U. S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended February 29, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
------------ ------------
Commission File No. 0-18686
PAK MAIL CENTERS OF AMERICA, INC.
---------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
Colorado 84-0934575
--------------------------------- ----------------------------------
(State or other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
7173 S. Havana St., Englewood, Colorado 80112
--------------------------------------- --------
(Address of principal executive offices) (zip code)
Issuer's telephone number: 303-957-1000
Former name, former address and former fiscal year,
if changed since last report: N/A
As of April 18, 2000, there were outstanding 3,873,738 shares of the issuer's
Common Stock, par value $.001 per share.
Transitional Small Business Disclosure Format
Yes [ ] No [X]
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
PAK MAIL CENTERS OF AMERICA, INC. AND SUBSIDIARY
Consolidated Balance Sheets
FEBRUARY NOVEMBER
29, 2000 30, 1999
---------- ---------
(Unaudited)
Assets
<S> <C> <C>
Current assets
Cash and cash equivalents ................................... $ 4,232 $ 44,536
Restricted cash ............................................. 17,058 1,880
Accounts receivable, net of allowance
of $64,827 (2000) and $135,716 (1999) ................ 717,207 567,945
Inventories ................................................. 108,652 101,357
Prepaid expenses and other current assets ................... 255,143 29,274
Deferred income tax benefit - current ....................... 347,500 347,500
----------- -----------
Total current assets ..................................... 1,449,792 1,092,492
----------- -----------
Property and equipment, at cost, net of accumulated depreciation 159,286 179,768
----------- -----------
Other assets:
Notes receivable, net: ...................................... 566,620 587,368
Deposits and other .......................................... 66,060 145,902
Deferred franchise costs, net of accumulated amortization of
$123,803 (2000) and $73,062 (1999) ..................... 166,019 95,191
Capitalized software costs, net ............................. 655,853 850,854
----------- -----------
Total other assets ....................................... 1,454,552 1,679,315
----------- -----------
$ 3,063,630 $ 2,951,575
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities
Trade accounts payable ...................................... $ 618,015 $ 315,375
Accrued bonuses & commissions ............................... 212,316 157,168
Other accrued expenses ...................................... 68,546 147,073
Deferred rent ............................................... 37,308 55,960
Due to advertising fund ..................................... 122,266 1,880
Preferred dividends payable ................................. 133,000 133,000
Notes payable ............................................... 100,000 120,000
----------- -----------
Total current liabilities ................................ 1,291,451 930,456
----------- -----------
Deferred revenue ............................................... 768,639 663,189
Stockholders' equity:
Series C redeemable preferred stock $1,000 par value; 6% cum.;
2,500 shares authorized; 2,216.668 shares issued and outstanding
(liquidation preference $2,216,668) ...................... 2,216,668 2,216,668
Common stock, $.001 par value; 200,000,000 shares authorized;
3,873,738 shares issued and outstanding .................. 3,873 3,873
Additional paid-in capital .................................. 5,113,995 5,113,995
Accumulated deficit ......................................... (6,330,996) (5,976,607)
----------- -----------
Total stockholders' equity ............................... 1,003,540 1,357,930
----------- -----------
$ 3,063,630 $ 2,951,575
=========== ===========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
PAK MAIL CENTERS OF AMERICA, INC. AND SUBSIDIARY
Consolidated Statement of Operations
THREE MONTHS ENDED
(Unaudited)
-------------------------------------
FEBRUARY 29, FEBRUARY 28,
2000 1999
----------- -----------
<S> <C> <C>
Revenue
Royalties from franchisees ....................................... $ 819,636 $ 741,900
Sales of equipment, supplies and services ........................ 236,220 150,514
Individual franchise fees ........................................ 53,900 70,850
Area franchise fees, net ......................................... 123,820 131,000
PSS license & maintenance fees ................................... 61,350 --
Interest income .................................................. 34 --
Other ............................................................ 29,813 14,125
----------- -----------
1,324,773 1,108,389
----------- -----------
Costs and expenses
Selling, general and administrative .............................. 632,416 484,608
Cost of sales of equipment, supplies and services ................ 296,134 135,463
Commissions on franchise sales ................................... 32,340 38,950
Royalties paid to area franchises ................................ 426,838 279,225
Advertising ...................................................... 66,032 40,016
Loss on investment in assets held for resale ..................... -- --
Depreciation and amortization .................................... 223,209 25,588
Interest ......................................................... 2,193 --
----------- -----------
1,679,162 1,003,850
----------- -----------
Net income (loss) ..................................................... $ (354,389) $ 104,539
=========== ===========
Basic income (loss) per common share .................................. $ (0.09) $ 0.03
=========== ===========
Weighted average number of common shares outstanding .................. 3,873,738 2,989,483
----------- -----------
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
<TABLE>
<CAPTION>
PAK MAIL CENTERS OF AMERICA, INC. AND SUBSIDIARY
Consolidated Statement of Cash Flows
THREE MONTHS ENDED
(Unaudited)
----------------------------
FEBRUARY 29, FEBRUARY 28,
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) ........................................................................ $(354,389) $ 104,539
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation and amortization ........................................................ 223,209 25,588
Deferred revenue, net ................................................................ 105,450 (63,851)
Change in operating assets and liabilities -
Accounts receivable ............................................................. (149,262) (68,704)
Inventories ..................................................................... (7,295) (5,454)
Prepaids and deferred franchise costs ........................................... (296,697) (26,725)
Notes receivable ................................................................ 20,748 52,584
Deposits and other .............................................................. 79,842 (15,610)
Trade accounts payable .......................................................... 302,640 46,769
Accrued expenses ................................................................ (42,032) (128,967)
Due to Ad Fund .................................................................. 120,386 (11,946)
--------- ---------
Net cash provided by operating activities ................................... 2,600 (79,029)
Cash flows from investing activities
Capital expenditures ..................................................................... (5,847) (50,774)
Capitalized software costs ............................................................... -- (65,709)
Purchase/additions of assets held for sale ............................................... -- --
--------- ---------
Net cash used by investing activities ....................................... (5,847) (116,483)
Cash flows from financing activities
Payment of short-term debt ............................................................... (20,000) --
--------- ---------
Net cash used by financing activities ....................................... (20,000) --
--------- ---------
Net decrease in cash and cash equivalents ..................................................... (23,247) (195,512)
Cash and cash equivalents, beginning of period ................................................ 44,537 234,844
--------- ---------
Cash and cash equivalents, end of period ...................................................... $ 21,290 $ 39,332
========= =========
Supplemental disclosure of cash flow information -
Cash paid during the period for interest ................................................. $ 2,193 $ --
========= =========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
PAK MAIL CENTERS OF AMERICA, INC.
Notes to Consolidated Financial Statements
Note 1 ORGANIZATION AND BUSINESS
Pak Mail Centers of America, Inc. was incorporated in Colorado in 1984
and is engaged in the business of marketing and franchising Pak Mail
service centers and retail stores which specialize in custom packaging
and crating of items to be mailed or shipped. For the period from
December 1, 1999 through March 31, 2000, the Company awarded 8
individual franchises. As of March 31, 2000, the Company had 372
domestic and international individual franchise agreements in
existence and 35 area franchises in existence.
The consolidated financial statements include the accounts of Pak Mail
Centers of America, Inc. and its wholly owned subsidiary, Pak Mail
Crating and Freight Service, Inc. (together, the "Company"). All
significant intercompany transactions and balances have been
eliminated in consolidation.
Note 2 BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared
by the Company. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. In the
opinion of the Company's management, the interim financial statements
include all adjustments necessary in order to make the interim
financial statements not misleading.
The results of operations for the three months ended February 29, 2000
are not necessarily indicative of the results to be expected for the
full year.
Item 2. Management's Discussion and Analysis or Plan of Operation
The following information should be read in conjunction with the
unaudited consolidated financial statements included herein. See Item
1.
LIQUIDITY AND CAPITAL RESOURCES
The Company used cash of $23,247 ($2,600 produced by operating
activities offset by $5,847 used by investing activities and $20,000
used by financing activities) during the three months ended February
29, 2000.
Deferred revenue increased $105,450 to $768,639 as a result of
deferring the recognition of revenue and deferring the commission
expense on the eight new individual franchises awarded during the
three months ending February 29, 2000. Two new franchisees completed
training during the period and revenue of $53,900 was recognized on
these sales. The Company anticipates that all of the currently
deferred individual franchise fees and commissions will be recognized
in fiscal 2000.
5
<PAGE>
RESULTS OF OPERATIONS
Three months ended February 29, 2000, compared to three months ended
February 28, 1999
Total revenues increased $216,384 (19.5%) from $1,108,389 for the
three months ended February 28, 1999, to $1,324,773 for the three
months ended February 29, 2000. The increase is primarily attributable
to increases in royalties from franchisees (up 10.5% from $741,900 to
$819,636), sales of equipment, supplies and services (up 56.9% from
$150,514 to $236,220) and PSS licensing and maintenance fees (up from
$0 to $61,350).
The $77,736 increase in royalties for the three months ended February
29, 2000 as compared to the three months ended February 28, 1999, is
due to increases in the average store volumes and number of stores
open.
The $85,706 increase in sales of equipment, supplies and services is
due to the increased number of new franchisees that purchased
equipment and the Company's decision to assemble and sell computers
during the three months ended February 29, 2000 which were not offered
or sold during the same prior year period. All existing franchisees
were required to update to the new computerized machines by February
2000. The new machines are required to run the new PSS software
developed by the Company, which resulted in $61,350 in PSS licensing
and maintenance fee revenues that did not exist during the same prior
year period.
Total expenses increased $675,312 (67.3%) from $1,003,850 for the
three months ended February 28, 1999, to $1,679,162 for the three
months ended February 29, 2000. The increase is primarily attributable
to increases in selling, general and administrative (up 30.5% from
$484,608 to 632,416), royalties paid to area franchisees and the
annual franchisee rebate which has been paid in the last quarter in
years past (up 52.9% from $279,225 to $426,838) and cost of sales of
equipment, supplies and services (up 118.6% from $135,463 to
$296,134).
The $147,808 increase in selling, general and administrative for the
three months ended February 29, 2000 as compared to the same prior
year period relates primarily to increases in rent and advertising
expenses. The $147,613 increase in royalties paid to area franchisees
over the same prior year period relates to the increase in percentage
of stores that operate within area marketer regions, an increase in
the average store volumes and a $66,033 payment of the annual
franchisee rebate which the Company previously paid in the fourth
quarter of each fiscal year.
The $160,671 increase in cost of sales of equipment, supplies and
services is primarily due to new machines required to run PSS
software.
The $197,621 increase in amortization and depreciation for the three
months ended February 29, 2000 as compared to the same prior year
period is due to the amortization of the PSS software program.
6
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(10)(a) Individual Franchise Agreement.
(10)(b) Area Marketing Agreement.
(b) Reports on Form 8-K.
None.
7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PAK MAIL CENTERS OF AMERICA, INC.
(Registrant)
Date: April 19, 1999
By: /s/ John E. Kelly
------------------------------------
John E. Kelly
President
By: /s/ James Q. Race
-----------------------------------
James Q. Race
Controller, Secretary and Treasurer
8
PAK MAIL CENTERS OF AMERICA, INC.
FRANCHISE AGREEMENT
TABLE OF CONTENTS
1. PURPOSE...................................................................1
2. GRANT OF FRANCHISE........................................................1
2.1. Grant of Franchise. .................................................1
2.2. Scope of Franchise Operation. ......................................1
3. FRANCHISED LOCATION AND TERRITORIAL RIGHTS................................2
3.1. Franchised Location. ................................................2
3.2. Protected Territory. ................................................2
3.3. Limitation on Franchise Rights. .....................................2
3.4. A.M. P.M. MOVERS Program. ...........................................2
3.5. Franchisor's Reservation of Rights. .................................2
4. INITIAL FRANCHISE FEE.....................................................3
4.1. Initial Franchise Fee. ..............................................3
5. DEVELOPMENT OF FRANCHISED LOCATION........................................3
5.1. Approval of Franchised Location. ....................................3
5.2. Approval of Lease. ..................................................3
5.3. Conversion and Design. ..............................................3
5.4. Signs. ..............................................................4
5.5. Equipment. ..........................................................4
5.6. Permits and Licenses. ...............................................4
5.7. Commencement of Operations. .........................................4
6. TRAINING..................................................................5
6.1. Initial Training Program. ...........................................5
6.2. Length of Training. .................................................5
6.3. Additional Training. ................................................5
7. DEVELOPMENT ASSISTANCE....................................................5
7.1. Franchisor's Development Assistance. ................................5
8. OPERATIONS MANUAL.........................................................6
8.1. Operations Manual. ..................................................6
8.2. Confidentiality of Operations Manual Contents. ......................7
8.3. Changes to Operations Manual. .......................................7
9. OPERATING ASSISTANCE......................................................7
9.1. Franchisor's Services. ..............................................7
9.2. Additional Franchisor Services. .....................................8
10. FRANCHISEE'S OPERATIONAL COVENANTS........................................8
10.1. Business Operations. ...............................................8
11. ROYALTIES................................................................10
11.1. Monthly Royalty. ..................................................10
11.2. Royalty Based Revenues. ...........................................10
11.3. Royalty Payments. .................................................10
11.4. Application of Payments. ..........................................11
<PAGE>
12. ADVERTISING..............................................................11
12.1. Approval of Advertising. ..........................................11
12.2. Marketing Material Beginning Inventory. ...........................11
12.3. Advertising Contribution. .........................................11
12.4. Regional Advertising Programs. ....................................13
13. QUALITY CONTROL..........................................................13
13.1. Compliance with Operations Manual. ................................13
13.2. Standards and Specifications. .....................................13
13.3. Inspections. ......................................................13
13.4. Restrictions on Services and Products. ............................14
13.5. Approved Suppliers. ...............................................14
13.6. Request to Approve Supplier. ......................................14
13.7. Shopping Service. .................................................14
14. MARKS, TRADE NAMES AND PROPRIETARY INTERESTS.............................15
14.1. Marks. ............................................................15
14.2. No Use of Other Marks. ............................................15
14.3. System. ...........................................................15
14.4. Mark Infringement..................................................15
14.5. Franchisee's Business Name. .......................................15
14.6. Change of Marks. ..................................................16
15. REPORTS, RECORDS AND FINANCIAL STATEMENTS................................16
15.1. Franchisee Reports. ...............................................16
15.2. Verification. .....................................................17
15.3. Books and Records. ................................................17
15.4. Audit of Books and Records. .......................................17
16. TRANSFER.................................................................17
16.1. Transfer by Franchisee. ...........................................17
16.2. Pre-Conditions to Franchisee's Transfer. ..........................17
16.3. Franchisor's Approval of Transfer. ................................18
16.4. Right of First Refusal. ...........................................19
16.5. Specific Types of Transfers. ......................................19
16.6. Assignment by the Franchisor. .....................................20
16.7. Franchisee's Death or Disability. .................................20
17. TERM AND EXPIRATION......................................................20
17.1. Term...............................................................20
17.2. Continuation. .....................................................20
17.3. Rights Upon Expiration. ...........................................20
17.4. Exercise of Option for Successor Franchise. .......................21
17.5. Conditions of Refusal. ............................................21
18. DEFAULT AND TERMINATION..................................................21
18.1. Termination by Franchisee. ........................................21
18.2. Termination by Franchisor - Effective Upon Notice. ................21
18.3. Termination by Franchisor - Thirty Days Notice. ...................22
18.4. Right to Purchase. ................................................23
18.5. Obligations of Franchisee Upon Termination or Expiration. .........24
18.6. Acknowledgement. .................................................25
18.7. State and Federal Law. ............................................25
<PAGE>
19. BUSINESS RELATIONSHIP....................................................25
19.1. Independent Businesspersons. ......................................25
19.2. Payment of Third Party Obligations. ...............................26
19.3. Indemnification. ..................................................26
20. RESTRICTIVE COVENANTS....................................................26
20.1. Non-Competition During Term. ......................................26
20.2. Post-Termination Covenant Not to Compete. .........................27
20.3. Confidentiality of Proprietary Information. .......................27
20.4. Confidentiality Agreement. ........................................27
21. INSURANCE................................................................28
21.1. Insurance Coverage. ...............................................28
21.2. Proof of Insurance Coverage. ......................................28
22. MISCELLANEOUS PROVISIONS.................................................28
22.1. Governing Law/Consent to Venue and Jurisdiction. .................28
22.2. Modification. .....................................................29
22.3. Entire Agreement. .................................................29
22.4. Delegation by the Franchisor. .....................................29
22.5. Effective Date. ...................................................29
22.6. Review of Agreement. ..............................................29
22.7. Attorneys' Fees. ..................................................29
22.8. Injunctive Relief. ................................................30
22.9. Payment of Taxes. .................................................30
22.10.No Waiver. ........................................................30
22.11.No Right to Set Off. ..............................................30
22.12.Invalidity. ......................................................30
22.13.Notices. .........................................................30
22.14.Acknowledgement. ..................................................30
EXHIBITS
I. Addendum to Franchise Agreement - Location Approval
II. Guaranty and Assumption of Franchisee's Obligations
III. Statement of Ownership
IV. Authorization Agreement for Prearranged Payments
V. Build-Out Program Addendum
<PAGE>
PAK MAIL CENTERS OF AMERICA, INC.
FRANCHISE AGREEMENT
THIS AGREEMENT (the "Agreement") is made this ____ day of ________, 20___,
by and between PAK MAIL CENTERS OF AMERICA, INC., a Colorado corporation,
located at 7173 South Havana Street, Suite 600, Englewood, Colorado 80112 (the
"Franchisor") and _____________________
___________________________________________________, located at
________________________ _______________________________________________________
(the "Franchisee"), who, on the basis of the following understandings and
agreements, agree as follows:
1. PURPOSE
1.1. The Franchisor has developed methods for establishing, operating and
promoting stores offering a variety of packaging, shipping, crating, freight
forwarding, mailing, communications and information services ("PAK MAIL Centers"
or "Centers") which use the service mark "PAK MAIL" and related trade names and
trademarks ("Marks") and the Franchisor's proprietary methods of doing business
("System").
1.2. The Franchisor grants the right to others to develop and operate a PAK
MAIL Center, under the Marks and pursuant to the System.
1.3. The Franchisee desires to establish a PAK MAIL Center at a location
identified herein or to be later identified, and the Franchisor desires to grant
the Franchisee the right to operate a PAK MAIL Center at such location under the
terms and conditions which are contained in this Agreement.
2. GRANT OF FRANCHISE
2.1. Grant of Franchise.
The Franchisor grants to the Franchisee, and the Franchisee accepts from
the Franchisor, the right to use the Marks and System in connection with the
establishment and operation of a PAK MAIL Center, at the location described in
Article 3 of this Agreement. The Franchisee agrees to use the Marks and System,
as they may be changed, improved, and further developed by the Franchisor from
time to time, only in accordance with the terms and conditions of this
Agreement.
2.2. Scope of Franchise Operation.
The Franchisee agrees at all times to faithfully, honestly and diligently
perform the Franchisee's obligations hereunder, and to continuously use best
efforts to promote the PAK MAIL Center. The Franchisee agrees to utilize the
Marks and System to operate all aspects of the business franchised hereunder in
accordance with the methods and systems developed and prescribed from time to
time by the Franchisor, all of which are a part of the System. The Franchisee's
PAK MAIL Center shall offer all products and services as the Franchisor shall
designate and shall be restricted from offering or selling any products and
services not previously approved by the Franchisor in writing.
<PAGE>
3. FRANCHISED LOCATION AND TERRITORIAL RIGHTS
3.1. Franchised Location.
The Franchisee is granted the right and franchise to own and operate a PAK
MAIL Center at the address and location which shall be set forth in Exhibit I,
attached hereto ("Franchised Location"). If, at the time of execution of this
Agreement, the Franchised Location cannot be designated as a specific address
because a location has not been selected and approved, then the Franchisee shall
promptly take steps to choose and acquire a location for its PAK MAIL Center
within the Designated Area, set forth in Exhibit I. In such circumstances, the
Franchisee shall, within 90 days after the execution of this Agreement, select
and propose to the Franchisor for the Franchisor's prior approval a specific
location for the Franchised Location which, once approved by the Franchisor,
shall hereinafter be set forth in the rider to Exhibit I.
3.2. Protected Territory.
So long as the Franchisee is in compliance with this Agreement, the
Franchisor shall not establish or license another person or entity to establish
a PAK MAIL Center within a certain geographic area as set forth in Exhibit I
("Protected Territory").
3.3. Limitation on Franchise Rights.
The rights that are granted to the Franchisee are for the specific
Franchised Location and Protected Territory and cannot be transferred to an
alternative Franchised Location or Protected Territory, or any other location,
without the prior written approval of the Franchisor, which approval shall not
be unreasonably withheld. The Franchisee shall not operate another Center or
offer services which are part of the System at any site other than the
Franchised Location without the Franchisor's prior written approval, which
approval can be withheld for any reason, in the Franchisor's sole discretion.
3.4. A.M. P.M. MOVERS Program.
The Franchisor may offer the Franchisee the opportunity to participate in
the "A.M. P.M. MOVERS Program," whereby local moving services for individuals
and small business customers are either provided by the Franchisee or arranged
by the Franchisee with a third party using the A.M. P.M. MOVERS Mark. The
Franchisee may not participate in the A.M. P.M. MOVERS Program without the
Franchisor's prior written permission, which will be given when the Franchisor
and the Franchisee sign the Franchisor's then current A.M. P.M. MOVERS Program
Amendment to this Agreement.
3.5. Franchisor's Reservation of Rights.
The Franchisee acknowledges that its franchise rights as granted are
non-exclusive and that the Franchisor retains the rights, among others: (1) to
use, and to license others to use, the Marks and System in connection with the
operation of a Pak Mail Center, at any location other than in the Protected
Territory; (2) to use the Marks to identify services and products other than
those which the Franchisee sells, to identify promotional and marketing efforts
and related items, and to identify services and products similar to those which
the Franchisee sells, made available through alternative channels of
distribution, at any location; and (3) to use and license the use of other
proprietary marks or methods in connection with the sale of products and
services similar to those which the Franchisee will sell, whether in alternative
2
<PAGE>
channels of distribution or in connection with the operation of packaging and
mailing businesses at any location, which businesses are the same as, or similar
to, or different from PAK MAIL Centers, on any terms and conditions as the
Franchisor deems advisable.
4. INITIAL FRANCHISE FEE
4.1. Initial Franchise Fee.
In consideration for the right to develop and operate one PAK MAIL Center,
the Franchisee agrees to pay to the Franchisor an initial franchise fee of
$27,950 as of the date of execution of this Agreement. The Franchisee
acknowledges and agrees that the initial franchise fee represents payment for
the initial grant of the rights to use the Marks and System, that the Franchisor
has earned the initial franchise fee upon receipt thereof and that the fee is
under no circumstances refundable to the Franchisee after it is paid, unless
otherwise specifically set forth in this Agreement.
5. DEVELOPMENT OF FRANCHISED LOCATION
5.1. Approval of Franchised Location.
The Franchisee shall follow the Franchisor's site selection procedures in
locating a Franchised Location for the PAK MAIL Center. The Franchisee shall
seek the Franchisor's approval of any site proposed as a Franchised Location, by
submitting a complete site submittal package, including demographics and other
materials requested by the Franchisor, containing all information reasonably
required by the Franchisor to assess a proposed Franchised Location. The
Franchisor will not unreasonably withhold approval of a proposed site that meets
all of the Franchisor's site selection criteria.
5.2. Approval of Lease.
The Franchisee shall obtain the Franchisor's prior written approval before
executing any lease or purchase agreement for the Franchised Location. Any lease
for the Franchised Location shall, at the option of the Franchisor, contain a
provision: (1) allowing for assignment of the lease to the Franchisor in the
event that this Agreement is terminated or not renewed for any reason; (2)
giving the Franchisor the right to cure any default by the Franchisee under such
lease; and (3) providing the Franchisor with the right, exercisable upon and as
a condition of the approval of the Franchised Location, to execute the lease
agreement or other document providing entitlement to the use of the Franchised
Location in its own name or jointly with the Franchisee as lessee and, upon the
exercise of such option, the Franchisor shall provide the Franchisee with the
right to use the premises as its sublessee, assignee, or other similar capacity
upon the same terms and conditions as obtained by the Franchisor. The lease
shall be collaterally assigned to the Franchisor as security for the
Franchisee's timely performance of all obligations under this Agreement; the
Franchisee shall obtain the lessor's consent to such collateral assignment. The
Franchisee shall deliver a copy of the signed lease for the Franchised Location
to the Franchisor within 15 days of its execution. The Franchisee acknowledges
that approval of a lease for the Franchised Location by the Franchisor does not
constitute a recommendation, endorsement or guarantee by the Franchisor of the
suitability or profitability of the location or the lease and the Franchisee
should take all steps necessary to ascertain whether such location and lease are
acceptable to the Franchisee.
5.3. Conversion and Design.
The Franchisee acknowledges that the layout, design, decoration and color
scheme of PAK MAIL Centers are an integral part of the Franchisor's proprietary
System and accordingly, the Franchisee shall convert, design and decorate the
Franchised Location in accordance with the Franchisor's plans and specifications
and with the assistance of contractors and suppliers designated by or otherwise
approved by the Franchisor. The Franchisee shall obtain the Franchisor's written
consent to any conversion, design or decoration of the premises before
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remodeling or decorating begins, recognizing that any related costs are the
Franchisee's sole responsibility. It shall be the Franchisee's responsibility to
have prepared all required construction plans and specifications to suit the
shape and dimensions of the Franchised Location and to insure compliance with
applicable laws and the lease.
