally guarantee to us the due and punctual observance and
performance by you of all of your obligations under this Agreement and any other
agreement to which you and us are parties. Each Guarantor agrees to guarantee us
against all liability, loss, harm, damage, costs, and expenses (including
attorney fees) that we may incur because of your failure to observe your
obligations. The liabilities and obligations of each Guarantor will not be
released, discharged, or affected by our release or discharge of or dealing with
you under any of these agreements; or by anything we do, suffer, or allow to be
done in relation to you; or by change, alteration, or modification of any of the
agreements; or by any compromise, arrangement, or plan of reorganization
affecting you; or by your bankruptcy or insolvency; or by any other act or
proceeding in relation to you or any of the agreements by which any Guarantor
might otherwise be released. The liabilities and obligations of each Guarantor
pursuant to this Guarantee will be continuing in nature and will terminate only
on the satisfaction of your obligations under this Agreement. A fresh cause of
action will arise in respect of each breach by you producing a liability of any
Guarantor.
The Guarantors agree that it shall not be necessary for us or our assigns to
institute suit or exhaust our legal remedies against you in order to enforce
this guaranty. Guarantors agree that we may from time to time extend the time
for performance or otherwise modify, alter, or change this Agreement, may extend
the time for payment of all sums guaranteed, and may receive and accept notes,
checks, and other instruments for the payment of money made by you and
extensions or renewals without in any way releasing or discharging Guarantors
from their obligations. This guaranty shall not be released, extinguished,
modified, or in any way affected by our failure to enforce all the rights or
remedies available to it under this Agreement. Our release of one or more
Guarantor will not operate as a release of the other Guarantors.
9.15 Receipt of Disclosure Documents. You acknowledge that you have
received a complete and final copy of this Agreement and its exhibits not less
than five business days before the date on which you executed this Agreement.
Any oral representations made by our representatives to you, whether or not set
forth in earlier versions of this document, have either been ratified by us by
including the representations in this document or have been disavowed by
excluding them from this document. You further acknowledge that you have
received a Franchise Disclosure document not less than ten business days before
the date you executed this Agreement.
9.16 Representation. The success of your Franchise is speculative and
depends, to a large extent, upon your ability as an independent businessperson.
You or your majority owner if you are a corporation, limited liability company
or partnership, must actively participate in the daily affairs of the business.
We do not make any representation or warranty, express or implied, as to the
potential success of the Franchise.
You acknowledge that an ITEX brokerage business involves hard work and sometimes
long hours, similar to most small businesses that are owner operated. We have
not represented that this business is going to be easy for you, your partners,
officers or directors. You represent that you are in good health and able to
devote your full time and best efforts in the day to day operations of your
franchised business or that you have the business management skills necessary to
successfully hire a general manager to run the day to day operations of your
franchised business.
You acknowledge that you have entered this Agreement after making an independent
investigation of our operations. You have not relied upon any representation as
to gross revenues, volume, cost savings, potential earnings or profits which you
in particular might realize. No person has made any other representation that is
not expressly set forth in this Agreement to induce you to accept this Franchise
and execute this Agreement.
9.17 Acknowledgments.
A. You have conducted an independent investigation of us and of the
Franchise. You recognize that the business venture contemplated by this
Agreement involves business risks. Your success will be dependent upon your
ability as an independent businessperson. We expressly disclaim the making of,
and you acknowledge that you have not received, any representation, warranty, or
guarantee, express or implied, concerning the potential revenues, cost savings,
volume, profits, or success of the business venture contemplated by this
Agreement.
B. You acknowledge that you have received, have had an ample time to
read and have read this Agreement. You understand its provisions. You have
received advice from advisors of your own choosing regarding all pertinent
aspects of this Franchise and the franchise relationship created by this
Agreement. You also acknowledge that you believe you have made a good decision
for yourself or your partners or your corporation based upon what you believe is
your ability to run and control a business of your own.
C. We may conduct investigations and make inquiries of any person or
persons we, in our reasonable judgment, believe appropriate concerning the
credit standing, character, and professional and personal qualifications of you
and your owners, shareholders, members and partners. You authorize us to conduct
these investigations and to make these inquiries. We agree to comply with the
requirements of laws that apply to these investigations and inquiries.
WE HAVE NOT MADE ANY REPRESENTATIONS, PROMISES, GUARANTEES, PROJECTIONS, OR
WARRANTIES OF ANY KIND TO YOU, YOUR OWNERS, OR THE GUARANTORS TO INDUCE THE
EXECUTION OF THIS AGREEMENT OR CONCERNING THIS AGREEMENT EXCEPT AS SPECIFICALLY
SET FORTH IN WRITING IN THIS AGREEMENT. YOU ACKNOWLEDGE THAT NEITHER WE NOR ANY
OTHER PARTY HAS GUARANTEED YOUR SUCCESS IN THE BUSINESS CONTEMPLATED BY THIS
AGREEMENT.
10 SIGNATURES
----------
IN WITNESS, the parties have executed this Agreement on the day and year first
above written.
("We/Us"): ITEX CORPORATION ("You"):
By: By:
-------------------------------
Title: Title:
----------------------------
IF YOU ARE A CORPORATION, LIMITED LIABILITY COMPANY OR OTHER ENTITY: THIS
AGREEMENT MUST BE SIGNED BY A COMPANY OFFICER. ADDITIONALLY, THE AGREEMENT MUST
BE GUARANTEED BY ALL OFFICERS AND OWNERS OF THE COMPANY AS INDIVIDUALS, ON THE
GUARANTEE FORM ATTACHED TO THIS AGREEMENT.
The undersigned officer_____________ being the _________________ of
________________ , pursuant to authority granted to him at a duly called meeting
of such company on the ___ day of ________ , 20__, executes this instrument, by
signing the name of the company, as an officer.
