EXHIBIT 10.2
FORM OF FRANCHISE AGREEMENT
[GRAPHIC OMITTED]
V2K WINDOW FASHIONS, INC.
FRANCHISE AGREEMENT
TABLE OF CONTENTS
ITEM PAGE
1. APPOINTMENT............................................................1
1.1. Grant of Franchise..................................................1
1.2. Description of Franchise and System.................................1
1.3. Area of Primary Responsibility......................................2
2. TERM AND RENEWAL.......................................................3
2.1. Initial Term........................................................3
2.2. Renewals............................................................3
3. V2K'S OBLIGATIONS......................................................4
3.1. Training and General Assistance.....................................4
3.2. Location and Scheduling Training....................................6
3.3. V2K'S Operations Assistance.........................................6
4. FEES...................................................................7
5. FRANCHISEE'S OBLIGATIONS..............................................10
5.1. Franchisee Organization and Operations.............................10
5.2. Promotion..........................................................11
5.3. Use, Display and Ownership of the Proprietary Marks................12
5.4. Approval of Advertising; Advertising Cooperatives;
Participation in Promotions........................................14
5.5. Approved Products and Services.....................................15
5.6. Business Equipment and Supplies....................................15
5.7. Goodwill...........................................................15
5.8. Warranties, Customer Relations and Refund Policies.................16
5.9. Publicity..........................................................16
5.10. Training and Certification.........................................16
5.11. Restriction On Goods/primary Suppliers/other Business..............16
5.12. Minimum Performance Standards......................................17
5.13. Insurance..........................................................17
5.14. Telephone Service..................................................18
5.15. Compliance With Laws; Licenses.....................................18
5.16. Minimum Working Capital............................................18
5.17. Enhancements Developed by Franchisee...............................18
6. FRANCHISEE TO OPERATE BUSINESS IN ACCORDANCE WITH MANUALS,
POLICIES AND PROCEDURES............................................18
6.1. Manuals............................................................18
6.2. Policy and Procedures..............................................19
7. COVENANTS.............................................................20
7.1. Proprietary Material...............................................20
7.2. Covenants of Operation and Non-competition.........................21
8. ACCOUNTING AND RECORDS................................................22
8.1. Maintain Records Six Years.........................................22
8.2. Submission of Records and Information by Franchisee................22
8.3. Franchisee Financial Reports.......................................22
8.4. Franchisee to Submit Other Records.................................22
8.5. V2K'S Right to Examine and Audit...................................22
8.6. Electronic Bookkeeping/payment System..............................22
9. TRANSFERABILITY OF INTEREST...........................................23
9.1. Transfer by V2K....................................................23
9.2. Transfer by Franchisee.............................................23
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9.3. Transfer to a Franchise Entity.....................................24
9.4. Transfer Upon Death or Substantial Incapacity......................24
9.5. Non-waiver of Claims...............................................24
9.6. Relocation.........................................................24
10. DEFAULT AND TERMINATION...............................................24
10.1. Termination by V2k Prior to Completion of Training.................24
10.2. Automatic Termination..............................................24
10.3. Termination Without Right to Cure..................................25
10.4. Franchisee's Right to Cure.........................................26
10.5. Modification by Law................................................26
10.6. Voluntary Termination by Franchisee................................26
10.7. Order Processing and Shipments.....................................26
11. FRANCHISEE'S OBLIGATIONS UPON TERMINATION.............................26
11.1. Upon Termination or Expiration.....................................26
11.2. V2K'S Right of First Refusal.......................................27
12. TAXES, PERMITS AND INDEBTEDNESS.......................................28
12.1. Franchisee Shall Pay Promptly......................................28
12.2. Franchisee Shall Comply With All Laws..............................28
12.3. Notification To V2K................................................28
13. INDEPENDENT CONTRACTOR AND INDEMNIFICATION............................28
13.1. Independent Contractor.............................................28
13.2. Franchisee to Hold Itself Out as Independent Contractor............28
13.3. Franchisee Not Authorized to Contract On Behalf of Franchisor......28
13.4. Franchisee Indemnifies Franchisor..................................28
14. NO WARRANTIES, GUARANTIES OR WAIVERS..................................29
14.1. V2K Makes No Warranties or Guaranties..............................29
14.2. No Waiver..........................................................29
15. NOTICES...............................................................29
16. ENTIRE AGREEMENT......................................................29
17. SEVERABILITY AND CONSTRUCTION.........................................30
17.1. Each Portion Severable.............................................30
17.2. Rights Limited to Parties..........................................30
17.3. Franchisee Bound by Maximum Duty...................................30
17.4. Captions Solely for Convenience....................................30
17.5. References.........................................................30
17.6. Duplicate Originals................................................30
17.7. Successors and Assigns.............................................30
18. LEGAL MATTERS.........................................................30
18.1. Governing Law......................................................30
18.2. Venue; Submission to Court, Limitation of Damages..................31
18.3. Costs and Attorneys' Fees..........................................31
18.4. Injunctive Relief..................................................31
19. ARBITRATION...........................................................31
20. CAVEAT................................................................32
21. SUBMISSION OF AGREEMENT...............................................32
22. CROSS DEFAULT, CROSS TERMINATION......................................32
22.1. Cross Default......................................................32
22.2. Cross Termination..................................................33
23. ACKNOWLEDGEMENTS......................................................33
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Riders to Franchise Agreement for Certain States (if applicable)
Appendix A - Receipt and Understanding for Franchise and Fee
Exhibit 1 - Franchise Area of Primary Responsibility and Franchise Fee
Exhibit 2 - Guaranty and Assumption of Obligations
Exhibit 3 - Addendum to Franchise Agreement - Software License Agreement
iii
V2K WINDOW FASHIONS, INC.
FRANCHISE AGREEMENT
THIS FRANCHISE AGREEMENT ("AGREEMENT") is made and entered into this
___ day of _____________, 20___ between V2K WINDOW FASHIONS, INC., a Colorado
corporation, located at 1127 Auraria Parkway, Suite 204, Denver, Colorado 80204
("V2K"); and ______________________________________, a _______________ located
at ________________________________________________________ ("FRANCHISEE").
RECITALS
A. V2K, as the result of the expenditure of time, skill, effort
and money, has accumulated extensive knowledge of the retail custom window
treatment business and has developed and owns a unique system relating to the
establishment, development and operation of a custom window treatment business
as is described herein and contained in the proprietary materials. The
proprietary materials and other information constitute trade secrets of V2K. All
of the knowledge, experience, processes, methods, specifications, techniques,
intellectual property, software, and information of V2K available for use in the
operation of the business subject to this Agreement are referred to in this
Agreement as the "SYSTEM."
B. V2K is the owner of the title and interest in the trade name,
trademark and service mark "V2K," and other trade names, trademarks, service
marks, logos, and commercial symbols (collectively the "PROPRIETARY MARKS") and
these items are part of the SYSTEM.
C. V2K grants franchises to qualified persons to be operated
under the SYSTEM, as well as the right to receive the training; the hardware
package; certain training, procedures, and operating manuals; fabric samples;
hand product sample binders; and other assistance.
D. Franchisee understands and acknowledges the importance of
V2K's high and uniform standards of quality and service and the necessity of
operating the business franchised hereunder in conformity with V2K's standards
and specifications at all times.
AGREEMENT
1. APPOINTMENT
1.1 GRANT OF FRANCHISE. V2K grants to Franchisee, under the terms
and conditions of this Agreement, the right and franchise to operate a V2K
franchise (the "FRANCHISE"), within the Franchisee's Area of Primary
Responsibility (as defined below), and to use solely in connection therewith the
SYSTEM, as it may be changed, improved and further developed from time to time.
V2K will not grant more than one franchise for every 30,000 households located
in a designated market, as determined by the most current U.S. Census estimate
or other source adopted by V2K.
1.2 DESCRIPTION OF FRANCHISE AND SYSTEM. The Franchise consists of
the integration of several unique components that are only available to
qualified persons and which together constitute the SYSTEM. Under the Franchise,
Franchisee is granted the right to engage in the retail sale and installation of
custom window treatments using the franchise version of the copyrighted V2K
Window FashionsTM Computer System. V2K has the right to require Franchisee to
implement new systems and software at Franchisee's expense; however, Franchisee
will be provided with updates to V2K's proprietary software (if any) at no
charge to
Franchisee by V2K. V2K may in the future expand the SYSTEM to include other home
and business furnishings, but is not obligated to do so.
1.3 AREA OF PRIMARY RESPONSIBILITY.
a. DESIGNATION OF INITIAL AREA OF PRIMARY RESPONSIBILITY.
Franchise's Area of Primary Responsibility (the "AREA OF PRIMARY RESPONSIBILITY"
or "AREA") shall be designated by Zip Code(s), to the extent Zip Codes are the
most practical means of determining boundaries, or other criteria as determined
solely by V2K. The criteria used for determining the boundaries of the Area of
Primary Responsibility may include: the size of the population base; the number
of households; the density of the population base; the growth and development
trends of the population base; the affluence of the population base; and/or
major and restricting topographical features which clearly define a contiguous
area, such as rivers, mountains, major freeways, and underdeveloped land areas.
As a result of these considerations, Areas of Primary Responsibility may vary in
size. Franchisee's Area of Primary Responsibility granted by V2K under the terms
of this Agreement includes a minimum of thirty thousand (30,000) households;
unless Franchisee qualifies for, and pays, the Small Market Franchise Fee, as
may be specified in SECTION 4 below, in which case Franchisee's Area of Primary
Responsibility will contain a minimum of 12,000 households. Franchisee's Area of
Primary Responsibility is set forth in EXHIBIT 1, attached to this Agreement and
incorporated herein by reference. If Franchisee's Area is designated by Zip
Code(s), and the U.S. Postal Service changes the Zip Code(s) by altering the
border(s) or adding, deleting, or splitting the Zip Code(s), V2K will alter
Franchisee's Area of Primary Responsibility, in V2K's sole determination, with a
view toward maintaining the population as close to the original size(s) as
reasonably possible in the Areas of all the franchisees impacted by the change.
Franchisee's retention of its Area of Primary Responsibility is conditional upon
Franchisee paying at least the Minimum Royalty Fee listed below. If Franchisee
fails to pay at least the Minimum Royalty Fee, or is otherwise not in full
compliance with this Agreement, V2K may grant others the right to, or itself,
engage in Actively Promoting (see SECTION 1.3.C below) in the Area of Primary
Responsibility similar products under the same Marks as Franchisee sells; or V2K
may establish company-owned businesses or grant others the right to operate
businesses in the Area of Primary responsibility that sell similar goods as
Franchisee under the Proprietary Marks.
b. SIZE OF FRANCHISEE'S AREA OF PRIMARY RESPONSIBILITY.
Franchisee acknowledges that at the time of execution of this Agreement, and
pursuant to its own independent investigation, Franchisee agrees and accepts the
Area of Primary Responsibility.
c. ACTIVE PROMOTION. The Area of Primary Responsibility is
assigned as an exclusive active promotion area, including lead development.
Franchisee's sales are not limited to its Area of Primary Responsibility
(subject to applicable laws). However, Franchisee is strictly prohibited from
Actively Promoting its franchise business outside of its Area of Primary
Responsibility without the written permission of V2K. "ACTIVELY PROMOTING" means
all forms of advertising and promotion for new customers that can reasonably be
restricted to a Zip Code, including, but not limited to, direct mailings, door
leaflets, telephone solicitation, local newspapers, and localized signs. Among
the purposes of this restriction are the following: (a) to insure that
Franchisee will promote the V2K business within his Area of Primary
Responsibility; and (b) to prevent confusion in the market place among V2K
franchisees soliciting the same customers and advertising in the same markets.
V2K and other franchisees of V2K are subject to restrictions on Actively
Promoting their businesses in Franchisee's Area of Primary Responsibility.
However, except as expressly provided in this provision, Franchisee does not
receive an exclusive or protected territory. Either V2K or another franchisee of
V2K may engage
FRANCHISE AGREEMENT - 2
in all other types of advertising, promotion and sales activity in Franchisee's
Area of Primary Responsibility.
d. OPTION TO PURCHASE ADDITIONAL TERRITORY. Provided Franchisee
is not in default under this Agreement any time during the term of the
Franchise, Franchisee shall have an option to purchase one or more additional
Areas of Primary Responsibility ("ADDITIONAL AREAS") subject to the terms in
effect at the time of Franchisee's election to do so, and subject to the
approval of V2K and the availability of Additional Areas. Additional Areas may
have more or less than 30,000 households. The fee for each Additional Area is
based on the number of households in the Additional Area, and will be the
then-current fee, which will be less than the then-current Franchise Fee. Under
this provision, Franchisee does not receive any rights other than the right to
Actively Promote its Franchise in the Additional Area. The parties will execute
an addendum to the Franchise Agreement for each Additional Area, in the form of
addendum in the V2K Franchise Offering Circular provided by V2K to Franchisee.
2. TERM AND RENEWAL
2.1 INITIAL TERM. Except as otherwise provided in this Agreement,
the term of this Agreement and of the Franchise shall commence on the date of
this Agreement and shall expire ten (10) years thereafter, unless terminated
before expiration pursuant to the terms and conditions hereof.
2.2 RENEWALS. Franchisee may renew the Franchise, subject to the
terms and conditions below, for two additional consecutive periods of five (5)
years each (the "RENEWALS"). Upon any Renewal, Franchisee shall execute V2K's
then-current form of Franchise Agreement for the five-year Renewal term (the
"SUPERSEDING AGREEMENT"), which shall supersede in all respects the Agreement in
effect just prior to a Renewal (the "PREVIOUS AGREEMENT") and Franchisee shall
comply with any additional requirements set forth therein. In no event, however,
will there be another franchise fee charged upon any Renewal hereunder. The
terms and conditions of the Superseding Agreement may differ from the terms and
conditions of the Previous Agreement including, without limitation, a higher
percentage royalty or advertising fee.
a. ELIGIBILITY. To be eligible for any Renewal hereunder
Franchisee shall:
i. Not be in default under the Previous Agreement or any
other agreement between Franchisee and V2K.
ii. Pay all outstanding amounts owed by Franchisee to V2K
as of the date of renewal.
b. EXERCISE RENEWAL. To exercise a Renewal hereunder, Franchisee
shall do all of the following:
i. Give V2K written notice of such election to renew not
less than six (6) months nor more than twelve (12) months prior to the
expiration of the then-current term of the Previous Agreement.
ii. Permit V2K to inspect the Franchisee business and
records at least five (5) months prior to the expiration of the then-current
term of the Previous Agreement, and V2K may require, as a condition precedent to
its approval of any Renewal, that Franchisee complete,
FRANCHISE AGREEMENT - 3
no later than six (6) days prior to expiration of the previous Agreement, such
modification and improvement of the Franchise as V2K requires.
iii. Except where prohibited by law, execute and deliver
to V2K, no later than fifteen (15) days prior to the effective date of any term
of renewal, a general release in form satisfactory to V2K that releases any and
all claims against V2K arising prior to such renewal date.
3. V2K'S OBLIGATIONS
3.1 TRAINING AND GENERAL ASSISTANCE. The ultimate form, content
and extent of the training, programs, and other general assistance provided by
V2K shall be determined by V2K, but shall include the following:
a. MANUALS. Beginning when Franchisee commences its mandatory
Basic Training (as defined below), V2K will lend Franchisee a Policy & Procedure
Manual, an Electronic Marketing Kit and Training Manual (collectively referred
to below as the "MANUALS") during the term of this Agreement, and provide sales
and training aids to Franchisee as deemed advisable by V2K from time to time.
V2K shall provide, from time to time, updated information and revisions to the
Manuals as new and improved methods, systems, and procedures are adopted. The
Manuals are incorporated into this Agreement by this reference. Manuals and
sales and training aids may, at V2K's discretion, be provided to Franchisee in
electronic form.
b. MANDATORY BASIC TRAINING. Within sixty (60) days of the
execution of this Agreement by Franchisee, V2K will provide mandatory Basic
Training to up to two individuals selected by Franchisee relating to the SYSTEM
("BASIC TRAINING"). All Basic Training shall be provided at locations to be
determined by V2K. Basic Training is available to up to two individuals selected
by Franchisee with no training fee assessed by V2K. V2K shall reimburse
Franchisee for airfare (up to $500) for one person to attend Basic Training, and
reimburse Franchisee for lodging expenses (but not the cost of meals) incurred
by one person attending the Basic Training. V2K shall also provide Basic
Training for one additional person for no training fee (if desired by
Franchisee), but Franchisee shall be responsible for the travel and living
expenses (including lodging and meals) for that person (see the "Fees" Section
below for the training fee for each additional person who attends Basic
Training). Upon a person successfully completing Basic Training, in V2K's sole
determination, that person will be deemed certified ("CERTIFIED") by V2K. V2K
reserves the right to establish additional mandatory training, as provided for
below. Each person who has not signed this Agreement in his or her individual
capacity must execute a confidentiality and non-competition agreement in a form
supplied by V2K before attending any training provided under this Agreement.
c. AVAILABLE OPTIONAL TRAINING. V2K may, but is not obligated to,
make available to Franchisee continuing training on an optional basis.