5.4. Signs.
The Franchisee shall purchase or otherwise obtain for use at the Franchised
Location and in connection with the PAK MAIL Center signs which comply with the
standards and specifications of the Franchisor as set forth in the Operations
Manual, as that term is defined in Section 8.1. It is the Franchisee's sole
responsibility to insure that any signs comply with applicable local ordinances,
mall regulations, building codes and zoning regulations. Any modifications to
the Franchisor's standards and specifications for signs which must be made due
to local ordinances, codes or regulations shall be submitted to the Franchisor
for prior written approval. The Franchisee acknowledges the Marks, or any other
name, symbol or identifying marks on any signs shall only be used in accordance
with the Franchisor's standards and specifications and only with the prior
written approval of the Franchisor.
5.5. Equipment.
The Franchisee shall purchase or otherwise obtain for use at the Franchised
Location equipment of a type and in an amount which complies with the standards
and specifications of the Franchisor. The Franchisee acknowledges that the type,
quality, configuration, capability and/or performance of the equipment are all
standards and specifications which are a part of the System and therefore such
equipment must be purchased, leased, or otherwise obtained in accordance with
the Franchisor's standards and specifications and only from sources approved by
the Franchisor. The Franchisee shall equip the Center with computerized
point-of-sale systems ("POS System"), computer hardware and software, copiers,
printers, facsimile machines and other designated equipment as are consistent
with the standards and specifications of the Franchisor. The Franchisee shall
also obtain and maintain an account with an internet service provider which
meets the Franchisor's standards and specifications.
5.6. Permits and Licenses.
The Franchisee agrees to obtain all such permits and certifications as may
be required for the lawful construction and operation of the PAK MAIL Center
together with all certifications from government authorities having jurisdiction
over the site that all requirements for construction and operation have been
met, including without limitation, zoning, access, sign, health, safety
requirements, building and other required construction permits, licenses to do
business and fictitious name registrations, sales tax permits, health and
sanitation permits and ratings and fire clearances. The Franchisee agrees to
obtain all customary contractors' sworn statements and partial and final lien
waivers for construction, remodeling, decorating and installation of equipment
at the Franchised Location. Copies of all subsequent inspection reports,
warnings, certificates and ratings issued by any governmental entity during the
term of this Agreement in connection with the conduct of the PAK MAIL Center
which indicates the Franchisee's failure to meet or maintain the highest
governmental standards, or less than full compliance by the Franchisee with any
applicable law, rule or regulation, shall be forwarded to the Franchisor within
five days of the Franchisee's receipt thereof.
5.7. Commencement of Operations.
Unless otherwise agreed to in writing by the Franchisor and the Franchisee,
the Franchisee has 180 days from the date of this Agreement within which to: (1)
secure all necessary financing for the Center; (2) complete the initial training
program described in Section 6.1 of this Agreement; (3) select, lease and
develop the Franchised Location; (4) purchase an opening inventory of materials
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and supplies; (5) obtain and provide evidence of insurance as described in
Section 21.1 below; and (6) commence operation of the PAK MAIL Center. The
Franchisor will extend the time in which the Franchisee has to commence
operations for a reasonable period of time in the event factors beyond the
Franchisee's reasonable control prevent the Franchisee from meeting this
development schedule, so long as the Franchisee has made reasonable and
continuing efforts to comply with such development obligations and the
Franchisee requests, in writing, an extension of time in which to have its PAK
MAIL Center established before such development period lapses. The Franchisee
shall obtain the Franchisor's approval prior to opening the Center for business.
6. TRAINING
6.1. Initial Training Program.
The Franchisee or, if the Franchisee is not an individual, the person
designated by the Franchisee to assume primary responsibility for the management
of the PAK MAIL Center ("Principal Operator"), is required to attend and
successfully complete the initial training program which is offered by the
Franchisor at one of the Franchisor's designated training facilities. Up to two
individuals are eligible to participate in the Franchisor's initial training
program without charge of a tuition or fee. The Franchisee shall be responsible
for any and all traveling and living expenses incurred in connection with
attendance at the training program. At least one individual must successfully
complete the initial training program prior to the Franchisee's commencement of
operation of its PAK MAIL Center.
6.2. Length of Training.
The initial training program shall consist of a total of 12 days, nine of
which shall be classroom instruction at a location designated by the Franchisor
and three of which shall be on-site at the Franchised Location at or around the
time the Center opens for business. The Franchisee, and if applicable, the
Principal Operator, shall attend the on-site training at the Franchised
Location. The Franchisor reserves the right to waive a portion of the training
program or alter the training schedule, if in the Franchisor's sole discretion,
the Franchisee or Principal Operator has sufficient prior experience or
training.
6.3. Additional Training.
From time to time, the Franchisor may present seminars, conventions or
continuing development programs or conduct meetings for the benefit of the
Franchisee. The Franchisee or its Principal Operator shall be required to attend
any ongoing mandatory seminars, conventions, programs or meetings as may be
offered by the Franchisor. The Franchisor shall give the Franchisee at least 30
days prior written notice of any ongoing seminar, convention or program which is
deemed mandatory. The Franchisor shall not require that the Franchisee attend
any ongoing training more often than once a year. All mandatory training will be
offered without charge of a tuition or fee; provided, however, the Franchisee
will be responsible for all traveling and living expenses which are associated
with attendance at the same.
7. DEVELOPMENT ASSISTANCE
7.1. Franchisor's Development Assistance.
The Franchisor shall provide the Franchisee with assistance in the initial
establishment of the PAK MAIL Center as follows:
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a. Provision of the initial training program to be conducted at the
Franchisor's designated training facilities or at another location
designated by the Franchisor, as described in Article 6 above.
b. Provision of written specifications for a Franchised Location which
shall include, without limitation, specifications for space requirements,
build out and the demographics and character of the surrounding market
area. In addition, if this Agreement governs the Franchisee's first PAK
MAIL Center, the Franchisor shall send one representative to the proposed
Franchised Location for up to one day to evaluate and, if possible, approve
a site for the Franchised Location. The Franchisee acknowledges that the
Franchisor shall have no other obligation to provide assistance in the
selection and approval of a Franchised Location other than the provision of
such written specifications and approval or disapproval of a proposed
Franchised Location, which approval or disapproval shall be based on
information submitted to the Franchisor in a form sufficient to assess the
proposed location as may be reasonably required by the Franchisor.
c. Directives regarding the required conversion, design and decoration
of the PAK MAIL Center premises, plus specifications concerning signs,
decor, color, equipment, machines, uniforms and equipment.
d. Information regarding the selection of suppliers of equipment,
items and materials used and inventory and services offered for sale in
connection with the PAK MAIL Center. After execution of this Agreement, the
Franchisor will provide the Franchisee with a list of approved suppliers,
if any, of such equipment, items, materials, inventory and services and, if
available, a description of any national or central purchase and supply
agreements offered by such approved suppliers for the benefit of PAK MAIL
franchisees.
e. Provision of an operations manual in accordance with Section 8.1
below.
f. The Franchisor will make available to the Franchisee at or around
the commencement of operations of the Franchisee's PAK MAIL Center a
representative to be present for three days during the initial operation of
the Franchisee's PAK MAIL Center. The representative will assist the
Franchisee's employees in the initial operation of the Center at a time
scheduled by the Franchisor, unless in the Franchisor's determination, the
Franchisee or the Principal Operator have had sufficient prior training or
experience.
g. The Franchisor will grant the Franchisee a nonexclusive,
nontransferable license to use certain proprietary computer programs and
related materials developed for use in the operation of Pak Mail Centers
("Program") in accordance with the terms of the Franchisor's then current
standard Software License Agreement ("Software License Agreement"). The
Franchisee will use the Program in accordance with the terms of the
Software License Agreement, including using computer equipment on which the
Program has been installed and other computer equipment designated by the
Franchisor as meeting its specifications.
8. OPERATIONS MANUAL
8.1. Operations Manual.
The Franchisor agrees to provide to the Franchisee one or more manuals,
technical bulletins, or other written materials (collectively referred to as
"Operations Manual") covering certain standards and specifications for
packaging, shipping, crating, freight forwarding, mailing, communications and
information products and services and other operating and marketing techniques
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for the PAK MAIL Center. The Franchisee agrees that it shall comply with the
Operations Manual as an essential aspect of its obligations under this Agreement
and failure by the Franchisee to substantially comply with the Operations Manual
may be considered by the Franchisor to be a breach of this Agreement.
8.2. Confidentiality of Operations Manual Contents.
The Franchisee agrees to use the Marks and System only as specified in the
Operations Manual. The Operations Manual is the sole property of the Franchisor
and shall be used by the Franchisee only during the term of this Agreement and
in strict accordance with the terms and conditions hereof. The Franchisee shall
not duplicate the Operations Manual nor disclose its contents to persons other
than its employees or officers who have signed a confidentiality and
noncompetition agreement in a form approved by the Franchisor. The Franchisee
shall return the Operations Manual to the Franchisor upon the expiration,
termination or assignment of this Agreement.
8.3. Changes to Operations Manual.
The Franchisor reserves the right to revise the Operations Manual from time
to time as it deems necessary to update or change operating and marketing
techniques or standards and specifications. The Franchisee, upon receipt of any
updated information, shall update its copy of the Operations Manual as
instructed by the Franchisor and shall conform its operations with the updated
provisions within a reasonable time thereafter. The Franchisee acknowledges that
a master copy of the Operations Manual maintained by the Franchisor at its
principal office shall be controlling in the event of a dispute relative to the
content of any Operations Manual.
9. OPERATING ASSISTANCE
9.1. Franchisor's Services.
The Franchisor agrees that, during the Franchisee's operation of the PAK
MAIL Center, the Franchisor shall make available to the Franchisee the following
services:
a. Upon the reasonable request of the Franchisee, consultation by
telephone, facsimile or electronic mail, regarding the continued operation
and management of a PAK MAIL Center and advice regarding the packaging and
shipping services, quality control, inventory issues, customer and supplier
relations issues and similar advice.
b. Access to advertising and promotional materials as may be developed
by the Franchisor, the cost of which may be passed on to the Franchisee, at
the Franchisor's option.
c. On-going updates of information and programs regarding the
packaging and shipping industry, the competition, the PAK MAIL concept and
the System, including, without limitation, information about special or new
products which may be developed and made available to PAK MAIL franchisees
as a part of the System.
d. On-going maintenance, updates and technical support for the
Program, as set forth in the Software License Agreement and technical
support for the hardware components of the POS System purchased from the
Franchisor, except to the extent that such components are covered by
manufacturer's warranties. The Franchisor reserves the right to charge an
annual maintenance fee for maintenance and update services, as set forth in
the Software License Agreement.
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e. The Franchisor shall make the initial training program available to
replacement or additional Principal Operators during the term of this
Agreement. The Franchisee shall be responsible for all travel and living
expenses incurred by its personnel during the training program. The
availability of the training programs shall be subject to space
considerations and prior commitments to new PAK MAIL franchisees.
9.2. Additional Franchisor Services.
Although not obligated to do so, the Franchisor may make its employees or
designated agents available to the Franchisee for on-site advice and assistance
in connection with the on-going operation of the PAK MAIL Center governed by
this Agreement.
10 .FRANCHISEE'S OPERATIONAL COVENANTS
10.1. Business Operations.
The Franchisee acknowledges that it is solely responsible for the
successful operation of its PAK MAIL Center and that the continued successful
operation thereof is, in part, dependent upon the Franchisee's compliance with
this Agreement and the Operations Manual. In addition to all other obligations
contained in this Agreement and in the Operations Manual, the Franchisee
covenants that:
a. The Franchisee shall maintain clean, efficient and high quality PAK
MAIL Center operations and shall operate the business in accordance with
the Operations Manual and in such a manner as not to detract from or
adversely reflect upon the name and reputation of the Franchisor and the
goodwill associated with the PAK MAIL name and Marks.
b. The Franchisee will conduct itself and operate its PAK MAIL Center
in compliance with all applicable laws, health department regulations and
other ordinances and in such a manner so as to promote a good public image
in the business community. In connection therewith, the Franchisee will be
solely and fully responsible for obtaining any and all licenses to carry on
business at the PAK MAIL Center.
c. The Franchisee acknowledges that proper management of the PAK MAIL
Center is important and shall insure that the Franchisee or a designated
Principal Operator who has completed the Franchisor's initial training
program be responsible for the management of the PAK MAIL Center.
d. The Franchisee shall offer only products and services through its
Center which meet or exceed the minimum standards and specifications
established by the Franchisor more fully described in the Operations
Manual. The Franchisee shall offer all types of products and services as
from time to time may be prescribed by the Franchisor and shall refrain
from offering any other types of products or services, or operating or
engaging in any other type of business or profession, from or through the
PAK MAIL Center.
e. The Franchisee will pay on a timely basis all amounts due and owing
to the Franchisor pursuant to any separate agreements between the
Franchisee and the Franchisor and all amounts due and owing by the
Franchisee to all third parties, including national vendors and taxing
authorities, with whom the Franchisee does business at or through the
Center. In connection with any amounts due and owing by the Franchisee to
third parties, the Franchisee expressly acknowledges that a default by the
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Franchisee with respect to such indebtedness may be considered a default
hereunder and the Franchisor may avail itself of all remedies provided for
herein in the event of default.
f. The Franchisee shall comply with all agreements with third parties
related to the PAK MAIL Center including, in particular, all provisions of
any premises lease and any equipment leases.
g. The Franchisee and all employees of the Franchisee shall present a
professional appearance, as described in the Operations Manual, and shall
render competent and courteous service to customers of the PAK MAIL Center
while working at the Franchised Location. The Franchisee is required, at
the Franchisee's expense, to purchase specified wearing apparel from
suppliers approved by the Franchisor. All Principal Operators, employees of
the Franchisee, the Franchisee and its owners, shall wear the specified
uniform at all times while working at the Franchised Location. The
Franchisor has the right, in its sole and absolute discretion, to change or
modify such dress code guidelines.
h. The Franchisee agrees to renovate, refurbish, remodel or replace,
at its own expense, the real and personal property and equipment, including
but not limited to, computer hardware, software, the Program and the POS
System, used in the operation of the PAK MAIL Center, when reasonably
required by the Franchisor in order to comply with the image, standards of
operation and performance capability established by the Franchisor from
time to time. If the Franchisor changes its image or standards of
operation, it shall give the Franchisee a reasonable period of time within
which to comply with such changes.
i. The Franchisee shall be responsible for training all of its
employees who work in any capacity in the PAK MAIL Center and shall be
fully responsible for all employees' compliance with the operational
standards which are part of the System. The Franchisee must conduct its
employee training in the manner and according to the standards as
prescribed in the Operations Manual. Any employee who does not
satisfactorily complete the training shall not work in any capacity in the
Franchisee's PAK MAIL Center.
j. The Franchisee shall at all times during the term of this Agreement
own and control the PAK MAIL Center authorized hereunder. Upon request of
the Franchisor, the Franchisee shall promptly provide satisfactory proof of
such ownership to the Franchisor. The Franchisee represents that the
Statement of Ownership, attached hereto as Exhibit III and by this
reference incorporated herein, is true, complete, accurate and not
misleading, and, in accordance with the information contained in the
Statement of Ownership, the controlling ownership of the PAK MAIL Center is
held by the Franchisee. The Franchisee shall promptly provide the
Franchisor with a written notification if the information contained in the
Statement of Ownership changes at any time during the term of this
Agreement and shall comply with the applicable transfer provisions
contained in Article 16 herein. In addition, if the Franchisee is an
entity, all of the owners of the Franchisee shall sign the Personal
Guaranty attached hereto as Exhibit II.
k. The Franchisee shall at all times during the term of this Agreement
keep its PAK MAIL Center open during the business hours as may be
designated by the Franchisor from time to time in the Operations Manual and
shall maintain sufficient supplies of products and employ adequate
personnel at all times so as to operate the Center at its maximum capacity
and efficiency.
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11 .ROYALTIES
11.1. Monthly Royalty.
The Franchisee agrees to pay to the Franchisor a monthly royalty
("Royalty") equal to 5% of the total amount of its "Royalty Based Revenues"
(defined in Section 11.2 below) for the first $200,000 of the Center's Royalty
Based Revenues, 4 1/2% for the next $50,000 of the Center's Royalty Based
Revenues, 4% for the next $50,000 of the Center's Royalty Based Revenues, 3 1/2%
for the next $50,000 of the Center's Royalty Based Revenues, and 3% for all
subsequent Royalty Based Revenues of the Center received in that calendar year.
11.2. Royalty Based Revenues.
"Royalty Based Revenues" shall mean and include the aggregate amount of all
sales of services, products or merchandise of every kind or nature performed,
sold from, at or in connection with the operation of the Center or arising out
of the operation or conduct of business by the Center, including sales made at
or away from the Center, whether for cash or credit, but excluding all: (i)
federal, state or municipal sales or service taxes collected from customers and
paid to the appropriate taxing authority; (ii) income generated from the sale of
postage stamps; (iii) key deposits; and (iv) other exclusions as may be
authorized in writing by the Franchisor.
11.3. Royalty Payments.
Royalty payments shall be made monthly and sent to the Franchisor by
electronic funds transfer no later than the 10th day of each month or such other
day which the Franchisor will designate from time to time ("Due Date") based on
Royalty Based Revenues for the immediately preceding month. At the Franchisor's
request and in no event later than 30 days prior to the opening of the Center,
the Franchisee shall execute an Authorization Agreement for Prearranged Payments
of Royalties and Advertising Contributions by electronic transfer of funds from
the Franchisee's bank account to the Franchisor's bank account, in the form
attached to this Agreement as Exhibit IV. No later than the Due Date of each
month, the Franchisee shall report to the Franchisor by electronic means or in
written form, as may be reasonably directed by the Franchisor, in a manner more
fully described in Section 15.1 below, with such information and pursuant to
such standard transmittal procedures regarding the Franchisee's Royalty Based
Revenues and such additional information as may be requested by the Franchisor.
The Franchisor reserves the right to require Royalty payments be made on a
weekly or bi-weekly basis if the Franchisee does not timely or fully submit the
required payments or reports. The Franchisor shall have the right to verify such
Royalty payments from time to time as it deems necessary, in any reasonable
manner. In the event that the Franchisee fails to have sufficient funds in its
account or otherwise fails to pay any Royalties as of the Due Date, the
Franchisee shall owe, in addition to such Royalties, interest after the Due Date
at the highest applicable legal rate for open account business credit, not to
exceed 1 1/2% per month. The Franchisee acknowledges that this Section 11.3
shall not constitute the Franchisor's or its affiliates' agreement to accept
such payments after they are due or a commitment to extend credit to or
otherwise finance operation of the Center. The Franchisor reserves the right to
automatically assess a monthly $50 late charge for any report and/or financial
statement required under Section 15.1 below which is not timely filed by the
Franchisee. Such late charge shall continue to accrue each month that said
report(s) and financial statement(s) remain unfiled, and shall be due and
payable in full upon demand by the Franchisor. In the event such late charge(s)
is/are not paid upon demand, the Franchisor may elect to pursue its remedies as
further set forth in this Agreement. In no event shall the Franchisee be
required to pay a late payment and/or interest at a rate greater than the
maximum interest rate permitted by applicable law.
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11.4. Application of Payments.
Notwithstanding any designation by the Franchisee, the Franchisor shall
have sole discretion to apply any payments by the Franchisee, and any credits
received by the Franchisor on the Franchisee's behalf from third party vendors,
to any of Franchisee's past due indebtedness to Franchisor for Royalties,
Advertising Contributions, purchases from the Franchisor or its affiliates,
interest or any other indebtedness.
12. ADVERTISING
12.1. Approval of Advertising.
The Franchisee shall obtain the Franchisor's prior written approval of all
written advertising or other marketing or promotional programs regarding the PAK
MAIL Center, including, without limitation, "Yellow Pages" advertising,
newspaper ads, flyers, brochures, coupons, direct mail pieces, Internet
advertising, including sites on the World Wide Web, specialty and novelty items
and radio and television advertising. The Franchisee shall also obtain the
Franchisor's prior written approval before using any promotional materials as
may be provided by vendors. The proposed written advertising or a description of
the marketing or promotional program shall be submitted to the Franchisor at
least 30 days prior to publication, broadcast or use. The Franchisee
acknowledges that advertising and promoting the PAK MAIL Center in accordance
with the Franchisor's standards and specifications is an essential aspect of the
System, and the Franchisee agrees to comply with all advertising standards and
specifications. The Franchisee shall display all required promotional materials,
signs, point of purchase displays and other marketing materials in its PAK MAIL
Center and in the manner prescribed by the Franchisor.
12.2. Marketing Material Beginning Inventory.
If this Agreement governs the first Center to be opened and operated by the
Franchisee, then the Franchisee shall pay to the Franchisor and other suppliers
a nonrefundable, nonrecurring fee for marketing material beginning inventory
("Marketing Material Beginning Inventory") in an amount between $580 and $900
for Franchisor's provision of a beginning inventory of marketing material for
the Franchisee's PAK MAIL Center. The exact amount payable for the Marketing
Material Beginning Inventory fee shall be determined by the Franchisee. All or a
part of that amount will be due and payable to the Franchisor and other
suppliers by the Franchisee on or before the Franchisee's commencement of the
initial training program. The Marketing Material Beginning Inventory will be
provided by the Franchisor and other suppliers at or around the opening of the
Franchisee's Center.
12.3. Advertising Contribution.
The Franchisee shall contribute to an advertising fund established by the
Franchisor ("Advertising Fund") a fee equal to 2% of the total amount of the
Franchisee's Royalty Based Revenues ("Advertising Contribution"). The
Advertising Contribution shall be paid to the Franchisor in addition to
Royalties and the following terms and conditions shall apply:
a. The Advertising Contribution shall be payable to "Pak Mail National
Ad Fund" and made concurrently with the payment of the Royalties by
electronic transfer of funds from the Franchisee's bank account to a bank
account designated by the Franchisor, no later than the 10th day of each
month, for the Advertising Contribution based on the Royalty Based Revenues
of the immediately preceding month.
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b. The Advertising Contributions will be subject to the same late
charges as the Royalties, in an amount and manner set forth in Section 11.3
above.
c. Upon the request of the Franchisee, the Franchisor will make
available to the Franchisee, no later than 30 days after the end of each
fiscal quarter, an unaudited financial statement which indicates how the
Advertising Fund has been spent.
d. The Franchisor shall direct all advertising and marketing programs
financed by the Advertising Fund, with sole discretion over the creative
concepts, materials and endorsements used therein, geographic, market and
media placement and allocation, and the administration thereof. The
Franchisee agrees that the Advertising Fund may be used to pay the costs of
preparing and producing video and audio and written advertising materials;
administering multi-regional advertising programs, including, without
limitation, purchasing direct mail and other media advertising and
employing advertising agencies and staff to assist therewith; and
supporting public relations, market research and other advertising and
marketing activities.
e. The Advertising Fund shall be accounted for separately from the
Franchisor's other funds and shall not be used to defray any of the
Franchisor's general operating expenses, except for such reasonable
administrative costs, salaries and overhead as the Franchisor may incur in
activities related to the administration of the Advertising Fund and its
marketing programs, including, without limitation, conducting market
research, preparing material, incurring related accounting and legal
expenses, collecting and accounting for Advertising Fund contributions and
all costs and expenses related to the Franchise System Advisory Council.
The Franchisor may spend in any fiscal year an amount greater or less than
the aggregate contribution of all PAK MAIL Centers to the Advertising Fund
in that year and the Advertising Fund may borrow from the Franchisor or
other lenders to cover deficits or cause the Advertising Fund to invest any
surplus for future use. All interest earned on monies contributed to the
Advertising Fund will be first used to pay costs. The Advertising Fund may
be incorporated or operated through an entity separate from the Franchisor
at such time as the Franchisor deems appropriate, and such successor entity
shall have all rights and duties of the Franchisor pursuant to this Section
12.3.
f. The Franchisee understands and acknowledges that the Advertising
Fund is intended to maximize recognition of the Marks and patronage of PAK
MAIL Centers. Although the Franchisor will endeavor to utilize the
Advertising Fund to develop advertising and marketing materials and
programs and to place advertising that will benefit all PAK MAIL Centers,
the Franchisor undertakes no obligation to ensure that expenditures by the
Advertising Fund in or affecting any geographic area are proportionate or
equivalent to the contributions by PAK MAIL Centers operating in that
geographic area or that any PAK MAIL Center will benefit directly from or
in proportion to its contribution to the development of advertising and
marketing materials or the placement of advertising. Except as expressly
provided in this Section 12.3, the Franchisor assumes no direct or indirect
liability or obligation to the Franchisee with respect to the maintenance,
direction or administration of the Advertising Fund.
g. The Franchisor reserves the right to terminate the Advertising
Fund, upon 30 days' written notice to the Franchisee. All unspent monies on
the date of termination shall be distributed to the Franchisor's
franchisees in proportion to their respective contributions to the
Advertising Fund during the preceding 12 month period. The Franchisor shall
have the right to reinstate the Advertising Fund upon the same terms and
conditions set forth herein upon 30 days' prior written notice to the
Franchisee.
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12.4. Regional Advertising Programs.
