ADVANTAGE PAYROLL SERVICES, INC.
ASSOCIATE LICENSE AGREEMENT
THIS AGREEMENT entered into this day of ____________, 20___ between ADVANTAGE
PAYROLL SERVICES, INC., a Delaware corporation with offices at 126 Merrow Road,
Auburn, Maine, 04211 (referred to as "we" or "us"), and ________________________
_____________________________________________________ (referred to as "you").
WITNESSETH:
We, as the result of the expenditure of time, skill, effort, and money,
have developed and own a unique and distinctive system ("System") relating to
the establishment and operation of an Advantage payroll business providing
payroll and other business related services including computerized payroll
calculation, payroll check issuance, weekly and monthly client reports, and
other services.
The distinguishing characteristics of the System include centralized
payroll services, distinctive business image, signs, business cards and
letterhead; marketing of the services; distinctive uniform standards,
specifications, and procedures for operations; consistency and uniformity of
products and services offered; procedures for quality control; training and
assistance; and advertising and promotional programs; all of which may be
changed, improved, and further developed by us from time to time;
We identify the System by means of certain trade names, service marks,
trademarks, logos, emblems, and indicia of origin, including the mark
"Advantage," and such other trade names, service marks, and trademarks as are
now designated (and may be designated by us in writing) for use in connection
with the System (referred to as "Proprietary Marks");
We continue to develop, use, and control the use of such Proprietary Marks
in order to identify for the public the source of services and products we
market under the System, and to represent the System's high standards of
quality, appearance, and service;
You desire to enter into the business of operating an Advantage Payroll
Services business under our System and wish to obtain a license from us for that
purpose, as well as to receive the training and other assistance we provide in
connection with the System;
You understand and acknowledge the importance of our high standards of
quality, cleanliness, appearance, and service and the necessity of operating the
Licensed Business in conformity with our standards and specifications;
In consideration of the undertakings and commitments of each party to the
other party as specified, we agree as follows:
I. GRANT
-----
A. We grant to you, upon the terms and conditions contained in this
Agreement, the right, license and privilege, and you undertake the
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obligation, to operate an Advantage Payroll Services business
(referred to as the "Licensed Business") and to use solely in
connection with the Proprietary Marks and the System, as they may be
changed, improved and further developed from time to time, only at the
approved location as provided in Section I.B.
B. The street address of the location approved under this Agreement is:
______________________________________________________________________
("Approved Location"). You may not relocate the Licensed Business
without our express prior written consent.
C. You may sell and service new clients located within the geographic
area specified in Attachment A (the "Protected Territory"). You may
sell and service new clients located outside of the Protected
Territory if they originate from referral sources located within the
Protected Territory, but you may not establish a processing office
located outside of the Protected Territory. Acceptable referral
sources are specified in our Operations Manual. Further, you must
restrict all marketing and promotional activity related to the
Licensed Business to the Protected Territory. Therefore, you may not
solicit business outside of the Protected Territory through the use of
an 800 number, the Internet, catalogue, direct mail, telemarketing or
any other advertising method. If a new client is sold in the protected
territory of another Advantage Payroll Services Franchise Owner, the
Franchise Owner in whose territory the client is sold is entitled to a
percentage override as specified in our Operations Manual.
D. During the term of this Agreement, without your prior written consent,
we will not establish, or license another person to establish, an
Advantage Payroll Services business under the System within the
Protected Territory, or directly process new payroll clients located
within the Protected Territory, except as specified in Sections I.E
and I.F below.
E. You must add at least an average of 25 net new payroll clients per
quarter to the Licensed Business in every 2 successive calendar
quarters. If you fail to do so, we may terminate this Agreement under
Section XIII.B. In the alternative, we may, in our absolute
discretion, modify the Protected Territory, directly solicit and
process new clients in the Protected Territory, assign one or more
additional associates to service clients located within the Protected
Territory, and/or require you to participate in a sales management
program approved by us.
F. We retain the right to develop, use and license the use of, within or
outside of the Protected Territory, marks other than the proprietary
marks for the sale of similar or different products or services,
including without limitation the sale of payroll and/or accounting
software, on any terms and conditions we may deem advisable, to
payroll clients or non-client businesses, without
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offering you the right to participate or compensating you for any sale
in the Protected Territory.
We retain the right to sell products and services similar to those
authorized to be sold by the Licensed Business, using the Proprietary
Marks, through dissimilar channels of distribution (including, without
limitation, the Internet, private label and National or Regional
Accounts), on any terms we deem appropriate, within or outside of the
Protected Territory, without offering you the right to participate or
compensating you for any sales in the Territory.
We reserve the right to directly service "existing payroll clients,"
as that term is defined in Attachment D, located within the Protected
Territory. We reserve the right to enter into new contracts to
directly service new payroll clients located within the Protected
Territory where such new client contracts result from referral sources
or contracts involving 10 or more new clients located within or
outside the Protected Territory and added at substantially the same
time. We reserve the right to enter into new contracts to directly
service new clients located within the Protected Territory with 300 or
more employees.
We reserve the right to establish other systems involving similar or
different products or services, under marks other than the Proprietary
Marks, and to establish company-owned or franchised outlets for those
other systems within and outside of the Protected Territory.
II. TERM AND RENEWAL
----------------
A. Except as otherwise provided, the term of this Agreement will expire
10 years from the date of execution of the License Agreement.
B. You may, at your option, renew this Agreement for 1 additional term of
10 years, subject to the following conditions which must be met before
renewal:
1. You must give us written notice of your election to renew not
less than 6 months nor more than 12 months before the end of the
initial term;
2. You must make or provide for, in a manner satisfactory to us,
renovation and modernization of the equipment and premises as we
may reasonably require, including renovation of signs, computers,
furnishings, fixtures, and decor, to reflect the then-current
standards and image of the System;
3. You must not be in default of any provision, amendment or
successor of this Agreement, or any other agreement between you
and us or our subsidiaries and affiliates; and you must have
substantially complied with all the items and conditions of such
agreements during the terms of such Agreement(s);
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4. You must have satisfied all monetary obligations owed by you to
us and our subsidiaries and affiliates and will have timely met
those obligations throughout the term of this Agreement;
5. You must execute our then-current form of renewal license
agreement, which agreement will supersede this Agreement in all
respects, and the terms of which may differ from the terms of
this Agreement, including a higher fee for company services.
6. You must execute a general release, in a form prescribed by us,
of any and all claims against us and our subsidiaries and
affiliates, and their respective officers, directors, agents, and
employees.
7. You must comply with our then-current qualification and training
requirements.
III. DUTIES OF COMPANY
-----------------
A. We will provide a two-week initial training program in Auburn,
Maine, or other designated training facility, as well as a
one-week field sales training program in an existing market of
our choice, for you (or, if you are a corporation or partnership,
for a principal of yours) and to your designated manager, and
will make available such other training programs as we deem
appropriate. All training provided by us will be subject to the
terms specified in Section V.D. of this Agreement. By mutual
agreement, training may be divided into two or more sessions and
may be completed after you have commenced operations.
B. We will provide continuing advisory assistance to you in the
operation, advertising, and promotion of the Licensed Business as
we deem advisable.
C. We will also provide refresher training programs for you (or, if
you are a corporation or partnership, for a principal of yours)
and to your manager as we deem appropriate. All refresher
training programs provided by us will be subject to the terms
specified in Section V.D. of this Agreement.
D. We will have the right to review and approve or disapprove all
advertising and promotional materials which you propose to use.
E. We will provide you, on loan, one copy of the Operations Manual
(referred to as "Manual"), as more fully described in Section
VII.
F. We will provide you, from time to time, as we deem appropriate,
advice and written materials concerning techniques of managing
and operating the Licensed Business, including new developments
and improvements in your computerized equipment and software.
G. We will establish a banking relationship with a financial
institution of our own choosing in order to provide banking
services related to System services provided in the Protected
Territory.
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H. We will seek to maintain the high standards of quality, appearance,
and service of the System, and to that end shall conduct, as we deem
advisable, inspections of the Licensed Business and evaluations of the
products and services rendered. We reserve the right to contact any of
your clients directly for any reason that we deem appropriate.
I. We will provide two bonus programs for you. Under the Starter Bonus
Program, we will pay to you a one-time bonus of $5 per employee up to
$75 per client for each new client processed during your first twelve
months in operation. The Starter Bonus is limited to the first ten
clients of a group of ten or more clients that are added at the same
time, or substantially the same time, resulting from a single contact
or acquisition. Under the Perfect Conversion Program, a bonus of up to
$27.50 per client is available to you for prompt collection and
transmittal to Our Tax Department of certain historical wage and tax
data regarding new clients that have been converted to the Advantage
System.
J. All of our obligations under this Agreement are to you, and no other
party is entitled to rely on, enforce, or obtain relief for breach of
such obligation, either directly or by subrogation.