Continuing training may provide Franchisee with education related to software
modifications, product knowledge, home decor design, sales and marketing, and
business management. For continuing training, Franchise will be charged a fee to
cover the costs of the trainer, instruction materials and manuals, training room
and on-site meals and/or refreshments to be determined by V2K. Franchisee shall
pay for all travel and living (including meals and lodging) expenses incurred in
attending training. This training shall be conducted by experienced, qualified
instructors chosen by V2K.
d. MANDATORY MEETINGS AND ADDITIONAL MANDATORY TRAINING. V2K may,
but is not required to, conduct mandatory meetings and/or additional mandatory
training programs of
FRANCHISE AGREEMENT - 4
franchisees. No more than one meeting/training program per year will be
scheduled by V2K. No attendance fee shall be required, but Franchisee will be
required to attend, and Franchisee will be responsible for paying its travel and
living (including meals and lodging) expenses incurred in attending the
meeting/training program. These meetings/training programs shall be held in the
region where franchisee is located. If Franchisee fails to attend a mandatory
meeting that is designated by V2K as an annual meeting, V2K may, at V2K's sole
determination, require Franchisee to pay a $500 missed annual meeting fee, which
fee will be due within 30 days of notice by V2K to Franchisee.
e. SOFTWARE. During the term of this Agreement, V2K shall, at no
cost to Franchisee, license to Franchisee the Franchise Version of proprietary
software of V2K or its affiliate, including all updates and enhancements created
during the term of this Agreement (if any). The software may be provided to
Franchisee in the form of CD-ROMs or other media, or V2K may provide Franchisee
with access to the software via the Internet or an Intranet. During the term of
this Agreement, V2K or its affiliate will use reasonable efforts to maintain in
working order the Franchise Version of proprietary software of V2K of its
affiliate that is provided to, or accessible by, Franchisee. Franchisee and its
officers, directors, members, managers, partners and employees (as applicable)
will be bound by the terms of the Software License Agreement attached to this
Agreement as EXHIBIT 3, and incorporated by this reference.
f. EQUIPMENT AND SUPPLIES. Upon Franchisee's satisfactory
completion of V2K's Basic Training, and as part of the consideration for the
Franchise Fee (as defined below), V2K shall provide to Franchisee one laptop
computer, portable printer, and carrying case; product samples (subject to
availability); and an initial supply of printed marketing materials, including
business cards, stationery, envelopers, promotional brochures and business
forms. The computer hardware may either be used or new at the option of V2K.
Additional supplies of these items shall be obtained at Franchisee's expense.
All printed materials must be obtained from V2K or an approved supplier.
g. ADVERTISING ASSISTANCE. V2K will provide Franchisee with
advertising assistance, planning and programs for promotional pieces, including
seasonal and special promotions, layouts for newspapers and recommendations for
their use. Franchisee shall pay V2K for materials and media actually used by
Franchisee. The cost of these materials and media is not included in the
Regional/National/Local Advertising Fund fees described below.
h. OPENING VENDOR ACCOUNTS. V2K may, at V2K's option, open
accounts on Franchisee's behalf with Franchisee's approved suppliers. In all
cases, however, Franchisee shall be solely responsible for payment to V2K or the
supplier (as directed by V2K) of all its accounts. If V2K opens accounts on
Franchisee's behalf, V2K may bill Franchisee for V2K's expenses in administering
these accounts, in addition to the actual cost charged by the supplier. If V2K
directs Franchisee to make its supplier purchases from V2K, all payments by
Franchisee shall be in compliance with the Policy & Procedure Manual (see also
SECTION 4.O, below). Franchisee may only purchase supplies, products, and
materials from suppliers approved by V2K.
i. MARKS, VIDEOS AND MANUALS. During the term of this Agreement,
V2K will loan to Franchisee, or give Franchisee access to, copyrighted videos
and the Manuals (in printed or electronic form) for the enhancement and
operation of the franchise.
j. DISCLAIMER. V2K shall make reasonable efforts in providing
approvals, advice, products, and services to Franchisee but shall not, by virtue
of any such approvals, advice or
FRANCHISE AGREEMENT - 5
services, be deemed to have made any warranty or guarantee thereof; and without
limiting the generality of the forgoing statement, V2K specifically does not
make any warranties concerning the computer hardware provided by V2K to
Franchisee.
3.2 LOCATION AND SCHEDULING TRAINING. The location and scheduling
of the training shall be at the discretion of V2K.
3.3 V2K'S OPERATIONS ASSISTANCE.
a. ADVICE AND GUIDANCE. V2K may, but is not obligated to, from
time to time advise or offer guidance to Franchisee relative to prices for the
services and products and supplies offered for sale by the franchised business
that in V2K's judgment constitute good business practice. Franchisee shall not
be obligated to accept any such advice or guidance. Franchisee shall have the
sole right to determine the prices to be charged from time to time by the
franchised business, and no such advice or guidance shall be deemed or construed
to impose upon Franchisee any obligation to charge any fixed, minimum or maximum
prices for any service or supply offered for sale by the franchise business.
b. SALES AND MARKETING ASSISTANCE. V2K will provide to Franchisee
sales and marketing assistance as set forth in V2K's Electronic Marketing Kit.
The kit also sets forth mandatory sales and marketing procedures for the
commencement of Franchisee's operations.
c. OPERATION PROBLEMS ASSISTANCE. V2K may, but is not obligated
to, advise Franchisee of problems arising out of the operation of the franchise
business as disclosed by reports submitted to V2K by Franchisee or by
inspections conducted by V2K of the franchise. V2K may furnish Franchisee with
such assistance in connection with the operation of the franchise as is
reasonably determined to be necessary by V2K from time to time. Operations
assistance may consist of advice and guidance with respect to any of the
following:
i. Proper utilization of methods and procedures
developed for a V2K Franchise with respect to the sale of products.
ii. Making available and promoting additional supplies,
materials, products and services authorized for V2K Franchises.
iii. The institution of proper administrative, supervisory
and general operating procedures for the effective operation of V2K Franchises.
iv. Advertising and promotional programs.
d. MASTER FRANCHISEE FIELD REPRESENTATIVE. As V2K deems
appropriate, any geographic region may be represented by a Master Franchisee,
Area Developer, or other party not affiliated with V2K (the "REPRESENTATIVE").
V2K's Representative may make periodic visits to the Franchise premises for the
purposes of consultation, assistance, and guidance of Franchisee in all aspects
of the operation and management of the Franchise, may prepare written reports
regarding such visits outlining any suggested changes or improvements in the
operations of the Franchise and detailing any defaults in such operations that
become evident as a result of any such visit, and/or perform other obligations
of V2K under this Agreement. A copy of each such written report may be provided
to both V2K and Franchisee.
FRANCHISE AGREEMENT - 6
e. ADMINISTRATION OF NATIONAL/REGIONAL/LOCAL ADVERTISING FUND.
V2K shall administer the National/Regional/Local Advertising Fund (the
"ADVERTISING FUND") for purposes of marketing, advertising, creating promotional
materials and campaigns to enhance the SYSTEM and general public recognition and
acceptance thereof. V2K shall determine the cost, form of media, content,
format, production, timing, location (including regional or local concentration
and seasonal exposure) and all other matters relating to advertising, public
relations and promotional campaigns. V2K is not obligated to spend money in the
Advertising Fund in Franchisee's Area of Primary Responsibility, but all such
advertising fees shall be spent to benefit V2K franchisees. Money in the
Advertising Fund may be used to promote the Proprietary Marks, goods and
services sold by the franchises. Money in the Advertising Fund will not be used
primarily to sell additional franchises, but advertisements may indicate that
franchises are available, and may include a V2K phone number. V2K may, at V2K's
option, charge the Advertising Fund an administration fee of up to 15% of the
expenditures by the Advertising Fund for advertising production, media
placement, and other expenses.
4. FEES
Franchisee shall pay to V2K the following fees:
a. FRANCHISE FEE. A FRANCHISE FEE of $_______, which Franchise
Fee ____ is, or _____ is not (check one), a Small Market Franchise Fee. This
Agreement must be executed and the Franchise Fee paid a minimum of twenty (20)
days before the commencement of the scheduled Basic Training.
b. FEE DEEMED FULLY EARNED. The Franchise Fee is deemed fully
earned when paid to V2K and is non-refundable except as provided herein. If
Franchisee (or a representative of Franchisee) commences Basic Training, but
Franchisee (or a representative of Franchisee) does not satisfactorily complete
Basic Training, as solely determined by V2K, the Franchise Fee will be refunded
less the expenses incurred by V2K (including the travel and living expenses for
Franchisee to attend training and the cost of the computer hardware package) and
Franchisee will keep the computer hardware package (i.e. the computer, portable
printer and carrying case). In this situation, the sample package and all
software manuals and proprietary materials must be returned to V2K.
c. ROYALTY FEE.
1. Franchisee must pay to V2K a non-refundable
continuing ROYALTY FEE in the percentages listed below, based on Gross Sales in
each Franchise Year (as defined below):
i. Up to $200,000.00 of Gross Sales per Franchise Year - 8%
ii. $200,000.01 to $300,000.00 of Gross Sales per Franchise
Year - 7%
iii. $300,000.01 and more of Gross Sales per Franchise Year -
4%
2. Franchisee must, however, at least pay a minimum
Royalty Fee of $2,500.00 in the first Franchise Year, $5,000.00 in the second
Franchise Year, and $10,000.00 in each Franchise Year thereafter (including each
Franchise Year during any Renewal period), subject to an increase as specified
below (the "MINIMUM ROYALTY FEE"); except if Franchisee qualifies for, and pays,
the Small Market Franchise Fee, the Minimum Royalty Fee is $1,250 in the first
Franchise Year, $2,500 in the second Franchise Year, and $5,000 in each year
FRANCHISE AGREEMENT - 7
thereafter (including each Franchise Year during any Renewal period). If
Franchisee has one or more Areas of Primary Responsibility under this Agreement
that has/have a total of more than 60,000 households, the Minimum Royalty Fee
will be increased proportionally for each household over 60,000. In addition,
and in any case, the Minimum Royalty Fee, at V2K's option, may be adjusted by
V2K once per year. The percentage increase (if any) may not exceed the U.S.
Consumer Price Index (for U.S. City Average, All Items Index, All Urban
Consumers) percentage increase for the prior 12-month period.
3. The first "FRANCHISE YEAR" commences the first day of
the first full month following Franchisee's satisfactory completion of Basic
Training or on any other date designated by V2K. Each subsequent one-year period
is another Franchise Year.
4. The Royalty Fee shall be paid by Franchisee to V2K
within 15 days after the date of an invoice from V2K for the preceding period,
as provided in the Policy & Procedure Manual (but see SECTION 4.O, below). V2K
may, at its discretion, require less frequent payment periods and/or to require
electronic funds transfer at Franchisee's expense, as provided in SECTION 6.2.D
below.
d. GROSS SALES DEFINITION. "GROSS SALES" means all revenues from
sales of all merchandise sold and services of any nature performed by the
Franchise, less any applicable sales taxes, installation charges, and returns.
e. NATIONAL/REGIONAL/LOCAL ADVERTISING FUND FEE. A non-refundable
continuing ADVERTISING FUND FEE beginning at the opening of the Franchise
business and continuing throughout the term of this Agreement in the amount of
two percent (2%) of Franchisee's Gross Sales, payable to the Advertising Fund,
or at V2K's direction, payable in whole or in part to a regional advertising
cooperative formed by V2K. Franchisee must, however pay to V2K at least a
minimum Advertising Fund Fee (the "MINIMUM ADVERTISING FUND FEE") of $50 per
month during the first Franchise Year; $100 per month during the second
Franchise Year; and $150 per month thereafter during the term of this Agreement
(including all months in any Renewal period); except if Franchisee qualifies
for, and pays, the Small Market Franchise Fee, the Minimum Advertising Fund Fee
is $25 per month during the first Franchise Year, $50 per month during the
second Franchise Year, and $75 per month thereafter during the term of this
Agreement (including all months in any Renewal periods). The Advertising Fund
and cooperatives (if any) will be administered by V2K and/or its contractors for
the benefit of the SYSTEM. V2K reserves the right in any given year to increase
the Advertising Fund Fees for all franchisees (subject to prior contractual
restrictions on other franchisees). However, the Advertising Fund Fee may not
exceed 5% of Gross Sales during the term of this Agreement; except that this
provision does not apply in the case of the Minimum Advertising Fund Fee
amounts, as stated above. The Advertising Fund Fee shall be paid every 30 days.
No interest on unexpended advertising fees shall be imputed for the benefit of
or payable to the franchisees. Fees collected by the Advertising Fund are kept
in a separate account apart from V2K's operating funds, except for the
administration fee payable by the Advertising Fund to V2K. Neither the
Advertising Fund Fees, the Advertising Fund nor any matter related thereto shall
in any way be construed as a "trust," "fiduciary relationship," or any other
similar special arrangement, nor shall payment of the Advertising Fund Fee or
any matter related thereto be construed to create the same. V2K may establish a
toll-free telephone number for the benefit of the SYSTEM, and if established,
the costs associated with the toll-free telephone system will be paid by the
Advertising Fund. V2K may in the future establish the V2K National Support
Services Network, under which qualified representatives will be able to respond
to inquiries from
FRANCHISE AGREEMENT - 8
customers of V2K franchisees. The costs for these services may be recovered by
V2K partially or wholly from the Advertising Fund.
f. LOCAL ADVERTISING/MARKETING. Although Franchisee is not
required to do so, V2K strongly recommends that once Franchisee's business is
established, Franchisee spend at least 5% of its Gross Sales each month on
advertising and marketing of its Franchise, which expenditures are subject to
the approval and direction of V2K. Payments will be made by Franchisee directly
to third parties who provide these goods and services to Franchisee.
g. SHOW ROOM PARTICIPATION. Upon thirty (30) days written notice
to Franchisee by V2K, a show room (for Franchisee to show the products and
services provided by its Franchise) may be provided to Franchisee in designated
metropolitan and regional areas. If the showroom is provided to Franchisee,
Franchisee shall be liable for its proportional rental fee, not to exceed
$150.00 per month.
h. PHONE AND ELECTRONIC TRANSFER FEES. All telephone and
electronic transfer fees between V2K and Franchisee shall be borne by
Franchisee. If Franchisee's Area of Primary Responsibility is located in a
central telephone service area, as designated by V2K, Franchisee shall pay its
proportionate share of the expenses of maintaining the service (based on the
total number of V2K franchisees located in the central telephone service area).
i. TRAINING FEE FOR ADDITIONAL ATTENDEES OF BASIC TRAINING. If at
any time during the term of this Agreement, Franchisee desires to send anyone to
training, and V2K has provided Basic Training for two persons without a training
fee (as provided for in SECTION 3.1.B above), the Basic Training fee for each
person is $250.00.
j. CONTINUING AND OPTIONAL TRAINING FEES. V2K shall charge a fee
determined by V2K based on the training (if applicable) being provided for
Franchisee representatives for continuing and additional training, as provided
above. All travel and living expenses shall be borne by the Franchisee.
k. TECHNOLOGY FEE. V2K may, upon at least 30 days advance written
notice to Franchisee, assess a fee for Website and e-mail hosting by V2K, for
future Web-based system integration, and for other technology related services
(the "TECHNOLOGY FEE") of $75 per month, subject to an annual increase at V2K's
sole determination, but not more than 10% per year. If assessed by V2K, the
Technology Fee will be payable monthly as billed by V2K.
l. INTEREST ON DELINQUENT PAYMENTS. All delinquent payments on
any sums due V2K may bear interest at the lesser of 18% per annum or the maximum
rate permitted by law.
m. INSUFFICIENT FUNDS FEE. If any check Franchisee provides to
V2K is returned to V2K by financial institution or other entity, or if V2K is
unable to charge Franchisee's credit or debit card for the full amount of any
payments owed to V2K (as specified in SECTION 6.2.D below), because of
insufficient funds, the account having been closed, or otherwise, V2K may charge
Franchisee a fee of the lesser of $20.00 or the highest amount permitted by
applicable law. The payment amount and this fee are immediately due and payable.
V2K may assess this fee for each occurrence of a returned check or its inability
to charge franchisee's credit or debit card as described in this provision.
n. NO ACCORD OR SATISFACTION. If Franchisee pays or V2K otherwise
received a lesser amount than the full amount provided for under this Agreement
for any payment due
FRANCHISE AGREEMENT - 9
hereunder, such payment or receipt shall be applied against the earliest amount
due V2K. V2K may accept any check or payment in any amount without prejudice to
V2K's right to recover the balance of the amount due or pursue any other right
or remedy. No endorsement or statement on any check or payment or in any letter
accompanying any check or payment or elsewhere shall constitute or be construed
as an accord or satisfaction.
o. FINANCING ARRANGEMENT. V2K may enter into an arrangement with
an unaffiliated third party to provide financing of purchases made by customers
of V2K Franchisees. If so, and if Franchisee chooses to participate in the
program, Royalty Fees will be deducted by V2K from the payments to Franchisee
resulting from the third party financing of those purchases. Franchisee is
responsible for paying any Royalty Fees owed to V2K that are not covered by
these deductions.
5. FRANCHISEE'S OBLIGATIONS
5.1 FRANCHISEE ORGANIZATION AND OPERATIONS.
a. FRANCHISEE REPRESENTATIONS. If Franchisee is a business
entity, Franchisee represents, warrants, and covenants that:
i. DULY ORGANIZED AND VALIDLY EXISTING. Franchisee is
duly organized and validly existing under the state law of its formation and is
authorized to do business in the jurisdiction where the V2K franchised business
shall be operated.
ii. ACTIVITIES CONFINED TO FRANCHISE. Franchisee's
governing documents shall at all times provide that the activities of Franchisee
are confined exclusively to the development and operation of a V2K franchised
business and no other business unless otherwise consented to by V2K in writing.
iii. MAINTAIN LIST OF OWNERS/NOTICE. If Franchisee is a
corporation, Franchisee shall maintain at all times a current list of
stockholders in the corporation. If Franchisee is a partnership, Franchisee
shall maintain at all times a current list of all owners of an interest in the
partnership. If Franchisee is a limited liability company, Franchisee shall
maintain at all times a current list of members. In the event there is a change
in such ownership, Franchisee shall provide such information to V2K within five
(5) days subsequent to any such change and its stockholders, partners and
members shall execute any documents deemed necessary by V2K in order to reflect
such changes. Franchisee shall make its list of owners available to V2K upon
request within five days.
iv. EXECUTION OF GUARANTY AND ASSUMPTION OF OBLIGATIONS.