The Franchisor reserves the right, upon 30 days prior written notice to the
Franchisee, to create a regional advertising association ("Association") for the
benefit of PAK MAIL franchisees located within a particular geographic area. If
an Association is established for the area where the Franchisee is located, the
Franchisee will be required to participate in the Association for the purpose of
selecting and participating in regional marketing and promotion programs for PAK
MAIL Centers. The Franchisor, in its sole discretion, may contribute up to
one-half of the Advertising Fund payments received by the Franchisor from
franchisees in the Association for such marketing and advertising programs. The
Franchisee will be required to remain a member of and be bound by the decisions
of the majority of the members of the Association regarding expenditures,
assessments and dues charged by the Association, to the extent that they are
approved by the Franchisor. Each Association has the right, by majority vote, to
require its members to pay additional monthly dues to the Association. The
failure of the Franchisee to participate in the Association or pay any dues
required by the Association, may, at the option of the Franchisor, be deemed to
be a breach of this Agreement. The Franchisor has the right, in its sole
discretion, to form and terminate all Associations and to determine the
composition of all geographic territories and market areas for the
implementation of such regional advertising and promotion campaigns and to
require that the Franchisee participate in such regional advertising programs as
and when they may be established by the Franchisor. If a regional advertising
program is implemented on behalf of a particular region by the Franchisor, the
Franchisor, to the extent reasonably calculable, will only use contributions
from PAK MAIL franchisees within such region for the particular regional
advertising program. The Franchisor also reserves the right to establish an
Association in the form of a cooperative for a particular region and enable the
cooperative Association to self-administer the regional advertising program. If
the Franchisor creates an Association, either as a cooperative or otherwise, the
Franchisor has the right to charge the Association for the actual costs of
forming and administering the Association.
13. QUALITY CONTROL
13.1. Compliance with Operations Manual.
The Franchisee agrees to maintain and operate the PAK MAIL Center in
compliance with this Agreement and the standards and specifications contained in
the Operations Manual, as the Operations Manual may be modified from time to
time by the Franchisor.
13.2. Standards and Specifications.
The Franchisor will make available to the Franchisee standards and
specifications for products and services offered at or through the PAK MAIL
Center and for decor, displays, uniforms, materials, forms, items, supplies and
services used in connection with the Center. The Franchisor reserves the right
to change standards and specifications for services and products offered at or
through the PAK MAIL Center and for the decor, displays, uniforms, materials,
forms, items, supplies and services used in connection with the Center, upon 30
days prior written notice to the Franchisee. The Franchisee shall, throughout
the term of this Agreement, remain in compliance with and strictly adhere to all
of the Franchisor's current standards and specifications for the PAK MAIL Center
as prescribed from time to time.
13.3. Inspections.
The Franchisor shall have the right to examine the Franchised Location,
including the inventory, products, equipment, materials, supplies or services
used or sold there, to ensure compliance with all standards and specifications
set by the Franchisor. The Franchisor shall conduct such inspections during
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regular business hours and the Franchisee may be present at such inspections.
The Franchisor, however, reserves the right to conduct the inspections without
prior notice to the Franchisee.
13.4. Restrictions on Services and Products.
The Franchisee is prohibited from offering or selling any products or
services not authorized by the Franchisor as being a part of the System.
However, if the Franchisee proposes to offer, conduct or utilize any products,
services, materials, forms, items, supplies or services for use in connection
with or sale through the PAK MAIL Center which are not previously approved by
the Franchisor as meeting its specifications, the Franchisee shall first notify
the Franchisor in writing requesting approval. The Franchisor may, in its sole
discretion, for any reason whatsoever, elect to withhold such approval; however,
in order to make such determination, the Franchisor may require submission of
specifications, information, or samples of such products, services, materials,
forms, items or supplies. The Franchisor will advise the Franchisee within a
reasonable time whether such products, services, materials, forms, items or
supplies meet its specifications.
13.5. Approved Suppliers.
The Franchisee shall purchase all products, services, supplies and
materials required for the operation of the PAK MAIL Center from suppliers
designated or approved by the Franchisor or, if there is no designated or
approved supplier for a particular product, service, supply or material, from
such other suppliers who meet all of the Franchisor's specifications and
standards as to quality, composition, finish, appearance and service, and who
shall adequately demonstrate their capacity and facilities to supply the
Franchisee's needs in the quantities, at the times, and with the reliability
requisite to an efficient operation of the PAK MAIL Center.
13.6. Request to Approve Supplier.
In the event the Franchisee desires to purchase or use products, services,
supplies or materials from suppliers other than those previously approved by the
Franchisor, the Franchisee shall, prior to purchasing from or otherwise
utilizing any supplier, give the Franchisor a written request to approve the
supplier. In the event the Franchisor rejects the Franchisee's requested new
supplier, the Franchisor must, within 60 days of the receipt of the Franchisee's
request to approve the supplier, notify the Franchisee in writing of its
rejection. The Franchisor may periodically inspect any suppliers' facilities and
products to assure compliance with the Franchisor's standards and
specifications. Permission to conduct periodic inspections and payment of the
Franchisor's costs incurred in conducting periodic inspections shall be a
condition of the continued approval of such supplier. The Franchisor may, at its
sole discretion, for any reason whatsoever, elect to withhold approval of the
supplier; however, in order to make such determination, the Franchisor may
require that samples from a proposed new supplier be delivered to the Franchisor
for testing prior to approval and use. A charge not to exceed the actual cost of
the test may be made by the Franchisor and shall be paid by the Franchisee.
13.7. Shopping Service.
The Franchisor reserves the right to use third party shopping services from
time to time to evaluate the conduct of the Franchisee's PAK MAIL Center,
including such things as customer service, cleanliness, merchandising and proper
use of the POS System. Franchisor may use such shopping services to inspect the
Franchisee's PAK MAIL Center at any time at the Franchisor's expense, without
prior notification to the Franchisee. The Franchisor may make the results of any
such service evaluation available to the Franchisee, in the Franchisor's sole
discretion.
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14. MARKS, TRADE NAMES AND PROPRIETARY INTERESTS
14.1. Marks.
The Franchisee acknowledges that the Franchisor has the sole right to own,
license and control the Franchisee's use of the PAK MAIL service mark and other
of the Marks, and that such Marks shall remain under the sole and exclusive
ownership and control of the Franchisor. The Franchisee acknowledges that it has
not acquired any right, title or interest in such Marks except for the right to
use such marks in the operation of its PAK MAIL Center as it is governed by this
Agreement. Except as may be permitted in the Operations Manual, the Franchisee
agrees not to use any of the Marks as part of an electronic mail address or on
any sites on the Internet or the World Wide Web and the Franchisee agrees not to
use or register any of the Marks as a domain name on the Internet.
14.2. No Use of Other Marks.
The Franchisee agrees that no service mark other than "PAK MAIL" or such
other Marks as may be specified by the Franchisor shall be used in the
identification, marketing, promotion or operation of the PAK MAIL Center.
14.3. System.
The Franchisee acknowledges that the Franchisor owns and controls the
distinctive plan for the establishment, operation and promotion of the PAK MAIL
Center and all related licensed methods of doing business, previously defined as
the "System," which include, but are not limited to, methods for shipping,
crating, freight forwarding, mailing, communications, information services,
inventory type and control, technical equipment standards, customer relations,
marketing techniques, written promotional materials, advertising, and accounting
systems, all of which constitute confidential trade secrets of the Franchisor,
and the Franchisee acknowledges that the Franchisor has valuable rights in and
to such trade secrets. The Franchisee further acknowledges that it has not
acquired any right, title or interest in the System except for the right to use
the System in the operation of the PAK MAIL Center as it is governed by this
Agreement and that it is obligated to maintain the confidentiality of the System
in accordance with Section 20.3 below.
14.4. Mark Infringement.
The Franchisee agrees to notify the Franchisor in writing of any possible
infringement or illegal use by others of a trademark the same as or confusingly
similar to one or more of the Marks which may come to its attention. The
Franchisee acknowledges that the Franchisor shall have the right, in its sole
discretion, to determine whether any action will be taken on account of any
possible infringement or illegal use. The Franchisor may commence or prosecute
such action in the Franchisor's own name and may join the Franchisee as a party
to the action if the Franchisor determines it to be reasonably necessary for the
continued protection and quality control of the Marks and System. The Franchisor
shall bear the reasonable cost of any such action, including attorneys' fees.
The Franchisee agrees to fully cooperate with the Franchisor in any such
litigation.
14.5. Franchisee's Business Name.
The Franchisee acknowledges that the Franchisor has a prior and superior
claim to the "PAK MAIL" trade name. The Franchisee shall not use one or both of
the words "PAK MAIL" in the legal name of its corporation, partnership or any
other business entity used in conducting the business provided for in this
Agreement. The Franchisee also agrees not to register or attempt to register a
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trade name using one or both of the words "PAK MAIL" in the Franchisee's name or
that of any other person or business entity, without prior written consent of
the Franchisor. The Franchisee shall not identify itself as being "Pak Mail
Centers of America, Inc." or as being associated with the Franchisor in any
manner other than as a franchisee or licensee. The Franchisee further agrees
that in all advertising and promotion and promotional materials it will display
its business name only in obvious conjunction with the phrase "PAK MAIL
Licensee" or "PAK MAIL Franchisee" or with such other words and in such other
phrases to identify itself as an independent owner of the PAK MAIL Center, as
may from time to time be prescribed in the Operations Manual.
14.6. Change of Marks.
In the event that the Franchisor, in its sole discretion, shall determine
it necessary to modify or discontinue use of any proprietary Marks, or to
develop additional or substitute marks, the Franchisee shall, within a
reasonable time after receipt of written notice of such a modification or
discontinuation from the Franchisor, take such action, at the Franchisee's sole
expense, as may be necessary to comply with such modification, discontinuation,
addition or substitution.
15. REPORTS, RECORDS AND FINANCIAL STATEMENTS
15.1. Franchisee Reports.
The Franchisee shall establish and maintain, at its own expense,
bookkeeping, accounting and data processing systems which conform to the
specifications which the Franchisor may prescribe from time to time (including,
without limitation, requirements for timely entry of information into data bases
of the Program, periodic printouts of reports generated by the Program and the
Franchisor's access to all Program data by modem). Each transaction of the
Center shall be processed on the Program in the manner prescribed by the
Franchisor. The Franchisor shall have the right of access to the Program and all
data processed thereon with respect to the Center. The Franchisee shall provide
the Franchisor with electronic access to the Program and its data at any time by
obtaining and maintaining an account with an internet service provider, paying
an annual fee to the Franchisor for an electronic mail connection and obtaining
and maintaining computer hardware which meets the Franchisor's standards and
specifications. The Franchisee shall supply to the Franchisor such types of
reports in a manner and form as the Franchisor may from time to time reasonably
require, including:
a. within 10 days after the end of each calendar month (or weekly if
the Franchisor requires the Franchisee to pay the Royalty described in
Section 11.1 hereof on a weekly basis), a report on the Center's Royalty
Based Revenues for such calendar month (or week);
b. within 90 days after the end of the Franchisee's fiscal year, a
balance sheet and profit and loss statement for the Center for such year
(or monthly or quarterly if required by the Franchisor, in which case such
statements shall also reflect year-to-date information); and
c. upon request of the Franchisor, within 10 days after such returns
are filed, exact copies of federal and state income, sales and any other
tax returns and such other forms, records, books and other information as
the Franchisor may periodically require.
The Franchisor reserves the right to require that the Franchisee submit
financial statements on a quarterly or monthly basis and within such time
periods as may be reasonable under the circumstances. The Franchisor also
reserves the right to disclose data derived from such reports, without
identifying the Franchisee, except to the extent identification of the
Franchisee is required by law. The Franchisee consents to the Franchisor
obtaining financial and account information regarding the Center and its
operations from third parties with whom the Franchisee does business, as and
when deemed necessary by the Franchisor.
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15.2. Verification.
Each report and financial statement to be submitted to the Franchisor
pursuant to this Agreement shall be signed and verified by the Franchisee.
15.3. Books and Records.
The Franchisee shall maintain all books and records for its PAK MAIL Center
in accordance with generally accepted accounting principles, consistently
applied, and in a manner as reasonably prescribed by the Franchisor, and shall
preserve these records for at least five years after the fiscal year to which
they relate.
15.4. Audit of Books and Records.
The Franchisee shall permit the Franchisor to inspect and audit the books
and records of the PAK MAIL Center at any reasonable time, at the Franchisor's
expense. If any audit discloses a deficiency in amounts for payments owed to the
Franchisor pursuant to this Agreement, then such amounts shall become
immediately payable to the Franchisor by the Franchisee, with interest from the
date such payments were due at the lesser of 1 1/2% per month or the maximum
rate allowed by law. In the event such inspection or audit is made necessary by
the Franchisee's failure to furnish required reports, supporting records or
other information, or by the Franchisee's failure to furnish such information on
a timely basis for two or more consecutive reporting periods, or if the
Franchisee has received advance notice from the Franchisor and fails to have the
books and records available for such audit or otherwise fails to cooperate
therewith or if an understatement of Royalty Based Revenues for the period of
any audit is determined by any such audit or inspection to be greater than 5%,
the Franchisee shall reimburse the Franchisor for the cost of such audit or
inspection, including, without limitation, the charges of attorneys and any
independent accountants and the travel expenses, room and board and compensation
of the Franchisor's employees.
16. TRANSFER
16.1. Transfer by Franchisee.
The franchise granted herein is personal to the Franchisee and, except as
stated below, the Franchisor shall not allow or permit any transfer, assignment,
subfranchise or conveyance of this Agreement or any interest hereunder. As used
in this Agreement, the term "transfer" shall mean and include the voluntary,
involuntary, direct or indirect assignment, sale, gift or other disposition by
the Franchisee (or any of its owners) of any interest in: (1) this Agreement;
(2) the ownership of the Franchisee; or (3) the Center or any assets of the
Center. Transfer shall include an assignment, sale, gift or other disposition
resulting from a divorce, insolvency, corporate or partnership dissolution
proceeding or otherwise by operation of law or, in the event of the death of the
Franchisee, or an owner of the Franchisee, by will, declaration of or transfer
in trust or under the laws of intestate succession.
16.2. Pre-Conditions to Franchisee's Transfer.
The Franchisee shall not transfer its rights under this Agreement or any
interest in it, or any part or portion of any business entity that owns it or
all or a substantial portion of the assets of the PAK MAIL Center, unless the
Franchisee obtains the Franchisor's written consent and complies with the
following requirements:
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a. Payment of all amounts due and owing pursuant to this Agreement by
the Franchisee to the Franchisor or its affiliates or to third parties
holding a security interest in any asset of the franchised business;
b. Agreement by the proposed transferee to satisfactorily complete the
initial training program described in this Agreement, which training may be
completed by the transferee either prior to or immediately after transfer
of rights under this Agreement;
c. Execution of a Franchise Agreement in a form then currently offered
by the Franchisor, which shall supersede this Agreement in all respects. If
a new Franchise Agreement is signed, the terms thereof may differ from the
terms of this Agreement; provided, however, the transferee will not be
required to pay any additional initial franchise fee;
d. Provision by the Franchisee of written notice to the Franchisor 30
days' prior to the proposed effective date of the transfer, such notice to
contain information reasonably detailed to enable the Franchisor to
evaluate the terms and conditions of the proposed transfer;
e. The proposed transferee shall have provided information to the
Franchisor sufficient for the Franchisor to assess the proposed
transferee's business experience, aptitude and financial qualification, and
the Franchisor shall have ascertained that the proposed transferee meets
such qualifications;
f. Execution by Franchisee of a general release, in a form
satisfactory to the Franchisor, of any and all claims against the
Franchisor, its affiliates and their respective officers, directors,
employees and agents;
g. Payment by the Franchisee or the proposed transferee of $2,500; and
h. Agreement by the Franchisee to abide by the post-termination
covenant not to compete set forth in Section 20.2 below.
16.3. Franchisor's Approval of Transfer.
The Franchisor has 30 days from the date of the written notice of the
proposed transfer to approve or disapprove in writing, of the Franchisee's
proposed transfer. The Franchisee acknowledges that the proposed transferee
shall be evaluated for approval by the Franchisor based on the same criteria as
is currently being used to assess new franchisees of the Franchisor and that
such proposed transferee shall be provided, if appropriate, with such
disclosures as may be required by state or federal law. The Franchisor shall
have the right to approve the material terms and conditions of the transfer,
including, without limitation, the right to confirm that the price and terms of
payment are not so burdensome as to affect adversely the transferee's operation
of the Center. If the Franchisee (and/or the transferring owners) finance any
part of the sale price of the transferred interest, if any, unless waived in
writing by the Franchisor, the Franchisee and/or its owners must agree that all
obligations of the transferee under or pursuant to any promissory notes,
agreements or security interests reserved by the Franchisee or its owners in the
assets of the Center or the Franchised Location shall be subordinate to the
transferee's obligations to pay Royalties, Advertising Contributions and other
amounts due to the Franchisor and its affiliates and to otherwise comply with
this Agreement. If the Franchisee and the proposed transferee comply with all
conditions for assignment set forth herein and the Franchisor has not given the
Franchisee notice of its approval or disapproval within the 30 day period,
approval is deemed granted.
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16.4. Right of First Refusal.
In the event the Franchisee wishes to transfer its rights under this
Agreement or any interest in it, or any part or portion of any business entity
that owns it, or all or a substantial portion of the assets of the PAK MAIL
Center, the Franchisee agrees to grant to the Franchisor a 30 day right of first
refusal to purchase such rights, interest or assets on the same terms and
conditions as are contained in the written offer to purchase submitted to the
Franchisee by the proposed purchaser; provided, however, the following
additional terms and conditions shall apply:
a. The Franchisee shall notify the Franchisor of such offer by sending
a written notice to the Franchisor (which notice may be the same notice as
required by Section 16.2(d) above), enclosing a copy of the written offer
from the proposed purchaser;
b. The 30 day right of first refusal period will run concurrently with
the period in which the Franchisor has to approve or disapprove the
proposed transferee;
c. Such right of first refusal is effective for each proposed transfer
and any material change in the terms or conditions of the proposed transfer
shall be deemed a separate offer on which a new 30 day right of first
refusal shall be given to the Franchisor;
d. If the consideration or manner of payment offered by a third party
is such that the Franchisor may not reasonably be required to furnish the
same, then the Franchisor may purchase the interest which is proposed to be
sold for the reasonable cash equivalent. If the parties cannot agree within
a reasonable time on the cash consideration, an independent appraiser shall
be designated by the Franchisor, whose determination will be binding upon
the parties. All expenses of the appraiser shall be paid for equally
between the Franchisor and the Franchisee; and
e. If the Franchisor chooses not to exercise its right of first
refusal, the Franchisee shall be free to complete the sale, transfer or
assignment, subject to compliance with Sections 16.2 and 16.3 above.
Absence of a reply to the Franchisee's notice of a proposed sale within the
30 day period is deemed a waiver of such right of first refusal.
16.5. Specific Types of Transfers.
The Franchisee acknowledges that the Franchisor's right to approve or
disapprove of a proposed transfer, and all other requirements and rights related
to such proposed transfer, as provided for above, shall apply (1) if the
Franchisee is a partnership or other business association, to the addition or
deletion of a partner or members of the association or the transfer of any
partnership or membership among existing partners or members; (2) if the
Franchisee is a corporation, to any proposed transfer of 25% or more of the
stock of the corporate Franchisee, whether such transfer occurs in a single
transaction or several transactions; and (3) if the Franchisee is an individual,
to the transfer from such individual or individuals to a corporation controlled
by them, in which case the Franchisor's approval will be conditioned upon: (i)
the continuing personal guarantee of the individual (or individuals) for the
performance of obligations under this Agreement; (ii) the issuance and/or
transfer of shares which would affect a change in ownership of 25% or more of
the stock in the corporation being conditioned on the Franchisor's prior written
approval; (iii) a limitation on the corporation's business activity to that of
operating the PAK MAIL Center and related activities; and (iv) other reasonable
conditions. With respect to a proposed transfer as described in subsection (1)
and (3) of this Section, the Franchisor's right of first refusal to purchase, as
set forth above, shall not apply and the Franchisor will waive any transfer fee
chargeable to the Franchisee for a transfer under these circumstances.
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16.6. Assignment by the Franchisor.
This Agreement is fully assignable by the Franchisor and shall inure to the
benefit of any assignee or other legal successor in interest, and the Franchisor
shall in such event be fully released from the same.
16.7. Franchisee's Death or Disability.
Upon the death or permanent disability of the Franchisee (or the
Franchisee's individual controlling the Franchisee entity), the executor,
administrator, conservator, guardian or other personal representative of such
person shall transfer the Franchisee's interest in this Agreement or such
interest in the Franchisee entity to an approved third party. Such disposition
of this Agreement or such interest (including, without limitation, transfer by
bequest or inheritance) shall be completed within a reasonable time, not to
exceed 120 days from the date of death or permanent disability, and shall be
subject to all terms and conditions applicable to transfers contained in this
Article 16. Provided, however, that for purposes of this Section 16.7, there
shall be no fee charged by the Franchisor for the initial training program
offered to the transferee. Failure to transfer the interest in this Agreement or
such interest in the Franchisee entity within said period of time shall
constitute a breach of this Agreement. For the purposes hereof, the term
"permanent disability" shall mean a mental or physical disability, impairment or
condition that is reasonably expected to prevent or actually does prevent the
Franchisee or the owner of a controlling interest in the Franchisee entity from
supervising the management and operation of the PAK MAIL Center for a period of
120 days from the onset of such disability, impairment or condition.
17. TERM AND EXPIRATION
17.1. Term.
The term of this Agreement is for a period of 10 years from the date of
this Agreement, unless sooner terminated as provided herein.
17.2. Continuation.
If the Franchisee continues to operate the Center with the Franchisor's
express or implied consent following the expiration or termination of this
Agreement, the continuation will be a month-to-month extension of this
Agreement. This Agreement will then be terminable by either party on 30 days
written notice. Otherwise, all provisions of this Agreement will apply while the
Franchisee continues to operate the Center.
17.3. Rights Upon Expiration.
At the end of the initial term hereof the Franchisee shall have the option
to renew its franchise rights for an additional term, by acquiring successor
franchise rights, if the Franchisor does not exercise its right not to offer a
successor franchise in accordance with Section 17.5 below and if the Franchisee:
a. At least 30 days prior to expiration of the term, executes the form
of Franchise Agreement then in use by the Franchisor;
b. Has complied with all provisions of this Agreement during the
current term, including the payment on a timely basis of all Royalties and
other fees due hereunder. "Compliance" shall mean, at a minimum, that the
Franchisee has not received any written notification from the Franchisor of
breach hereunder more than four times during the term hereof;
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c. Upgrades and/or remodels the PAK MAIL Center and its operations at
the Franchisee's sole expense (the necessity of which shall be in the sole
discretion of the Franchisor) to conform with the then current Operations
Manual;
d. Executes a general release, in a form satisfactory to the
Franchisor, of any and all claims against the Franchisor and its
affiliates, and their respective officers, directors, employees and agents
arising out of or relating to this Agreement; and
e. Pays a successor franchise fee of $2,500.
17.4. Exercise of Option for Successor Franchise.
The Franchisee may exercise its option for a successor franchise by giving
written notice of such exercise to the Franchisor not later than 180 days prior
to the scheduled expiration of this Agreement. The Franchisee's successor
franchise rights shall become effective by signing the Franchise Agreement then
currently being offered to new franchisees of the Franchisor.
17.5. Conditions of Refusal.
The Franchisor shall not be obligated to offer the Franchisee a successor
franchise upon the expiration of this Agreement if the Franchisee fails to
comply with any of the above conditions of renewal. In such event (except for
failure to execute the then current Franchise Agreement or pay the successor
franchise fee) the Franchisor shall give notice of expiration at least 180 days
prior to the expiration of the term, and such notice shall set forth the reasons
for such refusal to offer successor franchise rights. Upon the expiration of
this Agreement, the Franchisee shall comply with the provisions of Section 18.5
below.
18. DEFAULT AND TERMINATION
18.1. Termination by Franchisee.
If the Franchisee and its owners are in compliance with this Agreement and
the Franchisor fails to comply with this Agreement and fails to correct such
failure within 30 days after written notice of failure to comply is delivered to
the Franchisor, the Franchisee may terminate this Agreement effective 10 days
after delivery to the Franchisor of notice of termination. A termination of this
Agreement by the Franchisee for any other reason, or without notice and right to
cure, shall be deemed a termination by the Franchisee without cause and in no
way shall release the Franchisee from the terms and conditions of this
Agreement.