IV. FEES AND ASSOCIATE PAYMENTS
---------------------------
A. You must pay to us an initial license fee of $25,000 upon execution of
this Agreement. Alternatively, you may pay a percentage of the initial
license fee which will be due upon execution of this agreement
(receipt of which is acknowledged by us) and the balance may, at the
at our sole discretion, be financed over a period of 4 years, on terms
specified in the promissory note attached as Attachment B. The initial
license fee will be deemed fully earned and non-refundable in
consideration of administrative and other expenses incurred by us in
granting this license and for our lost or deferred opportunity to
license others.
B. During the term of this Agreement, we will forward to you gross
receipts less fees charged on the work performed for your clients.
Gross receipts are collected by us for services provided to your
clients and net receipts are remitted by us to you. Your net receipts
are calculated by deducting from gross receipts certain fees and
charges, payments, price concessions, or other consideration furnished
to any endorser approved on a System wide basis, who referred a client
to us or you. A schedule of current fees and charges is specified in
the Operations Manual. It is the express understanding of the parties
that such fees and charges specified in the Operations Manual may
change in our sole discretion upon 30 day's written notice to you.
C. If any national advertising fund for the System is established by us,
we will contribute, for use by such fund, a sum we will determine. The
national
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advertising fund will be maintained and administered by us as provided
in Section X.B.
D. All payments required by this Section IV. will be reported to you on a
regular basis.
E. As used in this Agreement, "gross receipts" will include all revenue
from the sale of all products and performance of services to your
clients and income of every kind and nature related to the Licensed
Business; provided, however, that "gross receipts" will not include
any sales taxes or other taxes collected from customers by you for
transmittal to the appropriate taxing authority. In computing gross
receipts, we will deduct the amount of cash refunds to, and revenues
on voided payroll checks by, clients, provided such amounts have been
included in sales.
F. The cost of note payments, marketing supplies and other obligations of
yours to us may be deducted from required payments to you.
V. DUTIES OF ASSOCIATE
-------------------
A. You understand and acknowledge that every detail of the Licensed
Business is important to you, us, and other associates in order to
maintain high and uniform operating standards, to increase the demand
for the products and services sold by all associates, and to protect
our reputation and goodwill.
B. A Franchise Owner operating as a corporation must comply, except as
otherwise approved in writing by us, with the requirements specified
in Section XII.C. of this Agreement, and with the following
requirements throughout the term of this Agreement:
1. You must furnish us with your Articles of Incorporation, Bylaws,
other governing documents, and any other documents we may
reasonable request, and any other related amendments.
2. You must confine your activities to operating the Licensed
Business, and your governing documents, if any, must at all times
provide that your activities are confined exclusively to
operating the Licensed Business.
3. You must maintain stop transfer instructions against the transfer
on your records of any equity securities; and must issue no
securities upon the face of which the following printed legend
does not legibly and conspicuously appear:
"The transfer of this stock is subject to the terms and
conditions of a license agreement with Advantage Payroll
Services, Inc. dated __________. Reference is made to the
provisions of the said License Agreement and to the Articles and
Bylaws of this Corporation."
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4. You must maintain a current list of all owners of record and all
beneficial owners of any class of your voting stock and must
furnish the list to us upon request.
C. A Franchise Owner which is a partnership must comply, except as
otherwise approved in writing by us, with the following requirements
throughout the term of this Agreement:
1. You must furnish us with your partnership agreement as well as
such other documents as we may reasonably request, and any other
related amendments.
2. You must prepare and furnish to us, upon request, a list of all
general and limited partners in said partnership.
D. Before your commencement of the Licensed Business, you (or, if you are
a corporation or partnership, a principal of yours) and/or your
designated manager, must complete, to our satisfaction, all
pre-training responsibilities identified by us, including but not
limited to, the procurement of suitable office space, equipment and
supplies, telephone service and local market research as well as the
initial training program offered by us. At our option, any persons
subsequently employed by you in the position of manager must also
complete to our satisfaction the initial training program. You, your
designated manager, and other employees must also attend such
refresher courses, seminars, and other training programs as we may
reasonably require from time to time. At our sole discretion, based
upon your quality of performance, you or your manager may be required
to attend special training sessions, and may be assessed a training
fee for such special training sessions. We will provide instructors
and training materials for all required training programs; and you or
your employees will be responsible for all other expenses incurred by
you in connection with any training programs, including the cost of
transportation, lodging, meals, and wages. The initial training
program will be approximately three weeks in duration and will take
place at our headquarters in Auburn, Maine, in an existing market of
our choice or such other locations as we, in our sole discretion, may
designate. By mutual agreement between us and you, initial training
may be divided into two or more sessions and may be completed after
you have commenced operations.
E. You must use the Licensed Business premises solely for the operation
of the Licensed Business; keep the business open and in normal
operation for such minimum hours and days as we may from time to time
specify in the Manual or as we may otherwise approve in writing
(subject to local ordinances or lease restrictions, if any); and
refrain from using or permitting the use of the premises for any other
purpose or activity at any time without first obtaining our written
consent.
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F. You must maintain the furniture, fixtures, computers, printers and
other equipment in a high degree of repair, and condition; and must
make such additions, alterations, repairs, and replacements (but no
others without our prior written consent) as may be required for that
purpose, including such periodic repainting, repairing, and replacing
of obsolete signs, fixtures, and furnishings as we may reasonably
direct.
G. You must, at your own expense, comply with all applicable laws,
ordinances, and regulations of municipal, county, state, or federal
authority.
H. You must maintain all premises and adjacent areas at your Approved
Location in a clean and neat manner.
I. At our request, which will not be more often than once every 5 years,
you must refurbish the furniture, fixtures, computers, printers and
other equipment at your expense, to conform to the trade dress, color
schemes, and presentation of trademarks and service marks consistent
with our then-current public image, including remodeling,
redecoration, and modifications to existing improvements.
J. You must operate the Licensed Business in strict conformity with such
methods, standards, and specifications as we may from time to time
prescribe in the Manual or otherwise in writing, to insure that the
highest degree of quality and service is uniformly maintained. You
agree:
1. To actively promote and sell or refer any and all products and
services authorized by us as part of the System.
2. To maintain in sufficient supply, and use at all times, only such
equipment, materials, supplies, and methods of service as conform
to our standards and specifications; and to refrain from
deviating by using non-conforming items or methods without our
prior written consent;
3. To purchase and install, at your expense, all fixtures,
furnishings, signs, and equipment as we may reasonably direct
from time to time in the Manual or otherwise in writing; and to
refrain from installing or permitting to be installed on or about
the Licensed Business premises, without our prior written
consent, any fixtures, furnishings, signs, equipment, or other
improvements not previously approved as meeting our standards and
specifications;
4. To comply with all Disaster Recovery requirements including all
hardware and software maintenance agreements as specified in the
Manual; and
5. To comply with all applicable federal, state, and local laws,
rules, and regulations with respect to any employees.
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K. We will have the right to require that certain equipment, computers,
computer software, fixtures, furnishings, blank checks, data
processing supplies, signs, office supplies, and other products and
materials required for the operation of the Licensed Business be
purchased solely from suppliers (including manufacturers,
distributors, and other sources), who demonstrate, to our continuing
reasonable satisfaction, the ability to meet our then-current
standards and specifications for such items; who possess adequate
quality controls and capacity to supply your needs promptly and
reliably; and who have first been approved in writing by us and not
disapproved. If you desire to purchase any item from an unapproved
supplier, you must submit to us a written request for such approval,
and have such supplier acknowledge in writing that you are an
independent entity from us and that we are not liable for debts
incurred by you. We will have the right to require that our
representatives be permitted to inspect the supplier's facilities, and
that samples from the supplier be delivered, at our option, either to
us or to an independent, certified laboratory designated by us for
testing. A charge not to exceed the reasonable cost of the inspection
and the actual cost of the test shall be paid by you or the supplier.
We may also require that the supplier comply with such other
reasonable requirements as we may deem appropriate, including payment
of reasonable continuing inspection fees and administrative costs. We
reserve the right, at our option, to re-inspect the facilities and
products of any such approved supplier and to revoke our approval upon
the supplier's failure to continue to meet any of our then-current
criteria.
L. You must grant us and our agents the right to enter upon the Licensed
Business premises at any reasonable time to inspect, photograph, or
videotape the premises, equipment, and operations to insure compliance
with all requirements of this Agreement; cooperate with our
representatives in such inspections by rendering such assistance as
they may reasonably request; and, upon reasonable notice from us or
our agents, and without limiting our other rights under this
Agreement, take such steps as may be necessary to correct immediately
the deficiencies detected during any such inspection, including
immediately desisting from the further use of any equipment,
advertising materials, products, or supplies that do not conform with
our then-current specifications, standards, or requirements.
M. You must not engage in any trade practice or other activity which is
harmful to the goodwill or reflects unfavorably on your or our
reputation, for that of the Advantage System, the Licensed Business,
or the services offered thereat, or constitutes deceptive or unfair
competition or otherwise is in violation of any applicable laws.
