EXHIBIT 10.36
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OUTSOURCE FRANCHISING, INC.
FRANCHISE AGREEMENT
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Agreement Date: _____________________________
Franchise Associate: _____________________________
Address: _____________________________
Location: _____________________________
(if different) _____________________________
TABLE OF CONTENTS
SECTION PAGE
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1. INTRODUCTION.......................................................... 1
1.1 Our System................................................... 1
1.2 Acknowledgments.............................................. 1
1.3 No Guaranties................................................ 2
1.4 Representations.............................................. 2
1.5 Business Organization........................................ 3
2. GRANT OF THE FRANCHISE................................................ 3
2.1 Grant and Location........................................... 3
2.2 Territorial Rights and Obligations........................... 4
2.3 Full Term Performance........................................ 5
2.4 Reservation of Rights........................................ 6
2.5 National Accounts............................................ 6
3. TERM, EXPIRATION AND SUCCESSION....................................... 7
3.1 Term......................................................... 7
3.2 Succession Rights............................................ 8
3.3 Notices...................................................... 8
3.4 Refurbishing of Your LABOR WORLD(R)Office.................... 8
3.5 Successor Agreement; Releases................................ 9
3.6 Training and Refresher Programs.............................. 9
3.7 Reimbursement................................................ 9
3.8 Subsequent Successor Franchises.............................. 10
4. DEVELOPMENT AND OPENING............................................... 10
4.1 Site Selection............................................... 10
4.2 LABOR WORLD/Registered Mark/Office Lease..................... 10
4.3 Development of the LABOR WORLD/Registered Mark/Business...... 11
4.4 Equipment, Furnishings, Fixtures and Signs................... 11
4.5 Opening for Business......................................... 12
4.6 No Delivery Date............................................. 13
4.7 Estimated Investment......................................... 13
5. TRAINING.............................................................. 13
5.1 Initial Training............................................. 13
5.2 Software Training............................................ 14
5.3 Training of Managers......................................... 14
5.4 Training of Other Personnel.................................. 14
5.5 Additional Training and Conference Attendance................ 15
5.6 Fees and Expenses............................................ 15
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SECTION PAGE
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6. SUPPORT SERVICES...................................................... 15
6.1 Base Level Support........................................... 15
6.2. Support Methods.............................................. 16
6.3 First Year Support........................................... 17
6.4 Optional Services............................................ 17
6.5 World Service Credits........................................ 18
6.6 Service Options.............................................. 21
6.7 Manual....................................................... 21
7. THE COMPUTER SYSTEM................................................... 21
7.1 Use of the Computer System................................... 21
7.2 Software License............................................. 22
7.3 Delivery and Installation.................................... 22
7.4 Copies....................................................... 22
7.5 Enhancements................................................. 22
7.6 Manuals...................................................... 22
7.7 Certain Responsibilities..................................... 23
7.8 Rights to Software........................................... 23
7.9 Security..................................................... 23
7.10 Copyright and Marks.......................................... 23
7.11 Coding....................................................... 23
7.12 Reverse Engineering.......................................... 24
7.13 Ideas and Suggestions........................................ 24
7.14 Access....................................................... 24
7.15 Infringement................................................. 24
7.16 Warranties................................................... 24
8. MARKS................................................................. 25
8.1 Ownership and Goodwill....................................... 25
8.2 Additional Marks............................................. 25
8.3 Limitations on Use........................................... 25
8.4 Infringements and Claims..................................... 25
8.5 Discontinuance of Use........................................ 26
8.6 Indemnification.............................................. 26
8.7 Consent...................................................... 26
9. RELATIONSHIP OF THE PARTIES; INDEMNIFICATION.......................... 26
9.1 Independent Contractor; No Fiduciary Relationship............ 26
9.2 No Liability; No Warranties.................................. 27
9.3 Taxes........................................................ 27
9.4 Indemnification.............................................. 27
10. CONFIDENTIAL INFORMATION; EXCLUSIVE RELATIONSHIP...................... 28
10.1 Types of Confidential Information............................ 28
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10.2 Disclosure and Limitations on Use............................ 28
10.3 Confidentiality Obligations.................................. 29
10.4 Exceptions to Confidentiality................................ 29
10.5 Exclusive Relationship....................................... 29
11. FEES AND ROYALTIES.................................................... 31
11.1 Initial Franchise Fee........................................ 31
11.2 Refundability................................................ 31
11.3 Computer System and Interior Signage......................... 31
11.4 Royalty and Service Fees..................................... 31
11.5 Incentive Royalty Reduction.................................. 32
11.6 Minimum Fees................................................. 32
11.7 CPI Adjustments.............................................. 33
11.8 Certain Definitions.......................................... 33
11.9 Late Payment Penalties....................................... 34
11.10 Interest on Late Payments.................................... 34
11.11 Application of Payments...................................... 34
11.12 Payment Offsets.............................................. 34
12. OPERATION OF THE LABOR WORLD/Registered Mark/BUSINESS................. 34
12.1 Importance of Uniformity..................................... 34
12.2 Condition and Appearance..................................... 35
12.3 Approved and Prohibited Activities........................... 35
12.4 Approved Products and Suppliers.............................. 36
12.5 System Standards............................................. 36
12.6 Compliance with Laws and Good Business Practices............. 37
12.7 Management and Personnel..................................... 38
12.8 Insurance.................................................... 38
12.9 Payroll Funding.............................................. 40
12.10 Risk Management Services..................................... 40
12.11 Credit Services.............................................. 41
12.12 Accounting Services.......................................... 41
12.13 Liability and Workers' Compensation Insurance................ 41
12.14 Optional Services............................................ 41
13. ADVERTISING AND PROMOTION............................................. 42
13.1 Pre-Opening Promotion........................................ 42
13.2 Local Advertising and Promotion.............................. 42
13.3 Association Participation and Contributions.................. 42
13.4 Telephone Directory Advertisements........................... 42
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14. ACCOUNTING, REPORTS AND FINANCIAL STATEMENTS.......................... 43
14.1 Accounting Records........................................... 43
14.2 Reports...................................................... 43
14.3 Risk Management Reports...................................... 44
14.4 Returns and Financial Records................................ 44
15. INSPECTIONS AND AUDITS................................................ 44
15.1 Our Right to Inspect......................................... 44
15.2 Our Right to Audit........................................... 45
16. OWNERSHIP AND TRANSFER REQUIREMENTS................................... 46
16.1 Transfer by Us............................................... 46
16.2 Transfer by You.............................................. 46
16.3 Conditions for Approval of Transfer.......................... 47
16.4 Death or Disability.......................................... 48
16.5 Transfer to an Affiliate..................................... 48
16.6 Effect of Consent to Transfer................................ 49
16.7 Right of First Refusal....................................... 49
16.8 Compliance with Laws......................................... 50
17. TERMINATION OF THE FRANCHISE.......................................... 50
17.1 Termination by You........................................... 50
17.2 Buy-Out Termination.......................................... 50
17.3 Termination by Us............................................ 51
18. RIGHTS AND OBLIGATIONS UPON TERMINATION OR EXPIRATION
OF THE FRANCHISE...................................................... 54
18.1 Payment of Amounts Owed to Us................................ 54
18.2 Marks........................................................ 55
18.3 De-Identification............................................ 55
18.4 Confidential Information..................................... 55
18.5 Post-Term Competitive Restrictions........................... 56
18.6 Our Right to Purchase the LABOR WORLD(R) Business............ 57
18.7 Continuing Obligations....................................... 58
18.8 Compliance With Other Agreements............................. 58
19. ENFORCEMENT........................................................... 58
19.1 Severability; Substitution of Valid Provisions............... 58
19.2 Waivers...................................................... 59
19.3 Limitation of Liability...................................... 59
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SECTION PAGE
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19.4 Approval and Consents........................................ 59
19.5 Waiver of Punitive Damages................................... 60
19.6 Limitations of Claims........................................ 60
19.7 Governing Law................................................ 60
19.8 Jurisdiction................................................. 60
19.9 Waiver of Jury Trial......................................... 60
19.10 Cumulative Remedies.......................................... 60
19.11 Costs and Attorneys' Fees.................................... 60
19.12 Binding Effect............................................... 61
19.13 Entire Agreement............................................. 61
19.14 No Liability to Others; No Other Beneficiaries............... 61
19.15 Construction................................................. 61
19.16 Certain Definitions.......................................... 61
19.17 Timing....................................................... 61
19.18 Effective Date............................................... 62
20. ARBITRATION........................................................... 62
20.1 Agreement to Arbitrate....................................... 62
20.2 Place and Procedure.......................................... 62
20.3 Awards and Decisions......................................... 62
20.4 Specific Performance......................................... 63
20.5 Survival..................................................... 63
21. NOTICES AND PAYMENTS.................................................. 63
EXHIBITS:
A Designation of Exclusive Area
B Business Organization Information
C Glossary
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OUTSOURCE FRANCHISING, INC.
FRANCHISE AGREEMENT
THIS FRANCHISE AGREEMENT (this "AGREEMENT") is effective as of
___________________, 19___ (the "AGREEMENT DATE"). The parties to this
Agreement are you, _________________________________________________________,
as franchise associate, and us, OUTSOURCE FRANCHISING, INC., as franchisor, a
Florida corporation, with our principal office at LABOR WORLD/registered
trademark/ National Support Center, 8000 North Federal Highway, Boca Raton,
Florida 33487.
1. INTRODUCTION.
This Agreement has been written in an informal style to make it more
easily understandable and to help you become thoroughly familiar with all of its
terms before you sign it. In this Agreement, we refer to OUTSOURCE FRANCHISING,
INC. in the first person, as "WE," "US" or "OURSELVES," or in some cases as the
"FRANCHISOR." We refer to you in the second person as "YOU" or in some cases as
a "FRANCHISE ASSOCIATE." Various terms are defined in context throughout this
Agreement, and a glossary is attached as Exhibit "C" for convenient reference.
1.1 OUR SYSTEM. Through the expenditure of considerable time and
effort, we have developed a distinctive system for marketing, promoting,
advertising, managing and providing temporary personnel, consisting generally of
relatively unskilled labor, to a variety of industrial businesses ("LABOR
WORLD/registered trademark/ BUSINESS(ES)"). LABOR WORLD/registered trademark/
Businesses use proprietary knowledge, procedures, formats, systems, forms,
printed materials, data assembly sheets, applications, specifications, standards
and techniques authorized or developed by us and feature our distinctive signs,
brochures, contracts and related forms, formats, procedures and advertising (all
of which we refer to as the "SYSTEM"). LABOR WORLD/registered trademark/
Businesses also utilize our proprietary computer software or such other computer
software we require from time to time (the "SOFTWARE"). We identify LABOR
WORLD/registered trademark/ Businesses and various components of the System by
certain trademarks, service marks, trade dress and other commercial symbols,
including "LABOR WORLD/registered trademark/ with design" and "LABOR
WORLD/service mark/" (collectively, the "MARKS"). We may, in the future,
develop, enhance or modify various aspects of the System and modify or
discontinue the Marks as well as add new trademarks. We grant to persons who
meet our qualifications and are willing to undertake the investment and efforts,
the right to own and operate a LABOR WORLD/registered trademark/ Business from a
single location.
1.2 ACKNOWLEDGMENTS. This Agreement is being presented to you because
you expressed the desire to own and operate a LABOR WORLD/registered trademark/
Business. You understand that the terms of this Agreement are reasonably
necessary to maintain our high standards of quality and service and the
uniformity of those standards at all LABOR WORLD/registered trademark/
Businesses, and to protect and preserve the goodwill of the Marks and the
System. In signing this Agreement, you acknowledge: (a) the importance of
operating your LABOR WORLD/registered trademark/ Business in strict
conformity with our standards; (b) that you have conducted an independent
investigation of LABOR WORLD/registered trademark/ Businesses and recognize
that, like any other businesses, their nature may evolve and change over time;
(c) that an investment in a LABOR WORLD/registered trademark/ Business involves
business risks, and that the success of this business venture is primarily
dependent on your business abilities and efforts.
1.3 NO GUARANTIES. We disclaim the making of, and you acknowledge that
you have not received or relied upon, any warranty or guaranty, express or
implied, as to the revenues, sales, profits or success of LABOR WORLD/registered
trademark/ Businesses generally, the business venture contemplated by this
Agreement or the extent to which we will continue to develop and expand the
network of LABOR WORLD/registered trademark/ Businesses. You acknowledge that:
(a) any statements regarding the potential or probable
revenues, sales or profits of the business venture are made solely in
the Franchise Offering Circular delivered to you prior to signing this
Agreement;
(b) any statement regarding the potential or probable
revenues, sales or profits of the business venture or statistical
information regarding any existing LABOR WORLD/registered trademark/
Businesses that is not contained in our Franchise Offering Circular is
unauthorized, unwarranted and unreliable and should be reported to us
immediately;
(c) any information you obtained from LABOR WORLD/registered
trademark/ franchise associates relating to revenues, sales, profits or
otherwise does not constitute information obtained from us and we do
not warrant or guaranty the accuracy of any such information; and
(d) you have not received or relied on any representations
about the Franchise made by us, or our officers, directors, employees
or agents, that are contrary to the statements made in our Franchise
Offering Circular or to the terms of this Agreement.
If there are any exceptions to any of the foregoing, you must: (i) immediately
notify our chief executive officer; and (ii) note such exceptions by attaching a
statement of exceptions to this Agreement prior to signing it (any such
statement must be signed by both you and us).
1.4 REPRESENTATIONS. To induce us to enter into this Agreement with
you, you represent and warrant that:
(a) in all of your dealings with us, our officers, directors,
employees and agents act only in a representative capacity and not in
an individual capacity;
(b) this Agreement, and all business dealings between you and
such individuals as a result of this Agreement, are solely between you
and us;
(c) you have made no misrepresentations in obtaining the
Franchise (as defined below);
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(d) you have read this Agreement and our Franchise Offering
Circular in their entirety; and
(e) you understand that we do not grant a franchise to you and
this Agreement is not effective until we sign this Agreement (and all
associated agreements between you and us or our affiliates).
1.5 BUSINESS ORGANIZATION. If you are (at any time) a business
organization (like a corporation, limited liability company or partnership), you
agree and represent that:
(a) You have the authority to execute, deliver and perform
your obligations under this Agreement and are duly organized or formed
and validly existing in good standing under the laws of the state of
your incorporation or formation;
(b) Your organizational or governing documents will recite
that the issuance and transfer of any ownership interests in you are
restricted by the terms of this Agreement, and all certificates and
other documents representing ownership interests in you will bear a
legend referring to the restrictions of this Agreement;
(c) Exhibit "B" to this Agreement will completely and
accurately describe all of your owners and their interests in you;
(d) You and your owners agree to revise Exhibit "B" as may be
necessary to reflect any ownership changes and to furnish such other
information about your organization or formation as we may request;
(e) Each of your owners at any time during the term of this
Agreement will sign and deliver to us our standard form of Principal
Owner's Guaranty, undertaking to be bound jointly and severally by all
provisions of this Agreement and any other agreements between you and
us; and
(f) At our request, you will furnish true and correct copies
of all documents and contracts governing the rights, obligations and
powers of your owners and your agents (like articles of incorporation
or organization and partnership, operating or shareholder agreements).
2. GRANT OF THE FRANCHISE.
2.1 GRANT AND LOCATION. You have applied for a franchise to own and
operate a LABOR WORLD/registered trademark/ Business. We have approved your
application in reliance on all of the representations you made in that
application. We grant to you a franchise (the "FRANCHISE") to operate a LABOR
WORLD/registered trademark/ Business in a single office located at the address
we approve (the "LABOR WORLD/registered trademark/ OFFICE"), within the area
described on Exhibit "A" to this Agreement (the "EXCLUSIVE AREA").
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2.2 TERRITORIAL RIGHTS AND OBLIGATIONS.
(a) YOUR TERRITORIAL RIGHTS: As long as you achieve the
Minimum Gross Profits (as defined in Section 11.6 and shown on Exhibit
"A") and comply with this Agreement, you will have:
(i) the exclusive right to operate a LABOR
WORLD/registered trademark/ Business within,
and market and sell the services offered by
LABOR WORLD/registered trademark/ Businesses
using the Marks to customers located in, the
Exclusive Area;
(ii) the nonexclusive right to market and sell
services offered by LABOR WORLD/registered
trademark/ Businesses using the Marks to
customers located outside of the Exclusive
Area but not within a geographic area
exclusively awarded to another Franchise
Associate or one of our affiliates or
reserved for us.
In return, you must NOT operate your LABOR WORLD/registered trademark/
Business within, solicit customers or offer services offered by LABOR
WORLD/registered trademark/ Businesses to any customers located or
doing business within a geographic area exclusively awarded to another
Franchise Associate, or one of our affiliates or reserved for us,
without our prior written consent. Other LABOR WORLD/registered
trademark/ Businesses may do likewise. You may open as many LABOR
WORLD/registered trademark/ Offices in the Exclusive Area as you want
and that we approve ("SATELLITE(S)") with no extra charge to you; but
you may not place a physical office outside of the Exclusive Area.
(b) SCOPE OF LABOR WORLD/registered trademark/ BUSINESS: Your
LABOR WORLD/registered trademark/ Business may offer to customers
skilled temporary help and payroll services in the industrial segment
as long as it does not violate any federal, state or local laws
governing employee leasing. Your right to do so, however, is not
exclusive to our rights. You understand that we reserve the right to
engage in various other businesses including: permanent employment,
employee leasing, and payroll transfer services and the temporary
personnel business for clerical, technical labor, accounting, medical
and other personnel of a classification that differs from the types of
skilled and unskilled industrial labor currently utilized and
authorized for LABOR WORLD/registered trademark/ Businesses. These
other businesses may be operated directly by us, franchised by us, or
operated directly, or franchised by, our affiliates, in any area,
including your Exclusive Area. They may also use the Marks or other
service marks. Your ability to engage in the businesses described in
this section does not limit our reservation of rights (as described in
Section 2.4).
(c) RIGHT OF FIRST REFUSAL: If we (or our affiliates) offer a
franchise program in any of the businesses described in Section 2.4, we
(or our affiliates) will grant you the right to acquire a franchise in
your Exclusive Area unless we (or our affiliates) have reserved that
geographic area for our (or our affiliates') own development. To accept
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the offer, you must notify us within 45 days of receipt of the offer
along with payment of the applicable initial franchise fee accompanied
by the signed Franchise Agreement utilized for such franchised
business. In order to qualify for such a franchise, you must meet the
same qualifications, standards and criteria that we (or our affiliates)
are then using for granting franchises for such other businesses. At
the time we (or our affiliates) offer the new franchise programs, we
will notify you whether or not we (or our affiliates) are reserving all
or a portion of your Exclusive Area for development by us (or our
affiliates).
(d) OUR TERRITORIAL RESTRICTIONS: We will not operate, or
grant a franchise to anyone else to operate, a LABOR WORLD/registered
trademark/ Business within the Exclusive Area unless:
(i) you breach any of the provisions of this
Agreement; or
(ii) during the first 5 years of operations of
your LABOR WORLD/registered trademark/
Business, you fail to either achieve the
Minimum Gross Profits or pay us the royalty
and services fees (as described in Section
11.4 of this Agreement) otherwise
attributable to such levels of Minimum Gross
Profits within 15 days of our notice to you;
or
(iii) after the initial 5 year period of
operations of your LABOR WORLD/registered
trademark/ Business, you either: (x) fail to
attain the Minimum Gross Profits; or (y)
achieve Gross Profits in any 42 weeks out of
any 52 consecutive week period that ranks in
the lowest 10% of Gross Profits of all
Franchise Associates open for 3 years or
more within your Market Group (as defined in
subsection 6.5(d)).
(e) MODIFICATION OF EXCLUSIVE AREA: During the first 5 years
of operations of your LABOR WORLD/registered trademark/ Business, if
you do not attain the Minimum Gross Profits OR pay the associated
royalty and service fees to us, we may: (i) either operate (or through
an affiliate), or grant a franchise to another, or otherwise permit
another, to operate, a LABOR WORLD/registered trademark/ Business
within your Exclusive Area; AND (ii) reduce or otherwise modify the
geographic dimensions of your Exclusive Area, or eliminate it entirely.
After the initial 5 year period of operations of your LABOR
WORLD/registered trademark/ Business, if you do not meet the
requirements of subsection 2.2(d)(iii) above even if you pay us the
royalty and service fee attributable to the Minimum Gross Profits; then
we may: (x) either operate (or through an affiliate), or grant a
franchise to another, or otherwise permit another, to operate, a LABOR
WORLD/registered trademark/ Business within your Exclusive Area; AND
(y) reduce or otherwise modify the geographic dimensions of your
Exclusive Area, or eliminate it entirely.