18.2. Termination by Franchisor - Effective Upon Notice.
The Franchisor shall have the right, at its option, to terminate this
Agreement and all rights granted the Franchisee hereunder, without affording the
Franchisee any opportunity to cure any default (subject to any state laws to the
contrary, where state law shall prevail), effective upon receipt of notice by
the Franchisee, addressed as provided in Section 22.13, upon the occurrence of
any of the following events:
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a. Abandonment. If the Franchisee ceases to operate the PAK MAIL
Center or otherwise abandons the PAK MAIL Center for a period of three
consecutive days, or any shorter period that indicates an intent by the
Franchisee to discontinue operation of the PAK MAIL Center, unless and only
to the extent that full operation of the PAK MAIL Center is suspended or
terminated due to fire, flood, earthquake or other similar causes beyond
the Franchisee's control and not related to the availability of funds to
the Franchisee;
b. Insolvency; Assignments. If the Franchisee becomes insolvent or is
adjudicated a bankrupt; or any action is taken by the Franchisee, or by
others against the Franchisee under any insolvency, bankruptcy or
reorganization act, (this provision may not be enforceable under federal
bankruptcy law, 11 U.S.C. ss.ss. 101 et seq.), or if the Franchisee makes
an assignment for the benefit of creditors, or a receiver is appointed by
the Franchisee;
c. Unsatisfied Judgments; Levy; Foreclosure. If any material judgment
(or several judgments which in the aggregate are material) is obtained
against the Franchisee and remains unsatisfied or of record for 30 days or
longer (unless a supersedeas or other appeal bond has been filed); or if
execution is levied against the Franchisee's business or any of the
property used in the operation of the PAK MAIL Center and is not discharged
within five days; or if the real or personal property of the Franchisee's
business shall be sold after levy thereupon by any sheriff, marshal or
constable;
d. Criminal Conviction. If the Franchisee is convicted of a felony, a
crime involving moral turpitude, or any crime or offense that is reasonably
likely, in the sole opinion of the Franchisor, to materially and
unfavorably affect the System, Marks, goodwill or reputation thereof;
e. Failure to Make Payments. If the Franchisee fails to pay any
amounts due the Franchisor or affiliates, including any amounts which may
be due as a result of any subleases or lease assignments between the
Franchisee and the Franchisor, within 10 days after receiving notice that
such fees or amounts are overdue;
f. Misuse of Marks. If the Franchisee misuses or fails to follow the
Franchisor's directions and guidelines concerning use of the Franchisor's
Marks and fails to correct the misuse or failure within ten days after
notification from the Franchisor;
g. Unauthorized Disclosure. If the Franchisee intentionally or
negligently discloses to any unauthorized person the contents of or any
part of the Franchisor's Operations Manual, the Program, the POS System or
any other trade secrets or confidential information of the Franchisor;
h. Repeated Noncompliance. If the Franchisee has received two previous
notices of default from the Franchisor and is again in default of this
Agreement within a 12 month period, regardless of whether the previous
defaults were cured by the Franchisee; or
i. Unauthorized Transfer. If the Franchisee sells, transfers or
otherwise assigns the Franchise, an interest in the Franchise or the
Franchisee entity, this Agreement, the PAK MAIL Center or a substantial
portion of the assets of the PAK MAIL Center owned by the Franchisee
without complying with the provisions of Article 16 above.
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<PAGE>
18.3. Termination by Franchisor - Thirty Days Notice.
The Franchisor shall have the right to terminate this Agreement (subject to
any state laws to the contrary, where state law shall prevail), effective upon
30 days written notice to the Franchisee, if the Franchisee breaches any other
provision of this Agreement and fails to cure the default during such 30 day
period. In that event, this Agreement will terminate without further notice to
the Franchisee, effective upon expiration of the 30 day period. Defaults shall
include, but not be limited to, the following:
a. Failure to Maintain Standards. The Franchisee fails to maintain the
then current operating procedures and adhere to the specifications and
standards established by the Franchisor as set forth herein or in the
Operations Manual or otherwise communicated to the Franchisee;
b. Deceptive Practices. The Franchisee engages in any unauthorized
business or practice or sells any unauthorized product or service under the
Franchisor's Marks or under a name or mark which is confusingly similar to
the Franchisor's Marks;
c. Failure to Obtain Consent. The Franchisee fails, refuses or
neglects to obtain the Franchisor's prior written approval or consent as
required by this Agreement;
d. Failure to Comply with Manual. The Franchisee fails or refuses to
comply with the then-current requirements of the Operations Manual; or
e. Breach of Related Agreement. The Franchisee defaults under any term
of the purchase contract, lease, sublease or lease assignment for the
Franchised Location, any other agreement material to the PAK MAIL Center,
any other Franchise Agreement between the Franchisor and the Franchisee or
any other agreement between the Franchisor and the Franchisee and such
default is not cured within the time specified in such purchase contract,
lease, sublease, other agreement or other Franchise Agreement. Provided,
however, so long as financing from the United States Small Business
Administration remains outstanding, the Franchisee will be given the same
opportunity to cure defaults under any agreement between the Franchisor or
its affiliates and the Franchisee, as the Franchisee is given under this
Agreement.
Notwithstanding the foregoing, if the breach is curable, but is of a nature
which cannot be reasonably cured within such 30 day period and the Franchisee
has commenced and is continuing to make good faith efforts to cure the breach
during such 30 day period, the Franchisee shall be given an additional
reasonable period of time to cure the same, and this Agreement shall not
automatically terminate without written notice from the Franchisor.
18.4. Right to Purchase.
Upon termination or expiration of this Agreement for any reason, the
Franchisor shall have the option to purchase the PAK MAIL Center or a portion of
the assets of the Center, which may include, at the Franchisor's option, all of
the Franchisee's interest, if any, in and to the real estate upon which the PAK
MAIL Center is located, and all buildings and other improvements thereon,
including leasehold interests, at fair market value, less any amount apportioned
to the goodwill of the PAK MAIL Center which is attributable to the Franchisor's
Marks and System, and less any amounts owed to the Franchisor by the Franchisee.
The following additional terms shall apply to the Franchisor's exercise of this
option:
a. The Franchisor's option hereunder shall be exercisable by providing
the Franchisee with written notice of its intention to exercise the option
given to the Franchisee no later than the effective date of termination, in
the case of termination, or at least 90 days prior to the expiration of the
term of the franchise, in the case of non-renewal.
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<PAGE>
b. The Franchisor and the Franchisee agree that the terms and
conditions of this right and option to purchase may be recorded, if deemed
appropriate by the Franchisor, in the real property records and the
Franchisor and the Franchisee further agree to execute such additional
documentation as may be necessary and appropriate to effectuate such
recording.
c. The Franchisor shall set the closing for the purchase of the PAK
MAIL Center to take place no later than 60 days after the termination or
nonrenewal date. The Franchisor will pay the purchase price in full at the
closing, or, at its option, in five equal consecutive monthly installments
with interest at a rate of ten percent per annum. The Franchisee must sign
all documents of assignment and transfer as are reasonably necessary for
purchase of the PAK MAIL Center or its assets by the Franchisor.
d. During the time after the Franchisor notifies the Franchisee of the
exercise of the option but before the closing ("Interim Period"), the
Franchisor has the right to obtain an independent appraisal of the fair
market value of the assets being purchased and, if the Franchisor requests
that such an appraisal be obtained, the Franchisor and the Franchisee shall
each select an appraiser who, in turn, shall select a third appraiser,
whose appraisal shall be binding on both parties. The obligation of the
Franchisor to close shall be contingent on the appraisal being acceptable
to the Franchisor.
In the event that the Franchisor does not exercise the Franchisor's right to
purchase the Franchisee's PAK MAIL Center as set forth above, the Franchisee
will be free to keep or to sell, after such termination or expiration, to any
third party, all of the physical assets of its PAK MAIL Center; provided,
however, that all appearances of the Marks are first removed in a manner
approved in writing by the Franchisor.
18.5. Obligations of Franchisee Upon Termination or Expiration. The
Franchisee is obligated upon termination or expiration of this Agreement to
immediately:
a. Pay to the Franchisor all Royalties, Advertising Contributions,
other fees, and any and all amounts or accounts payable then owed the
Franchisor or its affiliates pursuant to this Agreement, or pursuant to any
other agreement, whether written or oral, including subleases and lease
assignments, between the parties;
b. Cease to identify itself as a PAK MAIL franchisee or publicly
identify itself as a former Franchisee or use any of the Franchisor's trade
secrets, signs, symbols, devices, trade names, trademarks, or other
materials.
c. Immediately cease to identify the Franchised Location as being, or
having been, associated with the Franchisor and, if deemed necessary by the
Franchisor, paint or otherwise change the interior and exterior of the
Center to distinguish it from a PAK MAIL Center and immediately cease using
any proprietary mark of the Franchisor or any mark in any way associated
with the PAK MAIL Marks and System;
d. Deliver to the Franchisor all items which bear the PAK MAIL Marks,
signs, sign-faces, advertising materials, forms and other materials bearing
any of the Marks or otherwise identified with the Franchisor and obtained
by and in connection with this Agreement;
e. Immediately deliver to the Franchisor the Operations Manual and all
other information, documents and copies thereof which are proprietary to
the Franchisor;
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<PAGE>
f. Take such action as may be required to cancel all fictitious or
assumed names or equivalent registrations relating to its use of any Marks
which are under the exclusive control of the Franchisor or, at the option
of the Franchisor, assign the same to the Franchisor;
g. Notify the telephone company and all telephone directory publishers
of the termination or expiration of the Franchisee's right to use any
telephone number and any regular, classified or other telephone directory
listings associated with any Mark and to authorize transfer thereof to the
Franchisor or its designee. The Franchisee acknowledges that, as between
the Franchisee and the Franchisor, the Franchisor has the sole rights to
and interest in all telephone, telecopy or facsimile machine numbers and
directory listings associated with any Mark. The Franchisee authorizes the
Franchisor, and hereby appoints the Franchisor and any of its officers as
the Franchisee's attorney-in-fact, to direct the telephone company and all
telephone directory publishers to transfer any telephone, telecopy or
facsimile machine numbers and directory listings relating to the PAK MAIL
Center to the Franchisor or its designee, should the Franchisee fail or
refuse to do so, and the telephone company and all telephone directory
publishers may accept such direction or this Agreement as conclusive of the
Franchisor's exclusive rights in such telephone numbers and directory
listings and the Franchisor's authority to direct their transfer;
h. If applicable, take such action as may be required to remove from
the internet all sites referring to the Franchisee's former PAK MAIL Center
or any of the Marks and to cancel or assign to the Franchisor, in the
Franchisor's sole discretion, all rights to any domain names for any sites
on the internet that refer to the Franchisee's former PAK MAIL Center or
any of the Marks;
i. Comply with all applicable provisions of the Software License
Agreement; and
j. Abide by all restrictive covenants set forth in Article 20 of this
Agreement.
18.6. Acknowledgement.
In the event this Agreement is terminated by the Franchisor prior to its
expiration as set forth in Sections 18.2 and 18.3 above, the Franchisee
acknowledges and agrees that, in addition to all other available remedies, the
Franchisor shall have the right to recover lost future royalties during any
period in which the Franchisee fails to pay such royalties through and including
the remainder of the then current term of this Agreement.
18.7. State and Federal Law.
THE PARTIES ACKNOWLEDGE THAT IN THE EVENT THAT THE TERMS OF THIS AGREEMENT
REGARDING TERMINATION OR EXPIRATION ARE INCONSISTENT WITH APPLICABLE STATE OR
FEDERAL LAW, SUCH LAW SHALL GOVERN THE FRANCHISEE'S RIGHTS REGARDING TERMINATION
OR EXPIRATION OF THIS AGREEMENT.
19. BUSINESS RELATIONSHIP
19.1. Independent Businesspersons.
The parties agree that each of them are independent businesspersons, their
only relationship is by virtue of this Agreement and that no fiduciary
relationship is created hereunder. Neither party is liable or responsible for
the other's debts or obligations, nor shall either party be obligated for any
damages to any person or property directly or indirectly arising out of the
operation of the other party's business authorized by or conducted pursuant to
25
<PAGE>
this Agreement. The Franchisor and the Franchisee agree that neither of them
will hold themselves out to be the agent, employer or partner of the other and
that neither of them has the authority to bind or incur liability on behalf of
the other.
19.2. Payment of Third Party Obligations.
The Franchisor shall have no liability for the Franchisee's obligations to
pay any third parties, including without limitation, any product vendors, or any
sales, use, service, occupation, excise, gross receipts, income, property or
other tax levied upon the Franchisee, the Franchisee's property, the PAK MAIL
Center or upon the Franchisor in connection with the sales made or business
conducted by the Franchisee (except any taxes the Franchisor is required by law
to collect from the Franchisee with respect to purchases from the Franchisor).
19.3. Indemnification.
The Franchisee agrees to indemnify, defend and hold harmless the
Franchisor, its subsidiaries and affiliates, and their respective shareholders,
directors, officers, employees, agents, successors and assignees, (the
"Indemnified Parties") against, and to reimburse them for all claims,
obligations and damages described in this Section 19.3, any and all third party
obligations described in Section 19.2 and any and all claims and liabilities
directly or indirectly arising out of the operation of the PAK MAIL Center or
arising out of the use of the Marks and System in any manner not in accordance
with this Agreement. For purposes of this indemnification, claims shall mean and
include all obligations, actual and consequential damages and costs reasonably
incurred in the defense of any claim against the Indemnified Parties, including,
without limitation, reasonable accountants', attorneys' and expert witness fees,
costs of investigation and proof of facts, court costs, other litigation
expenses and travel and living expenses. The Franchisor shall have the right to
defend any such claim against it. This indemnity shall continue in full force
and effect subsequent to and notwithstanding the expiration or termination of
this Agreement.
20. RESTRICTIVE COVENANTS
20.1. Non-Competition During Term.
The Franchisee acknowledges that, in addition to the license of the Marks
hereunder, the Franchisor has also licensed commercially valuable information
which comprises and is a part of the System, including without limitation,
operations, marketing, advertising and related information and materials and
that the value of this information derives not only from the time, effort and
money which went into its compilation, but from the usage of the same by all the
franchisees of the Franchisor using the Marks and System. The Franchisee
therefore agrees that other than the PAK MAIL Center licensed herein or
authorized by separate agreement with the Franchisor, neither the Franchisee nor
any of the Franchisee's officers, directors, shareholders or partners, nor any
member of his or their immediate families, shall during the term of this
Agreement:
a. have any direct or indirect controlling interest as a disclosed or
beneficial owner in a "Competitive Business" as defined below;
b. perform services as a director, officer, manager, employee,
consultant, representative, agent or otherwise for a Competitive Business;
or
c. divert or attempt to divert any business related to, or any
customer or account of the PAK MAIL Center, the Franchisor's business or
any other PAK MAIL franchisee's business, by direct inducement or
otherwise, or divert or attempt to divert the employment of any employee of
26
<PAGE>
the Franchisor or another franchisee licensed by the Franchisor to use the
Marks and System, to any Competitive Business by any direct inducement or
otherwise.
The term "Competitive Business" as used in this Agreement shall mean any
business operating, or granting franchises or licenses to others to operate, a
packaging, crating, freight forwarding and/or mailing business or any similar
business (excluding operating or granting franchises or licenses to others for
PAK MAIL Centers operated under franchise agreements with the Franchisor).
Notwithstanding the foregoing, the Franchisee shall not be prohibited from
owning securities in a Competitive Business if such securities are listed on a
stock exchange or traded on the over-the-counter market and represent 5% or less
of that class of securities issued and outstanding.
20.2. Post-Termination Covenant Not to Compete.
Upon termination or expiration of this Agreement for any reason, the
Franchisee and its officers, directors, shareholders, and/or partners agree
that, for a period of two years commencing on the effective date of termination
or expiration, or the date on which the Franchisee ceases to conduct business,
whichever is later, neither Franchisee nor its officers, directors,
shareholders, and/or partners shall have any direct or indirect interest
(through a member of any immediate family of the Franchisee or its Owners or
otherwise) as a disclosed or beneficial owner, investor, partner, director,
officer, employee, consultant, representative or agent or in any other capacity
in any Competitive Business, defined in Section 20.1 above, located or operating
within a 25 mile radius of the Franchised Location or within 25 miles of any
other franchised or company-owned PAK MAIL Center. The restrictions of this
Section shall not be applicable to the ownership of shares of a class of
securities listed on a stock exchange or traded on the over-the-counter market
that represent 5% or less of the number of shares of that class of securities
issued and outstanding. The Franchisee and its officers, directors,
shareholders, and/or partners expressly acknowledge that they possess skills and
abilities of a general nature and have other opportunities for exploiting such
skills. Consequently, enforcement of the covenants made in this Section will not
deprive them of their personal goodwill or ability to earn a living.
20.3. Confidentiality of Proprietary Information.
The Franchisee shall treat all information it receives which comprises or
is a part of the System licensed hereunder as proprietary and confidential and
will not use such information in an unauthorized manner or disclose the same to
any unauthorized person without first obtaining the Franchisor's written
consent. The Franchisee acknowledges that the Marks and the System have valuable
goodwill attached to them, that the protection and maintenance thereof is
essential to the Franchisor and that any unauthorized use or disclosure of the
Marks and System will result in irreparable harm to the Franchisor.
20.4. Confidentiality Agreement.
The Franchisor reserves the right to require that the Franchisee cause each
of its officers, directors, partners, shareholders, and Principal Operator, and,
if the Franchisee is an individual, immediate family members, to execute a
Nondisclosure and Noncompetition Agreement containing the above restrictions, in
a form approved by the Franchisor.
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21. INSURANCE
21.1. Insurance Coverage.
The Franchisee shall procure, maintain and provide evidence of (i)
comprehensive general liability insurance for the Franchised Location and its
operations with a limit of not less than $1,000,000 combined single limit, or
such greater limit as may be required as part of any lease agreement for the
Franchised Location; (ii) automobile liability insurance covering all employees
of the PAK MAIL Center with authority to operate a motor vehicle in an amount
not less than $1,000,000 or, with the prior written consent of the Franchisor,
such lesser amount as may be available at a commercially reasonable rate, but in
no event less than any statutorily imposed minimum coverage; (iii) unemployment
and worker's compensation insurance with a broad form all-states endorsement
coverage sufficient to meet the requirements of the law; and (iv) all-risk
personal property insurance in an amount equal to at least 100% of the
replacement costs of the contents and tenant improvements located at the PAK
MAIL Center. All of the required policies of insurance shall name the Franchisor
as an additional named insured and shall provide for a 30 day advance written
notice to the Franchisor of cancellation.
21.2. Proof of Insurance Coverage.
The Franchisee will provide proof of insurance to the Franchisor prior to
commencement of operations at its PAK MAIL Center. This proof will show that the
insurer has been authorized to inform the Franchisor in the event any policies
lapse or are cancelled. The Franchisor has the right to change the minimum
amount of insurance the Franchisee is required to maintain by giving the
Franchisee prior reasonable notice, giving due consideration to what is
reasonable and customary in the similar business. Noncompliance with the
insurance provisions set forth herein shall be deemed a material breach of this
Agreement; in the event of any lapse in insurance coverage, in addition to all
other remedies, the Franchisor shall have the right to demand that the
Franchisee cease operations of the PAK MAIL Centers until coverage is
reinstated, or, in the alternative, pay any delinquencies in premium payments
and charge the same back to the Franchisee.
22 .MISCELLANEOUS PROVISIONS
22.1. Governing Law/Consent to Venue and Jurisdiction.
Except to the extent governed by the United States Trademark Act of 1946
(Lanham Act, 15 U.S.C. Sections 1051 et seq.) or other federal law, this
Agreement shall be interpreted under the laws of the state of Colorado and any
dispute between the parties shall be governed by and determined in accordance
with the substantive laws of the state of Colorado, which laws shall prevail in
the event of any conflict of law. The Franchisee and the Franchisor have
negotiated regarding a forum in which to resolve any disputes which may arise
between them and have agreed to select a forum in order to promote stability in
their relationship. Therefore, if a claim is asserted in any legal proceeding
involving the Franchisee, its officers or directors (collectively, "Franchisee
Affiliates") and the Franchisor, its officers, directors or sales employees
(collectively, "Franchisor Affiliates") both parties agree that the exclusive
venue for disputes between them shall be in the state and federal courts of
Colorado and each waive any objection either may have to the personal
jurisdiction of or venue in the state and federal courts of Colorado. The
Franchisor, the Franchisor Affiliates, the Franchisee and the Franchisee
Affiliates each waive their rights to a trial by jury.
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22.2. Modification.
The Franchisor and/or the Franchisee may modify this Agreement only upon
execution of a written agreement between the two parties. The Franchisee
acknowledges that the Franchisor may modify its standards and specifications and
operating and marketing techniques set forth in the Operations Manual
unilaterally under any conditions and to the extent in which the Franchisor, in
its sole discretion, deems necessary to protect, promote, or improve the Marks
and the quality of the System, but under no circumstances will such
modifications be made arbitrarily without such determination.
22.3. Entire Agreement.
This Agreement, including all exhibits and addenda, contains the entire
agreement between the parties and supersedes any and all prior agreements
concerning the subject matter hereof. The Franchisee agrees and understands that
the Franchisor shall not be liable or obligated for any oral representations or
commitments made prior to the execution hereof or for claims of negligent or
fraudulent misrepresentation and that no modifications of this Agreement shall
be effective except those in writing and signed by both parties. The Franchisor
does not authorize and will not be bound by any representation of any nature
other than those expressed in this Agreement. The Franchisee further
acknowledges and agrees that no representations have been made to it by the
Franchisor regarding projected sales volumes, market potential, revenues,
profits of the Franchisee's PAK MAIL Center, or operational assistance other
than as stated in this Agreement or in any disclosure document provided by the
Franchisor or its representatives.
22.4. Delegation by the Franchisor.
From time to time, the Franchisor shall have the right to delegate the
performance of any portion or all of its obligations and duties hereunder to
third parties, whether the same are agents of the Franchisor or independent
contractors which the Franchisor has contracted with to provide such services.
The Franchisee agrees in advance to any such delegation by the Franchisor of any
portion or all of its obligations and duties hereunder.
22.5. Effective Date.
This Agreement shall not be effective until accepted by the Franchisor as
evidenced by the signing and dating of this Agreement by an officer of the
Franchisor.
22.6. Review of Agreement.
The Franchisee acknowledges that it had a copy of this Agreement in its
possession for a period of time not less than ten full business days, during
which time the Franchisee has had the opportunity to submit same for
professional review and advice of the Franchisee's choosing prior to freely
executing this Agreement.
22.7. Attorneys' Fees.
In the event of any default on the part of either party to this Agreement,
in addition to all other remedies, the party in default will pay the aggrieved
party all amounts due and all damages, costs and expenses, including reasonable
attorneys' fees, incurred by the aggrieved party in any legal action,
arbitration or other proceeding as a result of such default, plus interest at
the highest rate allowable by law, accruing from the date of such default.
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22.8. Injunctive Relief.
Nothing herein shall prevent the Franchisor or the Franchisee from seeking
injunctive relief to prevent irreparable harm, in addition to all other
remedies. If the Franchisor seeks an injunction, the Franchisor will not be
required to post a bond or bonds in excess of $500.
22.9. Payment of Taxes.
The Franchisee shall reimburse the Franchisor, or its affiliates and
designees, promptly and when due, the amount of all sales taxes, use taxes,
personal property taxes and similar taxes imposed upon, required to be collected
or paid by the Franchisor, or its affiliates or designees, on account of
services or goods furnished by the Franchisor, its affiliates or designees, to
the Franchisee through sale, lease or otherwise, or on account of collection by
the Franchisor of the initial franchise fee, Royalties, Advertising
Contributions or any other payments made by the Franchisee to the Franchisor
required under the terms of this Agreement.
22.10. No Waiver.
No waiver of any condition or covenant contained in this Agreement or
failure to exercise a right or remedy by the Franchisor or the Franchisee shall
be considered to imply or constitute a further waiver by the Franchisor or the
Franchisee of the same or any other condition, covenant, right, or remedy.
22.11. No Right to Set Off.
The Franchisee shall not be allowed to set off amounts owed to the
Franchisor for Royalties, fees or other amounts due hereunder, against any
monies owed to Franchisee, nor shall the Franchisee in any event withhold such
amounts due to any alleged nonperformance by the Franchisor hereunder, which
right of set off is hereby expressly waived by the Franchisee.
22.12. Invalidity.
If any provision of this Agreement is held invalid by any tribunal in a
final decision from which no appeal is or can be taken, such provision shall be
deemed modified to eliminate the invalid element and, as so modified, such
provision shall be deemed a part of this Agreement as though originally
included. The remaining provisions of this Agreement shall not be affected by
such modification.
22.13. Notices.
All notices required to be given under this Agreement shall be given in
writing, by certified mail, return receipt requested, or by an overnight
delivery service providing documentation of receipt, at the address set forth in
the first Section of this Agreement or at such other addresses as the Franchisor
or the Franchisee may designate from time to time, and shall be effectively
given when deposited in the United States mails, postage prepaid, or when
received via overnight delivery, as may be applicable.
22.14. Acknowledgement.
BEFORE SIGNING THIS AGREEMENT, THE FRANCHISEE SHOULD READ IT CAREFULLY WITH
THE ASSISTANCE OF LEGAL COUNSEL. THE FRANCHISEE ACKNOWLEDGES THAT:
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(A) THE SUCCESS OF THE BUSINESS VENTURE CONTEMPLATED HEREIN INVOLVES
SUBSTANTIAL RISKS AND DEPENDS UPON THE FRANCHISEE'S ABILITY AS AN
INDEPENDENT BUSINESS PERSON AND ITS ACTIVE PARTICIPATION IN THE DAILY
AFFAIRS OF THE BUSINESS, AND
(B) NO ASSURANCE OR WARRANTY, EXPRESS OR IMPLIED, HAS BEEN GIVEN AS TO
THE POTENTIAL SUCCESS OF SUCH BUSINESS VENTURE OR THE EARNINGS LIKELY TO BE
ACHIEVED, AND
(C) NO STATEMENT, REPRESENTATION OR OTHER ACT, EVENT OR COMMUNICATION,
EXCEPT AS SET FORTH IN THIS AGREEMENT, AND IN ANY OFFERING CIRCULAR
SUPPLIED TO THE FRANCHISEE IS BINDING ON THE FRANCHISOR IN CONNECTION WITH
THE SUBJECT MATTER OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
PAK MAIL CENTERS OF AMERICA, INC., FRANCHISEE
a Colorado corporation
------------------------------------------
(Print Name)
By:
------------------------------ ------------------------------------------
Name: Individually
----------------------------
Title: Title:
--------------------------- -----------------------------------
Address:
---------------------------------
City:
-----------------------------------
State: Zip:
-------------- -------------
OR:
(if a corporation or partnership)
--------------------------------------------
Company Name
By:
--------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
Address:
---------------------------------
City:
-----------------------------------
State: Zip:
-------------- -------------
31
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EXHIBIT I TO
FRANCHISE AGREEMENT
ADDENDUM TO PAK MAIL CENTERS OF AMERICA, INC.
