Service center franchisor—Area director agreement. This Agreement is made _________, 19__, between _________, a _________ Corporation located at _________(Franchisor), and _________, a Corporation located at _________(Area Director). Recitals Franchisor has been in business for a period of years, principally in the State of _________; has invested valuable time, effort and money; and has employed valuable knowledge and experience of skilled personnel leading to the creation and ownership of franchised property (as defined below) of substantial value. Franchisor is establishing substantial brake, wheel alignment and front-end repair shops and service stations, and wheel and tire sales agencies, along with other after-market automobile services, based primarily upon the franchised property, and will repose a special trust and confidence in the Area Director in order that the purposes of this Agreement will be realized. Area Director comprehends the value of the franchised property, is desirous of serving Franchisor in this capacity, and is willing to accept the trust and confidence reposed in Area Director. Area Director represents that —he possesses the skill, business ability, finances, understanding, and available time essential to the successful development and operation of a franchised area (as defined below), and will make use of the franchised property solely in the fashion prescribed in this Agreement to further the objectives of this Agreement, and will do nothing in derogation of it. Franchisor is desirous of obtaining the services of Area Director to provide assistance in the creation, development, supervision and operation of franchises (as defined below) within the franchised area. THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, the parties agree as follows: I. Definitions 1. Franchisor's mark or marks refers to any and all trademarks and service marks owned by Franchisor whether State or Federal, whether registered or unregistered, used by Franchisor or any franchisee (as defined below), and Franchisor warrants to Area Director that the marks and trade name set forth in Exhibit A are owned by Franchisor and that Franchisor has the right to use the same in the jurisdiction in which the Area Director will be doing business. Franchisor's mark or marks shall include the marks shown in Exhibit B and incorporated in this Agreement by reference, and any additional marks as may from time to time be used by Franchisor or any franchisees. 2. "Franchised property" refers to Franchisor's method and system for organizing and operating brake, wheel alignment and front end repair shops and service stations and wheel and tire sales agencies, along with other after-market automobile services, which method and system includes the use of Franchisor's marks, information and guidance regarding site locations, training, equipment selection, record keeping and advertising, along with the tangible embodiments of them, and all additions, improvements or modifications in them as Franchisor may from time to time adopt. Franchised property does not include land or any interest in it, site preparation, the building in which a unit (as defined below) is operated, or the labor and materials employed in the construction of the building.
3. "Franchise" or "franchises" refers to the rights and obligations in respect of the franchised property as specified in an agreement among Franchisor, a third party or parties who wish to operate a franchised unit or units, (as defined below) and such additional persons or parties as may be party to any such agreement. 4. "Franchise agreement" refers to the Agreement embodying a franchise, copy of the agreement annexed to this Agreement as Exhibit C. 5. "Franchisee" refers to the owner of the franchise. 6. "Gross income" refers to all receipts from all sales, exclusive of sales tax. 7. "Franchised unit" or "units" refers to a business establishment operated pursuant to a franchise, with a single business location. 8. "Area" refers to the geographic region which includes the State of _________(excepting those existing units identified on Exhibit D) for which the Area Director shall have certain rights and be responsible under the terms and conditions of this Agreement. The area set forth is the exclusive area of the Area Director and Franchisor agrees that it shall not issue to any other person, firm, or corporation, or area directorship, or itself utilize that area, except for the 10, "Grandfather," units proposed in Exhibit D. II. Appointment 1. Franchisor appoints Area Director to serve in the "Area," and Area Director agrees to serve in the "Area" for an initial term of 30 years with an option to extend for 30 years subject to the terms and conditions provided in this Agreement. 2. Franchisor agrees that within 30 days of execution of this Agreement it will be licensed to do business within the State of _________. III. Payments 1. Franchisor will pay the Area Director a commission in the amount of 50% of the prevailing franchise fee for each unit developed in which Franchisor has an equity interest. In the event Area Director, or Franchisor, leases or sub-leases existing properties where no equity is available, Area Director's commission on prevailing franchise fee shall be reduced to 25%. 2. Franchisor will, during the term of this Agreement, pay Area Director an amount equal to 3% of the gross income of all the franchised units originally granted or renewed within the area (excepting those identified on Exhibit C). Franchisor shall list each franchise and the amount remitted to the Area Director for each of the franchisees so listed. The list shall be submitted to the Area Director at the same time payments are made by Franchisor to the Area Director. Payments to the Area Director, pursuant to this Section, shall be made on or prior to the 10th day of each calendar month based upon the gross income of all the franchised units within the area during the preceding calendar month. Area Director shall extend the time of payment by Franchisor pursuant to this Section with respect to amounts due to the Area Director as a result of any portion of the gross income generated by any franchise who is in monetary default in its obligation to Franchisor, pursuant to its franchise agreement, for a period of 30 days, or until such time as such monetary default is cured, whichever occurs first. In the event that such monetary default is not cured within the 30-day period, Franchisor shall notify Area Director of its intent to terminate its agreement with franchisee pursuant to its franchise agreement. Franchisor shall not be liable to Area Director for the sums due the Area Director computed on the gross income of the franchisee who is in such monetary default. The Area Director's 3% fee shall not be held up by a nonmonetary default.