N. You must arrange to use an answering machine, an answering service, a
paging service and/or other message system, acceptable to us, to field
and respond to business phone calls during normal business hours
within 2 hours of the call being received.
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O. You must commit to having a fully staffed office during normal
business hours by the time you are servicing 35 active clients.
P. You must subscribe to an Internet Service Provider which offers
standardized Internet protocols, and must be capable at all times
(subject to circumstances beyond your control) of receiving and
sending email.
Q. During the first 6 months, you must comply, participate and otherwise
conform with our Sales Management Program as outlined in the Manual.
R. You must maintain a quality client retention rate of at least 90%
during the term of this Agreement. If you fall below a quality client
retention rate of 90% in any period of 4 successive calendar months,
and fail to cure (as provided in Section XIII below), we may pursue
the remedial action described in Section XIII below.
As used in this Agreement, "quality client retention rate" means the
percentage of your clients that you actually retain compared to the
total number of clients that you reasonably could have retained, in
our judgment, by providing them with sufficient quality service. We
measure this rate by asking your former clients why they stopped doing
business with you.
VI. PROPRIETARY MARKS AND COMPUTER SOFTWARE
---------------------------------------
A. We represent with respect to the Proprietary Marks that:
1. We are the owner of the Proprietary Marks.
2. We have taken and will take all steps reasonably necessary to
preserve and protect the ownership and validity in and of the
Proprietary Marks.
3. We will permit you and other associates to use the Proprietary
Marks only in accordance with the System and the standards and
specifications attendant thereto which underlie the goodwill
associated with and symbolized by the Proprietary Marks.
B. With respect to your licensed use of the Proprietary Marks pursuant to
this Agreement, you agree that:
1. You must use only the Proprietary Marks designated by us, and
must use them only in the manner authorized and permitted by us.
2. You must use the Proprietary Marks only for the operation of the
Licensed Business and only at the approved location authorized,
or in advertising for the business conducted at or from the
approved location.
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3. Unless otherwise authorized or required by us, you must operate
and advertise the Licensed Business only under the name
"Advantage Payroll Services" without prefix or suffix.
4. During the term of this Agreement and any renewal, you must
identify yourself as the owner of the Licensed Business in
conjunction with any use of the Proprietary Marks, including, but
not limited to, on invoices, order forms, receipts, and
contracts, as well as at such conspicuous locations on the
premises of the Licensed Business as we may designate in writing.
The form and content of such identification must comply with
standards specified in the Manual.
5. Your right to use the Proprietary Marks is limited to such uses
as are authorized under this Agreement, and any unauthorized use
will constitute an infringement of our rights.
6. You must not use the Proprietary Marks to incur any obligation or
indebtedness on our behalf.
7. You must not use the Proprietary Marks as part of your corporate
or other legal name.
8. You must comply with our instructions in filing and maintaining
requisite trade name or fictitious name registrations, and must
execute any documents deemed necessary by us or our counsel to
obtain protection for the Proprietary Marks or to maintain their
continued validity and enforceability.
9. In the event that litigation involving the Proprietary Marks is
instituted or threatened against you, you must promptly notify us
and must cooperate fully in defending or settling such
litigation.
C. You expressly understand and acknowledge that:
1. We are the exclusive owner of all right and interest in and to
the Proprietary Marks and the goodwill associated with and
symbolized by them;
2. The Proprietary Marks are valid and serve to identify the System
and those who are authorized to operate under the System.
3. You must not directly or indirectly contest the validity or our
ownership of the Proprietary Marks.
4. Your use of the Proprietary Marks pursuant to this Agreement does
not give you any ownership interest or other interest in or to
the Proprietary Marks, except the license granted by this
Agreement.
5. Any and all goodwill arising from your use of the Proprietary
Marks in its licensed operation under the System will inure
solely and exclusively to our benefit, and upon expiration or
termination of this Agreement and the license granted, no
monetary amount will be assigned as attributable to any goodwill
associated with your use of the System or the Proprietary Marks.
6. The right and license of the Proprietary Marks granted to you is
nonexclusive, and thus we have and retain the rights, among
others:
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a. To use the Proprietary Marks ourselves in connection with
selling products and services;
b. To grant other licenses for the Proprietary Marks, in
addition to those licenses already granted to existing
Associates;
c. To develop and establish other non-competing systems using
the same or similar Proprietary Marks, or any other
proprietary marks, and to grant licenses or licenses without
providing any rights to you.
7. We reserve the right to substitute different Proprietary Marks
for use in identifying the System and the businesses if our
currently owned Proprietary Marks no longer can be used, or if
we, in our sole discretion, determine that substitution of
different Proprietary Marks will be beneficial to the System.
D. With respect to the proprietary computer software licensed to you
pursuant to this Agreement (the "licensed software"), we represent
that:
1. We are the owner or licensee of all right, title and interest in
and to the licensed software which is made available to you to
enable your computer to perform electronic management information
data collection and payroll services; and such other software
programs as are now designated and may be designated in the
future by us for use in connection with the System.
2. We will permit you and your transferees to use the licensed
software only so long as the nature and quality of the goods sold
and services rendered under the licensed software meet such
quality control standards and specifications as we may specify in
writing from time to time.
E. With respect to your use of the licensed software, you agree that:
1. Any and all goodwill arising from use of the licensed software by
you and your transferees will inure exclusively to our benefit.
You agree that during the term of this Agreement and after the
expiration or termination of this Agreement, you will not
directly or indirectly contest or aid in contesting the validity
or ownership of the licensed software, or take any action
whatsoever in derogation of our claimed rights therein.
2. You must adopt and use the licensed software solely in connection
with the operation of the business licensed.
3. You must execute all documents requested by us or our counsel
that are necessary to obtain protection of the licensed software
or to maintain their continued validity or enforceability, and to
take no action that would jeopardize the validity or
enforceability thereof.
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F. You expressly understand and acknowledge that:
1. The licensed software is integral and of the essence to this
Agreement.
2. You must at all times treat the licensed software, and the
information contained therein, as confidential, and must use all
reasonable efforts to maintain such information as secret and
confidential.
3. You must not at any time copy, duplicate, tamper with, record, or
otherwise reproduce the licensed software, in whole or in part,
except as directed by us in the Manual or otherwise in writing,
nor otherwise make the same available to any unauthorized person.
4. You further acknowledge that any failure to comply with the
requirements of this Section will cause us irreparable injury,
and you consent to the entry of an injunction against it to avoid
such irreparable injury from transpiring, and further agree to
pay all court costs and reasonable attorney's fees incurred by us
in obtaining specific performance of, or an injunction against
violation of, the requirements of this Section.
VII. ASSOCIATE OPERATIONS MANUAL
---------------------------
A. In order to protect our reputation and goodwill and to maintain
high standards of operation under our Proprietary Marks, you must
conduct your business in accordance with the Manual, one copy of
which you acknowledge having received on loan from us for the
term of this Agreement.
B. You must at all times treat the Manual, any other manuals created
for or approved for use in the operation of the Licensed
Business, and the information contained in them, as confidential
and must use all reasonable efforts to maintain such information
as secret and confidential. You must not at any time copy,
duplicate, record, or otherwise reproduce the confidential
materials, in whole or in part, nor otherwise make the same
available to any unauthorized person.
C. The Manual must at all times remain our sole property and must at
all times be kept in a secure place on the Licensed Business
premises.
D. We may from time to time revise the contents of the Manual, and
you expressly agree to comply with each new or changed standard.
E. You must at all times insure that your copy of the Manual is kept
current and up-to-date; and, in the event of any dispute as to
the contents of the Manual, the terms of the master copy of the
Manual maintained by us at our headquarters will be controlling.
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VIII.CONFIDENTIAL INFORMATION
------------------------
A. You must not, during the term of this Agreement or thereafter,
communicate, divulge, or use for the benefit of any other person,
persons, partnership, association, or corporation any confidential
information, knowledge, or know-how concerning the methods of
operation of the business licensed hereunder which may be communicated
to you or of which you may be apprised by virtue of your operation
under the terms of this Agreement. You must divulge such confidential
information only to such of your employees who must have access to it
in order to operate the Licensed Business. Any and all information,
knowledge, know-how, and techniques which we designate as confidential
must be deemed confidential for purposes of this Agreement, except
information which you can demonstrate came to your attention prior to
disclosure by us; or which, at or after the time of disclosure by us
to you, had become or later becomes a part of the public domain,
through publication or communication by others.
B. At our request, you must require your managers and any other personnel
having access to any confidential information from us to execute
covenants that they will maintain the confidentiality of information
they receive in connection with their employment by you at the
Licensed Business. Such covenants must be in a form satisfactory to
us, including the specific identification of us as a third party
beneficiary of such covenants with the independent right to enforce
them.
C. You acknowledge that any failure to comply with the requirements of
this Section VIII. will cause us irreparable injury, and you agree to
pay all court costs and reasonable attorney's fees we incur in
obtaining specific performance of, or an injunction against violation
of, the requirements of this Section VIII.