2.3 FULL TERM PERFORMANCE. You agree to perform your obligations under
this Agreement faithfully and honestly, and to continuously exert your best
efforts to promote and
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enhance your LABOR WORLD/registered trademark/ Business, for the full term of
this Agreement. Furthermore, you agree not to engage in any other business or
activity that may conflict with your obligations under this Agreement. The
Franchise granted to you by this Agreement is to operate the LABOR
WORLD/registered trademark/ Business and to use the Marks and the System only
for purposes of conducting a temporary personnel business in accordance with the
provisions of this Agreement and our System Standards communicated to you from
time to time. You must not operate a LABOR WORLD/registered trademark/ Business
at any location other than the LABOR WORLD/registered trademark/ Office without
our prior written approval.
2.4 RESERVATION OF RIGHTS. Except as described in Section 2.3, we
retain the right, on behalf of ourselves and our affiliates, in our discretion
and without granting any rights to you, to:
(a) sell products and services authorized for LABOR
WORLD/registered trademark/ Businesses, using the Marks or other
trademarks, service marks and commercial symbols;
(b) operate and grant to others the right to operate LABOR
WORLD/registered trademark/ Businesses outside of the Exclusive Area on
such terms and conditions as we deem appropriate; and
(c) operate and grant franchises to others to operate
businesses, wherever located, specializing in the sale of products or
provision of services other than a temporary personnel business similar
to LABOR WORLD/registered trademark/ Businesses (e.g., different
businesses would include: permanent employment, employee leasing,
payroll transfer business and temporary personnel businesses for
clerical, technical, accounting and medical personnel and other
personnel of a classification that differ from the types of skilled and
unskilled industrial labor currently utilized and authorized for LABOR
WORLD/registered trademark/ Businesses using certain of the Marks (or
other marks) and pursuant to such terms and conditions as we deem
appropriate.
2.5 NATIONAL ACCOUNTS. We have devoted considerable resources to
develop a national accounts program for the benefit of both our affiliated LABOR
WORLD/registered trademark/ Businesses and those operated by Franchise
Associates. A "NATIONAL ACCOUNT" is a customer or group of customers that
operate under common ownership or control, under the same trademarks or service
marks through independent franchises or some other association, that we have
arranged to provide services at multiple locations. The locations of some of the
National Accounts may be in your Exclusive Area. Accordingly, you and we agree
as follows:
(a) TERRITORIAL RIGHTS: You agree that we may solicit
customers located in your Exclusive Area, whether or not you currently
provide services to them, in order to develop them as National
Accounts. We may do so without violating any of your territorial rights
as described in this Agreement.
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(b) BEST EFFORTS: You agree to utilize your best efforts to
perform services to National Accounts located in your Exclusive Area on
the terms and conditions specified in the program for those National
Accounts. These terms may vary from National Account to National
Account depending on the situations and circumstances.
(c) ALTERNATIVE SERVICES: At your option, you may decide not
to perform services for any one or more of the National Accounts
operating in your Exclusive Area. In addition, you recognize that some
National Accounts, for whatever reason, may decide that they do not
want to do business with you. If that happens, we will cooperate with
you to the fullest extent practicable to resolve the National Account's
concerns. However, if after we exercise what we believe to be
reasonable efforts to rectify the problem, the National Account
continues to refuse to do business with you, then you agree that we or
any other Franchise Associate we designate may provide services for
that National Account in your Exclusive Area. You also agree that we or
any Franchise Associate we designate may perform services for any
National Account located in your Exclusive Area for whom you have
declined to provide services. Neither we nor any of such Franchise
Associates will be liable or obligated to pay you any compensation for
doing so and neither we nor such Franchise Associate will be considered
in breach of any provision of this Agreement or any other agreement
between you and us. You release us and such Franchise Associate from
any liability or obligation to you for providing services to such
National Accounts and we will indemnify, defend and hold you harmless
from and against any claims brought by a National Account arising out
of our, or another Franchise Associate's performance of services in
your Exclusive Area.
(d) REPORTS AND FORMS: For purposes of coordinating efforts
and results of National Account programs, you must timely provide us
with copies of all reports, forms and notices relating to performing
services for National Accounts that we may specify from time to time.
You also agree to coordinate with us any solicitations you conduct that
may have potential for development as National Accounts.
(e) ELIGIBILITY: Due to the need to insure adherence to System
Standards in performing services for National Accounts, you will not be
eligible for assignment of National Accounts unless you are in full
compliance with this Agreement.
3. TERM, EXPIRATION AND SUCCESSION.
3.1 TERM. Unless this Agreement is sooner terminated the Franchise
allows you to operate a LABOR WORLD/registered trademark/ Business from the
LABOR WORLD/registered trademark/ Office and to use the Marks and the System in
the operation of your LABOR WORLD/registered trademark/ Business, for a term of
approximately 10 years starting on the Agreement Date and ending on December 31
of the 10th year afterwards (i.e., if the Agreement Date is July 1, 1994, it
expires on December 31, 2004). Termination or expiration of this Agreement will
constitute a termination or expiration of your Franchise. For purposes of this
Agreement, the phrases "term of this Agreement" or "term of
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the Franchise" means the approximate 10-year term described above and any
renewal or extension of it.
3.2 SUCCESSION RIGHTS. If, at the expiration of this Agreement, you
have substantially complied with this Agreement and all other agreements between
you and us and/or our affiliates and you, in a timely fashion, satisfy the
requirements we then impose on new franchise associates generally, you will be
eligible to obtain successor franchises for your LABOR WORLD/registered
trademark/ Business. You have the right to obtain 5 successor franchises for
consecutive 5-year periods each. Any grant of a successor franchise to you must
meet all of the conditions of this Section 3 and of any successor agreement.
3.3 NOTICES. You must give us written notice of your election to obtain
a successor franchise at least 180 days (but not more than 360 days) before the
end of the term of this Agreement (i.e., by July 1 of the last year of the
term). If we do not timely receive that notice from you, you will be deemed to
have elected not to obtain a successor franchise. However, we will notify you of
your eligibility to obtain a successor franchise within 30 days of our timely
receipt of your notice. If our notice indicates that we will permit you to
obtain a successor franchise, your right to obtain a successor franchise will be
contingent on your continued full compliance with this Agreement and any other
agreement between you and us and/or our affiliates. If, at any time during the
term of this Agreement, you have failed to substantially comply with this
Agreement or any other agreement between you and us and/or our affiliates, we
may refuse to grant you a successor franchise. Our notice will state the reasons
for our decision. If we determine that you are not eligible to obtain a
successor franchise, but that the nature of the noncompliance may be cured so
that we are willing to consider granting you a successor franchise, we will
notify you accordingly. You will be eligible for a successor franchise if you
have cured the noncompliance within 30 days of our notice of noncompliance to
you.
3.4 REFURBISHING OF YOUR LABOR WORLD/registered trademark/ OFFICE. In
order to obtain a successor franchise:
(a) you must maintain possession of your LABOR
WORLD/registered trademark/ Office and agree to refurbish and otherwise
modify them to conform to standards then applicable to new franchises
for LABOR WORLD/registered trademark/ Businesses; or
(b) if you are unable to maintain possession of your LABOR
WORLD/registered trademark/ Office or, in our judgment, your LABOR
WORLD/registered trademark/ Office should be relocated, you must secure
a substitute location, obtain our consent to the new location and
develop it expeditiously in compliance with standards then applicable
to new franchises for LABOR WORLD/registered trademark/ Businesses
within 60 days of your loss of possession or receipt of our notice
requiring relocation. You must also cause your LABOR WORLD/registered
trademark/ Business to comply with all other then-current standards for
design, furniture, equipment, software, signage, provision of services,
methods of operation and other LABOR WORLD/registered trademark/ System
Standards.
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3.5 SUCCESSOR AGREEMENT; RELEASES. To obtain a successor franchise to
operate your LABOR WORLD/registered trademark/ Business, you (and if a
corporation or partnership is the Franchise Associate, its shareholders or
partners) will have the option to either:
(a) sign and deliver to us the form of standard franchise
agreement and any ancillary agreements we are then customarily using in
the grant of LABOR WORLD/registered trademark/ franchises (which may
provide for new and increased fees, such as royalty and service fees,
but with appropriate modifications to reflect the fact that the
agreement relates to the grant of a successor franchise; except that we
will not increase the percentage component of the royalty and service
fees by more than 25% (i.e. 10% to 12.5%) during the first successor
term nor more than 10% for any later successor term); or
(b) automatically extend under this Agreement. Such agreement
will then apply during the 5-year successor term. However, even if this
Agreement is extended (instead of utilizing the then-current
agreement), it will be automatically modified so that all royalties and
other fees described in the then-current Agreement will apply,
regardless of any contradictory provisions of this Agreement; except
for the limitations on increasing royalty and service fees already
described in subsection 3.5(a) of this Agreement.
In either case, you also must sign and deliver to us general releases, in a form
satisfactory to us, of any and all claims against us, our affiliates, and all of
our and their officers, directors, employees, agents, successors and assigns. If
you fail or refuse to sign and deliver to us those agreements and releases
within 30 days after their delivery to you, you will be deemed to have elected
not to obtain a successor franchise.
3.6 TRAINING AND REFRESHER PROGRAMS. Our grant of a successor franchise
is also conditioned on the satisfactory completion by you (or a manager of yours
approved by us) of any new training and refresher programs we may reasonably
require. However, we will not require any training and refresher programs unless
they have been approved by the Franchise Advisory Board. We will notify the
Franchise Advisory Board of training and refresher programs for successor
franchises. The Franchise Advisory Board must either approve the program, reject
it or present an alternative within 30 days of notice. If they do not timely
respond, the program will be deemed approved by the Franchise Advisory Board. If
the Franchise Advisory Board presents an alternative training and refresher
program for successor franchises, we will negotiate with them in good faith to
develop a mutually acceptable program. The mutually acceptable program will then
constitute the training and refresher program required for the grant of
successor franchises.
3.7 REIMBURSEMENT. You must reimburse us for our reasonable expenses we
incur in conjunction with the grant of the successor franchise; not to exceed
$1,000 (subject to CPI increase). Payment of those charges is due when you sign
the successor agreement.
9
3.8 SUBSEQUENT SUCCESSOR FRANCHISES. The fees and other conditions for
any later granting of subsequent successor franchises will be governed by the
successor franchise agreement (as described above).
4. DEVELOPMENT AND OPENING.
4.1 SITE SELECTION. We must approve the location of your LABOR
WORLD/registered trademark/ Office before you begin business. Your LABOR
WORLD/registered trademark/ Business Office must be located within the Exclusive
Area. You acknowledge and agree that:
(a) our approval of the location of your LABOR
WORLD/registered trademark/ Office indicates only that we believe that
its location falls within our acceptable criteria as of the time period
encompassing the evaluation;
(b) our approval of your Exclusive Area and the location of
your LABOR WORLD/registered trademark/ Office and any information
imparted to you regarding them does not constitute a representation or
warranty of any kind, expressed or implied, as to their suitability for
a LABOR WORLD/registered trademark/ Business or for any other purpose;
(c) application of criteria that have been effective with
respect to other territories or sites may not be predictive of the
potential for all territories or sites and that, subsequent to our
approval of a territory or site, demographic and/or economic factors
included in, or excluded from, our criteria could change, thereby
altering the potential of a territory or site;
(d) the uncertainty and instability of such criteria are
beyond our control and we are not responsible for the failure of a
territory or site approved by us to meet expectations as to potential
revenue or operational criteria; and
(e) your acceptance of a franchise for the operation of a
LABOR WORLD/registered trademark/ Business in your Exclusive Area and
at the location of your LABOR WORLD/registered trademark/ Office is
based on your own independent investigation of their suitability for
your LABOR WORLD/registered trademark/ Business.
If you already operate a LABOR WORLD/registered trademark/ Business and this
Agreement relates to another one, then you must bear the cost of obtaining our
approval of the location of your LABOR WORLD/registered trademark/ Office. This
expense includes demographic studies, photographs, drawings, plans and travel
and lodging costs of our personnel.
4.2 LABOR WORLD/registered trademark/ OFFICE LEASE. If the LABOR
WORLD/registered trademark/ Office will be leased, you must, within 60 days of
the date of this Agreement, obtain a written lease agreement for you to occupy
and gain possession of the premises of the LABOR WORLD/registered trademark/
Office. The lease agreement must contain terms and provisions reasonably
acceptable to us and you agree not to sign any lease or sublease which has not
been approved in writing by us. In any event,
10
the lease agreement for your Office must be collaterally assigned to us or our
affiliates pursuant to our standard form of collateral assignment agreement in
order to secure performance of all of your obligations to us pursuant to this
Agreement or any other agreement with us. In addition, the lease agreement must
contain substantially the following provisions:
(a) Tenant agrees that landlord may, upon the written request
of OUTSOURCE FRANCHISING, INC., disclose to OUTSOURCE FRANCHISING, INC.
all reports, information or data in landlord's possession respecting
sales made in, upon or from the leased premises.
(b) Landlord must give written notice to OUTSOURCE
FRANCHISING, INC. (concurrently with the giving of such notice to
tenant) of any default by tenant under the lease and OUTSOURCE
FRANCHISING, INC. must have, after the expiration of the period during
which the tenant may cure such a default, an additional 15 days to
cure, at its sole option, any such default.
4.3 DEVELOPMENT OF THE LABOR WORLD/registered trademark/ BUSINESS.
Unless the LABOR WORLD/registered trademark/ Business proposed to be operated by
you has already been developed and operated prior to the date of this Agreement,
you are responsible for its development. It is your responsibility to have
prepared all required construction plans and specifications to suit the shape
and dimensions of your LABOR WORLD/registered trademark/ Office, and you must
insure that those plans and specifications comply with applicable ordinances,
building codes, permit requirements and with lease requirements and
restrictions.
You agree at your expense to do or cause to be done the following
within 90 days after the date of this Agreement:
(a) obtain all required building, utility, sign, health, and
business permits and licenses and any other required permits and
licenses;
(b) construct all required improvements to the LABOR
WORLD/registered trademark/ Office; and decorate your LABOR
WORLD/registered trademark/ Office in compliance with layouts and
specifications approved by us;
(c) purchase and install all required equipment, furniture,
furnishings and signs;
(d) purchase the opening inventory of supplies; and
(e) hire any personnel required for your LABOR
WORLD/registered trademark/ Business.
4.4 EQUIPMENT, FURNISHINGS, FIXTURES AND SIGNS. You agree to use in the
development and operation of your LABOR WORLD/registered trademark/ Business
only those brands, types and/or models of equipment, store front, furnishings,
fixtures and signs containing the Marks that we
11
have approved as meeting our standards for quality, design, appearance,
function, and performance.
4.5 OPENING FOR BUSINESS.
(a) PRE-OPENING OBLIGATIONS: You must not open your LABOR
WORLD/registered trademark/ Business and commence business until:
(i) all of your obligations pursuant to the
other provisions of Section 4 of this
Agreement have been fulfilled;
(ii) we determine that the LABOR WORLD/registered
trademark/ Business has been constructed,
decorated, furnished, equipped and stocked
with materials and supplies in accordance
with our approved plans and specifications;
(iii) we have received the fully executed
Collateral Assignment of Lease and our
standard form of Collateral Assignment of
Telephone Numbers and Listings;
(iv) you and your personnel have satisfactorily
completed pre-opening training;
(v) you have paid us the initial franchise fee
and all other amounts then due to us;
(vi) any financing documents, loan documents, or
similar documentation have been delivered to
us;
(vii) you have furnished us with certification
that all required building, utility, sign,
health, sanitation, business and other
permits and licenses have been obtained from
any applicable governmental authority,
including any certificate of occupancy and
approvals necessary to operate a temporary
personnel business; and
(viii) we have been furnished with copies of all
insurance policies required by Section 12.8
in this Agreement, or such other evidence of
insurance coverage and payment of premiums
as we may request.
(b) TIMING OF OPENING: You must comply with these conditions
and be prepared to open your LABOR WORLD/registered trademark/ Business
for business within 100 days after the Agreement Date and only after
you have satisfactorily completed our initial training program. One of
our field consultants will assist you in the opening of your LABOR
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WORLD/registered trademark/ Business for 5 consecutive business days
during your first month of operations of the LABOR WORLD/registered
trademark/ Business.
(c) INITIAL ADVERTISING AND PROMOTION: You must conduct a
pre-opening promotion program, prior to, or within 60 days after, the
opening of your LABOR WORLD/registered trademark/ Business, spending a
minimum of $2,500 (subject to CPI adjustment). This amount is not
reimbursable by us under Section 13.2. The initial advertising and
promotion program must be in accordance with an opening marketing plan
approved by us.
4.6 NO DELIVERY DATE. There is no delivery date of franchise goods or
materials stated in this Agreement because we do not furnish those items to you
except that we will deliver the Computer System (with the Software installed)
and certain approved internal signage on or before the scheduled opening of your
LABOR WORLD/registered trademark/ Business, if you have complied with this
Agreement.
4.7 ESTIMATED INVESTMENT. In Item 7 of our Franchise Offering Circular,
we estimate that the required investment to establish a LABOR WORLD/registered
trademark/ Business ranges from $143,915 to $192,975. You should consult Item 7
of our Franchise Offering Circular for more information regarding your
investment.
5. TRAINING.
5.1 INITIAL TRAINING. You must attend and satisfactorily complete our
initial training program for new franchisees.
(a) ELIGIBILITY: Prior to attending our initial training we
will make our Manual available to you for study along with a test for
you to complete. To be eligible to attend initial training, you must
complete the test (on an "open-book" basis), return it to us for
grading and achieve a minimum score of 75%. The training program will
be furnished after you have secured your LABOR WORLD/registered
trademark/ Office and it is ready for occupancy (demonstrated by a
signed lease and certificate of occupancy).
(b) TRAINING METHODS: Our initial training is furnished in 3
components:
(i) 5 days of classroom style training at our
LABOR WORLD/registered trademark/ National
Support Center;
(ii) 4 days of "hands-on" training by working at
a LABOR WORLD/registered trademark/ Business
operated by us, our affiliates or a
Franchise Associate at a location we
specify; and
(iii) 5 days of assistance by 1 of our field
consultants during your first month of
operating your LABOR WORLD/registered
trademark/ Business.
13
(c) FEES AND EXPENSES: We will provide initial training free
of charge to you (or if the Franchise Associate is a corporation or
partnership, to one representative of the Franchise Associate approved
by us). If space permits, we will permit an additional person to attend
training with you for a cost of $750. However, you must pay all your
own expenses and those of your employees incurred in connection with
the initial training, including, for example, travel, room, board,
local transportation expenses and wages.
(d) FAILURE TO COMPLETE: We may terminate this Agreement if:
(i) you do not achieve a score of at least 75% on the pre-training
test; (ii) you fail to satisfactorily complete our initial training; or
(iii) if your LABOR WORLD/registered trademark/ is to be supervised by
a manager, your manager (and a substitute) fail to satisfactorily
complete our initial training program. If we so terminate this
Agreement, we will refund to you 1/2 of the initial franchise fee paid
to us, less any expenses to reimburse us for expenses incurred by us in
connection with the granting of the Franchise to you or in the training
of your manager (not to exceed $1,000 (subject to CPI adjustment)) and
the purchase price for the signage and the computer equipment as long
as you have returned that equipment to us in a condition satisfactory
to us.
5.2 SOFTWARE TRAINING. Our initial training will include 2 days of
training on the use of the Software. In addition, any person operating the
Software for your LABOR WORLD/registered trademark/ Business must attend and
satisfactorily complete Software training at our LABOR WORLD/registered
trademark/ National Support Center, at your expense. Software training will
consist of approximately 2 or 3 days of training. The length of training depends
on the type of payroll funding utilized by your LABOR WORLD/registered
trademark/ Business. Such operator must complete Software training within 60
days of commencing employment with you. Software training must coincide with our
training schedule.
5.3 TRAINING OF MANAGERS. If your LABOR WORLD/registered trademark/
Business is to be supervised by a manager, then your manager must complete our
initial training to our satisfaction. If we, in our sole discretion, determine
that the manager is unable to satisfactorily complete our training program, we
have the right to terminate this Agreement immediately upon notice to you. If
we, in our sole discretion, determine that any manager is unable to
satisfactorily complete the training program, you must hire a substitute manager
in the event the Franchise is not to be terminated and the substitute manager
must enroll in our training program within 15 days thereafter and complete the
training program to our satisfaction.