At all times, any person having a five percent (5%) or more interest in the
Franchisee may be required by V2K to execute a Guaranty and Assumption of
Obligations of this Agreement, in the form attached to this Agreement as EXHIBIT
2.
b. ABOVE WARRANTIES CONTINUING. Franchisee acknowledges and
agrees that the representations, warranties, and covenants set forth above are
continuing obligations of Franchisee.
c. DESIGNATED PERSON. If Franchisee is a business entity, or if
Franchisee is composed of more than any individual, and if any shareholder,
partner, member or individual owns less than fifty percent (50%) ownership
interest of Franchisee, one shareholder, partner,
FRANCHISE AGREEMENT - 10
member or individual shall be designated in writing to V2K as the person to make
all decisions for Franchisee (the "DESIGNATED PERSON") and shall have the Power
of Attorney of all other shareholders, partners, members or individuals. The
Designated Person shall communicate with, and receive all mail from, V2K on
behalf of Franchisee. When V2K provides notice to the Designated Person, V2K
shall be deemed to have provided notice to all stockholders, partners, members
or individuals.
d. FULL TIME OPERATION. V2K recommends that the Franchise be
operated full time in compliance with the Policy & Procedure Manual. Franchise,
or if Franchisee is an entity, at least one person employed by Franchisee, must
be active in the day-to-day operations of the Franchise, and must have
successfully completed V2K's Basic Training program and received V2K
certification.
f. INSPECTIONS. Franchisee agrees that V2K may inspect the
Franchise Premises and the Franchisee's inventory and supplies from time to time
as determined by V2K. However, inspections shall only occur during normal
business hours. Franchisee agrees that V2K may directly access Franchisee's
records and other information on Franchisee's computer.
g. INACTIVE STATUS. If Franchisee fails to submit any product
orders to V2K for a period of 90 days or more, or upon Franchisee's request
because of a serious medical condition or other circumstance, V2K may, at its
sole option, transfer the Franchise to "INACTIVE STATUS" for the time period
specified by V2K. While the Franchise is on Inactive Status, V2K will not
provide any customer leads to Franchisee, nor will the Franchise be listed on
the V2K website, as described in the Manuals. Upon conclusion of any Inactive
Status period, V2K may terminate this Agreement, as a franchisee abandonment, as
specified in SECTION 10.3.A below.
h. MPLOYEES AND CONTRACTORS. Franchisee is solely responsible
for hiring or engaging any employees or independent contractors it desires to
have assist it in the operation of its business, and shall screen all persons
who may enter the residences of any customers or potential customers. V2K may
require any employees or independent contractors of Franchisee that may have
access to proprietary information of V2K to sign a nondisclosure and
noncompetition agreement in the form provided by V2K.
i. INQUIRIES CONCERNING V2K PRODUCTS OR SERVICES. V2K will not
respond to inquiries from employees or other representatives of Franchisee,
concerning products or services provided by V2K, who have not been Certified by
V2K (see SECTION 3.1.B above).
j. LEAD FOLLOW-UP. Franchisee shall, within one business day of
receiving a potential customer lead from V2K, contact the prospective customer.
If Franchisee anticipates it will not be able to meet this requirement for a
limited time (such as a vacation by a Franchisee, or an individual owner of a
Franchisee), Franchisee must notify V2K in advance of, and receive V2K's
approval of, the time period in which it cannot meet this requirement. In any
case in which Franchisee cannot contact a potential customer within the one
business day time period, V2K may give the lead to another V2K franchisee.
5.2 PROMOTION. Franchisee shall use its best efforts to actively
promote the sale of V2K products and services, and to maintain and extend,
whenever possible, excellent business relations, goodwill, and reputation with
its customers, suppliers, and others.
FRANCHISE AGREEMENT - 11
5.3 USE, DISPLAY AND OWNERSHIP OF THE PROPRIETARY MARKS.
a. ONLY APPROVED MARKS. Franchisee shall use only the Proprietary
Marks designated by V2K and shall use them only in the manner authorized and
permitted by V2K.
b. MARKS ONLY FOR FRANCHISE. Franchisee shall use the Proprietary
Marks only for the operation of the Franchise and in advertising related to the
Franchise, and only during the term of the Agreement. Franchisee agrees to cease
use of the Proprietary Marks after the termination or expiration of this
Agreement and Franchisee shall take appropriate action to remove the Proprietary
Marks from Franchisee's business and to cancel any advertising relationship to
Franchisee's use of the Proprietary Marks, including Yellow Pages listings.
c. CONDITIONS OF USE OF MARKS; INTERNET RESTRICTIONS. During the
term of this Agreement and in compliance with the Policy & Procedure Manual,
Franchisee shall identify itself as the owner of the Franchise in conjunction
with any use of the Proprietary Marks, including tag lines applicable to, but
not limited to, use on invoices, order forms, receipts, contracts, stationery
and business cards and all other forms of advertising. Franchisee shall not use
the Proprietary Marks to incur any obligation or indebtedness on behalf of V2K.
Franchisee shall not use the Proprietary Marks as part of its business entity or
other legal name without the written permission of V2K. Franchisee shall comply
with V2K's instructions in filing and maintaining the requisite trade name or
fictitious name registrations, and shall execute any documents deemed necessary
by V2K to obtain protection for the Proprietary Marks or to maintain their
continued validity and enforceability. Franchisee shall identify all marks as
Proprietary Marks of V2K. Franchisee shall not post any of V2K's confidential
information on the Internet, and Franchisee shall not post any V2K copyrighted
material or information on the Internet without V2K's prior written permission;
nor shall Franchisee assist any other party in doing so. Franchisee shall not
maintain a Website or otherwise maintain a presence or advertise on the Internet
or any other public computer network in connection with the Franchise business
without V2K's prior written approval, which V2K may withhold for any reason or
no reason. Franchisee agrees that only V2K (and not Franchisee) may register a
domain name containing any Proprietary Mark or that is used for or in connection
with the Franchise business, and the domain name registration will remain at all
times under V2K's sole ownership. Franchisee agrees to submit to V2K for its
approval before use true and correct printouts of all Website pages Franchisee
proposes to use in its Website in connection with the Franchise business.
Franchisee shall only use material that V2K has approved. Franchisee's Website
must conform to all of V2K's Website requirements, whether set forth in the
Manuals or otherwise. If V2K grants approval for a Website: (1) Franchisee shall
not use any of the Proprietary Marks at the site except as V2K expressly
permits; (2) if Franchisee wishes to modify its approved site, all proposed
modifications must also receive V2K's prior written approval; (3) Franchisee
explicitly understands that it must not post on its Website any material in
which any third party has any direct or indirect ownership interest (including
video clips, photographs, sound bites, copyrighted text, trademarks or service
marks or any other text or image in which any third party may claim intellectual
property ownership interests); (4) Franchisee agrees to list on its Website any
Website maintained by V2K, and any other information V2K requires in the manner
V2K dictates; (5) Franchisee agrees to provide all hyperlinks or other links
that V2K requires; and (6) Franchisee agrees that V2K may provide on the V2K
Website a link to Franchisee's Website. The requirement for V2K's prior approval
set forth in this Section will apply to all activities on the Internet or other
communications network to be conducted by Franchisee, except that Franchisee may
maintain one or more e-mail addresses (but Franchisee must use V2K e-mail
addresses only for business of the Franchise), and Franchisee may conduct
individual e-mail communications without V2K's prior written
FRANCHISE AGREEMENT - 12
approval--provided that the address and communications comply with all of the
requirements (including those pertaining to the use of V2K's Proprietary Marks)
contained in this Agreement. Franchisee agrees to obtain V2K's prior approval as
provided above if it proposes to send advertising to multiple addresses via
e-mail.
d. NOTICE OF INFRINGEMENT. Franchisee shall immediately notify
V2K of any infringement of the Proprietary Marks or challenge to its use of any
of the Proprietary Marks or claim by any person of any rights in any of the
Proprietary Marks. Franchisee agrees that it will not communicate with any
person other than V2K's counsel in connection with any such infringement,
challenge, or claim. V2K shall have sole discretion to take such action as it
deems appropriate and the right to exclusively control any litigation, or any
Patent and Trademark Office or other proceeding arising out of any infringement,
challenge, or claim, or otherwise relating to any of the Proprietary Marks.
Franchisee agrees to execute any and all instruments and documents, render such
assistance, and do such acts and things as may, in the opinion of V2K, maintain
V2K's interests in any such litigation or Patent and Trademark Office or other
proceeding, or to otherwise protect and maintain V2K's interest in the
Proprietary Marks.
e. FRANCHISEE EXPRESSLY UNDERSTANDS AND ACKNOWLEDGES ALL OF THE
FOLLOWING:
i. OWNERSHIP. V2K is the owner of all right, title, and
interest in and to the Proprietary Marks and the goodwill associated with and
symbolized by them.
ii. FRANCHISEE SHALL NOT CONTEST. Franchisee shall not
directly or indirectly contest the validity of V2K's ownership in or validity of
the Proprietary Marks.
iii. FRANCHISEE HAS NO OWNERSHIP RIGHT. Franchisee's use
of the Proprietary Marks pursuant to this Agreement does not give Franchisee any
ownership or other interest in or to the Proprietary Marks, except the license
granted by this Agreement. Any and all goodwill arising from Franchisee's use of
the Proprietary Marks in its Franchised operation under this Agreement shall
inure solely and exclusively to V2K's benefit. Upon the expiration or
termination of this Agreement and the license herein granted, no monetary amount
shall be assigned as attributable to any goodwill associated with Franchisee's
use of the SYSTEM or the Proprietary Marks.
iv. FRANCHISEE'S RIGHT NON-EXCLUSIVE. The right and
license of the Proprietary Marks granted hereunder to Franchisee is
nonexclusive. V2K retains the right to grant other licenses for use of the
Proprietary Marks, in addition to those licenses already granted to existing
Franchisees, the right to develop and establish other systems using names or
marks, other than the Proprietary Marks, which may operate in your Area of
Primary Responsibility, and to grant licenses or Franchises thereto without
providing any rights therein to Franchisee.
v. V2K'S RIGHT TO CHANGE MARKS. V2K reserves the right
to add, delete or substitute different trade names, service marks, trademarks,
symbols, logos, emblems, and indicia of origin for the Proprietary Marks for use
in identifying the SYSTEM and the business operating thereunder if any of V2K's
currently owned Proprietary Marks no longer can be used, or if V2K, in its sole
assessment, determines that the addition, deletion or substitution of different
trade names, service marks, trademarks, symbols, logos, emblems, or indicia of
origin will be beneficial to the SYSTEM. In such event, V2K may require
Franchisee, at Franchisee's sole expense, to discontinue or modify its use of
any of the Proprietary Marks or to use one or
FRANCHISE AGREEMENT - 13
more additional or substitute trade names, service marks, trademarks, symbols,
logos, emblems, or indicia of origin.
5.4 APPROVAL OF ADVERTISING; ADVERTISING COOPERATIVES;
PARTICIPATION IN PROMOTIONS.
a. APPROVAL REQUIRED. All advertising and promotion by Franchisee
in any medium, including the Internet, shall conform to the standards and
requirements of V2K as set forth in the Policy & Procedure Manual or otherwise
as stated by V2K (see also SECTION 5.3.C above). Franchisee shall obtain V2K's
approval of all advertising and promotional plans and materials prior to use if
such plans and materials have not been prepared by V2K or previously approved by
V2K during the past twelve (12) months. Franchisee is responsible for obtaining
permission from all applicable parties before submitting to V2K for approval any
advertising that includes testimonials or materials copyrighted by other
parties. V2K has the right to use, and/or allow other franchisees to use, any
advertising or promotional materials created by Franchisee that are related to
Franchisee's business or the SYSTEM. Franchisee agrees to assign to V2K the
copyright on advertising and promotional materials whenever requested to do so
by V2K. V2K shall notify Franchisee of its approval or disapproval of
advertising and promotional materials within 30 days of submission by Franchisee
to V2K, unless V2K requests additional information, in which case the approval
time will be extended as necessary. If V2K does not notify Franchisee as
provided in this provision, the materials will be deemed to be approved.
Franchisee shall promptly discontinue use of any advertising or promotional
plans or materials, whether or not previously approved, upon notice from V2K.
b. REGIONAL COOPERATIVES. Franchisee understands that V2K may
form regional advertising cooperatives ("CO-OPS"), and if directed to do so by
V2K, Franchisee agrees to become a member of a Co-op for a region that includes
Franchisee's Area of Primary Responsibility. If directed by V2K to become a
member of a Co-op, Franchisee agrees to abide by the Bylaws established by the
Co-op.
c. PARTICIPATION IN PROMOTIONS. Franchisee must participate in
advertising promotions of the Advertising Fund, of any Co-op of which Franchisee
is a member, and in those created by V2K outside of the Advertising Fund and any
Co-ops.
d. FRANCHISEE ADVERTISING OUTSIDE ITS AREA. If Franchisee intends
to use any form of advertising that cannot be limited to Franchisee's Area(s) of
Primary Responsibility, prior to commencing the advertising, Franchisee must
advise V2K of the advertising and the area in which the advertising may be seen
or heard, and receive V2K's approval of the advertising. Franchisee must obtain
from V2K current information about other V2K franchisees in that area, and
Franchisee must use reasonable efforts (as specified below) to provide those
other franchisees with the opportunity to have information about their
franchises included in the advertising by paying their proportional share of the
costs of the advertising. In this situation, Franchisee will also be entitled to
collect from the other participating franchisees a total administrative fee of
15% of the cost of the advertising (or such other amount agreeable to Franchisee
and the other participating franchisees), which fee will be prorated among the
participating franchisees. In this provision, "reasonable efforts" means that
Franchisee will provide written notice to the other franchisees, in the manner
reasonably specified by V2K, and give the other franchisees at least ten (10)
days to respond.
e. STATEMENT OF INDEPENDENT OWNERSHIP. All advertising and
promotional materials (including business cards, order forms, and letterhead)
must state that Franchisee's business is
FRANCHISE AGREEMENT - 14
independently owned, using language that may be specified from time to time by
V2K. If Franchisee maintains an office other than in a residence, Franchisee
shall display in that office a sign, in a form and with language specified from
time to time by V2K, indicating that the business is independently owned.
5.5 APPROVED PRODUCTS AND SERVICES.
a. All products sold by Franchisee must be approved by V2K prior
to their sale, as specified in SECTION 5.11 below.
b. Franchisee shall offer for sale in its Franchise only those
types of products and services V2K deems to be consistent with and beneficial to
the SYSTEM, and Franchisee agrees specifically not to offer for sale products
for which Franchisee lacks sufficient skill and knowledge to provide the high
level of service associated with the SYSTEM.
5.6 BUSINESS EQUIPMENT AND SUPPLIES.
a. Franchisee shall maintain an office in Franchisee's home or
other location used solely for conducting activities related to the Franchise
business. In addition to the hardware package provided by V2K to Franchisee, the
office shall be equipped with equipment including a facsimile machine, copier
and answering machine or answering service, MasterCard/Visa processing service
and supplies necessary to conduct the Franchise business. V2K may, at is option,
require Franchisee to purchase magnetic car signs from an approved supplier.
b. Prior to the commencement of Franchisee's Basic Training,
Franchisee agrees to have installed at its office not less than one (1)
operational telephone line and equipment capable of making outgoing and
receiving incoming telephone calls with facsimile transmissions, e-mail, a
call-waiting function and voice mail. The equipment shall be operational and
functioning during the term of this Agreement.
c. Franchisee shall, at its expense, maintain a high-speed
Internet connection and e-mail account from a service provider meeting the
minimum standards established by V2K from time to time, so as to be able to
receive and transmit communications and documents as required by V2K. Franchisee
shall check its e-mail box every business day, and read and promptly respond (as
applicable) to all messages from V2K.
d. Franchisee agrees that during the term of this Agreement the
laptop computer provided to Franchisee by V2K will be used only for activities
related to the franchise business, and Franchisee will not add any software to
the computer that is not provided by, or specified by, V2K.
e. At all times, Franchisee shall, at Franchisee's expense,
maintain updates of fabric and product samples as required by V2K, or if updates
are designated as optional by V2K, then at Franchisee's discretion.
5.7 GOODWILL. Franchisee shall protect the goodwill of the
Proprietary Marks and the SYSTEM, and shall maintain uniform standards of
operation, shall pay all business obligations, whether with V2K, approved
suppliers, or with others, when due and according to their terms, and shall
comply with all standards, policies and manuals established by V2K relating to
merchandise, vehicles, display materials, and appearance and conduct of all
sales and installation personnel or other representatives who meet the public.
FRANCHISE AGREEMENT - 15
5.8 WARRANTIES, CUSTOMER RELATIONS AND REFUND POLICIES. Franchisee
agrees to follow any and all warranty and customer relations policies and/or
guarantee and refund policies established in the Policy & Procedure Manual or
otherwise in writing from time to time by V2K. Franchisee acknowledges that the
compliance with the V2K's warranty, customer relations and refund policies are
integral to the operation of the Franchise.
5.9 PUBLICITY. Franchisee agrees to allow V2K to use its (if
Franchisee is one or more persons) or its principal employees' name(s), written
endorsements and photographic likeness of any type (including film, video tape,
or photograph), in publicity of V2K.
5.10 TRAINING AND CERTIFICATION. Franchisee (or if Franchisee is an
entity, at least one representative of Franchisee) shall participate in and
complete the Basic Training that is required to achieve V2K certification, and
additionally shall participate in further training as required by V2K from time
to time. Franchisee shall require any employees, partners, or independent
contractors who render services in the Franchise to complete any and all
training required of them in accordance with V2K policies. At all times,
Franchisee shall have a minimum of one person Certified by V2K who is active in
the day-to-day operations of the Franchised business.
5.11 RESTRICTION ON GOODS/PRIMARY SUPPLIERS/OTHER BUSINESS.
a. RESTRICTION REQUIREMENTS; PAYMENT OF INVOICES. Franchisee
shall forward all of its purchase orders either directly to the approved
suppliers or to V2K directly, as instructed by V2K. All goods or materials may
only be purchased from V2K or V2K approved suppliers. Franchisee acknowledges
that prices charged by suppliers may vary between the original order and the
final invoice because of Franchisee requesting additional items, substitutions,
or other factors. Franchisee shall timely pay all invoices from suppliers.
b. VENDOR DISCOUNTS. Some approved suppliers give or pay V2K
discounts and/or advertising contributions based on purchases by V2K
franchisees. V2K may direct that these amounts from approved suppliers be paid
directly to V2K and/or to the Advertising Fund, at V2K's sole determination.