If at any time, or from time to time, Franchisor increases the royalties it receives from any franchised unit within the area to amount in excess of 7% of the gross income of the franchised unit, Area Director shall receive an amount equal to its pro rata share of the amount actually received by Franchisor in excess of the 7% of the gross income of the franchised unit. 3. The payments received in sections 1 and 2 of this Article shall be the sole payments made by the Franchisor to Area Director, pursuant to the terms of this Agreement. Area Director will pay operating costs and expenses in connection with the performance of the Area Director's obligations as detailed in this Agreement. IV. Area Operations 1. Area Director shall advise and assist Franchisor in locating and cooperating with prospective franchisees, and establishing franchised units within the area. Franchisor shall not be required to enter into a franchise agreement with any person or party proposed by Area Director as a franchise unless the person or party is reasonably acceptable to Franchisor. 2. Area Director shall seek persons or parties interested in entering a franchise agreement with Franchisor. Area Director shall advise and assist franchisees and proposed franchisees in the investigation and selection of locations for and the establishment of franchised units in the area. Franchisor shall not be required to enter into a franchise agreement if it does not approve of the location selected for the establishment of a proposed franchised unit. 3. Area Director shall advise and assist in arranging for the communication of information between the Franchisor and franchisee and proposed franchisees. 4. Area Director shall arrange for executed franchise agreements and the acquisition of property (leasehold or title to the site) in conformance with the schedule set forth in Exhibit E attached to and incorporated in this Agreement by reference. 5. Area Director shall submit to Franchisor a monthly report of activities. 6. Franchisor shall provide Area Director with continued guidance, supervision and assistance in performing Area Director's obligations under this Agreement. 7. Area Director shall permit Franchisor to make a reasonable inspection during normal business hours of Area Director's business premises, books and records in connection with its rights and obligations under this Agreement. 8. Franchisor shall retain sole control of any and all advertising programs as may be established, maintained or authorized and the Area Director shall not engage in any advertising program other than that established, maintained or authorized by Franchisor. 9. Area Director shall perform its obligations under this Agreement subject to the procedures and standards prescribed by Franchisor. V. Trademarks and Trade Name 1. Area Director shall oversee the use of Franchisor's marks and trade name within the franchise area in the manner specified by Franchisor in order that marks and trade name are:
(a) Being used only on or in connection with goods and services specified by Franchisor; (b) Being applied only to goods and services of such nature and quality as to conform to the standards established by Franchisor and to no other goods or services; and (c) Being displayed, employed and marked with trademark notice in accordance with standards established by Franchisor. 2. In the event Area Director believes that such marks and trade name are being used in any manner contrary to those set forth in 1 (a), (b) and (c), Area Director shall promptly notify Franchisor of such use. 3. Area Director shall, upon the reasonable request of Franchisor, inspect a franchisee's premises, observe the operation of business, inspect supplies and other materials and examine display and usage of the marks and trade name at reasonable intervals during normal business hours without advance notice to franchisee. 4. Franchisor may, in some instances, consent to use of the marks and trade name by Area Director, but Franchisor in all instances reserves the exclusive rights to specify and control the nature and quality of goods and services employed with the marks and trade name, and also reserves the exclusive right to determine the method and form of use and display of such marks and trade name, and Area Director will be bound by all such decisions of Franchisor and so use and display the marks and trade name. 5. Area Director acknowledges that Franchisor has the sole and exclusive right to use the marks and trade name, that Area Director's use of the marks and trade name is for the sole benefit of Franchisor, and that Area Director will claim no proprietary interest in them beyond those rights expressly granted by this Agreement. 6. Upon termination of this Agreement as defined below, Area Director agrees to promptly terminate use of the marks and trade name and materials and supplies bearing such marks and trade name. VI. Breach 1. In the event of default of breach of this Agreement by Area Director, Franchisor shall give Area Director 30 days' written notice specifically relating the course of conduct forming the basis upon which the notice is given and demand that Area Director cure the breach. If Area Director shall not cure the default within a reasonable period of time from the date of notice, Area Director's future rights under this Agreement shall cease. In the event that the future rights of Area Director cease, Area Director will provide Franchisor with access to such books, records and other documents as may be necessary for Franchisor to effectively carry on the duties of Area Director, pursuant to this Agreement. 