IX. ACCOUNTING AND RECORDS
----------------------
A. You must maintain during the term of this Agreement, and must preserve
for at least 3 years from the dates of their preparation, full,
complete, and accurate books, records, and accounts in accordance with
generally accepted accounting principles and in the form and manner
prescribed by us from time to time in the Manual or otherwise in
writing.
14
B. You must submit to us such weekly, monthly, quarterly, and annual
financial and sales information relating to the Licensed Business, and
such other data or information as we may require. We will specify the
information required in the Manual.
C. You must, upon our request and at your expense, provide us with a
profit and loss statement and balance sheet, accompanied by a review
report prepared by an independent certified public accountant we find
satisfactory, within 90 days after the end of each fiscal year during
the term of the Licensed Business, showing the results of operations
of the Licensed Business during said fiscal year.
D. You must also submit to us for review or auditing, such other forms,
reports, records, information, and data as we may reasonably
designate, in the form and at the times and places we reasonably
require, upon request and as specified from time to time in the Manual
or otherwise in writing.
E. We or our designated agents will have the right, at all reasonable
times, to examine and copy, at our expense, the books, records, and
tax returns of the Licensed Business.
X. ADVERTISING
-----------
Recognizing the value of advertising and the importance of the
standardization of advertising programs to the furtherance of the goodwill
and public image of the System, the parties agree as follows:
A. All advertising and promotion by you in any manner or medium will be
conducted in a dignified manner and must conform to such standards and
requirements as are specified by us. You must submit to us (through
the mail, return receipt requested), for our prior approval (except
with respect to prices to be charged), samples of all advertising and
promotional plans and materials that you desire to use and which have
not been prepared or previously approved by us. If written disapproval
is not received by you from us within 10 days of the date of our
receipt of such samples or materials, we will be deemed to have given
the required approval. You must display the Proprietary Marks in the
manner we prescribe on all signs and all other advertising and
promotional materials used in connection with the Licensed Business.
B. You agree that we will have the right, in our sole discretion, to
establish a fund for national advertising (referred to as the
"National Fund") for the System. In the event that the National Fund
is established, the parties agree that the National Fund will be
maintained and administered by us, or our designee, as follows:
15
1. We, or our designee will direct all advertising and/or
promotional programs with sole discretion over the concepts,
materials, and media used in the placement and allocation of such
programs. You agree and acknowledge that the National Fund is
intended to maximize general public recognition, acceptance, and
the use of the Proprietary Marks for the benefit of all
associates within the System, and that we or our designee are not
obligated, in administering the National Fund, to ensure that any
particular Associate benefits directly or pro rata from
expenditures by the National Fund.
2. As provided in Section IV.C, we will make contributions to the
National Fund in an amount determined by us.
3. The National Fund, including all contributions and any earnings,
will be used exclusively to meet any and all costs of
maintaining, administering, researching, directing, and preparing
advertising and/or promotional activities (including, among other
things, the cost of preparing and conducting television, radio,
magazine, and newspaper advertising campaigns; direct mail and
outdoor billboard advertising; marketing surveys and other public
relations activities; use of advertising agencies to assist
therein; and promotional brochures and other marketing materials
for Advantage licensed businesses operated under the System.)
4. All contributions made by us to the National Fund will be
maintained in an account separate from our other monies and will
not be used to defray any of our expenses, except for such
reasonable administrative costs and overhead as we may incur in
activities reasonably related to the administration or direction
of the National Fund and advertising programs for Associates and
the System. The National Fund and its earning shall not otherwise
inure to our benefit. We or our designee will maintain separate
bookkeeping accounts for the National Fund.
5. It is anticipated that all contributions to and earning of the
National Fund will be expended for advertising and/or promotional
purposes during the taxable year within which the contributions
and earning are received. If, however, excess amounts remain in
the National Fund at the end of such taxable year, all
expenditures in the following taxable year(s) will be made first
out of accumulated earnings from previous years, next out of
earnings in the current year, and finally from contributions.
6. The National Fund is not and will not be an asset of our Company
or our designees. A statement of the operations of the National
Fund will be made available to you upon written request.
7. Although the National Fund is intended to be of perpetual
duration, we maintain the right to terminate the National Fund.
The National Fund will not be terminated, however, until all
monies in the National Fund have been expended for advertising
and/or promotional purposes or returned to the general funds of
the Company.
16
C. You agree that we will have the right, in our discretion, to designate
any geographical area (such as Areas of Dominant Influence ("ADI's"),
as defined by Arbitron on an annual basis) for purposes of
establishing a regional advertising cooperative (referred to as
"Cooperative"). If a Cooperative has been established applicable to
the Licensed Business at the time you commence operations, you must
immediately become a member of such Cooperative and must execute an
advertising cooperative agreement prepared by us. If a Cooperative
applicable to the Licensed Business is established at any later time
during the term of this Agreement, you must become a member of such
Cooperative no later than 30 days after the date on which the
Cooperative commences operation. In no event will you be required to
be a member of more than one cooperative. The following provisions
will apply to each Cooperative:
1. Each Cooperative will be organized and governed in a form and
manner, and will commence operation on a date, approved in
advance by us in writing.
a. Each Cooperative will be organized for the exclusive purpose
of administering regional advertising programs and
developing, subject to our approval, standardized
promotional materials for use by members in local
advertising.
b. No advertising or promotional plans or materials may be used
by a Cooperative or furnished to its members without our
prior approval. All such plans and materials shall be
submitted to us in accordance with the procedure specified
in Section X.A.
c. Each Cooperative will have the right to require its members
to make contributions to the Cooperative in such amounts as
are determined by the Cooperative; provided, however, that
you will not be required to contribute to a Cooperative more
than 5% of your monthly net receipts.
d. You must submit to the Cooperative, no later than the 20th
day of each month, for the preceding calendar month, your
contribution as provided in Section X.C.1.c, together with
such other statements or reports as may be required by us or
by the Cooperative with our prior written approval.
2. We, in our sole discretion, may grant to any Franchise Owner an
exemption for any length of time from the requirement of
membership in a Cooperative, upon written request of such
Franchise Owner stating reasons supporting such exemption. Our
decision concerning such request for exemption will be final.
17
D. You will have the right to sell your products and offer services at
any price you may determine, and will in no way be bound by any price
which we may recommend or suggest.
XI. INSURANCE
---------
A. We do not require, but strongly recommend, that you maintain
insurance. We recommend the following insurance be maintained by you
at all times:
1. Comprehensive general liability insurance, including personal
injury, errors and omissions liability, completed operations,
contractual liability, and products liability, as well as
comprehensive automobile liability coverage for both owned and
non-owned vehicles,
2. Property damage liability insurance.
3. Fire, vandalism, and extended coverage insurance with primary and
excess limits of not less than the full replacement value of the
Licensed Business premises and its furniture, fixtures, and
equipment.
4. Employer's liability, workers' compensation, and such other
insurance as may be required by statute or rule of the state or
locality in which the Licensed Business is located and operated.
B. In connection with any construction, renovation, refurbishment, or
remodeling of the Licensed Business, you should consider requiring the
general contractor to maintain with a reputable insurer comprehensive
general liability insurance (with comprehensive automobile liability
coverage for both owned and non-owned vehicles, builder's risk,
private liability, and independent contractors coverage), and workers'
compensation and employer's liability insurance as may be required by
law.
C. Your maintenance of insurance will not relieve you of liability under
the indemnity provisions specified in Section XVII.C. of this
Agreement.
XII. TRANSFER OF INTEREST
--------------------
A. Transfer by Company:
-------------------
1. We will have the right to transfer or assign all or any part of our
rights or obligations to any person or legal entity.
18
B. Transfer by Associate:
---------------------
1. You understand and acknowledge that the rights and duties set
forth in this Agreement are personal to you, and that we have
granted this Agreement in reliance on your business skill,
financial capacity, and personal character. Accordingly, neither
you nor any immediate or remote successor to any part of your
interest in this license or the Licensed Business or its clients,
nor any individual, partnership, corporation, or other legal
entity which directly or indirectly owns any interest in this
license or the Licensed Business or its clients, shall sell,
assign, transfer, convey, give away, pledge, mortgage, or
otherwise encumber any direct or indirect interest in this
license or the Licensed Business or its clients (including any
direct or indirect interest in a corporate or partnership
Associate) without our prior written consent; provided, however,
that we will not consent to any sale, assignment, transfer,
conveyance, gift, pledge, mortgage, or other encumbrance of any
direct or indirect interest to a competitor of the System as
reasonably defined by us; but further provided, however, that our
consent will not be required for a transfer of an interest in a
publicly-held corporation. The term "publicly-held corporation"
as used in this Agreement means a corporation registered under
the Securities Exchange Act of 1934. Any purported assignment or
transfer, by operation of law or otherwise, not having our
written consent required by this Section XII.B.1. will be null
and void and will constitute a material breach of this Agreement,
for which we may then terminate without opportunity to cure
pursuant to Section XIII.B.4. of this Agreement.