Some or all of these amounts may be used by V2K to help offset its cost of
administrating the marketing and promotional costs of the V2K system and
responding to inquiries and complaints from V2K franchisee customers.
c. SUBMISSION FOR APPROVAL. Franchisee may request that V2K
designate a potential supplier as an approved supplier to the SYSTEM, but
Franchisee must follow the procedure for approval of new suppliers as set forth
in the Policy & Procedure Manual.
d. VENDOR ERRORS OR DELAYS. Franchisee waives the right to bring
any claims against V2K and its affiliates, and their respective officers,
directors, members, managers, partners, employees, agents or representatives (as
applicable), for any billing errors by vendors, and any errors or omissions in,
or delays in shipping or delivery of, any order; except to the extent directly
caused by V2K or its affiliate, and then only against the responsible entity,
and Franchisee waives the right to consequential or punitive damages.
e. CERTIFIED INSTALLERS. V2K may create a certified installer
program, in which V2K will train and certify individuals and/or business
entities to install products that Franchisee sells to its customers. If V2K
creates this program, and one or more certified installers exist for areas in
which Franchisee's customers are located, Franchisee must use only the certified
installer(s) for those locations.
FRANCHISE AGREEMENT - 16
5.12 MINIMUM PERFORMANCE STANDARDS.
a. In the first Franchise Year (does not apply to Renewals),
Franchisee is required to produce a minimum volume of Gross Sales sufficient to
produce a Minimum Royalty Fee of $2,500.00 (approximately $31,250.00 of Gross
Sales). In the second Franchise Year (does not apply to Renewals), Franchisee is
required to produce a minimum volume of Gross Sales sufficient to produce a
Minimum Royalty Fee of $5,000.00 (approximately $62,500.00 of Gross Sales). In
the third and subsequent Franchise Years (including each Franchise Year during
any Renewal period), Franchisee is required to produce a minimum volume of Gross
Sales sufficient to produce a Minimum Royalty Fee each Franchise Year of
$10,000.00 (approximately $125,000.00 Gross Sales per year) in order to retain
the rights granted herein by V2K.
b. If Franchisee qualifies for, and pays, the Small Market
Franchise Fee, instead of the amounts listed in the preceding paragraph,
Franchisee is required in the first Franchise Year (does not apply to Renewals)
to produce a minimum volume of Gross Sales sufficient to produce a Minimum
Royalty Fee of $1,250.00 (approximately $15,625.00 of Gross Sales). In the
second Franchise Year (does not apply to Renewals), Franchisee is required to
produce a minimum volume of Gross Sales sufficient to produce a Minimum Royalty
Fee of $2,500.00 (approximately $31,250.00 of Gross Sales). In the third and
subsequent Franchise Years (including each Franchise Year during any Renewal
period), Franchisee is required to produce a minimum volume of Gross Sales
sufficient to produce a Minimum Royalty Fee each Franchise Year of $5,000.00
(approximately $62,500.00 Gross Sales per year) in order to retain the rights
granted herein by V2K.
c. In any situation, if Franchisee has under this Agreement one
or more Areas of Primary Responsibility with a total of more than 60,000
households, the volume of Gross Sales Franchisee must produce will be increased
proportionally for each household over 60,000.
d. In any case, the Minimum Royalty Fee may, at V2K's option, be
adjusted by V2K once per year. The percentage increase (if any) may not exceed
the U.S. Consumer Price Index (for U.S. City Average, All Items Index, All Urban
Consumers) percentage increase for the prior 12-month period.
e. Failure to produce sufficient annual Gross Sales in any given
year, so as to produce at least the Minimum Royalty Fee, may result in loss of
Franchisee's Area of Primary Responsibility, transfer of Franchisee by V2K to
Inactive Status (as specified in SECTION 5.1.G above), and/or termination of
this Agreement, at the option of V2K; unless Franchisee pays V2K the Minimum
Royalty Fee for that year.
5.13 INSURANCE.
a. MINIMUM COVERAGE AND AMOUNTS. Franchisee shall obtain and
maintain in full force and effect at all times during the term of this
Agreement, and at its expense, the necessary insurance, including auto insurance
and a commercial general liability policy with a minimum of $1,000,000.00 for
each occurrence with a general aggregate of not less than $2,000,000.00, naming
V2K as an additional insured, in such form and coverage and insurers approved by
V2K as set forth in the Policy & Procedures Manual. Franchisee shall also obtain
and maintain in full force and effect at all times during the term of this
Agreement, and at its expense, unemployment insurance and worker's compensation
insurance sufficient to meet the requirements of the applicable laws and
regulations.
FRANCHISE AGREEMENT - 17
b. CERTIFICATE OF INSURANCE AND V2K FEE. Franchisee is required
to maintain on file with V2K all certificates of insurance as set forth in the
Policy & Procedure Manual.
5.14 TELEPHONE SERVICE. Franchisee shall be subject to the
telephone policies of V2K regarding the sharing of expenses in certain areas,
advertising restrictions and assignment of telephone listings as established in
the Policy & Procedure Manual. If this Franchise is located in a central
telephone service area as designated by V2K, Franchisee shall be obligated to
participate in and share in the proportionate costs thereof with the other
franchisees as provided in the Policy & Procedure Manual.
5.15 COMPLIANCE WITH LAWS; LICENSES. Franchisee is responsible for
becoming knowledgeable of, and complying with, all laws and regulations
applicable to Franchisee's business. Franchisee shall obtain, at its expense,
any licenses that are required under Franchisee's state or local laws in order
to operate the franchised business, which may include a Contractor's license.
Franchisee shall provide proof of all necessary licenses and permits to V2K.
5.16 MINIMUM WORKING CAPITAL. V2K recommends that Franchisee have a
minimum working capital of up to $20,500.00, but not less than $15,500.00, after
the franchise fee is paid but prior to the commencement of the franchise
operations, to be used for initial advertising, expenses including miscellaneous
office equipment as well as the office equipment required by V2K, insurance, all
necessary business licenses, contractors or other licenses required by
applicable law, initial tools and supplies, deposits, initial start-up costs and
related franchisee expenses including marketing expenses.
5.17 ENHANCEMENTS DEVELOPED BY FRANCHISEE. If Franchisee develops,
enhances or otherwise improves any aspect of, or related to, Franchisee's
business or the SYSTEM, any and all plans, methods, ideas and systems related to
the development, enhancement, or other improvement shall inure to the benefit of
V2K, shall be owned by V2K as a part of the SYSTEM; and may, in V2K's sole
discretion, be made available to other franchisees of V2K.
6. FRANCHISEE TO OPERATE BUSINESS IN ACCORDANCE WITH MANUALS, POLICIES AND
PROCEDURES.
6.1 MANUALS.
a. OPERATION IN ACCORDANCE WITH MANUALS. Franchisee shall operate
the franchise in accordance with the Manuals. V2K reserves the option to provide
all Manuals and other written information in electronic format including
computer discs, software, e-mail and facsimiles.
b. CONFIDENTIALITY OF MANUALS AND OTHER MATERIALS. Franchisee
shall at all times treat the Manuals as confidential, and shall use all
reasonable efforts to maintain V2K's information contained in the Manuals as
secret and confidential. Franchisee shall not at any time, without V2K's prior
written consent, copy, duplicate, record or otherwise reproduce the foregoing
materials, in whole or in part, nor otherwise make them available to any third
party.
c. PROPERTY OF V2K. The Manuals shall at all times remain the
sole property of V2K.
d. V2K'S RIGHT TO REVISE. V2K may from time to time revise the
contents of the Manuals and Franchisee agrees to comply with the revisions.
FRANCHISE AGREEMENT - 18
e. FRANCHISEE TO MAINTAIN CURRENT COPIES. Franchisee shall at all
times ensure that its copies of the Manuals are kept current and up-to-date, and
in the event of any dispute as to the contents of the Manuals, the terms of the
master copies of the Manuals maintained by V2K shall be controlling.
6.2 POLICY AND PROCEDURES.
a. SCOPE OF THE POLICY AND PROCEDURES. The policy and procedures
include not only all the information in the Manuals, but also the software
programs, business forms and methods of operation.
b. FRANCHISEE TO ABIDE BY POLICY AND PROCEDURES. Franchisee
understands and acknowledges that every detail of the SYSTEM is essential to the
SYSTEM. Franchisee agrees to abide by V2K's policies and procedures.
c. FRANCHISEE TO PAY PROMPTLY. Franchisee agrees to pay V2K and
all vendors promptly for all services and goods. If Franchisee fails to pay
timely as required in this Agreement or the Policy & Procedures Manual,
Franchisee agrees that V2K has the right to stop processing orders from
Franchisee and hold shipment on all pending orders. Franchisee also assigns and
authorizes V2K to collect any monies due and owing from customers on such orders
and to apply said monies for payment of said order and on any past due balances.
Payments by Franchisee may be withheld or reduced only for the portion of an
invoice being disputed by Franchisee as evidenced by a written notification to
V2K by Franchisee; and then only until V2K determines the validity of the
dispute, at which time Franchisee must pay to V2K or the vendor (as applicable)
all or the portion of the disputed amount determined by V2K to be valid (if
any).
d. CREDIT/DEBIT CARD DEFAULT AUTHORIZATION. When Franchisee commences
Basic Training, Franchisee shall execute an authorization for V2K to charge or
debit a Franchisee credit/debit card for the sole purpose of obtainment of
payment from the Franchisee in the event Franchisee is more than ten (10) days
late in payment of any fees as set forth in SECTION 4 above. In the event of
Franchisee's failure to pay as agreed, V2K shall provide forty-eight (48) hours
notice by fax to Franchisee of V2K's intent to execute the authorization unless
Franchisee cures the default. If the authorization is necessary to cure the
default, Franchisee agrees to pay to V2K the additional cost incurred by V2K in
administering this program, in the amount of 3% of the amount of the debit or
credit. V2K will bill Franchisee for these costs and payment will be due
immediately. Franchisee agrees that if the credit/debit card authorization does
not cure the default, Franchisee assigns to V2K the receivables from customers
of all outstanding orders until such default is cured. V2K may also terminate
this Agreement as provided for below.
e. TELEPHONE LINES, NUMBERS AND DIRECTORY ADVERTISING POLICY.
i. V2K may operate a toll-free telephone number to be
used by the customers of the Franchisee. The expenses associated with the
toll-free telephone number will be paid by the Advertising Fund.
ii. If Franchisee operates the Franchise from a place of
residence, Franchisee's business telephone line must be separate and distinct
from the owner's personal, residential telephone number. At the time of the
expiration or termination of this Agreement for any reason, with respect to
Franchisee's telephone numbers, Franchisee shall comply with the provisions on
termination below.
FRANCHISE AGREEMENT - 19
iii. Franchisee shall advertise the Franchise in one or
more Yellow Page telephone directories in its Area of Primary Responsibility, as
specified by V2K. The placement and size of Yellow Page advertising shall be at
Franchisee's sole discretion and cost, but its content must have prior approval
from V2K. All Yellow Page advertisements must state that the Franchise is
independently owned and operated, using language that V2K may specify from time
to time, must list the local telephone number of the Franchise, and may list the
V2K toll-free number if one has been established by V2K. Franchisee may, at its
option, but subject to approval by V2K, join with other V2K franchisees in a
single page advertisement; and if so, the local telephone number of each V2K
franchisee may be listed in the Yellow Page advertisement.
iv. Franchisee must appoint V2K (on a form supplied by
the telephone company or V2K) its attorney-in-fact with full power and authority
to execute on Franchisee's behalf any documents necessary to transfer telephone
numbers and listings from Franchisee to V2K upon termination of this Agreement.
Upon expiration or termination of this Agreement for any reason, V2K may retain
any listed telephone numbers relating to the franchise in its sole discretion,
and Franchisee shall do all the necessary or appropriate things to transfer
those telephone numbers to V2K. Franchisee shall not provide a call forwarding
or telephone number referral with respect to any such retained or disconnected
telephone. Furthermore, upon expiration or termination, Franchisee shall not
indicate in any manner it was previously affiliated with V2K.
7. COVENANTS
7.1 PROPRIETARY MATERIAL.
a. RESTRICTION OF USE OF PROPRIETARY MATERIAL. Franchisee
acknowledges that much of the information and written materials provided by V2K
to Franchisee is confidential information of V2K, constitutes trade secrets, and
remains the sole and exclusive property of V2K. Confidential information
includes: (1) methods of operation of V2K businesses; (2) information about
products, services, or procedures before they become public knowledge; (3) other
information disclosed to Franchisee through confidential notifications and the
Manuals. However, information generally known to the public or in the window
fashions industry is not confidential; but if such knowledge is the result of
disclosure by Franchisee, Franchisee will be liable for breach of this
Agreement. Franchisee and each of Franchisee's principals, employees or agents
shall not, during the term of this Agreement and thereafter, communicate or
divulge to, or use for the benefit of, any other person, persons or entity any
confidential information of V2K. Franchisee and each of Franchisee's principals
shall divulge such confidential information only to Franchisee's employees and
other personnel as must have access to it in order to assist in the Franchise
operations. Neither Franchisee nor Franchisee's principals, employees or other
representatives shall at any time, without V2K's prior written consent, copy,
duplicate, record or otherwise reproduce such materials or information, in whole
or in part, nor otherwise make the same available to any unauthorized person.
The covenant set forth in this Section shall survive the expiration or
termination of this Agreement and shall be perpetually binding upon Franchisee
and each of Franchisee's principals, employees and other representatives.
b. FRANCHISEE PERSONNEL TO EXECUTE COVENANTS. At V2K's request,
Franchisee shall require its sales personnel, assistants and any other personnel
of Franchisee and any persons having access to any confidential information of
V2K to execute agreements that they will maintain the confidentiality of the
information they receive in connection with their relationship
FRANCHISE AGREEMENT - 20
with Franchisee. Such covenants shall be in the form required by V2K in the
Policy & Procedure Manual or otherwise in writing.
7.2 COVENANTS OF OPERATION AND NON-COMPETITION.
a. FRANCHISEE COVENANTS. During the term of this Agreement,
Franchisee shall not, either directly or indirectly, for itself, or through, on
behalf of, or in conjunction with any person, persons or entity to any of the
following:
i. DIVERT ANY BUSINESS. Divert or attempt to divert any
business or customer of Franchisee, V2K or any other V2K franchise to any
competitor, by direct or indirect inducement or otherwise, or do or perform,
directly or indirectly, any other act injurious or prejudicial to the goodwill
associated with V2K's Proprietary Marks and the SYSTEM.
ii. INTEREST IN SIMILAR BUSINESS. Own, maintain, operate,
engage in, or have any interest in any business which is the same as or similar
to the Franchise or the SYSTEM.
b. POST TERMINATION. For two (2) years after assignment,
expiration or termination of this Agreement for any reason whatsoever, except as
otherwise approved in writing by V2K, Franchisee shall not, either directly or
indirectly, for itself, or through, on behalf of, or in conjunction with any
person, persons or entity do any of the following:
i. DIVERT ANY BUSINESS. Divert or attempt to divert any
business or customer of Franchisee, V2K or any other V2K franchisee to any
competitor, by direct or indirect inducement or otherwise, or do or perform,
directly or indirectly, any other act injurious or prejudicial to the goodwill
associated with V2K's Proprietary Marks and the SYSTEM.
ii. EMPLOY. Employ or seek to employ any person who is at
that time employed by V2K, or by any other Franchisee, or otherwise directly or
indirectly induce such person to leave his or her employment.
iii. INTEREST IN SIMILAR BUSINESS. Own, maintain, operate,
engage in, or have any interest in any business which is the same as or similar
to the Franchise or the SYSTEM, which business is, or is intended to be, located
within a twenty-five (25) mile radius of Franchisee's Area of Primary
Responsibility.
c. COVENANTS INDEPENDENT; ENFORCEABILITY. The parties agree that
each of the foregoing covenants shall be construed as independent of any other
covenant or provision of this Agreement. If all or any portion of a covenant in
this SECTION 7.2 is held unreasonable or unenforceable by an arbitrator, a court
or an agency having valid jurisdiction in an unappealed final decision to which
V2K is a party, the court may reduce or otherwise modify the scope of the
covenant so as to impose to the maximum restriction permitted by law.
d. RIGHT TO REDUCE SCOPE. Franchisee understands and acknowledges
that V2K has the right, in its sole discretion, to reduce the scope of any
covenant set forth above, or any portion thereof, without Franchisee's consent,
effective immediately upon written notice to Franchisee.
e. FRANCHISEE'S CLAIMS NOT A DEFENSE. Franchisee expressly agrees
that the existence of any claims that Franchisee may have against V2K, whether
or not arising from this Agreement, shall not constitute a defense to the
enforcement by V2K of the covenants above.
FRANCHISE AGREEMENT - 21
f. FRANCHISE TO OBTAIN EXECUTION OF COVENANTS. At V2K's request,
Franchisee shall require and obtain execution of covenants similar to those set
forth in this Section (including covenants applicable upon the termination of a
person's employment with Franchisee) from its employees, assistants and manager,
and any other person who has received or will receive training from V2K. Such
covenants shall be in the form required by V2K in the Policy & Procedure Manual,
or otherwise in writing.
8. ACCOUNTING AND RECORDS
8.1 MAINTAIN RECORDS SIX YEARS. During the term of this Agreement,
Franchisee shall maintain and preserve, for at least six (6) years from the
dates of their preparation, full, complete and accurate books, records and
accounts in accordance with U.S. Generally Accepted Accounting Principles and in
the form and manner prescribed by V2K from time to time in the Policy &
Procedure Manual or otherwise in writing.
8.2 SUBMISSION OF RECORDS AND INFORMATION BY FRANCHISEE.
Franchisee shall submit to V2K, on the first day of each month, a signed
statement in the form prescribed by V2K, accurately reflecting all Gross Sales
during the previous month. Franchisee shall submit such other information
including periodic royalty reports or data as V2K may require either in written
or electronic format as established by V2K's policy from time to time.
Franchisee shall provide to V2K cash receipt reports pursuant to the Policy &
Procedure Manual or as otherwise instructed. V2K may charge Franchisee a $25.00
late fee if any report is not submitted to V2K within three (3) days of its due
date.
8.3 FRANCHISEE FINANCIAL REPORTS. Franchisee shall submit to V2K
periodically as requested by V2K unaudited profit and loss statements for each
month and the year-to-date.
8.4 FRANCHISEE TO SUBMIT OTHER RECORDS. Franchisee shall also
submit to V2K, for review or auditing, such other forms, reports, records,
information and data as V2K may reasonably request, including but not limited to
the Franchisee's income tax returns.