FRANCHISE AGREEMENT
1. Franchised Location and Protected Territory. The Franchised Location,
set forth in Section 3.1 of the Agreement shall be:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Protected Territory described in Section 3.2 of the Agreement, shall be:
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OR
Designated Area. The Franchisor and the Franchisee acknowledge that the
Franchised Location cannot be designated in Section 1 above as a specific
address because the location has not been selected and approved; therefore,
within 90 days following the date of the Agreement, the Franchisee shall take
steps to choose and acquire a location for its PAK MAIL Center within the
following geographic area ("Designated Area"):
----------------------------------
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. Acknowledgement. By executing this Exhibit and/or the Rider hereto, the
Franchisee acknowledges that the Franchisor's approval of a site does not
constitute a representation or warranty of any kind, express or implied, as to
the suitability of the site for a PAK MAIL Center or for any other purpose and
that the Franchisee's acceptance of a franchise for the operation of a PAK MAIL
Center at the site is based on its own independent investigation of the
suitability of the site.
Fully executed this day of , 20 .
---- --------- --
PAK MAIL CENTERS OF AMERICA, INC., FRANCHISEE
a Colorado corporation
------------------------------------------
(Print Name)
By:
------------------------------ ------------------------------------------
Name: Individually
----------------------------
Title: Title:
--------------------------- -----------------------------------
Address:
---------------------------------
City:
-----------------------------------
State: Zip:
-------------- -------------
OR:
(if a corporation or partnership)
--------------------------------------------
Company Name
By:
--------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
Address:
---------------------------------
City:
-----------------------------------
State: Zip:
-------------- -------------
<PAGE>
EXHIBIT I-1
TO FRANCHISE AGREEMENT
RIDER TO ADDENDUM - LOCATION APPROVAL
1. Franchised Location. The Franchised Location, set forth in Section 3.1
of the Agreement shall be:
------------------------------------------------------
- --------------------------------------------------------------------------------
2. Legal Address. The business address for any notices mailed pursuant to
Section 22.12 of the Agreement shall be changed to read as follows:
- --------------------------------------------------------------------------------
3. Protected Territory. The Protected Territory described in Section 3.2 of
the Agreement, shall be:
-------------------------------------------------------
- --------------------------------------------------------------------------------
Fully executed this day of , 20 .
---- --------- --
PAK MAIL CENTERS OF AMERICA, INC., FRANCHISEE
a Colorado corporation
------------------------------------------
(Print Name)
By:
------------------------------ ------------------------------------------
Name: Individually
----------------------------
Title: Title:
--------------------------- -----------------------------------
Address:
---------------------------------
City:
-----------------------------------
State: Zip:
-------------- -------------
OR:
(if a corporation or partnership)
--------------------------------------------
Company Name
By:
--------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
Address:
---------------------------------
City:
-----------------------------------
State: Zip:
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EXHIBIT II
TO FRANCHISE AGREEMENT
GUARANTY AND ASSUMPTION OF FRANCHISEE'S OBLIGATIONS
In consideration of, and as an inducement to, the execution of the above
Franchise Agreement (the "Agreement") by Pak Mail Centers of America, Inc. (the
"Franchisor"), each of the undersigned hereby personally and unconditionally:
Guarantees to the Franchisor and its successors and assigns, for the
term of this Agreement, including renewals thereof, that the franchisee as
that term is defined in the Agreement ("Franchisee") shall punctually pay
and perform each and every undertaking, agreement and covenant set forth in
the Agreement; and
Agrees to be personally bound by, and personally liable for the breach
of, each and every provision in the Agreement.
Each of the undersigned waives the following:
1. Acceptance and notice of acceptance by the Franchisor of the
foregoing undertaking;
2. Notice of demand for payment of any indebtedness or nonperformance
of any obligations hereby guaranteed;
3. Protest and notice of default to any party with respect to the
indebtedness or nonperformance of any obligations hereby guaranteed;
4. Any right he or she may have to require that any action be brought
against Franchisee or any other person as a condition of liability; and
5. Any and all other notices and legal or equitable defenses to which
he or she may be entitled.
Each of the undersigned consents and agrees that:
1. His or her direct and immediate liability under this guaranty shall
be joint and several;
2. He or she shall render any payment or performance required under
the Agreement upon demand if Franchisee fails or refuses punctually to do
so;
3. Such liability shall not be contingent or conditioned upon pursuit
by the Franchisor of any remedies against Franchisee or any other person;
and
4. Such liability shall not be diminished, relieved or otherwise
affected by any extension of time, credit or other indulgence which the
Franchisor may from time to time grant to Franchisee or to any other
person, including without limitation the acceptance of any partial payment
or performance, or the compromise or release of any claims, none of which
shall in any way modify or amend this guaranty, which shall be continuing
and irrevocable during the term of the Agreement, including renewals
thereof.
IN WITNESS WHEREOF, each of the undersigned has affixed his or her
signature effective on the same day and year as the Agreement was executed.
WITNESS GUARANTOR(S)
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EXHIBIT III
TO FRANCHISE AGREEMENT
STATEMENT OF OWNERSHIP
Franchisee:
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Trade Name (if different from above):
-------------------------------------------
- --------------------------------------------------------------------------------
Form of Ownership
(Check One)
Limited
Liability
Individual Partnership Corporation Company
- ----- ------ ----- ------
If a Partnership, provide name and address of each partner showing
percentage owned, whether active in management, and indicate the state in which
the partnership was formed.
If a Limited Liability Company, provide name and address of each member and
each manager showing percentage owned and indicate the state in which the
Limited Liability Company was formed.
If a Corporation, give the state and date of incorporation, the names and
addresses of each officer and director, and list the names and addresses of
every shareholder showing what percentage of stock is owned by each.
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Franchisee acknowledges that this Statement of Ownership applies to the PAK
MAIL Center authorized under the Franchise Agreement.
Use additional sheets if necessary. Any and all changes to the above
information must be reported to the Franchisor in writing.
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Date Name
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EXHIBIT IV
TO FRANCHISE AGREEMENT
AUTHORIZATION AGREEMENT FOR PREARRANGED PAYMENTS
(DIRECT DEBITS)
The undersigned depositor ("Depositor") hereby (1) authorizes Pak Mail Centers
of America, Inc. ("Company") to initiate debit entries and/or credit correction
entries to the undersigned's checking and/or savings account indicated below and
(2) authorizes the depository designated below ("Depository") to debit such
account pursuant to Company's instructions.
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Depository Branch
- ------------------------------- ----------------------------------------
City State Zip Code
- ------------------------------- ----------------------------------------
Bank Transit/ABA Number Account Number
This authority is to remain in full force and effect until Depository has
received joint written notification from Company and Depositor of the
Depositor's termination of such authority in such time and in such manner as to
afford Depository a reasonable opportunity to act on it. Notwithstanding the
foregoing, Depository shall provide Company and Depositor with 30 days' prior
written notice of the termination of this authority. If an erroneous debit entry
is initiated to Depositor's account, Depositor shall have the right to have the
amount of such entry credited to such account by Depository, if (a) within 15
calendar days following the date on which Depository sent to Depositor a
statement of account or a written notice pertaining to such entry or (b) 45 days
after posting, whichever occurs first, Depositor shall have sent to Depository a
written notice identifying such entry, stating that such entry was in error and
requesting Depository to credit the amount thereof to such account. These rights
are in addition to any rights Depositor may have under federal and state banking
laws.
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- -------------------------------
DEPOSITOR (Print Name) DEPOSITORY (Print Name)
By: By:
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Its: Its:
--------------------------- ---------------------------------
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Date: Date:
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<PAGE>
EXHIBIT V
TO FRANCHISE AGREEMENT
ADDENDUM TO FRANCHISE AGREEMENT --
BUILD-OUT PROGRAM
THIS ADDENDUM ("Addendum") to the Franchise Agreement dated
__________________, 20____ is made effective as of the same date, by and between
PAK MAIL CENTERS OF AMERICA, INC. ("Franchisor") and
________________________________________________________________ ("Franchisee"),
to supplement and amend certain terms of the Agreement. To the extent not
defined herein, all initial-capitalized references in this Agreement shall have
the same meaning as defined in the Agreement.
PURPOSE
A. The Agreement grants the Franchisee a franchise for the establishment
and operation of a PAK MAIL Center in a retail location ("Center").
B. The Franchisor provides or makes available construction, development and
build-out services ("Build-Out Services") to assist qualified franchisees in
constructing, developing and equipping a Center.
C. The Franchisee desires to obtain the Build-Out Services and the
Franchisor desires to provide or make available the Build-Out Services to the
Franchisee under the terms and conditions which are contained in this Addendum.
The Franchisor and the Franchisee therefore agree as follows:
1. Build-Out Services. The Franchisor shall provide or make available,
itself or through arrangements with independent contractors, the following
Build-Out Services to the Franchisee, for the development and construction of
the Center:
a. Procurement of suitable plans and specifications conforming to the
Franchisor's requirements for dimensions, exterior design, materials,
interior design, layout, signs, counters, equipment and decorating for the
Center, in compliance with applicable ordinances, building codes, permit
requirements and lease requirements and restrictions.
b. Obtaining of required construction-related permits and licenses.
c. Procurement of fixtures, materials, equipment, modular furniture,
counters and other such materials required for the construction of the
Center.
d. Securing of all contractors and/or subcontractors to construct
improvements and install equipment and fixtures in the Center.
e. Completion of the construction of required improvements to the
Center premises and decorate the premises in compliance with the plans and
specifications, and delivery of the completed Center.
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f. Furnishing and installing the required signage for the Center, if
mutually agreed to by the parties.
g. Furnishing and installing certain optional equipment, if mutually
agreed to by the parties.
2. Commencement of Build-Out Services. The Franchisor shall not be
obligated to commence the Build-Out Services until the Franchisee submits an
executed lease or other authority ("Lease") to occupy the location for the
Center, which Lease has been previously approved by the Franchisor, and pays the
first installment of the costs for build-out, as prescribed in Section 4.a below
("Start Date").
3. Completion of Build-Out Obligations. Conditional upon the timely payment
of the costs for build-out, an estimate of which have been acknowledged and
agreed to by the parties in writing ("Build-Out Costs"), and submission of an
executed Lease for the location of the Center, the Franchisor agrees to use its
best efforts to complete development of and have the Center ready to open and
commence the operation of business within a reasonable time after the Franchisor
obtains possession of the premises, as may be necessary, and to obtain all
required construction permits.
4. Build-Out Costs and Additional Expenses. The Build-Out Costs shall be
calculated in the Build-Out Schedule and executed by the Franchisor and the
Franchisee no later than the Start Date. The Franchisee acknowledges that the
Build-Out Costs do not include other charges, costs and expenses for which the
Franchisee is responsible and liable, such as construction extras, landlord
chargebacks and additional costs and expenses as may be incurred due to the
Franchisee's failure to tender the Build-Out Costs as required by this
Agreement. The Franchisee acknowledges that the Build-Out Costs include a fee to
the Franchisor, denoted herein as the "Development Fee". In addition:
a. The Build-Out Costs shall be paid in two installments, one-half
prior to the commencement of the Build-Out Services and one-half upon
completion of the Build-Out Services. The Franchisee acknowledges and
understands that construction of the Center by the Franchisor will not
begin until one-half of the Build-Out Costs have been paid to the
Franchisor; provided, however, upon receipt by the Franchisor of evidence
of a binding finance commitment from a third party to the Franchisee, the
Franchisor may elect, in its sole discretion, to commence construction of
the Center without receiving one-half of the Build-Out Costs and/or to
otherwise vary the payment schedule for the Build-Out Costs.
b. The Franchisee is solely and exclusively responsible and liable for
and shall pay when due all sales, use, property or other taxes (including
any penalties and interest) owed due to the construction of the Center, the
improvement of the premises where the Center is located and the purchase of
all materials, equipment, fixtures, furniture, labor, or other items
utilized in the development and/or construction of the Center.
c. To the extent not covered by the Build-Out Costs, the Franchisee
shall be responsible for and shall pay when due all other costs and
expenses incurred in the development of the Center.
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d. Franchisee grants to Franchisor a Security Interest in all
equipment, supplies, furniture and inventory located at the Center until
such time as full payment is received by Franchisor and all third parties
for the Build-Out Services provided.
e. The Franchisee acknowledges and agrees that the actual cost of the
build-out shall be computed upon completion of the Build-Out Services and
the Development Fee and the second installment of the Build-Out Costs as
estimated in writing shall be adjusted to reflect the actual cost of the
build-out of the Center.
5. Control of Build-Out. The Franchisee acknowledges that the development
of the Center, all design changes, modifications to the Center design, all
construction issues, trade fixture and equipment changes, and all other matters
related to the development of the Center and the construction thereof, shall be
within the sole discretion of the Franchisor. The Center shall be turned over to
Franchisee ready to open for business, subject to a punch list of items to be
corrected within 60 days of the turnover to the Franchisee. Franchisee shall be
responsible and liable for obtaining all business licenses, permits and the like
not related to construction, required by state or local authorities for the
operation of the Center.
6. Conversion and Design, Signs, Equipment and Permits and Licenses.
Sections 5.3, 5.4, 5.5 and 5.6 of the Agreement are amended by adding the
following to the end of each section:
Notwithstanding the foregoing, the Franchisor acknowledges the
necessary conversion and design of the location, if any, meets the
Franchisor's plans and specifications; any signs meet the standards and
specifications of the Franchisor and comply with applicable mall
regulations, local ordinances, building codes and zoning regulations; the
equipment and POS System meet the Franchisor's standards and
specifications; and the necessary permits and licenses relating to the
construction of the Center have been obtained. To the extent applicable,
however, all of the Franchisee's covenants set forth in this Section apply
to the Franchisee's operation of the Center.
7. Improvements and Warranties. Within 30 days after completion of the
Center, the Franchisor shall provide the Franchisee a schedule listing all
leasehold improvements, equipment, furniture and fixtures installed in the
Center, and any and all equipment warranties provided by third parties, if not
already forwarded to the Franchisee.
8. Excuse of Performance. Notwithstanding anything in this Addendum to the
contrary, the obligations of the Franchisor to pursue and complete the Build-Out
Services shall be excused from such delay of performance as may be caused by any
legal directive; intervention of any governmental order, regulation, direction,
request or contingency; acts of God; or any cause beyond the reasonable control
of the Franchisor; provided, however, that such excuse of performance shall be
limited to the period of delay directly related to such cause.
9. Conflict. In the event of a conflict between the terms of the Agreement
and the terms of this Addendum, the terms of this Addendum shall control.
10. Effective Date. This Addendum shall not become effective until accepted
by the Franchisor as evidenced by the signing and dating of this Addendum by an
officer of the Franchisor.
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IN WITNESS WHEREOF, the parties hereto have executed this Addendum on the
date first set forth above.
PAK MAIL CENTERS OF AMERICA, INC., FRANCHISEE
a Colorado corporation
------------------------------------------
(Print Name)
By:
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Name: Individually
----------------------------
Title: Title:
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Address:
---------------------------------
City:
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State: Zip:
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OR:
(if a corporation or partnership)
--------------------------------------------
Company Name
By:
--------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
Address:
---------------------------------
City:
-----------------------------------
State: Zip:
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(2/29/00)
4
PAK MAIL CENTERS OF AMERICA, INC.
AREA MARKETING AGREEMENT
TABLE OF CONTENTS
Section Number Page Number
- ------- ----- -----------
1. BACKGROUND AND PURPOSE ................................................. 1
2. DEFINITIONS ............................................................ 1
2.1. Territory. .................................................. 1
2.2. Sales Year. ................................................. 1
2.3. Franchise Agreement. ........................................ 1
2.4. A.M. P.M. MOVERS Program. ................................... 2
2.5. Franchisee. ................................................. 2
2.6. System Manual. .............................................. 2
3. SCOPE OF APPOINTMENT ................................................... 2
3.1. Appointment of Marketer/Scope of Operations. ................ 2
3.2. Rights and Limitations to Territory. ........................ 2
3.3. Franchisor's Reservation of Rights. ......................... 3
4. FRANCHISE SALES PROCEDURES ............................................. 3
4.1. Sales Goals. ................................................ 3
4.2. Franchise Registration and Disclosure. ...................... 3
4.3. Advertising, Recruiting and Screening. ...................... 4
4.4. Franchisor's Approval of Prospective Franchisees. ........... 4
5. PAYMENTS TO THE FRANCHISOR ............................................. 5
5.1. Initial Area Marketing Fee. ................................. 5
6. PAYMENTS TO THE AREA MARKETER .......................................... 5
6.1. Commissions on Sales Services. .............................. 5
6.2. Commissions on Transfers of Franchises. ..................... 5
6.3. Service Fees. ............................................... 6
6.4. Application of Payments. .................................... 6
6.5. Setoffs. .................................................... 6
7. TRAINING ASSISTANCE .................................................... 7
7.1. Area Marketer Training. ..................................... 7
7.2. Length of Training. ......................................... 7
7.3. Additional Training. ........................................ 7
7.4. Seminars and Ongoing Training. .............................. 7
8. FRANCHISOR'S OPERATING ASSISTANCE ...................................... 8
8.1. System Manual. .............................................. 8
8.2. Operating Assistance. ....................................... 8
9. AREA MARKETER'S OBLIGATIONS ............................................ 8
9.1. Hiring and Training of Employees of Area Marketer. .......... 8
9.2. Commencement of Business. ................................... 8
9.3. Sales Services. ............................................. 9
9.4. Pre-Opening Support Services. ............................... 9
9.5. Ongoing Support Services. ................................... 9
<PAGE>
9.6. Compliance with Franchise Agreement........................ 10
9.7. Area Marketer's Inspections................................ 10
10. MARKS ............................................................... 11
10.1. Ownership and Goodwill of Marks........................... 11
10.2. Limitations on Use........................................ 11
10.3. Discontinuance of Use of Marks............................ 11
10.4. Notification of Infringements and Claims.................. 11
10.5. Indemnification........................................... 12
11. CONFIDENTIAL INFORMATION ............................................ 12
11.1. Confidential Information.................................. 12
11.2. Confidentiality and Noncompetition Agreement.............. 12
12. EXCLUSIVE RELATIONSHIP .............................................. 13
12.1. Exclusive Relationship.................................... 13
13. OPERATING STANDARDS ................................................. 13
13.1. Standards of Service...................................... 13
13.2. Compliance with Laws and Good Business Practices.......... 13
13.3. Accuracy of Information................................... 14
13.4. Notification of Litigation................................ 14
13.5. Ownership and Management of Business...................... 14
13.6. Conflicting Interests..................................... 14
13.7. Insurance................................................. 15
13.8. Proof of Insurance Coverage............................... 15
13.9. Advertising in Territory.................................. 15
13.10. Approval of Advertising................................... 15
13.11. Accounting, Bookkeeping and Records....................... 16
13.12. Reports................................................... 16
13.13. Late Charges.............................................. 16
13.14. Compliance with Third Party Agreements.................... 16
14. INSPECTIONS AND AUDITS .............................................. 17
14.1. Inspections and Audits.................................... 17
15. TRANSFERS .......................................................... 17
15.1. Transfers by the Franchisor............................... 17
15.2. Transfers by the Marketer................................. 17
15.3. Conditions for Approval of Transfer....................... 17
15.4. Transfer to an Entity..................................... 18
15.5. Franchisor's Approval of Transfer......................... 19
15.6. Death or Disability of Area Marketer...................... 19
16. TERM AND EXPIRATION ................................................. 19
16.1. Term...................................................... 19
16.2. Continuation.............................................. 19
16.3. Rights Upon Expiration.................................... 19
16.4. Exercise of Option for Successor Area Marketer Rights..... 20
16.5. Conditions of Refusal..................................... 20
17. TERMINATION ......................................................... 20
17.1. By the Marketer........................................... 20
17.2. By the Franchisor......................................... 20
17.3. Rights and Obligations of the Area Marketer Upon
Termination or Expiration................................ 21
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17.4. Confidential Information.................................. 22
17.5. Covenant Not to Compete................................... 23
17.6. No Further Right to Payment............................... 23
17.7. Continuing Obligations.................................... 23
17.8. State and Federal Law..................................... 23
18. RELATIONSHIP OF THE PARTIES ......................................... 24
18.1. Relationship of the Parties............................... 24
18.2. Payment of Third Party Obligations........................ 24
18.3. Independent Contractors................................... 24
18.4. Indemnification........................................... 24
19. MISCELLANEOUS PROVISIONS ............................................ 25
19.1. Governing Law/Consent to Venue and Jurisdiction........... 25
19.2. Severability.............................................. 25
19.3. Modification.............................................. 25
19.4. Attorneys' Fees........................................... 25
19.5. Injunctive Relief......................................... 25
19.6. Payment of Taxes.......................................... 26
19.7. No Waiver................................................. 26
19.8. No Right to Set Off....................................... 26
19.9. Effective Date............................................ 26
19.10. Review of Agreement....................................... 26
19.11. Entire Agreement.......................................... 26
19.12. Notices................................................... 27
19.13. Acknowledgment............................................ 27
EXHIBITS
Exhibit I Rider to Area Marketing Agreement
Exhibit II Franchise Agreement
Exhibit III Amendment to Franchise Agreement (A.M. P.M. MOVERS Program)
Exhibit IV Guaranty and Assumption of Area Marketer's Obligations
Exhibit V Statement of Ownership
<PAGE>
PAK MAIL CENTERS OF AMERICA, INC.
AREA MARKETING AGREEMENT
THIS AGREEMENT is made this ___ day of ________________, 20____, between
PAK MAIL CENTERS OF AMERICA, INC., a Colorado corporation, with its principal
offices at 7173 South Havana Street, Suite 600, Englewood, Colorado 80112
("Franchisor") and ___________________ ___________________________ whose
principal address is ____________ ________________________________________
("Marketer"), who on the basis of the following understandings and in
consideration of the following promises, agree as follows:
1. BACKGROUND AND PURPOSE
1.1. The Franchisor has developed methods for establishing, operating and
promoting stores offering a variety of packaging, shipping, crating, freight
forwarding, mailing, communications and information services ("PAK MAIL Centers"
or "Centers"). These methods feature the use and license of the service mark
"PAK MAIL" and related service marks and trademarks (all referred to in this
Agreement as the "Marks") and the Franchisor's distinctive plans for the
establishment, operation and promotion of PAK MAIL Centers and related licensed
methods of doing business (the "Licensed Methods").
1.2. The Franchisor grants to qualified individuals, or to entities with
which such individuals are affiliated, the right and license to develop and
operate Centers using the Marks and Licensed Methods.
1.3. The Marketer desires to sell franchises for PAK MAIL Centers within a
certain geographic area, and to develop, support and provide services to PAK
MAIL Centers within such geographic area, under the terms and conditions which
are contained in this Agreement ("Marketer Business" or "Business").
1.4. The Franchisor is willing to grant the right to Marketer to sell
franchises for PAK MAIL Centers and to provide site selection and support
services to PAK MAIL Centers within a certain geographic area, under the terms
and conditions which are contained in this Agreement.
2 .DEFINITIONS
2.1. Territory.
"Territory" shall mean the geographical area described in Exhibit I
attached hereto and incorporated herein by reference.
2.2. Sales Year.
"Sales Year" shall mean each 12-month period during the term of this
Agreement, as defined in Exhibit I attached.
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2.3. Franchise Agreement.
"Franchise Agreement" shall mean the forms of agreements (including,
without limitation, franchise agreement and any exhibits, riders, collateral
assignments of lease or sublease, and personal guarantees used in connection
therewith) used by the Franchisor from time to time in the granting of
franchises for the ownership and operation of PAK MAIL Centers. Attached to this
Agreement as Exhibit II and incorporated herein by reference, is the
Franchisor's current form of Franchise Agreement. The Marketer acknowledges that
the Marketer will use the Franchisor's then current form of franchise agreement
and that the Franchisor, in its sole discretion, may from time to time modify or
amend in any respect the form of franchise agreement and related agreements,
including but not limited to, modifying fees customarily charged in granting PAK
MAIL Center franchises.
2.4. A.M. P.M. MOVERS Program.
"A.M. P.M. MOVERS Program" shall mean the program that the Franchisor may
offer to Franchisees of the Franchisor whereby local moving services for
individuals and small business customers are either provided by the Franchisee
or arranged by the Franchisee with a third party, using the A.M. P.M. MOVERS
Mark. Those Franchisees approved to participate in the A.M. P.M. MOVERS Program
must execute the Amendment to Franchise Agreement (A.M. P.M. MOVERS Program),
the current form of which is attached to this Agreement as Exhibit III and
incorporated herein by reference ("A.M. P.M. MOVERS Amendment"). The Marketer
acknowledges that the Marketer will use the Franchisor's then current form of
A.M. P.M. MOVERS Amendment and that the Franchisor, in its sole discretion, may
from time to time, modify or amend in any respect the form of A.M. P.M. MOVERS
Amendment.
2.5. Franchisee.
"Franchisee" shall mean any person, corporation, partnership or other
entity that has entered into a Franchise Agreement with the Franchisor.
2.6. System Manual.
"System Manual" means the manuals, technical bulletins or other written
materials covering the proper operating and marketing techniques of a Marketer
Business and standards and specifications for implementing the Licensed Methods.
