Franchise Agreement

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Sample Franchise Agreement

ANAGO UNIT FRANCHISE AGREEMENT

Between

CORP NAME,Inc. A (State) Corporation

(We/Us/Our)

and

You/Your) Dated:___________, 20

©2002 Anago Cleaning Systems, Inc.

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ANAGO UNIT FRANCHISE AGREEMENT

THIS ANAGO UNIT FRANCHISE AGREEMENT is signed on this____day of

_____________, 200____, between CORP NAME,lnc, ("we," "us" or "our") a (State)

corporation, as a subfranchisor of Anago Franchising, Inc., and _____________________________________("you" or "your").

BACKGROUND

A.        Anago Cleaning Systems, Inc., a Florida corporation, developed and owns a special janitorial service system that services Clients under the trade name "Anago" and has licensed Anago Franchising, Inc., a Florida corporation (the "Franchisor") to sell Subfranchises commonly known as Master Franchises. We are a Subfranchisor of Anago Franchising, Inc. Anago Cleaning Systems, Inc., owns all the proprietary information used by Subfranchises and Unit Franchisees.

B.         The Franchisor has entered into a Subfranchise Rights Agreement with us granting us the right to sell Anago Unit Franchises in the State of (State) the Counties of (counties).

C.         The distinguishing characteristics of the System include: uniform standards and procedures for business operations; training in the operation, management and promotion of the Anago Unit Franchise; promotional programs; Client development and service techniques; and other technical assistance.

D.        You recognize the benefits of receiving an Anago Unit Franchise from us and desire to enter into this Unit Franchise Agreement subject to the terms in this Agreement and to receive the benefits we provide to you under this Agreement.

E.         We have reviewed your application and have decided to award an Anago Unit Franchise to you evidenced by this Agreement.

F.         You understand that Anago Cleaning Systems, Inc., and Anago Franchising, Inc., are not a party to this Unit Franchise Agreement and have no obligation to you.

The parties agree as follows:

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ARTICLE 1 - APPOINTMENT Section 1.1 Grant of Unit Franchise.

We grant to you, subject to this Agreement, the right and you undertake the obligation, to operate 1 Anago Unit Franchise under the System. You may operate the Anago Unit Franchise from your home or from an office.

Section 1.2 No Protected Territory.

You are not obtaining any exclusive or protected territory. You may operate anywhere within the Counties of (counties) in the State of (State). You cannot operate or provide janitorial services outside the Counties of (counties) in the State of (State). We may open and operate Company Units and franchise the Anago Unit Franchise to other Unit Franchisees or engage in any other method of distribution in our complete discretion whenever, however and wherever we determine, including in close proximity to you.

ARTICLE 2 - OUR DUTIES

We will provide you with the following assistance and services necessary for the operation of your Anago Unit Franchise, if you are not in default under this Agreement:

Section 2.1 Assignment of Accounts.

All Accounts will be between us and the Client. All payments made by a Client under an Account will be sent directly to us. We will assign to you the right to perform services under an Account and you will receive the gross monthly revenues of the Account less the fees belonging to us stated in Section 3.1 and any other liability you may have to us. We guarantee all Accounts assigned by us to you by us for one year. You are not permitted to offer, exchange or transfer Accounts that have been assigned to your Unit Franchise.

(a) Offering Period of Initial Business. We will offer to you Accounts generating gross monthly billings under the Program you select in Subsection 3.1(a) within the time period described, after the conditions described below have been satisfied. These Accounts will not be offered nor will the Initial Offering Period begin until you have satisfied the following conditions:

(i) You have successfully completed the Anago Training Program having obtained an 85% or better on the examinations.

(ii) Our training officer has certified you as qualified to operate an Anago Unit Franchise.

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(iii) You have signed a Training Acknowledgement form as stated in Exhibit 1.

(iv) You have obtained all necessary business licenses and permits and have forwarded copies to us.

(v) You have purchased or leased the major equipment described in Exhibit 5 and have furnished proof of purchase (for example, serial numbers and sales slips) to us.

(vi) You are under no obligation to accept or decline Initial Business offered, as our obligation is only to "offer" Initial Business to you within the Initial Offering Period. Should you decline an offer, then we have satisfied our obligation to offer that portion of Initial Business within the Initial Offering Period. Should you decline all Initial Business offered during the Initial Offering Period, then we have the right to terminate this Agreement. If we terminate this Agreement, we will keep all fees you paid to us and, if you financed a portion of the Unit Franchise Fee, the unpaid portion will be forgiven. If we do not exercise the right to terminate this Agreement and you have financed a portion of the Initial Unit Franchise Fee, the unpaid balance becomes immediately payable.