8.5 V2K'S RIGHT TO EXAMINE AND AUDIT. V2K or its designated agents
shall have the right at all times to examine the books, records, and tax returns
of Franchisee. V2K shall also have the right, at any time during normal business
hours, to have an independent audit made of the books of Franchisee. If any
inspection or audit reveals that Franchisee's Gross Sales have been understated
by 2% or more in any report to V2K, then Franchisee shall immediately pay to V2K
the cost of the audit, the amount of Royalty Fees, Advertising Fund Fees and/or
other payments due on such understatement, plus interest thereon, at the lesser
of 18% per annum or the highest rate permitted by law, from the date the
payments on such understatement would have been due if correctly reported, plus
the cost of the audit (including, without limitation, reasonable accountants'
and attorneys' fees and travel expenses, room and board and compensation of
V2K's employees arising from such understatement). The foregoing remedies shall
be in addition to any other remedies V2K may have.
8.6 ELECTRONIC BOOKKEEPING/PAYMENT SYSTEM. V2K reserves the right
to require Franchisee to establish an electronic bookkeeping and payment system,
including automatic electronic deposits, transfers or payments and credit card
and/or debit card authorizations. V2K further reserves the right to require
Franchisee to purchase any software necessary to implement any such V2K system.
FRANCHISE AGREEMENT - 22
9. TRANSFERABILITY OF INTEREST
9.1 TRANSFER BY V2K. V2K shall have the right to transfer or
assign all or any part of its rights or obligations herein to any person or
legal entity.
9.2 TRANSFER BY FRANCHISEE.
a. RIGHTS AND DUTIES PERSONAL TO FRANCHISEE. Franchisee
understands and acknowledges that the rights and duties set forth in this
Agreement are personal to Franchisee, and that V2K has granted the Franchise in
consideration of Franchisee's business skill and/or financial capacity.
Accordingly, neither this Agreement, the Franchise, all or any part of the
ownership interest of Franchisee, nor all or any substantial portion of the
assets of the Franchise, may be voluntarily, involuntarily, directly, or
indirectly assigned or transferred, pledged, mortgaged, hypothecated or
otherwise encumbered by Franchisee (including, without limitation, by will, by
declaration of or transfer in trust, or by the laws of intestate succession)
without the prior written consent of V2K, which consent shall not be
unreasonably withheld as set forth below. Any purported assignment or transfer,
by operation of law (except in cases of Franchisee's death or Substantial
Incapacity for the time period provided below) or otherwise, not having the
written consent of V2K shall be null and void.
b. CONDITIONS TO CONSENT TO TRANSFER. V2K shall not unreasonably
withhold its consent to a transfer by Franchisee of this Franchise or any part
of the ownership interest of Franchisee; provided, however, that prior to the
transfer, the transferee qualifies and Franchisee and the Transferee comply with
all of V2K's transfer requirements as follows:
i. Franchisee must not be in default under its Franchise
Agreement and must have satisfied all of its accrued outstanding obligations to
V2K and all other outstanding obligations related to the franchised business.
ii. Except where prohibited by law, Franchisee must
execute a general release, in form satisfactory to V2K, of any and all claims
against V2K and its officers, directors, shareholders, employees and agents, in
their corporate and individual capacities.
iii. The transferee must enter into a written assignment
with Franchisee, in form satisfactory to V2K, assuming and agreeing to discharge
all of Franchisee's obligations under this Agreement, including but not limited
to, warranty and guarantee work.
iv. The transferee (or if the transferee is a business
entity, its officers, directors, shareholders, managers, members or partners, as
required by V2K) must: meet V2K's educational, managerial, and business
standards; possess good moral character, business reputation, and credit rating;
have the aptitude and ability to conduct the franchised business (as evidenced
by their prior related business experience or otherwise); and have adequate
financial resources and capital to operate the franchise business.
v. The transferee must execute (and/or, upon V2K's
request, cause any officers, directors, shareholders, managers, members or
partners that V2K requires to execute) the then-current standard franchise
agreement and any ancillary agreements that V2K requires, including guarantees.
The initial franchise fee is waived.
FRANCHISE AGREEMENT - 23
vi. Franchisee or the transferee pays at the time of
transfer a transfer fee to V2K of $7,000 plus any brokerage commissions,
finder's fees or similar charges that V2K is required to pay to any third party
that is not an affiliate of V2K.
vii. The transferee must pay to V2K a $1,000 training fee
(and pay all of transferee's travel, food, and lodging expenses incurred in
attending the training program), and must satisfactorily complete the Basic
Training program; provided, however, that if the transferee is an existing V2K
franchisee who previously successfully completed the Basic Training Program, V2K
may (at its sole discretion) waive the training fee and the requirement that
transferee complete the Basic Training Program a second time.
9.3 TRANSFER TO A FRANCHISE ENTITY. If Franchisee is one or more
individuals who wish to transfer the Franchise to a business entity for their
convenience and without change of ownership exceeding 5%, the transfer fee above
shall not apply.
9.4 TRANSFER UPON DEATH OR SUBSTANTIAL INCAPACITY. If, upon the
death or Substantial Incapacity (as defined below) of any person with a majority
ownership interest in the Franchise, the executor, administrator, heir(s),
committee or other legally empowered personal representative of such person is
unable to meet the conditions for transfer stated above, then such personal
representative shall have a reasonable time to dispose of the interest of the
deceased person or person under Substantial Incapacity in the Franchise, which
disposition shall be subject to all the terms and conditions for transfers
listed above. If a transfer is not completed ninety (90) days from the date of
death or incapacity, the Franchise may be terminated by V2K. A person shall be
deemed to be under "SUBSTANTIAL INCAPACITY" when a qualified health care
professional certifies in writing that the patient is mentally impaired to the
extent that he or she is incapable of conducting his or her affairs for an
indefinite, but not necessarily permanent, period of time.
9.5 NON-WAIVER OF CLAIMS. V2K's consent to a transfer of any
interest in the Franchise shall not constitute a waiver of any claims it may
have against the transferring party, nor shall it be deemed a waiver of V2K's
right to demand exact compliance with any of the terms of the terms of this
Agreement by the transferee.
9.6 RELOCATION. Franchisee may relocate the Franchise to any
available Area of Primary Responsibility without an additional fee, but only
with the prior approval of V2K. Franchisee must be in full compliance with this
Agreement as a condition of V2K's approval of Franchisee's relocation.
10. DEFAULT AND TERMINATION
10.1 TERMINATION BY V2K PRIOR TO COMPLETION OF TRAINING. V2K may,
at its sole determination, terminate this Agreement for any reason at any time
before Franchisee commences Basic Training. In that event, V2K shall refund to
Franchisee all monies received in payment of the Franchise Fee, and all rights
Franchisee may have under this Agreement will automatically terminate. V2K may
terminate this Agreement after Franchisee commences Basic Training in accordance
with SECTION 4.B above.
10.2 AUTOMATIC TERMINATION. Franchisee shall be deemed in default
under this Agreement, and all rights granted herein shall automatically
terminate without notice to Franchisee if Franchisee becomes insolvent, makes a
general assignment for the benefit of creditors, is adjudicated a bankrupt,
suffers temporary or permanent court appointed
FRANCHISE AGREEMENT - 24
receivership of substantially all of its property, or suffers the filing of a
voluntary or involuntary bankruptcy petition; or if Franchisee or any officer,
director, manager, member or partner of Franchisee (as applicable) becomes
subject to U.S. Executive Order 13224.
10.3 TERMINATION WITHOUT RIGHT TO CURE. Franchisee shall be deemed
in default and V2K may, at its option, terminate this Agreement and all rights
granted hereunder, without affording Franchisee any opportunity to cure the
default, effective immediately upon receipt of notice by Franchisee, upon the
occurrence of any of the following events:
a. FRANCHISEE CEASES TO DO BUSINESS. Franchisee abandons the
business or otherwise ceases to do business, or fails to obtain sales for a
ninety (90) day period, without prior written permission from V2K.
b. CONVICTION OF FELONY OFFENSE, ETC. (i) Conviction of
Franchisee of any felony offense or of any misdemeanor offense involving moral
turpitude, or (ii) guilty plea by Franchisee (or, a plea of nolo contendere or
similar plea) to any of the above-enumerated offenses, or (iii) other admission
of guilt to any of such offenses.
c. UNAUTHORIZED ASSIGNMENT. Franchisee transfers any rights or
obligations under this Agreement to any third party without V2K's prior written
consent, or without full compliance with the conditions for transfer stated
above.
d. FAILURE TO COMPLY WITH COVENANTS. Franchisee fails to comply
with any of the covenants under SECTIONS 6.1.B OR 7 above.
e. TRANSFER NOT CONSUMMATED. An approved transfer is not
consummated after Franchisee's death or Substantial Incapacity as required by
SECTION 9.4.
f. MATERIAL MISREPRESENTATION. Franchisee made any material
misrepresentation on or in connection with its application for the Franchise.
g. IMPROPER BUSINESS PRACTICES. V2K determines that Franchisee:
engaged in an act of fraud with respect to its rights or obligations under this
Agreement; engaged in false advertising or otherwise made false or misleading
statements concerning V2K or the SYSTEM to the public or any other franchisees;
failed to report, or intentionally underreported, sales or other financial
information to V2K; failed to promptly provide, after a request from V2K,
financial data and records specified in this Agreement; engaged in any act that
(directly or indirectly) was, is or may be injurious or prejudicial to the good
will associated with the Marks or the SYSTEM; failed to comply with applicable
laws, regulation and ordinances; or failed to properly complete and service
customer orders. Notwithstanding the language above, if Franchisee has made
false or misleading statements to the public or any other franchisees, V2K may,
at its sole option, allow Franchisee to cure that default by publicly retracting
the false or misleading statements, in a manner acceptable to V2K, promptly and
within the time period specified by V2K.
h. PRIOR NOTICES OF DEFAULT. Franchisee is in default as provided
in SECTION 10.4 and has received one (1) or more prior notices of default
pursuant to SECTION 10.4 for the same, similar or different defaults, including
failure to pay timely, during the preceding twelve (12) months, even if cured.
FRANCHISE AGREEMENT - 25
10.4 FRANCHISEE'S RIGHT TO CURE. Franchisee shall have (i) fifteen
(15) days after receipt from V2K of a written notice of default as to any
Monetary Default (as defined below), or (ii) thirty (30) days after receipt of a
written notice of default as to any Non-Monetary Default (as defined below),
within which to remedy any of the defaults described in this SECTION 10.4 and to
provide evidence thereof to V2K. Monetary Defaults and Non-Monetary Defaults are
collectively referred to herein as "CURABLE DEFAULTS," and specifically do not
include the types of default described in SECTIONS 10.2 AND 10.3. If any Curable
Default is not cured within the applicable time period (or such longer period as
applicable law may require), this Agreement shall terminate without further
notice to Franchisee effective immediately at the end of such applicable time
period or such longer period as applicable law may require.
a. MONETARY DEFAULTS. "MONETARY DEFAULTS" are defined as the
failure, refusal or neglect of Franchisee (i) to promptly pay when due, in
compliance with this Agreement and/or the Policy & Procedure Manual, any monies
owing to V2K, its subsidiaries or affiliate, or to its vendors or suppliers;
(ii) to submit the business and financial information required by V2K under this
Agreement; (iii) to provide required authorizations for automatic electronic
deposits, transfers or payments or required credit card charge or debit
authorization for V2K payments; (iv) or to meet the minimum performance
standards as provided in SECTION 5.12 above.
b. NON-MONETARY DEFAULTS. "NON-MONETARY DEFAULTS" are defined as
the failure, refusal or neglect of Franchisee to comply with any provision of
this Agreement other than the defaults in SECTIONS 10.2 OR 10.3 above and the
Monetary Defaults.
10.5 MODIFICATION BY LAW. If any applicable law or rule requires an
earlier notice of default or the termination of, or election not to renew, this
Agreement, or the taking of some other action with respect to such default,
termination or election not to renew than is required hereunder, then the
requirements of such law or rule as to earlier notice or other action shall
govern. Termination of Franchisee pursuant to this SECTION 10 shall not be
deemed an election of remedies by V2K, and V2K may avail itself of any other
remedies available to it under applicable law.
10.6 VOLUNTARY TERMINATION BY FRANCHISEE. Franchisee may
voluntarily terminate this Agreement at any time, upon written notice to V2K.
All sums of money due and owing to V2K under the terms of this Agreement or any
other agreement between Franchisee and V2K as of the date of termination must be
paid to V2K by the date of termination. When these amounts are paid in full to
V2K, Franchisee will have no further obligation to pay Royalty Fees and
Advertising Fund Fees to V2K. Franchisee shall be subject to the requirements of
SECTION 11.
10.7 ORDER PROCESSING AND SHIPMENTS. If Franchisee is past due on
any payments owed to V2K, V2K may at its option, stop processing Franchisee
orders, stop shipments of orders to Franchisee, and take other actions as
specified in SECTION 6.2 above, until Franchisee pays all past due amounts to
V2K.
11. FRANCHISEE'S OBLIGATIONS UPON TERMINATION
11.1 UPON TERMINATION OR EXPIRATION. Upon the expiration or
termination of this Agreement for any reason all rights granted to Franchisee
under this Agreement shall immediately be void and of no further effect.
Franchisee must comply with all of the following obligations:
FRANCHISE AGREEMENT - 26
a. IMMEDIATELY CEASE OPERATION. Immediately cease to operate the
Franchise, and not thereafter, directly or indirectly, represent to the public
or hold itself out as a present or former Franchisee of V2K.
b. IMMEDIATELY CEASE USING MARKS. Immediately and permanently
cease to use, by advertising or in any manner whatsoever, confidential
information, methods, procedures and techniques associated with the Franchise,
and any Proprietary Marks and distinctive forms (including but not limited to
the color combinations used by V2K at the time of this Agreement's termination
or expiration, slogans, indoor and outdoor signs, symbols, or devices associated
with the SYSTEM).
c. ACTION REQUIRED BY FRANCHISEE. Take such action as may be
necessary to cancel or amend any assumed name or equivalent registration which
contains the name "V2K" or another Proprietary Mark to delete the reference to
such name or mark, and furnish V2K with evidence satisfactory to V2K of such
cancellation or amendment within thirty (30) days after termination or
expiration.
d. PROMPTLY PAY ALL SUMS DUE. Promptly pay all sums owing to V2K
and its subsidiaries and affiliates as of the date of termination. In the event
of termination for any default of Franchisee, such sums shall include all
damages, and costs and expenses (including but not limited to reasonable
attorneys' fees) incurred by V2K as a result of such default, which obligation
shall give rise to and remain, until paid in full, a lien in favor of V2K
against any and all of the machinery, fixtures, equipment, and inventory owned
by Franchisee at the time of default that is being, or has been, used by or in
connection with the Franchise. When these amounts are paid in full to V2K,
Franchisee will have no further obligation to pay Royalty Fees and Advertising
Fund Fees to V2K.
e. PAY ALL DAMAGES INCLUDING REASONABLE ATTORNEY FEES. In
addition to the amounts payable under the preceding subsection, pay to V2K all
damages, costs and expenses (including but not limited to reasonable attorneys'
fees) incurred by V2K in obtaining injunctive or other relief for the
enforcement of this SECTION 11.
f. TURN OVER ALL PROPRIETARY MATERIALS. Immediately turn over to
V2K all Manuals, records, files, instructions, correspondence, all materials
related to operating the Franchise including, without limitation, blank service
orders, promotional materials, brochures, agreements, disclosure statements, and
all copies thereof (all of which are acknowledged to be V2K's property) retain
no copy or record of any of the foregoing, excepting only Franchisee's copy of
this Agreement and any correspondence between the parties.
11.2 V2K'S RIGHT OF FIRST REFUSAL. Except for items that Franchisee
is required to return to V2K upon expiration or termination of this Agreement,
and for which Franchisee will receive no remuneration except if required by law,
V2K shall have the right of first refusal, to be exercised after written notice
by V2K to Franchisee within thirty (30) days of the termination or expiration of
the Franchise, to purchase any or all of Franchisee's equipment, signs,
promotional materials, supplies, and inventory at fair market value, or to the
extent these items may be sold to a third party, at the contract price obtained
by Franchisee in a bona-fide written offer from a third party. If V2K does not
elect to exercise its right under this provision within the time period
permitted, the right of first refusal shall expire. Fair market value will be
determined by agreement by the parties, or if the parties cannot agree, by the
average of three (3) independent appraisals (each party selects an appraiser and
the appraisers selects a third). If
FRANCHISE AGREEMENT - 27
V2K does exercise its right under this provision, V2K shall also have the right
to set off all amounts due from Franchisee under this Agreement against any
payment to Franchisee.
12. TAXES, LAWS, PERMITS AND ACTIONS
12.1 FRANCHISEE SHALL PAY PROMPTLY. Franchisee shall promptly pay
when due all taxes levied or assessed by any federal, state or local tax
authority, and any and all indebtedness incurred by Franchisee in the conduct of
the Franchise.
12.2 FRANCHISEE SHALL COMPLY WITH ALL LAWS. Franchisee shall comply
with all federal, state, and local laws, rules and regulations (including but
not limited to state and local laws and regulations), and shall timely obtain
any and all certificates, licenses, and permits necessary for the operation of
the Franchise, including, without limitation, certificate of occupancy, business
license, fictitious name registration and sales tax permit.
12.3 NOTIFICATION TO V2K. Franchisee shall notify V2K in writing
within five (5) days of the commencement of any action, suit or proceeding
and/or of the issuance of any order, writ, injunction, award or decree of any
court, administrative body, or other governmental entity, which may adversely
affect the operation or financial condition of the Franchise.
13. INDEPENDENT CONTRACTOR AND INDEMNIFICATION
13.1 INDEPENDENT CONTRACTOR. This Agreement does not create a
fiduciary relationship between V2K and Franchisee. Franchisee is an independent
contractor of V2K, and nothing in this Agreement is intended to constitute
either party as agent, legal representative, subsidiary, joint venturer,
partner, employee or servant of the other for any purpose whatsoever.