2. We will not unreasonably withhold our consent to a transfer of
any interest in this license or in the Licensed Business or its
clients; provided, however, that if a transfer, alone or together
with other previous, simultaneous, or proposed transfers, would
have the effect of transferring a controlling interest in the
Licensed Business, we may, in our sole discretion, require any or
all of the following as conditions of our approval:
a. All of your accrued monetary obligations and all other
outstanding obligations to us, our subsidiaries, and our
affiliates must have been satisfied;
b. You are not in default of any provision of this Agreement,
any amendment hereof or successor hereto, or any other
agreement between you and us, or our subsidiaries and
affiliates;
c. The transferor will have executed a general release under
seal, in a form satisfactory to us, of any and all claims
against us and our officers, directors, shareholders, and
employees, in their corporate and individual capacities,
including claims
19
arising under federal, state, and local laws, rules, and
ordinances;
d. The transferee (and, if the transferee is other than an
individual, such owners of a beneficial interest in the
transferee as we may request) must enter into a written
assignment, under such seal and in a form satisfactory to
us, assuming and agreeing to discharge all of your
obligations under this Agreement;
e. The transferee (or, if the transferee is a corporation or
partnership, a principal of transferee) must demonstrate to
our satisfaction that he meets our educational, managerial,
and business standards; possesses a good moral character,
business reputation, and credit rating; has the aptitude and
ability to conduct the Licensed Business (as may be
evidenced by prior related business experience or
otherwise); and has adequate financial resources and capital
to operate the business;
f. The transferee (and, if the transferee is other than an
individual, such owners of a beneficial interest in the
transferee as we may request) must execute, for a term
ending on the expiration date of this Agreement and with
such renewal term as may be provided by this Agreement, the
standard form associate License Agreement then being offered
to new System associates and such other ancillary agreements
as we may require for the Licensed Business, which
agreements shall supersede this Agreement in all respects
and the terms of which agreements may differ from the terms
of this Agreement, including, without limitation, a schedule
of higher fees, contributions, and charges withheld by us
from gross receipts; provided, however, that the transferee
will not be required to pay an initial license fee and that
the Protected Territory provided for in this Agreement will
remain the same;
g. The transferee, at its expense, must upgrade the Licensed
Business to conform to the then-current standards and
specification of System and must complete the upgrading and
other requirements within the time specified by us;
h. You must remain liable for all of the obligations to us in
connection with the Licensed Business prior to the effective
date of the transfer and must execute any and all
instruments reasonably requested by us to evidence such
liability;
i. At the transferee's expense, the transferee's manager(s)
must complete any training programs then in effect for
associates upon such terms and conditions as we may
reasonably require;
j. Except in the case of a transfer to a corporation formed for
the convenience of ownership, you must pay a transfer fee of
20
either $2,000.00 or 10% of the purchase price, as we may
elect in our sole discretion.
3. You must grant no security interest in any of the assets of the
Licensed Business unless we have given our written approval and
the secured party agrees that in the event of any default by you
under any documents related to the security interest, We will
have the right and option to be substituted as obligor to the
secured party and to cure any of your defaults.
4. You acknowledge and agree that each condition which must be met
by the transferee is necessary to assure such transferee's full
performance of the described obligations.
C. Transfer to Associate's Corporation:
------------------------------------
In the event that the proposed transfer is to a corporation formed by
you for the convenience of ownership, our consent to such transfer
shall, in addition to the requirements specified in Sections
XII.B.2.a. through j. inclusive of this Agreement, be conditioned upon
the following requirements:
1. You must be the owner of all the voting stock of the corporation;
and, if the Franchise Owner is more than one individual, each
individual must have the same proportionate ownership interest in
the corporation as they had in the Franchise prior to the
transfer;
2. The transferee corporation must comply with all the terms and
conditions specified in Section V.B. of this Agreement.
D. Right of First Refusal:
-----------------------
1. Any party holding any interest in this license or in the Licensed
Business or its clients who desires to accept any bona fide offer
from a third party to purchase such interest must notify us in
writing of each such offer, and must provide such information and
documentation relating to the offer as we may require. We will
have the right and option, exercisable within 30 days after
receipt of such written notification, to send written notice to
the seller that we intend to purchase the seller's interest on
the same terms and conditions offered by the third party. If we
elect to purchase the seller's interest, we will use our best
efforts to close on such purchase within 30 days from the date of
notice to the seller of our election to purchase. Any material
change in the terms of any offer before closing will constitute a
new offer subject to the same rights of first refusal by us as in
the case of an initial offer. Our failure to exercise the option
afforded by this Section XII.D. will not constitute a waiver of
any other provision of this Agreement, including all of the
requirements of this Section XII., with respect to a proposed
transfer.
21
2. If the consideration, terms, and/or conditions offered by a third
party are such that we may not reasonably be required to furnish
the same consideration, terms, and/or conditions, then we may
purchase the interest in the Licensed Business proposed to be
sold for the reasonable equivalent in cash. If the parties cannot
agree within a reasonable time on the cash consideration, an
independent appraiser will be designated by us, and his
determination will be binding.
E. Transfer Upon Death or Mental Incompetency:
-------------------------------------------
Upon the death or mental incompetency of any person with an interest
in the license, the executor, administrator, or personal
representative of such person must transfer within 6 months after such
death or mental incompetency his interest to a third party approved by
us. Such transfers, including transfers by devise or inheritance, will
be subject to the same conditions as any inter vivos transfer.
However, in the case of transfer by devise or inheritance, if the
heirs or beneficiaries of any such person are unable to meet the
conditions in this Section XII., the personal representative of the
deceased Franchise Owner will have a reasonable time to dispose of the
deceased's interest in the license, which disposition will be subject
to all the terms and conditions for transfers contained in this
Agreement. If the interest is not disposed of within a reasonable
time, we may terminate this Agreement.
F. Non-Waiver of Claims:
---------------------
Our consent to a transfer of any interest in the license granted will
not constitute a waiver of any claims we may have against the
transferring party, nor will it be deemed a waiver of our right to
demand exact compliance with any of the terms of this Agreement by the
transferee.
XIII. DEFAULT AND TERMINATION
-----------------------
A. You will be deemed to be in default under this Agreement, and all
rights granted will automatically terminate without notice to you, if
you become insolvent or make a general assignment for the benefit of
creditors; or if a petition in bankruptcy is filed by you or against
you and not opposed to by you; or if you are adjudicated as bankrupt
or insolvent; or if a bill in equity or other proceeding for the
appointment of a receiver or other custodian for your business or
assets is filed and consented to by you; or if a receiver or other
custodian (permanent or temporary) of your assets or property, or any
part of, is appointed by any court of competent jurisdiction; or if
proceedings for a composition with creditors under any state or
federal law should be instituted by or against you; or if a final
judgment remains unsatisfied or of record for 30 days or longer
(unless supersedeas bond is filed); or if you are dissolved; or
if execution is levied against your business or property; or if
22
the real or personal property of your Service Center will be sold
after levy by any sheriff, marshal, or constable.
B. You will be deemed to be in default and we may, at our option,
terminate this Agreement and all rights granted, without affording you
any opportunity to cure the default and effective immediately upon
receipt of notice by you (unless otherwise required by law), upon the
occurrence of any of the following events:
1. If you misappropriate any client or our payroll funds, fail to
exercise prudent control of payroll checks handled by you, fail
to give us notice of voided payroll checks, or use our signature
stamp in any unauthorized fashion;
2. If you at any time cease to operate or otherwise abandon the
Licensed Business, or loses the right to possession of the
premises, or otherwise forfeit the right to do or transact
business in the jurisdiction where the Licensed Business is
located; provided, however, that if any such loss of possession
results from the governmental exercise of the power of eminent
domain, or if, through no fault of yours, the premises are
damaged or destroyed, then you will have 30 days after either
such event in which to apply for our approval to relocate or
reconstruct the premises, which approval will not be unreasonably
withheld;
3. If you (or, if Associate is a corporation or partnership, any
principal of Associate) are convicted of a felony, a fraud, a
crime involving moral turpitude, or any other crime or offense
that we believe is reasonably likely to have an adverse effect on
the System, the Proprietary Marks, and the associated goodwill;
4. If you or any partner or shareholder in the franchised business
purports to transfer any rights or obligations under this
Agreement or any of your interest to any third party without our
prior written consent, contrary to the terms of Section XII. of
this Agreement;
5. If you fail to comply with the in-term covenants in Section XV.B.
or fail to obtain execution of the covenants required under
Section VIII.B. or Section XV.I.;
6. If you fail to attend and complete, to our satisfaction, the
initial training program required by us, as described in Section
V.D.;
7. If, contrary to the terms of Sections VII. or VIII., you disclose
or divulge the contents of the Manual or other confidential
information provided to you by us;
8. If an approved transfer is not effected within a reasonable time,
as required by Section XII.E., following your death or mental
incompetency;
9. If you knowingly maintain false books or records, or submit any
false reports to us;
10. If you, after curing a default pursuant to Section XIII.C or
XIII.D., commit the same act of default again;
23
11. If you fail to execute and/or participate in an advertising
cooperative agreement, as specified in Section X.E. of this
Agreement, within 15 days after receipt of notice to participate;
or
12. If you knowingly fail to comply with the provisions of Section
XVI.C.
