(h) that the number of shares or interests issued or outstanding in the transferee will not be increased or decreased without prior written notice to us, which notice will in its terms guarantee compliance with this Agreement. In addition, new shareholders, members of partners must be approved by use and agree to be bound by this entire Agreement. Shareholders, members or partners may make a separate agreement among them providing for purchase by the survivors amount them of the shares of any shareholders or interests of any members or partners upon death, or other agreements affecting ownership or voting rights, so long as voting control and a majority representation of the board of directors or members or partners remains with those individuals who initially applied for and were approved as Franchisees under this Agreement. Shareholders, members or partners must notify us in writing of any such agreement which affects control of the transferee.
(a) Upon the death or disability of Developer or an Owner, the executor, administrator, conservator, guardian or other personal representative must assign, sell, or transfer Developer’s interest in this Agreement, the Developer Business and its assets, or the Owner’s ownership interest in Developer, to a third party approved by us. That transfer (including, without limitation, transfer by bequest or inheritance) must occur, subject to our rights, within a reasonable time, not to exceed twelve (12) months from the date of death or disability, and is subject to all of the terms and conditions in this Section 11. A failure to transfer such interest within this time period is a breach of this Agreement. The term “disability” means a mental or physical disability, impairment or condition that is reasonably expected to prevent or actually does prevent Developer from supervising the RDA management and operation for ninety (90) or more consecutive days.
(b) If, upon the death or disability of Developer or an Owner, a trained manager who we approve is not managing the day-to-day operations, then the executor, administrator, conservator, guardian or other personal representative must, within a reasonable time not to exceed thirty (30) days from the date of death or disability, appoint a manager that we must approve to operate the Developer Business. The manager must, at Developer’s or the Owner’s estate’s expense, satisfactorily complete the training we designate with the specified time period.
We may, by delivering written notice to the Seller within fifteen (15) days after we receive both an exact copy of the offer and all other information requested, elect to purchase the interest for the price and on the terms and conditions contained in the offer, provided that: 1) we may substitute cash for any form or payment proposed in the offer; (2) our credit will be deemed equal to the credit of any proposed buyer; (3) the closing will be not less than thirty (30) days after notifying the Seller of our election to purchase or, if later, the closing date proposed in the offer; and (4) we must receive, and the Seller agrees to make, all customary representations and warranties, given by the seller of the assets of a business or ownership interests in a legal entity, as applicable, including, without limitation, representations and warranties regarding ownership and condition of, and title to, assets and (if applicable) ownership interests and validity of contracts and the liabilities, contingent on otherwise, relating to the assets or ownership interests being purchased. If we exercise our right of first refusal, the Seller agrees that, for two (2) years beginning on the closing date, the Seller and members of its immediate family will be bound by the non-competition covenant contained in Section 12.2 below.
If we do not exercise our right of first refusal, the Seller may complete the sale to the proposed buyer on the original offer’s terms, subject to our approval of the transfer as provided above. If the Seller does not complete the sale to the proposed buyer within sixty (60) days after we notify the Seller that we do not intend to exercise
our right of first refusal, or if there is a material change in the terms of the sale (which the Seller must let us know promptly), we will have an additional right of first refusal during the thirty (30) day period following either the expiration of the sixty (60) day period or receipt of notice of the material change(s) in the sale’s terms, either on the terms originally offered or the modified terms, at our option.
11.7 Ownership Structure. Developer represents and warrants that each person holding direct or indirect, legal or beneficial ownership interests in Developer and their respective interests and ownership structure (collectively, the “Owners’”) are listed in Exhibit 3to this Agreement. In consideration of, and as an inducement to, the execution of this Agreement, each Owner of the Developer and their respective spouses shall personally and unconditionally sign our form Guaranty and Acceptance of Obligations, attached as Exhibit 4, guarantying to us and our successors and assigns that the punctual payment and performance of each and every undertaking, agreement and covenant set forth in this Agreement; and agreeing to be personally bound by, and personally liable for the breach of, each and every provision in the Agreement. Developer shall not change its ownership structure without complying with all of the terms and conditions of this Section 11. Any proposed change in ownership structure, membership interest, or shareholders must be approved by us in writing.
12. NON-COMPETITION.
12.1 In Term. During the term of this Agreement, neither Developer, any of the Principals, nor any member of Developer’s or a Principal’s immediate family will have any direct or indirect interest (e.g., through a spouse) as a disclosed or beneficial owner, investor, partner, director, officer, controlling shareholder, employee, consultant, representative or agent, or in any other capacity, in a Competitive Business (defined below), whether located within or outside the RDA, without our prior written consent.
12.2 Post-Term. For a twelve (12) month period following the assignment, expiration or termination of this Agreement, for any reason, neither Developer, any Owner, nor any member of Developer’s or an Owner’s immediate family will have any direct or indirect interest (e.g., through a spouse, child or trust) as a disclosed or beneficial owner, investor, partner, director, officer, employee, consultant, representative or agent, or in any other capacity, in any Competitive Business located or operating: (a) within the RDA; (b) within the development area of any of our other Developers; or (c) within twenty-five (25) miles of any ESIO Franchise or Developer franchise in operation or development on the date of assignment, expiration or termination. The term “Competitive Business” means any business which derives more than Fifty-Thousand Dollars ($50,000) of revenue per year from: the distribution and sale of water, beverages, water and beverage equipment (including coolers, heaters, and other related equipment), services (including maintenance and repair) or products (including beverage packets), or any business which grants franchises or licenses to others to operate such a business, other than a ESIO Franchise operated under a franchise agreement with us.
13. TERMINATION.
13.1 Termination by Company. We may terminate this Agreement, effective upon written notice of termination to Developer, if:
(a) Developer or one of its Owners makes or attempts to make a transfer in violation of Section 11;
(b) Developer fails to meet the RD Minimum Development Obligation for any Development Period;
(c) Developer has made or makes a material misrepresentation or omission in acquiring the rights under this Agreement or in operating the Developer Business;
(d) Developer does not satisfactorily complete initial training;
(e) Developer is convicted by a trial court of, or pleads no contest to, a felony;
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(f) Developer fails to maintain the insurance we require from time to time;
(g) Developer or an Owner engages in any dishonest, unethical or illegal conduct or any other conduct which, in our opinion, adversely affects our reputation, the reputation or other ESIO Franchises or the goodwill associated with the Marks;
(h) Developer knowingly makes any unauthorized use or disclosure of any part of the Manuals or any other Confidential Information;
(i) Developer fails on three (3) or more separate occasions within any twelve (12) consecutive month period to submit when due reports or other data, information or supporting records, pay when due any amounts due to us (or our Affiliates), or otherwise comply with this Agreement, whether or not Developer corrects any of these failures after we deliver written notice to Developer, whether or not Developer corrects either of the failures after we deliver written notice to Developer;
(j) Developer makes an assignment for the benefit of creditors or admits in writing insolvency or inability to pay debts generally as they become due; Developer consents to the appointment of a receiver, trustee or liquidator of all or the substantial part of the assets of the Developer Business; or the assets of the Developer Business are attached, seized, subjected to a writ or distress warrant, or levied upon, unless the attachment, seizure, writ, warrant or levy is vacated within thirty (30) days following the order’ entry;
(k) Developer fails to comply with any other provision of this Agreement and does not correct the failure within thirty (30) days after we deliver written notice of the failure to Developer; or
(l) Developer fails to pay any sums due to us and does not correct the failure within ten (10) days after we deliver written notice of that failure to Developer.
13.2 Cross-Termination. Notwithstanding anything contained in this Agreement to the contrary, at any time that Developer or any of his Affiliates is in breach of his obligations under this Agreement, or any other agreement between Developer or any of his Affiliates and Franchisor or any of its Affiliates, Franchisor (or its Affiliate) may elect to defer the performance of Franchisor’s (or its Affiliate’s) obligations under this Agreement or such other agreement until Developer’s (or his Affiliate’s) breach has been cured. Franchisor’s (or its Affiliate’s) exercise of that right will not constitute a waiver of its rights under this Agreement or such other agreement, including Franchisor’s (or its Affiliate’s) right to terminate this Agreement or such other agreement. In addition, Franchisor’s (or its Affiliate’s) exercise of that right will not serve as a basis for any claim by Developer (or his Affiliate) that Franchisor did not perform its obligations in a timely manner.