13.2 FRANCHISEE TO HOLD ITSELF OUT AS INDEPENDENT CONTRACTOR.
During the term of this Agreement and any renewals hereof, Franchisee shall hold
itself out to the public as an independent contractor of V2K operating the
business pursuant to a franchise from V2K. Franchisee agrees to take such
affirmative action as may be necessary to do so.
13.3 FRANCHISEE NOT AUTHORIZED TO BIND V2K. Nothing in this
Agreement authorizes Franchisee to make any contract, agreement, warranty or
representation on V2K's behalf, or to incur any debt or obligation in V2K's
name. In no event will V2K assume liability for, or be deemed liable as a result
of any such unauthorized contract, agreement, warranty, or representation or as
a result of any act or omission of Franchisee in its conduct of the Franchise,
or by reason of any claim or judgment against V2K arising from any violation of
this Agreement.
13.4 FRANCHISEE INDEMNIFICATION OF V2K. Franchisee shall indemnify
and hold V2K harmless from and against any and all claims, actions, damages,
liability, and expenses in connection with loss of life, personal injury, and/or
damage to business or property arising directly or indirectly by reason of any
act or omission with respect to the business or operation of the Franchise,
whether sounding in contract or tort, as well as the costs and expenses
(including but not limited to attorneys', accountants', consultants', and
experts' fees) of defending against such claims and actions.
FRANCHISE AGREEMENT - 28
14. NO WARRANTIES, GUARANTIES OR WAIVERS
14.1 V2K MAKES NO WARRANTIES OR GUARANTIES. V2K makes no warranties
or guarantees upon which Franchisee may rely, and assumes no liability or
obligation to Franchisee, by providing any waiver, approval, consent or
suggestion to Franchisee in connection with this Agreement, or by reason of any
neglect, delay or denial of any request therefore.
14.2 NO WAIVER. No failure of V2K to exercise any power reserved to
it by this Agreement, or to insist upon strict compliance by Franchisee with any
obligation or condition hereunder, and no custom or practice of the parties at
variance with any of the terms hereof, shall constitute a waiver of V2K's right
to demand exact compliance with any of such terms. Waiver by V2K of any
particular default by Franchisee shall neither affect nor impair V2K's rights
with respect to any subsequent default of the same, similar or different nature.
No delay, forbearance or omission (collectively, an "OMISSION") of V2K in
exercising any power or right arising out of any of the terms, provisions or
covenants of this Agreement or out of any breach or default thereof by
Franchisee shall affect or impair V2K's right to exercise the same, nor shall
such Omission constitute a waiver by V2K of any right hereunder. Notwithstanding
any such Omission, V2K shall retain the right subsequently to declare any breach
or default and/or to terminate this Agreement prior to the expiration of its
term. The acceptance by V2K of any payments due to it hereunder (whether partial
or full payment) shall not be deemed to be a waiver by V2K of any preceding
breach by Franchisee of any of the terms, covenants or conditions of this
Agreement.
15. NOTICES
All notices required or permitted under this Agreement shall be in
writing and sent by facsimile; by e-mail, with a "read-receipt"; by a national
overnight courier service, with proof of delivery required; or by Certified
Mail-Return Receipt Requested with proper postage paid; to the respective
parties at the addresses above (unless and until a different address has been
designated by written notice to the other party). Notices shall be deemed given:
on the date of transmission as shown in a successful transmittal report if given
by facsimile; upon receipt, as indicated by a "read-receipt," if given by
e-mail; one (1) day after deposit with an overnight courier (as specified above)
with proper address and delivery charges paid; or if given by Certified Mail,
three days after deposit with the U.S. Postal Service with proper address and
postage paid. If delivery of any notice properly given under this provision is
refused or delivery cannot otherwise be completed, the notice will be deemed
delivered on the first attempted delivery.
16. ENTIRE AGREEMENT
This Agreement and the documents referred to herein constitute the
entire, full and complete Agreement between V2K and Franchisee concerning the
subject matter hereof, and supersede all prior agreements, representations. No
representations, inducements, promises or agreements, oral or otherwise, not
embodied herein or attached hereto, were made by either party. No subsequent
modification of this Agreement shall be binding on either party unless in
writing and executed by the authorized officer of V2K and Franchisee.
FRANCHISE AGREEMENT - 29
17. SEVERABILITY AND CONSTRUCTION
17.1 EACH PORTION SEVERABLE. Except as expressly provided to the
contrary herein, each portion, section, part, term and/or provision
(collectively "PORTION") of this Agreement shall be considered severable; and
if, for any reason, any such Portion is determined to be void, contrary to,
and/or in conflict with, any existing or future law or regulation by a court of
law, an administrative body of competent jurisdiction, or an arbitrator, such
Portion shall not impair the operation of, or have any other effect on, such
other Portions as may remain otherwise enforceable. Such enforceable Portions
shall continue to be given full force and effect and bind the parties hereto,
while the void portions shall be deemed not to be part of this Agreement.
17.2 RIGHTS LIMITED TO PARTIES. Anything to the contrary herein
notwithstanding, nothing in this Agreement is intended, nor shall be deemed, to
confer upon any person or legal entity other than V2K or Franchisee (and such of
their respective representatives, successors and assigns as may be contemplated
in this Agreement), any rights or remedies under or by reason of this Agreement.
17.3 FRANCHISEE BOUND BY MAXIMUM DUTY. Franchisee expressly agrees
to be bound by the maximum duty permitted or required by applicable law that is
subsumed in any promise or covenant of this Agreement, as though it were
separately articulated in and made a part of this Agreement. It is the strong
intent of the parties that any reviewing court of law, administrative body of
competent jurisdiction, or arbitrator, instead of canceling or invalidating this
Agreement, modify this Agreement by striking any portion(s) it determines to be
unreasonable or unenforceable and/or reducing the scope of any promise or
covenant to the extent required to delineate the maximum duty, obligation, or
restriction permitted by applicable law, or required by court order of final
decision.
17.4 CAPTIONS SOLELY FOR CONVENIENCE. All captions in the Agreement
are intended solely for the convenience of the parties, and none shall be deemed
to affect the meaning of construction of any provision hereof.
17.5 REFERENCES. All references herein to gender and number shall
be construed to include such other gender and number as the context may require,
and all acknowledgements, promises, covenants, agreements and obligations herein
made are undertaken by all of the signers of this Agreement on behalf of
Franchisee.
17.6 DUPLICATE ORIGINALS. This Agreement shall be executed in
duplicate, and each document so executed shall be deemed an original.
17.7 SUCCESSORS AND ASSIGNS. All the terms and provisions of this
Agreement will be binding upon and inure to the benefit of the successors and
assigns of the parties. However, nothing in this paragraph may be construed as
consent by V2K to the assignment or transfer of this Agreement or any rights by
Franchisee.
18. LEGAL MATTERS
18.1 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado, except to the
extent governed by the United States Trademark Act of 1946 (Lanham Act).
FRANCHISE AGREEMENT - 30
18.2 VENUE; SUBMISSION TO COURT; LIMITATION OF DAMAGES. Franchisee
and V2K agree as follows:
a. Any and all court proceedings arising from matters not subject
to arbitration under the terms of this Agreement shall be brought only in the
United States District Court for the State of Colorado (Denver, Colorado) or a
state court of competent jurisdiction in Jefferson or Arapahoe County, Colorado,
or in the City and County of Denver, Colorado; and V2K and Franchisee consent to
the exercise of jurisdiction by such courts.
b. The parties agree that all disputes submitted to the court
pursuant to this Agreement shall be tried to the court sitting without a jury,
subject to state law.
c. No punitive or exemplary damages shall be awarded against
either V2K or Franchisee, or any affiliates of either of them, in any proceeding
arising under this Agreement, and all claims to such damages are waived.
18.3 COSTS AND ATTORNEYS' FEES. The prevailing party in any action
arising out of, or related, to this Agreement (including an action to compel
arbitration) is entitled to recover all of its costs and expenses incurred in
the action, including reasonable accounting, expert witness, attorneys' and
arbitrator's fees, and costs of collecting monies owed, in addition to all other
amounts and damages awarded. If both parties are awarded a judgment in any
dollar amount, the court or arbitrator, as applicable, shall determine the
prevailing party taking into consideration the merits of the claims asserted by
each party, the amount of the judgment received by each party and the relative
equities between the parties.
18.4 INJUNCTIVE RELIEF. The parties agree that they have the right
in the proper case to seek temporary or preliminary injunctive relief. The
parties agree that they will not be required to post a bond to obtain any
injunctive relief and that the only remedy if an injunction is entered will be
the dissolution of such injunction.
19. ARBITRATION
a. Except for actions brought or related to Franchisee's use of
the Proprietary Marks or V2K's copyrights, or to otherwise enforce the
obligations of Franchisee under SECTION 7 of this Agreement (which actions V2K
may, at its option, bring in a court of competent jurisdiction), all disputes,
controversies, claims, causes of action and/or alleged breaches or failures to
perform (collectively "DISPUTES") arising between the parties in connection
with, or arising from, or with respect to: (1) any provision of this Agreement;
(2) the relationship of the parties; (3) the validity of this Agreement, or any
provision thereof; or (4) any specification, standard or operating procedure
relating to the establishment or operation of the Franchise business; shall be
submitted on demand of either party for arbitration to the Denver, Colorado
office of the Judicial Arbiter Group ("JAG"), or if JAG ceases to exist, to the
American Arbitration Association ("AAA"), unless the parties agree on another
organization. The arbitration proceedings shall be conducted in Denver,
Colorado, will be heard by one arbitrator, and except as otherwise provided in
this Agreement, shall be conducted in accordance with the then-current rules of
JAG for commercial arbitration, or the Commercial Arbitration Rules of the AAA
(as applicable).
b. The arbitrator shall have the right to award or include in his
or her award any relief which he or she deems proper in the circumstances,
including without limitation, money damages (with interest on unpaid amounts
from the due date), specific performance and
FRANCHISE AGREEMENT - 31
injunctive relief (but not punitive or exemplary damages). The award and
decision of the arbitrator shall be conclusive and binding upon all parties and
judgment upon the award may be entered in any court of competent jurisdiction.
This agreement to arbitrate shall continue in full force and effect subsequent
to and notwithstanding the termination or expiration of this Agreement.
c. V2K and Franchisee agree that arbitration will be conducted on
an individual basis only. Neither party shall commence any arbitration with a
third party against the other, or join with any third party in any arbitration
involving V2K and Franchisee. Further, neither V2K nor Franchisee shall attempt
to consolidate or otherwise combine in any manner an arbitration proceeding
involving V2K and Franchisee with another arbitration of any kind, nor shall V2K
or Franchisee attempt to certify a class or participate as a party in a class
action against the other. Notwithstanding the foregoing, if Franchisee controls,
is controlled by, or is in active concert with another franchisee of V2K, or
there is a guarantor of some or all of Franchisee's obligations to V2K, then the
joinder of those parties to any arbitration between V2K and Franchisee shall be
permitted; and in all events, the joinder of an owner, director, officer,
limited liability company member or manager, partner or other representative or
agent of V2K or Franchisee shall be permitted.
d. Any party may apply to the arbitrator for reasonable discovery
from the other. In this Agreement, "reasonable discovery" means a party may
submit no more than ten interrogatories, including subparts, 25 requests for
admission, 25 document requests, and three depositions per side.
e. If either party violates the terms of this SECTION 19, the
other party shall be entitled to seek injunctive relief in a court of law of
proper jurisdiction in accordance with SECTION 18 of this Agreement, and if the
prevailing party, shall be awarded its costs and expenses, including reasonable
attorneys' fees, in the action.
20. CAVEAT
The success of the business venture contemplated to be undertaken by
Franchisee by virtue of this Agreement is speculative and depends, to a large
extent, upon Franchisee's ability as an independent business person,
Franchisee's active participation in the daily affairs of the business, as well
as other factors. V2K does not make any representation or warranty, express or
implied, as to the potential success of the business venture contemplated
hereby.
21. SUBMISSION OF AGREEMENT
The submission of this Agreement to Franchisee does not constitute an
offer and this Agreement is effective and binding only upon the execution
thereof by the President or other officer of V2K.
22. CROSS DEFAULT; CROSS TERMINATION
22.1 CROSS DEFAULT. A default by Franchisee under this Agreement
will be deemed a default of all agreements between Franchisee and V2K. A default
by Franchisee under any other agreement between V2K and Franchisee will be
deemed a default under this Agreement. A default by the Guarantor(s) of this
Agreement or any other agreement Guaranty of Contract, will be deemed a default
of this Agreement.
FRANCHISE AGREEMENT - 32
22.2 CROSS TERMINATION. If this Agreement is terminated as a result
of a default by Franchisee, V2K may, at its option, elect to terminate any or
all other agreements between Franchisee and V2K. If any other agreement between
Franchisee and V2K is terminated as a result of a default by Franchisee, V2K
may, at its option, elect to terminate this Agreement. It is agreed that an
incurable or uncured default under this Agreement or any other agreement between
Franchisee and V2K will be grounds for termination of this Agreement and/or any
and all agreements between Franchisee and V2K, without additional notice or
opportunity to cure.
23. ACKNOWLEDGEMENTS
A. FRANCHISEE ACKNOWLEDGES THAT: (1) FRANCHISEE OR ITS PRINCIPAL
REPRESENTATIVE(S) ("YOU" OR "YOUR") HAVE CONDUCTED AN INDEPENDENT INVESTIGATION
OF THE FRANCHISE AND HAS BEEN AFFORDED THE OPPORTUNITY TO ASK QUESTIONS AND
REVIEW MATERIALS THAT YOU DEEM RELEVANT IN MARKING THE DECISION TO ENTER INTO
THIS AGREEMENT AND ACQUIRE THE FRANCHISE; (2) YOU RECOGNIZE THAT THE BUSINESS
VENTURE OF A V2K FRANCHISE INVOLVES BUSINESS RISKS, AND (3) THE SUCCESS OF THIS
VENTURE, IF ANY, WILL BE LARGELY DEPENDENT UPON YOUR ABILITY AS AN INDEPENDENT
BUSINESS PERSON. V2K EXPRESSLY DISCLAIMS THE MAKING OF, AND YOU ACKNOWLEDGE THAT
YOU HAVE NOT RECEIVED ANY WARRANTY, GUARANTEE, CLAIM OR OTHER REPRESENTATION,
EXPRESS OR IMPLIED, AS TO THE POTENTIAL VOLUME, PROFITS OR SUCCESS OF THE
BUSINESS VENTURE CONTEMPLATED BY THIS AGREEMENT.
B. YOU ACKNOWLEDGE THAT YOU HAVE BEEN ADVISED TO RECEIVE ADVICE
OF LEGAL COUNSEL AS TO ALL MATTERS RELATING TO THE DUE DILIGENCE REVIEW OF THE
FRANCHISE, INCLUDING THE UNIFORM FRANCHISE OFFERING CIRCULAR AND FRANCHISE
AGREEMENT.
C. YOU ACKNOWLEDGE THAT YOU HAVE RECEIVED, READ AND UNDERSTOOD
THIS AGREEMENT. V2K HAS ACCORDED YOU AMPLE TIME AND OPPORTUNITY TO CONSULT WITH
FINANCIAL ADVISORS OF YOUR OWN CHOOSING ABOUT THE POTENTIAL BENEFITS AND RISKS
OF ENTERING INTO THIS AGREEMENT. YOU FURTHER ACKNOWLEDGE THAT NOTHING IN THIS
AGREEMENT CREATES, OR SHALL BE DEEMED TO HAVE CREATED, A FIDUCIARY RELATIONSHIP
BETWEEN V2K AND YOU.
D. THIS AGREEMENT SUPERSEDES ANY AND ALL OTHER AGREEMENTS AND
REPRESENTATION RESPECTING THE FRANCHISE AND CONTAINS ALL OF THE TERMS AND
CONDITIONS OF THE PARTIES WITH RESPECT TO THE GRANT OF THE FRANCHISE.
E. YOU REPRESENT THAT NEITHER FRANCHISEE NOR ANY OF ITS OFFICERS,
DIRECTORS, MANAGERS, MEMBERS, OR PARTNERS (AS APPLICABLE) ARE SUBJECT TO U.S.
EXECUTIVE ORDER 13224.
F. YOU AND EACH AND EVERY SIGNER OF THIS AGREEMENT SEVERALLY
REPRESENTS AND WARRANTS THAT YOU HAVE RECEIVED A COPY OF V2K'S FRANCHISE
OFFERING CIRCULAR AT THE EARLIER OF:
FRANCHISE AGREEMENT - 33
(1) THE FIRST PERSONAL MEETING BETWEEN V2K AND FRANCHISEE
OR ITS PRINCIPAL REPRESENTATIVE(S);
(2) TEN (10) BUSINESS DAYS BEFORE THE SIGNING OF THIS
AGREEMENT; OR
(3) TEN (10) BUSINESS DAYS BEFORE ANY PAYMENT TO V2K.
G. YOU AND EACH AND EVERY SIGNER OF THIS AGREEMENT SEVERALLY
REPRESENTS AND WARRANTS THAT YOU HAVE RECEIVED A COPY OF THIS AGREEMENT, IN THE
FORM INTENDED TO BE EXECUTED BY THE PARTIES, AT LEAST FIVE (5) BUSINESS DAYS
PRIOR TO THE SIGNING OF THIS AGREEMENT.
H. THIS AGREEMENT MAY BE EXECUTED IN COUNTERPART AND IF SIGNED BY
ALL PARTIES ON SEPARATE DOCUMENTS, COPIES SHALL BE FULLY EXECUTED.
V2K WINDOW FASHIONS, INC.
----------------------------------------
By: By:
-------------------------------- ------------------------------------
Print Name: Print Name:
------------------------ -----------------------------
Title: Title:
----------------------------- ----------------------------------
FRANCHISE AGREEMENT - 34
HAWAII RIDER TO THE
V2K WINDOW FASHIONS, INC. FRANCHISE AGREEMENT
BETWEEN V2K WINDOW FASHIONS, INC.
AND _______________________________
DATED ______________
1. The following paragraph is added to Section 10.5:
Section 482E-6(3) of the Hawaii Revised Statutes provides that upon
termination or refusal to renew the Franchise, the Franchisor is
obligated to compensate the Franchisee 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 the remedies provided above, shall 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 monies due the Franchisor.