13. If you fail to comply with the minimum net new client requirement
in Section I.E.
C. If you fail to maintain the quality client retention rate described in
Section V.R, you will be in default of this Agreement and we will
issue a written notice of termination to you. You may cure this
default by achieving a quality client retention rate of at least 90%
in each of the next 2 calendar months following your receipt of our
notice of termination, or in such other manner as you and we may agree
in writing. If you fail to cure this default as provided in this
Section, this Agreement will terminate without further notice to you
on the 1st day of the 3rd calendar month following your receipt of our
notice of termination, or at such other time as you and we may agree
in writing.
D. Except as provided in Sections XIII.A., XIII.B and. XIII.C of this
Agreement, you will have 30 days after your receipt from us of a
written notice of termination within which to remedy any default (or,
if the default cannot reasonably be cured within such 30 days, to
initiate within that time substantial and continuing action to cure
the default), and to provide evidence to us. If any such default is
not cured within that time (or, if appropriate, substantial and
continuing action to cure the default is not initiated within that
time), or such longer period as applicable law may require, this
Agreement will terminate without further notice to you effective
immediately upon expiration of the 30 day period or such longer period
as applicable law may require. You will be in default for any failure
to comply substantially with any of the requirements imposed by this
Agreement, as it may from time to time reasonably be supplemented by
the Manual, or to carry out the terms of this Agreement in good faith.
Such defaults include the occurrence of any of the following events:
1. If you fail, refuse, or neglect promptly to submit the financial
or other information required by us under this Agreement, or make
any false statements in connection with the above information;
2. If you fail to maintain any of the standards or procedures
prescribed by us in this Agreement, the Manual, or otherwise in
writing;
3. If you fail, refuse, or neglect to obtain our prior written
approval or consent as required by this Agreement;
4. If you misuse or make any unauthorized use of the Proprietary
Marks or otherwise materially impair the goodwill associated with
our rights;
24
5. If you engage in any business or market any service or product
under a name or mark which, in our opinion, is confusingly
similar to the Proprietary Marks; or
6. If you, by act or omission, permit a continued violation in
connection with the operation of the Licensed Business of any
law, ordinance, rule or regulation of a governmental agency, in
the absence of a good faith dispute over its application or
legality and without promptly resorting to an appropriate
administrative or judicial forum for relief therefrom.
E. You may terminate this Agreement, with or without cause, effective
immediately upon the submission of written notice by you to us.
XIV. OBLIGATIONS UPON TERMINATION OR EXPIRATION
------------------------------------------
Upon termination or expiration of this Agreement, all rights granted to you
will terminate, and:
A. You must immediately cease to operate the business licensed under this
Agreement, and must not thereafter, directly or indirectly, represent
to the public or hold yourself out as our present or former Associate.
B. You must immediately and permanently cease to use, in any manner
whatsoever, any confidential methods, procedures and techniques
associated with the System; the Proprietary Mark "Advantage"; and all
other Proprietary Marks and distinctive forms, slogans, signs,
symbols, and devices associated with the System. In particular, you
must cease to use, without limitation, all signs, advertising
materials, displays, stationery, forms, and any other articles which
display the Proprietary Marks; provided, however, that this Section
XIV.B. will not apply to the operation by you of any other license
under the system which may be granted by us to you.
C. You must take such action as may be necessary to cancel any assumed
name or equivalent registration which contains the mark "Advantage" or
any of our other service marks or trademarks, and you must furnish us
with this obligation within 30 days after termination or expiration of
this Agreement.
D. You must promptly and irrevocably assign and transfer all of your
right, title, and interest in clients served by the Licensed Business.
Upon such assignment and transfer, we will pay you on a continuing
basis for a period ending 4 years following the termination or
expiration, 25% of the "regular, ongoing data processing items"
received by us during such four year time period; however, any
discount given by you or any other payments to third-party endorsers
will be deducted from the 25%. The term "regular, ongoing data
processing items" means those revenues received by us as specified in
the Schedule of Regular, Ongoing, Data Processing Items contained in
Attachment C. Such payments will be based upon your clients
25
at the time of the termination or expiration. The System policies for
determining which clients are included in the post-termination payment
program is set forth in Attachment D. The Schedule of Regular, Ongoing
Data Processing Items which is set forth in Attachment C, and the
policies set forth in Attachment D defining your clients may be
changed in our discretion upon 30 days written notice to you. The
parties agree that we will be required to make such payments only on
the basis of regular, ongoing data processing items actually received
by us, and will have no obligations whatsoever to you with respect to
clients who terminate their relationship with us. The parties further
agree that such payments shall expressly be conditioned on your
compliance with the post termination covenants set forth in Section
XV.C. of this Agreement. Payments described in this Section XIV.D.
will be forwarded to the former Associate within 30 days after receipt
of client revenues by us. We agree that such payments must be
accompanied by a written statement of our receipt of regular, ongoing
data processing items, and the computation of the former Franchise
Owner's payment. If the former Franchise Owner has any question or
objection to the computation, you must submit such question or
objection within 10 days of receipt of payment. If no such written
question or objection is received by us, the payment will be deemed
accepted.
E. You must, at our option, assign to us any interest which you have in
any lease or sublease for the non-residential premises of the Licensed
Business. If we do not elect to exercise our option to acquire the
lease or sublease for the non-residential premises of the Licensed
Business pursuant to Section XIV.D., you must make such modifications
or alterations to the premises operated (including, without
limitation, the changing of the telephone number and assigning the
telephone number of the Licensed Business to us) immediately upon
termination or expiration of this Agreement as may be necessary to
prevent the operation of any business by itself or others in
derogation of this Section XIV. and must make such specific additional
changes as we may reasonably request for that purpose. If you fail or
refuse to comply with the requirements of this Section XIV., we will
have the right to enter upon the non-residential premises where the
Licensed Business was conducted, without being guilty of trespass or
any other tort, for the purpose of making or causing to be made such
changes as may be required at the expense of your, which expense you
agree to pay upon demand.
F. You agree, in the event you continue to operate or subsequently begin
to operate any other business, not to use any reproduction,
counterfeit, copy, or colorable imitation of the Proprietary Marks,
either in connection with such other business or the promotion
thereof, which is likely to cause confusion, mistake, or deception, or
which is likely to dilute our rights in and to the Proprietary Marks,
and further agree not to utilize any designation of origin or
description or representation which falsely suggests or represents an
association or connection with us constituting unfair competition.
26
G. You must promptly pay all sums owed to us and our subsidiaries and
affiliates. In the event of termination for any default by you, such
sums will include all damages, costs, and expenses, including
reasonable attorney's fees, incurred by us as a result of the default,
which obligation will give rise to and remain, until paid in full, a
lien in favor of us against any and all of the personal property,
furnishings, equipment, signs, fixtures, and inventory owned by you
and on the premises operated hereunder at the time of default.
H. You must pay to us all damages, costs, and expenses, including
reasonable attorney's fees, incurred by us subsequent to the
termination or expiration of this Agreement in obtaining injunctive or
other relief for the enforcement of any provisions of this Section
XIV.
I. You must immediately deliver to us all manuals, including the Manual,
records, files, instructions, correspondence; licensed computer
software, computer program workbooks and manuals; and all materials
related to operating the Licensed Business, including, without
limitation, printed checks, signature stamps, brochures, agreements,
disclosure statements invoices, and any and all other materials
relating to the operation of the Licensed Business in your possession,
and all copies thereof (all of which are acknowledged to be our
property). You must retain no copy or record of any of the foregoing,
except your copy of this Agreement and of any correspondence between
the parties and any other documents which you reasonably need for
compliance with any provision of law.
J. Within 15 days from the date of termination, you and we shall arrange
for an inventory to be made, at our cost, of all of your personal
property, fixtures, equipment, and inventory, including any and all
items bearing the Proprietary Marks, related to the operation of the
Licensed Business. We will have the option, to be exercised within 30
days after termination or expiration, to purchase from you any or all
such items at fair market value. If the parties cannot agree on fair
market value within a reasonable time, an independent appraiser will
be designated by us, and his determination will be binding. If we
elect to exercise any option to purchase, we will have the right to
set off all amounts due from you under this Agreement, and the cost of
the appraisal, if any, against any payment.
K. You must comply with the covenants contained in Section XV.C. of this
Agreement.
XV. COVENANTS
---------
A. License covenants that during the term of this Agreement, except as
otherwise approved in writing by us, you (or, if Associate is a
corporation or partnership, a principal of Associate approved by us)
must devote full time, energy, and best efforts to the management and
operation of the Licensed
27
Business and other licensed businesses established and operated by you
under the System.