3. SCOPE OF APPOINTMENT
3.1. Appointment of Marketer/Scope of Operations.
The Franchisor appoints the Marketer as an "Area Marketer," and the
Marketer agrees to perform its obligations in accordance with the terms and
conditions of this Agreement, only within the Territory, to solicit prospective
Franchisees for PAK MAIL Centers to be located in the Territory ("Sales
Services") as described in Section 9.3 below, to perform certain site
acquisition services and to render support and other services ("Support
Services") to Centers located within the Territory as those services are
described in Sections 9.4 and 9.5 below.
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3.2. Rights and Limitations to Territory.
The Franchisor will not establish and license any other area marketers to
perform Sales Services or Support Services to Franchisees within the Territory;
provided, however, that the Franchisor shall retain such rights in the Territory
as described in Section 3.3 below.
3.3. Franchisor's Reservation of Rights.
The Marketer acknowledges that its franchise rights granted hereunder are
nonexclusive and the Franchisor (on behalf of itself, its affiliates and
designees), retains the rights, among others:
a. to use, and to license others to use, the Marks and Licensed
Methods for the operation of other area marketer businesses at any location
outside of the Territory;
b. to solicit prospective Franchisees and sell franchises for PAK MAIL
Centers at locations within and outside of the Territory and on such terms
and conditions as the Franchisor deems appropriate and to itself own and
operate PAK MAIL Centers within the Territory;
c. to use and license the use of other proprietary marks or methods in
connection with the sale of products and services similar to those which
Franchisees who operate PAK MAIL Centers sell, whether in alternative
channels of distribution or in connection with the operation of packaging
and mailing businesses which are the same as, or similar to, or different
from PAK MAIL Centers, at any location, within and outside of the
Territory, on any terms and conditions as the Franchisor deems advisable;
and
d. to use the Marks to identify services and products other than those
sold by Franchisees who operate PAK MAIL Centers, to identify promotional
and marketing efforts and related items, and to identify services and
products similar to those offered by Franchisees who operate PAK MAIL
Centers, made available through alternative channels of distribution, at
any location, within and outside of the Territory.
4. FRANCHISE SALES PROCEDURES
4.1. Sales Goals.
The Marketer agrees that during the term of this Agreement, the Marketer
will meet and maintain the franchise sales goals ("Sales Goals") set forth in
Exhibit I to this Agreement.
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4.2. Franchise Registration and Disclosure.
Neither the Marketer nor any employee or representative of the Marketer
shall solicit prospective Franchisees of PAK MAIL Centers until the Franchisor
has registered to sell franchises in the applicable jurisdiction and has
provided the Marketer with the requisite documents, nor shall the Marketer, its
employees or representatives, solicit Franchisees at any time when the
Franchisor notifies the Marketer that its registration is not then in effect or
its documents are not then in compliance with applicable law. If the Marketer's
activities pursuant to this Agreement require the preparation, amendment,
registration or filing of information or any disclosure or other documents, all
requisite offering circulars, ancillary documents and registration applications
shall be prepared and filed by the Franchisor or its designee, and registration
secured before the Marketer may solicit prospective Franchisees of PAK MAIL
Centers. Costs of such registration applicable to the Marketer shall be borne by
the Marketer. In particular, the Marketer shall:
a. prepare and forward to the Franchisor verified financial statements
of the Marketer in such form and for such periods as shall be designated by
the Franchisor, including audited financial statements if necessary and
appropriate to comply with applicable legal disclosure, filing or other
legal requirements;
b. promptly provide all information reasonably required by the
Franchisor to prepare all requisite offering circulars and ancillary
documents for the offering of franchises throughout the Territory;
c. execute all documents required by the Franchisor for the purpose of
registering the Marketer and the Franchisor to offer franchises throughout
the Territory; and
d. pay to the Franchisor, or its designee, upon demand, the costs of
registering and preparing those portions of all such offering circulars and
ancillary documents which are applicable to the Marketer.
The Marketer agrees to review all information pertaining to the Marketer
prepared to comply with legal requirements for selling franchises in the
Territory and verify its accuracy if so requested by the Franchisor. The
Marketer acknowledges that the Franchisor, its affiliates or its designees,
shall not be liable to the Marketer for any errors, omissions or delays which
may occur in the preparation of such materials.
4.3. Advertising, Recruiting and Screening.
The Marketer shall be responsible for advertising for, recruiting,
screening and interviewing prospects for PAK MAIL Centers franchises within the
Territory. The Marketer shall provide prospective Franchisees with written
information regarding a PAK MAIL Center franchise approved by the Franchisor, or
via the telephone, face-to-face meetings or by visiting other PAK MAIL Centers
within the Territory. The Marketer shall submit each qualified applicant
("Applicant") for a PAK MAIL Center franchise to the Franchisor for approval.
The Marketer further agrees that all Applicants submitted to the Franchisor by
the Marketer, if an individual, or the Principal Owner of the Applicant, if the
Applicant is not an individual, shall be individuals who are of good character,
have adequate financial resources and meet the Franchisor's criteria for
Franchisees or Principal Owners of Franchisees. A "Principal Owner" is defined
in Section 7.1 below. Each application for a franchise received by the Marketer
shall be submitted to the Franchisor with all information respecting the
Applicant, the Principal Owner of the Applicant, if applicable, the Applicant's
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proposed franchise location, if known, and all other information then
customarily required by the Franchisor concerning Applicants, including such
financial statements and other information as the Franchisor may reasonably
require. The Marketer shall assist the Applicant in the preparation of financial
and other required information.
4.4. Franchisor's Approval of Prospective Franchisees.
By delivery of written notice to the Marketer, the Franchisor shall approve
or disapprove Applicants to become PAK MAIL Center Franchisees. The Franchisor
agrees to exert its best efforts to deliver such notification to the Marketer
within 30 days after the later of: (a) receipt by the Franchisor of a complete
application, financial statement and other materials regarding the Applicant
requested by the Franchisor; or (b) the personal interview of Applicant by the
Franchisor, if any. If the Franchisor, in its sole discretion, determines that
the Applicant possesses sufficient financial and managerial capability and meets
the other criteria then utilized by the Franchisor in the grant of franchises,
the Franchisor shall offer to the Applicant a franchise for the operation of a
PAK MAIL Center. The grant of the franchise shall be effected only upon and
after the full execution of the then current Franchise Agreement by the
Franchisor and the Applicant.
5. PAYMENTS TO THE FRANCHISOR
5.1. Initial Area Marketing Fee.
The initial area marketing fee ("Marketing Fee") payable to the Franchisor
by the Marketer in consideration for the Marketer's appointment as exclusive
Marketer within the Territory shall be calculated and set forth in the attached
Exhibit I. Unless otherwise agreed, the Marketing Fee is payable in full upon
execution of this Agreement. The Marketing Fee is fully earned by the Franchisor
upon receipt and is nonrefundable once paid. The Marketer acknowledges that the
Marketing Fee does not include payment of any initial franchise fees for
individual PAK MAIL Centers.
6. PAYMENTS TO THE AREA MARKETER
6.1. Commissions on Sales Services.
During the term of this Agreement, the Marketer shall be paid a commission
based on a percentage of initial franchise fees paid by Franchisees for the
purchase of a franchise for a PAK MAIL Center to be located within the
Territory, upon fulfillment of the following conditions ("Franchise Sales
Conditions"):
a. The Franchisee shall have executed a Franchise Agreement with the
Franchisor and an initial franchise fee shall have been paid and actually
received by the Franchisor (the Franchisor shall not be deemed to have
received any fees paid into escrow, if applicable, until such fees have
actually been remitted to the Franchisor). If the Franchisee pays its
initial franchise fee in whole or in part with a promissory note, then the
Marketer shall be paid a commission on each payment after it has been
received by the Franchisor;
b. The sale for which the initial franchise fee has been paid shall
not be a resale of any existing PAK MAIL Center, or any interest therein;
c. The Franchisee shall have successfully completed the Franchisor's
initial training program; and
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d. The Marketer shall have complied with all other of its obligations
under this Agreement with respect to such sale and verified the same to the
Franchisor, in writing in a form prescribed by the Franchisor. 0
Commissions on Sales Services shall be paid to the Marketer in the amount
of 40% of the total initial franchise fees paid to the Franchisor, payable to
the Marketer within 45 days after the Franchise Sale Conditions have been
fulfilled. The Marketer shall not receive any commission on Sales Services for
PAK MAIL Centers owned and operated by the Franchisor, its affiliates or
designees ("Company Owned Centers") in the Territory.
6.2. Commissions on Transfers of Franchises.
If, during the term of this Agreement, a PAK MAIL Center located within the
Territory or an interest therein is resold to a different Franchisee and the
sale results in the execution of a Franchise Agreement and the payment of a
transfer fee, then the Marketer will not be paid a commission on any transfer
fee paid to the Franchisor, but the Marketer will be paid Service Fees in
accordance with Section 6.3 below.
6.3. Service Fees.
The Franchisor shall pay to the Marketer, within 45 days after the end of
each month, a service fee ("Service Fee") consisting of 50% of the royalty fees
("Royalty Fees") that each Franchisee located in the Territory paid to the
Franchisor during the applicable month pursuant to their Franchise Agreement.
Royalty Fees do not include advertising fees. Notwithstanding the foregoing:
a. If the Marketer has failed to conduct the quarterly inspections
described in Section 9.5 below or failed to file a written report or failed
to perform in any material respect the other services to be provided to
Franchisees located in the Territory described in Article 9 below during
any applicable month with respect to one or more Franchisees located in the
Territory, the Marketer shall not be entitled to receive Service Fees with
respect to such Franchisees for the period during which reports or services
were not provided.
b. The Marketer shall not be entitled to share or receive any Service
Fees from any fees paid to the Franchisor by Franchisees in the Territory
prior to the time the Marketer completes the initial Marketer training
program and commences full performance of the services set forth in Article
9 of this Agreement.
c. If there are franchised Centers operating in the Territory at the
time the Marketer signs this Agreement, then the Marketer shall receive
Service Fees from those Centers during the term of this Agreement.
d. The Marketer shall not receive any Service Fees with respect to any
PAK MAIL Centers in the Territory owned and operated by the Franchisor or
its affiliates, unless those Centers are operating under Franchise
Agreements and pay Royalty Fees to the Franchisor.
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6.4. Application of Payments.
The Franchisor's payments to the Marketer shall be based on amounts
actually collected from Franchisees, not on payments accrued, due or owing. In
the event of termination of a Franchise Agreement for a PAK MAIL Center within
the Territory under circumstances entitling the Franchisee to the return of all
or part of the initial franchise fee or Royalty Fees (or in the event that the
Franchisor becomes legally obligated or decides in its sole discretion, to
return part or all of the initial franchise fee or Royalty Fees), the Franchisor
may deduct the portion of the amount to be returned to Franchisee in the same
proportion as the Marketer shared in the initial franchise fee or Royalty Fees
from any future amounts owed the Marketer. The Franchisor shall apply any
payments received from a Franchisee to any past due indebtedness of that
Franchisee for Royalty Fees, advertising contributions, purchases from the
Franchisor or its affiliates, interest or any other indebtedness of that
Franchisee to the Franchisor or its affiliates. To the extent that such payments
are applied to a Franchisee's overdue Royalty Fee payments, the Marketer shall
be entitled to its pro rata share of such payments, less its pro rata share of
the costs of collection paid to third parties.
6.5. Setoffs.
The Marketer shall not be allowed to set off amounts owed to the Franchisor
for fees or other amounts due hereunder, against any monies owed to the Marketer
by the Franchisor, which right of set off is hereby expressly waived by the
Marketer. The Franchisor shall be allowed to set off amounts owed to the
Marketer for commissions, Service Fees or other amounts due hereunder, against
any monies owed to the Franchisor by the Marketer, including, setting off
amounts owed to the Marketer for commissions or Service Fees against monies owed
to the Franchisor for commissions on Sales Services which were paid to the
Marketer before the Franchisee failed to successfully complete the Franchisor's
initial training program.
7. TRAINING ASSISTANCE
7.1. Area Marketer Training.
Within 90 days after the date of execution of this Agreement, the
Franchisor shall furnish, and the Marketer (or if the Marketer is a partnership,
corporation, or other entity, an individual designated by the Marketer who owns
at least 25% of the ownership interest in the Marketer and who has been approved
by the Franchisor, who shall be designated as the "Principal Owner") shall
attend, at the Marketer's sole cost and expense, an initial training program, to
consist of the training program applicable to the Franchisor's Franchisees and
such further training which may include topics such as marketing, franchise
sales, franchise law compliance, site selection and store opening procedures, as
the Franchisor in its sole discretion deems advisable, furnished at such place
and time as the Franchisor may designate.
7.2. Length of Training.
The first portion of the initial Marketer training program will last up to
twelve days and will consist of the initial training program applicable to the
Franchisor's Franchisees. The second portion of the initial Marketer training
consists of up to 3 days of on the job instruction at the Marketer's Business
location. Other than the Marketing Fee, no tuition or fee shall be charged for
the initial training. However, the Marketer shall be responsible for all travel
and living expenses which are incurred in connection with attendance at the
initial training program.
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7.3. Additional Training.
The initial training program will be made available to replacement or
additional Principal Owners and other management personnel during the term of
this Agreement. The Franchisor reserves the right to charge a tuition or fee in
an amount payable in advance, commensurate with the then current published
prices of the Franchisor for such training. The Marketer will be responsible for
all travel and living expenses incurred by its personnel in connection with
attendance at the training program. Further, the availability of the training
programs will be subject to space considerations and prior commitments to new
PAK MAIL Franchisees and Marketers.
7.4. Seminars and Ongoing Training.
From time to time, the Franchisor may present seminars, conventions or
continuing development programs for the benefit of the Marketer. The Marketer or
its Principal Owner shall be required to attend any ongoing mandatory seminars,
industry conventions or programs as may be offered by the Franchisor. The
Franchisor shall give the Marketer at least 30 days prior written notice of any
seminar, convention or program which is deemed mandatory. The Franchisor will
not require that the Marketer attend any ongoing training more often than a
total of five working days each calendar year. The Marketer will be responsible
for all travel and living expenses which are associated with attendance at any
ongoing training program.
8. FRANCHISOR'S OPERATING ASSISTANCE
8.1. System Manual.
The Franchisor shall, in addition to the Marketer training program, loan to
the Marketer during the term hereof one copy of its System Manual to assist the
Marketer and its employees in the conduct of the Business contemplated by this
Agreement. The Franchisor may prescribe mandatory and suggested standards and
operating procedures for the Marketer in the System Manual, which may be
modified from time to time by the Franchisor. The Marketer shall keep its copy
of the System Manual current. In the event of a dispute relating to the System
Manual, the master copy that the Franchisor maintains at its principal office
shall be controlling. The Marketer may not at any time copy any part of the
System Manual, unless approved in writing by the Franchisor. In the event the
Marketer's copy of the System Manual is lost, destroyed or damaged, the Marketer
shall be obligated to obtain from the Franchisor, at the Franchisor's then
applicable charge, a replacement copy of the System Manual. The System Manual
and other writings communicated to the Marketer shall constitute material
provisions of this Agreement as if fully set forth herein.
8.2. Operating Assistance.
The Franchisor will make available the following services during the term
of this Agreement:
a. Upon the reasonable request of the Marketer, consultation by
telephone regarding advice related to franchise sales, Franchisee support
and assistance; and
b. Access to franchise sales advertising and promotional materials as
may be developed by the Franchisor, which reasonable cost may be passed on
to the Marketer at the Franchisor's option.
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9. AREA MARKETER'S OBLIGATIONS
9.1. Hiring and Training of Employees of Area Marketer.
The Marketer shall hire all of the Marketer's employees, shall be
exclusively responsible for the terms of their employment and compensation and
shall implement a training program for employees to ensure their compliance with
the Franchisor's requirements; provided that the Marketer shall not employ any
person whom the Franchisor, in its sole discretion, has determined to be unfit
to represent the Franchisor in the marketing of PAK MAIL Center franchises or in
furnishing services to Franchisees.
9.2. Commencement of Business.
Unless otherwise agreed to in writing by the Franchisor and the Marketer,
the Marketer has 120 days from the date of this Agreement within which to
complete its initial training and commence operation of its PAK MAIL Marketer
Business. The Franchisor will extend the time within which the Marketer has to
commence operations for a reasonable period of time, in the event that factors
beyond the Marketer's reasonable control prevent the Marketer from meeting this
development schedule, so long as the Marketer has made reasonable and continuing
efforts to comply and the Marketer requests in writing, an extension of time in
which to have its Business established before the development period lapses. The
obligations of the Marketer, including Sales Services, shall commence at the
earlier of the date the Marketer or its Principal Owner has satisfactorily
completed the Franchisor's initial training program or 120 days from the date of
this Agreement.
9.3. Sales Services.
The Marketer shall solicit and identify prospective franchisees for PAK
MAIL Centers to be located within the Territory.
9.4. Pre-Opening Support Services.
The Marketer shall perform the following pre-opening Support Services on
behalf of the Franchisor with respect to Franchisees of PAK MAIL Centers located
in the Territory:
a. Assist with Center location selection for each Franchisee, which
shall consist of providing each Franchisee with criteria for a satisfactory
site and assisting each Franchisee in completing a site report (containing
such demographic, commercial and other information and photographs as the
Franchisor may reasonably require) for each location at which the
Franchisee proposes to establish and operate a PAK MAIL Center and which
Marketer reasonably believes conform to the Franchisor's site selection
criteria;
b. At the Franchisor's request, travel to the Franchisee's proposed
site(s) for its PAK MAIL Center, evaluate each proposed site and submit a
report to the Franchisor on the condition of each proposed site;
c. Provide information about required, recommended or acceptable terms
and conditions to be included in the Franchisee's lease for the Center
premises;
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d. To the extent required by the Franchisor, assist a Franchisee in
securing financing;
e. Provide standards and specifications for the build out, interior
design, layout, floor plan, signs, designs, color and decor of the Center
as prescribed from time to time by the Franchisor;
f. Travel to each PAK MAIL Center located in the Territory during its
first week of operation and provide not fewer than 24 hours of on-site
assistance to the Franchisee; and
g. Provide guidance in implementing advertising and marketing
programs, operating and sales procedures and bookkeeping and accounting
programs.
9.5. Ongoing Support Services.
With respect to Franchisees of PAK MAIL Centers located in the Territory,
the Marketer shall perform the following ongoing Support Services on behalf of
the Franchisor:
a. Initiate not fewer than two consultations by telephone with each
Franchisee each month regarding the continuing operation and management of
the Center and advise the Franchisee regarding services offered and related
issues;
b. Conduct seminars for Franchisees to provide on-going updates of
information regarding new services and products, the shipping business in
general, marketing and business techniques and updated Licensed Methods,
including without limitation, information about new services or special
programs of the Franchisor, such as the A.M. P.M. MOVERS Program;
c. Provide advice and assistance to the Franchisee in connection with
the development of and improvements to the Franchisee's Center;
d. Conduct at least one on-site inspection of each PAK MAIL Center in
the Territory every calendar quarter in the manner as required by the
Franchisor from time to time, said inspections to be verified by written
reports;
e. Provide access to advertising and promotional materials as may be
developed by the Franchisor from time to time and assist Franchisees in
implementing advertising and promotional campaigns;
f. At the Franchisor's written request, establish a toll-free
telephone number for all PAK MAIL Centers located in the Territory to
consult with Franchisees during regular business hours;
g. Submit monthly reports to the Franchisor on activities in the
Territory, using procedures and forms prescribed and supplied by the
Franchisor; and
h. Use best efforts to cause Franchisees in the Territory to timely
pay all amounts due to the Franchisor and collect past due amounts from
Franchisees.
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9.6. Compliance with Franchise Agreement.
The Marketer acknowledges that the Franchisor is delegating certain of its
responsibilities to Franchisees in the Territory to the Marketer. The
responsibilities to Franchisees are to be performed by the Marketer as described
herein or as may in the future be set forth in the System Manual or other
reasonable standards and specifications as may be provided by the Franchisor
from time to time, and the Marketer's responsibilities to Franchisees will not
materially change during the term of this Agreement. In the performance of
services to Franchisees operating PAK MAIL Centers located in the Territory, the
Marketer shall in all respects comply with the terms and conditions of any
Franchise Agreement or other agreement in effect between the Franchisee and the
Franchisor. The Marketer understands, however, that its rights as an area
marketer are only by virtue of this Agreement and that it is not in any manner a
party, third party beneficiary or holder of any other right, title or interest
in or to any Franchise Agreement, unless it is a Franchise Agreement in which
the Marketer is the Franchisee.
9.7. Area Marketer's Inspections.
The Marketer shall ascertain through field audits, reviews and inspections,
that each Franchisee in the Territory has complied satisfactorily with all of
the terms and conditions of the Franchise Agreement, specifications, standards,
operating procedures, and the Franchisee Operations Manual, and shall promptly
notify the Franchisee in writing, with a copy and evaluation report to the
Franchisor, of any deficiencies; provided, however, the Marketer understands and
acknowledges that its inspections and reports are advisory only and that the
Franchisor shall have: (a) all of the rights to inspect and ascertain compliance
of all Franchisees as if this Agreement were not in effect; (b) the sole right
to send notices of default to the Franchisee; (c) the sole right to terminate a
Franchise Agreement for failure to cure such defaults (if an opportunity to cure
is granted); and (d) the sole right to take any legal action with respect to any
default or any violation of a Franchise Agreement. If the Marketer believes that
any Franchisee in the Territory has breached a Franchise Agreement with the
Franchisor, the Marketer shall document in writing all facts related to the
alleged breach and shall request in writing that the Franchisor investigate such
alleged breach. If, as a result of the Franchisor's investigation, the
Franchisor determines that there is a breach by the Franchisee of its Franchise
Agreement with the Franchisor, the Franchisor shall, in its sole discretion,
take such action as it deems appropriate.
10. MARKS
10.1. Ownership and Goodwill of Marks.
The Marketer acknowledges that its rights to use the Marks are derived
solely from this Agreement, unless such rights are granted under a separate
written agreement with the Franchisor, and are limited to operating as a
Marketer pursuant to and in compliance with this Agreement. Any unauthorized use
of the Marks by the Marketer shall constitute a breach hereof and an
infringement of the Franchisor's rights in and to the Marks. The Marketer
acknowledges and agrees that its usage of the Marks and any goodwill established
thereby shall inure to the Franchisor's exclusive benefit and that this
Agreement does not confer any goodwill or other interest in the Marks upon the
Marketer.
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10.2. Limitations on Use.
The Marketer shall not use any Mark as part of any corporate or trade name
or with any prefix, suffix or other modifying words, terms, designs or symbols
(other than logos licensed to the Marketer hereunder), or in any modified form,
nor may the Marketer use any Mark in connection with unauthorized services or
products or in any other manner not expressly authorized in writing by the
Franchisor. The Marketer agrees to give such notices of trademark and service
mark registration as the Franchisor specifies and to use and obtain such
fictitious or assumed name registrations as may be required by the Franchisor or
under applicable law. The Marketer further agrees that no service mark other
than "PAK MAIL" or such other Marks as may be specified by the Franchisor shall
be used in the marketing, promotion or operation of the Marketer's Business.
Except as may be permitted in the System Manual, the Marketer agrees not to use
any of the Marks as part of an electronic mail address or on any sites on the
Internet or on the World Wide Web and the Marketer agrees not to use or register
any of the Marks as a domain name on the Internet.
10.3. Discontinuance of Use of Marks.
If it becomes advisable at any time, in the Franchisor's sole discretion,
for the Franchisor and/or the Marketer to modify or discontinue use of any Mark
and/or use one or more additional or substitute trade or service marks, the
Marketer agrees, at its own expense, to comply with the Franchisor's directions
to do so within a reasonable time after notice thereof.
10.4. Notification of Infringements and Claims.
The Marketer shall immediately notify the Franchisor of any possible
infringement of or challenge to the Marketer's use of any Mark or copyrighted
work, or claim by any person of any rights in any Mark or copyrighted work, and
the Marketer shall not communicate with any person other than the Franchisor or
its counsel in connection with any such matter. The Marketer may not settle any
claim without the Franchisor's written consent. The Franchisor shall have sole
discretion to take such action as it deems appropriate and the right to control
exclusively any litigation, U.S. Patent and Trademark Office proceeding or any
other administrative proceeding arising out of any such infringement, challenge
or claim or otherwise relating to any Mark or copyrighted work. The Marketer
agrees to execute any and all instruments and documents, render such assistance
and perform such acts as, in the opinion of the Franchisor's counsel, may be
necessary or advisable to protect and maintain the Franchisor's interest in the
Marks and in its copyrighted works.
10.5. Indemnification.
The Franchisor agrees to indemnify the Marketer against and to reimburse
the Marketer for all damages for which the Marketer is held liable in any
proceeding arising out of its authorized use of any Mark or copyrighted work
pursuant to and in compliance with this Agreement and for all costs reasonably
incurred by the Marketer in defending any such claim or any proceeding in which
the Marketer is named as a party, provided that the Marketer has timely notified
the Franchisor of such claim or proceeding and has otherwise complied with this
Agreement. The Franchisor, at its option, shall be entitled to defend and
control the defense of any proceeding arising out of the Marketer's use of any
Mark or copyrighted work pursuant to and in compliance with this Agreement.