13.3 Rights and Obligations Upon Termination or Expiration. Upon the expiration of the Term or any Renewal Term, or upon the earlier termination of this Agreement, Developer shall have no further right to construct, equip, own, open or operate additional ESIO Franchises (except pursuant to a Franchise Agreement between Developer and us which is in full force and effect on the date of expiration or termination and is not terminated pursuant to Section 13.2). Upon expiration or termination of this Agreement, we may ourselves construct, equip, open, own or operate, or license others to construct, equip, open, own or operate ESIO Franchises in the RDA, except as provided in any Franchise Agreement executed pursuant to this Agreement. When this Agreement expires or is terminated for any reason and except as required to perform Developer’s obligations under a valid Franchise Agreement with us, Developer shall:
(a) Forfeit to Franchisor all fees paid by Developer to Franchisor, except as expressly set forth in Section 7 of this Agreement.
(b) All goodwill associated with Developer’s operations is, and will be, the property of Franchisor, and Developer will receive no payment therefor.
(c) Developer will receive no further payments except as set forth in Section 7.
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(d) Not directly or indirectly at any time thereafter or in any manner: (i) identify itself or any business as a current or former Developer or ours; (ii) use any Mark, any colorable imitation of a Mark, any trademark, service mark or commercial symbol that is confusingly similar to any Mark or other indicia of an ESIO Franchise in any manner or for any purpose; or (iii) use for any purpose any trade name, trademark, service mark or other commercial symbol that indicates or suggests a connection or association with us;
(e) Take the actions required to cancel all fictitious or assumed name or equivalent registrations relating to Developer’s use of any Mark;
(f) Deliver to us within thirty (30) days all advertising, marketing and promotional material, forms and other materials containing any Mark or otherwise identifying or relating to the Developer Business or to an ESIO Franchise;
(g) If applicable, notify all search engines of the termination or expiration of Developer’s right to use all domain names, Websites and other search engines associated directly or indirectly with the Marks or ESIO Franchises and authorize those search engines to transfer to us or our designee all rights to the domain names, Websites and search engines relating to the Marks or ESIO Franchises. We have the absolute right and interest in and to all domain names, Websites and search engines associated with the Marks or ESIO Franchises, and Developer hereby authorizes us to direct all applicable parties to transfer Developer’s domain names, Websites and search engines to us or our designee if this Agreement expires or is terminated for any reason whatsoever. All parties may accept this Agreement as conclusive of our right to such domain names, Websites and search engines and this Agreement will constitute the authority from Developer for all parties to transfer all such domain names, Websites and search engines to us;
(h) Immediately cease using any of the Confidential Information in any business or otherwise and return to us all copies of the Manuals and any other confidential materials that we have loaned Developer; and
(i) Provide us, within thirty (30) days after the expiration or termination of this Agreement, evidence satisfactory to us of Developer’s compliance with these obligations.
13.4 Right to Seek Injunctive Relief. Upon any breach by Developer of any of the terms of this Agreement, Franchisor may institute and prosecute proceedings, at law or in equity, in any court of competent jurisdiction, to obtain an injunction to enforce the provisions of this Agreement and to pursue any other remedy to which Franchisor may be entitled. Developer agrees that the rights conveyed by this Agreement are of a unique and special nature and that Franchisor’s remedy at law for any breach would be inadequate and agrees and consents that temporary or permanent injunctive relief may be granted in any proceeding that may be brought to enforce any provision of this Section 15, without the necessity of posting bond therefor or proof of actual damages.
14. MEDIATION AND ARBITRATION.
14.1 Specific Performance; Injunctive Relief. Provided we give you the appropriate notice, we will be entitled, without being required to post a bond, to the entry of temporary and permanent injunctions and orders of specific performance to: (1) enforce the provisions of this Agreement relating to your use of the Marks and non-disclosure and non-competition obligations under this Agreement; (2) prohibit any act or omission by you or your employees that constitutes a violation of any applicable law, ordinance, or regulation; constitutes a danger to the public; or may impair the goodwill associated with the Marks or ESIO franchises; or (3) prevent any other irreparable harm to our interests. If we obtain an injunction or order of specific performance, then you shall pay us an amount equal to the total of our costs of obtaining it, including without limitation reasonable attorneys’ and expert witness fees, costs of investigation and proof of facts, court costs, other litigation expenses and travel and living expenses, and any damages we incur as a result of the breach of any such provision. You further agree to waive any claims for damage in the event there is a later determination that an injunction or specific performance order was issued improperly.
14.2 Mediation and Arbitration. The parties acknowledge it is in their best interest to resolve any dispute which arises in a consistent and orderly manner. Therefore, the parties agree to diligently pursue informal
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negotiations, internal appeal procedure, or other informal methods (“Informal Methods”) to resolve any such dispute. In the event such Informal Methods are unsuccessful, the parties agree as follows.
(a) Non-Binding Mediation. All claims, controversies or disputes that arise between the parties which relates in any way to this Agreement, the purchase or operation of the Developer Business or the relationship between you and us, must be submitted to non-binding mediation before an action may be brought in in arbitration or a court of competent jurisdiction. At the request of either party, the mediation will be conducted in secrecy. The parties to the mediation will share equally in its cost and expenses, except those costs and expenses incurred separately by each party. The mediation process will be deemed “Completed” when the parties agree that it has been completed, the mediator declares that any impasse exists or 60 days have elapsed since the date of the initiating party’s notice to the other party that it is initiating the mediation process, whichever occurs first.
(b) Arbitration. Once the mediation has been Completed, the parties must submit any unresolved dispute to arbitration administered by the American Arbitration Association (“AAA”) under its Commercial Arbitration Rules. All claims, controversies or disputes arising out of or relating in any way to this Agreement, the purchase or operation of the Franchised Business or the relationship between you and us will, to the fullest extent permitted by Federal Arbitration Act, be resolved by binding arbitration administered by the American Arbitration Association (“AAA”) under its Commercial Arbitration Rules in Maricopa County, Arizona.
(c) Arbitration Procedures. The demand for Arbitration (“Demand”) will contain a description of the claim, dispute, or controversy and the remedy requested. In no event may a Demand be made after the date when the institution of a legal or equitable proceeding based on the claim, dispute or controversy in question would be barred by the applicable statute of limitations or laches. The appointed arbitrator shall have the authority to dismiss claims for failure to comply with the applicable statute of limitations or laches. Any claim requesting relief or an award of less than One hundred thousand and 00/100 Dollars ($100,000.00) will be conducted before a single independent and impartial arbitrator selected pursuant to the Commercial Arbitration Rules of the AAA. For any claim requesting relief or an award of greater than one hundred thousand and 00/100 Dollars ($100,000.00), the arbitration will be conducted before a panel of three (3) independent and impartial arbitrators selected pursuant to the Commercial Arbitration Rules of the AAA. Unless otherwise mutually agreed, all arbitrators shall be lawyers licensed by the State of Arizona, with five (5) or more years’ experience in the practice of commercial law and approved to be on an AAA Panel. The arbitrator(s) will issue a reasoned award, with findings of fact and conclusions of law. Actions to enforce an express obligation to pay monies may be brought under the Expedited Procedures of the AAA’s Commercial Arbitration Rules. The Federal Arbitration Act shall govern, excluding all state arbitration laws. Arizona law will govern all other issues. With respect to discovery, the arbitrator shall require each party to make a good cause showing before such discovery will be granted.
(d) Appealability of Award. Either party may appeal the final award of the arbitrator(s) to the appropriate U.S. District Court. The Court’s review of the arbitrator’s findings of fact will be under the clearly erroneous standard, and the Court’s review of all legal rulings will bede novo. If it should be determined that this provision regarding appealability of the award is not enforceable, then either party may appeal the arbitrator’s final award to a panel of three arbitrators chosen under AAA procedures, which will employ the same standards of review stated immediately above.
