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Franchise Your Business
Franchise AgreementSAGE AUTO CARE FRANCHISE GROUP, LLC FRANCHISE AGREEMENT PARTIES THIS AGREEMENT is made by and between SAGE AUTO CARE FRANCHISE GROUP, LLC, a UTAH LLC, hereinafter known as SAC or "Franchisor" and the persons signing as Franchisee or Guarantors’ and referenced to herein individually or collectively as "Franchisee," to evidence the agreement and understanding between the parties as follows: RECITALS WHEREAS, Franchisor has invested ample efforts, resources, and experience based skill, have developed unique and exclusive methods to execute reconditioning services, operates and has the right to license a system or business program, including expertise for conducting and operating a reconditioning services business under the mark SAGE AUTO CARE GUARANTEE MANAGEMENT® (SAC ); and WHEREAS, Franchisor has exclusive ownership of certain trade names, trademarks, logos, service marks and other property in connection with the operation of business and has developed expertise (including confidential information) and a unique, distinctive and comprehensive system (the "System") for the establishment and operation of a franchised business offering: SAGE AUTO CARE GUARANTEE MANAGMENT® for the promotion and identification of the mark, SAGE AUTO CARE GUARANTEE MANAGEMENT® and stylized logo for the sale of products and services from SAGE AUTO CARE GUARANTEE MANAGEMENT® businesses and other locations at the discretion of the licensee (the SAGE AUTO CARE GUARANTEE MANAGEMENT BUSINESS® and hereinafter referred to as a Franchise Location or "SAC Business"); and WHEREAS, Franchisor has devised a uniform system for the establishment and operation of an SAC Business, including a distinctive aesthetic design of trade dress décor and color scheme; uniform standards, specifications, and procedures for operations; procedures for quality control; training and ongoing operational assistance; advertising and promotional programs; and other related benefits for use of Franchisee under the Names and Marks, all of which may be changed, improved, and further developed by SAC from time to time; and WHEREAS, SAC Businesses identify themselves System by means of certain trade names, service marks, trademarks, logos, emblems, trade dress and other indicia of origin, including but not limited to the mark “SAGE AUTO CARE GUARANTEE MANGEMENT” and such other trade names, service marks, trademarks and trade dress as are now designated (and may hereafter be designated by SAC in writing) for use in connection with its System (the "Names and Marks"). WHEREAS, SAC continues to develop, use, and control the use of such Names and Marks to identify for the public the source of services and products marketed there under and under its System, and to represent the System's high standards of consistent quality, appearance, and service. WHEREAS, Franchisor has established substantial goodwill and business value in its Names and Marks, expertise and System; and WHEREAS, Franchisee desires to obtain a franchise from Franchisor for the right to use the "Names and Marks" and the expertise for operating an SAC Business and to obtain the benefits and knowledge of Franchisor's System including, but without limitation, business design, operating methods, product preparation, advertising, sales techniques and materials, signs, personnel management, control systems, bookkeeping and accounting methods, and in general a style, method and procedure of business operation utilizing the Names and Marks as a Franchisee of Franchisor; and WHEREAS, Franchisee recognizes the benefits to be derived from being identified with and licensed by Franchisor and Franchisee understands and acknowledges the importance of SAC ’s high standards of quality, cleanliness, appearance, and service and the necessity of operating the Business in conformity with SAC standards and specifications. NOW, THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and sufficiency of which is hereby mutually acknowledged, the parties hereto, intending to be legally bound, do hereby agree as follows: I. FRANCHISEE'S ACKNOWLEDGEMENT OF BUSINESS RISK AND ABSENCE OF GUARANTEE Franchisee (and each partner or shareholder if Franchisee is a partnership or Corporation or LLC) hereby represents that he or she has conducted an independent investigation of the Franchisor's business and System and recognizes that the business venture contemplated by this Agreement involves business risks and that its success will depend upon Franchisee's abilities as an independent businessperson. Franchisor expressly disclaims the making of, and Franchisee acknowledges that it has not received any warranty or guarantee, express or implied, as to the potential volume, profits or success of the business contemplated by this Agreement.
II. FRANCHISEE'S ACKNOWLEDGEMENTS CONCERNING RECEIPT AND THOROUGH EVALUATION OF AGREEMENT Franchisee acknowledges having received, read, and understood this Agreement, including the Uniform franchise disclosure document and attachments thereto. Franchisee further acknowledges that Franchisor has accorded Franchisee ample time and opportunity to consult with independent legal counsel and other advisors of its own choosing concerning the potential benefits and risks of entering into this Agreement. Franchisee acknowledges that it has received a completed copy of this Agreement, attachments referred to herein, and agreements relating hereto, if any, at least seven (7) days prior to the date on which this Agreement was executed. Franchisee further acknowledges that it has received the disclosure document required by the Trade Regulation Rule of the Federal Trade Commission, entitled "Information For Prospective Franchisees Required By The Federal Trade Commission," at least fourteen (14) days prior to the date on which this Agreement was executed. Franchisee acknowledges that it has read and understands this Agreement, the Attachments hereto, and any agreements relating thereto, and that Franchisee has been advised by a representative of SAC to consult with an attorney or advisor of Franchisee's own choosing about the potential benefits and risks of entering into this Agreement prior to its execution. Franchisee acknowledges that any statements, oral or written, by SAC or its agents preceding the execution of this Agreement were for informational purposes only and do not constitute any representation or warranty by SAC . The only representations, warranties and obligations of SAC are those specifically set forth in the Uniform franchise disclosure document and this Agreement. Franchisee must not rely on, and the parties do not intend to be bound by, any statement or representation not contained therein. Franchisee acknowledges that SAC will not provide or designate locations for Franchisee, will not provide financial assistance to Franchisee, and has made no representation that it will buy back from Franchisee any products, supplies or equipment purchased by Franchisee in connection with the Business. III. ACTUAL, AVERAGE, PROJECTED OR FORECASTED FRANCHISE SALES, PROFITS OR EARNINGS The Franchisor does not make or present and has not prepared “Earning Claims” and has not made them any as an exhibit to the Uniform franchise disclosure document. Earnings claims located in the Uniform franchise disclosure document are the only statement of sales, profits or earnings that the Franchisee should rely upon. Franchisee, and each party executing this document hereto, acknowledges that SAC , itself or through any officer, director, employee or agent, has not made, and Franchisee has not received or relied upon, any oral or written, visual, express or implied information, representations, assurances, warranties, guarantees, inducements, promises or agreements concerning the actual, average, projected or forecasted franchise sales, revenues, profits, earnings or likelihood of success that Franchisee might expect to achieve from operating the Business, except as set forth in the Franchise Offering Circular reviewed by Franchisee or its representatives. IV. INDEPENDENT CONTRACTOR A. Franchisee is an Independent Contractor During the term of this Agreement, and any renewals or extensions hereof, Franchisee shall hold itself out to the public as an independent contractor operating its business pursuant to a franchise from the Franchisor. Franchisee agrees to take such affirmative action as may be necessary, including, without limitation, exhibiting multiple public notices of that fact, the content and display of which Franchisor shall have the right to specify. For example, such notices shall be provided on letterhead, business cards, bank account names, bank checks, and signs at the place of business. B. Franchisor Is Not In A Fiduciary Relationship With Franchisee It is understood and agreed by the parties hereto that this Agreement does not establish a fiduciary relationship between them, and that nothing in this Agreement is intended to constitute either party an agent, legal representative, subsidiary, joint venture, partner, employee, or servant of the other for any purpose whatsoever. It is understood and agreed that nothing in this Agreement authorizes Franchisee, and Franchisee shall have no authority, to make any contract, agreement, warranty, or representation on behalf of SAC , or to incur any debt or other obligation in SAC ’s name; and that SAC shall in no event assume liability for, or be deemed liable hereunder or there under as a result of any such action; nor shall SAC be liable by reason of any act or omission of Franchisee in its conduct of the Business or for any claim or judgment arising there from against Franchisee or SAC . V. FRANCHISE GRANT Franchisor hereby grants to Franchisee, upon the terms and conditions herein contained and subject to the License Agreement, the right, license, and privilege, and Franchisee hereby accepts a franchise under the terms and conditions set forth herein for the right to operate a Business at the Location set forth in Section VI. (the "Accepted Location"), providing only our Premium Interior Reconditioning Services or other reconditioning services that we introduce and/or explicitly grant permission, with the right to use solely in connection therewith the Franchisor's Names and Marks, its advertising and merchandising methods, and Franchisor's System, as they may be changed, improved and further developed from time to time only at the Accepted Location as set forth in Section VI. and provided the Franchisee shall adhere to the terms and conditions hereof. VI. EXCLUSIVE AREA OR TERRITORY The Franchise Location(s) shall be: within the State of __________________in the county(s) of __________________________And in the Territory Boundaries described below (See Item 12): ______________________________________________________________ The exact accepted office location is: _________________________________________________________________ If accepted location is not selected prior to the signing of this agreement, by the parties, then it shall be entered at a later date, under the terms of this agreement.) Franchisee shall not relocate the Business Office without the express prior written consent of SAC . During the term of this Agreement, SAC shall not establish, nor license another party or entity to establish, an SAC Business within your Territory. VII. TERM AND RENEWAL OF AGREEMENT A. Term The Franchise herein granted shall be for a term of TEN (10) years from the date of execution and acceptance (the "Effective Date") of this Franchise Agreement (the "Agreement") by SAC and subject to earlier termination as herein provided. B. Renewal Franchisee may, at its option, renew this Franchise for two (2) additional periods of TEN (10) years, if Franchisor is still offering franchises at that time, and further subject to the following conditions, all of which must be met prior to renewal: 1. Franchisee shall give the Franchisor written notice of its election to renew not less than six (6) months prior to the end of the then current term; 2. Franchisee must not be in default under any provision of the Agreement, any amendment hereof or successor hereto, or any other agreement between Franchisor and Franchisee, and Franchisee shall have complied with all the terms and conditions of all such agreements during the terms thereof; 3. Franchisee shall complete to Franchisor's satisfaction such maintenance and renovation of the Business as Franchisor may reasonably require in writing; 4. Franchisee shall have satisfied all monetary obligations owed by Franchisee to Franchisor and its affiliate, and shall have timely met these obligations throughout the previous term; 5. Franchisee shall execute, before the renewal term, the Franchisor's then-current form of Agreement, which agreement shall supersede this Agreement in all respects, and the terms of which may differ from the terms of this Agreement. Franchisor shall charge Franchisee a renewal fee of Two Thousand Dollars ($2,000) for each territory granted to you under this agreement, which is due and payable upon signing our then current Franchise Agreement and will be nonrefundable under all circumstances once paid; 6. Franchisee shall comply with Franchisor's then current qualification and training requirements; and 7. Franchisee must execute a general release, in a form prescribed by Franchisor, of any and all claims against Franchisor and its affiliate, and their respective officers, directions, agents and employees, if such release is not in conflict with any local, state or federal laws. VIII. FRANCHISEE'S INITIAL INVESTMENT The Franchisee's initial investment will vary depending upon the size of the Business, its geographical location, leasehold improvements required, the number of Businesses selected by the Franchisee, and other factors. Franchisee hereby certifies that he or she has reviewed the above-estimated start-up costs as detailed in the Uniform franchise disclosure document and has sufficient cash resources available to meet said expenses. These start-up costs are in addition to the franchise fee. IX. FRANCHISEE'S INITIAL FRANCHISE FEE AND TERRITORY FEES
A. Initial Franchise Fee
By executing this Agreement, you agree to become a Franchisee and pay an initial franchise fee in the amount of TWENTY THOUSAND DOLLARS ($20,000) for a single SAC Business Franchise the "Initial Franchise Fee," which is due upon execution of this Agreement and receipt of which is hereby acknowledged by SAC . The Initial Franchise Fee shall be paid in a lump sum in U.S. funds and shall be deemed fully earned and nonrefundable in consideration of administrative and other expenses incurred by SAC in granting this franchise and for lost or deferred opportunity to franchise others. B. Territory Fees You must pay us a territory fee (“Territory Fee”) of $ 30,000 for each Territory. The Territory Fee is payable in a lump sum when you sign the Franchise Agreement. If you purchase two or more territories when you sign the Franchise Agreement, the Territory Fee for each additional territory is reduced to $ 15,000. See Item 12. Territory Fees under Franchise Agreements are uniform and fully earned when paid and are not refundable under any circumstances, except as provided below. If we determine that you (or your managing owner) cannot satisfactorily complete initial training, we may terminate the Franchise Agreement and your Territory Fee will be fully refundable minus any costs incurred in the sale of your franchise. Those costs may include, but are not limited to, any commissions to sales agents or brokers, travel expenses, marketing costs or lost revenue opportunities. We will return your Territory Fee to you, minus costs, if you sign our required form of release of claims. C. Time Limit for Approving Franchisee
Franchisor, within thirty (30) days of payment of the Initial Franchise Fee provided in Section IX.C. Above, will approve or disapprove the Franchisee's application for a franchise. If Franchisee is disapproved, the fee provided in Section IX.A. Above will be refunded in full.