("We/Us"): ITEX CORPORATION ("You"):
By: By:
--------------------------------------------
Title: Title:
-------------------------------------------
By:
Title:
IF YOU ARE A PARTNERSHIP: THIS AGREEMENT MUST BE SIGNED BY ALL GENERAL PARTNERS.
THE AGREEMENT MUST ADDITIONALLY BE GUARANTEED BY ALL GENERAL PARTNERS, AS
INDIVIDUALS, ON THE GUARANTEE FORM ATTACHED TO THIS AGREEMENT.
The undersigned partner, ____________________ , being a General Partner
authorized to execute this Agreement on behalf of the partnership, executes this
instrument by signing the name of the partnership by himself, as general partner
of the partnership.
("We/Us"): ITEX CORPORATION ("You"):
("We/Us"): ITEX CORPORATION ("You"):
By: By:
--------------------------------------------
Title: Title:
-------------------------------------------
By:
Title:
GUARANTOR(S):
------------ ------------
------------ ------------
------------ ------------
(EXHIBIT D)
CONDITIONAL ASSIGNMENT OF PHONE NUMBER
_________________ ("You") operate your franchise business at __________________.
In consideration of the granting of a franchise to you and other valuable
consideration given by ITEX CORPORATION, a Nevada corporation ("Us"), you assign
to us all telephone numbers and listings you use in the operation of the
franchise. We assume the performance of all of the terms, covenants and
conditions of your agreement with the Telephone Company concerning the telephone
numbers and telephone listings with the full force and effect as if we had been
originally issued the telephone numbers and telephone listings. We will hold
this assignment, and will deliver it to the Telephone Company or other
interested third parties only upon termination of the Franchise Agreement
between us and you dated ___________.
DATED this _________ day of _________________, 20__.
("We/Us"): ITEX CORPORATION ("You"):
By: By:
--------------------------------------------
Title: Title:
-------------------------------------------
By:
Title:
(EXHIBIT E)
ITEX CORPORATION FRANCHISE AGREEMENT ADDENDUM
ABANDONMENT, RELINQUISHMENT, AND TERMINATION
OF ASSUMED OR FICTITIOUS BUSINESS NAME
--------------------------------------
Pursuant to the provisions of relevant state laws concerning the registration
and use of assumed or fictitious business names, the undersigned applicant,
being a franchisee of ITEX CORPORATION, submits the following to evidence its
intent to abandon, relinquish and terminate its right to use the business name
ITEX CORPORATION:
1. Name of Applicant who is Using the Assumed or Fictitious
Business Name:
---------------------------------
---------------------------------
a(an) individual/partnership/corporation organized and doing
business under the laws of the State of
---------------------------------
2. Date When Original Assumed or Fictitious Business Name was
Filed by Applicant:
---------------------------------
3. Address of Applicant's Registered Office in the State of:
---------------------------------
---------------------------------
---------------------------------
4. Please cancel the Applicant's registration to use the name
ITEX
DATED:
---------------------------------------------
----------------------------
Applicant
By:
-------------------------
Title:
----------------------
(EXHIBIT F)
UNIFORM FRANCHISE OFFERING CIRCULAR
STATE LAW ADDENDUM
The following modifications and additions are part of ITEX CORPORATION's
Franchise Offering Circular ("OC") and Franchise Agreement ("FA") as required by
relevant state laws. We are not currently registered to offer Franchises in the
States of: California, Hawaii, Illinois, Indiana, Kentucky, Maryland, Michigan,
Minnesota, Nebraska, New York, North Dakota, Rhode Island, South Dakota, Texas,
Virginia, Washington or Wisconsin.
These states have statutes which may supersede the Franchise Agreement in your
relationship with us including the areas of termination and renewal of the
Franchise:
ARKANSAS (Stat. Section 70-807)
CALIFORNIA (Bus. & Prof. Code Sections 20000-20043)
CONNECTICUT (Gen. Stat. Section 42-133e et seq.)
DELAWARE (Code, tit.)
HAWAII (Rev. Stat. Section 482-E1)
ILLINOIS (815 ILCS 705/19 and 705/20)
INDIANA (Stat. Section 23-2-2.7)
MICHIGAN (Stat. Section 19.854(27))
MINNESOTA (Stat. Section 80C.14)
MISSISSIPPI (Code Section 75-24-51)
MISSOURI (Stat. Section 407.400)
NEBRASKA (Rev. Stat. Section 8-401)
NEW JERSEY (Stat. Section 56.10-1)
SOUTH DAKOTA (Codified Laws Section 37-5A-51)
VIRGINIA (Code 13.1-557-574, 13.1-564)
WASHINGTON (Code Section 19.100.180)
WISCONSIN (Stat. section 135.03)
These and other states may have court decisions which may supersede the
Franchise Agreement in your relationship with us, including the areas of
termination and renewal of the Franchise.
California
----------
THE CALIFORNIA FRANCHISE INVESTMENT LAW REQUIRES THAT A COPY OF ALL
PROPOSED AGREEMENTS RELATING TO THE SALE OF THE FRANCHISE DE DELIVERED
TOGETHER WITH THE OFFERING CIRCULAR
OC Item 17, FA Sections 5 and 6
--------------------------------
(1) California Business and Professions Code Sections 20000
through 20043 provide rights to the franchisee concerning termination or
non-renewal of a franchise. If the Franchise Agreement contains a provision that
is inconsistent with the law, the law will control.
(2) The Franchise Agreement provides for termination upon
bankruptcy. This provision may not be enforceable under federal bankruptcy law
(11 U.S.C.A. Sec. 101 et. seq.).
(3) The Franchise Agreement contains a covenant not to compete
which extends beyond the termination of the franchise. This provision may not be
enforceable under California law.