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11. CONFIDENTIAL INFORMATION
11.1. Confidential Information.
The Franchisor possesses certain proprietary confidential information
consisting of the methods, techniques, formats, specifications, procedures,
information, systems, methods of business management, sales and promotion
techniques and knowledge of and experience in the operation and franchising of
PAK MAIL Centers (the "Confidential Information"). The Franchisor shall disclose
the Confidential Information to the Marketer in the training program, the System
Manual and in guidance furnished to the Marketer during the term hereof. The
Marketer will not acquire any interest in the Confidential Information, other
than the right to utilize it in the Territory in the execution of the Marketer's
duties hereunder during the term of this Agreement, and the Marketer
acknowledges that the use or duplication of the Confidential Information in any
other business venture would constitute an unfair method of competition. The
Marketer acknowledges and agrees that the Confidential Information is
proprietary, includes trade secrets of the Franchisor and is disclosed to the
Marketer solely on the condition that the Marketer agrees, and the Marketer (and
its shareholders, officers, directors, partners, members, managers and
equivalents if the Marketer is an entity) does hereby agree that the Marketer:
(a) shall not use the Confidential Information in any other business or
capacity; (b) shall maintain the absolute confidentiality of the Confidential
Information during and for two years after the term of this Agreement; (c) shall
not make unauthorized copies of any portion of the Confidential Information
disclosed in written or other tangible form; and (d) shall adopt and implement
all reasonable procedures prescribed from time to time by the Franchisor to
prevent unauthorized use or disclosure of the Confidential Information. The
Marketer agrees that the Franchisor shall have the perpetual right to use and
authorize other PAK MAIL Center Franchisees and area marketers to use, and the
Marketer shall fully and promptly disclose to the Franchisor, all ideas,
concepts, methods and techniques relating to the development and/or operation of
a PAK MAIL Center or the Marketer's activities howsoever conceived or developed
by the Marketer and/or its employees and/or the franchised PAK MAIL Centers
serviced by the Marketer during the term of this Agreement. The Marketer
acknowledges that any such ideas, concepts, methods and techniques shall be the
property of the Franchisor and the Franchisor may utilize or disclose such
information to Franchisees or other persons as it determines to be appropriate.
11.2. Confidentiality and Noncompetition Agreement.
The Franchisor reserves the right to require that the Marketer cause each
of its shareholders, officers, directors, partners, employees, members, managers
and equivalents, or if the Marketer is an individual, the Marketer's spouse, to
execute a Confidentiality and Noncompetition Agreement in a form approved by the
Franchisor.
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12. EXCLUSIVE RELATIONSHIP
12.1. Exclusive Relationship.
The Franchisor is entering into this Agreement with the Marketer on the
condition that the Marketer will deal exclusively with the Franchisor. The
Marketer acknowledges and agrees that the Franchisor would be unable to protect
its Confidential Information and would be unable to encourage a free exchange of
ideas and information among area marketers and the Franchisor if area marketers
were permitted to hold interests in any Competitive Business, as defined below.
The Marketer therefore agrees that, during the term hereof, neither the
Marketer, the Marketer's officers, directors, shareholders, members, managers,
partners or equivalents who participate in the management of the Marketer, nor
the Marketer's spouse or Principal Owner, if applicable, shall:
a. have any direct or indirect interest as a disclosed or beneficial
owner in a "Competitive Business," which shall be defined as a business
operating or granting franchises or licenses to others to operate, a
packaging, crating, freight forwarding and/or mailing business or any
similar business deriving more than 10% of its gross receipts (excluding
PAK MAIL Centers operated under Franchise Agreements with the Franchisor)
from the sale of packaging and mailing products or services;
b. have any direct or indirect controlling interest as a disclosed or
beneficial owner in a Competitive Business;
c. perform services as a director, officer, manager, employee,
consultant, representative, agent or the equivalent for a Competitive
Business; or
d. divert or attempt to divert any business related to, or any
customer or account of, the Marketer's Business, the Franchisor's business
or any other PAK MAIL area marketer's or Franchisee's business, by direct
inducement or otherwise, or divert or attempt to divert the employment of
any employee of the Franchisor or another area marketer or Franchisee
licensed by the Franchisor, to any Competitive Business by any direct
inducement or otherwise.
Notwithstanding the foregoing, the Marketer shall not be prohibited from owning
securities in a Competitive Business if such securities are listed on a stock
exchange or traded on the over-the-counter market and represent 2% or less of
that class of securities issued and outstanding.
13. OPERATING STANDARDS
13.1. Standards of Service.
The Marketer shall at all times give prompt, courteous and efficient
service to PAK MAIL Center Franchisees in the Territory. The Marketer shall, in
all dealings with Franchisees, prospective franchisees and the public, adhere to
the highest standards of honesty, integrity, fair dealing and ethical conduct.
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13.2. Compliance with Laws and Good Business Practices.
The Marketer shall secure and maintain in force all required licenses,
permits and certificates relating to the Marketer's activities hereunder and
shall operate in full compliance with all applicable laws, ordinances and
regulations. The Marketer acknowledges being advised that many jurisdictions
have enacted laws concerning the advertising, sale, renewal, termination and
continuing relationship between parties to a franchise agreement, including
without limitation, laws concerning disclosure requirements. The Marketer agrees
promptly to become aware of, and to comply with, all such laws and legal
requirements in force in the Territory and to utilize only offering circulars
that the Franchisor has approved for use in the applicable jurisdiction.
13.3. Accuracy of Information.
Before it offers or sells any franchise, the Marketer shall each time take
reasonable steps to confirm that the information contained in any written
materials, agreements and other documents related to the offer or sale of
franchises is true, correct and not misleading at the time of such offer or
sale, and the offer or sale of such franchise will not at that time be contrary
to or in violation of any applicable state law related to the registration of
the franchise offering. The Franchisor shall provide the Marketer with any
changes to its disclosure documents and other agreements on a timely basis, and
shall, upon request, provide the Marketer with confirmation that the information
contained in any written materials, agreements or documents being used by the
Marketer is true, correct and not misleading, except for information
specifically relating to disclosures regarding the Marketer. If the Marketer
notifies the Franchisor of an error in any information in the Franchisor's
documents, the Franchisor shall have a reasonable period of time to attempt to
correct any deficiencies, misrepresentations or omissions in such information.
13.4. Notification of Litigation.
The Marketer shall notify the Franchisor in writing within five days after
(i) the commencement of any action, suit, proceeding or investigation; and (ii)
the issuance of any order, writ, injunction, award or decree, by any court,
agency or other governmental body, which concerns the operation or financial
condition of the Marketer, the Marketer's Business or any Franchisee in the
Territory.
13.5. Ownership and Management of Business.
The Marketer's Business shall at all times be under the direct, day-to-day,
full-time supervision of the Marketer (or, if the Marketer is a partnership,
corporation, limited liability company or other entity, the Principal Owner who
shall have been approved by the Franchisor and who shall have satisfactorily
completed the Franchisor's training program). The Marketer shall at all times
during the term of this Agreement own and control the Business authorized
hereunder. Upon the request of the Franchisor, the Marketer shall promptly
provide satisfactory proof of such ownership. The Marketer represents that the
Statement of Ownership, attached to this Agreement as Exhibit V and incorporated
herein by reference, is true, complete, accurate and not misleading. The
Marketer shall promptly provide the Franchisor with written notification if the
information contained in the Statement of Ownership changes at any time during
the term of this Agreement and shall comply with the applicable transfer
provision contained in Article 15 of this Agreement. If the Marketer is not an
individual, an individual or individuals designated by the Franchisor shall
execute the Guaranty and Assumption of Area Marketer's Obligations attached
hereto as Exhibit IV and incorporated herein by reference.
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13.6. Conflicting Interests.
The Marketer shall at all times faithfully, honestly and diligently perform
its obligations hereunder and continuously exert its best efforts to promote,
enhance and service PAK MAIL Centers in the Territory. The Marketer shall not
engage in any other business or other activity, directly or indirectly, that
requires any significant management responsibility, time commitments, or
otherwise may conflict with the Marketer's obligations hereunder, without the
prior written approval of the Franchisor.
13.7. Insurance.
The Marketer shall at all times during the term of this Agreement maintain
in force, at the Marketer's sole expense, comprehensive, public and motor
vehicle liability insurance against claims for bodily and personal injury, death
and property damage caused by or occurring in conjunction with the operation of
the Marketer's Business under this Agreement. Such insurance coverage shall be
maintained under one or more policies of insurance containing minimum liability
protection of $1,000,000 per occurrence for bodily and personal injury and death
and $500,000 per occurrence for property damage. All such insurance policies
shall be issued by insurance carriers acceptable to the Franchisor. All of the
required insurance policies shall name the Franchisor as an additional insured,
contain a waiver of the insurance company's right of subrogation against the
Franchisor and provide that the Franchisor will receive 30 days' prior written
notice of termination, expiration or cancellation of any such policy. The
Franchisor has the right to change the minimum amount of insurance the Marketer
is required to maintain by giving the Marketer prior reasonable notice, giving
due consideration to what is reasonable and customary in similar businesses.
13.8. Proof of Insurance Coverage.
The Marketer will provide proof of insurance to the Franchisor prior to
commencement of operations of its Marketer Business. This proof will show that
the insurer has been authorized to inform the Franchisor in the event any
policies lapse or are cancelled. The Marketer shall submit to the Franchisor
annually a copy of the certificates or other evidence of the renewal or
extension of each required insurance policy. Noncompliance with the insurance
provisions set forth herein shall be deemed a material breach of this Agreement;
and in the event of any lapse in insurance coverage, in addition to all other
remedies, the Franchisor shall have the right to demand that the Marketer cease
operations of the Marketer Business until coverage is reinstated, or, in the
alternative, pay any delinquencies in premium payments and charge the same back
to the Marketer. The Marketer's obligation to obtain and maintain required
insurance policies shall not be limited in any way by reason of any insurance
maintained by the Franchisor, nor shall the Marketer's compliance with the
insurance provisions in this Agreement relieve the Marketer of its obligations
under Section 18.4 of this Agreement.
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13.9. Advertising in Territory.
The Marketer is required to spend during each calendar quarter a certain
specified amount ("Advertising Expenditure") to advertise and promote the offer
and sale of franchises for PAK MAIL Centers in the Territory. The amount of the
Advertising Expenditure shall be designated in Exhibit I attached hereto. The
Marketer shall submit to the Franchisor an accounting of its Advertising
Expenditures within 20 days following the end of each calendar quarter during
the term of this Agreement. The Franchisor reserves the right to withhold the
payment of Service Fees due to the Marketer for any calendar quarter until such
time as the Franchisor receives the Marketer's Advertising Expenditure report
for all previous quarters. All advertising and promotion by the Marketer shall
be completely factual and conform to the highest standards of ethical
advertising. The Marketer agrees to refrain from any business or advertising
practice that may be injurious to the Franchisor, the goodwill associated with
the Marks or PAK MAIL Centers.
13.10. Approval of Advertising.
Prior to their use by the Marketer, samples of all advertising and
promotional materials not prepared or previously approved by the Franchisor,
including, without limitation, Internet advertising on the World Wide Web or
other similar network, shall be submitted to the Franchisor for approval, which
approval shall not be unreasonably withheld. If written disapproval is not
received by the Marketer within 15 business days from the Franchisor's receipt
of proposed advertising materials, the Franchisor shall be deemed to have given
its approval. The Marketer shall not use any advertising or promotional
materials that the Franchisor has disapproved. The Marketer acknowledges and
understands that certain states require the filing of franchise sales
advertising materials with the appropriate state agency prior to dissemination.
The Marketer agrees to fully and timely comply with such filing requirements at
the Marketer's own expense unless such advertising has been previously filed
with the state by the Franchisor.
13.11. Accounting, Bookkeeping and Records.
The Marketer shall maintain at its Business premises in the Territory all
original invoices, receipts, checks, contracts, licenses, acknowledgement of
receipt forms and bookkeeping and business records as the Franchisor may require
from time to time. The Marketer shall furnish to the Franchisor, within 90 days
after the end of the Marketer's fiscal year, a balance sheet and profit and loss
statement for the Marketer's Business for such year (or monthly or quarterly
statements if required by the Franchisor, in which case such statements shall
also reflect year-to-date information). In addition, upon request of the
Franchisor, within 10 days after such returns are filed, exact copies of federal
and state income, sales and any other tax returns and such other forms, records,
books and other information as the Franchisor may periodically require regarding
the Marketer's Business shall be furnished to the Franchisor. The Marketer shall
maintain all records and reports of the Business conducted pursuant to this
Agreement for at least two years after the date of termination or expiration of
this Agreement.
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13.12. Reports.
The Marketer shall, as often as required by the Franchisor, deliver to the
Franchisor a written report of its Business activities during such periods as
required in Sections 9.4, 9.5 and 9.7 above, in such form and in such detail as
the Franchisor may from time to time specify, including information about
efforts to solicit prospective Franchisees, the status of pending real estate
transactions and the status of the Centers in the Territory. The Marketer shall,
as often as required by the Franchisor, during the term of this Agreement,
deliver to the Franchisor the field inspection reports required in Section 9.5
above, for each Franchisee-owned Center in the Territory, in such form and in
such detail as the Franchisor may from time to time specify.
13.13. Late Charges.
The Franchisor reserves the right to automatically assess a $50 late charge
for any report or financial statement required under the terms of this Agreement
which is not timely filed by the Marketer. Such late charge shall continue to
accrue each month that the late report or financial statement remains unfiled
and shall be due and payable in full upon demand by the Franchisor. In the event
any late charge is not paid upon demand, the Franchisor may elect to pursue all
of its available remedies.
13.14. Compliance with Third Party Agreements.
The Marketer shall comply with all agreements with third parties related to
the Marketer Business including, in particular, all provisions of any premises
lease.
14. INSPECTIONS AND AUDITS
14.1. Inspections and Audits.
To determine whether the Marketer is complying with this Agreement, the
Franchisor or its designee shall have the right at any time during normal
business hours, and without prior notice to the Marketer, to enter onto the
premises in which the Marketer is then keeping its business records and inspect,
and conduct an audit of, the business records, bookkeeping and accounting
records, invoices, payroll records, time cards, check stubs, bank deposits,
receipts, sales tax records and returns and other business records and documents
of the Marketer's Business. The Marketer and its employees shall fully cooperate
with representatives of the Franchisor making, conducting, supervising or
observing any such inspection or audit. Marketer must purchase certain office
equipment that meets the Franchisor's standards and specifications, including a
facsimile machine, a separate phone line dedicated to the Business, and pay an
annual fee for access to the Franchisor's electronic mail network to facilitate
the Franchisor's communication with the Marketer and among all Marketers and
Franchisees. At the Franchisor's request, the Marketer will purchase computer
equipment and software according to the Franchisor's standards and
specifications, to allow the Franchisor unlimited electronic access to the
Marketer's Business records. The Marketer must have access to the internet in
order to receive and send electronic mail messages on the Franchisor's
electronic mail network.
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15. TRANSFERS
15.1. Transfers by the Franchisor.
This Agreement is fully transferable by the Franchisor and shall inure to
the benefit of any transferee or other legal successor to the Franchisor's
interests herein.
15.2. Transfers by the Marketer.
The Marketer agrees that the rights and duties created by this Agreement
are personal to the Marketer (or its officers, directors, shareholders,
managers, members, partners or equivalents if the Marketer is an entity) and
that the Franchisor has entered into this Agreement in reliance upon the
Franchisor's perceptions of the individual or collective character, skill,
aptitude, attitude, business ability and financial capacity of the Marketer (or
its officers, directors, shareholders, members, managers or partners).
Accordingly, without the prior written consent of the Franchisor, which consent
will not be unreasonably withheld, neither this Agreement (or any interest
therein), nor any of the assets of the Business, nor any part or all of the
ownership of the Marketer may be transferred. Any unauthorized transfer shall
constitute a breach hereof and be void and of no effect. As used in this
Agreement, the term "transfer" shall mean and include the voluntary,
involuntary, direct or indirect assignment, sale, subfranchise, gift or other
disposition by the Marketer (or any of its owners) of any interest in: (1) this
Agreement; (2) 30% or more of the ownership interests in the Marketer; or (3)
the assets of the Business.
15.3. Conditions for Approval of Transfer.
If the Marketer (and its officers, directors, managers, owners and
equivalents if the Marketer is an entity) is in full compliance with this
Agreement, the Franchisor shall not unreasonably withhold its approval of a
transfer that meets all the applicable requirements of this Section. The
proposed transferee and its officers, directors, managers and owners must be
individuals of good moral character and otherwise meet the Franchisor's then
applicable standards for area marketers. If the transfer is of this Agreement, a
30% or more ("Controlling Interest") interest in the Marketer, or all or a
substantial portion of the assets of the Business, or is one of a series of
transfers which in the aggregate constitute the transfer of this Agreement, a
Controlling Interest in the Marketer or all or a substantial portion of the
assets of the Business, all of the following conditions must be met prior to or
concurrently with the effective date of the transfer:
a. The transferee shall have sufficient business experience, aptitude
and financial resources to act as a Marketer, agree to be bound by all of
the terms and conditions of this Agreement and the transferee and/or its
Principal Owner must have completed the Franchisor's training program to
the Franchisor's satisfaction;
b. The Marketer shall have paid all fees due hereunder, all amounts
owed for purchases from the Franchisor and all other amounts owed to the
Franchisor or its affiliates and third party creditors and submit to the
Franchisor all required reports and statements;
c. The Marketer or the transferee shall have paid the Franchisor a
transfer fee in the amount of $2,500 to defray expenses the Franchisor
incurs in connection with the transfer;
d. The Marketer (and/or its transferring owners) shall have executed a
general release, in form satisfactory to the Franchisor, of any and all
claims against the Franchisor and its affiliates and their respective
officers, directors, employees and agents;
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e. The transferee shall have executed an Area Marketing Agreement in
the form then currently offered by the Franchisor, the term of which will
end on the expiration date of this Agreement, and which shall supersede
this Agreement in all respects. The Marketer acknowledges that the terms of
a new Area Marketing Agreement may differ from the terms of this Agreement;
f. The Franchisor shall have approved the material terms and
conditions of such transfer, including, without limitation, that the price
and terms of payment are not so burdensome as to affect adversely the
transferee's business as a Marketer of the Franchisor;
g. If the Marketer (and/or the transferring owners) finances any part
of the sale price of the transferred interest, the Marketer and/or its
owners shall have agreed that all obligations of the transferee under any
promissory notes, agreements or security interests shall be subordinate to
the transferee's obligations to pay fees, and other amounts due to the
Franchisor, its affiliates and designees and otherwise to comply with this
Agreement; and
h. The Marketer (and/or its transferring owners) shall have executed a
noncompetition covenant in favor of the Franchisor and the transferee with
terms the same as those set forth in Section 17.5 below.
15.4. Transfer to an Entity.
If the Marketer is in full compliance with this Agreement, the Marketer may
transfer this Agreement to a corporation or other entity in which the Marketer
owns all of the ownership interest, with the Franchisor's prior written
approval, which approval shall not be unreasonably withheld. The transfer fee
described in Section 15.3(c) above will be waived by the Franchisor and all
owners of such entity shall sign a Guaranty and Assumption of the Area
Marketer's Obligations, attached hereto as Exhibit IV.
15.5. Franchisor's Approval of Transfer.
The Franchisor has 30 days from the date of the written notice to approve
or disapprove in writing, of the Marketer's proposed transfer. Written notice
shall mean and include all documentation necessary to evaluate the transferee.
The Marketer acknowledges that the proposed transferee shall be evaluated for
approval by the Franchisor based on the same criteria as is currently being used
to assess new marketers of the Franchisor and that the proposed transferee shall
be provided, if appropriate, with such disclosures as may be required by state
or federal law.
15.6. Death or Disability of Area Marketer.
Upon the death or permanent disability of the Marketer (or a Principal
Owner of or the owner of a Controlling Interest in the Marketer), the executor,
administrator, conservator, guardian or other personal representative of such
person shall transfer his or her interest in this Agreement or such interest in
the Marketer to an approved third party. Such disposition of this Agreement or
such interest (including, without limitation, transfer by bequest or
inheritance) shall be completed within a reasonable time, not to exceed six
months from the date of death or permanent disability, and shall be subject to
all the terms and conditions applicable to transfers contained in this Article.
Failure to transfer the interest in this Agreement or such interest in the
Marketer within said period of time shall constitute a breach of this Agreement.
For purposes hereof, the term "permanent disability" shall mean a mental or
physical disability, impairment or condition that prevents the Marketer, a
Principal Owner or an owner of a Controlling Interest in the Marketer from
performing the essential functions of the Marketer.
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16. TERM AND EXPIRATION
16.1. Term.
The term of this Agreement is for a period of 5 years from the date of this
Agreement, unless sooner terminated as provided herein.
16.2. Continuation.
If, for any reason, the Marketer continues to operate the Business beyond
the term of this Agreement or any subsequent renewal period, it shall be deemed
to be on a month-to-month basis under the terms of this Agreement and subject to
termination upon 30 days notice or as required by law. If said holdover period
exceed 90 days, this Agreement is subject to immediate termination unless
applicable law requires a longer period. Upon termination after any holdover
period, the Marketer and those in active concert with the Marketer, including
family members, officers, directors, partners and managing agents, are subject
to the terms of Articles 11 and 12 and Sections 17.3, 17.4 and 17.5 of this
Agreement and all other applicable post-termination obligations contained in
this Agreement.
16.3. Rights Upon Expiration.
At the end of the initial term, the Marketer shall have the option to renew
its area marketer rights for an additional term as set forth in the then current
form of Area Marketing Agreement, by acquiring successor area marketer rights,
if the Franchisor authorizes a successor area marketer franchise in accordance
with Section 16.3 below, and if the Marketer:
a. At least 60 days prior to expiration of the term, executes the form
of Area Marketing Agreement then in use by the Franchisor. The Marketer
acknowledges that such agreement may contain terms which are materially
different from those in this Agreement, including commission percentages
and territories;
b. Has complied with all provisions of this Agreement during the
current term, including the payment on a timely basis of all fees due
hereunder. "Compliance" shall mean, at a minimum, that the Marketer has not
received written notification from the Franchisor of breach hereunder more
than three times during the term hereof;
c. Executes a general release, in a form satisfactory to the
Franchisor, of any and all claims against the Franchisor and its
affiliates, and their respective officers, directors, employees,
successors, assigns and agents arising out of or relating to this
Agreement; and
d. Has agreed with the Franchisor on new Sales Goals for the
additional term at least 60 days prior to expiration of the term.
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16.4. Exercise of Option for Successor Area Marketer Rights.
The Marketer may exercise its option for successor area marketer rights by
giving written notice of such exercise to the Franchisor not less than 120 days
nor more 180 days prior to the scheduled expiration of this Agreement. The
Marketer's successor area marketer rights shall become effective by signing the
Area Marketing Agreement then currently being offered by the Franchisor;
however, if the Marketer fails to sign the general release and the Area
Marketing Agreement within 60 days after delivery thereof to the Marketer, the
Marketer shall be deemed to have elected not to acquire a successor area
marketing franchise.
16.5. Conditions of Refusal.
The Franchisor shall not be obligated to offer the Marketer successor area
marketer rights upon the expiration of this Agreement if the Marketer fails to
comply with any of the above conditions of renewal. In such event, except for
failure to execute the then current Area Marketing Agreement, the Franchisor
shall give the Marketer notice of expiration not more than 90 days after the
Franchisor receives the Marketer's notice, and such notice shall set forth the
reasons for such refusal to offer successor area marketer rights. Upon the
expiration of this Agreement, the Marketer shall comply with the provisions of
Section 17.3 below.
17. TERMINATION
17.1. By the Marketer.
The Marketer may terminate this Agreement at any time during the term
hereof with 90 days advance written notice to the Franchisor.
17.2. By the Franchisor.
The Franchisor shall have the right to terminate this Agreement effective
upon delivery of written notice of termination to the Marketer, unless otherwise
noted below (subject to any state laws to the contrary, where state law shall
prevail) if the Marketer (and/or any of its shareholders, members, managers,
Principal Owners, partners or the equivalent):
a. Fails to satisfactorily complete the training program as provided
in Section 7.1 of this Agreement;
b. Has made any material misrepresentation or omission in its
application to be a Marketer;
c. Fails to meet the Sales Goals set forth in Exhibit I;
d. Fails to comply with any other provision of this Agreement or any
mandatory specification, standard or operating procedure prescribed by the
Franchisor and does not correct such failure within 30 days after written
notice of such failure to comply is delivered to the Marketer;
e. Surrenders, transfers control of or makes an unauthorized transfer
of this Agreement or an ownership interest in the Marketer;
f. Is convicted by a trial court of or pleads no contest to a felony,
or to any other crime or offense that is, in the opinion of the Franchisor,
likely to adversely affect the goodwill associated with the Marks, or
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engages in any conduct which may adversely affect the reputation of PAK
MAIL Centers or the goodwill associated with the Marks;
g. Is declared bankrupt or insolvent or voluntarily institutes a
bankruptcy proceeding under the Bankruptcy Code or is adjudicated bankrupt
as a result of an involuntary petition in bankruptcy being filed against
it. (This provision may not be enforceable under federal bankruptcy law, 11
U.S.C. ss.ss. 101 et seq.);
h. Abandons or ceases to operate the Marketer Business for a period of
15 consecutive days or any shorter period that indicates an intent by the
Marketer to discontinue operation of the Marketer Business unless precluded
from doing so by an event beyond the Marketer's reasonable control, other
than for financial reasons;
i. Has received three notices of default from the Franchisor within a
12 month period, regardless of whether the defaults were cured by the
Marketer;
j. Makes any unauthorized use of the Marks or unauthorized use or
disclosure of the Confidential Information, or uses, duplicates or
discloses any part of the System Manual; or
k. Has terminated a Franchise Agreement between the Franchisor and the
Marketer, or if the Franchisor has terminated such a Franchise Agreement.