D. Time Limit for Starting Business Franchisee shall commence operations on the first business day immediately following the day initial training as described in Section XX of this agreement has been completed. The Business shall operate uninterrupted from the day of commencement. It is understood and agreed that, except as expressly provided herein, this franchise is non-exclusive and includes no right of Franchisee to sub franchise. E. Cooperation Required Franchisee shall cooperate reasonably with Franchisor to ensure that the various actions occur which are necessary to obtain acceptance by Franchisor of the Business Office location. In particular, Franchisee shall furnish any pertinent information as may be reasonably requested by Franchisor regarding Franchisee's business and finances. X. OTHER FEES Base Royalty Fees In addition to the Initial Franchise Fee described in Item IX above, the following recurring or isolated payments are required to be made by the Franchisee. The Franchisee pays to SAC a Base Royalty Fee of EIGHT Percent (8%) on total Gross Sales of the Franchised Business. As used in this Agreement, "Gross Sales" shall include all revenue accrued from the sale of all products and performance of services in, at, upon, about, through or from the Business, whether for cash or credit and regardless of collection in the case of credit, and income of every kind and nature related to the Business including insurance proceeds and/or condemnation awards for loss of sales, profits or business; provided, however, that "Gross Sales" shall not include revenues from any sales taxes or other add on taxes collected from customers by Franchisee for transmittal to the appropriate taxing authority, and the amount of cash refunds to, provided such amounts have been included in gross sales. The sale and delivery of products and services away from the Business is by written approval of SAC only. Should SAC approve such sales in writing, these sales will be included in computing Gross Sales. The Royalty Fee is uniform as to all persons currently acquiring a Franchise, nonrefundable, and is not collected on behalf of nor paid to any third party. The Franchisee shall participate in our electronic funds transfer program by which all monthly royalty payments for the immediately preceding month and other payments and fees owed to us under this Agreement, including all required product and supply purchases will be automatically deducted from your specified bank account by us on the 20th day of each month or the day designated by us (the “Due Date”). Before the Commencement Date, you must sign and return to us and your bank, all documents necessary to effectuate this program. You must notify us immediately of any change in your banking relationship, including changes in account numbers. We reserve the right to require you to submit all payments due to us under this Agreement in the form and manner we prescribe. No later than the due date of each month, you must report to us by electronic means or in written form, as may be reasonably directed by us, in a manner more fully described in Section XIV Part C below, with such information and pursuant to such standard transmittal procedures regarding your Gross Sales and such additional information as we reasonably request. We reserve the right, with 60 days prior written notice, to require Royalty payments are to be made on a semimonthly or weekly basis, at our sole discretion. We have the right to reasonably verify such Royalty payments from time to time, as we deem necessary. Any payment or report not actually received by SAC on or before the specified date shall be deemed overdue. If any payment is overdue, in addition to the right to exercise all rights and remedies available to SAC under this Agreement, Franchisee shall pay SAC , in addition to the overdue amount, a penalty of $50 per month plus interest on such amount from the date it was due until paid at the lesser of the rate of eighteen (18%) percent per annum and the maximum rate allowed by the laws of the State in which Franchisee’s business is located or any successor or substitute law (hereinafter the "Default Rate"), until paid in full. Franchisee acknowledges we have the right to require timely payment and any previous forbearance shall not obligate us to offer any further forbearance. Such late charges shall be assessed monthly for each Royalty and other amounts due and SAC will have the right to immediately debit such amounts from your bank account. Notwithstanding any designation by you, we shall have sole discretion to apply any of your payments to any of your past due indebtedness to us our affiliates and/or System Suppliers as are referenced in Section II, A, 4. You acknowledge that we have the right to set off any amounts we may owe to you against any amounts you may owe to us. XI. FINANCING ARRANGEMENTS Franchisee hereby acknowledges that financing is the responsibility of the Franchisee. The Franchisor does not finance or guarantee the obligations of the Franchisee. The Franchise Fee is due and payable upon execution of this Agreement and as set forth in Section IX.C. of this Agreement. There are no waivers of defense by the Franchisee in either the Franchise Agreement or other documents evidencing obligations to the Franchisor. XII. GENERAL OBLIGATIONS OF FRANCHISEE A. Follow Operations Manual and Directives of Franchisor Franchisee agrees that use of Franchisor’s System and adherence to the Operations Manual (the "Manual"), and to Franchisor's standardized design and specifications for decor of the Business and uniformity of equipment, layouts, signs, and other incidents of the Business, are essential to the image and goodwill thereof. Franchisee shall cooperate and assist Franchisor with any customer or marketing research program which Franchisor may institute from time to time. Franchisee's cooperation and assistance shall include, but not be limited to, the distribution, display and collection of customer comment cards, questionnaires, and similar items. In order to further protect the System and the goodwill associated therewith, Franchisee shall: 1. Operate the Business and use the Operations Manual solely in the manner prescribed by Franchisor; 2. Comply with such requirements respecting any service mark, trade name, trademark, or copyright protection and fictitious name registrations as Franchisor may, from time to time, direct; 3. Follow the methods of preparation, service, and presentation so as to conform to the specifications and standards of Franchisor in effect from time to time; 4. Use only such supplies, equipment, and products so as to conform to Franchisor's specifications in effect from time to time; which means that SAC may establish business relationships, from time to time, with suppliers who may produce, among other things, certain furnishings, supplies, fixtures, equipment, products and inventory according to our proprietary standards and specifications or private label goods that we have authorized and prescribed for sale by System franchisees (“System Suppliers”). You recognize that System Suppliers are essential to the operation of the SAC Business and to the System generally. You further recognize that your failure to pay System Suppliers may interfere with such suppliers’ willingness to supply the System, which may result in other System franchisees’ inability to obtain product or ability to obtain product only on less favorable price or credit terms. Accordingly, you agree to pay system Suppliers when due. SAC reserves the right to make payment to the system Supplier for any and all amounts deemed by us to be in default on your behalf. The amount paid on your behalf will then be treated as amounts past due to us and will be treated in accordance with Section X of this agreement. 5. Sell from the Business all products and services specified by Franchisor and not sell or offer for sale any other products of any kind or character without first obtaining the express approval of Franchisor, which shall be at the full discretion of the Franchisor who shall have the sole right of decision in regards to all products to be sold in the Franchise Business. Franchisor shall have the right to not approve any product for any reason whatsoever or for no reason whatsoever. 6. Discontinue selling or offering for sale or using any products Franchisor may, in its absolute discretion, delete from its standards and specifications for any reason whatsoever or for no reason whatsoever. 7. Maintain in sufficient supply, and use at all times, only such products, materials, supplies, ingredients, methods of preparation and service, weight and dimensions of products served, standards of cleanliness, health and sanitation and methods of service as conform to SAC standards and specifications; and to refrain from deviating there from by using non-conforming items or methods without SAC prior written consent. 9. Purchase such equipment, supplies, or products as may be required by SAC , for the appropriate handling and selling of any services and products that become approved for offering in the System. 10. Require clean uniforms conforming to such specifications as to color, design, etc. as Franchisor may designate, from time to time, to be worn by all of Franchisee's employees at all times while in attendance at the Business, and to cause all employees to present a clean, neat appearance and render competent and courteous service to customers, as may be further detailed in the Manual. 11. Permit SAC or its agents, at any reasonable time, to remove from the Business samples of item without payment therefore, in amounts reasonably necessary for testing by SAC or an independent laboratory to determine whether said samples meet SAC ’s then-current standards and specifications. In addition to any other remedies it may have under this Agreement, SAC requires Franchisee to bear the cost of such testing if the supplier of the item has not previously been approved by SAC , or if the sample fails to conform to SAC specifications. 12. Not to install or permit to be installed on or about the Business premises and/or vehicle, without our prior written consent, any fixtures, furnishings, signs, equipment, or other improvements not previously approved as meeting SAC standards and specifications 13. Employ a sufficient number of employees and maintain sufficient inventories as necessary to operate the Business at its maximum capacity as prescribed or approved by SAC and to comply with all applicable Laws with respect to such employees. 14. Not engage in any trade practice or other activity or sell any product or literature which Franchisor determines to be harmful to the goodwill or to reflect unfavorably on the reputation of Franchisee or SAC the Business, or the products sold thereat; or which constitutes deceptive or unfair competition, or otherwise is in violation of any applicable laws. The above limitations are closely related to the business image, purpose and marketing strategy of the System, and therefore any change there from would fundamentally change the nature of the business. B. Operate Franchised Business Only Franchisee shall use the System and the Names and Marks provided to Franchisee by Franchisor for the operation of the Business and shall not use them in connection with any other line of business or any other activity. Neither Franchisee, nor any of its employees, may conduct any business at the Business other than that authorized pursuant to this Agreement, without the prior written approval of Franchisor. Neither Franchisee, nor any of its employees, may engage in the performance or delivery of any other automotive reconditioning services or businesses without the expressed written consent or approval of SAC . Neither Franchisee, nor any of its employees, may conduct any activity at the Business or in connection therewith which is illegal or which could result in damage to the Names and/or Marks or the reputation and goodwill of Franchisor. C. Comply With Laws Franchisee shall comply with all federal, state and local laws and regulations, and shall obtain and at all times maintain any and all permits, certificates, or licenses necessary for full and proper operation of the Business franchised under this Agreement. Franchisor’s standards may exceed any and all of the requirements of said laws. D. Maintain Confidentiality of Proprietary Information Neither Franchisee nor any of its partners, officers, directors, agents, or employees shall, except as required in the performance of the duties contemplated by this Agreement, disclose or use at any time, whether during the terms of this Agreement or thereafter, any information disclosed to or known by Franchisee or any such person as a result of this Agreement. Such information, includes, but shall not be limited to, information conceived, originated, discovered, or developed by Franchisee or by any employee of Franchisee which is not generally known in the trade or industry about Franchisor's products, services, or licenses, including information relating to discoveries, ideas, manufacturing, purchasing, accounting, engineering, marketing, merchandising or selling. E. Maintain and Renovate Business Franchisee shall at all times maintain the Business and/or business vehicle in a clean, orderly condition and in first class repair and condition in accordance with all maintenance and operating standards set forth in the Manual. Franchisee shall make, at Franchisee's expense, all additions, repairs, replacements improvements and alterations that may be determined by Franchisor to be necessary so that the facilities which are viewed by the public will conform to the System's image, as may be prescribed by Franchisor from time to time. Franchisee shall undertake and complete such