(e) Certain Disputes Exempted. Notwithstanding anything contained in this Agreement to the contrary, the provisions of Sections 14.2 do not apply in cases where (i) Franchisor brings an action for an express obligation to pay monies, declaratory relief, preliminary or permanent equitable relief, any action at law for damage to Franchisor’s goodwill, the Proprietary Information, the Service Marks or other property or for fraudulent conduct by Franchisee; (ii) the delay resulting from the mediation process may adversely affect Franchisor’s financial condition or endanger or adversely affect the public (for example, unhealthy, unsafe or
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unsanitary conditions would continue to exist) or (iii) Franchisor in good faith believes that the controversy or dispute would not be resolved through the mediation process.
(f) Other Disputes. Disputes concerning the validity or scope of arbitration, including whether a dispute is subject to arbitration, are beyond the authority of the arbitrator(s) and will be determined by a court of competent jurisdiction pursuant to the Federal Arbitration Act, 9 U.S.C. §1 et seq., as amended from time to time.
(g) Survives Termination. The provisions of this Section 14 will continue in full force and effect subsequent to and notwithstanding the expiration or termination of this Agreement, however effected.
(h) Election to Resolve Claims. This Section 14 is an election to resolve claims, disputes, and controversies by mediation and arbitration rather than the judicial process. The parties agree and understand that they are waiving certain rights to seek redress before state and federal courts. It is understood that this will you and us to waive any right to a jury trial or a trial in court. The parties understand that the rules applicable to arbitrations and the rights of parties in arbitrations differ from the rules and rights applicable in court.
14.3 Governing Law/Consent To Jurisdiction. Except to the extent governed by the United States Trademark Act of 1946 (Lanham Act, 15 U.S.C. §§ 1051etseq.) and except that all issues relating to arbitrability or the enforcement or interpretation of the agreement to arbitrate set forth in Section 14.2 which will be governed by the United States Arbitration Act (9 U.S.C. § 1etseq.) and the federal common law relating to arbitration, this Agreement and the Franchise will be governed by the internal laws of the State of Arizona (without reference to its choice of law and conflict of law rules), except that the provisions of any Arizona law relating to the offer and sale of business opportunities or franchises or governing the relationship of a franchisor and its franchisees will not apply unless their jurisdictional requirements are met independently without reference to this Section. You agree that we may institute any action against you arising out of or relating to this Agreement (which is not required to be arbitrated hereunder or as to which arbitration is waived) in any state or federal court of general jurisdiction in Maricopa County, Arizona, and you irrevocably submit to the jurisdiction of such courts and waive any objection you may have to either the jurisdiction or venue of such court.
14.4 Binding Effect. This Agreement is binding on and will inure to the benefit of our successors and assigns and, subject to the Transfers provisions contained in this Agreement, will be binding on and inure to the benefit of your successors and assigns, and if you are an individual, on and to your heirs, executors, and administrators.
14.5 No Liability to Others; No Other Beneficiaries. We will not, because of this Agreement or by virtue of any approvals, advice or services provided to you, be liable to any person or legal entity who is not a party to this Agreement, and no other party shall have any rights because of this Agreement.
14.6 Construction. All headings of the various Sections of this Agreement are for convenience only, and do not affect the meaning or construction of any provision. All references in this Agreement to masculine, neuter or singular usage will be construed to include the masculine, feminine, neuter or plural, wherever applicable. Except where this Agreement expressly obligates us to reasonably approve or not unreasonably withhold our approval of any of your actions or requests, we have the absolute right to refuse any request by you or to withhold our approval of any action or omission by you. The term “Affiliate” as used in this Agreement is applicable to any company directly or indirectly owned or controlled by you or your Principal Owners, or any company directly or indirectly owned or controlled by us that sells products or otherwise transacts business with you.
14.7 Joint and Several Liability. If two (2) or more persons are the Developer under this Agreement, their obligation and liability to us shall be joint and several.
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14.8 Multiple Originals. This Agreement will be executed using multiple copies, each of which will be deemed an original.
15. GENERAL CONDITIONS AND PROVISIONS.
15.1 Relationship of Developer to Company. It is expressly agreed that the parties intend by this Agreement to establish between us and Developer the relationship of franchisor and franchisee. Except as expressly provided herein, it is further agreed that Developer has no authority to create or assume in our name or on our behalf, any obligation, express or implied, or to act or purport to act as agent or representative on our behalf for any purpose whatsoever. In no event shall either party be deemed to be fiduciaries of the other. Neither we nor Developer is the employer, employee, agent, partner or co-venturer of or with the other, each being independent contractors. Developer agrees that it will not hold himself out as the agent, employee, partner or co-venturer of ours, or as having any of the aforesaid authority. All Employees hired by or working for Developer shall be the employees of Developer and shall not, for any purpose, be deemed employees of us or subject to our control.
15.2 Indemnification.
(a) Indemnification by Developer. To the fullest extent permitted by law, Developer agrees to indemnify, defend and hold harmless us, our Affiliates, and our and their respective shareholders, directors, officers, employees, agents, representatives, successors and assigns (“Our Indemnified Parties”) from and against, and to reimburse any one or more of Our Indemnified Parties for any and all claims, obligations and damages directly or indirectly arising out of: (i) the Developer Business; (ii) Developer’s breach of this Agreement, or (3) Developer’s non-compliance or alleged non-compliance with any law, ordinance, rule or regulation. For purposes of this indemnification, “claims” include all obligations, damages (actual, consequential, punitive or otherwise) and costs that any Indemnified Party reasonably incurs in defending any claim against it, including, without limitation, reasonable accountants’, arbitrators’, attorneys’ and expert witness’ fees, costs of investigation and proof of facts, court costs, travel and living expenses and other expenses of litigation, arbitration or alternative dispute resolution, regardless of whether litigation or alternative dispute resolution is commenced. Each Our Indemnified Party may defend and control the defense of any claim against it which is subject to this indemnification at Developer’s expense, and Developer may not settle any claim or take any other remedial, corrective or other actions relating to any claim without our consent. This indemnity will continue in full force and effect subsequent to and notwithstanding this Agreement’s expiration or termination. An Our Indemnified Party need not seek recovery from an insurer or other third party, or otherwise mitigate its losses and expenses, in order to maintain and recover fully a claim against Developer. Developer agrees that a failure to pursue a recovery or mitigate a loss will not reduce or alter the amounts that an Our Indemnified Party may recover from Developer.
(b) Indemnification by Us. To the fullest extent permitted by law, we agree to indemnify, defend and hold harmless you, your Affiliates, and your and their respective shareholders, directors, officers, employees, agents, representatives, successors and assigns (“Your Indemnified Parties”) from and against, and to reimburse any one or more of Your Indemnified Parties for any and all claims, obligations and damages directly or indirectly arising out of: (1) the business conducted by us pursuant to this Agreement, (2) our breach of this Agreement, or (3) our non-compliance or alleged non-compliance with any law, ordinance, rule or regulation. For purposes of this indemnification, “claims” include all obligations, damages (actual, consequential, punitive or otherwise) and costs that any Your Indemnified Party reasonably incurs in defending any claim against it, including, without limitation, reasonable accountants’, arbitrators’, attorneys’ and expert witness’ fees, costs of investigation and proof of facts, court costs, travel and living expenses and other expenses of litigation, arbitration or alternative dispute resolution, regardless of whether litigation or alternative dispute resolution is commenced. Each Your Indemnified Party may defend and control the defense of any claim against it which is subject to this indemnification at our expense, and we may not settle any claim or take any other remedial, corrective or other actions relating to any claim without your consent. This indemnity will continue in full force and effect subsequent to and notwithstanding this Agreement’s expiration or termination. A Your Indemnified Party need
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not seek recovery from an insurer or other third party, or otherwise mitigate its losses and expenses, in order to maintain and recover fully a claim against us. We agree that a failure to pursue a recovery or mitigate a loss will not reduce or alter the amounts that a Your Indemnified Party may recover from us.