(4) The Franchise Agreement requires application of the laws
of the State of Nevada. This provision may not be enforceable under California
law.
(5) Section 31125 of the California Corporations Code requires
us to give you a disclosure document, in a form and containing such information
as the Commissioner may by rule or order require, before a solicitation of a
proposed material modification of an existing franchise.
Negotiated Sales
----------------
Copies of any notice of negotiated sale of a franchise may be reviewed at any
office of the California Department of Corporations. Attached are copies of all
notices of negotiated sale filed during the 12 months immediately preceding the
effective date of the Offering Circular.
All negotiated sales in California are subject to the following provisions as
outlined in the California Administrative Code, Title 10, Chapter 3, Subchapter
2.6, Section 310.100.2:
1. The initial offer must be registered pursuant to the
California Franchise Investment Law.
2. The prospective Franchisee because of its business or
financial experience could be reasonably assumed to have the
capacity to protect its own interest in the transaction. The
income and net worth of the prospective its spouse may be
included in determining the total income and net worth
required by this paragraph. The net worth and income test
may also be satisfied by a prospective franchisee
corporation (or by a 50 percent or more shareholder of such
prospective franchisee corporation) or a prospective
franchisee partnership (or by a prospective franchisee
general partner of such partnership). In making the
determination, we may rely on the representations of the
prospective franchisee with respect to its net worth and
income provided we have no reason to doubt the
representations.
3. If a negotiated sale is consummated, Notice of Negotiated
Sale of Franchise in the form set forth in the regulations
must be filed with the Commissioner within 15 business days
after the negotiated sale.
WE CERTIFY AND DECLARE THAT ALL NOTICES HAVE BEEN FILED WITH THE
COMMISSIONER AS REQUIRED BY THE NEGOTIATED SALES SECTION OF THE
CALIFORNIA ADMINISTRATIVE CODE, TITLE 10, CHAPTER 3, SUBCHAPTER
2.6, SECTION 310.100.2(a).
Connecticut
-----------
If we fail to deliver products, equipment or supplies or fail to render the
services necessary to begin substantial operation of the franchise within 45
days of the delivery date agreed upon by contract, you may cancel the contract
upon written notification.
Hawaii
------
Paragraph 4110.01, Section 482E-6(3): Upon termination or refusal to
renew the franchise the franchisee will be compensated for the fair market
value, at the time of the termination or expiration of the franchise, of the
franchisee's inventory, supplies, equipment and furnishings purchased from the
franchisor or a supplier designated by the franchisor; provided that
personalized materials which have no value to the franchisor need not be
compensated for. If the franchisor refuses to renew a franchise for the purpose
of converting the franchisee's business to one owned and operated by the
franchisor, the franchisor, in addition to their remedies provided in this
paragraph, will compensate the franchisee for the loss of goodwill. The
franchisor may deduct from such compensation reasonable costs incurred in
removing, transporting and disposing of the franchisee's inventory, supplies,
equipment, and furnishings pursuant to this requirement, and may offset from
such compensation any moneys due the franchisor.
Illinois
--------
OC Items 5 and 6
----------------
The Illinois Franchise Disclosure Act prohibits discrimination among franchisees
for payments made for Initial Franchise Fees, Revenue Sharing, and the purchase
of goods or services from the franchisor.
OC Item 17
----------
A franchisee's rights upon termination and non-renewal may be affected by
Illinois law. III. Xxx. Stat. Ch 1212, Section 704.3, 704.4. All provisions of
the Franchise Agreement, including but not limited to the giving of general
releases must comply with the Illinois Franchise Disclosure Act.
OC Item 5, FA Section 2.1
-------------------------
Based upon the franchisor's updated financial statements, the state of Illinois
has imposed financial assurance requirments on the franchisor. The form of
assurance is the deferral of payment of the initial franchise fee. All initial
franchise fees will be due and payable only after the franchisor has fulfilled
and performed all of its initial financial obligations and the franchisee has
opened the franchise business and commenced business operations under the
Franchise Agreement (which opening and commencement occurs upon completion of
the initial training course).
OC Item 17 and FA Section 9
---------------------------
Section 4 of the Illinois Franchise Disclosure Act and Rule 200.608 of the Rules
and Regulations promulgated thereunder dictate that "any provision in the
Franchise Agreement which designates jurisdicion or venue in a forum outside of
Illinois is void with respect to any cause of action which otherwise is
enforceable in Illinois, provided that the Franchise Agreement may provide for
arbitration in a forum outside of Illinois." Section 41 of the Act and Rule
200.609 void any attempt to waive compliance with Illinois law. Any governing
law and choice of law clause granting authority to a state other than Illinois
effectively negates the Illinois Franchise Disclosure Act. Therefore all
provisions of the Offering Circular and Franchise Agreement are amended to fully
comply with and full apply Illinois law as applicable to franchisees and the
franchises in Illinois.
Indiana
-------
OC Item 17; FA Section 5 and 6
------------------------------
In Indiana, the reference to "members of their households or members of their
immediate families" under the provisions of covenants not to compete will mean
any person who has access to the information, including a spouse or any other
person who lives within the household.
Maryland
--------
UFOC Item 17 and FA Sections 6.1, 6.3, 7.1 and 9.7
--------------------------------------------------
Pursuant to COMAR 02.02.08.16L, a general release required as a condition of
renewal or assignment or transfer will not apply to any liability under the
Maryland Franchise Registration and Disclosure Law.
Any provision that provides for termination upon bankruptcy of the franchisee
may not be enforceable under federal bankruptcy law (11 U.S.C. Section 101 et
seq.).
Section 14-216(c) (25) of the Maryland Franchise Registration and Disclosure Act
requires a franchisor to file an irrevocable consent to be sued in Maryland.