17.3. Rights and Obligations of the Area Marketer Upon Termination or
Expiration. Upon termination of this Agreement, whether pursuant to Section
17.1, 17.2 or upon expiration of this Agreement pursuant to Article 16 above,
the Marketer agrees:
a. To pay the Franchisor within 15 days after the effective date of
termination or expiration of this Agreement, or such later date that the
amounts due to the Franchisor are determined, such fees, amounts owed for
purchases by the Marketer from the Franchisor, its affiliates or designees,
interest due on any of the foregoing and all other amounts owed to the
Franchisor, its affiliates or designees which are then unpaid;
b. To refrain from, directly or indirectly at any time or in any
manner (except with respect to PAK MAIL Center franchises owned and
operated by the Marketer) identifying itself or any business as a current
or former PAK MAIL Marketer, use any Mark, any colorable imitation thereof
or other indicia of a PAK MAIL Center in any manner or for any purpose or
utilize for any purpose any trade name, trademark or service mark or other
commercial symbol that suggests or indicates a connection or association
with the Franchisor or its affiliates;
c. To immediately deliver to the Franchisor all past and present
franchise sales leads and records and all contracts, acknowledgements of
receipt, and other information and records related to Franchisees of the
Franchisor in the Territory;
d. To immediately deliver to the Franchisor all advertising materials,
the System Manual, all other manuals, forms, offering circulars, franchise
sales brochures and other materials containing any Mark or otherwise
identifying or relating to the sale or service of PAK MAIL Centers;
e. To refrain from communicating, in any manner, with Franchisees,
except as expressly authorized by the Franchisor;
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f. To take such action as may be required to cancel all fictitious or
assumed names or equivalent registrations relating to the Marketer's use of
any Mark;
g. To notify the telephone company and all telephone directory
publishers of the termination or expiration of the Marketer's right to use
any telephone number and any regular, classified or other telephone
directory listings associated with any Mark and to authorize transfer
thereof to the Franchisor or its designee. The Marketer acknowledges that,
as between it and the Franchisor, the Franchisor has the sole rights to and
interest in all telephone, telecopy or facsimile machine numbers and
directory listings associated with any Mark. The Marketer authorizes the
Franchisor, and hereby appoints the Franchisor and any of its officers as
the Marketer's attorney-in-fact, to direct the telephone company and all
telephone directory publishers to transfer any telephone, telecopy or
facsimile machine numbers and directory listings relating to the Marketer's
Business to the Franchisor at its direction, should the Marketer fail or
refuse to do so, and the telephone company and all telephone directory
publishers may accept such direction or this Agreement as conclusive
evidence of the Franchisor's exclusive rights in such telephone numbers and
directory listings and the Franchisor's authority to direct their transfer;
h. If applicable, take such action as may be required to remove from
the internet all sites referring to the Marketer's former Business, PAK
MAIL Centers or any of the Marks and to cancel or assign to the Franchisor,
in the Franchisor's sole discretion, all rights to any domain names for any
sites on the internet that refer to the Marketer's former Business, PAK
MAIL Centers or any of the Marks;
i. Abide by all restrictive covenants set forth in this Agreement; and
j. Furnish the Franchisor, within 30 days after the effective date of
termination or expiration, with evidence satisfactory to the Franchisor of
the Marketer's compliance with the foregoing obligations.
17.4. Confidential Information.
Marketer agrees that, upon termination or expiration of this Agreement, the
Marketer shall immediately cease to use any Confidential Information of the
Franchisor pursuant to this Agreement in any business or otherwise (except in
connection with the operation of a PAK MAIL Center pursuant to a Franchise
Agreement with the Franchisor) and return to the Franchisor all copies of the
System Manual and any other confidential materials which have been loaned to the
Marketer by the Franchisor.
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17.5. Covenant Not to Compete.
Upon termination or expiration of this Agreement for any reason, the
Marketer (and its shareholders, officers, directors, members, managers and/or
partners if the Marketer is a corporation, partnership, or limited liability
company) agrees that for a period of two years commencing on the effective date
of termination or expiration, or the date on which the Marketer ceases to
conduct business, whichever is later, the Marketer (and its shareholders,
officers, directors, members, managers, partners and/or equivalents if the
Marketer is an entity) shall not have any direct or indirect interest (through a
member of any immediate family of the Marketer or its affiliates, shareholders,
officers, directors, partners, members, managers, equivalents or otherwise) as a
disclosed or beneficial owner, investor, partner, director, officer, employee,
consultant, representative or agent or in any other capacity in any Competitive
Business located or operating within the Territory. The restrictions of this
Section shall not be applicable to the ownership of shares of a class of
securities listed on a stock exchange or traded on the over-the-counter market
that represent 2% or less of the number of shares of that class of securities
issued and outstanding. The Marketer (and its shareholders, officers, directors,
members, managers, partners and/or equivalents) expressly acknowledges that it
possesses skills and abilities of a general nature and has other opportunities
for exploiting such skills. Consequently, enforcement of the covenants made in
this Section will not deprive it of its personal goodwill or ability to earn a
living.
17.6. No Further Right to Payment.
Upon termination or expiration of this Agreement, the Marketer forfeits all
fees paid to the Franchisor and remains liable to the Franchisor for all amounts
due to the Franchisor on the date of termination or expiration. The Marketer
shall have no further right to receive payment of commissions or Service Fees
from the Franchisor, except for those commissions or Service Fees which have
been fully earned by the Marketer up through the date of such termination or
expiration. For purposes of this Agreement, "fully earned" commissions shall
mean commissions due on franchise sales for which all Franchise Sales Conditions
described in Section 6.1 of this Agreement have been met or fulfilled by the
Marketer. "Fully earned" Service Fees shall mean those Service Fees which accrue
up through the date of termination which are otherwise owed to the Marketer. The
Franchisor shall have the right to immediately assume control of and manage all
franchise sales in the Territory and to receive all Service Fees from
Franchisees in the Territory. Any fully earned commissions or Service Fees which
are due to the Marketer will be paid by the Franchisor in accordance with the
provisions of Article 6 of this Agreement.
17.7. Continuing Obligations.
All obligations of the Franchisor and the Marketer which expressly or by
their nature survive the expiration or termination of this Agreement shall
continue in full force and effect subsequent to and notwithstanding its
expiration or termination and until they are satisfied or by their nature
expire.
17.8. State and Federal Law.
THE PARTIES ACKNOWLEDGE THAT IN THE EVENT THAT THE TERMS OF THIS AGREEMENT
REGARDING TERMINATION OR EXPIRATION ARE INCONSISTENT WITH APPLICABLE STATE OR
FEDERAL LAW, SUCH LAW SHALL GOVERN THE MARKETER'S RIGHTS REGARDING TERMINATION
OR EXPIRATION OF THIS AGREEMENT.
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18. RELATIONSHIP OF THE PARTIES
18.1. Relationship of the Parties.
It is understood and agreed by the parties hereto that this Agreement does
not create a fiduciary relationship between them, that the parties are
independent contractors and that nothing in this Agreement is intended to make
either party an agent, subsidiary, joint venturer, partner, employee or servant
of the other for any purpose. The Marketer shall conspicuously identify itself
in all dealings with Franchisees, prospective Franchisees, lessors, contractors,
suppliers, public officials and others as the owner of its own Business under an
Area Marketing Agreement with the Franchisor, and shall place such other notices
of independent ownership on signs, forms, stationery, advertising and other
materials as the Franchisor may require from time to time.
18.2. Payment of Third Party Obligations.
Neither the Franchisor nor the Marketer shall make any express or implied
agreements, guaranties or representations, or incur any debt, in the name of or
on behalf of the other or represent that their relationship is other than
franchisor and franchisee, and neither the Franchisor nor the Marketer shall be
obligated by or have any liability under any agreements or representations made
by the other that are not expressly authorized hereunder, nor shall the
Franchisor be obligated for any damages to any person or property directly or
indirectly arising out of the operation of the Marketer's Business, whether or
not caused by the Marketer's negligent or willful action or failure to act.
18.3. Independent Contractors.
The Marketer may delegate its duties hereunder to independent contractors
provided that the Marketer receives written approval from the Franchisor prior
to any such delegation of duties and complies with all state laws which require
broker registration for such persons. The Franchisor reserves the right to
withdraw the approval of any independent contractor engaged by the Marketer to
fulfill its duties and obligations under this Agreement, at any time.
18.4. Indemnification.
The Marketer agrees to indemnify and hold the Franchisor and its
subsidiaries, affiliates, stockholders, directors, officers, employees, agents
and assignees harmless against, and to reimburse them for, any loss, liability,
taxes or damages (actual or consequential) and all reasonable costs and expenses
of defending any claim brought against any of them or any action in which any of
them is named as a party (including, without limitation, reasonable
accountants', attorneys' and expert witness fees, costs of investigation and
proof of facts, court costs, other litigation expenses and travel and living
expenses) which any of them may suffer, sustain or incur by reason of, arising
from or in connection with any acts, omissions or activities of the Marketer or
any employee of or independent contractor engaged by the Marketer whether such
acts, omissions or activities are authorized by or are not in accordance with
this Agreement. The Franchisor shall have the right to defend any such claim
against it. This indemnity shall continue in full force and effect, subsequent
to and notwithstanding the expiration or termination of this Agreement.
26
<PAGE>
19. MISCELLANEOUS PROVISIONS
19.1. Governing Law/Consent to Venue and Jurisdiction.
Except to the extent governed by the United States Trademark Act of 1946
(Lanham Act, 15 U.S.C. Sections 1051 et seq.) or other federal law, this
Agreement shall be interpreted under the laws of the state of Colorado and any
dispute between the parties shall be governed by and determined in accordance
with the substantive laws of the state of Colorado, which laws shall prevail in
the event of any conflict of law. The Marketer and the Franchisor have
negotiated regarding a forum in which to resolve any disputes which may arise
between them and have agreed to select a forum in order to promote stability in
their relationship. Therefore, if a claim is asserted in any legal proceeding
involving the Marketer, its officers, partners, managers or directors
(collectively, "Marketer Affiliates") and the Franchisor, its officers,
directors or sales employees (collectively, "Franchisor Affiliates") both
parties agree that the exclusive venue for disputes between them shall be in the
state and federal courts of Colorado and each waive any objection either may
have to the personal jurisdiction of or venue in the state and federal courts of
Colorado. The Franchisor, the Franchisor Affiliates, the Marketer and the
Marketer Affiliates each waive their rights to a trial by jury.
19.2. Severability.
If any provision of this Agreement is held invalid by any tribunal in a
final decision from which no appeal is or can be taken, such provision shall be
deemed modified to eliminate the invalid element and, as so modified, such
provision shall be deemed a part of this Agreement as though originally
included. The remaining provisions of this Agreement shall not be affected by
such modification.
19.3. Modification.
The Franchisor and/or the Marketer may modify this Agreement only upon
execution of a written agreement between the two parties. The Marketer
acknowledges that the Franchisor may modify its standards and specifications and
operating and marketing techniques set forth in the System Manual unilaterally
under any conditions and to the extent that the Franchisor, in its sole
discretion, deems necessary to protect, promote, or improve the Marks and the
quality of the Licensed Methods, but under no circumstances will such
modifications be made arbitrarily without such determination.
19.4. Attorneys' Fees.
In the event of any default on the part of either party to this Agreement,
in addition to all other remedies, the party in default will pay the aggrieved
party all amounts due and all damages, costs and expenses, including reasonable
attorneys' fees, incurred by the aggrieved party in any legal action or other
proceeding as a result of such default, plus interest at the highest rate
allowable by law, accruing from the date of such default.
19.5. Injunctive Relief.
Nothing herein shall prevent the Franchisor or the Marketer from seeking
injunctive relief to prevent irreparable harm, in addition to all other
remedies. If the Franchisor seeks an injunction, the Franchisor will not be
required to post a bond in excess of $500.
27
<PAGE>
19.6. Payment of Taxes.
The Marketer shall reimburse the Franchisor, and its affiliates and
designees, promptly and when due, the amount of all sales taxes, use taxes,
personal property taxes and similar taxes imposed upon, required to be collected
or paid by the Franchisor, or its affiliates or designees, on account of
services or goods furnished by the Franchisor, its affiliates or designees, to
the Marketer through sale, lease or otherwise, or on account of any payments
made by the Marketer to the Franchisor required under the terms of this
Agreement.
19.7. No Waiver.
No waiver of any condition or covenant contained in this Agreement or
failure to exercise a right or remedy by the Marketer or the Franchisor shall be
considered to imply or constitute a further waiver by the Franchisor or the
Marketer of the same or any other condition, covenant, right, or remedy.
19.8. No Right to Set Off.
The Marketer shall not be allowed to set off amounts owed to the Franchisor
for fees or other amounts due hereunder, against any monies owed to the
Marketer, nor will the Marketer in any event withhold any amounts due to any
alleged nonperformance by the Franchisor hereunder, which right of set off is
hereby expressly waived by the Marketer.
19.9. Effective Date.
Regardless of the date first written above, this Agreement shall not be
effective until accepted by the Franchisor as evidenced by the dating and
signing of this Agreement by an officer of the Franchisor.
19.10. Review of Agreement.
The Marketer acknowledges that it had a copy of the Franchisor's Uniform
Franchise Offering Circular in its possession for a period of time not less than
10 full business days, and this Agreement in its possession for a period of time
not less than 5 full business days, during which time the Marketer has had the
opportunity to submit the same for review and advice by a professional of the
Marketer's choosing prior to freely executing this Agreement.
19.11. Entire Agreement.
This Agreement, including all Exhibits and addenda, contains the entire
agreement between the parties and supersedes any and all prior agreements
concerning the subject matter hereof. The Marketer agrees and understands that
the Franchisor shall not be liable or obligated for any oral representations or
commitments made prior to the execution hereof or for claims of negligent or
fraudulent misrepresentation and that no modifications of this Agreement shall
be effective except those in writing and signed by both parties. The Franchisor
does not authorize and will not be bound by any representation of any nature
other than those expressed in this Agreement. The Marketer further acknowledges
and agrees that no representations have been made to it by the Franchisor
regarding projected sales volumes, market potential, revenues, profits of the
Marketer's Business, or operational assistance other than as stated in this
Agreement or in any disclosure document provided by the Franchisor or its
representatives.
28
<PAGE>
19.12. Notices.
All notices required to be given under this Agreement shall be given in
writing, by certified mail, return receipt requested, or by an overnight
delivery service providing documentation of receipt, to the addresses set forth
in the first paragraph of this Agreement, or, with respect to notices to the
Marketer, to the address of the Marketer Business, or at such other addresses as
the Franchisor or the Marketer may designate from time to time, and shall be
effectively given when deposited in the United States mails, postage prepaid, or
when received via overnight delivery, as may be applicable.
19.13. Acknowledgment.
BEFORE SIGNING THIS AGREEMENT, THE MARKETER SHOULD READ IT CAREFULLY WITH
THE ASSISTANCE OF LEGAL COUNSEL. THE MARKETER ACKNOWLEDGES THAT:
(A) THE SUCCESS OF THE BUSINESS VENTURE CONTEMPLATED HEREIN INVOLVES
SUBSTANTIAL RISKS AND DEPENDS UPON THE MARKETER'S ABILITY AS AN INDEPENDENT
BUSINESS PERSON AND ITS ACTIVE PARTICIPATION IN THE DAILY AFFAIRS OF THE
BUSINESS, AND
(B) NO ASSURANCE OR WARRANTY, EXPRESS OR IMPLIED, HAS BEEN GIVEN AS TO
THE POTENTIAL SUCCESS OF SUCH BUSINESS VENTURE OR THE EARNINGS LIKELY TO BE
ACHIEVED, AND
(C) NO STATEMENT, REPRESENTATION OR OTHER ACT, EVENT OR COMMUNICATION,
EXCEPT AS SET FORTH IN THIS DOCUMENT, AND IN ANY OFFERING CIRCULAR SUPPLIED
TO THE MARKETER IS BINDING ON THE FRANCHISOR IN CONNECTION WITH THE SUBJECT
MATTER OF THIS AGREEMENT.
29
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed and delivered this
Agreement in counterparts on the last date written below.
PAK MAIL CENTERS OF AMERICA, INC., AREA MARKETER
a Colorado corporation
a Colorado corporation
------------------------------------------
(Print Name)
By:
------------------------------ ------------------------------------------
Name: Individually
----------------------------
Title: Title:
--------------------------- -----------------------------------
Address:
---------------------------------
City:
-----------------------------------
State: Zip:
-------------- -------------
OR:
(if a corporation or partnership)
--------------------------------------------
Company Name
By:
--------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
Address:
---------------------------------
City:
-----------------------------------
State: Zip:
-------------- -------------
30
<PAGE>
EXHIBIT I
RIDER
TO AREA MARKETING AGREEMENT
BETWEEN PAK MAIL CENTERS OF AMERICA, INC.
AND
-----------------------------------------------
DATED _______________, 20 ____
1. Territory. The Territory referred to in Section 2.1 of the Agreement
shall be the following geographic area:
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------.
2. Marketing Fee. The Marketing Fee payable to the Franchisor by the
Marketer under Section 5.1 of the Agreement shall be an amount equal to the
product of the estimated population within the Territory and the price per
person within the Territory, which shall be no less than $0.06, and adjusted as
follows:
- ---------------------------------------------------------------------------- and
calculated as follows:
A. 1990 Bureau of Census Population Estimate = _________
B. Adjustment to Population Estimate = _________
C. Current Population Within Territory (A+B =) _________
- =========
D. Adjusted Price Per Person = _________
MARKETING FEE (DxC =) _________
=========
Unless otherwise agreed, the Marketing Fee is payable in cash, certified funds
or by wire transfer. The Franchisor and the Marketer agree that the Marketing
Fee will not be subject to change for any reason, including subsequent revisions
of the Bureau of Census population estimates.
3. Advertising Expenditure. During the term of the Agreement, Marketer
shall be required during each calendar quarter to spend a minimum of $_________
("Advertising Expenditure") to advertise and promote the offer and sale of
franchises for PAK MAIL Centers in the Territory, in accordance with Section
13.9 of the Agreement, based on the following calculation:
A. 1990 Bureau of Census Population Estimate = _________
B. Adjustment to Population Estimate = _________
C. Current Population Within Territory (A+B =) _________
D. Price Per Person = $.001 _________
=========
ADVERTISING EXPENDITURE (D x C =) _________
=========
The Franchisor and the Marketer agree that the Advertising Expenditure will
not be subject to change for any reason, including subsequent revisions of the
Bureau of Census population estimates.
4. Sales Goals. The Marketer shall meet the following cumulative Sales
Goals by the last day of each twelve-month period ("Sales Year") during the term
of the Agreement:
1
<PAGE>
Cumulative Minimum
Number of New Pak Mail Last Day of Sales
Sales Year Centers Sold in the Territory Year
First ,
------------------------------- ------------
Second ,
------------------------------- ------------
Third ,
------------------------------- ------------
Fourth ,
------------------------------- ------------
Fifth ,
------------------------------- ------------
TOTAL SALES GOALS
The first Sales Year commences on the date of the Agreement and expires on the
date shown above. Each subsequent Sales Year commences on the date succeeding
the last day of the preceding Sales Year and expires on the respective date
shown above. The sales made during the term of the Agreement are cumulative.
Therefore, if the Marketer meets its total Sales Goals prior to the end of the
fifth Sales Year, the Marketer's Sales Goals will be satisfied.
PAK MAIL Centers located in the Territory and owned by the Franchisor do not
count toward fulfillment of the Marketer's cumulative Sales Goals.
PAK MAIL CENTERS OF AMERICA, INC., AREA MARKETER
a Colorado corporation
a Colorado corporation
------------------------------------------
(Print Name)
By:
------------------------------ ------------------------------------------
Name: Individually
----------------------------
Title: Title:
--------------------------- -----------------------------------
Address:
---------------------------------
City:
-----------------------------------
State: Zip:
-------------- -------------
OR:
(if a corporation or partnership)
--------------------------------------------
Company Name
By:
--------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
Address:
---------------------------------
City:
-----------------------------------
State: Zip:
-------------- -------------
2
<PAGE>
EXHIBIT II
CURRENT FORM OF FRANCHISE AGREEMENT
<PAGE>
EXHIBIT III
CURRENT FORM OF AMENDMENT TO FRANCHISE AGREEMENT
(A.M. P.M. MOVERS PROGRAM)
<PAGE>
EXHIBIT IV
GUARANTY AND ASSUMPTION OF
AREA MARKETER'S OBLIGATIONS
In consideration of, and as an inducement to, the execution of the above
Area Marketing Agreement (the "Agreement") by PAK MAIL CENTERS OF AMERICA, INC.
("Franchisor"), each of the undersigned ("Guarantors") personally and
unconditionally (1) guarantees to the Franchisor and its affiliates and their
successors and assigns, for the term of the Agreement and thereafter as provided
in the Agreement, that the Area Marketer defined in the Agreement (the
"Marketer") shall punctually pay and perform each and every undertaking,
agreement and covenant set forth in the Agreement and (2) agrees personally to
be bound by, and personally liable for the breach of, each and every provision
in the Agreement.
1. Waiver. Each of the undersigned waives:
a. acceptance and notice of acceptance by the Franchisor and its
affiliates of the foregoing undertakings;
b. notice of demand for payment of any indebtedness or nonperformance
of any obligations hereby guaranteed;
c. protest and notice of default to any party with respect to the
indebtedness or nonperformance of any obligations hereby guaranteed;
d. any right he or she may have to require that an action be brought
against the Marketer or any other person as a condition of liability; and
e. any and all other notices and legal or equitable defenses to which
he or she may be entitled.
2. Consents. Each of the undersigned consents and agrees that:
a. his or her direct and immediate liability under this guaranty shall
be joint and several;
b. he or she shall render any payment or performance required under
the Agreement upon demand if the Marketer fails or refuses punctually to do
so;
c. such liability shall not be contingent or conditioned upon pursuit
by the Franchisor or its affiliates of any remedies against the Marketer or
any other person;
d. such liability shall not be diminished, relieved or otherwise
affected by any extension of time, credit or other indulgence which the
Franchisor or its affiliates may from time to time grant to the Marketer or
to any other person, including, without limitation, the acceptance of any
partial payment or performance or the compromise or release of any claims,
none of which shall in any way modify or amend this guaranty, which shall
be continuing and irrevocable during the term of the Agreement; and
1
<PAGE>
e. he or she shall be bound by the restrictive covenants and
confidentiality provisions contained in Articles 11 and 12 and Sections
17.4 and 17.5 of the Agreement, and the indemnification provisions
contained in Section 18.4 of the Agreement; and
f. the governing law, consent to jurisdiction and related provisions
contained in Article 19 and the costs and attorneys fees provision
contained in Section 19.4 of the Agreement shall govern this Guaranty and
such provisions are incorporated into this Guaranty by this reference.
IN WITNESS WHEREOF, each of the undersigned has affixed his or her
signature, effective as of the ____ day of ____________________, 20___.
PERCENTAGE OF OWNERSHIP GUARANTOR(S)
INTEREST IN AREA MARKETER
- --------------------------------- -----------------------------------------
(Print Name)
-----------------------------------------
Signature
-----------------------------------------
-----------------------------------------
-----------------------------------------
Address
-----------------------------------------
Telephone Number
- --------------------------------- -----------------------------------------
(Print Name)
-----------------------------------------
Signature
-----------------------------------------
-----------------------------------------
-----------------------------------------
Address
-----------------------------------------
Telephone Number
2
<PAGE>
- --------------------------------- -----------------------------------------
(Print Name)
-----------------------------------------
Signature
-----------------------------------------
-----------------------------------------
-----------------------------------------
Address
-----------------------------------------
Telephone Number
3
<PAGE>
EXHIBIT V
STATEMENT OF OWNERSHIP
Area Marketer:
-----------------------------------------------------------------
- --------------------------------------------------------------------------------
Trade name (if different from above):
-------------------------------------------
- --------------------------------------------------------------------------------
Form of Ownership
(Check One)
Limited
Liability
Individual Partnership Corporation Company
- ----- ------ ----- ------
If a Partnership, provide name and address of each partner showing
percentage owned, whether active in management, and indicate the state in which
the partnership was formed.
If a Corporation, give the state and date of incorporation, the names and
addresses of each officer and director, and list the names and addresses of
every shareholder showing what percentage of stock is owned by each.
If a Limited Liability Company, give the state and date of formation, the
names and addresses of every manager, the names and addresses of every member
and the percentage of membership interest held by each member.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Marketer acknowledges that this Statement of Ownership applies to the PAK
MAIL Marketer Business authorized under the Area Marketing Agreement. Use
additional sheets if necessary. Any and all changes to the above information
must be reported to the Franchisor in writing.
- -------------------------------- ----------------------------------------
Date Name
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-END> FEB-29-2000
<CASH> 21,290
<SECURITIES> 0
<RECEIVABLES> 782,034
<ALLOWANCES> 64,827
<INVENTORY> 108,652
<CURRENT-ASSETS> 1,449,792
<PP&E> 682,331
<DEPRECIATION> 523,045
<TOTAL-ASSETS> 3,063,630
<CURRENT-LIABILITIES> 1,291,451
<BONDS> 0
0
2,216,668
<COMMON> 3,873
<OTHER-SE> (1,217,001)
<TOTAL-LIABILITY-AND-EQUITY> 3,063,630
<SALES> 236,220
<TOTAL-REVENUES> 1,324,773
<CGS> 296,134
<TOTAL-COSTS> 755,312
<OTHER-EXPENSES> 921,657
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,193
<INCOME-PRETAX> (354,389)
<INCOME-TAX> 0
<INCOME-CONTINUING> (354,389)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (354,389)
<EPS-BASIC> 0.09
<EPS-DILUTED> 0.09
</TABLE>