5.4 TRAINING OF OTHER PERSONNEL. It is very important to the operation
of your LABOR WORLD/registered trademark/ Business that all your employees have
the appropriate training for their jobs. You are responsible for ensuring that
all employees of your LABOR WORLD/registered trademark/ Business are qualified,
properly trained to capably perform their duties and responsibilities and duly
licensed. We may require that you or your managers and assistant managers attend
supplemental and refresher training programs during the term of the Franchise,
to be furnished at such time and
14
place as we may designate. You must maintain at all times a staff of trained
employees sufficient to operate your LABOR WORLD/registered trademark/ Business
in compliance with our standards.
5.5 ADDITIONAL TRAINING AND CONFERENCE ATTENDANCE. You agree that you,
your managers, and employees will complete any additional training programs
approved by the Franchise Advisory Board (utilizing the same procedures as
described in Section 3.6) and will attend any national or regional LABOR
WORLD/registered trademark/ System conferences that we designate as mandatory,
at such places and times as we may specify from time to time during the term of
this Agreement. We will not charge you a fee for mandatory training, except for
Software training of your operators. We may, at our discretion, provide other
special training of your personnel or other assistance in operating your LABOR
WORLD/registered trademark/ Business that you request; however, if we do so, you
must pay all expenses for that training or assistance, including a per diem
charge and travel and living expenses for our personnel.
5.6 FEES AND EXPENSES. We have the right to charge a fee for any
training programs, other than the initial training and the initial training of
your manager, which we provide to you, your managers, or your other employees,
for which attendance is not mandatory. We will not charge you a per diem charge
for our personnel in providing training for your LABOR WORLD/registered
trademark/ Business unless you and we have agreed on the amount. Of course, we
will not be required to provide such training to you until you and we have
reached that agreement. In any event, our per diem charges will not exceed 1.5
times the average daily wage and benefits of our personnel utilized to conduct
such training, plus travel and living expenses. You agree to pay all your own
expenses and the expenses incurred by your employees in connection with all
training programs and conferences, including travel, room, board, local
transportation expenses, and wages, whether or not attendance is mandatory.
6. SUPPORT SERVICES.
6.1 BASE LEVEL SUPPORT. During the term, we will furnish you with base
level support ("BASE LEVEL SUPPORT") at no additional charge regarding:
(a) the marketing of the services offered by LABOR
WORLD/registered trademark/ Businesses and the use of the System;
(b) coordinating the activities of LABOR WORLD/registered
trademark/ Businesses;
(c) establishing and conducting employee training programs at
your LABOR WORLD/registered trademark/ Office;
(d) development and implementation of local advertising and
promotional programs;
(e) general operating and management procedures;
15
(f) purchasing approved equipment, furniture, furnishings,
signs, forms, materials and supplies;
(g) furnishing information dealing with trends in employment,
including temporary personnel and other items;
(h) the administration of risk management programs for
workers' com- pensation and unemployment compensation;
(i) developments in the laws regulating temporary personnel
businesses; and
(j) changes in any of the above that occur from time to time.
6.2. SUPPORT METHODS. We will provide the Base Level Support to you in
the form of:
(a) the LABOR WORLD/registered trademark/ Operations Manual
(the "MANUAL")
(b) bulletins, written reports and recommendations, and other
written materials;
(c) electronic transmission;
(d) telephone consultations, or personal consultations at your
LABOR WORLD/registered trademark/ Office or at our LABOR
WORLD/registered trademark/ National Support Center, at such times as
we determine;
(e) up to 2 days per calendar year of personal assistance at
your LABOR WORLD/registered trademark/ Office by one of our field
consultants, or someone else we designate from our LABOR
WORLD/registered trademark/ National Support Center. These days will be
furnished at your request (as we can reasonably schedule) or as we
consider appropriate. Unused days are not available for use in any
following year;
(f) unlimited telephone access to a field consultant, vice
president-operations, chief operating officer or our president.
(g) up to 12 hours of telephone and other working support with
anyone else at our National Support Center per calendar year;
(h) unlimited frequent written communications from our LABOR
WORLD/registered trademark/ National Support Center concerning
information important to Franchise Associates; and
16
(i) non-voting membership in National Association of Temporary
and Staffing Services or its successor ("NATSS"), including all NATSS
newsletters and special bulletins.
6.3 FIRST YEAR SUPPORT. During the first 12 months of operations, we
will provide you with Base Level Support plus the following:
(a) 5 days of personal assistance by a field consultant at
your LABOR WORLD/registered trademark/ Office during your first month
of business;
(b) 2 additional days of personal assistance from a field
consultant or someone else we designate from the LABOR WORLD/registered
trademark/ National Support Center during the 12- month period
following your opening;
(c) additional visits as we consider appropriate or necessary
by our field consultant or other personnel;
(d) utilization of our assistance with the Software, risk
management service, human resources assistance, unemployment
compensation guidance and credit advice other than credit reports;
(e) free registration costs for 2 people (double occupancy) at
our next LABOR WORLD/registered trademark/ national convention
including travel and lodging expenses we arrange and coordinate for
you; and
(f) first years annual dues for the LABOR WORLD/registered
trademark/ franchise advisory board.
To obtain the additional first year support described in subsection 6.3(d)
above, you must sign our standard agreements for the provision of such services
(except that the first year's service fees will be waived). Nevertheless, if you
(or your affiliates) already operate another Labor World/registered trademark/
Business under a franchise from us, then we will not be obligated to provide
you with the support described in this subsection 6.3.
6.4 OPTIONAL SERVICES. If you want special training for your personnel
at your LABOR WORLD/registered trademark/ Business, you must pay our per diem
charges for such training or assistance, and travel and living expenses of our
personnel to do so. We may also offer programs relating to specific elements of
the operation of LABOR WORLD/registered trademark/ Businesses at a per diem
charge plus expenses ("OPTIONAL SERVICES"). Optional Services are available to
you at your option. We will publish a description of Optional Services from time
to time in an annual schedule. You may use World Service Credits (defined below)
to purchase Optional Services. We may periodically modify the Optional Services
that are available and their pricing from time to time, as well as the methods
for earning World Service Credits.
17
6.5 WORLD SERVICE CREDITS. By complying with this Agreement and through
successful operation of your LABOR WORLD/registered trademark/ Business, you may
earn credits that may be applied against charges we impose for Optional Services
or against future royalties ("WORLD SERVICE CREDITS"). World Service Credits may
be earned and can be used in the methods and for the purposes described in this
Agreement.
(a) RIGHT TO EARN: You may earn an unlimited amount of World
Service Credits based on our World Service Credit Schedule only if you:
(i) are current in payment of royalties and all
other amounts due us or our affiliates;
(ii) are current on submission of all financial
reports and financial statements due us;
(iii) submit all financial reports and statements
in conformity with our standard Chart of
Accounts and accounting methods; and
(iv) are in substantial compliance with this
Agreement.
(b) FORFEITURE: If you are in breach of any provision of this
Agreement, you will not be entitled to use the World Service Credits in
any way until the breach is cured to our satisfaction. Moreover, you
may lose the right to earn, or even forfeit, World Service Credits
under the following conditions:
(i) if you fail to deliver your weekly
operation's data by computer "download"
within 3 days of their due date, you will
forfeit all World Service Credits that you
may otherwise have had the right to earn for
that week;
(ii) if you fail to submit any required financial
reports or any required financial statements
within 15 days of their due date, or do not
utilize our standard Chart of Accounts and
accounting methods, you will forfeit all
World Service Credits that you may otherwise
have had the right to earn for the entire
period represented by such statements or
reports; and
(iii) if you do not pay us amounts due us for
royalties or Optional Services or other
amounts due us on a timely basis, you will
lose the right to earn all World Service
Credits for the week in which the royalties
accrued or the week during which our invoice
was generated for Optional Services or any
other amounts due us.
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(c) WORLD SERVICE CREDIT SCHEDULE: World Service Credits are
earned by calculation of a percentage of the Gross Profit of your LABOR
WORLD/registered trademark/ Business. We will notify you monthly of the
amount of World Service Credits you have earned approximately 60 days
after receipt of royalties and reports. Our schedule for earning World
Service Credits is based on a percentage of the Gross Profit of your
LABOR WORLD/registered trademark/ Business as follows:
PERCENTAGE OF GROSS PROFIT
EVENT EARNED AS WORLD SERVICE CREDITS
----- -------------------------------
(i) Timely Payment of Royalties by Check .50%
(ii) Timely Payment of Royalties by
Electronic Transfer .60%
(iii) Timely submission of Financial Statements .50%
and Other Reports
(iv) Serving as Officer of State Chapter of NATSS* .25%
(v) Franchise Advisory Board Member* .50%
(vi) Franchise Advisory Board President* .25%
(vii) Market Saturation (Top 25 Percentile) 2.25%
(viii) Market Saturation (Second Quartile) 1.00%
* World Service Credits for these will be based only on the Gross Profits from
your largest LABOR WORLD/registered trademark/ franchise if you own more than
one.
(d) MARKET SATURATION: We will calculate market saturation
based on a formula which is defined as Gross Profit divided by the
population of your Exclusive Area. We will divide the year into 12
accounting periods; 8 containing 4 weeks and 4 containing 5 weeks.
Market saturation will be calculated based on your performance during
such accounting periods. We will place all Franchise Associates into
one of three groups (a "MARKET GROUP") based on the population of their
exclusive territory as of the time they begin operations:
(i) areas with a population of 500,000 or less
people;
(ii) areas with a population of more than 500,000
but less than 1,000,000 people;
19
(iii) areas with a population of 1,000,001 or more
people.
World Service Credits will be earned based on the World Service Credit
schedule based on your performance measured by Gross Profits in
comparison to other Franchise Associates with exclusive territories in
your population bracket.
(e) USE OF WORLD SERVICE CREDITS: You may use World Service
Credits in a variety of ways:
(i) to pay for Optional Services based on the
price list we announce from time to time;
(ii) to pay for marketing materials we prepare;
(iii) to apply against royalty and service fees
due in the next calendar year of up to 75%
of your previously earned but unused World
Service Credits, evenly spread over the next
12 months following our receipt of your
notice to us electing to do so;
(iv) redeemed for cash for certain approved local
advertising and promotion expenses (as
described in Section 13.2) that we have
approved but have not already reimbursed,
within 60 days of our receiving documentary
verification that we require; or
(v) redeemed for cash at their face value by the
end of the fifth calendar year following the
year in which they were earned.
For purposes of this Agreement, "EARN" World Service Credits mean those
World Service Credits originally earned by you in accordance with this
Agreement, and do not include World Service Credits you may have
acquired from another Franchise Associate. World Service Credits that
you have acquired from someone else may only be used in accordance with
the provisions described below.
World Service Credits must be used by you prior to June 30 of
the year immediately following the year in which they were earned. At
your election, you may save World Service Credits so that we will
redeem them at face value at the end of the fifth calendar year
following the year earned. Again, we will only redeem World Service
Credits or permit their use if you are in substantial compliance with
this Agreement and otherwise eligible to use World Service Credits as
described in this Agreement. If, in any calendar year, you paid us cash
for any Optional Services, and you later earn World Service Credits
that are not otherwise used, you may apply those World Service Credits
for payment of the previously furnished Optional Service and obtain a
refund. We will pay the refund to you within 30 days of our receipt of
the refund request.
20
(f) TRADING WORLD SERVICE CREDITS: World Service Credits may
be purchased, sold, exchanged or otherwise traded by one Franchise
Associate to another Franchise Associate in 1,000 unit increments. In
order to effectuate the trade, the owner of the World Service Credits
must notify us of the transfer showing the amount traded, the name of
the transferee and the terms of the transfer. Once World Service
Credits are traded or transferred, they may not be applied against
future royalties or redeemed for cash. However, traded or transferred
World Service Credits may be used to pay for Optional Services.
6.6 SERVICE OPTIONS. We will periodically offer you the opportunity to
acquire certain Optional Services on an as-needed, monthly, annual or full
service contract basis ("SERVICE OPTIONS") at a predetermined purchase price. We
will notify you of the scope of Optional Services offered and the prices of the
Service Options in a reasonable time before a particular Service Option
commences. To accept one of the Service Options, you must notify us before a
particular Service Option commences. You may apply World Service Credits against
the purchase price for the Service Options. We will notify you of the pricing
and Optional Services covered by the Service Options through bulletins or
additions to the Manual.
6.7 MANUAL. During the term, we will lend you one copy of the Manual.
The Manual will contain mandatory and suggested specifications, standards, and
operating procedures which we prescribe from time to time for LABOR
WORLD/registered trademark/ Businesses ("SYSTEM STANDARDS"), as well as
information about other obligations you have in the operation of a LABOR
WORLD/registered trademark/ Business. The Manual may be modified from time to
time to reflect changes in the System Standards. Revisions to the Manual will be
effective on delivery to you, unless we specify a later effective date for a
particular revision. You must keep your copy of the Manual current by
immediately inserting all new and modified pages we furnish to you. If the
Manual is lost, stolen or damaged, you must obtain a replacement from us at our
then-current price. If a dispute develops with respect to the contents of the
Manual, the master copy we maintain at our principal office will be controlling.
You must keep the Manual in a secure location. You must not:
(a) permit any part of the Manual to be copied;
(b) disclose it or any of its contents to anyone not having a
need to know its contents for purposes of operating your LABOR
WORLD/registered trademark/ Business; and/or
(c) remove it from your LABOR WORLD/registered trademark/
Office without our permission.
7. THE COMPUTER SYSTEM.
7.1 USE OF THE COMPUTER SYSTEM. We have the right to use, and allow our
Franchise Associates to use, the Software in various aspects of operating a
LABOR WORLD/registered trademark/ Business for dispatching, employee and
customer maintenance, invoicing, accounts receivable, payroll processing, and
various other matters. We may change, modify, alter, upgrade and enhance the
21
Software and even designate new or replacement software programs, at any time in
our discretion. We have also compiled a set of computer hardware components to
operate the Software (collectively, the "COMPUTER SYSTEM"). You must purchase
the Computer System from us when you sign this Agreement. The computers and
computer-related equipment and peripheral devices are referred to as the
"DESIGNATED HARDWARE". We operate a "NETWORK" which is an electronic
communications network which links computers of Franchise Associates in
different locations with us and consists of the Software, the Designated
Hardware and certain communications software. The Software includes any
modifications, improvements, changes, alterations or enhancements, all related
documentation, the tangible media upon which the program is recorded, and
database file structure, but excludes any data or databases owned or compiled by
us or our affiliates for use with the Software which are owned by us or
otherwise or any data generated by our use of the Software.
7.2 SOFTWARE LICENSE. We grant you a non-exclusive, non-transferable,
non-assignable license to use the Software and the Network solely in connection
with the operation of your LABOR WORLD/registered trademark/ Business. No other
use of the Software or the Network is permitted. You must use the Software
solely on and in connection with the Designated Hardware. Your right to use the
Software is co-extensive with the term of this Agreement. If, for any reason,
this Agreement is terminated, your right to use the Software is also terminated.
7.3 DELIVERY AND INSTALLATION. We will deliver to you one copy of the
Software (in non-printed, machine readable disk form). We will install the
Software on the Designated Hardware. We are not responsible for testing the
Software except that we will demonstrate to you that the interface module to the
Network is fully operational.
7.4 COPIES. You must not copy by any process whatsoever the Software or
any portion of it, without our prior written consent. However, you may make
copies (in non-printed, machine readable disk form) of the Software solely for
archival and backup purposes. You must reproduce and include any copyright
notice, trademarks, service marks, other proprietary markings and/or
confidential legends on or within any archival copy of that Software.
7.5 ENHANCEMENTS. If you are in substantial compliance with this
Agreement, we will deliver to you and you must install and use, such error
corrections, upgrades, modifications, improvements, enhancements, extensions and
other changes to the Software (collectively, "ENHANCEMENTS"), developed or
adopted by us or our affiliates for use on the Designated Hardware. Our delivery
of the Enhancements to you may be based on such conditions as we deem necessary
or reasonable relating to their use. We will not charge you any fees or other
amounts for the delivery of any Enhancements. Upon delivery of any Enhancements
to you, your use of them will be governed by this Agreement. Any Enhancements to
the Software are owned by us.
7.6 MANUALS. We may specify numerous requirements relating to the use
of the Software in our Manuals. Any Manuals provided to you or any portion of
the Manuals that are
22
devoted to the Software or the Network are strictly confidential and
proprietary. You may not copy the Manuals for any reason whatsoever.
7.7 CERTAIN RESPONSIBILITIES. You are exclusively responsible for
supervising, managing and controlling the use of the Software by you, your
agents and your employees, including:
(a) assuring proper configuration of the Designated Hardware
and related equipment or devices;
(b) implementing and enforcing procedures sufficient to
discharge your obligations of confidentiality and security under this
Agreement; and
(c) immediately disclosing all steps taken by you to satisfy
your obligations regarding the Software to us on request. We may
require additional procedures or steps, or the signing of additional
documents, in order to protect our rights in and to the Software.
7.8 RIGHTS TO SOFTWARE. You acknowledge and agree that (other than
through license from us) we have the exclusive right to use the Software in all
forms (whether printed, magnetic disk, coded or otherwise), all copies of the
Software and all Manuals. All applicable rights relating to the Software
(including without limitation, trade secrets, rights and proprietary
information, patents, copyrights and trademarks) remain vested in and owned by
us. You must not, and have no right to, sublicense the Software or to use the
Software in any commercial endeavor other than the operation of your LABOR
WORLD/registered trademark/ Business.
7.9 SECURITY. You must keep the Software in a secure place and use
sufficient restrictions to prevent disclosure of the Software to unauthorized
persons. The Software is confidential in nature, proprietary and constitutes one
of our trade secrets. Thus, you must not, directly or indirectly, sell, grant,
pledge, hypothecate, assign, convey, transfer, publish, display, make available
or in any other manner disclose to any third party the Software or its function,
logic or structure. All persons or entities who are permitted access to the
Software must sign such documents as we may require to protect confidentiality
of the Software and our rights. If you neglect or fail to protect the
confidentiality of the Software, or permit any unauthorized disclosure of the
Software to a third person, we may terminate this Agreement.
7.10 COPYRIGHT AND MARKS. You must not remove, deface or destroy any
copyright, patent, trademark or service mark notice or other proprietary
markings or confidential legends placed on or within the Software.
7.11 CODING. We are under no obligation to disclose to you the source
codes of the Software or the Network in non-machine readable form. We retain
ownership to and title in all coding relating to the Software, including without
limitation, the source code.
23
7.12 REVERSE ENGINEERING. You must not decompile, disassemble or
reverse engineer the Software or attempt to do so. You must not modify, enhance,
alter or attempt to do any of the foregoing to the Software in any way
whatsoever.
7.13 IDEAS AND SUGGESTIONS. You must promptly disclose to us all ideas
and suggestions for modifications or enhancements of the Software or the Network
conceived or developed by or for you. You grant to us a worldwide,
non-exclusive, perpetual, royalty-free license to use and to license the use of
any ideas and suggestions for modifications or enhancements of the Software that
you may develop from time to time.
7.14 ACCESS. We have the right at all times to access the Software and
the Network and to retrieve, analyze and use all data in your files for the
Software at any time. You must not in any way bar, restrict or limit our access
to your files in the Network or the Software. If you deny us access, it will
constitute a material breach of this Agreement.
7.15 INFRINGEMENT. You must notify us immediately of the assertion of
any claim that the Software or your use of the Software violates the trade
secret, trademark, copyright, patent or other proprietary rights of any other
party. You must also cooperate with us in the investigation or resolution of any
such claim. We will defend you against any and all such claims. If the Software
becomes, or in our opinion is likely to become, the subject of any claims of
infringement of a copyright or patent, we may procure for you the right to
continue using the Software, or replace or modify the Software to render it
non-infringing or discontinue its use.
7.16 WARRANTIES.
(a) RIGHT TO USE: We represent and warrant to you that we have
the right to use, and to license to you the right to use, the Software
and the Network.
(b) WARRANTY LIMITATIONS: We do not represent or warrant to
you, and expressly disclaim any warranty, that the Software or the
Network are error-free or that the operation and use of the Software or
the Network by you will be uninterrupted or error-free. We have no
obligation or liability for any expense or loss incurred by you arising
from your use of the Software or the Network nor do we have any
obligation or liability for any expense or loss incurred by you arising
from your use of any other software.