Notwithstanding anything to the contrary in the franchise agreement or offering
circular, you may bring a lawsuit in Maryland for claims arising under the
Maryland Franchise Registration and Disclosure Act.
FA Section 9
------------
Section 14-226 of the Maryland Franchise Registration and Disclosure Law
prohibits a franchisor from requiring a prospective franchisee to assent to any
release, estoppel or waiver of liability as a condition of purchasing a
franchise. Our franchise agreement contains disclaimers of the occurrence or
acknowledgment of the non-occurrence of acts that could constitute a violation
of Maryland laws. These disclaimers, acknowledgments and representations are not
intended to nor shall they act as a release, estoppel or waiver of any liability
incurred under the Maryland Franchise Registration and Disclosure Law.
OC Item 5, FA Section 2.1
-------------------------
All initial franchise fees will be due and payable only after the franchisor has
fulfilled and performed all of its initial obligations and the franchisee has
commenced business operations under the Franchise Agreement.
Michigan
--------
The State of Michigan prohibits certain unfair provisions that are sometimes in
franchise documents. If any of the following provisions are included in these
franchise documents, the provisions are void for Michigan franchisees and cannot
be enforced against Michigan franchisees. These provisions are:
(a) A prohibition on the right of a franchisee to join an
association of franchisees.
(b) A requirement that a franchisee assent to a release,
assignment, novation, waiver, or estoppel which deprives a
franchisee of rights and protections provided in the Michigan
Franchise investment law. This will not preclude a franchisee,
after entering into a Franchise Agreement, from settling any
and all claims.
(c) A provision that permits a franchisor to terminate a franchise
prior to the expiration of its term except for good cause.
Good cause will include the failure of the franchisee to
comply with any lawful provision of the Franchise Agreement
and to cure the failure after being given written notice and a
reasonable opportunity, which in no event need be more than 30
days, to cure the failure.
(d) A provision that permits a franchisor to refuse to renew a
franchise without fairly compensating the franchisee by
repurchase or other means for the fair market value at the
time of expiration of the franchisee's inventory, supplies,
equipment, fixtures, and furnishings. Personalized materials
which have no value to the franchisor and inventory, supplies,
equipment, fixtures, and furnishings not reasonably required
in the conduct of the franchise business are not subject to
compensation. This subsection applies only if:
(i) The term of the franchise is less than 5 years, and
(ii) The franchisee is prohibited by the franchise or
other agreement from continuing to conduct
substantially the same business under another
trademark, service xxxx, trade name, logotype,
advertising, or other commercial symbol in the same
area subsequent to the expiration of the franchise,
or the franchisee does not receive at least six
months' advance notice of the franchisor's intent not
to renew the franchise.
(e) A provision that permits the franchisor to refuse to renew a
franchise on terms generally available to other franchisees of
the same class or type under similar circumstances. This
section does not require a renewal provision.
(f) A provision requiring that arbitration or litigation be
conducted outside this state. This will not preclude the
franchisee from entering into an agreement, at the time of
arbitration, to conduct arbitration at a location outside this
state.
(g) A provision which permits a franchisor to refuse to permit a
transfer of ownership of a franchise, except for good cause.
This subdivision does not prevent a franchisor from exercising
a right of first refusal to purchase the franchise. Good cause
will include, but is not limited to:
(i) The failure of the proposed transferee to meet the
franchisor's then current reasonable qualifications
or standards.
(ii) The fact that the proposed transferee is a competitor
of the franchisor or subfranchisor.
(iii) The unwillingness of the proposed transferee to agree
in writing to comply with all lawful obligations.
(iv) The failure of the franchisee or proposed transferee
to pay any sums owing to the franchisor or to cure
any breach in the Franchise Agreement existing at the
time of the proposed transfer.
(h) A provision that requires the franchisee to resell to the
franchisor items that are not uniquely identified with the
franchisor. This subdivision does not prohibit a provision
that grants to a franchisor a right of first refusal to
purchase the assets of a franchise on the same terms and
conditions as a bona fide third party willing and able to
purchase those assets, nor does this subdivision prohibit a
provision that grants the franchisor the right to acquire
the assets of a franchise for the market or appraised value
of assets if the franchisee has breached the lawful
provisions of the Franchise Agreement and has failed to cure
the breach in the manner provided in subdivision (c).
(i) A provision which permits the franchisor to directly or
indirectly convey, assign, or otherwise transfer the
franchisee's obligations to fulfill contractual obligations to
the franchisee unless provision has been made for providing
the required contractual services.
The fact that there is a notice of this offering on file with the Attorney
General does not constitute approval, recommendation or endorsement by the
Attorney General. A franchisor whose most recent financial statements are
unaudited and show a net worth of less than $100,000 will, at the request of a
franchisee, arrange for the escrow of initial investment and other funds paid by
the franchisee until the obligations to provide real estate, improvements,
equipment, inventory, training, or other items included in the franchise
offering are fulfilled. At the option of the franchisor, a surety bond may be
provided in place of the escrow. Any questions regarding this notice should be
directed to the Department of the Michigan Attorney General, 0000 Xxxxxxxxxx
Xxx, Xxxxx 0, Xxxxxxx, Xxxxxxxx 00000; (000) 000-0000.
The name and address of the franchisor's agent in Michigan authorized to receive
service of process is:
Michigan Department of Commerce
Corporation and Securities Bureau
Office of Franchise and Agent Licensing
0000 Xxxxxxxxxx Xxx
P. O. Xxx 00000 Xxxxxxx, Xxxxxxxx 00000
Minnesota
---------
Minnesota law prohibits requiring a franchisee to waive his or her rights to a
trial or to consent to liquidated damages, termination penalties, or judgment
notes; provided, that this part will not bar a voluntary arbitration of any
matter if the proceeding is conducted by an independent tribunal under the rules
of the American Arbitration Association. (Minn. Rules 2860.4400(J)).