B. You specifically acknowledge that, pursuant to this Agreement, you
will receive valuable specialized training and confidential
information, including, without limitation, information regarding our
operational, sales, promotional and marketing methods and techniques
and the System. You covenant that, during the term of this Agreement,
except as otherwise approved in writing by us, you must not, either
directly or indirectly, for yourself, or through, on behalf of, or in
conjunction with any person, persons, or legal entity:
1. Divert or attempt to divert any business or customer of the
Licensed Business 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 our Proprietary Marks and the System.
2. Employ or seek to employ any person who is at that time employed
by us or by any of our other associates or developers, or
otherwise directly or indirectly induce such person to leave his
or her employment.
C. You covenant that, except as otherwise approved in writing by us, you
will not, during the term of this Agreement and for a continuous
uninterrupted period commencing upon the expiration or termination of
this Agreement, regardless of the cause for termination, and
continuing for 4 years thereafter, either directly or indirectly for
yourself, or through, on behalf of, or in conjunction with any person,
persons, or legal entity, own, maintain, operate, engage in, be
employed by, or have any interest in any payroll service business
which features computerized, third party payroll services of the type
offered at the Licensed Business and which is, or is intended to be,
located within the Protected Territory or any other territory granted
by us to an associate for use of the System.
D. Section XV.C. will not apply to ownership by you of less than a 5%
beneficial interest in the outstanding equity securities of any
publicly-held corporation.
E. The parties agree that each of the covenants will be construed as
independent of any other covenant or provision of this Agreement. If
all or any portion of a covenant in this Section XV. is held
unreasonable or unenforceable by a court or agency having valid
jurisdiction in an un-appealed final decision to which we are a party,
you expressly agree to be bound by any lesser covenant subsumed within
the terms of such covenant that imposes the maximum duty permitted by
law, as if the resulting covenant were separately stated in and made a
part of this Section XV.
28
F. You understand and acknowledge that we will have the right, in our
sole discretion, to reduce the scope of any covenant specified in
Sections XV.B. and XV.C. of this Agreement, or any portion thereof,
without your consent, effective immediately upon receipt by you of
written notice; and you agree that you will comply with any covenant
as so modified, which shall be fully enforceable notwithstanding the
provisions of Section XX.
G. You expressly agree that the existence of any claims you may have
against us, whether or not arising from this Agreement, will not
constitute a defense to the enforcement by us of the covenants in this
Section XV. You agree to pay all costs and expenses (including
reasonable attorney's fees) incurred by us in connection with the
enforcement of this Section XV.
H. You acknowledge that your violation of the terms of this Section XV.
would result in irreparable injury to us for which no adequate remedy
at law may be available, and you accordingly consent to an immediate
cessation of the post termination payments described in Section XIV.D.
and to the issuance of an injunction prohibiting any conduct by you in
violation of the terms of this Section XV.
I. At our request, you must require and obtain execution of covenants
similar to those set forth in this Section XV. (including covenants
applicable upon the termination of a person's relationship with you)
from any or all of the following persons: (1) All of your principals
(if you are a corporation or partnership), all your managers, and any
other personnel employed by you who have received or will receive
training from us; (2) all officers, directors, and holders of a
beneficial interest of 5% or more of the securities of the Licensed
Business, and of any corporation directly or indirectly controlling
the Franchised Business, if you are a corporation; and (3) the general
partners and any limited partners (including any corporation, and the
officers, directors, and holders of a beneficial interest of 5% or
more of the securities of any corporation which controls, directly or
indirectly, any general or limited partner), if you are a partnership.
Every covenant required by this Section XV.I. shall be in a form
satisfactory to us, including, without limitation, specific
identification of us as a third party beneficiary of such covenants
with the independent right to enforce them. Failure by you to obtain
execution of a covenant required by this Section XV.I. shall
constitute a default under Section XIII.B.5.
XVI. TAXES, PERMITS, AND INDEBTEDNESS
--------------------------------
A. You must promptly pay when due all taxes levied or assessed,
including, unemployment and sales taxes, and all accounts and other
indebtedness of every kind incurred by you in the conduct of the
business licensed under this Agreement. You must pay to us an amount
equal to any sales tax, gross receipts tax, or similar tax (other than
income tax, or similar tax) imposed on
29
us with respect to any payments to us required under this Agreement,
unless the tax is credited against income tax otherwise payable by us.
B. In the event of any bona fide dispute as to your liability for taxes
assessed or other indebtedness, you may contest the validity or the
amount of the tax or indebtedness in accordance with procedures of the
taxing authority or applicable law; however, in no event will you
permit a tax sale or seizure by levy or execution or similar writ or
warrant, or attachment by a creditor, to occur against the premises of
the Licensed Business, or any improvements thereon.
C. You must comply with all federal, state, and local laws, rules and
regulations, and will timely obtain any and all permits, certificates,
or licenses necessary for the full and proper conduct of the business
licensed under this Agreement, including, without limitation, licenses
to do business, fictitious name registrations, sale tax permits, and
fire clearances.
D. You must notify us in writing within 5 days of the commencement of any
action, suit, or proceeding, and of the issuance of any order, writ,
injunction, award, or decree of any court, agency, or other
governmental instrumentality, which may adversely affect the operation
or financial condition of the Licensed Business.
XVII. INDEPENDENT CONTRACTOR AND INDEMNIFICATION
------------------------------------------
A. It is understood and agreed by the parties hereto that this Agreement
does not create a fiduciary relationship between them; that you must
be an independent contractor; and that nothing in this agreement is
intended to constitute either party as an agent, legal representative,
subsidiary, joint venturer, partner, employee, or servant of the other
for any purpose whatsoever.
B. During the term of this Agreement and any extensions hereof, you must
hold yourself out to the public as an independent contractor operating
the business pursuant to a license from us. You agree to take such
action as may be necessary to do so, including, without limitation,
exhibiting a notice of that fact in a conspicuous place in the
licensed premises, the content and form of which we reserve the right
to specify.
C. It is understood and agreed that nothing in this Agreement authorizes
you to make any contract, agreement, warranty, or representation on
our behalf, or to incur any debt or other obligation in our name; and
that we will in no event assume liability for, or be deemed liable
hereunder as a result of, any such action; nor will we be liable by
reason of any of your acts or omissions in your conduct of the
Licensed Business or for any claim or judgment arising therefrom
against you or us. You must indemnify and hold us, and our officers,
directors, and employees, harmless against any and all claims
30
arising directly or indirectly from, as a result of, or in connection
with your operation of the Licensed Business, as well as the costs,
including attorney's fees, of defending against them.
XVIII. APPROVALS AND WAIVERS
---------------------
A. Whenever this Agreement requires our prior approval or consent, you
must make a timely written request to us, and such approval or consent
must be obtained in writing.
B. We make no warranties or guarantees upon which you may rely, and
assume no liability or obligation to you, by providing any waiver,
approval, consent, or suggestion to you in connection with this
consent, or by reason of any neglect, delay, or denial of any request
therefor.
C. No failure of ours to exercise any power reserved to us in this
Agreement, or to insist upon compliance by you with any obligation or
condition in this agreement, and no custom or practice of the parties
at variance with the terms hereof, will constitute a waiver of our
rights to demand exact compliance with any of the terms of this
Agreement. Waiver by us of any particular default will not affect or
impair our right with respect to any subsequent default of the same or
of a different nature; nor will any delay, forbearance, or omission by
us to exercise any power or right arising out of any breach or default
by you of any of the terms, provisions, or covenants of this Agreement
affect or impair our rights; nor shall such constitute a waiver by us
of any rights hereunder or rights to declare any subsequent breach or
default.
XIX. NOTICES
-------
Any and all notices required or permitted under this Agreement must be
in writing and must be personally delivered or mailed by certified or
registered mail, return receipt requested, to the respective parties
at the following addresses unless and until a different address has
been designated by written notice to the other party:
Notices to Company: Advantage Payroll Services, Inc.
P.O. Box 1330
126 Merrow Road
Auburn, Maine 04211-1330
Notices to Associate: _________________________________________
_________________________________________
_________________________________________
_________________________________________
31
Any notice by certified or registered mail shall be deemed to have been
given at the date and time of receipt.
XX. ENTIRE AGREEMENT
----------------
This Agreement, the documents, and the attachments, constitute the entire,
full, and complete Agreement between us and you concerning the subject
matter, and supersede all prior agreements. Except for those permitted to
be made unilaterally by us, no amendment, change, or variance from this
Agreement will be binding on either party unless mutually agreed to by the
parties and executed by their authorized officers or agents in writing.
XXI. SEVERABILITY AND CONSTRUCTION
-----------------------------
A. Except as expressly provided to the contrary, each portion, section,
part, term and/or provision of this Agreement will be considered
severable; and if, for any reason, a portion, section, part, term,
and/or provision herein is determined to be invalid and contrary to,
or in conflict with, any existing or future law or regulation by a
court or agency having valid jurisdiction, such will not impair the
operation of, or have any other effect upon, such other portions,
sections, parts, terms, and/or provisions of this Agreement as may
remain otherwise intelligible; and the latter shall continue to be
given full force and effect and bind the parties; and said invalid
portions, sections, parts, and/or provisions will be deemed not to be
a part of this Agreement.