(c) MERCHANTABILITY AND FITNESS: We make no other warranty
whatsoever, whether express or implied other than described in
subsection 7.16(b) above. WE DISCLAIM ANY IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
(d) LIMITATION OF LIABILITY: WE HAVE NO LIABILITY TO YOU FOR
LOST SAVINGS, LOST PROFITS OR CONSEQUENTIAL, PUNITIVE OR INCIDENTAL
DAMAGES. THE ABOVE-STATED
24
EXPRESS WARRANTY IS IN LIEU OF ALL OF OUR LIABILITIES OR OBLIGATIONS
FOR DAMAGES ARISING OUT OF OR IN CONNECTION WITH THE DELIVERY, USE OR
PERFORMANCE OF THE SOFTWARE OR THE NETWORK. IN NO EVENT WILL OUR
LIABILITY FOR BREACH OF WARRANTY EXCEED THE AGGREGATE AMOUNT OF ALL
AMOUNTS PAID TO US BY YOU UNDER THIS AGREEMENT. Your exclusive remedy
and our entire liability, with respect to your use of the Software and
the network, is limited as described in this Section of this Agreement.
8. MARKS.
8.1 OWNERSHIP AND GOODWILL. Your right to use the Marks is derived
solely from this Agreement and is limited to the operation of your LABOR
WORLD/registered trademark/ Business pursuant to and in compliance with this
Agreement and all applicable standards and operating procedures we prescribe
during the term of this Agreement. If you make any unauthorized use of any of
the Marks, it will constitute a breach of this Agreement and an infringement of
our rights in and to the Marks. Your use of the Marks and any goodwill
established by your use, will inure to our benefit exclusively. This Agreement
does not confer any goodwill or other interests in the Marks on you (other than
the right to operate your LABOR WORLD/registered trademark/ Business in
compliance with this Agreement).
8.2 ADDITIONAL MARKS. All provisions of this Agreement which apply to
the Marks will apply to any additional trademarks, service marks, commercial
symbols, designs, artwork, trade dress and logos we may authorize and license
you to use during the term of this Agreement.
8.3 LIMITATIONS ON USE. You must use the Marks we designate as the sole
trade identification of your LABOR WORLD/registered trademark/ Business, except
that you must also identify yourself as an independent owner in the form we
prescribe. You must not: (a) use any Mark as part of any corporate or trade name
or with any prefix, suffix, or other modifying words, terms, designs, or
symbols, or in any modified form; (b) use any Mark or any commercial symbol
similar to any Mark in connection with the performance or sale of any
unauthorized services or products, or in any other manner we have not expressly
authorized in writing; (c) employ any of the Marks in any manner that we have
determined may result in our liability for any indebtedness or obligation of
yours. You will display the Marks in the manner we prescribe at your LABOR
WORLD/registered trademark/ Business and in connection with advertising and
marketing materials, along with any notices of trademark and service mark
registrations that we specify. You will also to obtain any fictitious name,
assumed name or "doing business as" registrations that may be required under
applicable law.
8.4 INFRINGEMENTS AND CLAIMS. You must notify us immediately in writing
of any apparent infringement of or challenge to your use of any Mark, or claim
by any person of any rights in any Mark or similar trade name, trademark or
service mark of which you become aware. You must not communicate with anyone
except us and our attorneys in connection with any such infringement, challenge
or claim. We have sole discretion to take whatever action we deem appropriate.
We have the sole right to control exclusively any litigation or other
25
proceeding arising out of any infringement, challenge or claim relating to any
Mark. You must sign any documents, give any assistance, and do any acts that our
attorneys believe are necessary or advisable in order to protect and maintain
our interests in any litigation or proceeding related to the Marks or otherwise
to protect and maintain our interests in the Marks. You may not, at any time,
contest the validity or ownership of any of the Marks, or assist any other
person in contesting the validity or ownership of any of the Marks.
8.5 DISCONTINUANCE OF USE. If it becomes advisable at any time in our
sole judgment for your LABOR WORLD/registered trademark/ Business to modify or
discontinue the use of any of the Marks or for your LABOR WORLD/registered
trademark/ Business to use one or more additional or substitute trademarks or
service marks, you agree to comply with our directions to modify or otherwise
discontinue the use of such Mark, or use one or more additional or substitute
trademarks or service marks, within a reasonable time after our notice to you.
Our sole liability and obligation to you for such modification or discontinuance
will be to provide you with, or reimburse you for, replacement of stationery,
forms, business cards, signage and the like, utilizing the substitute marks.
8.6 INDEMNIFICATION. We will indemnify you against and reimburse you
for all damages for which you are held liable to third parties in any proceeding
arising out of your authorized use of any Mark, pursuant to it and in compliance
with this Agreement, resulting from claims by third parties that your use of the
Marks infringes their trademark rights, and for all costs you reasonably incur
in the defense of any such claim in which you are named as a party, so long as
you have timely notified us of the claim and have otherwise complied with the
terms of this agreement. We will not indemnify you against the consequences of
your use of the Marks except in accordance with the requirements of this
Agreement. You must provide written notice to us of any such claim within 10
days of your receipt of such notice and you must tender the defense of the claim
to us. We will have the right to defend any such claim and if we do so, we will
have no obligation to indemnify or reimburse you for any fees or disbursements
of any attorney retained by you. If we elect to defend the claim, we will have
the right to manage the defense of the claim including the right to compromise,
settle or otherwise resolve the claim, and to determine whether to appeal a
final determination of the claim.
8.7 CONSENT. You acknowledge and agree that we may grant franchises to
other franchisees to operate LABOR WORLD/registered trademark/ Businesses using
the Marks. You agree that, whenever we may request from time to time, you will
give your written consent to such use of the Marks by such franchisees.
9. RELATIONSHIP OF THE PARTIES; INDEMNIFICATION.
9.1 INDEPENDENT CONTRACTOR; NO FIDUCIARY RELATIONSHIP. This Agreement
does not create a fiduciary relationship between you and us. You are an
independent contractor, and nothing in this Agreement is intended to make either
party a general or special agent, joint venturer, partner, or employee of the
other for any purpose whatsoever. You will conspicuously
26
identify yourself in all your dealings with customers, suppliers, public
officials, personnel working at your LABOR WORLD/registered trademark/ Business
(or otherwise employed by you) and others as the owner of your LABOR
WORLD/registered trademark/ Business pursuant to a franchise agreement with us,
and agree to place any other notices of independent ownership on your forms,
business cards, stationery, advertising, and other materials that we may require
from time to time.
9.2 NO LIABILITY; NO WARRANTIES. Except as expressly authorized by this
Agreement, neither you nor we will make any express or implied agreements,
warranties, guarantees or representations, or incur any debt, in the name of or
on behalf of the other or represent that the relationship between you and us is
other than that of franchisee and franchisor. We will not be liable for any
agreements, representations, or warranties you make that are not expressly
authorized under this Agreement, nor will we be obligated for any damages to any
person or property directly or indirectly arising out of the operation of the
business you conduct pursuant to this Agreement, whether or not caused by your
negligent or willful action or failure to act, or your use of the Marks in a
manner not in accordance with this Agreement. Without limiting the provisions of
this Section 9.2, you will NOT be liable for any agreements, representations or
warranties we make to others, or for any damages to any person or property
directly or indirectly arising out of the operation of our business.
9.3 TAXES. We will not be liable for any sales, service, use, excise,
income, gross receipts, property, payroll or other taxes levied against you or
your assets or against us in connection with the business you conduct or any
payments you make to us pursuant to this Agreement or any other agreement
(except for our own income taxes and any taxes we are required by law to collect
from you on purchases from us). Without limiting the provisions of this Section
9.3, you will NOT be liable for any sales, service, use, excise, income, gross
receipts, property, payroll or other taxes levied against us or our assets, or
otherwise in connection with our business, except for any taxes that may be
imposed on the royalty and service fees or other amounts that you pay us under
this Agreement.
9.4 INDEMNIFICATION.
(a) INDEMNIFICATION BY YOU: You must indemnify, defend and
hold us, our affiliates and our and their shareholders, directors,
officers, employees, agents and assignees (collectively, "INDEMNIFIED
PARTIES") harmless against and reimburse the Indemnified Parties for
all such obligations, damages, and taxes (as described in Sections 9.2
and/or 9.3 above) for which any of the Indemnified Parties are held
liable and for all costs any of the Indemnified Parties reasonably
incur in the defense of any such claim brought against any of the
Indemnified Parties or in any such action in which any of the
Indemnified Parties is named as a party, including but not limited to
actual and consequential damages, reasonable attorneys', accountants',
and expert witness fees, cost of investigation and proof of facts,
court costs, other litigation expenses and travel and living expenses.
The Indemnified Parties have the right to defend any such claim against
them. Your indemnification obligations described above will continue in
full force and effect after the expiration or termination of this
Agreement.
27
(b) INDEMNIFICATION BY US: We must indemnify, defend and hold
you and your shareholders, directors, officers, employees, agents and
assignees harmless against and reimburse them for all obligations,
damages and taxes arising out of our operation of our business (Section
9.2 and/or 9.3 above) for which any of them are held liable and for all
costs they reasonably incur in the defense of any such claim brought
against any of them or in any such action in which any of them is named
as a party, including but not limited to actual and consequential
damages, reasonable attorneys', accountants', and expert witness fees,
costs of investigation and proof of facts, court costs, other
litigation expenses and travel and living expenses. You have the right
to defend any such claim against you. Our indemnification obligations
described above will continue in full force and effect after the
expiration or termination of this Agreement.
10. CONFIDENTIAL INFORMATION; EXCLUSIVE RELATIONSHIP.
10.1 TYPES OF CONFIDENTIAL INFORMATION. We own certain confidential and
proprietary information and trade secrets consisting of the following categories
of information, methods, techniques, products, and knowledge developed or
compiled by us:
(a) the System and the know-how related to its use;
(b) sources and design of equipment, forms, materials and
supplies;
(c) advertising and promotional programs for LABOR
WORLD/registered trademark/ Businesses;
(d) the Software and any other computer software we provide or
recommend for use in LABOR WORLD/registered trademark/ Businesses;
(e) the selection, testing and training of managers and other
employees for LABOR WORLD/registered trademark/ Businesses; and
(f) methods, techniques, formats, specifications, procedures,
information and systems related to and knowledge of and experience in
the development, operation, and franchising of LABOR WORLD/registered
trademark/ Businesses.
10.2 DISCLOSURE AND LIMITATIONS ON USE. We will disclose much of the
above-described information to you, and will do so in furnishing the Manual to
you and in providing training, guidance and assistance to you. In addition, in
the course of the operation of your LABOR WORLD/registered trademark/ Business,
you or your employees may develop ideas, concepts, methods, techniques or
improvements ("IMPROVEMENTS") relating to your LABOR WORLD/registered trademark/
Business, which you agree to disclose to us. We may then use the Improvements in
the operation of LABOR WORLD/registered trademark/ Businesses and authorize you
and others to use them in the operation of LABOR WORLD/registered trademark/
Businesses. (Any such information disclosed to, or developed by, you will be
referred to as "CONFIDENTIAL INFORMATION.")
28
10.3 CONFIDENTIALITY OBLIGATIONS. You agree that your relationship with
us does not vest in you any interest in the Confidential Information other than
the right to use it in the development and operation of your LABOR
WORLD/registered trademark/ Office, and that the use or duplication of the
Confidential Information in any other business would constitute an unfair method
of competition. You acknowledge and agree that the Confidential Information
belongs to us, constitutes trade secrets belonging to us and is disclosed to you
or authorized for your use solely on the condition that you agree, and you
therefore do agree, that you:
(a) will not use the Confidential Information in any other
business or capacity;
(b) will maintain the absolute confidentiality of the
Confidential Information during and after the term of this Agreement;
(c) will not make unauthorized copies of any portion of the
Confidential Information disclosed in tangible or intangible form,
including, for example, the Manual; and
(d) will adopt and implement all reasonable procedures we may
prescribe from time to time to prevent unauthorized use or disclosure
of the Confidential Information, including, but not limited to,
restrictions on disclosure to your employees and the use of
nondisclosure and noncompetition agreements we may prescribe for
employees or others who have access to the Confidential Information.
10.4 EXCEPTIONS TO CONFIDENTIALITY. The restrictions on your disclosure
and use of the Confidential Information will not apply to the following:
(a) disclosure or use of information, methods, or techniques
which are generally known and used in the temporary personnel service
industry (as long as the availability is not because of a disclosure by
you), provided that you have first given us written notice of your
intended disclosure and/or use; and
(b) disclosure of the Confidential Information in legal
proceedings when you are legally required to disclose it, provided that
you have first given us the opportunity to obtain an appropriate legal
protective order or other assurance satisfactory to us that the
information required to be disclosed will be treated confidentially.
10.5 EXCLUSIVE RELATIONSHIP. You agree that we would be unable to
protect the Confidential Information against unauthorized use or disclosure and
would be unable to encourage a free exchange of ideas and information among
LABOR WORLD/registered trademark/ Businesses if owners of franchised LABOR
WORLD/registered trademark/ Businesses were permitted to hold interests in any
Competitive Businesses as defined below. You also acknowledge that we have
entered into this Agreement with you in part in consideration of and in reliance
on your agreement to deal exclusively with us. Therefore, you agree as follows:
29
(a) NONCOMPETITION AND NONSOLICITATION: During the term of
this Agreement, neither you, nor any member of your immediate family
(and if a corporation or partnership is the Franchise Associate,
neither their shareholders, officers, directors, partners nor any
members of their immediate families) must:
(i) engage in a Competitive Business or perform
services for a Competitive Business directly
or indirectly, as a director, owner,
proprietor, officer, manager, employee,
consultant, representative, agent,
independent contractor or otherwise, except
under a franchise agreement with us or our
affiliates; and/or
(ii) have any direct or indirect interest, as a
disclosed or beneficial owner, in a
Competitive Business, except under franchise
agreements with us or our affiliates; and/or
(iii) have any direct or indirect interest, as a
disclosed or beneficial owner, in any entity
which is granted or is granting franchises
or licenses to others to operate any
Competitive Business, except LABOR
WORLD/registered trademark/ Businesses under
franchise agreements with us or our
affiliates; and/or
(iv) recruit or hire any employee of ours or our
affiliates or our franchisees without our
prior written consent and/or that of the
other franchisee; and/or
(v) directly or indirectly, on behalf of
yourself or any other person, or as an
employee, proprietor, owner, consultant,
agent, contractor, employer, affiliate,
partner, officer, director or associate, or
stockholder of any other person or entity,
or in any other capacity, solicit, divert,
take away, or interfere with any of the
business, customers, clients, contractors,
trade or patronage of ours, our affiliates
or our franchisees as such may exist
throughout the term of this Agreement.
(b) EXCLUSIVITY: You (and if a corporation or partnership is
the Franchise Associate, their shareholders, officers, directors,
partners) must not, directly or indirectly, on behalf of yourself or
any other person, or as an employee, proprietor, owner, consultant,
agent, contractor, employer, affiliate, partner, officer, director or
associate, or stockholder of any other person or entity, or in any
other capacity, engage in or conduct any other business if you have any
significant operational or management responsibility or obligation
regarding such business, other than LABOR WORLD/registered trademark/
Businesses operated under franchise agreements with us or our
affiliates, unless your LABOR WORLD/registered trademark/ Business is
managed by a manager, approved by us, that has satisfactorily completed
our training programs or who can otherwise demonstrate
30
proficiency in the System. This provision must not be deemed to
prohibit passive investments in other businesses. However, interest in
business in which your capacity is either a director, officer or
majority stockholder (or any combination thereof) must be deemed NOT to
be a passive investment, and must be considered a breach of these
provisions of this Agreement.
(c) COMPETITIVE BUSINESS: The term "COMPETITIVE BUSINESS" as
used in this Agreement means any business operating, or granting
franchises or licenses to others to operate, any temporary personnel
business, or any other business that provides the same or similar
services as are customarily offered by LABOR WORLD/registered
trademark/ Businesses.
(d) PUBLIC COMPANIES: We do not prohibit your ownership of the
issued and outstanding shares of any class of stock of (i) a publicly
traded company that does not also constitute a Competitive Business; or
(ii) our capital stock.
11. FEES AND ROYALTIES.
11.1 INITIAL FRANCHISE FEE. When you sign this Agreement, you must pay
us a non-recurring initial franchise fee of $22,000. Your Exclusive Area will be
determined as of the Agreement Date. Our initial franchise fee is reduced in
half for existing LABOR WORLD/registered trademark/ Franchise Associates. The
population figures used to determine the scope of the Exclusive Area will be
those listed in the most current edition of The Business Control Atlas published
by American Map Corporation.
11.2 REFUNDABILITY. The initial franchise fee is fully earned by us
when paid. The initial franchise fee is refundable, only in accordance with the
provisions of Section 5.1(d) of this Agreement.
11.3 COMPUTER SYSTEM AND INTERIOR SIGNAGE. You must purchase the
Computer System and certain interior signage. The interior signage you purchase
must be approved by the Franchise Advisory Board (in accordance with the
procedures described in Section 3.6 of this Agreement). The purchase price for
the Computer System is $29,800 and the purchase price for the interior signage
is $215. The purchase price for both must be paid on the Agreement Date along
with the initial franchise fee. If you open an additional office within the
Exclusive Area (with our consent) you must purchase another Computer System and
the interior signage at the prices we are then charging.
11.4 ROYALTY AND SERVICE FEES. You agree to pay us continuing monthly
royalty and service fees based on Gross Profits of your LABOR WORLD/registered
trademark/ Business during the term of this Agreement. The amount of the monthly
royalty and service fees is the sum of $625/month plus 18% of your Gross
Profits. You must pay us on or before the 15th day of each month.
31
11.5 INCENTIVE ROYALTY REDUCTION. If you are in full compliance with
the provisions of this Agreement (and all other agreements with us), and have
not been delinquent in any pay- ments due us during the year, as an incentive,
we will:
(a) for a 6-month period following the opening of your LABOR
WORLD/registered trademark/ Business, waive payment of the $625/month
component of the royalty and service fee; and
(b) reduce the royalty and service fee paid on Gross Profits
you earn to the sum of $625/month plus 10% of your Gross Profits in
excess of the following cumulative Gross Profits goals from the
Agreement Date for Exclusive Areas with the following industrial
payroll levels (as of the Agreement Date):
INDUSTRIAL PAYROLL DOLLARS(1) CUMULATIVE GROSS PROFITS
----------------------------- ------------------------
(IN MILLIONS)
-----------
Up to $750 $2,500,000
750 - 1,500 $2,750,000
1,500 - 2,250 $3,000,000
2,250 - 3,000 $3,250,000
3,000 - 3,750 $3,500,000
3,750 - 4,500 $3,750,000
each additional $750 or fraction + $250,000
(c) if you acquire franchises for additional LABOR
WORLD/registered trademark/ Businesses, reduce the royalty and service
fee for the additional franchises to the sum of $167/month plus 18% of
cumulative Gross Profits from your other LABOR WORLD/registered
trademark/ Businesses up to 1/2 of the cumulative Gross Profits based
on the population of the Exclusive Area of the other LABOR
WORLD/registered trademark/ Business(es) shown above and 10% of such
cumulative Gross Profits over such amounts, on a cumulative basis.
11.6 MINIMUM FEES. If you do not achieve the level of Gross Profits
described in Section 2.2 and Exhibit "A" of this Agreement ("MINIMUM GROSS
PROFITS"), in order to retain your Exclusive Area, you must pay to us within 15
days of our invoice, the difference between:
____________
1 Industrial Payroll Dollars are the dollars of manufacturing and wholesale
distribution payroll for the year 1990 as listed in THE COMPLETE ECONOMIC AND
DEMOGRAPHIC DATA SOURCE ("CEDDS"), Volumes 1 through 3, (C)Woods & Poole
Economics, Inc., 1794 Columbia Road, NW, Washington, DC 20009.
32
(a) the royalty and service fees attributable to the Minimum
Gross Profits; and
(b) the royalty and service fees you actually paid during the
applicable time period.
11.7 CPI ADJUSTMENTS. All fixed dollar amounts used in this Agreement
(i.e., for Gross Profits, Gross Revenues, the fixed component of the royalty and
service fee, reimbursements, transfer fees and expenses, but excluding Minimum
Gross Profits) will be adjusted on January 1 of each year in proportion to the
changes in the Consumer Price Index (U.S. Average, all items) maintained by the
U.S. Department of Labor (or such equivalent index as may be adopted in the
future) between January 1, 1995 and January of the then-current year. Each
adjustment will be made effective on January 1 based on the January index, but
the first adjustment will not be made until the second January following the
Agreement Date (i.e., for an Agreement Date of July 1, 1995, the first
adjustment would be effective as of January 1, 1997). We will notify you of the
adjustments and you must pay us within 30 days of our invoice the amount of any
difference between the royalty and service fees actually paid to us and the
amount that should have been paid to us based on the adjustment due to changes
in the Consumer Price Index. The CPI adjustments do not apply to Cumulative
Gross Profits, as that figure is used for purposes of calculating royalty and
service fees due. However, CPI adjustments will affect the following amounts:
(a) The fixed component of the royalty and service fee (but
NOT the percentage component);
(b) Reimbursements due to us;
(c) Transfer fees and expenses; and
(d) Successor fees and expenses.