Minnesota law provides franchisees with certain termination and nonrenewal
rights. Minn. Stat. Sec. 80C.14, Subd. 3, 4 and 5 require, except in certain
specified cases, that a franchisee be given ninety days notice of termination
(with sixty days to cure) and one hundred days notice for nonrenewal of the
Franchise Agreement.
OC Item 5, FA Section 2.1
-------------------------
All initial franchise fees will be due and payable only after the franchisor has
fulfilled and performed all of its initial financial obligations and the
franchisee has commenced business operations under the Franchise Agreement
(which occurs upon completion of the initial training course).
OC Item 13; FA Section 5
------------------------
Minnesota Statutes Section 80C.20, Subdivision 1(g) allows the Minnesota
Commissioner of the Department of Commerce to issue a cease and dismiss order or
issue an order denying, suspending or revoking any registration, amendment or
exception on finding any of the following . . . that the method of sale or
proposed method of sale of franchises or the operation of the business of the
franchisor or any term or condition of the franchise agreement or any practice
of the franchisor is or would be unfair or inequitable to franchisees. Pursuant
to this section, the Commissioner requires all franchisors registering in the
state of Minnesota to state that the franchisor will protect the franchisee's
right to use the trademarks, service marks, trade names, logo types or other
commercial symbols or indemnify the franchisee from any loss, cost or expenses
arising out of any claim, suit or demand regarding the use of the name. We
intend to comply with the Minnesota statute and to protect the franchisee's
rights and indemnify the franchisee for any losses to the full extent required
by relevant state law.
FA Section 9
------------
Pursuant to Minnesota Statutes Section 80.C.21, this section will not in any way
abrogate or reduce any rights of the franchisee as provided for in Minnesota
Statutes, Chapter 80.C, including, but not limited to, the right to submit
matters to the jurisdiction of the courts in Minnesota.
New York
--------
UNIFORM FRANCHISE OFFERING CIRCULAR COVER PAGE
----------------------------------------------
INFORMATION COMPARING FRANCHISORS IS AVAILABLE. CALL THE STATE ADMINISTRATORS
LISTED IMMEDIATELY BELOW OR YOUR PUBLIC LIBRARY FOR SOURCES OF INFORMATION.
REGISTRATION OF THIS FRANCHISE BY NEW YORK STATE DOES NOT MEAN THAT NEW YORK
STATE RECOMMENDS IT OR HAS VERIFIED THE INFORMATION IN THIS OFFERING CIRCULAR.
IF YOU LEARN THAT ANYTHING IN THE OFFERING CIRCULAR IS UNTRUE, CONTACT THE
FEDERAL TRADE COMMISSION AND THE NEW YORK STATE DEPARTMENT OF LAW BUREAU OF
INVESTOR PROTECTION AND SECURITIES, 000 XXXXXXXX, 00XX XXXXX, XXX XXXX, XXX XXXX
00000.
THE FRANCHISOR MAY, IF IT CHOOSES, NEGOTIATE WITH YOU ABOUT ITEMS COVERED IN THE
PROSPECTUS. HOWEVER, THE FRANCHISOR CANNOT USE THE NEGOTIATING PROCESS TO
PREVAIL UPON A PROSPECTIVE FRANCHISEE TO ACCEPT TERMS WHICH ARE LESS FAVORABLE
THAN THOSE SET FORTH IN THIS PROSPECTUS.
UFOC Item 3
-----------
Neither the franchisor, its predecessor, any person listed in Item 2, nor any
affiliate offering franchises under the franchisor's principal trademark:
1. Has any administrative, criminal or material civil action
pending against that person alleging: a felony; a violation of
a franchise, antitrust or securities law, fraud, embezzlement,
fraudulent conversion, misappropriation of property; unfair or
deceptive practices or comparable civil or misdemeanor
allegations. There are no pending actions, other than routine
litigation incidental to the business, which are significant
in the context of the number of franchises and the size,
nature or financial condition of the franchise system or its
business operations.
2. Has been convicted of a felony or pleaded nolo contendere
to a felony charge or, within the ten-year period immediately
preceding the date of this Offering Circular, has been
convicted of or pleaded nolo contendere to a misdemeanor
charge or has been the subject a civil action alleging:
violation of a franchise, antifraud or securities law, fraud,
embezzlement, fraudulent conversion or misappropriation of
property, or unfair or deceptive practices or comparable
allegations.
3. Is subject to a currently effective injunctive or
restrictive order or decree relating to the franchise or under
any federal, state or Canadian franchise, securities,
antitrust, trade regulation or trade practice law, resulting
from a concluded or pending action or proceeding brought by a
public agency or is subject to any currently effective order
of any national securities association or national securities
exchange (as defined in the Securities Exchange Act of 1934)
suspending or expelling such person from membership in such
association or exchange; or is subject to a currently
effective injunctive or restrictive order relating to any
other business activity as a result of an action brought by a
public agency or department, including without limitation
actions affecting a license as a real estate broker or sales
agent.
UFOC Item 4
-----------
Neither the franchisor, its affiliates, its predecessors, officers, nor general
partners, during the ten-year period immediately before the date of the offering
circular: (a) filed as a debtor (or had filed against it) a petition to start an
action under the U.S. Bankruptcy Code; (b) obtained a discharge of its debts
under the bankruptcy code; or (c) was a principal officer of a company or
general partner of a partnership that either filed as a debtor (or had filed
against it) a petition to start an action under the U.S. Bankruptcy Code or that
obtained a discharge of its debts under the U.S. Bankruptcy Code during or
within one year after the officer or general partner of the franchisor held this
position in the company or partnership.