B. Except as expressly provided to the contrary, nothing in this
Agreement is intended, nor will be deemed, to confer upon any person
or legal entity other than you, us, our officers, directors, and
employees, and such of your and our respective successors and assigns
as may be contemplated (and, as to you, permitted) by Section XII.
hereof, any rights or remedies under or by reason of this Agreement.
C. You expressly agree to be bound by any promise or covenant imposing
the maximum duty permitted by law which is subsumed within the terms
of any provision hereof, as though it were separately articulated in
and made a part of this Agreement, that may result from striking from
any of the provisions hereof any portion or portions which a court may
hold to be unreasonable and unenforceable in a final decision to which
we are is a party, or from reducing the scope of any promise or
covenant to the extent required to comply with such a court order.
D. All captions in this Agreement are intended solely for the convenience
of the parties, and none shall be deemed to affect the meaning or
construction of any provision hereof.
32
E. All references to the masculine, neuter, or singular shall be
construed to include the masculine, feminine, neuter, or plural, where
applicable; and all acknowledgments, promises, covenants, agreements,
and obligations herein made or undertaken by you will be deemed
jointly and severally undertaken by all those executing this Agreement
on your behalf.
F. This Agreement may be executed in several parts, and each copy so
executed will be deemed an original.
XXII. APPLICABLE LAW
--------------
A. This Agreement takes effect upon its acceptance and execution by us in
Maine, and will be interpreted and construed under the laws thereof,
which laws will prevail in the event of any conflict of law; provided,
however, that if any of the provisions of this Agreement would not be
enforceable under the laws of Maine, then such provisions will be
interpreted and construed under the laws of the state in which the
premises of the Licensed Business are located. Any grievance, breach,
or alleged breach of this Agreement must be brought within one year of
the date of the breach or the party forfeits the right to do so.
B. The parties agree that any action brought by either party against the
other in any court, whether federal or state, will be brought within
the State of Maine in the United States District Court, Portland,
Maine, or the Maine District Court, Lewiston, Maine, and do hereby
waive all questions of personal jurisdiction or venue for the purpose
of carrying out this provision.
C. No right or remedy conferred upon or reserved to us or you by this
Agreement is intended to be, nor will be deemed, exclusive of any
other right or remedy herein or by law or equity provided or
permitted, but each will be cumulative of every other right or remedy.
D. Nothing herein contained will bar our right to obtain injunctive
relief against threatened conduct that will cause it loss or damages,
under the usual equity rules, including the applicable rules for
obtaining restraining orders and preliminary injunctions.
XXIII. ACKNOWLEDGMENTS
---------------
A. You acknowledge that you have conducted an independent investigation
of the Licensed Business, and recognize that the business venture
contemplated by this Agreement involves business risks and that its
success will be largely dependent upon your ability as an independent
businessman. We expressly disclaim the making of, and you acknowledge
that you have not received, any warranty or guarantee, express or
implied, as to the potential volume, profits, or success of the
business venture contemplated by this Agreement.
33
B. You acknowledge that you received a copy of the complete Advantage
Payroll Services, Inc. License Agreement, the Attachments thereto, and
agreements relating thereto, if any, at least 10 business days prior
to the date on which this Agreement was executed. You further
acknowledge that you received the disclosure document required by the
Trade Regulation Rule of the Federal Trade Commission entitled
"Disclosure Requirements and Prohibitions Concerning Franchising and
Business Opportunity Ventures" at least 10 business days prior to the
date on which this Agreement was executed.
C. You acknowledge that you have read and understood this Agreement, the
Attachments hereto, and any agreements relating thereto, and that we
have accorded you ample time and opportunity to consult with advisors
of your own choosing about the potential benefits and risks of
entering into this Agreement.
34
IN WITNESS WHEREOF, the parties hereto have duly executed, sealed, and
delivered this Agreement on the day and year first above written.
ADVANTAGE PAYROLL SERVICES, INC.
--------------------------------
- ------------------------ ---------------------------------------------------
Witness Title:
--------------------------------------------
ASSOCIATE
---------
- ------------------------ ---------------------------------------------------
Witness
- ------------------------ ---------------------------------------------------
Witness
Each of the undersigned owns a beneficial interest in Associate; each has
read this Agreement; and each agrees to be bound, jointly and severally, by all
obligations of Associate hereunder.
- ------------------------ ---------------------------------------------------
Witness
- ------------------------ ---------------------------------------------------
Witness
- ------------------------ ---------------------------------------------------
Witness
35
ATTACHMENT A
ADVANTAGE PAYROLL SERVICES, INC.
ASSOCIATE LICENSE AGREEMENT
As provided in Section I.C. of the Associate License Agreement, the
following area shall be the Protected Territory:
ATTACHMENT B
ADVANTAGE PAYROLL SERVICES, INC.
ASSOCIATE LICENSE AGREEMENT
PROMISSORY NOTE
---------------
$ Date
------------------ ---------------
FOR VALUE RECEIVED, the undersigned, __________________, hereby promises to
pay to ADVANTAGE PAYROLL SERVICES, INC., of Auburn, Maine, or order, the sum of
________ dollars (_______), with interest on the balance from time to time
outstanding at the rate of ten percent (10%) per annum, payable in the following
manner:
Interest shall accrue through the anniversary date of this note, following
which the sum ___________ of dollars ($________) shall be amortized by payment
of ________ (______) equal monthly payments of principal and interest of
__________ dollars ($______) commencing on the date that is thirteen months from
the date of this note and continuing on the same date of each succeeding month
until paid in full. Payments will be first applied to interest with the
remaining balance to principal.
At the option of the holder of this note, any default by the maker in the
timely payment of any installment hereunder shall be a default of the whole, and
the holder may accelerate this note and demand immediate payment of all sums
due. In addition to all other sums due hereunder, the maker also agrees to pay
all costs and expense, including reasonable attorney fees, incurred by the
holder in connection with collection and enforcement or attempted collection and
enforcement of this note. Holder shall, in addition to all other available
remedies, have the right to set off any amount due hereunder against payments
owed to Maker pursuant to Maker's contract with holder. Maker hereby waives
presentment, protest, notice of dishonor, and all other notices with respect to
this note.
Dated this day of , 20 .
------ ----------------------------------- ----
Signed: Date:
------------------------------------------------- ----------------
ATTACHMENT C
ADVANTAGE PAYROLL SERVICES, INC.
ASSOCIATE LICENSE AGREEMENT
The schedule of "Regular, Ongoing Data Processing Items" on which all
post termination payments are to be made pursuant to Section XIV.D. of the
Associate License Agreement is as follows:
I. The following items are included in "Regular, Ongoing Data Processing
Items":
Base per pay period
Check fees
New hires
Changes
W-2 forms
Sick time accrual
Vacation time accrual
Sick/Vacation time report
Rate review report
Special presentation sheet with tips
Tip allocations
Labor costing
Special runs
Non-weekly processing
100% of all normal conversions fees (not problem resolutions billed on
a time and material basis) will be paid to you.
II. The following items are not included in "Regular, Ongoing Data
Processing Items":
B.A.C. charges
Stop payments
Manual checks
Delivery fees
Problem resolution billed on a time and material basis
Other services
ATTACHMENT D
ADVANTAGE PAYROLL SERVICES, INC.
ASSOCIATE LICENSE AGREEMENT
The following system wide policies shall govern all questions regarding
existing clients, client successors, client mergers, and client divisions:
I. Any existing client of ours or yours in your territory will remain our
client so long as service is not interrupted for a period of more than
one year.
II. The successor of an existing Company or Associate client will remain a
client of ours or yours so long as service is not interrupted for a
period of more than thirty days. We or you, at our or your discretion,
grant permission to others to sell and set up the successor of a
client prior to the thirty day lapse in service. The new client will
then be a client of yours or ours, as the case may be, for
post-termination payment purposes.
III. If a client is acquired by or merges with another client, the
surviving company will continue to be processed in the same manner
with no change in client status. We reserve the right to make the
final decision regarding which company is deemed the surviving
company, should it be necessary.
IV. When an existing client of ours acquires a controlling interest in
another (new or existing) non-client corporation, we shall have thirty
days in which to initiate processing and thus establish a
Company-client status. The same thirty days will be allowed if your
client acquires another corporation.
V. When an existing client acquires a controlling interest in another
corporation (new or existing) which is already its client and will
continue to do business as a separate corporation with a separate
federal ID number, the acquired corporation shall continue as our or
your client, as the case may be.
VI. If a client opens a new division in another territory, the client
status of that corporation shall remain unchanged.
VII. Situations not addressed by the above policies will be decided on an
individual basis through negotiation between us and one or more
associates.