additions, repairs, replacements, improvements and alterations within the time and under the terms and conditions which may be reasonably specified by Franchisor. F. Maintain Competent Staff Franchisor will create and make available to Franchisee training programs and other selected training materials, as Franchisor deems appropriate. Franchisee shall maintain a fully trained competent staff capable of rendering courteous quality service in a manner in keeping with the standards set by Franchisor. G. Open Business Within Time Limit You must commence operations of your SAC Business on the business day immediately following the completion of the initial training program as described in Time is of the essence. Prior to opening, Franchisee shall complete to Franchisor's satisfaction all preparations and training concerning the SAC Business, in accordance with specifications set forth in the Manual, and as required by local governmental agencies, including the installation of fixtures, furnishings, and equipment and the acquisition of supplies and inventory. H. Operate Business in Strict Conformity to Requirements Franchisee shall operate the Business in strict conformity with such standards, techniques, and procedures as Franchisor may from time to time prescribe in the Manual, or otherwise in writing, and shall not deviate there from without Franchisor's prior written consent. Franchisee further agrees to offer its customers all products and services which Franchisor may, from time to time, prescribe, to offer its customers only those products and services which meet Franchisor's standards of quality and which Franchisor has approved in writing to be offered in connection with the Business's operations, and to discontinue offering any products or services which Franchisor may, in its sole discretion, disapprove in writing at any time. I. Use Approved Supplies and Products 1. Franchisee shall sell, serve, or otherwise dispense, only "SAC /SAGE AUTO CARE GUARANTEE MANGEMENT" items and related products which may, from time to time, be specified in writing, designated, and approved for sale by Franchisor. The proprietary products listed in the operations manual are developed by Franchisor. The "Proprietary Products" developed by Franchisor are the only products approved for use by Franchisee. The "Proprietary Products" must be purchased by the Franchisee directly from SAC , unless SAC makes other arrangements which shall be given to Franchisee in writing such as an approved supplier that may purchase the products from the Franchisor and resell them to the Franchisee. 2. To insure the consistent high quality and uniformity of products and services offered by "SAC Businesses", Franchisee shall purchase all equipment, inventory, and other supplies, products, and materials used in the operation of "SAC Businesses” as Franchisor may specify from time to time, solely from suppliers who demonstrate to Franchisor's continuing satisfaction an ability to meet Franchisor's standards and specifications. In approving any supplier, Franchisor may consider factors such as the supplier's financial strength, quality control, and capacity to supply Franchisee's needs promptly and reliably. All suppliers must be approved in writing by Franchisor and not thereafter disapproved. If Franchisee desires to purchase the items from an unapproved supplier, Franchisee shall submit to Franchisor a written request for such approval. Franchisor shall have the right to require, as a condition of its approval and review, that its representatives be permitted to inspect the facilities of the proposed supplier and that the proposed item be delivered to Franchisor or its designee for testing. The cost of such inspection and testing shall be paid by Franchisee or supplier, and Franchisor shall not be liable for damage to or for the return of any sample. Franchisor reserves the right to re-inspect the facilities and to retest the product of any approved supplier and to revoke any approval if the supplier fails to continue to meet Franchisor's high standards. 3. Franchisor reserves the right to require Franchisee to purchase designated proprietary items and products, and products bearing the Names and Marks, as specified in the Manual from time to time, from Franchisor or its related or affiliated entities or from sources designated or approved by Franchisor, to the extent permitted by law. J. Use Approved Equipment In operating the Business, Franchisee shall install equipment, signs, furnishings, supplies and fixtures in accordance with the standards and specifications recommended by Franchisor or that will continue to be recommended by Franchisor. K. Use Approved Signs Franchisee shall purchase or lease such signs that provide maximum displays of the Names and Marks of Franchisor, primarily in the form of graphic displays on the vehicle(s) used in your SAC Business. Upon renewal of this Agreement, Franchisee shall be totally responsible for obtaining and equipping the Business with the signage that is approved for use by Franchisor at the time of the renewal of this Agreement. The color, size, design and location of said signs shall be as specified and/or approved by SAC . Franchisee shall not place additional signs, posters or other décor items in, on or about the Accepted Location without the prior written consent of SAC . L. Use Approved Uniforms Franchisee may require its employees to wear uniforms while working at the Business and such uniforms shall be of such design and color as Franchisor may prescribe from time to time, as set forth in the Manual. M. Maintain Regular Business Hours Franchisee shall keep the Business open and in normal operation during normal business hours for its geographical region, for at least FIVE (5) days per week, FIFTY-TWO (52) weeks per year. Being that we are a subscription-based business, it is essential that a consistent schedule be maintained. Observance of national holidays is acceptable according to the schedules of your customer base. Such minimum hours and days of operation may be changed as SAC may from time to time specify in the Manual. N. Maintain Uniform Operating Standards Franchisee understands and acknowledges that every detail of the design and operation of the Business is important to Franchisee, Franchisor and other franchisees in order to develop and maintain uniform operating standards, to increase the demand for the products and services sold by the Business under the System, and to protect Franchisor's reputation and goodwill. O. Telephone Number of Business Franchisee understands and agrees that the telephone number(s) for the Business constitute a part of the System and is subject to the restrictions of this Agreement. Accordingly, Franchisee shall not change the telephone number(s) for the Business without prior notice and written approval by Franchisor. Franchisee shall advertise and publicize the telephone number(s) for the Business in the manner prescribed by Franchisor. P. Disclose Discoveries and Ideas to Franchisor Franchisee shall promptly disclose to Franchisor all discoveries, inventions or ideas, whether patent able or not, relating to Franchisor's business, which are conceived or made by Franchisee or any partner, officer, director, agent, or employee of Franchisee solely or jointly with others, during the term of this Agreement, whether or not Franchisor's facilities, materials, or personnel are utilized in the conception or making of such discoveries or ideas. Franchisee hereby acknowledges and agrees that all such discoveries, inventions or ideas are the exclusive property of Franchisor, and that Franchisor shall have no obligation to Franchisee with respect thereto. The purpose of this clause is to ensure that ideas for improvements to the System that may be generated by franchisees within the System will be distributed to the other franchisees as a benefit of belonging to the System. Q. Permit Franchisor to Enter Business Franchisee shall permit Franchisor and its agents or representatives to enter the Business at any reasonable time for the purpose of conducting inspections, shall cooperate fully with Franchisor's representatives in such inspections by rendering such assistance as they may reasonably request, and, upon notice from Franchisor or its agents, and without limiting Franchisor's other rights under this Agreement, shall take such steps as may be deemed necessary to immediately correct any deficiencies detected during such inspections. In the event Franchisee fails or refuses to correct immediately any deficiency detected during such inspection, Franchisor shall have the right to make or cause to be made such changes as may be required, at the expense of Franchisee, which expense Franchisee agrees to pay upon demand. The foregoing shall be in addition to any other remedies Franchisor may have pursuant to this Agreement. R. Additional Requirements for Corporate Franchisee If Franchisee is or becomes a corporation, limited or general partnership or other organization or entity, the following requirements shall apply: 1. Franchisee shall confine its activities to the establishment and operation of the Business. 2. Franchisee's Certificate or Articles of Incorporation and Bylaws (or comparable governing documents) shall at all times provide that its activities are confined exclusively to operation of the Business and that the issuance, redemption, purchase for cancellation and transfer of voting stock, or other ownership interest therein, is restricted by the terms of this Agreement. Franchisee shall furnish SAC promptly upon request copies of Franchisee's Articles of Incorporation, Bylaws, and other governing documents, and any other documents SAC may reasonably request and any amendments thereto, from time to time. 3. Franchisee shall maintain a current list of all owners of record and beneficial owners of any class of voting stock of Franchisee and shall furnish such list to Franchisor upon request. 4. Franchisee shall maintain stop transfer instructions against the transfer on its record of any equity securities (voting or otherwise) except in accordance with the provisions of Article XV. All securities issued by Franchisee shall bear the following legend, which shall be printed legibly and conspicuously on each stock certificate or other evidence of ownership interest:
THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE TERMS AND CONDITIONS OF A FRANCHISE AGREEMENT WITH SAC DATED . REFERENCE IS MADE TO SAID AGREEMENT AND TO THE RESTRICTIVE PROVISIONS OF THE ARTICLES AND BYLAWS OF THIS CORPORATION OR LLC. 5. All shareholders of Franchisee shall jointly and severally guarantee Franchisee's performance hereunder and shall bind themselves to the terms of this Agreement, provided, however, that the requirements of this Section XII.T. shall not apply to any Corporation or LLC registered under the Securities Exchange Act of 1934 (hereinafter known as a "Publicly-Held Corporation or LLC"). 6. If Franchisee is or becomes a partnership, Franchisee shall furnish SAC promptly upon request a copy of its partnership agreement and any other documents SAC may reasonably request, and any amendments thereto, from time to time. 7. Franchisee shall maintain a current list of all general and limited partners and all owners of record and all beneficial owners of any class of voting stock of Franchisee and shall furnish the list to SAC promptly upon request, from time to time. 8. Each individual who or entity which holds a ten percent (10%) or greater ownership or beneficial ownership interest in Franchisee, directly or indirectly, (including each individual holding a fifty (50%) or greater interest in any partnership or corporation which has a ten percent (10%) or greater interest in Franchisee) shall enter into a continuing guaranty agreement under seal, in the form attached hereto as Exhibit A, as such form may be amended or modified by SAC , from time to time (if such guaranty agreement is to be executed subsequent to the date hereof in accordance with the terms of this Franchise Agreement). S. Training Prior to Franchisee's opening of the Business to the public, Franchisee and/or up to two (2) personnel of Franchisee (or, if Franchisee is a Corporation or LLC or partnership, a principal of Franchisee) shall complete to SAC ’s satisfaction our management training program conducted at our location in Billings, Utah and/or at another location which we may designate. At SAC ’s option, key personnel subsequently employed by Franchisee shall also complete to SAC ’s satisfaction, the management training program. SAC may, at its discretion, make available additional training programs, seminars, as well as refresher courses to Franchisee and/or Franchisee's designated individual(s) from time to time. SAC may, at any time, discontinue management training and decline to certify Franchisee and/or Franchisee's designated individual(s) who fail to demonstrate an understanding of the management training acceptable to SAC . If Franchisee or Franchisee's designated individual's management training is discontinued by SAC , Franchisee shall have thirty (30) days to present an alternative acceptable candidate for management training to Franchisor. If Franchisee's new candidate does not adequately complete the management training, then SAC has the option of terminating this Agreement. SAC shall provide instructors and training materials for all required training programs; and Franchisee or its employees shall be responsible for all other expenses incurred by Franchisee or its employees in connection with any training programs, including, without limitation, the cost of transportation, lodging, meals, and wages. T. Miscellaneous 1. Franchisee shall give SAC advance written notice of Franchisee's intent to institute legal action against SAC , specifying the