15.3 Waiver and Delay. Except as otherwise expressly provided to the contrary, no waiver by us of any breach or series of breaches or defaults in performance by the Developer, and no failure, refusal or neglect of or by us to exercise any right, power or option given to us under this Agreement or under any other agreement between us and Developer, whether entered into before, after or contemporaneously with the execution of this Agreement (and whether or not related to this Agreement) or to insist upon strict compliance with or performance of the Developer’s obligations under this Agreement or any other agreement between us and Developer, whether entered into before, after or contemporaneously with the execution of this Agreement (and whether or not related to this Agreement), shall constitute a novation, or a waiver of the provisions of this Agreement with respect to any subsequent breach thereof or a waiver of our right at any time thereafter to require exact and strict compliance with the provisions thereof.
15.4 Survival of Covenants. The covenants contained in this Agreement which, by their terms, require performance by the parties after the expiration or termination of this Agreement or ancillary agreements shall be enforceable notwithstanding said expiration or other termination of this Agreement for any reason whatsoever.
15.5 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the legal representatives, successors and assigns of us and Developer.
15.6 Joint and Several Liability. If either party consists of more than one person or entity, or a combination thereof, the obligations and liabilities of each such person or entity to the other under this Agreement are joint and several.
15.7 Consent to Jurisdiction. Subject to Section 14 and the provisions below, Developer and its owners agree that all actions arising under this Agreement or otherwise as a result of the relationship between Developer and us must be commenced in the State of Arizona, and in the state or federal court of general jurisdiction closest to where our principal business address then is located, and Developer (and its Owners) irrevocably submits to the jurisdiction of those courts and waives any objection Developer (or its owners) might have with either the jurisdiction of or venue in those courts. Nonetheless, Developer and any of its Owners agree that we may enforce this Agreement and any arbitration orders and awards in the courts of the state or states in which Developer or its Owners are domiciled.
15.8 Waiver of Punitive Damages and Jury Trial. Except for the Parties’ indemnification obligation under Section 15.2 above and except where authorized by federal statute, we and Developer and its Owners waive to the fullest extent permitted by law any right to or claim for any punitive or exemplary damages against the other and agree that, in the event of a dispute between us and Developer, the party making a claim will be limited to equitable relief and to recovery of any actual damages it sustains. We and Developer irrevocably waive trial by jury in any action, proceeding or counterclaim, whether at law or in equity, brought by either party.
15.9 Limitation of Claims. Any and all claims arising out of or relating to this Agreement or our relationship with Developer, except for claims for indemnification under Section 15.2 above, will be barred unless a judicial or arbitration proceeding is commenced within one (1) year from the date on which the party asserting the claim knew or should have known of the facts giving rise to the claims.
15.10 Entire Agreement. This Agreement and the Exhibits incorporated in the Agreement contain all of the terms and conditions agreed upon by the parties to this Agreement with reference to the subject matter of this Agreement. No other agreements, and all prior agreements, understanding and representations are merged in this Agreement and superseded by this Agreement. Each party represents to the other that there are no contemporaneous agreements or understandings between the parties relating to the subject matter of this Agreement that are not contained in this Agreement. This Agreement cannot be modified or changed except by written instrument signed by all of the parties to this Agreement, provided that we may modify or amend the Manuals at any time without notice to, or approval of, Developer or any other person. Nothing in this Agreement
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shall have the effect of disclaiming any of the information in the Franchise Disclosure Document or its attachments or addenda.
15.11 Title for Convenience. Article and Section titles used in this Agreement are for convenience only and shall not be deemed to affect the meaning or construction of any of the terms, provisions, covenants or conditions of this Agreement.
15.12 Gender. All terms used in any one number or gender shall extend to mean and include any other number and gender as the facts, context or sense of this Agreement or any section or paragraph hereof may require.
15.13 Severability. Except as expressly provided to the contrary in this Agreement, each Section, paragraph, term and provision of this Agreement is severable, and if, for any reason, any part thereof, to be invalid or contrary to or in conflict with any applicable present or future law and regulation in a final, unappealable ruling issued by any court, agency or tribunal with competent jurisdiction, that ruling will not impair the operation or, or otherwise affect, any other portions of this Agreement, which will continue to have full force and effect and bind the parties. If any covenant which restricts competitive activity is deemed unenforceable by virtue of its scope in terms of area, business activity prohibited, and/or length of time, but would be enforceable if modified, we and Developer agree that the covenant will be enforced to the fullest extent permissible under the laws and public policies applied in the jurisdiction whose law determines the covenant’s validity. If any applicable and binding law or rule of any jurisdiction requires more notice than this Agreement requires of this Agreement’s termination or of our refusal to enter into a successor agreement, or if, under any applicable and binding law or rule of any jurisdiction, any provision of this Agreement is invalid or unenforceable or unlawful, the notice and/or other action required by the law or rule will be substituted for the comparable provisions of this Agreement, and we may modify the invalid or unenforceable provisions to the extent required to be valid and enforceable or delete the unlawful provision in its entirety. Developer agrees to be bound by any promise or covenant imposing the maximum duty the law permits which is subsumed within any provision of this Agreement, as though it were separately articulated in and made a part of this Agreement.
15.14 Fees and Expenses. Should any party to this Agreement commence any action or proceeding for the purpose of enforcing, or preventing the breach of, any provision of this Agreement, whether by arbitration, judicial or quasi-judicial action or otherwise, or for damages for any alleged breach of any provision of this Agreement, or for a declaration of such party’s rights or obligations under this Agreement, then the prevailing party shall be reimbursed by the losing party for all costs and expenses incurred in connection therewith, including, but not limited to, reasonable attorneys’ fees for the services rendered to such prevailing party.
15.15 Notices. Except as otherwise expressly provided herein, all written notices and reports permitted or required to be delivered by the parties pursuant to this Agreement shall be deemed so delivered at the time delivered by hand, one (1) business day after transmission by mail, via registered or certified mail, return receipt requested; or one (1) business day after placement with Federal Express, or other reputable air courier service, requesting delivery on the most expedited basis available, postage prepaid and addressed as follows:
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| If to Company: | ESIO FRANCHISING, LLC Attn: Chief Operating Officer 1740 W. Broadway Mesa, Arizona 85202 |
If to Developer:
Or to such other addresses any such party may designate by ten (10) days’ advance written notice to the other party.
15.16 Time of Essence. Time shall be of the essence for all purposes of this Agreement.
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Regional Developer Agreement 04/12 | C-24 | |
5.17 Lien and Security Interest. To secure your performance under this Agreement and indebtedness for all sums due us or our Affiliates, we shall have a lien upon, and you hereby grant us a security interest in, the following collateral and any and all additions, accessions, and substitutions to or for it and the proceeds from all of the same: (a) all inventory now owned or after-acquired by Developer and the Developer Business, including but not limited to all inventory and supplies transferred to or acquired by Developer in connection with this Agreement; (b) all accounts of Developer and/or the Developer Business now existing or subsequently arising, together with all interest in Developer and/or the Developer Business, now existing or subsequently arising, together with all chattel paper, documents, and instruments relating to such accounts; (c) all contract rights of Developer and/or the Developer Business, now existing or subsequently arising; and (d) all general intangibles of Developer and/or the Developer Business, now owned or existing, or after-acquired or subsequently arising. You agree to execute such financing statements, instruments, and other documents, in a form satisfactory to us, that we deem necessary so that we may establish and maintain a valid security interest in and to these assets.
15.18 Submission of Agreement. This Agreement shall not be binding upon us unless and until it shall have been submitted to and signed by our President or Chief Executive Officer, and the date of said signing as set forth on the first page of this agreement shall be the effective date of this agreement.