Cumulative Gross Profits (for the purposes described in Section 11.6) and
Minimum Gross Profits (for the purposes described in Section 11.7) will not be
affected by any CPI adjustments.
11.8 CERTAIN DEFINITIONS.
(a) GROSS REVENUES: The term "GROSS REVENUES" means all fees,
charges or other consideration collected from the sale of products and
services in, on, or from your LABOR WORLD/registered trademark/
Business, or through any other means that is in any way related to your
LABOR WORLD/registered trademark/ Business, whether for cash, exchange
or credit, including, without limitation, any other revenues in any way
associated with or developed through the use of the Marks or the
System, but not including any sales, use or service taxes, collected
from customers and paid to the appropriate taxing authority.
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(b) GROSS PROFITS: The term "GROSS PROFITS" means Gross
Revenues, net of uncollectible accounts, less the following expenses
actually paid or accrued by your LABOR WORLD/registered trademark/
Business for direct temporary labor gross payroll wages, workers'
compensation premiums, payroll taxes, liability insurance, net
non-taxable transportation costs, and any mandatory (by law) health
care costs that apply to temporary workers. Such expenses will be based
on the appropriate accounting classification under our standard Chart
of Accounts.
11.9 LATE PAYMENT PENALTIES. All royalty and service fees, amounts due
for purchases by you from us, and any interest accrued thereon, and any other
amounts which you owe us or our affiliates, are subject to a late payment fee of
5% of the amount due. The late payment fee is due immediately on any delinquent
payments. By signing the Franchise Agreement, you acknowledge that the provision
in this Agreement concerning late payment fees does not mean that we accept or
condone late payments, nor does it indicate that we have any intention to extend
credit to, or otherwise finance the operation of, your LABOR WORLD/registered
trademark/ Business.
11.10 INTEREST ON LATE PAYMENTS. All royalty and service fees, amounts
due for purchases by you from us or our affiliates, and other amounts which you
owe to us or our affiliates must bear interest after the due date at the highest
applicable legal rate for open account business credit, not to exceed 1.5% per
month. Charging interest does not constitute our agreement to accept late
payments after they are due or a commitment by us to extend credit to, or
otherwise finance the operation of, your LABOR WORLD/registered trademark/
Business. Your failure to pay all amounts owed to us or our affiliates when due
constitutes grounds for termination of this Agreement.
11.11 APPLICATION OF PAYMENTS. When we receive a payment from you, we
may apply it as we see fit, in our sole discretion, to any past due indebtedness
of yours to us or our affiliates, whether for royalty and service fees,
purchases, interest, or for any other reason, regardless of how you may direct a
particular payment to be applied.
11.12 PAYMENT OFFSETS. We may set off from any amounts that we may owe
you any amount that you owe to us for any reason whatsoever, including without
limitation, royalty and service fees, late payment penalties and late payment
interest, amounts owed to us for purchases or for any other reason. Thus,
payments that we make to you may be reduced, in our discretion, by amounts that
you owe to us from time to time. However, you do not have the right to offset
payments owed to us for amounts purportedly due to you from us.
12. OPERATION OF THE LABOR WORLD/registered trademark/ BUSINESS.
12.1 IMPORTANCE OF UNIFORMITY. Every detail of your LABOR
WORLD/registered trademark/ Business is important--not only to you, but to us
and to our franchisees and affiliates--in order to:
(a) develop and maintain high and uniform operating standards;
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(b) increase the demand for the programs, products and
services sold by LABOR WORLD/registered trademark/ Businesses; and
(c) establish and maintain a reputation for operating uniform
and high quality temporary personnel businesses.
Thus, a fundamental requirement of this Agreement is your adherence to our
standards and policies, except for any differences we may otherwise approve from
time to time.
12.2 CONDITION AND APPEARANCE. You agree that:
(a) your LABOR WORLD/registered trademark/ Office will not be
used, without our prior written approval, for any purpose other than
the operation of a LABOR WORLD/registered trademark/ Business in
compliance with this Agreement;
(b) you will maintain the condition and appearance of your
LABOR WORLD/registered trademark/ Office, its equipment, furniture,
furnishings and signs, in accordance with our standards and consistent
with the image of a LABOR WORLD/registered trademark/ Business as an
efficiently operated business offering high quality services, and
efficient and courteous service.
(c) you will place or display at the LABOR WORLD/registered
trademark/ Office (interior and exterior) only those signs, emblems,
designs, artwork, lettering, logos, and display and advertising
materials that we from time to time approve; and
(d) if at any time, in our reasonable judgment, the general
state of repair, safety, appearance or cleanliness of the LABOR
WORLD/registered trademark/ Office (including parking areas) or your
LABOR WORLD/registered trademark/ Office's fixtures, equipment,
furniture or signs do not meet our standards, we may notify you,
specifying the action you need to take to correct the deficiency. If
you do not initiate within 10 days after delivery of our notice, and
then continue in good faith and with due diligence, a bona fide program
to complete any required maintenance, repair, replacement or
refurbishing, we may do it for you, and you must reimburse us on
demand.
12.3 APPROVED AND PROHIBITED ACTIVITIES. You agree that:
(a) your LABOR WORLD/registered trademark/ Business will
offer, in the manner we prescribe, all services and products that we
from time to time authorize for LABOR WORLD/registered trademark/
Businesses; and
(b) your LABOR WORLD/registered trademark/ Business will not
offer or provide, at the LABOR WORLD/registered trademark/ Office or
any other location, any products or services we have not approved for
LABOR WORLD/registered trademark/ Businesses.
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We have the right to impose conditions including successful completion of
additional training, which all franchisees, including you, must fulfill in order
to offer new programs. Such authorization and conditions will, in our sole
discretion, depend and be based on such factors as the facilities and equipment
of your LABOR WORLD/registered trademark/ Business, your qualifications and
experience and those of your employees and other considerations we deem
relevant.
We may conduct research and testing to determine the feasibility of new
programs, market trends, and the marketability of new programs. You agree to
cooperate and participate in our research and testing programs upon our request,
by test marketing new programs at your LABOR WORLD/registered trademark/
Business and by providing us with timely reports and other relevant information
regarding research and testing programs. In connection with test marketing of
any new program, you agree to make reasonable efforts to sell any products and
services comprising the new program.
12.4 APPROVED PRODUCTS AND SUPPLIERS. The reputation and goodwill of
LABOR WORLD/registered trademark/ Businesses are based on, and can be maintained
only by, the sale of high quality products and services in an efficient,
professional and appealing manner. We have developed standard contracts and
forms and other materials for use by your LABOR WORLD/registered trademark/
Business. We have developed standards and specifications for other equipment,
materials and supplies used in the marketing and furnishing of services and
products authorized for sale by LABOR WORLD/registered trademark/ Businesses. We
have approved and will continue periodically to approve suppliers of these
products that meet our standards and requirements, including, without
limitation, standards and requirements relating to product quality, prices,
consistency, reliability, financial capability, labor relations and customer
relations. You agree that your LABOR WORLD/registered trademark/ Business will
purchase only those brands or types of equipment, materials, supplies and other
products that we have approved as meeting our standards and specifications. You
further agree that your LABOR WORLD/registered trademark/ Business will:
(i) purchase standard contracts and forms and
other trademarked or copyrighted products or
materials we develop only from us, our
affiliates, or from a third party licensed
or approved by us to sell those products or
materials; and
(ii) purchase other products only from suppliers
we have designated or approved.
12.5 SYSTEM STANDARDS. You agree to comply with all System Standards,
including, but not limited to, standards and procedures relating to:
(a) image, appearance and decor of your LABOR WORLD/registered
trademark/ Office;
(b) notices, signs, marketing and advertising materials;
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(c) type, brand, appearance, cleanliness, sanitation, safety
and functioning of the LABOR WORLD/registered trademark/ Business and
its fixtures, furnishings, furniture, equipment, decor and signs,
including but not limited to computer hardware and software;
(d) appearance of employees and agents of the LABOR
WORLD/registered trademark/ Business;
(e) use of standard forms and contracts;
(f) methods of dealing with customers and potential customers
and the labor personnel;
(g) use of the Marks and use and protection of Confidential
Information;
(h) preparation and retention of records;
(i) supervising your personnel to conform to our
specifications, standards and procedures;
(j) risk management administration methods for dealing with
workers' compensation and unemployment compensation;
(k) use of exterior and interior signs, posters, displays and
standard formats; and
(l) hours and days during which your LABOR WORLD/registered
trademark/ Business will be open for business.
We will prescribe System Standards from time to time for LABOR
WORLD/registered trademark/ Businesses in the Manual, or otherwise in writing.
Such System Standards are incorporated into this Agreement. All references to
"this Agreement" also refer to System Standards.
12.6 COMPLIANCE WITH LAWS AND GOOD BUSINESS PRACTICES.
(a) LEGAL COMPLIANCE: You agree to secure and maintain in
force in your name all required licenses, permits, and certificates
relating to the operation of your LABOR WORLD/registered trademark/
Business. You agree to operate your LABOR WORLD/registered trademark/
Business in full compliance with all applicable laws, ordinances, and
regulations, including, without limitation, all government regulations
relating to workers' compensation insurance, unemployment insurance,
and withholding and payment of federal, state and local taxes. You
agree to comply with all applicable laws and regulations related to the
licensing of temporary personnel business, if any.
(b) ETHICAL STANDARDS: All advertising and promotional
materials you use must be completely factual, in good taste (in our
judgment), and must conform to the
37
highest standards of ethical advertising. You agree that in
all dealings with us, your customers, your suppliers, other providers
in the temporary personnel agency or related industries and with public
officials, you will adhere to the highest standards of honesty,
integrity, fair dealing and ethical conduct. You further agree to
refrain from any business or advertising practice which may be harmful
to our business and the goodwill associated with the Marks and other
LABOR WORLD/registered trademark/ Businesses. 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 unit, which may
adversely affect your operation or financial condition or that of your
LABOR WORLD/registered trademark/ Business, or of any notice of
violation of any law, ordinance, or regulation relating to health or
safety.
12.7 MANAGEMENT AND PERSONNEL. Your LABOR WORLD/registered trademark/
Business must be under your direct, full-time management (or, if you have
received our prior written approval, under the direct, full-time management of a
manager who has satisfactorily completed our training programs or whom can
otherwise demonstrate proficiency in the System). Full-time means the
expenditure of at least 35 hours per week, excluding vacation, sickness, etc.
You agree to staff your LABOR WORLD/registered trademark/ Business with
sufficient personnel to maintain the high quality, professional service we
specify from time to time. You agree to hire all employees of your LABOR
WORLD/registered trademark/ Business and to be exclusively responsible for the
terms of their employment, their compensation, and for their proper training in
the operation of your LABOR WORLD/registered trademark/ Business. You agree to
establish at your LABOR WORLD/registered trademark/ Business a training program
for all employees that meet our standards. You agree to require all employees to
maintain a neat and clean appearance. You agree not to recruit, hire or engage,
either directly or indirectly, any person who is then an employee of a LABOR
WORLD/registered trademark/ Business operated by us, our affiliates or one of
our franchise associates, unless you obtain advance written permission from the
LABOR WORLD/registered trademark/ Business which previously employed, or was
associated with, that person.
12.8 INSURANCE.
(a) TYPES REQUIRED: During the term of this Agreement, you
must maintain in force, at your sole expense and under policies of
insurance issued by carriers approved by us:
(i) comprehensive, public and product liability
insurance against claims for bodily and
personal injury, death and property damage
caused by or occurring in conjunction with
the operation of your LABOR WORLD/registered
trademark/ Business or otherwise in
conjunction with the conduct of business by
you pursuant to this Agreement under one or
more policies of insurance containing
minimum liability coverage prescribed by us
from time to time;
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(ii) general casualty and property insurance
including fire and extended coverage,
vandalism and malicious mischief insurance
with a full replacement value of your LABOR
WORLD/registered trademark/ Business and the
contents, covering such risks as are covered
in the Standard Extended Coverage
Endorsement;
(iii) motor vehicle insurance (including personal
injury protection) for any motor vehicles
operated by your LABOR WORLD/registered
trademark/ Business and/or for non-owned
vehicles;
(iv) all insurance required under the lease for
your LABOR WORLD/registered trademark/
Office; and
(v) workers' compensation.
(b) COVERAGE REQUIREMENTS: You must maintain the insurance
coverages in the minimum amounts we prescribe from time to time in the
Manual. We may periodically increase or decrease the amounts of
coverage required under these insurance policies and require different
or additional kinds of insurance at any time to reflect inflation,
identification of new risks, changes in law or standards of liability,
higher damage awards, or other relevant changes in circumstances.
(c) POLICY TERMS: All insurance policies must:
(i) contain no provision which in any way limits
or reduces coverage for us in the event of
any claim by us or any of our affiliates,
directors, officers or agents;
(ii) extend to provide indemnity for all
obligations assumed by you under this
Agreement and all items for which you are
required to indemnify us under the
provisions of this Agreement or otherwise;
(iii) name us as an additional insured;
(iv) contain a waiver of the insurance company's
right of subrogation against us;
(v) provide that the coverage afforded applies
separately to each insured against whom a
claim is brought as though a separate policy
had been issued to each insured;
(vi) provide that the insurance company will
provide us with at least 30 days prior
written notice of termination, expiration,
cancellation or material modification of any
such policy; and
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(vii) provide that you cannot reduce the policy
limits, restrict coverage, cancel or
otherwise alter or amend the policies
without our prior written consent.
(d) EVIDENCE OF COVERAGE: Before the expiration of the term of
each insurance policy, you must furnish us with a copy of each new,
renewal or replacement policy you have obtained to extend your
coverage, along with evidence of the payment of the premium for each
such policy. If you do not maintain the required insurance coverage, or
do not furnish us with satisfactory evidence of your insurance coverage
and the payment of the premiums for them, we may obtain, at our option
and in addition to our other rights and remedies under this Agreement,
any required insurance coverage on your behalf. If we do so, you agree
to: (i) fully cooperate with us in our effort to obtain the insurance
policies; (ii) promptly sign all forms or instruments required to
obtain or maintain the insurance: (iii) allow any inspections of your
LABOR WORLD/registered trademark/ Business which are required to obtain
or maintain the insurance; and (iv) pay to us, on demand, any costs and
premiums we incur or will incur. You also agree that if we obtain
insurance coverage for you, we may utilize carriers and policies
approved by us, including any Master General Liability Policy we
authorize, even if we earn revenues or fees through such utilization.
Your obligation to maintain insurance coverage as described in this
Agreement will not be reduced in any manner by reason of any separate
insurance we maintain on our own behalf, nor will our maintenance of
that insurance relieve you of any obligations under Section 9.4 of this
Agreement.
(e) WORKERS' COMPENSATION: Due to the special significance of
workers' compensation insurance to your LABOR WORLD/registered
trademark/ Business, you must segregate into a separate account a fund
to pay your workers' compensation insurance premiums to ensure
maintenance of your workers' compensation insurance, unless a payroll
funding company segregates this account for you. The amount to be
segregated into the fund will vary from time to time based on the
payroll of your LABOR WORLD/registered trademark/ Business. We will
notify you of the amount to be segregated into the fund from time to
time. You must report to us the amount of the premiums charged for your
workers' compensation insurance coverage, and all rate changes, due to
audits or otherwise.
12.9 PAYROLL FUNDING. At your option, you may utilize our services for
payroll funding of the employees of your LABOR WORLD/registered trademark/
Business. Our payroll funding services are designed to handle payment of the
wages, federal income withholding taxes, local taxes, unemployment compensation,
workers' compensation premiums, and other deductions from payroll for you. We
charge a fee for these services. The terms of providing the payroll funding
services are described in our affiliate's standard payroll funding agreement.
12.10 RISK MANAGEMENT SERVICES. At your option, you may utilize our
services in providing risk management and claims administration of workers'
compensation and unemployment compensation claims for your LABOR
WORLD/registered trademark/ Business. You may also utilize our services for
evaluating and contesting individual unemployment compensation claims. If you
40
do so, you must pay us a service fee and sign our standard form of Risk
Management and Unemployment Compensation Services Agreement. The terms of our
provision of services and the payment of fees are governed by such agreement.
12.11 CREDIT SERVICES. At your option, you may utilize the credit
services that we provide to LABOR WORLD/registered trademark/ Businesses. We
have developed, along with third parties, access to a database as well as
certain formats, procedures and techniques, to provide LABOR WORLD/registered
trademark/ Businesses with credit information regarding their customers and
prospective customers. If you choose to obtain the credit services from us, you
must pay us a service fee and sign our standard form of Credit Services
Agreement. Our rendering of credit services to you and the payment of fees to us
are governed by the terms of such agreement.
12.12 ACCOUNTING SERVICES. At your option, you may utilize the
accounting services that we provide to LABOR WORLD/registered trademark/
Businesses. The accounting services utilize our standard form of Chart of
Accounts and reports generated by the use of accounting services will comply
with our requirements for format and content of financial reports and
statements. If you choose to obtain the accounting services from us, you must
pay us a service fee and enter into our standard form of Accounting Services
Agreement. Our rendering of accounting services to you and the payment of fees
to us are governed by the terms of such agreement.
12.13 LIABILITY AND WORKERS' COMPENSATION INSURANCE. We may
periodically arrange for the issuance of a master general liability policy and a
master workers' compensation policy to cover LABOR WORLD/registered trademark/
Businesses. If we do so, you may obtain such insurance at your option. We also
may charge an administrative fee or otherwise be compensated for our services in
obtaining such insurance. If we obtain such master insurance policies, you will
be required to pay premiums for such insurance to us in advance. If you do not
timely pay the premiums to us, it will be a breach of this Agreement and we may
cancel your insurance coverage as well as terminate this Agreement in accordance
with its terms.
To be eligible for a master workers' compensation policy, you must: (i)
meet the underwriting qualifications; (ii) follow, in our opinion, "best
practices" in regard to job site evaluation and risk management procedure; (iii)
lease your temporary employees from our affiliate under its Client Services
Agreement (a current copy of which is attached to our Offering Circular as
Exhibit "I"); and (iv) meet such other conditions as we consider necessary or
desirable. We are not obligated to allow you to initially participate or
continue to participate in our master workers' compensation policy if, in our
sole opinion, you do not meet, or continue to meet, our requirements.
12.14 OPTIONAL SERVICES. As long as we offer various services and you
meet the conditions we prescribe, we will provide them to you in accordance with
the service agreements. Nevertheless, we are not obligated to continue to
furnish optional services indefinitely and may discontinue them at any time
(subject to contract).
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13. ADVERTISING AND PROMOTION.
13.1 PRE-OPENING PROMOTION. You must spend, within 60 days after the
opening of your LABOR WORLD/registered trademark/ Business, an amount not less
than $2,500, for local promotion of the opening of your LABOR WORLD/registered
trademark/ Business in accordance with an opening marketing plan approved by us.
This amount is not reimbursable under Section 13.2 below.
13.2 LOCAL ADVERTISING AND PROMOTION. You should conduct local
advertising and promotion. Prior to their use, you must submit samples of all
local advertising and promotional materials, not prepared or previously approved
by us, for approval. If you do not receive written approval from us within 15
days from the date of our receipt of the materials, we will be deemed to have
given the required approval. You must not use any advertising or promotional
materials that we have disapproved. If you are in compliance with this
Agreement, we will reimburse you for 50% of your actual verified direct costs of
approved eligible advertising expenditures, up to a maximum of .5% of your Gross
Profit during any calendar year. We will publish from time to time a list of
approved expenditures eligible for reimbursement. To obtain reimbursement, you
must submit your reimbursement request on such forms and with such verification
as we direct from time to time no later than January 31 for the advertising
expenditures of the immediately preceding calendar year. Reimbursement requests
received by us after that time will not be honored. We will pay the proper
reimbursement to you no later than 30 days after we have approved the
reimbursements.
13.3 ASSOCIATION PARTICIPATION AND CONTRIBUTIONS. If an association of
LABOR WORLD/registered trademark/ Franchise Associates is established in a
geographic area in which your LABOR WORLD/registered trademark/ Business is
located (the "ASSOCIATION"), you must join and actively participate in it. You
also must contribute to the Association such amounts as are determined from time
to time by the Association. We will not set the amount of those contributions.
The Association will adopt its own rules, regulations and procedures, which you
must follow. Your failure to timely contribute the amounts required by the
Association constitutes a material breach of the provisions of this Agreement.
We may offset against any amounts we owe to you the amount of your Association
contributions and pay such contributions for you.