basis for such proposed action, and shall grant SAC thirty (30) days from receipt of said notice to cure the alleged act upon which such legal action is to be based. XIII. SPECIFIC OBLIGATIONS OF FRANCHISEE RELATING TO INSURANCE A. Overall Coverage Required Franchisee shall procure, prior to opening the Business, and shall maintain in full force and effect during the term of this Agreement at Franchisee's expense, an insurance policy or policies protecting Franchisor, and the officers, directors, partners, and employees of both Franchisor and Franchisee against any loss, liability, personal injury, death, property damage, or expense whatsoever arising or occurring upon or in connection with operating the Business. Franchisor shall be named as an additional insured on all such policies. Prior to the opening of the Business and thereafter at least thirty (30) days prior to the expiration of any such policy or policies, Franchisee shall deliver to SAC certificates of insurance evidencing the proper coverage with limits not less than those required hereunder. All certificates shall expressly provide that not less than thirty (30) days prior written notice shall be given to SAC in the event of material alteration to termination, non-renewal, or cancellation of; the coverage’s evidenced by such certificates. B. Insurance Carrier Must be Approved by Franchisor Such policy or policies shall be written by an insurance company rated A-minus or better, in Class 10 or higher, by Best Insurance Ratings Service and satisfactory to SAC in accordance with standards and specifications set forth in the Manuals or otherwise in writing, from time to time, and shall include, at a minimum (except as additional coverage’s and higher policy limits may be specified by SAC from time to time), the following initial minimum coverage: 1. (i) Commercial General Liability Insurance, including coverage for products-completed operations, contractual liability, personal and advertising injury, fire damage, medical expenses, having a combined single limit for bodily injury and property damage of $1,000,000.00 per occurrence and $3,000,000.00 in the aggregate plus (ii) non-owned automobile liability insurance and, if Franchisee owns, rents or identifies any vehicles with any Names and Marks or vehicles are used in connection with the operation of the Business, automobile liability coverage for owned, non-owned, scheduled and hired vehicles having limits. All such coverage’s shall be on an occurrence basis and shall provide for waivers of subrogation. 2. All-risk property insurance, including theft and flood coverage (when applicable), written at replacement cost value covering the building, improvements, furniture, fixtures, equipment and inventory. Coverage shall be written in a value which will cover not less than eighty (80%) percent of the replacement cost of the building and one hundred (100%) percent of the replacement cost of the contents of the building. 3. Employer's Liability and Worker's compensation Insurance, as required by state law. 4. Garage keepers’ liability with a minimum limit of $150,000 Franchisee's obligation to obtain and maintain, or cause to be obtained and maintained, the foregoing policy or policies in the amounts specified shall not be limited in any way by reason of any insurance which may be maintained by SAC , nor shall Franchisee's performance of that obligation relieve it of liability under the indemnity provisions set forth in Section XVIII. of this Agreement. C. No Limitations on Coverage Franchisee's obligations to obtain and maintain the foregoing insurance policies in the amounts specified shall not be limited in any way by reason of any insurance which may be maintained by Franchisor, nor shall Franchisee's performance of that obligation relieve it of liability under the indemnity provisions set forth in this Agreement. Franchisee may maintain such additional insurance, as it may consider advisable. D. Franchisee Must Provide Evidence of Coverage to Franchisor Upon obtaining the insurance required by this Agreement and on each policy renewal date thereafter, Franchisee shall promptly submit evidence of satisfactory insurance and proof of payment to Franchisor, together with, upon request, copies of all policies and policy amendments and endorsements. The evidence of insurance shall include a statement by the insurer that the policy or policies will not be cancelled or materially altered without giving at least thirty (30) days' prior written notice to Franchisor. E. Franchisor May Procure Insurance Coverage Should Franchisee, for any reason, fail to procure or maintain the insurance required by this Agreement, as described from time to time by the Manual or otherwise in writing, Franchisor shall have the right and authority (but no obligation) to procure such insurance and to charge same to Franchisee, which charges, together with a reasonable fee for Franchisor's expenses in so acting, shall be payable by Franchisee immediately upon notice from Franchisor. XIV. SPECIFIC OBLIGATIONS OF FRANCHISEE RELATING TO ACCOUNTING AND RECORDS A. Bookkeeping, Accounting and Records Franchisee shall maintain during the term of this Agreement, and shall preserve for a minimum of three (3) years, full, complete accurate records of sales, closeout sheets, payroll, and accounts payable in accordance with the standard accounting system described by Franchisor in the Manual or otherwise specified in writing. B. Franchisor's Right to Audit SAC or its designated agents shall have the right, at all reasonable times, to examine and copy, at SAC ’s expense, the books, records, and tax returns of Franchisee and the Business. SAC shall also have the right, at any time, to have an independent audit made of the books of the Business. If an inspection should reveal that any payments to Franchisor have been understated in any report to SAC , then Franchisee shall immediately pay to SAC the amount understated upon demand, in addition to interest on such amount from the date such amount was due until paid, at the Default Rate, calculated on a daily basis. If an inspection discloses an understatement in any payment to Franchisor of two percent (2%) or more, Franchisee shall, in addition, reimburse SAC for any and all costs and expenses relating to the inspection (including, without limitation, travel, lodging and wage expenses and reasonable accounting and legal costs), and, at Franchisor's discretion, submit audited financial statements prepared, at Franchisee' expense, by an independent certified public accountant satisfactory to SAC . If an inspection discloses an understatement in any payment to Franchisor of four percent (4%) or more, such act or omission shall constitute grounds for immediate termination of this Agreement, as set forth in Section XXIII. hereof. The foregoing remedies shall be in addition to any other remedies SAC may have pursuant to this Agreement and as provided at law and in equity. C. Reporting of Gross Sales Franchisee shall purchase, install and operate the latest version of QuickBooks Pro software on your computer and use it to prepare financial reports sent to us. You will provide us with electronic access to the data in your computer at all times. You shall supply us with weekly gross sales reports signed by you and in the form and manner we specify, including, without limitation, a summary of all monies received during the relevant period, as well as customer counts and average sales, and such other additional information which we deem necessary to properly evaluate your progress on or before the close of business on Friday of each week. This reporting is to be received by SAC within FIVE (5) days of the last day in the reporting cycle. In addition, Franchisee is required to furnish such other data or information as SAC may require, from time to time. D. Submission of Financial Statements Franchisee shall, at its expense, submit to Franchisor, within thirty (30) days of the end of each calendar quarter during the term of this Agreement, on forms prescribed by Franchisor, a financial statement, which may be unaudited, for the preceding quarter, including both an income statement and balance sheet. Each financial statement shall be signed by Franchisee or by Franchisee's Treasurer or Chief Financial Officer, attesting that the statement is true and correct. Franchisee shall also, at its expense, submit to Franchisor within sixty (60) days of the end of each fiscal year of Franchisee during the terms of this Agreement, a complete financial statement for said fiscal year, including, without limitation, both an income statement and balance sheet, which may be unaudited, together with such other information in such form as Franchisor may require. Franchisee shall also submit to Franchisor the current financial statement and other forms, records, reports, information, and data as Franchisor may reasonably designate, in the form, and at the times and the places reasonably required by Franchisor, upon request, and as specified from time to time in the Manual or otherwise in writing E. Accounting Equipment Franchisee shall follow and adhere to the daily accounting and reporting procedures as required by SAC , from time to time, and shall purchase and/or acquire accounting and reporting equipment including, but not limited to, the latest version of QuickBooks Pro, a computer with the required capabilities to efficiently run such programs and allow SAC to remotely connect and log on via the internet to inspect the records contained within. XV. SPECIFIC OBLIGATIONS OF FRANCHISEE RELATING TO USES OF NAMES AND MARKS A. Names and Marks are Owned by Franchisor Franchisor warrants with respect to the proprietary Names and Marks that: 1. Pursuant to a license agreement originally dated July 27th, 2009 between SAC and SAGE AUTO CARE, LLC a UTAH corporation, SAC has been granted the exclusive right to use the Names and Marks to establish SAGE AUTO CARE GUARANTEE MANAGEMENT® in the United States. 2. Franchisor is taking and will take such steps as are reasonably necessary to preserve and protect the ownership and validity of such Names and Marks; and 3. Franchisor will use and permit Franchisee and other franchisees to use the Names and Marks with the System and standards attendant thereto, which underlie the goodwill associated with and symbolized by the Names and Marks. B. Franchisee is Licensed to Use Names and Marks With respect to Franchisee's franchised use of the Names and Marks pursuant to this Agreement, Franchisee agrees that: 1. Franchisee shall use only the Names and Marks as are approved in writing by Franchisor for Franchisee's use, and shall use them only in the manner authorized and permitted by Franchisor and that in any use whatsoever of the Names and Marks of Franchisor that the Names and Marks are identified as being registered to or owned by Franchisor; 2. Franchisee shall use the Names and Marks only in connection with the operation of the Business and in advertising for the Business conducted at or from the Accepted Location; 3. Franchisee shall use and display, as Franchisor may require in the operation of the Business, a notice in the form approved by Franchisor indicating that Franchisee is a "Franchised Operator" under the System and that the Names and Marks are used by Franchisee under such Franchise; 4. Unless otherwise authorized or required by Franchisor, Franchisee shall operate and advertise the Business under the Name and Mark "SAGE AUTO CARE GUARANTEE MANAGEMENT®"; 5. Franchisee's right to use the Names and Marks is limited to such usages as are authorized under this Agreement, and any unauthorized use thereof shall constitute an infringement of Franchisor's rights; 6. Franchisee shall not use the Names and Marks to incur any obligations or indebtedness on behalf of Franchisor; 7. Franchisee shall not use the Names and Marks or any part thereof as part of its corporate or other legal name; 8. Franchisee shall comply with Franchisor's instructions in filing and maintaining the requisite trade name or fictitious name registration, and shall execute any documents deemed necessary by Franchisor or its counsel to obtain protection for the Names and Marks or to maintain their continued validity and enforceability; and 9. In the event any litigation involving the Names and Marks is instituted or threatened against Franchisee, Franchisee shall promptly notify Franchisor and shall cooperate fully with Franchisor in defending such litigation. 10. During the term of this Agreement and any renewal hereof, Franchisee shall identify itself as the owner of the Business in conjunction with any use of the Names and Marks, including, but not limited to, on invoices, order forms, receipts, and contracts, as well as at such conspicuous locations on the premises of the Business as SAC may designate in writing. The form and content of such identification shall comply with standards set forth in the Manual. C. Franchisee Will Not Challenge Franchisor's Rights In Its Names and Marks Franchisee expressly understands and acknowledges that: 1. As between the parties hereto, Franchisor is the owner of all right, title, and interest in and to the Names and Marks and the goodwill associated with and symbolized by them; 2. The Names and Marks are valid and serve to identify the System and those who are franchised under the System; 3. Franchisee shall not directly or indirectly contest the validity or the ownership of the Names and Marks; 4. Franchisee's use of the Names and Marks pursuant to this Agreement does not give Franchisee any ownership interest or other interest in or to the Names and Marks, except the non-exclusive Franchise granted herein; 5. Any goodwill arising from Franchisee's use of the Names and Marks in its Business under the System shall inure solely and exclusively to Franchisor's benefit, and upon expiration or termination of this Agreement and the Franchise herein granted, no monetary amount shall be assigned as attributable to any goodwill associated with Franchisee's use of the System or the Names and Marks; 6. Franchisor reserves the right to substitute different Names and Marks for use in identifying the System, the Business and other franchised businesses operating there under; and 7. Franchisee hereby agrees not to register or attempt to register the Names and Marks in Franchisee's name or that of any other firm, person or corporation. 