15.19 Developer’s Acknowledgement of Business Risk and Absence of Guarantee.
A. Developer acknowledges and represents that Franchisor, itself or through any officer, director, employee, or agent, has not made, and Developer has not received or relied upon, any oral or written, visual, express or implied information, representations, warranties, guarantees, or promises regarding the amount of sales levels or income Developer might expect to earn from the rights granted hereby, except as set forth in the Franchise Disclosure Document. _____ (Initialed by Developer)
B. The business venture contemplated by the Developer Agreement involves business risks. _____ (Initialed by Developer)
C. Developer’s success will be largely dependent upon Developer’s ability as an independent businessperson. _____ (Initialed by Developer)
D. The Developer has received, read, and understands this Regional Developer Agreement and any attachments. _____ (Initialed by Developer)
E. Developer understands and agrees that the beverage distribution industry is highly competitive, cyclical, seasonal and volatile with constantly changing market conditions. _____ (Initialed by Developer)
F. Developer acknowledges and agrees that Franchisor has answered any questions it or its representatives have posed to Franchisor regarding this Developer Agreement to Developer’s satisfaction. _____ (Initialed by Developer)
G. Developer has been advised to consult with Developer’s own advisors with respect to the legal, financial, and other aspects of this Regional Developer Agreement, the business franchised hereby, and the prospects for such business. Developer either has consulted with such advisors or has deliberately declined to do so. _____ (Initialed by Developer)
H. Any written inquiries made to Franchisor by Developer pertaining to the nature of this Regional Developer Agreement have been answered in writing to the satisfaction of Developer. _____ (Initialed by Developer)
I. Developer has had the opportunity and adequate time to independently investigate, analyze, and construe both the business opportunity being offered hereunder and the terms and provisions of this
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Regional Developer Agreement 04/12 | C-25 | |
Regional Developer Agreement, utilizing the services of legal counsel, accountants, and other advisors (if Developer so elects). _____ (Initialed by Developer)
J. Any and all applications, financial statements, and representations, whether oral or in writing, submitted to Franchisor by Developer were complete and accurate when submitted and are complete and accurate as of the date of execution of this Regional Developer Agreement, unless the same have been otherwise amended in writing. Developer states that he/she is not presently involved in any business activity that could be considered competitive in nature, unless heretofore disclosed to Franchisor in writing. _____ (Initialed by Developer)
K. Developer agrees not to contest, directly or indirectly, Franchisor’s ownership, title, right, or interest in its names or Proprietary Marks, trade secrets, methods, procedures, know-how, and advertising techniques which are part of Franchisor’s business or contest Franchisor’s sole right to register, use, or license others to use such names and Proprietary Marks, trade secrets, methods, procedures, and techniques. _____ (Initialed by Developer)
L. Developer’s signature to this Regional Developer Agreement has not been induced by any representation inconsistent with the terms of this Regional Developer Agreement or inconsistent with the Franchise Disclosure Document given to Developer by Franchisor. _____ (Initialed by Developer)
M. Developer represents and warrants that Developer is not a party to or subject to any order or decree of any court or government agency which would limit or interfere in any way with the performance by Developer of the obligations under this Regional Developer Agreement, and that Developer is not a party, and has not within the last ten (10) years been a party, to any litigation, bankruptcy, or legal proceedings other than those heretofore disclosed to Franchisor in writing. _____ (Initialed by Developer)
IN WITNESS WHEREOF,the parties to this Agreementhave caused this Agreement to be executed as of the first date set forth above.
ESIO FRANCHISING, LLC
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By: | Lyle W. Myers |
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Its: | President |
TEMPCO, INC.
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By: | Anthony Silverman |
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Its: | |
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Regional Developer Agreement 04/12 | C-26 | |
EXHIBIT 1
DEVELOPMENT AREA AND INITIAL DEVELOPMENT FEE
DEVELOPMENT AREA
Dallas/Ft. Worth/Tyler
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County | Number of
qualified HH | Cost if sold
separately | Cost of area | Households | Population |
Anderson | 6,725 | $6,500.83 | $1,625.21 | 15,936 | 58,458 |
Angelina | 12,535 | $12,117.48 | $3,029.37 | 31,735 | 86,771 |
Bosque | 2,915 | $2,817.79 | $704.45 | 6,732 | 18,212 |
Camp | 1,633 | $1,578.88 | $394.72 | 4,588 | 12,401 |
Cherokee | 6,529 | $6,311.14 | $1,577.78 | 17,091 | 50,845 |
Colin | 192,070 | $185,668.12 | $46,417.03 | 278,363 | 782,341 |
Comanche | 1,898 | $1,834.70 | $458.68 | 5,243 | 13,974 |
Cooke | 6,917 | $6,686.12 | $1,671.53 | 14,623 | 38,437 |
Dallas | 401,466 | $388,083.82 | $97,020.95 | 843,416 | 2,368,139 |
Delta | 798 | $770.97 | $192.74 | 2,045 | 5,231 |
Denton | 154,161 | $149,022.44 | $37,255.61 | 237,903 | 662,614 |
Ellis | 28,618 | $27,664.11 | $6,916.03 | 49,598 | 149,610 |
Erath | 18,500 | $17,883.39 | $4,470.85 | 49,598 | 37,890 |
Fannin | 5,143 | $4,971.99 | $1,243.00 | 11,824 | 33,915 |
Franklin | 1,684 | $1,627.90 | $406.97 | 3,734 | 10,605 |
Freestone | 3,163 | $3,057.19 | $764.30 | 7,107 | 19,816 |
Grayson | 20,737 | $20,045.64 | $5,011.41 | 44,885 | 120,877 |
Gregg | 17,947 | $17,348.93 | $4,337.23 | 44,314 | 121,730 |
Hamilton | 1,219 | $1,178.82 | $294.71 | 3,064 | 8,517 |
Henderson | 9,658 | $9,336.49 | $2,334.12 | 29,810 | 78,532 |
Hill | 5,258 | $5,082.68 | $1,270.67 | 13,379 | 35,089 |
Hood | 11,134 | $10,763.16 | $2,690.79 | 20,543 | 51,182 |
Hopkins | 5,494 | $5,310.84 | $1,327.71 | 13,175 | 35,161 |
Huston | 2,611 | $2,523.96 | $630.99 | 7,794 | 23,732 |
Hunt | 12,640 | $12,218.20 | $3,054.55 | 31,520 | 86,129 |
Jack | 1,382 | $1,335.54 | $333.88 | 2,984 | 9,044 |
Johnson | 27,543 | $26,625.08 | $6,656.27 | 51,579 | 14,075 |
Kaufman | 20,552 | $19,866.75 | $4,966.69 | 34,599 | 103,350 |
Lamar | 7,497 | $7,246.91 | $1,811.73 | 19,272 | 49,793 |
Nacogdoches | 8,117 | $7,846.30 | $1,961.58 | 22,929 | 64,524 |
Navarro | 7,391 | $7,144.79 | $1,786.20 | 17,598 | 47,735 |
Palo Pinto | 4,774 | $4,615.14 | $1,153.78 | 10,447 | 28,111 |
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Regional Developer Agreement Exhibit 1- Development Area and Initial Development Fee 04/2012 | C-27 | |
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County | Number of
qualified HH | Cost if sold
separately | Cost of area | Households | Population |
Parker | 22,821 | $22,060.36 | $5,515.09 | 43,140 | 116,927 |
Rains | 1,697 | $1,640.21 | $410.05 | 4,069 | 10,914 |
Red River | 1,742 | $1,683.77 | $420.94 | 5,108 | 12,860 |
Rockwell | 19,495 | $18,845.33 | $4,711.33 | 26,488 | 78,337 |
Rusk | 8,551 | $8,266.25 | $2,066.56 | 18,272 | 53,330 |
Sabine | 1,325 | $1,280.42 | $320.10 | 4,430 | 10,834 |
San Augustine | 934 | $902.70 | $225.67 | 3,691 | 8,865 |
Smith | 35,783 | $34,590.03 | $8,647.51 | 79,341 | 209,714 |
Somervell | 1,482 | $1,432.56 | $358.14 | 2,923 | 8,490 |
Tarrant | 346,639 | $335,084.77 | $83,771.19 | 655,273 | 1,809,034 |
Upshur | 6,762 | $6,536.53 | $1,634.13 | 14,927 | 39,309 |
Van Zandt | 8,153 | $7,881.64 | $1,970.41 | 19,838 | 52,579 |
Wise | 11,255 | $10,879.68 | $2,719.92 | 20,279 | 59,127 |
Wood | 6,301 | $6,090.97 | $1,522.74 | 15,792 | 41,964 |
Total | 1,481,650 | $1,432,261.33 | $358,065.33 | 2,860,999 | 7,739,124 |
TOTALS | | $1,345,261.33 | $250,000.00 | | |
INITIAL DEVELOPMENT FEE
THE INITIAL DEVELOPMENT FEE FOR THE DEVELOPMENT AREA DESCRIBED ABOVE IS$250,000.