V2K WINDOW FASHIONS, INC.
-----------------------------------
FRANCHISEE (Print Name)
By: By:
----------------------------------- --------------------------------
Title: Title:
-------------------------------- -----------------------------
ILLINOIS RIDER TO THE
V2K WINDOW FASHIONS, INC. FRANCHISE AGREEMENT
BETWEEN V2K WINDOW FASHIONS, INC.
AND ___________________________
DATED_________________
1. Section 16 is supplemented with the following language:
Notwithstanding the language above, this provision does not act to
exclude any express written commitments, representations or
undertakings in the V2K Window Fashions Franchise Offering Circular
provided by V2K to Franchisee.
2. Sections 18.1 and 18.2 are deleted and replaced with the following
language, and Sections 18.3 and 18.4 are renumbered as Sections 18.2 and 18.3:
18.1 LEGAL MATTERS.
The Federal Arbitration Act governs all questions about the
enforceability and scope of this Section 18.1. Issues subject to
arbitration under this Agreement will be governed by and construed in
accordance with the laws of the State of Colorado, except to the extent
governed by federal law, or except to the extent the Federal
Arbitration Act does not preempt Illinois law requiring application of
Illinois law to this Agreement. Otherwise, except to the extent
governed by the United States Trademark Act of 1946 (Lanham Act, 15
U.S.C. Sections 1051 ET SEQ.), or other federal law, all matters
regarding this Agreement shall be interpreted under the laws of the
state of Illinois. The exclusive venue for disputes not required to be
arbitrated pursuant to the terms of this Agreement is in the federal
and state courts of Illinois, and in that situation, each party waives
any objection it may have to the personal jurisdiction or venue in the
federal and state courts of the Illinois.
3. The 10 business day waiting periods in Sections 23.E.(2) and (3) are
replaced with 14-day waiting periods.
4. Section 23.F is deleted and replaced with the following language:
YOU ACKNOWLEDGE THAT YOU RECEIVED A COPY OF THIS AGREEMENT ON
________________, 20___, AND YOU HAVE HAD THE OPPORTUNITY TO SUBMIT
THIS AGREEMENT FOR PROFESSIONAL REVIEW AND ADVICE OF YOUR CHOOSING
PRIOR TO FREELY EXECUTING THIS AGREEMENT.
V2K WINDOW FASHIONS, INC.
-----------------------------------
FRANCHISEE (Print Name)
By: By:
----------------------------------- --------------------------------
Title: Title:
-------------------------------- -----------------------------
INDIANA RIDER TO THE
V2K WINDOW FASHIONS, INC. FRANCHISE AGREEMENT
BETWEEN V2K WINDOW FASHIONS, INC.
AND ___________________________________
DATED _______________________
1. Section 7.2b.iii. is deleted and replaced with the following provision:
iii. INTEREST IN SIMILAR BUSINESS. Own, maintain, operate, engage in,
or have any interest in any business which is the same as or similar to
the Franchise or the SYSTEM, which business, is, or is intended to be,
located within Franchisee's Area(s) of Primary Responsibility.
2. The following sentence is added at the end of Section 16:
Notwithstanding anything to the contrary in this provision, the
Franchisee does not waive any right under the Indiana statutes with
regard to prior representations made by the Franchisor.
V2K WINDOW FASHIONS, INC.
-----------------------------------
FRANCHISEE (Print Name)
By: By:
----------------------------------- --------------------------------
Title: Title:
-------------------------------- -----------------------------
MARYLAND RIDER TO THE
V2K WINDOW FASHIONS, INC. FRANCHISE AGREEMENT
BETWEEN V2K WINDOW FASHIONS, INC.
AND ___________________________________
DATED __________________
1. The following language is added at the end of Section 2.2. and Section
9.2.b:
(Any release executed in connection herewith will not apply to any
claims that may arise under the Maryland Franchise Registration and
Disclosure Law.)
2. The following paragraph is added to the end of Section 18:
The Franchisee may commence any cause of action against the Franchisor
in any court of competent jurisdiction, including the state or federal
courts of Maryland, unless otherwise governed by the arbitration
provisions of this Agreement. Any claims arising under the Maryland
Franchise Registration and Disclosure Law must be brought within three
years after the grant of the franchise.
3. The following sentence is added to the end of Sections 16 and 23:
Provided, however, that this provision is not limited to, nor shall it
act as a release, estoppel or waiver of any liability incurred under
the Maryland Franchise Registration and Disclosure Laws.
V2K WINDOW FASHIONS, INC.
-----------------------------------
FRANCHISEE (Print Name)
By: By:
----------------------------------- --------------------------------
Title: Title:
-------------------------------- -----------------------------
MINNESOTA RIDER TO THE
V2K WINDOW FASHIONS, INC. FRANCHISE AGREEMENT
BETWEEN V2K WINDOW FASHIONS, INC.
AND ____________________________________
DATED _______________
1. The following statement is added at the end of Section 2.2b. and
Section 9.2b.:
Any release executed in connection herewith shall not apply to any
claims that may arise under the Minnesota Franchise Act.
2. Section 5.3d. is modified by the following language:
As it deems necessary, V2K will protect Franchisee's right to use V2K's
Proprietary Marks. The Minnesota Department of Commerce requires
Franchisors to indemnify Franchisees against liability to third parties
resulting from claims by third parties that the Franchisee's use of the
Franchisor's marks infringes upon the trademark rights of the third
party.
3. The following sentence is added to Section 10.5:
Minnesota law provides Franchisee with certain termination and
nonrenewal rights. Minn. Stat. Sec. 80C.14 Subd. 3, 4 and 5 require,
except in certain specified cases, that Franchisee be given 90 days
notice of termination (with 60 days to cure) and 180 days notice for
nonrenewal of this Agreement.
4. Section 18 is modified with the addition of the following sentences:
Minn. Stat. ss.80c.21 and Minn. Rule 2860.4400j prohibit V2K from
requiring litigation to be conducted outside Minnesota. In addition,
nothing in this Agreement can abrogate or reduce any of Franchisee's
rights as provided for in Minnesota statutes, chapter 80c, or
Franchisee's rights to any procedure, forum, or remedies provided for
by the laws of the jurisdiction.
5. Section 18.2b., concerning waiver of jury trials, is deleted.
V2K WINDOW FASHIONS, INC.
-----------------------------------
FRANCHISEE (Print Name)
By: By:
----------------------------------- --------------------------------
Title: Title:
-------------------------------- -----------------------------
NEW YORK RIDER TO THE
V2K WINDOW FASHIONS, INC. FRANCHISE AGREEMENT
BETWEEN V2K WINDOW FASHIONS, INC.
AND _______________________________
DATED __________________
1. The following is added at the end of Sections 16 and 23:
Provided however, that all rights enjoyed by Franchisee and any causes
of action arising in its favor from the provisions of Article 33 of the
General Business Law of the State of New York and the regulations
issued thereunder shall remain in force; it being the intent of this
proviso that the non-waiver provisions of General Business Law, Section
687.4 and 687.5 be satisfied.
V2K WINDOW FASHIONS, INC.
-----------------------------------
FRANCHISEE (Print Name)
By: By:
----------------------------------- --------------------------------
Title: Title:
-------------------------------- -----------------------------
NORTH DAKOTA RIDER TO THE
V2K WINDOW FASHIONS, INC. FRANCHISE AGREEMENT
BETWEEN V2K WINDOW FASHIONS, INC.
AND ______________________________
DATED __________________
1. The following is added at the end of Section 2.2 and 9.2b:
Any release executed in connection herewith shall not apply to any
claims that may arise under the North Dakota Franchise Investment Law.
2. The following sentence is added at the end of Section 7.2:
Covenants not to compete, such as those mentioned above, are generally
considered unenforceable in the State of North Dakota.
3. The following sentence is added to the end of Section 11.1.d and
11.1.e:
This provision is amended to the extent it is in conflict with Section
18.3.
4. The following sentence is added at the end of Section 18.1:
The choice of Colorado law may not be enforceable under the North
Dakota Franchise Investment Law.
5. The following sentences are added at the end of Section 18.2:
The choice of Colorado law may not be enforceable under the North
Dakota Franchise Investment Law. The waiver of a jury trial may not be
enforceable under the North Dakota Franchise Investment Law. The waiver
of punitive or exemplary damages may not be enforceable under the North
Dakota Franchise Investment Law.
6. The following sentences are added at the end of Section 19:
The requirement that arbitration be held in Denver, Colorado, may not
be enforceable under the North Dakota Franchise Investment Law. The
waiver of punitive or exemplary damages may not be enforceable under
the North Dakota Franchise Investment Law.
V2K WINDOW FASHIONS, INC.
-----------------------------------
FRANCHISEE (Print Name)
By: By:
----------------------------------- --------------------------------
Title: Title:
-------------------------------- -----------------------------
RHODE ISLAND RIDER TO THE
V2K WINDOW FASHIONS, INC. FRANCHISE AGREEMENT
BETWEEN V2K WINDOW FASHIONS, INC.
AND _________________________________
DATED _______________________
1. The following paragraphs are added at the end of Section 18:
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 this Act."
The above language has been included in this Offering Circular as a
condition to registration. V2K and the Franchisee do not agree with the
above language and believe that each of the provisions of the Franchise
Agreement, including all choice of law provisions, are fully
enforceable. V2K and the Franchisee intend to fully enforce all of the
provisions of the Franchise Agreement and all other documents signed by
them, including but not limited to, all venue, choice-of-law,
arbitration provisions and other dispute avoidance and resolution
provisions and to rely on federal pre-emption under the Federal
Arbitration Act.
V2K WINDOW FASHIONS, INC.
-----------------------------------
FRANCHISEE (Print Name)
By: By:
----------------------------------- --------------------------------
Title: Title:
-------------------------------- -----------------------------
SOUTH DAKOTA RIDER TO THE
V2K WINDOW FASHIONS, INC. FRANCHISE AGREEMENT
BETWEEN V2K WINDOW FASHIONS, INC.
AND _______________________________
DATED ______________________
1. The following sentence is added to Sections 16 and 23:
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.
2. To the extent this Addendum will be deemed to be inconsistent with any
terms or conditions of the agreements, exhibits or attachments thereto, the
terms of this Addendum will govern. All other terms and conditions of these
agreements will remain the same.
V2K WINDOW FASHIONS, INC.
-----------------------------------
FRANCHISEE (Print Name)
By: By:
----------------------------------- --------------------------------
Title: Title:
-------------------------------- -----------------------------
WASHINGTON RIDER TO THE
V2K WINDOW FASHIONS, INC. FRANCHISE AGREEMENT
BETWEEN V2K WINDOW FASHIONS, INC.
AND ________________________________
DATED __________________
These states have statutes that may supersede the Franchise Agreement
in your relationship with V2K, including the areas of termination and renewal of
your franchise: ARKANSAS [Stat. Sections 4-72-201 to 4-72-210], CALIFORNIA [Bus.
& Prof. Code Sections 20000-20043], CONNECTICUT [Gen. Stat. Ch. 739, Sections
42-133e to 42-133h], DELAWARE [Title 6, Ch. 25, Code Sections 2551-2556], HAWAII
[Title 26, Rev. Stat. Section 482E-6], IDAHO [Code Section 29-110], ILLINOIS
[ILCS, Ch.815, Sections 705/1-705/44], INDIANA [Code Section 23-2-2.7-1 to 7],
IOWA [Title XX, Code Sections 523H.1-523H.17], MARYLAND [Ann. Code Sections
11-1301 to 11-1307], MICHIGAN [1979 Comp. Laws, Section 445.1527], MINNESOTA
[1996 Stat. Section 80C.14], MISSISSIPPI [Code Sections 75-24-51 to 75-24-63],
MISSOURI [Rev. Stat. Sections 407.400-407.410, 407.413, 407.420], NEBRASKA [Rev.
Stat. Sections 87-401 to 87-410], NEW JERSEY [Rev. Stat. Sections 56:10-1 to
56:10-12], SOUTH DAKOTA [Codif. L. Section 37-5A-51], VIRGINIA [Code Section
13.1-564], WASHINGTON [Rev. Code Sections 19.100.180, 19.100.190], WISCONSIN
[Stat. Sections 135.01 - 135.07], DISTRICT OF COLUMBIA [Code Sections 29-1201 to
29-1208], PUERTO RICO [Ann. Laws, Title 10, Ch. 14, Sections 278-278d], VIRGIN
ISLANDS [Code Ann., Title 12A, Ch. 2, Subch. III, Sections 130-139]. These and
other states may have court decisions that may supersede the Franchise Agreement
in your relationship with V2K, including the areas of termination and renewal of
your franchise.
Arbitration shall take place in the state of Washington, but only if
"in-state" arbitration is a valid requirement of the Washington Franchise
Investment Practices Act. The above language has been included in this Franchise
Agreement as a condition to registration. V2K and the Franchisee do not agree
that "in-state" arbitration is required under the Washington Franchise
Investment Practices Act and believe that each of the provisions of the
Franchise Agreement, including all venue provisions, are fully enforceable. V2K
and the Franchisee intend to fully enforce all of the provisions of the
Franchise Agreement and all other documents signed by them, including but not
limited to, all venue, choice-of-law, arbitration provisions and other dispute
avoidance and resolution provisions and to rely on federal pre-emption under the
Federal Arbitration Act.
In the event of a conflict of laws, the provisions of the Washington
Franchise Investment Protection Act, Chapter 19.100 RCW shall prevail.
A release or waiver of rights executed by a franchisee shall not
include rights under the Washington Franchise Investment Protection Act except
when executed pursuant to a negotiated settlement after the 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.
V2K WINDOW FASHIONS, INC.
-----------------------------------
FRANCHISEE (Print Name)
By: By:
----------------------------------- --------------------------------
Title: Title:
-------------------------------- -----------------------------
2
WISCONSIN RIDER TO THE
V2K WINDOW FASHIONS, INC. FRANCHISE AGREEMENT
BETWEEN V2K WINDOW FASHIONS, INC.
AND __________________________________
DATED ___________________
1. The following paragraph is added to the end of Section 10.5:
The conditions under which the Franchise Agreement can be terminated or
not renewed may be affected by the Wisconsin Fair Dealership Law,
Wisconsin Statutes 1981-82, Title XIV-A, Chapter 135.
V2K WINDOW FASHIONS, INC.
-----------------------------------
FRANCHISEE (Print Name)
By: By:
----------------------------------- --------------------------------
Title: Title:
-------------------------------- -----------------------------
APPENDIX A
RECEIPT AND UNDERSTANDING FOR
FRANCHISE AND FEE
RECEIPT of the sum of ____________________ Dollars ($______________)
from __________________________ ("FRANCHISEE") is acknowledged. If Franchisee is
a business entity, the term "Franchisee" in this Appendix A refers to the entity
and the individual(s) signing below, as applicable. This sum is in payment of
the initial franchise fee for a V2K Window Fashions, Inc. franchise.
Franchisee acknowledges that an Offering Circular, dated January 10,
2007 (the "UFOC"), was furnished to Franchisee at least ten (10) business days
before the execution of this Receipt and Understanding; that it is entering into
this Agreement with the understanding that it is a business decision, complete
with associated risks; that the success or failure of the franchise is subject
to numerous variables, including but not limited to skill and ability of the
individuals operating and managing the business, the economy, location,
operational costs, and the market place.
Franchisee acknowledges that Franchisee has read the Franchise
Agreement (including its Exhibits) and understands the information contained in
the Agreement. Furthermore, Franchisee acknowledges that in executing this
Receipt and Understanding, Franchisee has consulted all necessary advisors and
is willing to proceed, subject to these risks.
Franchisee further acknowledges that he/she/it has not received from
V2K or any representative of V2K (including employees of V2K and its franchise
brokers) any oral or written information concerning the actual or potential
sales, costs, income, or profit of a V2K Window Fashions franchise--except for
the information included in the Statement of Annual Revenues and Gross Margins
Exhibit to the UFOC. If Franchisee believes that it has received any such
information from V2K, please describe that information in the space provided
below.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Dated this _____ day of ______________, 20___.
V2K WINDOW FASHIONS, INC.
"Franchisee"
By: By:
---------------------------------- --------------------------------
---------------------------------- --------------------------------
Print Name Print Name
Title: Title:
---------------------------- --------------------------
EXHIBIT 1
FRANCHISEE'S AREA OF PRIMARY RESPONSIBILITY
Franchisee's Area of Primary Responsibility referred to in SECTION 1.3
of the Franchise Agreement is described as follows:
-----------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
V2K WINDOW FASHIONS, INC.
-----------------------------------
By: By:
-------------------------------------- --------------------------------
Print Name: Print Name:
----------------------------- ------------------------
Title: Title:
---------------------------------- -----------------------------
Date: Date:
------------------------------------ ------------------------------
EXHIBIT 2
GUARANTY AND ASSUMPTION OF OBLIGATIONS
In consideration of, and as an inducement to, the execution of that
certain Franchise Agreement (the "AGREEMENt") entered into by V2K WINDOW
FASHIONS, INC. ("V2K") and the Franchisee named below ("FRANCHISEE") on the date
listed below, each of the undersigned personally and unconditionally (1)
guarantees to V2K, and its successors and assigns, for the term of the Agreement
and thereafter as provided in the Agreement, that Franchisee shall punctually
pay and perform each and every undertaking, agreement and covenant set forth in
the Agreement; and (2) agrees to be personally bound by, and personally liable,
for the breach of each and every provision in the Agreement, both monetary
obligations and obligations to take or refrain from taking specific actions or
to engage or refrain from engaging in specific activities. Each of the
undersigned waives: (1) acceptance and notice of acceptance by V2K of the
foregoing undertakings; (2) notice of demand for payment of any indebtedness or
non-performance of any obligations guaranteed; (3) protest and notice of default
to any party with respect to the indebtedness or nonperformance of any
obligations guaranteed; (4) any right the undersigned may have to require that
an action be brought against Franchisee or any other person as a condition of
liability; and (5) any and all other notices and legal or equitable defenses to
which the undersigned may be entitled.