(vii) If we are unable to secure and offer you the full amount of Initial Business within the time frame allocated for the Initial Offering Period in the Program you purchase, an amount equal to 2.85 times the amount of Initial Business not offered to you will be refunded. Any refund will be first applied to any outstanding balance on your Promissory Note you owe us, with the remaining sum, if any, paid to you. A refund under this provision will fulfill our obligations to offer any remaining portion of the Initial Business.

(b) Assignment of Additional Business. Upon your completion of the obligations under Subsection 2.1(a), we may offer to you additional Accounts of varying amounts if you are not in default under this Agreement and we determine that you are capable of servicing additional Accounts. You are under no obligation to assume these additional Accounts. If we offer additional Accounts and you desire to assume these additional Accounts, you must comply with the following:

(i) You must demonstrate that you are in compliance with the covenants contained in Section 6 of the Policies and Procedures Manual.

(ii) You must sign an Account Assumption Agreement as stated in Exhibit 6.

(iii) You must have sufficient equipment, supplies and working capital to insure proper servicing of the Account.

(iv) You must pay, in addition to Royalties, Administration Fees and

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Advertising Contributions, if any, any other payments such as group insurance and bonding, and C-Fees as stated in Subsection 3.1(e)(f).

(c) Repiacement of Initial Business,

(i) If you lose or transfer an initial Account due to circumstances beyond your reasonable control (such as an Account going out of business or ceasing business for more than 7 days due to a natural disaster) within the first year, we will replace the remaining portion of this Account with a new Account or Accounts having the same or greater gross monthly billings for the remainder of the term of the initial Account and no additional C-Fee will be due on the Initial Business portion.

(ii) If you lose or transfer an initial Account for the following reasons:

(A)       Your poor service; or

(B)       The Client's dissatisfaction;

then, we will replace that portion of the outstanding balance of the Account with a new Account or Accounts having the same or greater gross monthly billings for the remainder of the term of the initial Account, provided, you attend and successfully complete retraining and have been certified by our training officer as qualified to resume normal Unit Franchise operations. There is no specific time period in which we are obligated to offer this replacement business.

(iii) If you lose or transfer an initial Account for the following reasons:

(A)       Theft or willful destruction of a Client's property;

(B)       Abandonment of service without notice to us;

(C)       Use or selling of illegal drugs;

(D)       Use of alcoholic beverages while performing services;

(E)       Continuing to service an Account after we have terminated the Account; or

(F)       Any other Event of Default has occurred; then, we have no obligation to replace the Account and may elect to terminate this Agreement and keep all fees you paid, with the right to demand immediate payment of all amounts owed to us.

Section 2.2 Anago Training Program.

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We will provide the Anago Training Program for you within 30 days of the Agreement Date. The Anago Training Program consists of 7 classroom sessions and 5 on-site sessions at one of our existing Account buildings. Each session is a maximum of 6 hours. The Anago Training Program covers the following items: orientation, general office cleaning, restroom cleaning, floor maintenance, customer relations and sales of Accounts. The training is provided by the use of video films, lectures and "hands on" training by our experienced staff. Your employees may attend certain sessions of the Anago Training Program as we designate. There is no additional fee for Initial Training.

Section 2.3 Loan of the Manuals.

We will loan to you 1 registered copy of each volume of the Manuals (with revisions as required). Our practice is to deliver the Manuals to you shortly before completing the Anago Training Program.

Section 2.4 Lists, Forms and Schedules.

We will provide to you:

(a)       A list of required equipment, supplies, materials, inventory and other items necessary to open and operate your Anago Unit Franchise;

(b)       An initial set of forms, including the standard brochure and various operational forms, standardized periodic reporting forms for reporting performance, evaluation, inspection and communication; and

(c)       A schedule of items that must be purchased or leased from us.

Section 2.5 Employee Information and Assistance.

We will give you employee hiring information including pay scale guidelines and a standardized interviewing/selection system. You are solely responsible for the hiring, supervising, promoting and terminating of your employees and the establishment of their salaries.

Section 2.6 Equipment and Supplies.