THE INITIAL DEVELOPMENT SHALL BE PAID BY CASHIER’S CHECK OR WIRE TRANSFER UPON EXECUTION OF THIS AGREEMENT AND IS NOT REFUNDABLE.
TEMPCO, INC.
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By: | Anthony Silverman |
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Its: | |
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Regional Developer Agreement Exhibit 1- Development Area and Initial Development Fee 04/2012 | C-28 | |
EXHIBIT 2
ESIO REGIONAL DEVELOPER
DEVELOPMENT OBLIGATIONS
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Year | Annual | Total | Notes |
Year 1 | 3 | 3 | (Includes Developer’s Pilot Franchises) |
Year 2 | 0 | 3 | |
Year 3 | 2 | 5 | |
Year 4 | 2 | 7 | |
Year 5 | 2 | 9 | |
Year 6 | 2 | 11 | |
Year 7 | 1 | 12 | |
Year 8 | 1 | 13 | |
Year 9 | 1 | 14 | |
Year 10 | 1 | 15 | |
TEMPCO, INC.
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By: | Anthony Silverman |
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Its: | |
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Regional Developer Agreement Exhibit 2- Development Obligations 04/2012 | C-29 | |
EXHIBIT 3
OWNERSHIP STRUCTURE
[INTENTIONALLY LEFT BLANK]
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Regional Developer Agreement 10/11 | C-30 | |
FIRST AMENDMENT TO REGIONAL DEVELOPER AGREEMENT
THIS FIRST AMENDMENT TO REGIONAL DEVELOPER AGREEMENT (the “Amendment”) is made and entered into this14th day of August 2012, by and between ESIO Franchising, LLC, a Delaware limited liability company (“ESIO, “us,” or “we”), and Tempco, Inc., a Nevada corporation (“Developer” or “you”):
WHEREAS, ESIO and Developer have entered into a Regional Developer Agreement (the “Agreement”) granting Developer certain development rights and obligations with respect to a defined geographical area (the “RDA”);
WHEREAS, Developer has agreed to acquire six (6) Regional Developer Areas (“RDA”) from ESIO and ESIO, in turn, has agreed to offer Developer special terms and pricing arrangements in conjunction with Developer’s acquisition of multiple RDAs;
WHEREAS, ESIO and Developer desire to amend the Agreement to reflect certain changes ESIO and Developer have agreed to with respect to their respective rights and obligations pursuant to the Agreement;
THEREFORE, ESIO and Developer agree to amend the Agreement as follows:
For purposes of the Agreement, the term “Principal” shall mean all officers and directors of Developer as well as any shareholder owning more than 5% of the company’s outstanding capital stock.
Section 2.1(c) of the Agreement is deleted in its entirety and replaced with the following:
(c) Development Schedule. Developer shall satisfy the Development Schedule set for in Exhibit 2, which is incorporated herein and by this reference within each of the time periods (the “RD Development Period(s)”) specified therein (the “RD Minimum Development Obligation”). ESIO and Developer agree that the RD Minimum Development Obligations set forth in Exhibit 2 to the Agreement shall begin on the one (1) year anniversary of the Effective Date of the Agreement.
Section 2.1(h) of the Agreement is deleted in its entirety and replaced with the following:
(h) Pilot Franchise Units. In conjunction with the execution of this Agreement, Developer shall sign three (3) Franchise Agreements (in the form currently being signed by ESIO Unit Franchisees) whereby Developer agrees to open and operate, no later than twelve (12) months from the Effective Date of the Agreement, three (3) ESIO Pilot Franchise locations within the RDA. Developer’s operation of each Pilot Franchise must successfully pass our operational review and be able to serve as a prototype business and training facility before Developer may perform any Regional Developer Franchise services under this Agreement. Developer will operate the Pilot Franchises or replacements therefore at all times during the Term and any extension thereof. The Pilot Franchise must be located at a site within the RDA that is suitable for the operation of an ESIO Unit Franchise and may operate from the same location as the Developer Sales Office. We will not approve or disapprove of the Pilot Franchise Site.
Section 2.4 of the Agreement is deleted in its entirety and replaced with the following:
2.4 Point of Contact; Communication with Franchisees. Developer shall appoint one or more persons within Developer’s organization to be the main point of contact for all ESIO Franchises in the RDA. Developer shall instruct all Franchisees in the RDA that communication concerning services, questions, problems, complaints, or otherwise shall be directed to Developer’s appointed representatives in the RDA and not Franchisor.
Section 2.16 of the Agreement is deleted in its entirety.
Section 4 of the Agreement is deleted in its entirety and replaced with the following:
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First Amendment to Regional Developer Agreement | 1 | |
TERM. The term of this Agreement (the “Term”) shall be for a period of eleven (11) years commencing on the Effective Date of the Agreement. The Development Obligations set forth in Exhibit 2 shall begin on the one (1) year anniversary of the Effective Date. Unless sooner terminated in accordance with the provisions of this Agreement, Developer shall have the right to extend the term for two (2) additional ten (10) year terms (“Renewal Term(s)”) if: (i) Developer notifies us in writing no more than one hundred eighty (180) days and no less than ninety (90) days before the Term or first Renewal Term would otherwise expire; (ii) during the Term or first Renewal Term, Developer has substantially complied with the RD minimum development obligations, and all of the other terms of this Agreement; (iii) Developer and each Principal signs our general release form waiving any and all claims against us, our Affiliates, and our and their owners, officers, directors, employees, agents, successors and assigns; (iv) we and Developer mutually agree on a new minimum or other Development Obligations for the RDA during the Renewal Term; and (v) Developer has paid a renewal fee of $40,000.
Section 6 of the Agreement is deleted in its entirety and replaced with the following:
6. DEVELOPMENT FEE. Developer shall pay ESIO a non-refundable fee (the “Development Fee”) upon execution of the Agreement and Amendment.
A. The Development Fee for the RDA is $250,000.
B. If we require Developer to acquire an in-depth demographic analysis of the RDA, Developer shall also purchase the demographic analysis from us or our designated supplier for the then-applicable fee.
Section 7.1 of the Agreement is deleted in its entirety and replaced with the following:
7.1 Developer.
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| (a) | Initial Fee Commission and Conditions of Payment. During the Term of this Agreement, Developer shall be paid a commission, as set forth in this Section, based on a percentage of Initial Franchise Fees and/or Renewal Fees paid by Unit Franchisees for the purchase or renewal of ESIO Unit Franchises located within the RDA (the “Initial Fee Commission”) as long as Developer has satisfied the Initial Fee Commission Conditions at the time such Initial Fee Commission would be due to Developer. For purposes of this Agreement, the term “Initial Fee Commission Conditions” shall mean: (a) the Unit Franchisee executes a Franchise Agreement with us and pays us an initial franchise fee (we shall not be deemed to have received any fees until our bank confirms receipt of the fees or fees paid into escrow, if applicable, until such fees actually have been remitted to us); and (b) Developer has complied with all of its other obligations under this Agreement with respect to such sale and has verified the same to us in writing in a form prescribed by us. Initial Fee Commissions shall be an amount equal to: |
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| i. | 20 percent (20%) percent of the Initial Franchise Fees, renewal fees and transfer fees paid to us minus broker’s fees or sales commissions during any period of time in which Developer is not actively involved in the referral of prospective franchisees to ESIO; |
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| ii. | fifty percent (50%) of the total Initial Franchise Fees, renewal fees and transfer fees paid to us minus broker’s fees or sales commissions during any period of time in which Developer is actively involved in the referral of prospective franchisees to ESIO |
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First Amendment to Regional Developer Agreement | 2 | |
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| iii. | Developer shall only be entitled to any share of transfer fees if Developer is providing all of the required training to the transferee. |
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| (b) | Commissions on Royalty Fees. We shall pay to Developer: |
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| i. | twenty percent (20%) of the Royalty Fees (which excludes advertising and marketing fees) actually received by us from each ESIO Unit Franchise located in the RDA during any period where Developer is not actively involved in the referral of prospective franchisees and substantially providing the services set forth in Section 2 of the Agreement; |
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| ii. | forty percent (40%) of the Royalty Fees (which excludes advertising and marketing fees) actually received by us from each ESIO Unit Franchise located in the RDA (and from Developer for each Regional Developer Franchise) pursuant to their Franchise Agreement (“Royalty Commissions”) during any period of time in which Developer is actively involved in the referral of prospective franchisees and substantially providing services set forth in Section 2 of the Agreement. Notwithstanding the foregoing, if Developer has failed to conduct the periodic inspections described in Section 2.3 and failed to perform in any material respect, its obligations under this Agreement as to one or more Unit Franchisees located in the RDA during any applicable month, Developer shall not be entitled to receive Royalty Commissions with respect to such Unit Franchisees for the period during which reports or services were not provided. |
Section 8.1 and 8.2 are deleted in their entirety and replaced with the following.
8.1 DEVELOPER SHALL BE RESPONSIBLE FOR FIFTY PERCENT (50%) OF THE FOLLOWING AMOUNTS PAID BY FRANCHISOR:
(a) If Franchisor is required, or decides to, return all or a part of a Franchisee’s Initial Franchise Fee of which Developer received a portion pursuant to Section 7.1.
8.2.1 DEVELOPER SHALL BE RESPONSIBLE FOR FORTY PERCENT (40%) OF THE FOLLOWING AMOUNTS PAID BY FRANCHISOR:
(a) If Franchisor is required, or decides to, return any Royalty Fees paid by a Franchisee of which Developer received a portion pursuant to Section 7.2.
The following sentence is added to the end of Section 10.2(b)
The parties agree that Developer’s disclosure of Confidential Information in securities filing required by the securities laws of the United States and the states in which it is required to make securities filings shall not be a violation of this Section 10.2. Developer shall provide Franchisor no less than forty eight (48) hours (and more time if practical) to review and object to the disclosure of any Confidential Information. If Franchisor does not object, in writing, within the stated time period (never less than 48 hours), Developer may submit the proposed filing that includes Franchisor Confidential Information. If Franchisor objects to any or all of the proposed disclosure, Developer shall make such amendments as reasonably requested by Franchisor.
Section 11.1 of the Agreement is deleted in its entirety and replaced with the following:
11.1 Assignability by Us.
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First Amendment to Regional Developer Agreement | 3 | |
(a) We shall have the right, but not the obligation, to cause a subsidiary or Affiliate of ours to perform any or all of our obligations and exercise any or all of our rights under this Agreement and under any Franchise Agreement, and to require Developer to perform any or all of its obligations hereunder, in favor or such subsidiary or Affiliate, by delivery of written notice thereof to Developer.
(b) We have the right, exercisable at any time, upon notice to you and your provision of written consent, which shall not be unreasonably withheld, to change our ownership or form and/or transfer and assign all or any part of our rights and obligations under this Agreement to any person or legal entity as long as such person or legal entity expressly assume the obligations under this Agreement.
(c) After our transfer or assignment of this Agreement to a third party, in a manner consistent with this Agreement, who expressly assumes the obligations under this Agreement, we no longer will have any performance or other obligations under this Agreement.
Sections 11.2, 11.4, 11.5 and 11.7 are deleted in their entirety.
Section 11.3 is deleted in its entirety and replaced with the following.
11.3 Conditions for Approval of Assignment or Transfer. Our consent to a Transfer of your rights under this Agreement shall be conditioned on your compliance and the proposed assignee’s compliance with the conditions set forth below. For purposes of this Agreement, “Transfer” means any voluntary, involuntary, direct or indirect assignment, sale, gift, exchange, grant of a security interest, or occurrence of any other event which would or might change the controlling ownership of Developer, and includes, without limitation: (1) the Transfer of a controlling interest of capital stock, partnership interest or other ownership interest of Developer; (2) merger or consolidation, in which Developer is not the surviving entity, of a majority interest in Developer; (3) sale, to a single individual or entity, of more than 50% of the common stock of Developer, pursuant to a private placement or registered public offering; (4) Transfer of an controlling interest in Developer in a divorce proceeding or otherwise by operation of law; or (5) Transfer of an controlling interest by will, declaration of or transfer in trust, or under the laws of intestate succession.
(a) that the assignee (or the principal officers, shareholders, directors or general partners of the assignee in the case of a business entity assignee) demonstrates that it has the skill, qualifications and economic resources necessary, in our judgment, reasonably exercised, to own and operate the Developer Business;
(b) that Developer has paid all amounts owed to us;
(c) that the assignee shall expressly assume in writing for our benefit all of the obligations of Developer under this Agreement and any other agreements proposed to be assigned to such assignee;
(d) that neither the assignee nor its owners or Affiliates operates, has an ownership interest in or performs services for a Competitive Business (defined in Section 12.2);
(e) that the assignee shall have completed (or agreed to complete) our training program;
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First Amendment to Regional Developer Agreement | 4 | |
(f) that the assignee signs our then current form of Developer Agreement, the provisions of which may differ materially from any and all of those contained in this Agreement, and the term of which shall be the remaining term of this Agreement;
(g) that as of the date of any such assignment, the assignor shall have strictly complied with all of its obligations to us, whether under this Agreement or any other agreement, arrangement or understanding with us;
(h) that the assignee is not then in default of any of the obligation to us under any agreement between such assignee and us;
(i) that the assignor shall pay to us a transfer fee;
(j) that the assignor shall sign a general release, in a form satisfactory to us, of any and all claims against us and our Affiliates and our and their respective shareholders, officers, directors, employees, representatives, agents, successors and assigns; and
(k) Any attempted assignment or transfer of your rights under this Agreement without complying with the conditions set forth in this Section 11.3 is a breach of this Agreement and has no effect.
Section 11.6 is deleted in its entirety and replaced with the following.
11.6 Company’s Right of First Refusal. If Developer, a Principal or Principals, or Developer’s shareholders (the “Seller”), at any time, determine to sell or transfer a controlling interest in Developer, this Agreement or the Developer Business, as applicable, the Seller must obtain from a responsible and fully disclosed buyer, and send us a true and complete copy of a bona fide, executed written offer relating exclusively to an interest in Developer or this Agreement and the Developer Business. For purposes of this Agreement, a “controlling interest” shall mean “more than 50% of Developer’s voting shares.” The offer must include details of the payment terms of the proposed sale and the sources and terms of any financing for the proposed purchase price. To be a valid, bona fide offer, the proposed purchase price must be in a fixed dollar amount and without any contingent payments of purchase price (such as earn-out payments).
We may, by delivering written notice to the Seller within fifteen (15) days after we receive both an exact copy of the offer and all other information requested, elect to purchase the interest for the price and on the terms and conditions contained in the offer, provided that: (1) we may substitute cash for any form or payment proposed in the offer; (2) our credit will be deemed equal to the credit of any proposed buyer; (3) the closing will be not less than thirty (30) days after notifying the Seller of our election to purchase or, if later, the closing date proposed in the offer; and (4) we must receive, and the Seller agrees to make, all representations and warranties required by us, given by the seller of the assets of a business or ownership interests in a legal entity, as applicable, including, without limitation, representations and warranties regarding ownership and condition of, and title to, assets and (if applicable) ownership interests and validity of contracts and the liabilities, contingent on otherwise, relating to the assets or ownership interests being purchased. If we exercise our right of first refusal, the Seller agrees that, for two (2) years beginning on the closing date, the Seller, its Principals and members of the Principals’ immediate family will be bound by the non-competition covenant contained in Section 12.2 below.