Each of the undersigned consents and agrees that: (1) the undersigned's
direct and immediate liability under this guaranty shall be joint and several;
(2) the undersigned shall render any payment or performance required under the
Agreement upon demand if Franchisee fails or refuses to do so; (3) such
liability shall not be contingent or conditioned upon pursuit by V2K of any
remedies again Franchisee or any other person; and (4) such liability shall not
be diminished, relieved or otherwise affected by any extension of time, credit
or other indulgence which V2K may from time to time grant to Franchisee or to
any other person; including without limitation the acceptance of any partial
payment or performance, or the compromise or release of any claims, none of
which shall in any way modify or amend this guaranty, which shall be continuing
and irrevocable during the term of the Agreement.
NAME OF FRANCHISEE:
-----------------------------------------------------------
Date of Franchise Agreement:
------------------------------------------
GUARANTOR(S)
----------------------------------------------
Print Name:
-----------------------------------
----------------------------------------------
Print Name:
-----------------------------------
EXHIBIT 3
ADDENDUM TO FRANCHISE AGREEMENT
SOFTWARE LICENSE AGREEMENT
THIS SOFTWARE LICENSE AGREEMENT ("AGREEMENT") is made and entered into
this ___ day of ______________________, 20______, by and between V2K WINDOW
FASHIONS, INC., a Colorado corporation, with its principal offices at 1127
Auraria Parkway, Suite 204, Denver, Colorado 80204, ("V2K"); and
____________________________________, whose principal address is
______________________________________________________ ("LICENSEE"), and the
officers, directors, shareholders, managers, members, partners, employees (as
applicable) of Licensee listed on ATTACHMENT A, (collectively, the "LICENSEE
AFFILIATES") which is incorporated into this Agreement by this reference.
1. BACKGROUND. V2K and Licensee have entered into a V2K Window
Fashions Franchise Agreement to which this Agreement is attached as EXHIBIT 3
(the "FRANCHISE AGREEMENT") for the V2K franchise (the "V2K BUSINESS") located
at _________________________________________________ the (the "FRANCHISE
LOCATION"). V2K desires to license, or if applicable, sublicense, to Licensee
certain computer software programs that are owned by V2K, or that are owned by
an affiliate of V2K (the "V2K AFFILIATE") and licensed to V2K, including any
modifications or revisions of the programs ("SOFTWARE"), for use in the
operation of the V2K Business; all documentation (other than the Software)
related to the Software; and the tangible media upon which such programs are
recorded and the database file structure thereof (the Software, documentation
and media are collectively referred to as the "PROGRAM"). Licensee desires to
obtain a license, or if applicable, a sublicense, to use the Program, subject to
the terms and conditions contained in this Agreement. The license or sublicense
granted to Licensee may be referred to below in either case as the "license."
2. BINDING EFFECT. Licensee and V2K agree to be bound by the terms
of this Agreement, and the Licensee Affiliates are bound upon signing ATTACHMENT
A. This Agreement is also binding on the successors, assigns, heirs and personal
representatives of the parties (as applicable).
3. GRANT OF SUBLICENSE AND ENGAGEMENT. Subject to the terms and
conditions of this Agreement, V2K grants to Licensee a nonexclusive,
nontransferable license to use the Program for the term of this Agreement. The
parties agree as follows:
a. To participate in this Agreement, Licensee must be in "good
standing" with V2K. Good standing requires Licensee to be current with, and not
otherwise in breach of, any of Licensee's obligations or payments under the
Franchise Agreement, or any other contract or agreement with V2K. V2K shall, in
its sole discretion, determine whether Licensee is in good standing.
b. The Program shall be installed only on the computer equipment
owned by, and used in conjunction with, the V2K Business (the "DESIGNATED
EQUIPMENT").
c. Except with the prior written consent of V2K, the Program shall
not be: (i) operated by entities or persons other than Licensee and the Licensee
Affiliates; (ii) operated on more than one computer at a time; (iii) operated on
equipment other than the Designated Equipment;
or (iv) operated at locations other than the Franchise Location or at the homes
and businesses of customers of the V2K Business.
d. The Program shall be used only in conjunction with the operation
of the V2K Business, and must not be used for any other purpose or business.
e. Licensee shall not, and shall not allow the Licensee Affiliates or
any other employees, agents or representatives of Licensee to: (i) sell, assign,
lease, license, sublicense, market or commercially exploit in any way, the
Program, any component of it or any data generated by the use of the Program;
(ii) disclose or grant access to the Program, any component of it or any data
generated by the use of the Program, to any third party other than one whom V2K
has approved in writing and who has agreed in writing with Licensee and V2K to
keep the Program confidential; or (iii) copy or reproduce the Program, any
component thereof or any data generated by the use of the Program, in any
manner; provided that Licensee may use the data generated by the Program to the
extent reasonably necessary to comply with local, state and federal law and for
usual and customary business purposes.
f. Licensee and the Licensee Affiliates shall keep the Program and
any data generated by the use of the Program confidential during and after the
term of this Agreement, and shall establish and maintain such security
precautions as are prescribed by V2K from time to time to maintain the secrecy
of the Program and any data generated by the use of the Program, and to prevent
the unauthorized access to or use, disclosure or copying of the Program or any
data generated by the use of the Program. Licensee shall immediately inform V2K
in writing if any Licensee Affiliate or any other employee, agent or
representative of Licensee violates the terms and conditions of this Section, or
if Licensee learns of any actual or possible unauthorized disclosure of the
Program or any data generated by the use of the Program, such as the loss or
theft of any tangible medium (such as a CD-Rom), documentation or other
component.
g. Licensee and the Licensee Affiliates acknowledge and agree that:
(1) the Program and any data generated by the use of the Program is the valuable
proprietary property and trade secret of V2K or the V2K Affiliate; (2) they
shall use the utmost care to safeguard the Program and any data generated by the
use of the Program and to maintain its secrecy and confidentiality; (3) they
shall not undertake to patent, copyright or otherwise assert proprietary rights
to the Program and any data generated by the use of the Program or any portion
of it; and (4) they shall not create any derivative works based on the Software
without the prior written consent of V2K.
h. Licensee and the Licensee Affiliates recognize that all or part
of the Program and any data generated by the use of the Program may be
copyrighted by V2K or the V2K Affiliate (as applicable), and they agree that
distribution of the Program to Licensees and third parties shall not be
construed as causing the copyrighted material to be public information.
i. Licensee and the Licensee Affiliates shall ensure that any copies
of the Program and any data generated by the use of the Program or any
components of it in their possession contain a copyright notice or other notice
of proprietary rights specified by V2K.
j. V2K or the V2K Affiliate (as applicable) retains title and
ownership of the Program. The grant of this License to Licensee is not a sale by
V2K of the Program. Licensee and the Licensee Affiliates agree that the Program
and concept of the Program is now and shall remain the sole property of V2K or
the V2K Affiliate (as applicable).
SOFTWARE LICENSE AGREEMENT - 2
k. Licensee and the Licensee Affiliates shall not modify, adapt,
translate, reverse engineer, decompile or disassemble the Program in any way
without the prior written consent of V2K.
l. V2K and/or the V2K Affiliate shall have the right to use any ideas
and suggestions for modifications to or enhancements of the Program developed by
Licensee or the Licensee Affiliates.
m. Licensee and the Licensee Affiliates acknowledge and agree that
any breach or threatened breach by Licensee of the provisions of this SECTION 3
would cause V2K and/or the V2K Affiliate irreparable injury for which V2K and/or
the V2K Affiliate would have no adequate remedy at law and that, in addition to
any other remedies which it may have, V2K and/or the V2K Affiliate shall be
entitled to preliminary and permanent injunctive relief against any such breach
or threatened breach.
n. Upon expiration or termination of this Agreement or the Franchise
Agreement, Licensee and the Licensee Affiliates shall immediately (1) cease
further use of the Program; (2) allow V2K's employees or agents to remove the
Program from the Designated Equipment, return the Program and any data generated
by the use of the Program to V2K, and destroy any and all copies of the Program
or parts of it, documentation for the Program and any data generated by the use
of the Program, and other materials or information which relate to or reveal the
Program and its operation and any data generated by the use of the Program. In
addition, V2K may cease performance of all of its obligations under this
Agreement without liability of V2K to Licensee or the Licensee Affiliates.
4. UPGRADES AND NEW PROGRAMS. During the term of the Franchise
Agreement, and provided that Licensee and the Licensee Affiliates are in
substantial compliance with the terms of this Agreement, V2K and/or the V2K
Affiliate shall offer and/or provide to Licensee enhancement and maintenance
upgrades of the Program, if they are to be provided in accordance with the terms
of the Franchise Agreement.
5. TERM. Subject to earlier termination in accordance with the
terms of this Agreement or the Franchise Agreement, the term of this Agreement
and the license granted under it shall commence on the date of full execution of
the Franchise Agreement and shall extend through the term of the Franchise
Agreement.
6. TAXES. Licensee shall pay when due any and all sales, license,
transaction, property or other federal, state or local taxes, however
designated, which are levied or imposed by reason of the transaction
contemplated by this Agreement.
7. ALTERATION AND ATTACHMENTS. If the attachment of unauthorized
equipment to, or the alteration of, any Designated Equipment or Software
directly or indirectly causes a malfunction of the Program, V2K and the V2K
Affiliate (as applicable) shall be relieved of any warranty obligations for all
affected Designated Equipment or Software. Licensee shall give V2K prior written
notice of any such alteration or attachment. If any such alteration or
attachment is made, V2K and the V2K Affiliate (as applicable) shall not be
responsible for: (i) any malfunction, nonperformance or degradation of any
Designated Equipment or Software, consumable supplies or maintenance/diagnostic
aids; or (ii) injury to person or damage to any property, caused by or resulting
directly or indirectly from such alteration or attachment.
SOFTWARE LICENSE AGREEMENT - 3
8. USE OF LICENSE. V2K represents and warrants to Licensee that:
(a) V2K has all right, title, license and authorization to license the Program
to Licensee; and (b) the Program does not, and as a result of any upgrades, the
Program will not, to the best of V2K's knowledge, infringe upon any United
States patent, copyright or other proprietary right of any third party. If
Licensee's use of the Program as provided by V2K is enjoined as a result of a
claim by a third party of patent or copyright infringement or violation of
proprietary rights, then V2K shall use its best efforts, in its sole discretion,
to either (i) procure for Licensee the right to continue use of the Program as
contemplated under this Agreement; or (ii) replace the Program or modify it such
that there is no infringement of the third party's rights. This action by V2K
shall be V2K's sole and exclusive obligation to Licensee with respect thereto,
and V2K shall have no further liability to Licensee. The term "best efforts" as
used in this Section shall not be construed to include expenditures of money by
V2K.
9. WARRANTIES AND LIMITATIONS ON LIABILITY. Neither V2K nor the V2K
Affiliate makes any representations or warranties to Licensee, and expressly
disclaims any warranty, that the Program is error free or that the operation and
use of the Program by Licensee will be uninterrupted or error free.
EXCEPT AS MAY BE REQUIRED BY APPLICABLE LAW, NEITHER V2K NOR THE V2K
AFFILIATE MAKES ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, WHETHER EXPRESS OR IMPLIED, BY OPERATION OF LAW OR OTHERWISE, AND ALL
SUCH WARRANTIES ARE EXPRESSLY EXCLUDED.
IN NO EVENT SHALL V2K OR THE V2K AFFILIATE HAVE ANY LIABILITY TO
LICENSEE FOR (1) INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT
LIMITED TO LOSS OF USE, REVENUE OR PROFIT; (2) DAMAGES CAUSED BY LICENSEE'S
FAILURE TO PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT; OR (3) CLAIMS, DEMANDS
OR ACTIONS AGAINST LICENSEE BY ANY THIRD PARTY.
10. INDEMNIFICATION. Licensee and the Licensee Affiliates agree to
indemnify and hold V2K and the V2K Affiliate and their affiliates, and their
shareholders, officers, directors, employees and agents (collectively, the
"INDEMNIFIED PARTIES") harmless from and against any and all loss, cost, damage,
liability and expense (including, without limitation, reasonable attorneys'
fees, court costs and other reasonable costs and expenses) that may be suffered,
sustained or incurred by any one or more of the Indemnified Parties as a result
of, arising out of, or in connection with (a) Licensee's or any of the Licensee
Affiliates' breach of any its obligations under this Agreement, and (b) any and
all negligent acts or omissions of Licensee or any of its owners, officers,
directors, employees, or agents.
11. TRANSFER BY LICENSEE. Licensee may transfer Licensee's rights
under this Agreement only in conjunction with a transfer of the Franchise
Agreement approved by V2K and with the written consent of V2K.
12. TERMINATION. The license granted to Licensee under this Agreement
shall terminate at V2K's option, upon the occurrence of any of the following
events:
a. Immediately upon delivery to Licensee of written notice of
termination if Licensee or any of the Licensee Affiliates have violated any
provision of this Agreement.
SOFTWARE LICENSE AGREEGMENT -4
b. Immediately and without notice if Licensee (or a transferee of the
License Agreement approved by V2K) ceases to have the right to operate the V2K
Business pursuant to the Franchise Agreement, or any other agreement.
c. Immediately and without notice if Licensee sells, assigns or
transfers, directly or indirectly, (i) Licensee's rights under this Agreement;
(ii) a controlling interest in the ownership of Licensee; or (iii) substantially
all of the assets of the V2K Business; if such sale, assignment or transfer has
not been approved in advance in writing by V2K. "CONTROLLING INTEREST" means
twenty-five percent (25%) or more of the equity or voting control of Licensee.
13. EFFECT OF TERMINATION. Immediately upon the termination of this
Agreement and the license granted herein, all rights granted to Licensee and the
Licensee Affiliates under this Agreement shall revert to V2K, and Licensee and
the Licensee Affiliates shall be deemed to have assigned, transferred or
conveyed to V2K any and all equities or other rights of the Licensee under this
Agreement.
14. SURVIVAL OF OBLIGATIONS. The obligations of Licensee under
SECTION 3(B) through (N) shall survive the termination of this Agreement.
15. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the state of Colorado.
16. LIABILITY FOR BREACH. In the event of any default on the part of
either party of this Agreement, in addition to all other remedies, the
party(ies) in default will pay the aggrieved party(ies) all amounts due and all
damages, costs and expenses, including reasonable attorneys' fees, incurred by
the aggrieved party(ies) in any legal action or proceeding as a result of such
default, plus interest at the highest rate allowable by law accruing from the
date of such default.
17. JURISDICTION AND VENUE. If a claim arising out of, or in
conjunction with this Agreement is asserted in any legal proceeding, Licensee,
the Licensee Affiliates, and V2K irrevocably submit to the jurisdiction of the
District Court of the State of Colorado and the Federal District Court for the
District of Colorado, and irrevocably agree that venue for any action or
proceeding shall be in the City and County of Denver, State of Colorado. Both
parties waive any objection to the jurisdiction of these courts or to venue in
the City and County of Denver, Colorado. Notwithstanding the foregoing, in the
event that the laws of the state where the Licensee resides or the Franchise
Location is located prohibit the aforesaid designation of jurisdiction and
venue, then that other jurisdiction's laws shall control.
18. NO WAIVER. No waiver of any condition or covenant contained
in this Agreement or failure to exercise a right or remedy by V2K or the V2K
Affiliate shall be considered to imply or constitute a further waiver by V2K or
the V2K Affiliate of the same or any other condition, covenant, right or remedy.
19. NOTICES. All notices required or permitted under this Agreement
shall be in writing and sent by facsimile; by e-mail, with a "read-receipt"; by
a national overnight courier service, with proof of delivery required; or by
Certified Mail-Return Receipt Requested with proper postage paid; to the
respective parties at the addresses above or on EXHIBIT A, as applicable,
(unless and until a different address has been designated by written notice to
the other party). Notices shall be deemed given: on the date of transmission as
shown in a successful transmittal report if given by facsimile; upon receipt, as
indicated by a "read-receipt," if given by
SOFTWARE LICENSE AGREEMENT - 5
e-mail; one (1) day after deposit with an overnight courier (as specified above)
with proper address and delivery charges paid; or if given by Certified Mail,
three days after deposit with the U.S. Postal Service with proper address and
postage paid.
20. CROSS DEFAULT; CROSS TERMINATION.
a. A default by Licensee under this Agreement will be deemed a
default of all agreements between Licensee and V2K. A default by Licensee under
any other agreement between V2K and Licensee will be deemed a default under this
Agreement.
b. If this Agreement is terminated as a result of a default by
Licensee, V2K may, at its option, elect to terminate any or all other agreements
between Licensee and V2K. If any other agreement between Licensee and V2K is
terminated as a result of a default by Licensee, V2K may, at its option, elect
to terminate this Agreement. It is agreed that an incurable or uncured default
under this Agreement or any other agreement between Licensee and V2K will be
grounds for termination of this Agreement and/or any and all agreements between
Licensee and V2K, without additional notice or opportunity to cure.
V2K WINDOW FASHIONS, INC.
-----------------------------------
By: By:
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Print Name: Print Name:
---------------------------- ------------------------
Title: Title:
--------------------------------- -----------------------------
SOFTWARE LICENSE AGREEMENT - 6
ATTACHMENT A
LICENSEE AFFILIATES
The undersigned agree to be bound by the foregoing Software License
Agreement to the extent specified in the Agreement.
Relationship
NAME ADDRESS TO LICENSEE SIGNATURE
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INDIANA RIDER TO THE
V2K WINDOW FASHIONS, INC.
SOFTWARE LICENSE AGREEMENT
BETWEEN V2K WINDOW FASHIONS, INC.
AND ____________________________
DATED ______________________
1. Section 15 is deleted and replaced with the following language:
15. GOVERNING LAW. Except to the extent governed by the
Indiana Franchise Disclosure Law or the Indiana Deceptive Franchise
Practices Law, this Agreement shall be governed as to validity,
interpretation, construction, effect and in all other respects by the
laws and decisions of the State of Colorado.
NORTH DAKOTA RIDER
TO THE
SOFTWARE LICENSE AGREEMENT
BETWEEN
V2K WINDOW FASHIONS, INC.
AND ________________________________
DATED ___________________
The choice of Colorado law as stated in Section 15, and the
jurisdiction and venue of the Colorado courts as stated in Section 17, may not
be enforceable under North Dakota law. Either or both Section 15 and Section 17
will be modified to the extent required by North Dakota law.