UFOC Item 17
------------
THIS TABLE LISTS CERTAIN IMPORTANT PROVISIONS OF THE FRANCHISE AND RELATED
AGREEMENTS PERTAINING TO RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION.
YOU SHOULD READ THESE PROVISIONS IN THE AGREEMENTS ATTACHED TO THIS OFFERING
CIRCULAR.
---------------------------------------- ----------------- ---------------------------------------------------------
Choice of Law Section 9.7 NEVADA law applies except to the extent governed by the
United States Trademark Act and except in those states
whose franchise laws require exclusive application.
The foregoing choice of law should not be considered a
waiver of any right conferred upon the Franchisee by
the GBL of the State of New York, Article 33.
---------------------------------------- ----------------- ---------------------------------------------------------
North Dakota
------------
OC Item 5, FA Section 2.1
-------------------------
All initial franchise fees will be due and payable only after the franchisor has
fulfilled and performed all of its initial financial obligations and the
franchisee has commenced business operations under the Franchise Agreement
(which occurs upon completion of the initial training course).
OC Item 9
---------
Under North Dakota law, no modification or change the franchisor makes to the
Operations Manual or Method of Operation may materially affect the franchisee's
status, rights, or obligations under the Franchise Agreement.
FA Sections 5 and 6
-------------------
Covenants not to compete are considered unenforceable in the State of North
Dakota.
FA Section 6
------------
Under North Dakota law, a requirement that franchisees consent to liquidated
damages or termination penalties in the event of termination of the franchise
agreement is considered unenforceable.
FA Section 9.6
--------------
The North Dakota Franchise Investment Law (Section 51-19-09) requires that this
Agreement will be governed by the laws of North Dakota, which laws will prevail.
Further, all issues or disagreements relating to this Agreement will be
arbitrated, tried, heard and decided within the jurisdiction of courts in the
state of North Dakota.
Rhode Island
------------
OC Item 17 and FA Section 9
---------------------------
Section 19-28.1-14 of the Rhode Island Franchise Investment Act provides that "A
provision in a franchise agreement restricting jurisdiction or venue to a forum
outside this state or requiring the application of the laws of another state is
void with respect to a claim otherwise enforceable under the Act."
South Dakota
------------
OC Item 5, FA Section 2.1
-------------------------
All initial franchise fees will be due and payable only after the franchisor has
fulfilled and performed all of its initial financial obligations and the
franchisee has commenced business operations under the Franchise Agreement
(which occurs upon completion of the initial training course).
OC Item 17; FA Section 6
------------------------
Under South Dakota law, termination provisions covering breach of the Franchise
Agreement, failure to meet performance and quality standards and failure to make
royalty payments contained in the offering circular and franchise agreement must
afford a franchisee thirty (30) days' written notice with an opportunity to cure
the breach prior to termination.
FA Section 9
------------
The law regarding franchise registration, employment, covenants not to compete,
and other matters of local concern will be governed by the laws of the State of
South Dakota; but as to contractual and all other matters, this Agreement and
all provisions of this instrument will be and remain subject to the application,
construction, enforcement, and interpretation under the governing law of the
State of Nevada.
Covenants not to compete upon termination of the franchise agreement are
generally unenforceable in the State of South Dakota. Pursuant to SDCL 37-5A-86,
any acknowledgement provision, disclaimer, or integration clause or a provision
having a similar effect in a franchise agreement does not negate or act to
remove from judicial review any statement, misrepresentation or action that
would violate this chapter or a rule or order under this chapter.
In the event that either party will make demand for arbitration, such
arbitration will be conducted in a mutually agreed-upon site in accordance with
Section 11 of the Commercial Arbitration Rules of the American Arbitration
Association.
Any provision in a franchise agreement which designates jurisdiction or venue or
requires the franchisee to agree to jurisdiction or venue in a forum outside of
South Dakota is void with respect to any cause of action which is otherwise
enforceable in South Dakota.
Virginia
--------
OC Item 9
---------
In Virginia, notice of approval or disapproval of a proposed supplier will be
issued by us within 45 days after the franchisee has delivered all required
materials.
OC Item 5, FA Section 2.1
-------------------------
All initial franchise fees will be due and payable only after the franchisor has
fulfilled and performed all of its initial financial obligations and the
franchisee has commenced business operations under the Franchise Agreement
(which occurs upon completion of the initial training course).
OC Item 1, Receipt Page
-----------------------
The Clerk of the State Corporation Commission, 00000 Xxxx Xxxx Xxxxxx, Xxxxxxxx
Xxxxxxxx 00000, is our registered agent authorized to receive process in
Virginia.
Washington
----------
OC Item 5, FA Section 2.1
-------------------------
All initial franchise fees will be due and payable only after the franchisor has
fulfilled and performed all of its initial financial obligations and the
franchisee has commenced business operations under the Franchise Agreement
(which occurs upon completion of the initial training course).
OC Item 17; FA Section 6 and 7
------------------------------
In any arbitration involving a franchise purchased in Washington, the
arbitration site will be either in the state of Washington, or in a place
mutually agreed upon at the time of the arbitration, or as determined by the
arbitrator.
In the event of a conflict of laws, the provisions of the Washington Franchise
Investment Protection Act, Chapter 19.100 RCW will prevail.
A release or waiver of rights executed by a franchisee will not include rights
under the Washington Franchise Investment Protection Act, except when executed
pursuant to a negotiated settlement after the Franchise Agreement is in effect
and where the parties are represented by independent counsel. Provisions such as
those which unreasonably restrict or limit the statute of limitations period for
claims under the Act, rights or remedies under the Act such as a right to a jury
trial may not be enforceable.