13.4 TELEPHONE DIRECTORY ADVERTISEMENTS. At your expense, you must
obtain your telephone number and list and advertise your LABOR WORLD/registered
trademark/ Business in the principal regular (white pages telephone directory)
and the classified (yellow pages) telephone directories distributed in your
metropolitan area, in such directory categories as we specify, utilizing our
standard forms of listing and classified directory advertisements. You must
place your classified directory advertisements and listings together with other
LABOR WORLD/registered trademark/ Businesses operating within the distribution
area of the directories. If a joint listing is obtained, the cost of the
advertisements and listings will be apportioned among all LABOR WORLD/registered
trademark/ Businesses placed together.
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14. ACCOUNTING, REPORTS AND FINANCIAL STATEMENTS.
14.1 ACCOUNTING RECORDS. During the term of this Agreement, you must
establish and maintain record keeping and accounting systems conforming to the
requirements prescribed by us from time to time. You must prepare and preserve
for 2 years from the dates of their preparation (and for such other time period
as required by law), full, complete and accurate books, records and accounts
prepared pursuant to our approved method of accounting, including, but not
limited to, invoices, cash receipts, service contracts, disbursement records,
accounts payable, general ledgers, itemized bank deposit slips and statements,
and copies of sales and service tax returns and state and federal payroll and
income tax returns reflecting the operation of your LABOR WORLD/registered
trademark/ Business.
14.2 REPORTS. You must furnish to us the following reports utilizing
the forms, chart of accounts and standards we have developed for such purpose:
(a) statements of Gross Profits of your LABOR WORLD/registered
trademark/ Business for the preceding week due on Tuesday of each week
by electronic "download" along with such other information available
through your use of the Computer System as we may request. The
following items must only be sent to us as we require (by notice to
you) from time to time: copies of deposit slips, updated accounts
receivable aging schedules, invoice registers, copies of bank
statements and the like;
(b) concurrently with the payment of the royalty and service
fees a monthly and year-to-date profit and loss statement and accounts
receivable report of your LABOR WORLD/registered trademark/ Business as
of the end of such month including copies of bank statements;
(c) within 90 days after the end of each fiscal year, an
annual profit and loss statement for such fiscal year for your LABOR
WORLD/registered trademark/ Business and a balance sheet for your LABOR
WORLD/registered trademark/ Business as of the end of such fiscal year.
We may require that the annual financial statements be audited by an
independent certified public accountant. If we require you to provide
us with annual financial statements audited by an independent certified
public accountant, we will pay for the cost of the audit and we will be
entitled to select the independent certified public accountant.
However, if the audit reveals an understatement of Gross Profits for
such fiscal year of 3% or more, then you must immediately reimburse our
audit costs as well as pay us any other amounts you owe us due to the
shortfall; and
(d) immediately upon their occurrence, you must report to us
all accidents. You must provide to us all information regarding
workers' compensation losses (including "loss runs") and status reports
from the insurance carrier regarding the progress of workers'
compensation claims and cases on a quarterly basis. The risk management
reports must be on forms that we prescribe from time to time and
contain all of the information required.
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You must furnish to us such other periodic reports as are prescribed by
us and such other information and supporting records as we may from time to time
prescribe. All such reports, financial statements and information must be on
forms prescribed or approved by us, fully and accurately completed and must be
verified and signed by you, unless prepared through use of our accounting
services. We have the right to obtain information, relating to all reports made
to or due us, from our computer links with your LABOR WORLD/registered
trademark/ Business. If we are denied access to your Computer System to
retrieve any information relating to the reports due us so that we do not have
such information by the date it is due, you will be deemed delinquent in
providing us with such reports and you will be in material breach of this
Agreement.
14.3 RISK MANAGEMENT REPORTS. In order to enable us to assist you with
the administration of risk management of workers' compensation and unemployment
compensation matters, you must report to us all accidents and employment
terminations immediately upon their occurrence. You must provide to us all
information regarding workers' compensation losses (including "loss runs") and
status reports from the insurance carrier regarding the progress of the workers'
compensation claims and cases. The risk management reports must be on forms that
we prescribe from time to time and contain all of the information required.
14.4 RETURNS AND FINANCIAL RECORDS. You must maintain readily available
for our inspection, and must furnish to us, within 15 days of filing, exact
copies of any state and local sales and service tax returns and federal and
state payroll and income tax returns filed by you that reflect the operation of
your LABOR WORLD/registered trademark/ Business. You must furnish to us, and to
those designated by us, for inspection or audit, such forms, reports, records,
financial statements, sales and income tax returns and other information as we
may require. You must make such financial records and other information
available at our principal office or such other locations as we request and must
provide us and our designees with full and free access to such records and
information at your LABOR WORLD/registered trademark/ Office during regular
business hours. We and our designee must have the right to make extracts from,
and copies of, all such records and information.
15. INSPECTIONS AND AUDITS.
15.1 OUR RIGHT TO INSPECT. To determine whether you and your LABOR
WORLD/registered trademark/ Business are complying with this Agreement and with
the standards and operating procedures we prescribe for the operation of LABOR
WORLD/registered trademark/ Businesses, we or our agents have the right, at any
reasonable time and without advance notice to you, to:
(a) inspect the LABOR WORLD/registered trademark/ Office;
(b) observe the operations of your LABOR WORLD/registered
trademark/ Business for such consecutive or intermittent periods as we
deem necessary;
(c) interview personnel of your LABOR WORLD/registered
trademark/ Business (including temporary and your full-time employees);
44
(d) interview present and former customers of your LABOR
WORLD/registered trademark/ Business; and
(e) inspect and copy any books, records and documents relating
to the operation of your LABOR WORLD/registered trademark/ Business.
You must cooperate fully with us in connection with any of these inspections,
observations and interviews.
15.2 OUR RIGHT TO AUDIT. We have the right at any time during business
hours, and without advance notice to you, to inspect and audit, or cause to be
inspected and audited, the business records, bookkeeping and accounting records,
sales, payroll and income tax records and returns and other records of your
LABOR WORLD/registered trademark/ Business (and the books and records of any
corporation or partnership which is the franchisee under this Agreement).
(a) COOPERATION: You agree to fully cooperate with our
representatives and any independent accountants we may hire to conduct
any inspection or audit. If any inspection or audit discloses an
understatement of the Gross Profits of your LABOR WORLD/registered
trademark/ Business, you agree to pay us, within 15 days after delivery
of the inspection or audit report, the royalty and service fees, plus
interest and late payment fees due on the amount of the understatement
from the date originally due until the date of payment.
(b) REIMBURSEMENTS: Further, if the inspection or audit is
made necessary by your failure to timely pay amounts due us, furnish
the reports, supporting records, other information, or financial
statements required by this Agreement, or to furnish those reports,
records, information, or financial statements on a timely basis, or if
an understatement of Gross Profits for any 3 consecutive periods is
determined by an audit or inspection to be greater than 3%, you must:
(i) reimburse us for the cost of such inspection or
audit (including, but not limited to, the charges of attorneys
and any independent accountants, and the travel expenses, room
and board and applicable per diem charges for our employees
and agents); and
(ii) at our request, have the annual financial
statements for the LABOR WORLD/registered trademark/ Business
audited or reviewed by an independent certified public
accountant, and provide such audited statements to us within
60 days after the end of your fiscal year.
The above remedies are in addition to all our other remedies and rights under
this Agreement or under applicable law.
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16. OWNERSHIP AND TRANSFER REQUIREMENTS.
16.1 TRANSFER BY US. This Agreement is fully transferable by us and
will inure to the benefit of any person or entity to whom we transfer it, or to
any other legal successor to our interest in this Agreement. However, we will
not assign or transfer this Agreement unless the Assignee provides us with
assurances, satisfactory to us, of its assumption of all of our obligations
hereunder and provides us with evidence, satisfactory to us, of its ability to
do so.
16.2 TRANSFER BY YOU. You understand and acknowledge that the rights
and duties created by this Agreement are personal to you and that we have
entered into this Agreement in reliance on your character, skill, aptitude,
attitude, business ability, and financial capacity (and if you are a corporation
or partnership, on these qualities of your owners). Therefore, except as
provided with respect to assignment to a controlled corporation in Section 16.5,
below, neither this Agreement (or any interest in it), your LABOR
WORLD/registered trademark/ Business (or any interest in it), nor any part or
all of the ownership of the Franchise Associate may be transferred without our
prior written approval, and any such transfer without our approval constitutes a
breach of this Agreement, and will convey no rights to, or interests in, this
Agreement, the LABOR WORLD/registered trademark/ Business or the Franchise
Associate.
As used in this Agreement, the term "TRANSFER" means and includes the
voluntary, involuntary, direct or indirect assignment, sale, or other transfer
of: (a) any interest in this Agreement; (b) any part or all of the ownership of
the Franchise Associate; or (c) your LABOR WORLD/registered trademark/ Business
or any interest in it. An assignment, sale, or other transfer includes:
(i) the transfer of ownership of capital stock
or partnership interests in the Franchise
Associate;
(ii) the merger or consolidation, or issuance of
additional securities representing an
ownership interest in the Franchise
Associate;
(iii) the sale of common stock of the Franchise
Associate sold pursuant to a private
placement or registered public offering;
(iv) the transfer of interest in the Franchise
Associate or your LABOR WORLD/registered
trademark/ Business in a divorce proceeding
or otherwise by operation of law; or
(v) the transfer of an interest in the Franchise
Associate or your LABOR WORLD/registered
trademark/ Business in the event of the
death of the Franchise Associate or an owner
of the Franchise Associate by will,
declaration of or transfer in trust, or
under the laws of intestate succession.
46
16.3 CONDITIONS FOR APPROVAL OF TRANSFER. If you are in full compliance
with this Agreement, we will not unreasonably withhold our approval of a
transfer that meets all the applicable requirements of this Section. The
proposed transferee or its owner(s) must be of good moral character and
otherwise meet our then-applicable standards for franchisees. A transfer of
ownership in your LABOR WORLD/registered trademark/ Business may only be made in
conjunction with a transfer of this Agreement. If the transfer is of a
controlling interest in the Franchise Associate, or is one of a series of
transfers which in the aggregate constitute the transfer of a controlling
interest in the Franchise Associate, all of the following conditions must be met
prior to, or concurrently with, the effective date of the transfer:
(a) the transferee must have sufficient business experience,
aptitude, and financial resources to operate a LABOR WORLD/registered
trademark/ Business;
(b) all your obligations incurred in connection with this
Agreement must be assumed by the transferee;
(c) you must pay such royalty fees and any other amounts owed
to us or our affiliates which are then due and unpaid and all debts to
third parties arising out of the operation of your LABOR
WORLD/registered trademark/ Business must be satisfied or assumed by
the transferee;
(d) the transferee and/or its manager must have satisfactorily
completed our training program;
(e) to the extent such consents are required by the terms of
the lease(s) for the LABOR WORLD/registered trademark/ Office, the
lessor(s) of the LABOR WORLD/registered trademark/ Office must have
consented to the assignment or sublease of the LABOR WORLD/registered
trademark/ Office to the transferee;
(f) the transferee must agree and enter into our then current
form of franchise agreement (and will be deemed to have earned the
transferor's cumulative Gross Profits for purposes of determining the
applicable royalty and service fee, except that if the transferor
earned Gross Profits greater than $1,500,000, the amount will be deemed
to be equal to $1,500,000);
(g) you or the transferee must pay us an amount equal to 25%
of our then-current initial franchise fee for your Exclusive Areas,
plus any direct out-of-pocket expenses we incur for legal and
administrative expenses related to the transfer (such expense will not
exceed $5,000 (subject to CPI adjustment));
(h) the Franchise Associate and its owners must execute a
general release, in form satisfactory to us, of any and all claims
against the Franchisor, its affiliates, and their officers, directors,
employees, and agents;
47
(i) we must approve the material terms and conditions of such
transfer, (which approval will not be given if the price and terms of
payment are so burdensome as to adversely affect the future operations
of the LABOR WORLD/registered trademark/ Business by the transferee);
(j) the Franchise Associate and its transferring owners must
execute a non-competition covenant in favor of us and the transferee,
agreeing that for a period of not less than 2 years, commencing on the
effective date of the transfer, to comply with the provisions of
Section 18.5 of this Agreement;
(k) you and your owners must have entered into an agreement
with us agreeing to subordinate to the transferee's obligations to us,
(including, for example, any royalty and service fees) any obligations
of such transferee to make installment payments of the purchase price
to you and your owners; and
(l) if the transferee is a corporation (or other entity with
limited liability for its owners), its principal owners must sign and
deliver to us our standard form of Principal Owner's Guaranty.
16.4 DEATH OR DISABILITY. If you (or any person owning a controlling
interest in the Franchise Associate where the Franchise Associate is a
corporation) dies or becomes permanently disabled, the executor, administrator,
conservator, or other personal representative of that person must transfer that
interest to a third party approved by us within a reasonable time (not to exceed
9 months), from the date of death or permanent disability. The transfer will be
subject to all the terms and conditions for transfers under Section 16.3 of this
Agreement, except that we will waive the transfer fee described in subsection
16.3(g) above if the transfer is made to an heir or family member. Failure to
transfer in accordance with the provisions of this Section 16.4 or failure to
comply with this Agreement after such death or disability and before such
transfer will constitute a breach of this Agreement.
16.5 TRANSFER TO AN AFFILIATE. This Agreement and the assets and
liabilities of your LABOR WORLD/registered trademark/ Business may be assigned
to an affiliate (corporation, partnership, etc.) that conducts no business other
than your LABOR WORLD/registered trademark/ Business, so long as you actively
manage the affiliate, you own and control 2/3rds of its voting securities (e.g.,
stock, partnership interest, etc.), and you sign and deliver to us our standard
form of Principal Owner's Guaranty so that you personally guarantee the
obligations of the transferee to us. The articles of incorporation, bylaws and
other organizational documents of such entity must recite that the issuance and
assignment of any ownership interest in the entity are restricted by the terms
of this Agreement, and all issued and outstanding securities of such entity must
bear a legend reciting or referring to the restrictions of this Agreement on the
issuance and transfer of such securities. As a condition of our approval of the
issuance or transfer of securities in such entity to any person other than you,
we may require (in addition to the other requirements we have the right to
impose) that such person sign our standard form of Principal Owner's Guaranty,
agreeing to
48
be bound jointly and severally by, to comply with, and to guaranty the
performance of, all of your obligations under this Agreement.
16.6 EFFECT OF CONSENT TO TRANSFER. Our consent to a proposed transfer
of the Franchise or any interest in you or your LABOR WORLD/registered
trademark/ Business pursuant to the provisions of this Section 16 will not
constitute a waiver of any claims we may have against you, or your owners, nor
will it be deemed a waiver of our right to demand exact compliance with any of
the terms or conditions of this Agreement by any transferee.
16.7 RIGHT OF FIRST REFUSAL. If you or your owners must at any time
determine to sell or to transfer, for consideration, this Agreement, your LABOR
WORLD/registered trademark/ Business (or an interest in it) or an ownership
interest in the Franchise Associate, your owners must obtain a bona fide,
executed written offer from a responsible and fully disclosed purchaser and must
submit an exact copy of such offer to us. Such offer must completely set forth
the purchase price, payment terms, terms of assumption of liabilities and all
other material terms of the transfer (and include all exhibits and other
information so that we may readily determine the foregoing). The purchase price
includes any consulting, noncompetition or other compensation to be paid to you
(or your principal owners) for services after the transfer. We will have the
right, exercisable by written notice delivered to you or your owners within 45
days from the date of delivery of an exact copy of such offer to us (with all
supporting documentation), to purchase your rights under this Agreement, your
LABOR WORLD/registered trademark/ Business (or such interest in it), or such
ownership interest in the Franchise Associate for the price and on the terms and
conditions contained in such offer, provided that:
(a) we may substitute cash for any form of payment proposed in
such offer;
(b) our credit will be deemed equal to the credit of any
proposed purchaser; and
(c) we will have not less than 120 days to prepare for
closing.
Provided, however, that we will not have the right of first refusal to acquire
your LABOR WORLD/registered trademark/ Business at the time of any transfer if:
(a) the transfer is made due to your death or disability as
described in Section 16.4 of this Agreement; and
(b) The transfer is to a family member, employee of your LABOR
WORLD/registered trademark/ Business or other person who meets our
qualifications for Franchise Associates, as they exist at the time of
the transfer.
The 45 day period must not commence until you have delivered to us such
documentation for us to fully evaluate the offer, including any exhibits or
supporting schedules. If we do not exercise our right of first refusal, you or
your owners may complete the sale to such purchaser
49
pursuant to and on the terms of such offer, subject to our approval of the
purchaser as provided in Sections 16.2 and 16.3, provided that if the sale to
such purchaser is not completed within 120 days after delivery of such offer to
us, or there is a material change in the terms of the sale, we must again have
the right of first refusal herein provided.
16.8 COMPLIANCE WITH LAWS. You agree that in connection with any
proposed transfer of an interest in this Agreement, your LABOR WORLD/registered
trademark/ Business or you, you will comply with any laws and regulations that
apply to the transfer, including state and federal laws and regulations
governing the offer and sale of franchises. You further agree to indemnify and
hold us and our officers, directors, shareholders, and employees harmless
against any and all claims arising and expense incurred (including attorneys'
fees) directly or indirectly from, as a result of, or in connection with any
alleged failure on your part to comply with any franchise law or other
applicable law.
17. TERMINATION OF THE FRANCHISE.
17.1 TERMINATION BY YOU. If you have fully complied with your
obligations under this Agreement and we materially breach this Agreement, you
will have the right to terminate this Agreement if we do not cure such material
breach within 30 days after we receive a written notice of default from you,
unless the breach cannot reasonably be cured within 30 days, in which case you
will have the right to terminate this Agreement if, after our receipt of a
written notice of default from you, we do not promptly undertake and continue
efforts to cure such material breach within a reasonable period of time, and
furnish you reasonable proof of our efforts. To terminate this Agreement under
this Section you must give us a separate written notice of termination, which
will be effective 30 days after delivery of such notice to us.
17.2 BUY-OUT TERMINATION. Commencing at the beginning of the first full
calendar year following 5 full years of operating your LABOR WORLD/registered
trademark/ Business under this Agreement, you may terminate this Agreement and
we will waive the competitive restrictions imposed by Section 18.5, on the
following conditions:
(a) you must send us written notice 6 months prior to the date
of the proposed buy-out;
(b) you must pay us a buy-out price equal to 12% of the Gross
Revenues of your LABOR WORLD/registered trademark/ Business during the
immediately preceding 12 calendar months;
(c) the notice must include a cash deposit of 1/3rd of the
amount due us for the buy-out, along with a promissory note for the
balance on such forms as we prescribe and our standard form of mutual
termination agreement utilized in this context;
(d) 50% of the balance of the buy-out amount must be paid on
the actual date of termination, and the remainder must be paid in 12
equal monthly payments bearing
50
interest at the annual rate of the prime rate charged by Citibank,
N.A. plus 5% as of the date of the notice;
(e) interest on the note accrues from the date we receive your
notice;
(f) if after sending us a notice to buy out this Agreement,
you do not consummate the transaction, we may either:
(i) retain 50% of the deposit paid with your
notice as liquidated damages and keep this
Agreement in force; or
(ii) purchase your LABOR WORLD/registered
trademark/ Business on the terms described
in Section 18.6, retain the deposit and
return the promissory note.
Your option to terminate this Agreement through this buy-out procedure
automatically ceases if we grant you a successor franchise as described in
Section 3 of this Agreement. Any buy-out option at that time will be governed by
the terms of the successor franchise agreement. If you exercise and fully comply
with the buy-out procedures described in this Section, we will waive the
post-termination competitive restrictions described in Section 18.5 of this
Agreement and our right to purchase your LABOR WORLD/registered trademark/
Business as described in Section 18.6. However, you will remain responsible for
compliance with all of the other post-termination obligations described in
Section 18 or otherwise in this Agreement. If you (or one of your principal
owners) owns or has a controlling interest in one or more additional LABOR
WORLD/registered trademark/ Businesses, you may only exercise your right to buy
out this Agreement if you (or such principal owner) also exercise such
terminations rights with respect to all LABOR WORLD/registered trademark/
Businesses in which you or such principal owner hold equity interest.
17.3 TERMINATION BY US. We may terminate this Agreement in accordance
with the following provisions:
(a) WITH NOTICE: We may terminate this Agreement upon the
occurrence of any of the following events and your failure to cure
within the specified time period:
(i) You fail to pay when due any royalty and
service fees or other payments due to us or
our affiliates that you do not cure within
30 days after you have received written
notice of default from us. To terminate the
Franchise Agreement under this subsection,
we must give you a separate written notice
of termination, which will be effective 30
days after delivery of such notice to you;
or
(ii) You submit 3 or more monthly reports or
annual financial statements, income tax
returns or other reports and records that
understate by 3% or more, the Gross Profits
of your LABOR WORLD/registered trademark/
Business or otherwise furnish to us
information
51
containing material misstatements or
omissions to state information which makes
the other information false or misleading.