8. The right and license of the Names and Marks granted hereunder to Franchisee is nonexclusive, and SAC thus has and retains the rights, among others: a. To use the Names and itself in connection with selling products and services; b. To grant other licenses for the Names and Marks, in addition to those licenses already granted to existing franchisees; and c. To develop and establish other systems using similar Names and Marks, or any other proprietary marks, and to grant licenses or franchises thereto at any location(s) whatsoever without providing any rights therein to Franchisee. 9. Franchisee understands and acknowledges that Franchisor has the unrestricted right to engage, directly or indirectly, through its or their employees, representatives, licensees, assigns, agents and others, at wholesale, retail and otherwise, in the production, distribution and sale of products bearing the Names and Marks licensed hereunder or other names or marks, including without limitation, products included as part of the System. Franchisee shall not under any circumstances engage in any wholesale trade or sale of System products for resale. XVI. SPECIFIC OBLIGATIONS OF THE FRANCHISEE RELATING TOCONFIDENTIALITY OF PROPRIETARY INFORMATION A. Franchisee Will Learn Proprietary Matters Franchisee acknowledges that he or she will obtain knowledge of proprietary matters, techniques and business procedures or Franchisor that are necessary and essential to the operation of the Business, without which information Franchisee could not effectively and efficiently operate such business, including, without limitation, knowledge regarding the System, the layout of the Business and the Manual. Franchisee further acknowledges that such proprietary information was not known to Franchisee prior to execution of this Agreement and that the methods of Franchisor are unique and novel to the System. As used herein, "Proprietary Information" shall mean confidential information concerning: 1. Persons, corporations or other entities which are have been or become Franchisees of the System and any investors therein; 2. Persons, corporations or other entities which are have been or become customers of the Business; 3. The terms of and negotiations relating to past or current Franchise Agreements with respect to the System; 4. The operating procedures of the System, including without limitation: distinctive management, bookkeeping and accounting systems and procedures, advertising, promotional and marketing methods, personnel hiring and training procedures, the manufacturers, suppliers and uses of equipment, and lists of vendors and suppliers; 5. The economic and financial characteristics of the System and Franchisees, including without limitation: pricing policies and schedules, profitability, earnings and losses, and capital and debt structures; 6. The services and products offered to customers of Businesses, including, without limitation, the scope of services performed and services refused; and 7. All documentation of the information listed in Sections XVI.A.1. through XVI.A.7. hereof, including, without limitation, the Manual. During the term of this Agreement and for a period of five (5) years following the expiration or termination of this Agreement, Franchisee agrees not to divulge, directly or indirectly, any Proprietary Information, without the prior written consent of Franchisor. Nothing contained herein shall be construed so as to require Franchisor to divulge any secret processes, formulas, or the like. B. Franchisee's Employees Will Not Disclose Proprietary Information The Franchisee may disclose Proprietary Information only to such of its employees, agents and representatives as must have access to it in order to operate the Business. Franchisee shall obtain from each such employee, representative or agent, an agreement that such person shall not during the course of his employment, representation, or agency with Franchisee, or for a period of five (5) years thereafter, use, divulge, disclose or communicate, directly or indirectly, in any form or manner, to any person, firm or corporation, any of the Proprietary Information of Franchisor. C. Injunctive Relief is Available to Franchisor Franchisee acknowledges that any failure to comply with the requirements of this Section XVI will cause Franchisor irreparable injury, and Franchisor shall be entitled to obtain specific performance of, or an injunction against any violation of, such requirements; Franchisee waives any requirements for the posting of any bond(s) relating thereto. Franchisee agrees to pay all court costs and reasonable attorneys' fees incurred by Franchisor in obtaining specific performance of, or an injunction against, violation of requirements of this Section XVI. The foregoing remedies shall be in addition to any other legal or equitable remedies which Franchisor may have. D. Franchisor's Patent Rights and Copyrights Franchisor does not currently own rights in or to any patents that are material to the Franchise but may elect to do so in the future. However, Franchisor intends to obtain copyright protection for the Manual and certain marketing, sales, and operations literature. Furthermore, Franchisor claims rights to certain trade secrets and confidential information as discussed above. XVII. SPECIFIC OBLIGATIONS OF FRANCHISEE RELATING TO TAXES, PERMITS AND LAWSUITS A. Franchisee Must Notify Franchisor of Lawsuits Franchisee shall notify Franchisor in writing within five (5) days of notice of the commencement of any action, suit, or proceeding against Franchisee, and of the issuance of any inquiry, subpoena, order, writ, injunction, award or decree of any court, agency, or other governmental instrumentality, which arises out of, concerns, or may affect the operation or financial condition of the Business, including, without limitation, any criminal action or proceedings brought by Franchisee against its employees, customers, or other persons. B. Franchisee Must Comply With Laws Franchisee shall, at Franchisee's expense, comply with all federal, state and local laws, rules, regulations and ordinances and shall timely obtain and shall keep in force as required throughout the term of this Agreement all permits, certificates and licenses necessary for the full and proper conduct of the Business, including, without limitation, any required permits, licenses to do business, fictitious name registrations, sales tax permits, and fire clearances. C. Franchisee Must Pay Taxes Promptly Franchisee shall promptly pay when due all taxes levied or assessed, including, without limitation, unemployment and sales taxes, and all accounts and other indebtedness of any kind incurred by Franchisee in the conduct of the Business. Franchisee shall pay Franchisor an amount equal to any sales tax, gross receipts tax or similar tax imposed on Franchisor with respect to any payments to Franchisor required under this Agreement, unless tax is credited against income tax otherwise payable by Franchisor. D. Franchisee May Contest Tax Assessments In the event of any bona fide dispute as to any liability for taxes assessed or other indebtedness, Franchisee may contest the validity or the amount of the tax or indebtedness in accordance with procedures of the taxing authority or applicable law. However, in no event shall Franchisee permit a tax sale or seizure by levy of execution or similar writ or warrant, or attachment by a creditor to occur against the premises of the Business, or any improvements thereon. XVIII. SPECIFIC OBLIGATION OF FRANCHISEE RELATING TO INDEMNIFICATION Franchisee understands and agrees that nothing in this Agreement authorizes Franchisee to make any contract, agreement, warranty or representation on Franchisor's behalf, or to incur any debt or other obligation in Franchisor's name. Franchisee further understands and agrees that Franchisor shall in no event assume liability for, or be deemed liable hereunder as a result of, any such action, or by reason of any act or omission of Franchisee in its conduct of the Business or any claim or judgment arising there from against Franchisee. Franchisee shall indemnify and hold Franchisor and Franchisor's officers, directors, shareholders and employees harmless against any and all claims arising directly or indirectly from, as a result of, or in connection with, Franchisee's operation of the Business, as well as the cost, including attorney's fees, of defending against same. XIX. MISCELLANEOUS COVENANTS OF FRANCHISEE A. Covenants are Independent The parties agree that each covenant herein shall be construed to be independent of any other covenant or provision of this Agreement. If all or any portion of the covenants in this Agreement is held to be unenforceable or unreasonable by a court or agency having competent jurisdiction in any final decision to which Franchisor is a party, Franchisee expressly agrees to be bound by any lesser covenant subsumed within the terms of such covenant that imposes the maximum duty permitted by law, as if the resultant covenant were separately stated in and made a part of this Agreement. B. Franchisee Will Not Compete Against Franchisor Franchisee specifically acknowledges that, pursuant to this Agreement, Franchisee will receive valuable specialized training and confidential information, including, without limitation, information regarding the operational, sales, promotional and marketing methods and techniques of SAC and the System. Franchisee covenants that, during the term of this Agreement, except as otherwise approved in writing by SAC , Franchisee shall not, either directly or indirectly, for itself, or through, on behalf of, or in conjunction with, any person, persons, or legal entity, employ or seek to employ any person who is at that time employed by SAC or by any other franchisee or affiliate of SAC , or otherwise directly or indirectly induce such person to leave his or her employment. Franchisee covenants that, except as otherwise approved in writing by SAC . Franchisee shall not, during the term of this Agreement and for a continuous uninterrupted period commencing upon the expiration or termination of this Agreement, regardless of the cause for termination, and continuing for two (2) years thereafter, either directly or indirectly for itself, or through, on behalf of, or in conjunction with, any person, persons, or legal entity, own, maintain, operate, engage in, be employed by, or have any interest in any business featuring the overall SAC concept, with similar decor or similar items to SAC within a fifty (50) mile radius of the business territory designated hereunder, or within a fifty (50) mile radius of any other SAC Business territory in existence or planned as of the time of termination or expiration of this Agreement, as identified in the Franchise Offering Circular of SAC in effect as of the date of expiration or termination of this Agreement. C. Exception to Covenant Not to Compete Section XIX.B. hereof shall not apply to ownership by Franchisee of less than a five percent (5%) beneficial interest in the outstanding equity securities of any Publicly-Held Corporation. D. Franchisee Will Not Divert Business During the term of this Agreement and for a period of two (2) years following the expiration or termination of this Agreement, Franchisee covenants that it will not, either directly or indirectly, for itself, or through, on behalf of, or in conjunction with any person, persons, or legal entity: 1. Divert or attempt to divert business or customers of the Business with which or with whom Franchisee has had contact during the term of this Agreement to any competitor by direct or indirect inducement or otherwise; or 2. Do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Names and Marks or the System or both; or 3. Induce, directly or indirectly, any person who is at that time employed by Franchisor or by any other Franchisee of Franchisor, to leave his or her employment. The provisions of this Section XIX.D. shall apply only in the geographical area lying within the exclusive territory of the Business. E. Franchisor Is Entitled to Injunctive Relief Franchisee acknowledges that any failure to comply with the requirements of this Section XIX. will cause Franchisor irreparable injury for which no adequate remedy at law may be available and Franchisee hereby accordingly consents to the issuance by a court of competent jurisdiction of an injunction prohibiting any conduct by Franchisee in violation of the terms of this Section XIX. and waives any requirement for the posting of any bond(s) relating thereto. Franchisor may further avail itself of any legal or equitable rights and remedies which it may have under the Agreement or otherwise. F. Covenants Are Enforceable Independent of Claims Franchisee expressly agrees that the existence of any claim it may have against Franchisor, whether or not arising from this Agreement, shall not constitute a defense to the enforcement by Franchisor of the covenants of this Section XIX. Franchisee further agrees that Franchisor shall be entitled to set off any amounts owed by Franchisor to Franchisee against any loss or damage to Franchisor resulting from Franchisee's breach of this Section XIX.