Transfer Fees are collectable to the extent that they reflect the franchisor's
reasonable estimated or actual costs in effecting a transfer.
The franchisee acknowledges receipt of this Addendum.
Wisconsin
---------
OC Item 17
----------
The applicable laws of Wisconsin may require notice periods greater than those
set forth above for termination, cancellation, non-renewal, or the like, and may
limit the reasons or causes for termination, cancellation, non-renewal, or the
like. To the extent any provisions of the Franchise Agreement provide for
periods of notice or for termination, cancellation, non-renewal, or the like
other than in accordance with the applicable law, such provisions will not be
effective, to the extent such are not in accordance with applicable law, and the
franchisor will comply with the applicable law.
The Wisconsin Fair Dealership Law (Wisconsin Statutes, 1983-84, Title XIV-A,
Chapter 135) supersedes any provision of a Franchise Agreement inconsistent with
the law.
It is agreed that this state law addendum for the state of ___________ is made
part of and supersedes relevant portions of the Franchise Agreement dated the
___ day of ________ , 20__ between ____________ ("We") and ___________ ("You").
DATED this ______ day of _________, 20__ .
("We/Us"): ITEX CORPORATION ("You"):
------------------------
By: By:
-------------------------------------------- ----------------------------
Title:
-------------------------
FRANCHISOR REPRESENTS THAT THIS PROSPECTUS DOES NOT KNOWINGLY OMIT ANY MATERIAL
FACT OR CONTAIN ANY UNTRUE STATEMENT OF A MATERIAL FACT.
(EXHIBIT G)
-----------
TRADE NAME FILING INFORMATION SHEET
-----------------------------------
You are obligated by the franchise agreement to comply with all state and local
laws necessary to operate the licensed business. One such law concerns trade
name filings. Most states require that any individual or company doing business
under a name different from your corporate or other legal name record that fact
somewhere in the state. You cannot use "ITEX" as part of your corporate or other
legal names. Consequently, these laws will apply to you since the name under
which the licensed business operates, "ITEX," will be different from your
corporate or other legal name.
Depending on the state, such a name may be called a "trade name," "assumed
name," "fictitious name," "dba," or some other similar designation. Regardless
of the terminology, the purpose of the trade name filing is to prevent deception
of the public by enabling consumers and creditors to know with whom they are
trading. Trade name filings do not, and are not intended to, grant any right to
use the name ITEX after the franchise agreement terminates or expires. At that
time, you will cancel the trade name filing at our direction, as provided in the
franchise agreement.
Just as the terminology varies from state-to-state, so do the procedures for
filing. In some states, the filing is made at the state level, while in others,
the filing is at the county or city level. Some states may require multiple
filings. For this reason, we recommend that you contact the offices of the
Secretary of State, County Clerk, and City or Town Clerk in the jurisdictions
where the licensed business will be conducted, as well as the franchisees'
counsel, to obtain the necessary forms and to ensure that all required filings
are made. Operating under a trade name without the requisite filing may result
in civil or criminal penalties.
If you have any questions or encounter any difficulties in complying with the
trade name filing requirements, please call us and we will be glad to help you.
(EXHIBIT H)
-----------
A CHECKLIST OF LEGAL START-UP REQUIREMENTS
------------------------------------------
- Formation of the business, i.e. Corporation, Partnership, etc.
- Filings with the State Department of Taxation and obtaining sales
and use tax number.
- Inquiry into both state and county requirements regarding
registration of fictitious/assumed name which would vary
depending on the type of the business entity.
- Contacting the county and the city, i.e. Chamber of Commerce or
the office of small business administration regarding merchant's
license requirements.
- Contacting local Department of Labor and Department of Health
regarding posters that need to be displayed on premises.
- Insurance as per Franchise Agreement including Worker's
Compensation Insurance for the staff, poster must be displayed.
The above is not a comprehensive list. We recommend that a local attorney be
consulted with regard to these and any other legal requirements to ensure full
compliance with the Franchise Agreement, federal, state and local laws.
ACKNOWLEDGMENT OF RECEIPT BY PROSPECTIVE
FRANCHISEE OF THE ITEX CORPORATION
FRANCHISE AGREEMENT IN FINAL FORM
THE UNDERSIGNED, PERSONALLY AND AS AN OFFICER OR PARTNER OF THE PROPOSED
FRANCHISEE, ACKNOWLEDGES RECEIPT, ON THE DATE INDICATED, OF THE ITEX CORPORATION
FRANCHISE AGREEMENT, COMPLETELY FILLED IN WITH THE INFORMATION AND ANY EXHIBITS
OR ADDENDA IN THE FORM IN WHICH THEY ARE INTENDED TO BE EXECUTED.
DATED this ____ day of ____________, 20__.
---------------------------------
FRANCHISEE (Please type or print)
IF A PARTNERSHIP, ALL GENERAL PARTNERS MUST EXECUTE THIS
ACKNOWLEDGMENT. IF A CORPORATION, By: AN OFFICER AUTHORIZED
TO RECEIVE (Please type or print) THIS CIRCULAR ON BEHALF OF
THE CORPORATION MUST EXECUTE THIS ACKNOWLEDGMENT.
By:
------------------------------
---------------------------------
Signature
Its:
-----------------------------
ACKNOWLEDGMENT OF RECEIPT
ITEX CORPORATION
THIS OFFERING CIRCULAR SUMMARIZES CERTAIN PROVISIONS OF THE FRANCHISE AGREEMENT
AND OTHER INFORMATION IN PLAIN LANGUAGE. READ THIS OFFERING CIRCULAR AND ALL
AGREEMENTS CAREFULLY.