If we do not exercise our right of first refusal, the Seller may complete the sale to the proposed buyer on the original offeror’s terms. If the Seller does not complete the sale to the proposed buyer within: (i) one hundred eighty (180) days if the buyer is a publicly traded company (for purposes of this Agreement a publicly traded company is a company issuing stocks, which are traded on the open market, either
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First Amendment to Regional Developer Agreement | 5 | |
on a stock exchange or on the over-the-counter market); or (ii) sixty (60) days if the buyer is a privately held company; after we notify the Seller that we do not intend to exercise our right of first refusal, or if there is a material change in the terms of the sale (which the Seller must let us know promptly), we will have an additional right of first refusal during the thirty (30) day period following either the expiration of the applicable period or receipt of notice of the material change(s) in the sale’s terms, either on the terms originally offered or the modified terms, at our option.
Section 11.7 is deleted in its entirety.
The following is added to Section 15.15.
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If to Developer | TEMPCO, INC. 7625 E. Via Del Reposo Scottsdale, AZ 85258 |
Section 12 is terminated in its entirety and replaced with the following.
12.1 In Term. During the term of this Agreement, neither Developer, any Principal, or any member of a Principal’s immediate family will have any direct or indirect interest (e.g., through a spouse) as a disclosed or beneficial owner, investor, partner, director, officer, controlling shareholder, employee, consultant, representative or agent, or in any other capacity, in a Competitive Business (defined below), whether located within or outside the RDA, without our prior written consent.
12.2 Post-Term. For a twelve (12) month period following the assignment, expiration or termination of this Agreement, for any reason, neither Developer, any Principal, or any member of a Principal’s immediate family will have any direct or indirect interest (e.g., through a spouse, child or trust) as a disclosed or beneficial owner, investor, partner, director, officer, employee, consultant, representative or agent, or in any other capacity, in any Competitive Business located or operating: (a) within the RDA; (b) within the development area of any of our other Developers; or (c) within twenty-five (25) miles of any ESIO Franchise or Developer franchise in operation or development on the date of assignment, expiration or termination. The term “Competitive Business” means any business which derives more than Fifty-Thousand Dollars ($50,000) of revenue per year from: the distribution and sale of water, beverages, water and beverage equipment (including coolers, heaters, and other related equipment), services (including maintenance and repair) or products (including beverage packets), or any business which grants franchises or licenses to others to operate such a business, other than a ESIO Franchise operated under a franchise agreement with us.
Section 13.1 is deleted in its entirety and replaced with the following.
13.1 Termination by Company. We may terminate this Agreement, effective upon written notice of termination to Developer, if:
(a) Developer makes or attempts to make a transfer in violation of Section 11;
(b) Developer fails to meet the RD Minimum Development Obligation for any Development Period;
(c) Developer or a Principal has made or makes a material misrepresentation or omission in acquiring the rights under this Agreement or in operating the Developer Business;
(d) Developer does not satisfactorily complete initial training;
(e) Developer or a Principal is convicted by a trial court of, or pleads no contest to, a felony;
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(f) Developer fails to maintain the insurance we require from time to time;
(g) Developer or a Principal engages in any dishonest, unethical or illegal conduct or any other conduct which, in our opinion, adversely affects our reputation, the reputation or other ESIO Franchises or the goodwill associated with the Marks;
(h) Developer knowingly makes any unauthorized use or disclosure of any part of the Manuals or any other Confidential Information;
(i) Developer fails on three (3) or more separate occasions within any twelve (12) consecutive month period to submit when due reports or other data, information or supporting records, pay when due any amounts due to us (or our Affiliates), or otherwise comply with this Agreement, whether or not Developer corrects any of these failures after we deliver written notice to Developer, whether or not Developer corrects either of the failures after we deliver written notice to Developer;
(j) Developer makes an assignment for the benefit of creditors or admits in writing insolvency or inability to pay debts generally as they become due; Developer consents to the appointment of a receiver, trustee or liquidator of all or the substantial part of the assets of the Developer Business; or the assets of the Developer Business are attached, seized, subjected to a writ or distress warrant, or levied upon, unless the attachment, seizure, writ, warrant or levy is vacated within thirty (30) days following the order’ entry;
(k) Developer fails to comply with any other provision of this Agreement and does not correct the failure within thirty (30) days after we deliver written notice of the failure to Developer; or
(l) Developer fails to pay any sums due to us and does not correct the failure within ten (10) days after we deliver written notice of that failure to Developer.
Section 13.2 is deleted in its entirety and replaced with the following.
13.2 Cross-Termination. Notwithstanding anything contained in this Agreement to the contrary, at any time that Developer or any of its Affiliates or Principals are in breach of his obligations under this Agreement, or any other agreement between Developer or any Principal or Developer’s Affiliates and Franchisor or any of its Affiliates, Franchisor (or its Affiliate) may elect to defer the performance of Franchisor’s (or its Affiliate’s) obligations under this Agreement or such other agreement until Developer’s (or its Principal’s or Affiliate’s) breach has been cured. Franchisor’s (or its Affiliate’s) exercise of that right will not constitute a waiver of its rights under this Agreement or such other agreement, including Franchisor’s (or its Affiliate’s) right to terminate this Agreement or such other agreement. In addition, Franchisor’s (or its Affiliate’s) exercise of that right will not serve as a basis for any claim by Developer, a Principal (or Developer’s Affiliate) that Franchisor did not perform its obligations in a timely manner.
Section 14.6 is deleted in its entirety and replaced with the following.
14.6 Construction. All headings of the various Sections of this Agreement are for convenience only, and do not affect the meaning or construction of any provision. All references in this Agreement to masculine, neuter or singular usage will be construed to include the masculine, feminine, neuter or plural, wherever applicable. Except where this Agreement expressly obligates us to reasonably approve or not unreasonably withhold our approval of any of your actions or requests, we have the absolute right to refuse any request by you or to withhold our approval of any action or omission by you. The term “Affiliate” as used in this Agreement is applicable to any company directly or indirectly owned or
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controlled by you or any Principal, or any company directly or indirectly owned or controlled by us that sells products or otherwise transacts business with you.
Section 15.7 is deleted in its entirety and replaced with the following.
15.7 Consent to Jurisdiction. Subject to Section 14 and the provisions below, Developer and its Principals agree that all actions arising under this Agreement or otherwise as a result of the relationship between Developer and us must be commenced in the State of Arizona, and in the state or federal court of general jurisdiction closest to where our principal business address then is located, and Developer (and its Owners) irrevocably submits to the jurisdiction of those courts and waives any objection Developer (or its owners) might have with either the jurisdiction of or venue in those courts. Nonetheless, Developer and any its Principals agree that we may enforce this Agreement and any arbitration orders and awards in the courts of the state or states in which Developer or a Principal is domiciled.
Section 15.8 is deleted in its entirety and replaced with the following.
15.8 Waiver of Punitive Damages and Jury Trial. Except for the Parties’ indemnification obligation under Section 15.2 above and except where authorized by federal statute, we and Developer and its Principals waive to the fullest extent permitted by law any right to or claim for any punitive or exemplary damages against the other and agree that, in the event of a dispute between us and Developer, the party making a claim will be limited to equitable relief and to recovery of any actual damages it sustains. We and Developer irrevocably waive trial by jury in any action, proceeding or counterclaim, whether at law or in equity, brought by either party.
Except as set forth herein, the Agreement by and between Developer and ESIO shall remain in full force and effect. Unless explicitly modified, deleted, or changed above, the parties to the Agreement intend for the rights and obligations set forth therein to remain in full force and effect.
If the Amendment contradicts any provision of the Agreement, the parties intend for the Amendment to control.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF,the parties to this First Amendment to Regional Developer Agreement tohave caused it to be executed as of the first date set forth above.
ESIO FRANCHISING, LLC
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By: | Lyle W. Myers |
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Its: | President |
TEMPCO, INC.
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By: | Anthony Silverman |
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Its: | |
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