G. No Right of Set-Off Franchisee expressly agrees that the existence of any claims it may have against SAC whether or not arising from this Agreement, shall not constitute a defense to the enforcement by SAC of the covenants in this Section XIX. Franchisee agrees to pay all damages, costs and expenses (including reasonable attorney's fees) incurred by SAC in connection with the enforcement of this Section XIX. XX. OBLIGATIONS OF THE FRANCHISOR: SUPERVISION, ASSISTANCE OR SERVICES The Franchisor shall provide the Franchisee with the following assistance and services: A. The Training Program 1. The Franchisor will provide a training program concerning the operation of the Business consisting of up to FIVE (5) days of training at a location to be designated by Franchisor and up to FIVE (5) days of on the job field training either, in your Territory, in the Territory of an experienced SAC franchisee or at our designated training facility at our option. The training session at our location will begin approximately thirty (30) days or more before the opening of the Business. The exact days will be mutually selected by Franchisor and Franchisee. Franchisee and/or his or her designated representative shall attend such training program at no charge to the Franchisee. Franchisee shall be responsible for any travel, lodging, meal or other costs for the attendee(s) of the training program at the Franchisor's Home Office. If we visit your Territory, we pay our own transportation and lodging expenses incurred in providing the field training in your Territory, however you will be responsible for transporting your personnel and our instructor in the vehicle(s) that you have purchased for use in your Business. If you are required to travel to the Territory of an experienced SAC franchisee or if you are required to attend our Training Facilities for the field training, you will pay your own travel and lodging expenses and those of your employees. Franchisee must have at least one fully trained, full-time Manager operating the Business during the entire term of the Agreement. Either the Franchisee or Franchisee's Manager must attend the training sessions. Any person subsequently employed as a full-time manager of the Business may be required by Franchisor to complete the initial training program. Satisfactory completion of all mandatory training sessions is required. Failure to do so shall result in a breach of this Agreement. 2. SAC shall provide such continuing advisory assistance to Franchisee in the operation, advertising and promotion of the Business as SAC deems advisable. SAC shall also provide refresher training programs for Franchisee and to Franchisee's employees as SAC deems appropriate 3. The Franchisor may conduct additional seminars or other training programs for the benefit of the Franchisee, and Franchisee (and/or Franchisee's employees) may attend any such seminar or program. Franchisor may charge a reasonable fee for such seminar or program if it is deemed appropriate. Any and all traveling, living and other expenses incurred by anyone attending training shall be paid by Franchisee. 4. Franchisee may make reasonable request for training in addition to that specified above, and Franchisor shall provide such training, at Franchisee's expense, including without limitation, any travel, lodging, meals and other related costs. 5. Franchisee shall complete and/or shall cause its employees to complete, to Franchisor's satisfaction, such other additional training as Franchisor may reasonably require from time to time. 6. SAC may provide Franchisee, from time to time, as SAC deems appropriate, such merchandising, marketing and other data and advice as may from time to time be developed by SAC and deemed by SAC to be helpful in the managing and operation of the Business. 7. SAC may provide such periodic individual or group advice, consultation and assistance, rendered by personal visit or telephone, or by newsletter or bulletins made available from time to time to all SAC franchisees, as SAC may deem necessary or appropriate. 8. SAC may provide such bulletins, brochures, manuals and reports, if any, as may from time to time be published by or on behalf of SAC regarding its plans, policies, developments and activities. In addition, SAC may provide such communication concerning new developments, techniques and improvements management which SAC feels are relevant to the operation of the Business. 9. SAC shall seek to maintain the high standards of quality, appearance, and service of the System, and to that end shall conduct, as it deems advisable, inspections of the Business franchised hereunder, and evaluations of the products sold and services rendered therein. 10. Franchisor is obligated to take any appropriate action to preserve the Names and Marks against unauthorized operations which infringe on such Names and Marks. 11. All obligations of SAC under this Agreement shall benefit only the Franchisee, and no other party is entitled to rely on, enforce, benefit from or obtain relief for breach of such obligations, either directly or by subrogation. B. Site Selection Given the on-site nature of an SAC Business, there is no requirement to maintain a fixed place of business. You are, however, required to maintain an office to facilitate the operations of your business in accordance with the requirements laid out in the Operations Manual. This may be in a home office, or leased space. There are no signage requirements for either option. Regardless of which type of location you select, your Office must be compliant with the criteria for an SAC Business Office outlined in our Operations Manual. If you would like to install signage, the design and placement of such signage must be submitted to SAC for approval. C. Business-Layout and Design SAC will assume the layout and design responsibilities of your mobile workstation (vehicle used to operate your business). Both interior functionality as well as exterior aesthetics will be considered to maximize productivity and the professional appearance of your SAC Business according to our high standards. We will provide and install the customized workstation(s) in your vehicle(s), which include most of the equipment and supplies needed to operate your Business for your first two hundred (200) standard serviced units. D. Post-Training Assistance In addition to the assistance rendered to the Franchisee prior to opening, the Franchisor will provide continuing consultation and advise regarding business, financial, operational, technical, pricing, legal, sales and advertising matters, products, management of supplies, styles and type of service, operation of the Business, and development of personnel policies. The Franchisor will provide such assistance by telephone or, if the situation warrants, through on-site assistance of appropriate Franchisor personnel. If Franchisor is required to perform on-site assistance, travel, lodging and other appropriate fees and/or expenses may be the responsibility of the Franchisee. E. Operations Manual In order to protect the reputation and goodwill of SAC and to maintain high standards of operation under SAGE AUTO CARE GUARANTEE MANAGEMENT® Proprietary Marks, Franchisee shall conduct its business in accordance with this Agreement and Training Manuals, Audio/Video Media and/or Online Training Modules described herein as the "Manuals" (one copy of which Franchisee shall acknowledge in writing upon receipt has been received on loan from SAC for the term of this Agreement), other written directives which SAC may issue to Franchisee from time to time whether or not such directives are made part of the Manuals, and any other manuals, Audio/Video Media and/or Online Training Modules , and materials created or approved for use in the operation of the Business by Franchisor, from time to time. Franchisee shall at all times treat the Manuals, any written directives of SAC , any business plans and specifications, and any other manuals created for or approved for use in the operation of the Business, and any supplements thereto, and the information contained therein, in trust and as confidential information, and shall use all reasonable efforts to maintain such information as secret and confidential. Franchisee shall not at any time copy, duplicate, record, or otherwise reproduce the foregoing materials, in whole or in part, nor otherwise make the same available to any unauthorized person. The Manuals, written directives, other manuals and materials, and any other confidential communications provided or approved by SAC , shall at all times remain the sole property of SAC shall at all times be kept and maintained in a secure place on the Business premises. SAC may from time to time revise the contents of the Manuals and the contents of any other manuals and materials created or approved for use in the operation of the Business, and Franchisee expressly agrees that each new or changed standard shall be deemed effective upon receipt by Franchisee or as specified in such standard. Franchisee shall at all times insure that its copy of the Manuals is kept current and up-to-date; and, in the event of any dispute as to the contents of the Manuals, the master copy of the Manuals maintained by SAC at SAC ’s headquarters shall be controlling. Any suggestions Franchisee may have concerning the improvement of products, equipment, uniforms, business facilities, service format and advertising are encouraged and shall be considered by SAC when adopting or modifying the standards, specifications and procedures for the System. F. Selecting Suppliers Franchisor shall provide Franchisee a list of approved suppliers of necessary supplies. G. Recommended Price Schedules Franchisor shall advise Franchisee from time to time, concerning such suggested retail prices. Franchisor and Franchisee agree that any list or schedule of prices furnished to Franchisee by Franchisor is a maximum retail price list. Nothing contained herein shall be deemed a representation by Franchisor that the use of the Franchisor's suggested prices will in fact optimize profits. H. Advertising and Promotion On-site sales visits are core of our advertising function. SAC may develop and provide creative materials and/or promotional items to enhance your sales visits and generally promote your business. If you desire to initiate any type of advertising or promotional campaign, SAC shall provide specific guidelines for any such campaign and reserve the right to disapprove any advertising which is not found to be, in SAC ’s opinion, in accordance with these guidelines. However, no approval shall be unreasonably withheld. XXI. VARYING STANDARDS Because complete and detailed uniformity under many varying conditions may not be possible or practical, Franchisor specifically reserves the right and privilege, at its sole and absolute discretion and as it may deem in the best interests of all concerned in any specific instance, to vary standards for any franchisee based upon the peculiarities of a particular site or circumstance, density of population, business potential, population or trade area, existing business practices, or any other condition which Franchisor deems to be of importance to the successful operation of such Franchisee's business. Franchisee shall not have any right to complain about a variation from standard specifications and practices granted to any other Franchisee and shall not be entitled to require Franchisor to grant to Franchisee a like or similar variation.
XXII. SALE OF FRANCHISE A. Assignment by Franchisee This Agreement restricts the Franchisee's right to assign the Agreement to a third party. Neither this Agreement, nor any of the Franchisee's rights or privileges, shall be assigned, transferred, shared, redeemed or divided by operation of law or otherwise, in any manner, without the prior written consent of Franchisor, which consent will not be withheld or delayed unreasonably. In granting any such consent, the Franchisor may impose reasonable conditions, including, without limitation, the following: 1. Franchisee must be in full compliance with the terms of this Franchise Agreement, including being paid in full on all fees due and payable to us or our affiliate; 2. The proposed assignee (or its partners, managers, directors, officers, or controlling shareholders, if it is a corporation or partnership) must meet the then-applicable standards of Franchisor; 3. The proposed assignee must not operate a franchise, license or other business offering services similar to those offered by the Business; 4. The assignee must execute and agree to be bound by the then current form of this Agreement, which form may contain provisions which materially alter the rights or obligations of Franchisee under this Agreement; 5. Franchisor shall not charge such assignee an Initial Franchise Fee for the Franchise, but will charge a transfer fee of FIVE THOUSAND DOLLARS ($5,000) per territory. If Franchisor determines that training is required, assignee will attend training at Franchisor's Home Office as required under the then current Franchise Agreement. Published rates for training and other related fees may apply. Franchisor shall have the right to require Franchisee and its owners to execute a general release of Franchisor in a form satisfactory to Franchisor's counsel as a condition to its approval of assignment or other transfer of the Franchise; 6. Franchisee shall have substantially complied with all of the terms and provisions of this Agreement, any amendment hereof or successor hereto, or any other agreements between the Franchisee and SAC , its subsidiaries or affiliates and, at the time of transfer, shall not be in default thereof; 7. The transferor shall have executed a general release under seal, in a form satisfactory to SAC , of any and all claims against SAC and its officers, directors, shareholders, and employees, in their corporate and individual capacities, including, without limitation, claims arising under federal, state, and local laws, rules, and ordinances; 8. The transferee (and, if the transferee is other than an individual, such principals and/or owners of a beneficial interest in the transferee as SAC may request) shall enter into a written assumption agreement, in a form satisfactory to SAC , assuming and agreeing to discharge all of Franchisee's obligations under this Agreement and/or any new franchise agreement, as hereinafter provided; 9. The transferee shall demonstrate to SAC ’s satisfaction that the transferee meets SAC educational, managerial, and business standards; possesses a good moral character, business reputation, and credit rating; has the aptitude and ability to conduct the Business (as may be evidenced by prior related business experience or otherwise); and has adequate financial resources and capital to operate the Business. 