We may terminate if you do not cure such
breach within 30 days after you have
received a written notice of default from
us, unless the breach cannot reasonably be
cured within 30 days, in which case we will
have the right to terminate this Agreement
if you do not promptly undertake and
continue efforts to cure such material
breach within a reasonable period of time,
and furnish us with reasonable proof of your
efforts. To terminate this Agreement under
this subsection, we must give you a separate
written notice of termination, which will be
effective 30 days after delivery of such
notice to you; or
(iii) You experience a cancellation of, or fail to
renew or extend the lease or sublease for,
or otherwise fail to maintain possession of
the LABOR WORLD/registered trademark/Office
and fail to secure a suitable alternative
location approved by us. We must give you 15
days written notice and also notify the
Grievance Committee of the Franchise
Advisory Board. The Grievance Committee will
then have 15 calendar days from our notice
to them to advise us if they agree or
disagree regarding cause for termination. If
the Grievance Committee (in good faith)
determines that there is not cause for
termination, we will not proceed with
termination of your Franchise Agreement.
However, if the Grievance Committee agrees
that there is cause for termination, we will
notify you and you will have 30 days to cure
the default. If you do not cure the default
within such 30 day period, we will have the
right to terminate the Franchise Agreement.
To terminate the Franchise Agreement we will
then give you a separate written notice of
termination, which will be effective
immediately; or
(iv) You fail to submit when due reports or other
data, information, supporting records, tax
returns or financial statements, or
otherwise fail to comply with this Agreement
or any other agreement between you and us or
our affiliates. We must give you 15 days
written notice and also notify the Grievance
Committee of the Franchise Advisory Board
(utilizing the same procedures as described
in subsection 17.3(a)(iii); or
(v) You repeatedly fail to conform or adhere to
any one or more of our standards,
specifications and procedures for the
operation of a LABOR WORLD/registered
trademark/ Business. We must give you 15
days written notice and also notify the
Grievance Committee of the Franchise
52
Advisory Board (utilizing the same
procedures as described in subsection
17.3(a)(iii); or
(vi) You fail to comply with any other provision
of this Agreement or any mandatory
specification, standard, or operating
procedure we prescribe and do not: (i)
correct any failure within 30 days after
written notice of the failure to comply is
delivered to you or (ii) if the failure
cannot reasonably be corrected within 30
days after notice, undertake within 10 days
after notice, and continue, efforts to bring
your LABOR WORLD/registered
trademark/Business into full compliance (in
this case, you must furnish proof acceptable
to us, whenever we request it, of your
efforts and the date of their expected
completion). We must give you 15 days
written notice and also notify the Grievance
Committee of the Franchise Advisory Board
(utilizing the same procedures as described
in subsection 17.3(a)(iii).
If you have utilized your best efforts to comply with all of the
insurance coverage requirements of Section 12.8 of this Agreement, and you
provide us with proof satisfactory to us that you have done so, we will not
terminate this Agreement, if you are unable to obtain insurance that complies
with the provisions of subsection 12.8(c)(ii)-(vii). However, you must continue
efforts to obtain insurance that complies with all requirements of Section 12.8
at any time we notify you.
We may also terminate this Agreement on delivery of written notice to
you, if you do not complete to our satisfaction, or if you fail to attend,
without good cause in our judgment, any mandatory training program or LABOR
WORLD/registered trademark/ conference, as required by Section 5.5.
(b) WITHOUT NOTICE: We may terminate this Agreement without
further action by us or notice to you, if you:
(i) make an unauthorized direct or indirect
assignment of this Agreement or an ownership
interest in the Franchise Associate or fail
or refuse to assign this Agreement or the
interest in the Franchise Associate of a
deceased or disabled controlling owner
thereof as required by this Agreement; or
(ii) abandon, surrender or transfer control of
the operation of your LABOR WORLD/registered
trademark/ Business without our advance
written approval or otherwise fail to
continuously and actively operate your LABOR
WORLD/registered trademark/ Business for a
period of 5 or more consecutive days; or
(iii) have made any material misrepresentation or
omission in applying for the Franchise; or
53
(iv) file a voluntary or involuntary petition in
bankruptcy or have a petition in bankruptcy
filed against you or you otherwise make an
assignment for the benefit of creditors or
experience any act of insolvency or enter
into any proceedings for the benefit of
creditors; or
(v) are convicted by a trial court of or plead
no contest to a felony, or other crime or
offense that is likely to adversely affect
your reputation, our reputation, or the
reputation of your LABOR WORLD/registered
trademark/ Business or any other LABOR
WORLD/registered trademark/ Business office;
or
(vi) fail to deliver to us when due any required
reports of the operation, or of the Gross
Profits, of your LABOR WORLD/registered
trademark/ Business, or fail to make payment
of any amounts due to us or our affiliates
for royalty and service fees, purchases, or
any other payments due us or our affiliates,
on 3 or more separate occasions, within a 12
month period, after we have notified you of
such a default; or
(vii) make any unauthorized use, duplication or
disclosure of any Confidential Information,
the Marks, or the Manual; or
(viii) 9 months after death, or appointment of a
committee guardian of the person or estate
of Franchisee, if Franchisee is an
individual; 9 months after the death,
insanity, or appointment of a committee or
guardian of the person or estate of the
principal shareholder, if you are a
corporation; provided, however, this
Agreement must not terminate if, within said
9 month period, it is assigned in accordance
with the provisions.
18. RIGHTS AND OBLIGATIONS UPON TERMINATION OR EXPIRATION OF THE FRANCHISE.
18.1 PAYMENT OF AMOUNTS OWED TO US. You agree to pay us within 7 days
after the effective date of termination or expiration of this Agreement, or any
later date that the amounts due to us are determined, any royalty and service
fees, amounts owed for your purchases from us or our affiliates, amounts due us
under any promissory notes with us, interest due on any of the above, and all
other amounts owed to us or our affiliates which are then unpaid. In addition,
you must pay all suppliers all amounts owed to them as of the date of
termination.
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18.2 MARKS. You agree that no later than 7 days after the termination
or expiration of this Agreement you must:
(a) not directly or indirectly at any time identify yourself
or any business with which you are associated as a current or former
LABOR WORLD/registered trademark/ Business or franchisee;
(b) not use any Mark or any colorable imitation of any Mark in
any manner or for any purpose, or use for any purpose any trademark or
other commercial symbol that suggests or indicates an association with
us;
(c) return to us, remove the Marks from, or destroy (whichever
we specify) all forms and materials containing any Mark or otherwise
relating to a LABOR WORLD/registered trademark/ Business office;
(d) take any action that may be required to cancel all
fictitious or assumed name or equivalent registrations relating to your
use of any Mark;
(e) cease all use of the Software and the Manuals and
disconnect from the Network (all rights to use the Software
automatically revert back to us)
(f) deliver to us all materials we have furnished you
pertaining to the Software or the Network (including all disks, copies
and Manuals);
(g) furnish to us, within 30 days after the effective date of
termination or expiration, evidence satisfactory to us of your
compliance with the above obligations; and
(h) comply with all of the post-termination obligations of any
other agreements you have with us or our affiliates that also terminate
or expire when this Agreement is terminated.
18.3 DE-IDENTIFICATION. If you retain possession of the LABOR
WORLD/registered trademark/ Office after the termination or expiration of this
Agreement, you must completely remove or modify, at your sole expense, any part
of the interior and exterior decor as may be necessary in our judgment to
disassociate the LABOR WORLD/registered trademark/ Office from the image of
LABOR WORLD/registered trademark/ Businesses, including but not limited to
removal of all signs and graphic materials authorized by us for use at your
LABOR WORLD/registered trademark/ Office. If you do not take the actions we
request within 30 days after notice from us, we have the right to enter the
LABOR WORLD/registered trademark/ Office and make the required changes at your
expense, and you agree to reimburse us for those expenses on demand.
18.4 CONFIDENTIAL INFORMATION. You agree that on termination or
expiration of this Agreement you will immediately cease to use any of the
Confidential Information, and will not use it in any business or for any other
purpose. You further agree to immediately return to us
55
your copy of the Manual and any other materials containing any of the
Confidential Information which we have loaned or otherwise provided to you.
18.5 POST-TERM COMPETITIVE RESTRICTIONS. In the event of transfer,
termination or expiration of this Agreement in accordance with its terms, you
(and each shareholder or partner of any corporation or partnership that is the
Franchise Associate) agree that for a period of two years after the effective
date of termination or expiration, or the date on which you stop operating your
LABOR WORLD/registered trademark/ Business, whichever is later, neither you, nor
any member of your immediate family, nor any such shareholder or partner will:
(a) engage in a Competitive Business or perform services of,
directly or indirectly, on behalf of yourself or any other person or as
an employee, proprietor, owner, partner, agent, contractor, employer,
consultant, affiliate, or as a director, officer or associate or as a
stockholder of any person or entity within an area that is within a 25
mile radius of the LABOR WORLD/registered trademark/ Office or of any
other LABOR WORLD/registered trademark/ Business whether owned by us,
our affiliates or any of our franchise associates; and/or
(b) have any direct or indirect interest, as a disclosed or
beneficial owner, in any Competitive Business within the area described
in subsection 18.5(a) above, except in accordance with other franchise
agreements with us; and/or
(c) perform services as a director, officer, manager,
employee, consultant, representative, agent, independent contractor or
otherwise for any Competitive Business, except other LABOR
WORLD/registered trademark/ Businesses operated under franchise
agreements with us; and/or
(d) have any direct or indirect interest in any entity which
is granted or is granting franchises or licenses to others to operate a
Competitive Business, except other LABOR WORLD/registered trademark/
Businesses operating under franchise agreements with us; and/or
(e) recruit or hire any employee of ours, our affiliates or
our franchise associates without our prior written consent and/or that
of the other franchise associate or affiliate; and/or
(f) directly or indirectly, on behalf of yourself or any other
person, or as an employee, proprietor, consultant, agent, contractor,
employer, affiliate, partner, owner, officer, director or associate, or
stockholder of any other person or entity, or in any other capacity,
solicit, divert, take away, or interfere with any of the business,
customers, clients, contractors, trade or patronage of ours, our
affiliates or any of our franchise associates as such may exist during
the term of this Agreement or afterwards.
Notwithstanding the foregoing, the ownership of other LABOR WORLD/registered
trademark/ Business offices under agreements with us and the aggregate ownership
of 2% or less of the issued and outstanding shares of any class of stock of a
publicly traded company by the persons to whom this
56
Section 18.5 applies is not prohibited by this Section. The time period during
which the post-term covenant not to compete described in this Section 18.5 of
this Agreement regarding refraining from any of the activities listed in Section
18.5 above, must be extended by any length of time in which you or any of your
affiliates, successors or assigns or any other party described above are in
breach of any provision of this Agreement (including the limitations of this
Section). The provisions of this Section must continue in full force and effect
through the duration of the extended time period.
18.6 OUR RIGHT TO PURCHASE THE LABOR WORLD/registered trademark/
BUSINESS. Upon expiration of the term of this Agreement, if you are given the
right to renew the Franchise and decline to do so, or if we terminate this
Agreement in accordance with the terms of this Agreement, or if you terminate
this Agreement without grounds to do so, or if this Agreement terminates for any
reason whatsoever, we or our designee have the option, exercisable by giving
written notice thereof within 30 days from the date of such expiration or
termination, to purchase from you all the assets of the LABOR WORLD/registered
trademark/ Business and to assume your rights and obligations under the lease
for the LABOR WORLD/registered trademark/ Office.
(a) INCLUDED ASSETS: Assets include, without limitation,
leasehold improvements, equipment, furniture, furnishings, signs; and
must exclude intangible assets such as goodwill, any unamortized
portion of the initial franchise fee, cash and short-term investments.
If we exercise our option, you must assign to us the lease for the
LABOR WORLD/registered trademark/ Office (or, if an assignment is
prohibited, a sublease for the full remaining term and on the same
terms and conditions as your lease). We or our designee will be
entitled to all customary warranties and representations in connection
with our asset purchase, including without limitation, representations
and warranties as to ownership, condition and title to assets, liens
and encumbrances on the assets, validity of contracts and agreements,
and liabilities inuring to us or affecting the assets, contingent or
otherwise.
(b) LEASE OF LABOR WORLD/registered trademark/ OFFICE: If you
own the LABOR WORLD/registered trademark/ Office, you must grant to us
or our designee a standard commercial lease for a term of 10 years, at
a rental rate of the lesser of the amount charged as rental expense for
federal income tax purposes or the prevailing market rate for similarly
situated and similar quality real estate within the Exclusive Area;
plus all costs incurred by you in connection with the payment of real
estate taxes, insurance and assessments for the office. We will have
the unrestricted right to assign this option to purchase.
(c) PURCHASE PRICE: The purchase price for the assets of the
LABOR WORLD/registered trademark/ Business will be the Book Value (as
defined below).
(d) BOOK VALUE DEFINITION: "BOOK VALUE" means the net book
value of the tangible assets of the LABOR WORLD/registered trademark/
Business as disclosed by the balance sheet of the last four-week
statement of the LABOR WORLD/registered trademark/ Business required to
have been
57
submitted to us pursuant to this Agreement prior to such termination or
expiration, provided, that:
(i) each depreciable asset must be valued as if
it has been depreciated on a "straight-line"
basis from the date of its acquisition over
its useful life without provision for
salvage value; and
(ii) we may exclude from the assets purchased any
fixtures, equipment, furniture, signs or
supplies that have not been acquired in
compliance with the provisions of this
Agreement.
(e) METHODS OF PAYMENT: We will pay the purchase price in cash
at the closing of the purchase. The closing will occur no later than 90
days after receipt by you of our notice to exercise the option to
purchase. At the closing you must deliver to us instruments
transferring to us or our assignee: (a) good and merchantable title to
the assets purchased, free and clear of all liens and encumbrances
(other than liens and security interests acceptable to us or our
designee), with all sales and other transfer taxes paid by you; and (b)
all licenses of the LABOR WORLD/registered trademark/ Business and/or
permits which may be assigned or transferred. If you cannot deliver
clear title to all of the purchased assets, or if there are other
unresolved issues, the closing will be accomplished through an escrow.
We will set off against and reduce the purchase price by any and all
amounts owed by you to us, and the amount of any encumbrances or liens
against the assets.
(f) INTERIM OPERATION: If we or our assignee exercise this
option to purchase, pending the closing of such purchase, we will have
the right to appoint a manager to maintain the operation of the LABOR
WORLD/registered trademark/ Business. Alternatively, we may require you
to close the LABOR WORLD/registered trademark/ Business during such
time period without removing any assets from its premises. You must
maintain in force all insurance policies required by Section 12.8 until
the date of closing.
18.7 CONTINUING OBLIGATIONS. All obligations under this Agreement
(whether yours or ours) which expressly or by their nature survive the
expiration or termination of this Agreement will continue in full force and
effect after and notwithstanding its expiration or termination until they are
satisfied in full or by their nature expire.
18.8 COMPLIANCE WITH OTHER AGREEMENTS. You may enter into other
agreements with us or our affiliates that may terminate or expire if this
Agreement is terminated or expires. If so, you must comply with all of the
post-termination provisions of such agreement immediately in accordance with
their terms.
19. ENFORCEMENT.
19.1 SEVERABILITY; SUBSTITUTION OF VALID PROVISIONS. Except as
otherwise stated in this Agreement, each term of this Agreement, and any portion
of any term, are severable. The
58
remainder of this Agreement will continue in full force and effect. To the
extent that any provision restricting your competitive activities is deemed
unenforceable, you and we agree that such provisions will be enforced to the
fullest extent permissible under governing law. This Agreement will be deemed
automatically modified to comply with such governing law if any applicable law
requires: (a) a greater prior notice of the termination of or refusal to renew
this Agreement; or (b) or the taking of some other action not described in this
Agreement; or (c) if any LABOR WORLD/registered trademark/ System Standard is
invalid or unenforceable. We may modify such invalid or unenforceable provision
to the extent required to be valid and enforceable. In such event, you will be
bound by the modified provisions.
19.2 WAIVERS. We will not be deemed to have waived our right to demand
exact compliance with any of the terms of this Agreement, even if at any time:
(a) we do not exercise a right or power available to us under this Agreement; or
(b) insist on your strict compliance with the terms of this Agreement; or (c) if
there develops a custom or practice which is at variance with the terms of this
Agreement; or (d) if we accept payments which are otherwise due to us under this
Agreement. Similarly, our waiver of any particular breach or series of breaches
under this Agreement or of any similar term in any other agreement between you
and us or between us and any other franchise associate, will not effect our
rights with respect to any later breach by you or anyone else.
19.3 LIMITATION OF LIABILITY. Neither of the parties will be liable for
loss or damage or deemed to be in breach of this Agreement if failure to perform
obligations results from:
(a) compliance with any law, ruling, order, regulation,
requirement or instruc- tion of any federal, state or municipal
government or any department or agency thereof;
(b) acts of God;
(c) acts or omissions of a similar event or cause; or
(d) any such delay as may be reasonable.
However, such delays or events do not excuse payments of amounts owed at any
time.
19.4 APPROVAL AND CONSENTS. Whenever this Agreement requires our
advance approval, agreement or consent, you agree to make a timely written
request for it. Our approval or consent will not be valid unless it is in
writing. Except where expressly stated otherwise in this Agreement, we have the
absolute right to refuse any request by you or to withhold our approval of any
action or omission by you. If we provide to you any waiver, approval, consent,
or suggestion, or if we neglect or delay our response or deny any request for
any of those, we will not be deemed to have made any warranties or guarantees
which you may rely on, and will not assume any liability or obligation to you.
59
19.5 WAIVER OF PUNITIVE DAMAGES. WITHOUT LIMITING YOUR OBLIGATIONS TO
INDEMNIFY US PURSUANT TO SECTION 9.4 OF THIS AGREEMENT, YOU AND WE EACH WAIVE TO
THE FULL EXTENT PERMITTED BY LAW ANY RIGHT TO, OR CLAIM FOR, ANY PUNITIVE OR
EXEMPLARY DAMAGES AGAINST THE OTHER. YOU AND WE ALSO AGREE THAT, IN THE EVENT OF
A DISPUTE BETWEEN YOU AND US, THE PARTY MAKING A CLAIM WILL BE LIMITED TO
RECOVERY OF ANY ACTUAL DAMAGES IT SUSTAINS.
19.6 LIMITATIONS OF CLAIMS. ANY AND ALL CLAIMS ARISING OUT OF THIS
AGREEMENT OR THE RELATIONSHIP AMONG YOU AND US MUST BE MADE BY WRITTEN NOTICE TO
THE OTHER PARTY WITHIN 1 YEAR FROM THE OCCURRENCE OF THE FACTS GIVING RISE TO
SUCH CLAIM (REGARDLESS OF WHEN IT BECOMES KNOWN); EXCEPT FOR CLAIMS ARISING
FROM: (A) UNDER-REPORTING OF GROSS PROFITS; (B) UNDER-PAYMENT OF AMOUNTS OWED TO
US OR OUR AFFILIATES; (C) CLAIMS FOR INDEMNIFICATION; AND/OR (D) UNAUTHORIZED
USE OF THE MARKS. HOWEVER, THIS PROVISION DOES NOT LIMIT THE RIGHT TO TERMINATE
THIS AGREEMENT IN ANY WAY.
19.7 GOVERNING LAW. EXCEPT TO THE EXTENT THIS AGREEMENT OR ANY
PARTICULAR DISPUTE IS GOVERNED BY THE U.S. TRADEMARK ACT OF 1946 (LANHAM ACT, 15
U.S.C. SS.1051 AND THE SECTIONS FOLLOWING IT) OR OTHER FEDERAL LAW, THIS
AGREEMENT AND THE FRANCHISE ARE GOVERNED BY FLORIDA LAW, EXCLUDING ANY LAW
REGULATING THE SALE OF FRANCHISES OR GOVERNING THE RELATIONSHIP BETWEEN A
FRANCHISOR AND FRANCHISE ASSOCIATE, UNLESS THE JURISDICTIONAL REQUIREMENTS OF
SUCH LAWS ARE MET INDEPENDENTLY WITHOUT REFERENCE TO THIS SECTION. ALL MATTERS
RELATING TO ARBITRATION ARE GOVERNED BY THE FEDERAL ARBITRATION ACT.