2. The failure of Franchisor to give notice of termination for any one or more actions or instances provided in Section 1 of this Article shall in no fashion whatsoever be construed as a waiver, express or implied, of the right of Franchisor to terminate for any other action or instance of like or different nature. 3. Area Director acknowledges the value and unique features of the business reputation of Franchisor and agrees not to compete with Franchisor during the term of this Agreement and for a period of two years subsequent to the date of termination of this Agreement except in the case(s) where Franchisor rejects sites proposed by Area Director for franchise units. Area Director or any related companies shall not enter into competitive operational ownership other than for rental purposes. VII. Indemnification
1. Area Director agrees to indemnify and save harmless Franchisor from any and all damages, fines, suits, losses, expenses, proceedings, claims, demands, assessments, judgments or costs of any kind or nature by anyone, that may arise from the negligent act, undertaking, omission, malfeasance or misfeasance of the Area Director, its agents, servants or employees. 2. Area Director shall, immediately following execution of this Agreement, and at all times during the entire term of this Agreement, keep in force appropriate insurance covering public liability of all kinds, including, but not limited to, fire and general liability, in an amount not less than _________ covering one person, and in an amount not less than _________ covering more than one person, insuring Area Director against any liability that may arise against h— by reason of h— negligent operation of the area. Area Director will provide a duplicate certificate of insurance naming Franchisor as co-insured, and shall provide, at the request of Franchisor, periodically but not less than annually, proof of continued maintenance of the insurance. 3. Notwithstanding the foregoing, Franchisor agrees to indemnify and hold harmless the Area Director for any of the Franchisor's actions as they relate but not necessarily limited to compliance with the Federal Trade Commission and State Statutes regulating the granting of franchises, including the providing of a prospectus. VIII. Transferability 1. This Agreement, or any portion, and the rights and obligations granted under it may not be sold, transferred or assigned, in whole or in part, by Area Director, except with the prior express written consent of Franchisor, which shall not be unreasonably withheld. In any event, if Area Director proposes to sell this Agreement, in whole or in part, or any portion, or the rights granted under it, Franchisor shall have a right of first refusal to purchase this Agreement and the rights granted at the price of any bona fide offer received by Area Director. This right of Franchisor must be exercised within 30 days of notification of such offer by Area Director and failure to so notify Area Director within 30 days shall be construed approval deemed given. If Franchisor does not exercise its right of first refusal and consents to the sale, Area Director may freely sell this Agreement, in whole or in part, and the rights under it; provided, however, that if the sale does not occur on the terms communicated to Franchisor within 90 days after the expiration of the offer to Franchisor, this Agreement and the rights under it shall again become subject to this Section 1 of Article VIII. 2. Any purchaser, transferee or assignee proposed by Area Director must be willing to execute an agreement substantially identical in all material respects with this Agreement. IX. Termination 1. This Agreement may be terminated by Franchisor upon giving 120 days' written notice to the Area Director subject to the provisions of Article VI. X. Notice 1. Any notice necessary or desirable under the terms of this Agreement shall be deemed properly given by certified mail return receipt requested with notice being deemed given upon evidence of receipt of correspondence. XI. Severability 1. Should any part or provision of this Agreement be held unlawful, unenforceable or in conflict with State, Federal or local laws, the validity of remaining provisions shall not be affected by such holding.
XII. Merger 1. It is understood and agreed that this Agreement embodies the complete understanding of the parties and that any and all provisions, negotiations and representations not included are abrogated. This Agreement cannot be changed, modified or varied, except by written instrument signed by both parties. XIII. Governing Law 1. Regardless of the place of actual signing, this Agreement shall be deemed executed in the State of _________ and be governed by the substantive laws of the State of _________. In witness, the parties have subscribed the date written above. _________ By: _________ _________ By: _________