10. The transferee (and, if the transferee is other than an individual, such principals and/or owners of a beneficial interest in the transferee as SAC may request) shall execute, for a term ending on the expiration date of this Agreement and with such renewal term, if any, as may be provided by this Agreement, the standard form franchise agreement then being offered to new System franchisees and such other ancillary agreements as SAC may require for the Business, which agreements shall supersede this Agreement in all respects and the terms of which agreements may differ from the terms of this Agreement, including, without limitation, a higher percentage royalty rate, advertising contribution, and service charge for goods; provided; however, that the transferee shall not be required to pay an initial franchise fee; 11. The transferee, at its expense, shall upgrade the Business to conform to the then-current standards and specifications of the new entry System and shall complete the upgrading and other requirements within the time specified by SAC ; 12. Franchisee shall remain liable for all of the obligations to SAC connection with the Business prior to the effective date of the transfer and shall execute any and all instruments reasonably requested by SAC to evidence such liability; 13. Franchisee shall agree to remain obligated under the covenants against competition of this Agreement as if this Agreement had been terminated on the date of the transfer; 14. At the transferee's expense, the transferee and, if applicable, the transferee's designated individual manager shall complete any training programs then in effect for franchisees upon such terms and conditions as SAC may reasonably require; and 15. The transferee shall agree to a sublease or to a transfer and assignment, and assumption of the lease of the Business site (if applicable) and/or Business Vehicles from the original franchisee and shall obtain the landlord’s approval if required prior to any transfer or sublease, if applicable. B. Assignment by Franchisor Franchisor has an unrestricted right to transfer or assign all or part of its rights or obligations under this Agreement to any assignee or other legal successor to the interests of Franchisor. C. Transfer Upon Death or Mental Incapacity Upon the death or mental incapacity of any person with an interest in the Business, the executor, administrator, or personal representative of that person must transfer his interest to a third party approved by Franchisor within six (6) months after death or mental incapacity. These transfers, including, without limitation, transfers by devise or inheritance, will be subject to the same restrictions and conditions as any inter vivos transfer. However, in the case of a transfer by devise or inheritance, if the heirs or beneficiaries of any deceased person are unable to meet the conditions of this Agreement, the personal representative of the deceased Franchisee shall have a reasonable time to dispose of the deceased's interest in the Business, which disposition will be subject to all the terms and conditions for transfer contained in this Agreement. If the interest is not disposed of within a reasonable time, Franchisor may terminate this Agreement. Pending assignment, upon the death of the Principal, or in the event of any temporary or permanent mental or physical disability of the Principal, a manager shall be employed for the operation of the Business who has successfully completed Franchisor's training courses to operate the Business for the account of Franchisee. If after the death or disability of the Principal, the Business is not being managed by such trained manager, SAC is authorized to appoint a manager to maintain the operation of the Business until an approved assignee will be able to assume the management and operation of the Business, but in no event for a period exceeding one (1) year without the approval of the personal representative of the Principal; such manager shall be deemed an employee of the Franchisee. All funds from the operation of the Business during the period of management by such appointed or approved manager shall be kept in a separate fund and all expenses of the Business, including compensation of such manager, other costs and travel and living expenses of such appointed or approved manager (the "Management Expenses"), shall be charged to such fund. As compensation for the management services provided, in addition to the Fees due hereunder, SAC shall charge such fund the full amount of the direct expenses incurred by SAC during such period of management for and on behalf of Franchisee, provided that SAC shall only have a duty to utilize reasonable efforts and shall not be liable to Franchisee, the Principal or personal representative of the Principal, the Entity or any person or entity having an interest therein for any debts, losses or obligations incurred by the Business, or to any creditor of Franchisee or the Principal during any period in which it is managed by a SAC -appointed or approved manager. D. Sale of Franchised Business If the Franchisee (or its owners) desire to sell the Business, or part or all of the ownership of the Business, then Franchisor will reasonably assist Franchisee (or its owners) in connection therewith. If Franchisee (or its owners) shall obtain a bona fide written offer to purchase the Business, or such ownership, such offer shall be submitted promptly to Franchisor. For a period of thirty (30) days from the date of Franchisor's receipt of such offer, Franchisor shall have the right, exercisable by written notice to Franchisee (or its owners), to purchase the Business, or such ownership, for the price and on the same terms and conditions contained in such offer, provided that Franchisor may substitute cash for any form of payment proposed in such offer. If Franchisor does not exercise its right of first refusal, the bona fide written offer may be accepted by Franchisee or its owners, subject to the prior written approval of Franchisor. To enable SAC to determine whether it will exercise its option, Franchisee and the seller shall provide such information and documentation, including financial statements, as SAC may require. In the event that SAC elects to purchase said interest, closing on such purchase must occur within ninety (90) days from the date of notice to the seller of the election to purchase said Interest by SAC . Failure of SAC to exercise the option afforded by this Section XXII.D. shall not constitute a waiver of any other provision of this Agreement, including all of the requirements of this Section XXII., with respect to a proposed transfer of any Interest. Any subsequent change in the terms of any offer prior to closing shall constitute a new offer subject to the same rights of first refusal by SAC as in the case of an initial offer. XXIII. TERMINATION OF FRANCHISE A. Impact of Statutes Upon Franchise Agreement In accordance with the provisions of Florida Statute 559.803(9), if Franchisor fails to deliver the product, equipment, or supplies necessary to begin substantial operation of a SAC franchise business within forty-five (45) days of the delivery date stated in the Franchise Agreement, Franchisee may notify Franchisor in writing, cancel the Franchise Agreement, and obtain a full refund of the Initial Franchise Fee. The delivery date of this Agreement shall be the first day of the training session. The California Franchise Relations Act (Business and Professions Code, Section 20000 through 20043), became effective October 1, 1982. This Act provides certain rights to Franchisees, including: (1) limitations on Franchisor's ability to terminate a franchise except for good cause; (2) restrictions on Franchisor's ability to deny renewal of a franchise; (3) circumstances under which Franchisor may be required to purchase certain inventory of Franchisees when a franchise is terminated or not renewed in violation of the statute; and (4) provisions relating to arbitration. To the extent that the provisions of this Franchise Agreement are inconsistent with the terms of the Act, the terms of the Act may control in California. The conditions under which your franchise can be terminated and your rights upon non-renewal may be affected by Illinois Law. Ill.Rev.Stat. 1987, ch. 12111/2, pars. 1719, 1720. Termination or modification of a lease or contract upon the bankruptcy of one of the parties may be unenforceable under the Bankruptcy Act of 1978, Title II, U.S. Code, as amended. B. By Franchisor Franchisee acknowledges that the strict performance of all the terms of this Agreement is necessary not only for protection of Franchisor, but also the protection of Franchisee and other franchisees of Franchisor. As a result, Franchisee therefore acknowledges and agrees that strict and exact performance by Franchisee of each of the covenants and conditions contained herein is a condition precedent to the continuation of this Agreement. If Franchisee shall breach any material provision of this Agreement, then Franchisor shall notify Franchisee in writing of such breach, specifying its nature and giving Franchisee five (5) days, or such longer period as applicable law may require, in which to remedy same. If Franchisee shall fail to remedy such breach, then Franchisor can terminate this Agreement and the Franchise effective five (5) days, or such longer period as applicable law may require, after delivery of notice of termination to Franchisee. C. Termination of Franchise Without Cure Notwithstanding the foregoing, Franchisee shall be deemed to be in breach and Franchisor, at its option, may terminate this Agreement and all rights granted under it, without affording Franchisee any opportunity to cure the breach, effective immediately upon Franchisor notifying Franchisee in writing of such breach, if Franchisee does any of the following: 1. Abandons, surrenders, or transfers control of the operation of the Business or fails to continuously and actively operate the Business, unless precluded from doing so by damage to the premises of the Business due to war, act of God, civil disturbance, natural disaster, labor dispute or other events beyond Franchisee's reasonable control; 2. Consistently fails or refuses to submit when due any financial statement, tax return or schedule, or to pay when due the Base Royalty Fees, or any other payments due Franchisor or its affiliate; 3. Operates the Business in a manner that violates any federal, state, or local law, rule, regulation or ordinance; 4. Has made a material misrepresentation or omission on the application for the Franchise; 5. Transfers, assigns, or sub franchises this Agreement without having the prior written consent of Franchisor, as set forth herein; 6. Discloses or divulges the contents of the Manual or any other Proprietary Information provided to Franchisee by Franchisor; 7. Repeatedly fails to substantially comply with any of the requirements imposed by this Agreement, whether or not cured after notice; 8. Commits a breach of this Agreement or engages in any other activity which has a material adverse effect on Franchisor or the Names and Marks; 9. Fails or refuses to comply with any provision of this Agreement or any other agreement between Franchisor and Franchisee relating to the Business or the Franchise, and does not correct such failure or refusal within thirty (30) days after written notice of such failure or refusal to comply is delivered to Franchisee; 10. Is convicted of a felony or has pleaded nolo contendere to a felony; 11. Engages in dishonest or unethical conduct; 12. Fails to discharge any valid lien placed against the property of the business; 13. Makes an assignment for the benefit of creditors or an admission of the Franchisee's inability to pay its obligations as they become due; 14. Files a voluntary petition in bankruptcy or any pleading seeking any reorganization, arrangement, disposition, adjustment, liquidation, dissolution or similar release under any law, or admitting or failing to contest the material allegations of any such pleading filed against him, or is adjudicated bankrupt or insolvent, or a receiver is appointed for a substantial part of the assets of the Franchisee or the Business, or the claims of creditors of Franchisee or the Business are abated or subject to a moratorium under any laws. 15. Becomes insolvent or makes a general assignment for the benefit of creditors. 16. If a bill in equity or other proceeding for the appointment of a receiver of Franchisee or other custodian for Franchisee's business or assets is filed and consented to by Franchisee. 17. If a receiver or other custodian (permanent or temporary) of the Business, Franchisee, or Franchisee's assets or property, or any part thereof, is appointed by any court of competent jurisdiction or by private instrument or otherwise. 18. If proceedings for a composition with creditors under any state or federal law should be instituted by or against Franchisee. 19. If a final judgment remains unsatisfied or of record for thirty (30) days or longer (unless supersedeas bond is filed); or if Franchisee is dissolved or is wound up. 20. If execution is levied against Franchisee's business or property or against any ownership interest in Franchisee. 21. If any real or personal property of Franchisee's Business shall be sold after levy thereupon by any sheriff, marshal, or constable. 22. If, in violation of the terms of Sections XII., XVI. and/or XX. hereof, Franchisee, its principals, representatives, agents or employees disclose or divulge the contents of the Manuals or other confidential information provided to Franchisee by SAC , or if Franchisee maintains false books or records, or submits any false reports to SAC . 