IF ITEX CORPORATION OFFERS YOU A FRANCHISE, ITEX CORPORATION MUST PROVIDE THIS
OFFERING CIRCULAR TO YOU BY THE EARLIEST OF:
1. THE FIRST PERSONAL MEETING TO DISCUSS THE FRANCHISE; OR
2. TEN BUSINESS DAYS BEFORE THE SIGNING OF A BINDING AGREEMENT; OR
3. TEN BUSINESS DAYS BEFORE A PAYMENT TO ITEX CORPORATION
YOU MUST ALSO RECEIVE A FRANCHISE AGREEMENT CONTAINING ALL MATERIAL TERMS AT
LEAST FIVE BUSINESS DAYS BEFORE YOU SIGN A FRANCHISE AGREEMENT.
IF ITEX CORPORATION DOES NOT DELIVER THIS OFFERING CIRCULAR ON TIME OR IF IT
CONTAINS A FALSE OR MISLEADING STATEMENT, OR A MATERIAL OMISSION, A VIOLATION OF
FEDERAL AND STATE LAW MAY HAVE OCCURRED AND SHOULD BE REPORTED TO THE FEDERAL
TRADE COMMISSION, WASHINGTON, D.C. 20580 AND TO THE STATE AUTHORITIES IDENTIFIED
IN EXHIBIT A.
Our authorized agents for service of process are identified in Exhibit A of this
offering circular.
THE UNDERSIGNED, PERSONALLY AND AS AN OFFICER OR PARTNER OF THE PROPOSED
FRANCHISEE, ACKNOWLEDGES RECEIPT, ON THE DATE INDICATED, OF ITEX CORPORATION
FRANCHISE OFFERING CIRCULAR FOR PROSPECTIVE FRANCHISEES, EFFECTIVE AS
OF_____________. THE CIRCULAR INCLUDES THESE APPENDICES ATTACHED:
A: Agents for Service of Process and Regulatory Authorities
B: Audited Financial Statements
C. Sample Franchise Agreement
D. Conditional Assignment of Phone Number
E. Abandonment, Relinquishment, and Termination of Assumed Business Name
F. State Law Addendum
G. Trademark Filing Information
H. Checklist for Start-up
DATED this _______ day of __________, 20__.
--------------------------------------------------------------------------------
Prospective Franchisee Prospective Franchisee
IF A PARTNERSHIP, ALL GENERAL PARTNERS MUST EXECUTE THIS ACKNOWLEDGMENT. IF A
CORPORATION OR LIMITED LIABILITY COMPANY, AN OFFICER AUTHORIZED TO RECEIVE THIS
CIRCULAR ON BEHALF OF THE CORPORATION OR LIMITED LIABILITY COMPANY MUST EXECUTE
THIS ACKNOWLEDGMENT.
ACKNOWLEDGMENT OF RECEIPT
ITEX CORPORATION
THIS OFFERING CIRCULAR SUMMARIZES CERTAIN PROVISIONS OF THE FRANCHISE AGREEMENT
AND OTHER INFORMATION IN PLAIN LANGUAGE. READ THIS OFFERING CIRCULAR AND ALL
AGREEMENTS CAREFULLY.
IF ITEX CORPORATION OFFERS YOU A FRANCHISE, ITEX CORPORATION MUST PROVIDE THIS
OFFERING CIRCULAR TO YOU BY THE EARLIEST OF:
1. THE FIRST PERSONAL MEETING TO DISCUSS THE FRANCHISE; OR
2. TEN BUSINESS DAYS BEFORE THE SIGNING OF A BINDING AGREEMENT; OR
3. TEN BUSINESS DAYS BEFORE A PAYMENT TO ITEX CORPORATION
YOU MUST ALSO RECEIVE A FRANCHISE AGREEMENT CONTAINING ALL MATERIAL TERMS AT
LEAST FIVE BUSINESS DAYS BEFORE YOU SIGN A FRANCHISE AGREEMENT.
IF ITEX CORPORATION DOES NOT DELIVER THIS OFFERING CIRCULAR ON TIME OR IF IT
CONTAINS A FALSE OR MISLEADING STATEMENT, OR A MATERIAL OMISSION, A VIOLATION OF
FEDERAL AND STATE LAW MAY HAVE OCCURRED AND SHOULD BE REPORTED TO THE FEDERAL
TRADE COMMISSION, WASHINGTON, D.C. 20580 AND TO THE STATE AUTHORITIES IDENTIFIED
IN EXHIBIT A.
Our authorized agents for service of process are identified in Exhibit A.
THE UNDERSIGNED, PERSONALLY AND AS AN OFFICER OR PARTNER OF THE PROPOSED
FRANCHISEE, ACKNOWLEDGES RECEIPT, ON THE DATE INDICATED, OF ITEX CORPORATION
FRANCHISE OFFERING CIRCULAR FOR PROSPECTIVE FRANCHISEES, EFFECTIVE AS OF
___________. THE CIRCULAR INCLUDES THESE APPENDICES ATTACHED:
A: Agents for Service of Process and Regulatory Authorities
B: Audited Financial Statements
C: Sample Franchise Agreement
D: Conditional Assignment of Phone Number
E: Abandonment, Relinquishment, and Termination of Assumed Business Name
F: State Law Addendum
G: Trademark Filing Information
H: Checklist for Start-up
DATED this _______ day of __________, 20__.
--------------------------------------------------------------------------------
Prospective Franchisee Prospective Franchisee
IF A PARTNERSHIP, ALL GENERAL PARTNERS MUST EXECUTE THIS ACKNOWLEDGMENT. IF A
CORPORATION OR LIMITED LIABILITY COMPANY, AN OFFICER AUTHORIZED TO RECEIVE THIS
CIRCULAR ON BEHALF OF THE CORPORATION OR LIMITED LIABILITY COMPANY MUST EXECUTE
THIS ACKNOWLEDGMENT.