19.8 JURISDICTION. YOU CONSENT AND IRREVOCABLY SUBMIT TO THE
JURISDICTION AND VENUE OF ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION
LOCATED IN PALM BEACH COUNTY, FLORIDA AND WAIVE ANY OBJECTION TO THE
JURISDICTION AND VENUE OF SUCH COURTS.
19.9 WAIVER OF JURY TRIAL. YOU AND WE EACH IRREVOCABLY WAIVE TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER AT LAW OR IN EQUITY,
BROUGHT BY EITHER YOU OR US.
19.10 CUMULATIVE REMEDIES. The rights and remedies provided in this
Agreement are cumulative and neither you nor we will be prohibited from
exercising any other right or remedy provided under this Agreement or permitted
by law or equity.
19.11 COSTS AND ATTORNEYS' FEES. If a claim for amounts owed by you to
us or any of our affiliates is asserted in any legal or arbitration proceeding
or if either you or we are
60
required to enforce this Agreement in a judicial or arbitration proceeding, the
party prevailing in such proceeding will be entitled to reimbursement of its
costs and expenses, including reasonable accounting and attorneys fees.
Attorneys fees will include, without limitation, reasonable legal fees charged
by attorneys, paralegal fees, and costs and disbursements, whether incurred
prior to, or in preparation for, or contemplation of, the filing of written
demand or claim, action, hearing, proceeding to enforce the obligations of the
parties under this Agreement.
19.12 BINDING EFFECT. This Agreement is binding on and will inure to
the benefit of our successors and assigns. Except as otherwise provided in this
Agreement, this Agreement will also be binding on your successors and assigns,
and your heirs, executors and administrators.
19.13 ENTIRE AGREEMENT. This Agreement, including the introduction,
addenda and exhibits to it, constitutes the entire agreement between you and us.
There are no other oral or written understandings or agreements between you and
us concerning the subject matter of this Agreement. Except as expressly provided
otherwise in this Agreement, this Agreement may be modified only by written
agreement signed by both you and us.
19.14 NO LIABILITY TO OTHERS; NO OTHER BENEFICIARIES. We will not,
because of this Agreement or by virtue of any approvals, advice or services
provided to you, be liable to any person or legal entity who is not a party to
this Agreement. Except as specifically described in this Agreement, no other
party has any rights because of this Agreement.
19.15 CONSTRUCTION. The headings of the sections are for convenience
only. If two or more persons are at any time franchise associates hereunder,
whether or not as partners or joint venturers, their obligations and liabilities
to us are joint and several. This Agreement may be signed in multiple copies,
each of which will be an original. The phrase "A OR B" (or the like) means "A OR
B OR BOTH."
19.16 CERTAIN DEFINITIONS. The term "FAMILY MEMBER" refers to parents,
spouses, offspring and siblings, and the parents and siblings of spouses. The
term "AFFILIATE" means any company directly or indirectly owned or controlled by
a person, under common control with a person or controlled by a person. The
terms "FRANCHISEE, FRANCHISE ASSOCIATE, FRANCHISE ASSOCIATE, YOU AND YOUR" are
applicable to one or more persons, a corporation or a partnership, as the case
may be. The singular use of any pronoun also includes the plural and the
masculine and neuter usages include the other and the feminine. The term
"PERSON" includes individuals, corporations, partnerships and all artificial
entities. The term "SECTION" refers to a section or subsection of this
Agreement. The term "INCLUDING" means "INCLUDING BUT NOT LIMITED TO." The term
"PRINCIPAL OWNER" includes any person who has any beneficial, ownership or
voting interest in any entity (corporation, partnership, etc.), disclosed or
undisclosed, direct or indirect.
19.17 TIMING. It will be a material breach of this Agreement to fail to
perform any obligation within the time required or permitted by this Agreement.
All references to time mean the time at the LABOR WORLD/registered trademark/
National Support Center. In computing time periods from
61
one date to a later date, the words "FROM" and "BEGINNING ON" (and similar
terms) mean "FROM AND INCLUDING;" and the words "TO," "UNTIL" and "ENDING ON"
(and similar terms) mean "TO BUT EXCLUDING."
19.18 EFFECTIVE DATE. The effective date of this Agreement is the date
shown on the cover page. However, this Agreement is not binding on us, and no
franchise is granted, until we accept this Agreement by signing it.
20. ARBITRATION.
20.1 AGREEMENT TO ARBITRATE. EXCEPT FOR CLAIMS (AS DEFINED BELOW)
RELATED TO OR BASED ON THE MARKS (WHICH AT OUR SOLE OPTION MAY BE SUBMITTED TO
ANY COURT OF COMPETENT JURISDICTION) AND EXCEPT AS OTHERWISE EXPRESSLY PROVIDED
BY SECTION 20.4 OF THIS AGREEMENT, any litigation, claim, dispute, suit, action,
controversy, proceeding or otherwise ("CLAIM") between or involving you and us
(and/or involving you and/or any claim against or involving any of our or our
affiliates, shareholders, directors, partners, officers, employees, agents,
attorneys, accountants, affiliates, guarantors or otherwise) whether involving
this Agreement, any other agreement between you and us, or otherwise, which are
not resolved within 45 days of notice from either you or we to the other, will
be submitted to arbitration to the office of the American Arbitration
Association closest to our headquarters. The arbitration will be conducted by
the American Arbitration Association pursuant to its Commercial Arbitration
Rules. The parties to any arbitration will execute an appropriate
confidentiality agreement, excepting only such disclosures and filings as are
required by law.
20.2 PLACE AND PROCEDURE. The arbitration proceedings will be conducted
in Palm Beach County, Florida. Any Claim and any arbitration will be conducted
and resolved on an individual basis only and not a class-wide, multiple
plaintiff or similar basis. Any such arbitration proceeding will not be
consolidated with any other arbitration proceeding involving any other person,
except for disputes involving affiliates of the parties to such arbitration. The
parties agree that, in connection with any such arbitration proceeding, each
must submit or file any claim which would constitute a compulsory counterclaim
(as defined by Rule 13 of the Federal Rules of Civil Procedure) within the same
proceeding as the Claim to which it relates. Any such Claim which is not
submitted or filed in such proceeding will be barred.
20.3 AWARDS AND DECISIONS. The arbitrator will have the right to award
any relief which he deems proper in the circumstances, including, for example,
money damages (with interest on unpaid amounts from their due date(s)), specific
performance, temporary and/or permanent injunctive relief, and reimbursement of
attorneys' fees and related costs to the prevailing party. The arbitrator will
not have the authority to award exemplary or punitive damages. The award and
decision of the arbitrator will be conclusive and binding. The parties
acknowledge and agree that any arbitration award may be enforced against either
or both of them in a court of competent jurisdiction and each waives any right
to contest the validity or enforceability of such award. Without limiting the
foregoing, the parties will be entitled in any
62
such arbitration proceeding to the entry of an order by a court of competent
jurisdiction pursuant to an opinion of the arbitrator for specific performance
of any of the requirements of this Agreement. Judgment upon an arbitration award
may be entered in any court having jurisdiction and will be binding, final and
non-appealable.
20.4 SPECIFIC PERFORMANCE. Nothing in this Agreement bars our rights to
obtain specific performance of the provisions of this Agreement and injunctive
relief against threatened conduct that will cause us loss or damage, under
customary equity rules, including applicable rules for obtaining restraining
orders and preliminary injunctions, by application to a court of competent
jurisdiction. You agree that we may have injunctive relief, without bond, but
upon due notice, in addition to such further and other relief as may be
available at equity or law, and your sole remedy, in the event of the entry of
such injunction, will be the dissolution of such injunction, if warranted, upon
hearing duly had (all claims for damages by reason of the wrongful issuance of
any such injunction being expressly waived hereby).
20.5 SURVIVAL. This provision continues in full force and effect
subsequent to and notwithstanding the expiration or termination of this
Agreement for any reason.
21. NOTICES AND PAYMENTS.
All written notices and reports permitted or required under this
Agreement or by the Manuals will be deemed delivered:
(a) at the time delivered by hand;
(b) 1 business day after transmission by facsimile, telecopy
or other electronic system;
(c) 2 business days after being placed in the hands of a
commercial airborne courier service for next business day delivery; or
(d) 3 business days after placement in the United States mail
by registered or certified mail, return receipt requested, postage
prepaid.
All such notices must be addressed to the parties as follows:
If to Us: OUTSOURCE FRANCHISING, INC.
8000 North Federal Highway
Boca Raton, Florida 33487
Attention: Robert A. Lefcort
63
If to You: ______________________________
______________________________
______________________________
______________________________
Attention:____________________
Either you or we may change the address for delivery of all notices and
reports and any such notice will be effective within 10 business days of any
change in address. Any required payment or report not actually received by us
during regular business hours on the date due (or postmarked by postal
authorities at least 2 days prior to such date, or in which the receipt from the
commercial courier service is not dated prior to 2 days prior to such date) will
be deemed delinquent.
Intending to be bound you and we sign and deliver this Agreement in 2
counterparts effective on the Agreement Date, regardless of the actual date of
signature.
OUTSOURCE FRANCHISING, INC.
By:
- --------------------------------- -----------------------------
FRANCHISE ASSOCIATE (Print Name) Robert A. Lefcort
Executive Vice President
Date: Date:
---------------------------- ---------------------------
- --------------------------------
FRANCHISE ASSOCIATE (Signature)
Date:
---------------------------
64
EXHIBIT "A"
TO THE
OUTSOURCE FRANCHISING, INC.
FRANCHISE AGREEMENT
DATED _______________, 19__
WITH
---------------------------
(NAME OF FRANCHISE ASSOCIATE)
1. EXCLUSIVE AREA: Your Exclusive Area is as follows: _______________
______________________________________________________________________________
______________________________________________________________________________
The population of your Exclusive Area is estimated at:_______________________.
2. MINIMUM GROSS PROFITS: The level of Gross Profits ("MINIMUM GROSS
PROFITS") that you must achieve in operating your LABOR WORLD/registered
trademark/ Business during the term of thiS Agreement are as follows:
TIME PERIOD MINIMUM GROSS PROFITS
Year 1 $_________
Year 2 $_________
Year 3 $_________
Year 4 $_________
Year 5 and thereafter $_________
"Year 1" commences on the Agreement Date and ends on the day immediately prior
to the anniversary of the Agreement Date. "Year 2" commences on the first
anniversary of the Agreement Date; and so on.
OUTSOURCE FRANCHISING, INC.
By:
---------------------------- ------------------------------
Name: Robert A. Lefcort Signature
Title: Executive Vice President
------------------------------
Print Name
Date:---------------------------- Date: ------------------------
A-1
EXHIBIT "B"
TO THE OUTSOURCE FRANCHISING, INC.
FRANCHISE AGREEMENT
DATED ____________, 199_
WITH
---------------------------
(NAME OF FRANCHISE ASSOCIATE)
YOU AND YOUR OWNERS
-------------------
This form must be completed by you if you have multiple owners or if
you or your franchised business is owned by a business organization (like a
corporation, partnership or limited liability company). We are relying on its
truth and accuracy in awarding the franchise to you.
1. FORM OF OWNER. You are a (check one):
(a) General Partnership [ ]
(b) Corporation [ ]
(c) Limited Partnership [ ]
(d) Limited Liability Company [ ]
(e) Other [ ]
Specify:
You were formed under the laws of ___________________________________.
(state)
2. BUSINESS ENTITY. You were incorporated or formed on
___________________________, 19__, under the laws of the State of
__________________________. You have not conducted business under any name other
than your corporate, limited liability company or partnership name and
_________________________________________. The following is a list of all
persons who have management rights and powers (e.g., officers, managers,
partners, etc.) and their positions are listed below:
NAME OF PERSON POSITION(S) HELD
- ------------------------------------ ---------------------------------
- ------------------------------------ ---------------------------------
- ------------------------------------ ---------------------------------
- ------------------------------------ ---------------------------------
- ------------------------------------ ---------------------------------
B-1
3. OWNERS. The following list includes the full name and mailing
address of each person who is one of your owners and fully describes the nature
of each owner's interest. Attach additional sheets if necessary.
OWNER'S NAME AND ADDRESS DESCRIPTION OF INTEREST
- ------------------------------------ ---------------------------------
- ------------------------------------ ---------------------------------
- ------------------------------------ ---------------------------------
- ------------------------------------ ---------------------------------
4. GOVERNING DOCUMENTS. Attached are copies of the documents and
contracts governing the ownership, management and other significant aspects of
the business organization (e.g., articles of incorporation or organization,
partnership or shareholder agreements, etc.).
This Exhibit "B" is current and complete as of _____________, 199_
OWNER
INDIVIDUALS:
------------------------------------
[Signature]
------------------------------------
[Print Name]
------------------------------------
[Signature]
------------------------------------
[Print Name]
CORPORATION, LIMITED LIABILITY
COMPANY OR PARTNERSHIP:
------------------------------------
[Name]
By:
--------------------------------
Title:
---------------------------
B-2
EXHIBIT "C"
TO THE
OUTSOURCE FRANCHISING, INC.
FRANCHISE AGREEMENT
DATED ________________, 19__
WITH
---------------------------
(NAME OF FRANCHISE ASSOCIATE)
GLOSSARY
TERM DESCRIPTION
---- -----------
AFFILIATE Any company directly or indirectly owned or controlled by
Sectio 19.16 a person, under common control with a person or controlled
by a person.
AGREEMENT The Franchise Agreement between you and us.
1st Paragraph
AGREEMENT DATE The effective date of the Agreement.
1st Paragraph
ASSOCIATION An association of LABOR WORLD/registered trademark/
Section 13.3 Franchise Associates in A geographic area in which your
LABOR WORLD/registered trademark/ Business iS located.
BASE LEVEL SUPPORT Certain support that we provide you at no additional
Section 6.1 charge during the term of the Agreement.
BOOK VALUE The net book value of the tangible assets of your LABOR
Section 18.6(d) WORLD/registered trademark/ Business.
CLAIM Any litigation, claim, dispute, suit, action, controversy,
Section 20.1 proceeding or otherwise between or involving you and us
(and/or involving you and/or any claim against or
involving any of our affiliates, shareholders, directors,
partners, officers, employees, agents, attorneys,
accountants, affiliates, guarantors or otherwise) whether
involving this Agreement, any other agreement between you
and us, or otherwise.
COMPETITIVE Any business operating, or granting franchises or licenses
BUSINESS to others to operate, any temporary personnel business, or
Section 10.5(c) any other business that provides the same or similar
services as are customarily offered by LABOR
WORLD/registered trademark/ Businesses.
C-1
TERM DESCRIPTION
---- -----------
COMPUTER SYSTEM The set of the Designated Hardware and the Software for
Section 7.1 use in your LABOR WORLD/registered trademark/ Business.
CONFIDENTIAL Any confidential and proprietary information and trade
INFORMATION secrets information disclosed to, or developed by, you.
Section 10.2
DESIGNATED The computers and computer-related equipment and
HARDWARE peripheral devices that a Franchise Associate
Section 7.1 must purchase from us.
EFT Electronic Funds Transfer from your bank account to ours.
Section 11.4
ENHANCEMENTS Error corrections, upgrades, modifications, improvements,
Section 7.5 enhancements, extensions and other changes to the Software
developed or adopted us from time to time.
EXCLUSIVE AREA The geographic area described on Exhibit "A" to the
Section 2.1 Franchise Agreement.
FAMILY MEMBER Parents, spouses, offspring and siblings, and the
Section 19.16 parents and siblings of spouses.
FRANCHISE ASSOCIATE The owner of a LABOR WORLD/registered trademark/
Section 1 franchise. Also referred to aS "you" or "your."
FRANCHISE The right to operate a LABOR WORLD/registered trademark/
Section 2.1 Business in a single officE located at an approved address
and to use the Marks and the System.
FRANCHISOR OUTSOURCE FRANCHISING, INC. Also referred to as "we," "us"
Section 1 or "our."
GROSS PROFITS Gross Revenues, net of uncollectible accounts, less the
Section 11.8(b) following expenses actually paid or accrued by your LABOR
WORLD/registered trademark/ Business for direct temporary
labor gross payroll wages, workers' compensation premiums,
payroll taxes, liability insurance, net non- taxable
transportation costs, and any mandatory (by law) health
care costs that apply to temporary workers. Such expenses
will be based on the appropriate accounting classification
under our standard Chart of Accounts.
C-2
TERM DESCRIPTION
---- -----------
GROSS REVENUES All fees, charges or other consideration collected from
Section 11.8(a) the sale of products and services in, on, or from your
LABOR WORLD/registered trademark/ Business,or through any
other means that is in any way related to your LABOR
WORLD/registered trademark/ Business, whether for cash,
exchange oR credit, including, without limitation, any
other revenues in any way associated with or developed
through the use of the Marks or the System, but not
including any sales, use or service taxes, collected from
customers and paid to the appropriate taxing authority.
IMPROVEMENTS Ideas, concepts, methods, techniques or improvements
Section 10.2 relating to the LABOR WORLD/registered trademark/ Business
developed by you or your employees.
INDEMNIFIED PARTIES The person you must indemnify against certain claims,
Section 9.4(a) including us, our affiliates, and our and their
shareholders, directors, officers, employees, agents and
assignees.
LABOR WORLD The single office located at the approved address
/registered operating the LABOR WORLD/registered trademark/ Business.
trademark/
Section 2.1
LABOR WORLD The business of marketing, promoting, advertising,
/registered managing and providing temporary personnel, consisting
trademark/ generallly of relatively unskilled labor, to a variety
BUSINESS(ES) of industrial businesses under a franchise agreement
Section 1.1 with us.
MANUAL One or more of the LABOR WORLD/registered trademark/
Section 6.2(a) Operations Manual aS modified, amended or supplemented
from time to time.
MARKET GROUP One of 3 groups based on the population of a Franchise
Section 6.5(d) Associate's territorial rights, including the Exclusive
Area.
MARKS Our trademarks, service marks, trade dress and other
Section 1.1 commercial symbols, including "LABOR WORLD/registered
trademark/ with design," "LABOR WORLD/service mark/
modified or supplemented from time to time.
MINIMUM GROSS The level of Gross Profits that you must achieve in
PROFITS operating your LABOR WORLD/registered trademark/ Business
Exhibit "A" during the term of the Agreement.
NATIONAL ACCOUNTS A customer or group of customers that operate under common
Section 2.5 ownership or control, under the same trademarks or
service marks through independent franchises or some
other association, that we have arranged to provide
services at multiple locations. The locations of some of
the National Accounts may be in your Exclusive Area.
C-3
TERM DESCRIPTION
---- -----------
NATSS National Association of Temporary Services or its
Section 6.2(i) successor.
NETWORK An electronic communications network that links computers
Section 7.1 of franchise owners in different locations with us and
consists of the Software, the Designated Hardware and
certain communications software.
OPTIONAL SERVICES Programs we may offer relating to specific elements of the
Section 6.4 operation of LABOR WORLD/registered trademark/ Businesses.
PERSON Individuals, corporations, partnerships, and all
Section 19.16 artificial entities.
PRINCIPAL OWNER Any person who has any beneficial, ownership or voting
Section 19.16 interest in any entity (corporation, partnership, etc.),
disclosed or undisclosed, direct or indirect.
SECTION A section or subsection of this Agreement.
Section 19.16
SATELLITE(s) Additional LABOR WORLD/registered trademark/ Offices that
Section 2.2 we approve and you open in your Exclusive Area.
SERVICE OPTIONS Optional Services offered periodically on an
Section 6.6 as-needed, monthly, annual or full service contract basis
at a predetermined purchase price.
SOFTWARE Our proprietary computer software or such other computer
Section 1.1 software we require from time to time.
SYSTEM Our proprietary knowledge, procedures, formats, systems,
Section 1.1 forms, printed materials, data assembly sheets,
applications, specifications, standards and techniques
authorized or developed by us and which feature our
distinctive signs, brochures, contracts and related forms,
formats, procedures and advertising.
SYSTEM STANDARDS Mandatory and suggested specifications,
Section 6.7 standards, and operating procedures prescribed by us from
time to time for LABOR WORLD/registered trademark/
Businesses.
TERM OF THIS The approximate 10-year term beginning on the Agreement
AGREEMENT OR Date and ending on December 31 of the 10th year
FRANCHISE afterwards.
Section 3.1
C-4
TERM DESCRIPTION
---- -----------
TRANSFER The voluntary, involuntary, direct or indirect assignment,
sale, or other transfer of: (a) any interest in the
Franchise Agreement; (b) any part or all of the ownership
of the Franchise Associate; or (c) your LABOR
WORLD/registered trademark/ Business or any interest in
it.
WORLD SERVICE Credits that you may earn that may be applied against
CREDITS charges we impose for Optional Services or against future
Section 6.5 royalties.
C-5