23. If any inspection of Franchisee's records discloses an understatement of payments due SAC of four percent (4%) or more. 24. If Franchisee's alternate candidate for management training shall not adequately complete such management training program, after either Franchisee or Franchisee's designated individual previously failed to complete adequately the management training. D. Termination of Franchise With Cure. Notwithstanding the foregoing, Franchisee shall cure violations of health, safety, or sanitation laws with 72 hours notice, and shall pay past due monies owed to us upon ten (10) days notice. Any default not specifically listed herein shall be cured within five (10) days of notice. E. By Franchisee Franchisee is entitled to termination of the Franchise Agreement and a full refund of all monies paid as consideration therefore if Franchisor violates Florida Statute 559.803(9). If Franchisee is in compliance with this Agreement and Franchisor breaches this Agreement and fails to cure such breach within thirty (30) days after written notice thereof is delivered to Franchisor, then Franchisee may terminate this Agreement and the franchise effective thirty (30) days after delivery to Franchisor of notice thereof. Any termination of this Agreement and the franchise by Franchisee, without complying with the foregoing requirements, or for any reason other than breach of this Agreement by Franchisor and Franchisor's failure to cure such breach within thirty (30) days after receipt of written notice thereof, shall be deemed a termination by Franchisee without cause. XXIV.FRANCHISEE'S OBLIGATIONS UPON TERMINATION OR EXPIRATION A. Franchisee Shall Cease Using Names and Marks Franchisee further agrees that, upon termination or expiration of this Agreement, Franchisee shall immediately and permanently cease to use, by advertising, or any manner whatsoever, any confidential methods, procedures, descriptions of products, and techniques associated with Franchisor and the Names and Marks and any proprietary marks and distinctive forms, slogans, symbols, signs, logos or devices associated with the System. In particular, Franchisee shall cease to use, without limitation, all signs, advertising materials, stationery, forms, and any other articles which display the Names and Marks. Franchisee shall comply with the covenant not to compete and the agreement to maintain the confidentiality of proprietary information. B. Franchisee Shall Cease Operating Business Franchisee shall immediately cease to operate the Business under this Agreement, and shall not thereafter, directly or indirectly, represent itself to the public or hold itself out as a present or former Franchisee of Franchisor. C. Franchisee May Not Adopt Confusingly Similar Names and Marks Franchisee agrees, in the event it continues to operate or subsequently begins to operate any other business, not to use any reproduction, counterfeit, copy or colorable imitation of the Names and Marks, either in connection with such other business or in the promotion thereof, which is likely to cause confusion, mistake or deception, or which is likely to dilute Franchisor's exclusive rights in and to the Names and Marks, and further agrees not to utilize any designation of origin or description or representation which falsely suggests or represents an association or connection with Franchisor or a former association or connection with Franchisor. D. Franchisee Shall Cancel Assumed Names and Transfer Phone Numbers Franchisee further agrees that upon termination or expiration of this Agreement, it will take such action that may be required to cancel all assumed names or equivalent registrations relating to its use of any Names or Marks and to notify the telephone company and listing agencies of the termination or expiration of Franchisee's right to use any telephone number in any classified ad and any other telephone directory listings associated with the Names and Marks or with the Business and to authorize transfer of same to Franchisor. Franchisee acknowledges that as between Franchisor and Franchisee, Franchisor has the sole rights to an interest in all telephone number and directory listings associated with any Names or Marks of the Business. Franchisee further authorizes Franchisor, and hereby appoints Franchisor as its attorney in fact, to direct the telephone company and all listing agencies to transfer same to Franchisor, should Franchisee fail or refuse to do so, and the telephone company and all listing agencies may accept such direction in this Agreement as conclusive evidence of the exclusive rights of Franchisor in such telephone numbers and directory listings and its authority to direct their transfer. E. Franchisee Must Return Manual and Other Materials Franchisee further agrees that upon termination or expiration of this Agreement, it will immediately return to Franchisor all copies of the Manual, training aids and any other materials which have been loaned to it by Franchisor. Franchisee further agrees to turn over to Franchisor any other manuals, computer programs, software, customer lists, records, files, instructions, correspondence and brochures, and any and all other confidential and proprietary materials relating to the operation of the Business in Franchisee's possession, custody, or control, and all copies thereof (all of which are acknowledged to be Franchisor's property), and only Franchisee's copy of this Agreement and any correspondence between the parties, and any other document copies which Franchisee reasonably needs for compliance with any provision of law may be retained by Franchisee. F. Franchisor May Purchase Inventory and Equipment Franchisor shall have the right (but not the duty), to be exercised by notice of intent to do so within thirty (30) days after termination or expiration, to purchase any or all inventory, equipment, supplies, signs, advertising materials and items bearing Franchisor's Names and Marks, at fair market value (less the amount of any outstanding liens or encumbrances). If the parties cannot agree on a fair market value within a reasonable time, an independent appraiser shall be designated by Franchisor, and determination of such appraiser shall be binding. If Franchisor elects to exercise any option to purchase as herein provided, it shall have the right to set off all amounts due from Franchisee, and the cost for the appraisal, if any, against any payment therefore. G. Franchisee Must Pay Monies Owed to Franchisor Franchisee shall pay to Franchisor, within fifteen (15) days after the effective date of termination or expiration of this Agreement, such Base Royalty Fees, payments for inventory, equipment or merchandise, or any other sums owed to Franchisor by Franchisee, which are then unpaid. Franchisee shall pay to SAC all damages, costs, and expenses, including reasonable attorney's fees, incurred by SAC in obtaining injunctive or other relief for the enforcement of any provisions of Section XIX. XXV. ENFORCEMENT A. Franchisee May Not Withhold Payments Due Franchisor Franchisee agrees that he or she will not withhold payments of any Base Royalty Fees or any other amounts of money owed to Franchisor for any reason, on grounds of alleged nonperformance by Franchisor of any obligation hereunder. All such claims by Franchisee shall, if not otherwise resolved by Franchisor and Franchisee, be submitted to arbitration as provided in this Agreement. B. Severability and Substitution of Valid Provisions All provisions of this Agreement are severable, and this Agreement shall be interpreted and enforced as if all completely invalid or unenforceable provisions were not contained herein, and any partially valid and enforceable provisions shall be enforced to the extent valid and enforceable. If any applicable law or rule requires a greater prior notice of the termination of this Agreement than is required hereunder, or requires the taking of some other action not required hereunder, the prior notice or other action required by such law or rule shall be substituted for the notice or other requirements hereof. C. Arbitration Except insofar as Franchisor elects to enforce this Agreement by judicial process, injunction, or specific performance (as hereinabove provided), all disputes and claims relating to any provision hereof, any specification, standard or operating procedure, or any other obligation of Franchisee prescribed by Franchisor, or any obligation of Franchisor, or the breach thereof (including, without limitation, any specification, standard or operating procedure or any other obligation of Franchisee or Franchisor, which is illegal or otherwise unenforceable or voidable under any law, ordinance, or ruling) shall be settled by mandatory binding arbitration in Able County, Utah, in accordance with the U.S. Arbitration Act, if applicable, and the Rules of the American Arbitration Association (in accordance with the rules relating to the arbitration of disputes arising from franchise and license agreements, if any, or otherwise in accordance with the general rules of commercial arbitration), provided that at the option of Franchisor or Franchisee the arbitrator shall be selected from a list of retired federal or state judges supplied by the American Arbitration Association (if obtainable, or otherwise in accordance with the customary procedures for selecting an arbitrator). The arbitrator shall allow discovery in accordance with the Federal Rules of Civil Procedure and may apply the sanctions relating to noncompliance with discovery orders therein provided. The arbitrator shall issue a written opinion explaining the reasons for his or her decision and award and the arbitrator shall have the right to award or include in the award the specific performance of this Agreement. Judgment upon the award of the arbitrator will be entered in any court having competent jurisdiction thereof or of the Franchisor of Franchisee. During the pendency of any arbitration proceeding hereunder, Franchisee and Franchisor shall fully perform their respective obligations pursuant to the terms and conditions of this Agreement. D. Rights of Parties Are Cumulative The rights of Franchisor and Franchisee are cumulative, and the exercise or enforcement by Franchisor or Franchisee of any right or remedy shall not preclude the exercise or enforcement by Franchisor or Franchisee of any other right or remedy hereunder which Franchisor or Franchisee is entitled by law to enforce by the provisions of this Agreement or of the Manual. E. Judicial Enforcement, Injunction and Specific Performance Franchisor shall have the right to enforce by judicial process its right to terminate this Agreement for the causes enumerated in Section XXIII. of this Agreement, to collect any amounts owed to Franchisor for any unpaid Base Royalty Fees, or other unpaid charges due hereunder, arising out of the business conducted by Franchisee pursuant hereto, and to pursue any rights it may have under any leases, subleases, sales, purchases, or security agreements or other agreements with Franchisee. Franchisor shall be entitled, without bond, to the entry of temporary or permanent injunctions and orders of specific performance enforcing any of the provisions of this Agreement. If Franchisor secures any such injunction or orders of specific performance, Franchisee agrees to pay to Franchisor an amount equal to the aggregate costs of obtaining such relief, including, without limitation, reasonable attorneys' fees, costs of investigation, court costs, and other litigation expenses, travel and living expenses, and any damages incurred by Franchisor as a result of the breach of any provision of this Agreement. F. Construction Any other agreements or instruments referred to herein or which relate to the purchase or lease by Franchisee from Franchisor of any fixtures, signs, equipment, merchandise, or the like, constitutes the entire agreement of the parties, and there are no other oral or written understandings or agreements between Franchisor or Franchisee relating to the subject matter of this Agreement. The headings of the several sections and paragraphs hereof are for convenience only and do not define, limit, or construe the contents of those sections or paragraphs. The term "Franchisee" as used herein is applicable to one or more persons, a corporation or partnership, as the case may be, the singular usage includes the plural, and the masculine and neuter usages include the other and the feminine. References to "Franchisee" applicable to an individual or individuals shall mean the principal owner or owners of the equity or operating control of Franchisee if Franchisee is a corporation or partnership. G. Utah Law Applies Except to the extent governed by the U.S. Trademark Act of 1946 (Lanham Act, 15 U.S.C., Section 1051 et. seq.) or the U.S. Arbitration Act, this Agreement shall be governed by the laws of the State of Utah, and venue shall lie in Able County, Utah. H. Attorney Fees In the event any legal proceedings between the parties hereto arise under this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees and court costs from the other party. I. Binding Effect This Agreement is binding upon the parties hereto and their respective permitted assigns and successors in interest. J. There Are No Unwritten Agreements; Operations Manual is Subject to Change. This instrument contains the entire Agreement between the parties relating to the rights herein granted and the obligations herein assumed. Any oral representations or modifications concerning this Agreement shall be of no force or effect unless a subsequent modification in writing is signed by the parties hereto. The manual may be amended at any time by Franchisor, however, and Franchisee shall adapt its methods or procedures to comply with the requirements thereof.
K. Entire Agreement This Agreement, the documents referred to herein, and the attachments hereto, if any, constitute the entire, full, and complete Agreement between SAC and Franchisee concerning the subject matter hereof, and supersede all prior agreements. Except for those acts permitted to be made unilaterally by SAC hereunder, no amendment, change, or variance from this Agreement shall be binding on either party unless mutually agreed to by the parties and executed by their authorized officers or agents in writing. L. Force Majeure Except for monetary obligations hereunder, or as otherwise specifically provided in this Franchise Agreement, if either party to this Agreement shall be delayed or hindered in or prevented from the performance of any act required under this Agreement by reason of strikes, lock-outs, labor troubles, inability to procure materials, failure of power, restrictive governmental laws or regulations, riots, insurrection, war, or other causes beyond the reasonable control of the party required to perform such work or act under the terms of this Agreement not the fault of such party, then performance of such act shall be excused for the period of the delay, but in no event to exceed ninety (90) days from the stated time periods as set forth in Article I of this Franchise Agreement. XXVI. APPROVALS AND WAIVERS Whenever this Agreement requires the prior approval or consent of SAC , Franchisee shall make a timely written request to SAC therefore, and such approval or consent shall be obtained in writing. SAC makes no warranties or guarantees upon which Franchisee may rely, and assumes no liability or obligation to Franchisee, by providing any waiver, approval, consent, or suggestion to Franchisee or in connection with any consent, or by reason of any neglect, delay, or denial of any request therefore. No failure of Franchisor to exercise any power reserved to it by this Agreement or to insist upon strict compliance by Franchisee with any obligation or condition hereunder, and no custom or practice of the parties at variance with the terms hereof, shall constitute a waiver of Franchisor's right to demand exact compliance with any of the terms herein. Waiver by Franchisor of any particular default or breach by Franchisee shall not affect or impair Franchisor's rights with respect to any subsequent default or breach of the same, similar or different nature, nor shall any delay, forbearance, or omission, breach or default by Franchisor to exercise any power or right arising out of any breach or default by Franchisee of any of the terms, provisions, or covenants hereof, affect or impair Franchisor's right to exercise the same, nor shall such constitute a waiver by Franchisor of any preceding breach by Franchisee of any terms, covenants or conditions of this Agreement. XXVII. AUTHORITY Franchisee or, if Franchisee is a corporation or partnership, the individuals executing this Agreement on behalf of such corporation or partnership, warrant to Franchisor, both individually and in their capacities as partners or officers, that all the partners in the partnership or all of the shareholders of the corporation, as the case may be, have read and approved this Agreement, including the restrictions which this Agreement places upon their right to transfer their respective interests in the partnership or corporation, as set forth in Section XXII. herein. XXVIII. NOTICES Any and all notices required or permitted under this Agreement shall be in writing and shall be personally delivered or mailed by certified, registered or express mail, return receipt requested, or by overnight delivery service, to the respective parties at the following addresses unless and until a different address has been designated by written notice to the other party: Franchise Your Business
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