We will provide to you office and marketing materials as stated in Exhibit 2, cleaning supplies as stated in Exhibit 3 and minor equipment as stated in Exhibit 4. The replenishment of these materials and supplies is at your expense.

Section 2.7 Assistance in Initial Set-Up and First Time Cleaning.

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We will provide to you experienced operational support and accompany you and your employees during the initial set-up and first time cleaning of the very first Account.

Section 2.8 Continued Assistance and Support.

Upon the opening of your Anago Unit Franchise, we will or may provide to you the following:

(a)        Invoicing and Accounting Services. We will provide you with invoicing and accounting services to Accounts you service. You are not permitted to directly invoice your Clients. We will invoice your Clients monthly for the cost of services and supplies you render. We will accept payments from your Clients and maintain revenue records for you. Money due you will reflect deductions of Royalty Fees, Administration Fees, Advertising Contributions, C-Fees, Note Payments and all other amounts you owe to us or our Affiliates and out-of-pocket costs (including attorney's fees and court costs) we incur in enforcing payment of Accounts. On or before the 20th day of each month following the month of service, we will mail to you all monies collected as recorded in the "Due Owner" column of the Owners Report, less monies due us in accordance with this agreement. If amounts billed to customers are unpaid, you will incur the loss of nonpayment. We will take action to enforce payment at your sole discretion and expense.

(b)        Supply Sources. We will continue to investigate supply sources for better pricing. Although you are not required to purchase any cleaning equipment or supplies from us, we may be able to obtain lower prices on supplies and will direct you to that supplier.

(c)        Field Visits. We will perform periodic quality control visits to each building you clean. All operations will be inspected and recommendations will be made to you. Our representative will operate from the local Anago office and will be available during normal business hours to answer questions and to assist with Unit Franchise operations.

(d)        Assistance with Business Development. We will continue to provide you with estimating expertise, custom proposals and references in order to assist development of your business.

(e)        Assistance with Clients' Services. Our local office will accept service calls from your Clients and relay these service calls to you in a timely manner.

(f)       Telephone Hotline. We will maintain a telephone "hotline" for informational assistance and emergencies.

(g)       Local Advertising. We will provide advice on Local Advertising.

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(h) Promotional Literature. We will make available to you promotional literature of the Anago System and all pertinent new developments in the janitorial service industry including procedures for improved efficiency to the extent actually known by us.

(i) Periodic Assistance. We may provide advisory assistance in the operation and promotion of the Anago Unit Franchise as we deem advisable. Advisory assistance may include additional training and assistance, communication of new developments, improvements in equipment and supplies, and new techniques in advertising, service and management relevant to the operation of your Anago Unit Franchise through audio or videotapes and service manuals.

(j) Additional Training. We may provide additional training programs, seminars or advanced management training for you and your employees at our principal training facility. Any additional training that is recommended by the Regional Office because you have received an unusually high number of complaints from Clients, gives us the option to suspend all further business offerings until we are satisfied that the deficiencies have been corrected.

(k) Retraining. If you receive unsatisfactory inspection reports from us and fail to promptly remedy the deficiencies, we may require you and designated employees to attend refresher training as soon as reasonably possible. You are solely responsible for all expenses associated with these programs including the then prevailing standard training fee we charge for these programs and all travel, meals and lodging costs of your attendees. If you fail the Anago Training Program, you must attend retraining classes in the areas the training officer feels are necessary for you to successfully complete the Anago Training Program. If you lose or are transferred from an Initial Business Account due to non-performance or Client dissatisfaction, and we deem it in your best interest for you to attend retraining classes, retraining in the areas of deficiency will be required.

(1) Special Assistance. If you request, we will furnish non-routine guidance and assistance to address your unusual or unique operating problems.

(m) Research and Development. We will continue to research and develop new products and services, introductions and techniques as we deem appropriate in our sole discretion.

Section 2.9 License of Proprietary Marks.

Subject to this Agreement, we license to you the right to use the "Anago" trade name and the other Proprietary Property.

Section 2.10 Duties Only to You.

All of our obligations under this Agreement are only to you. No other party is entitled to

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rely on, enforce, or obtain relief for breach of the obligations either directly or by subrogation.

Section 2.11 Our Right to Delegate Duties.

You agree to our right to delegate duties under this Agreement to a Designee. You must perform your duties with the Designee to the extent we request, as you must do with us.

ARTICLE 3 - FEES AND PAYMENTS

Section 3.1 Types of Fees.

In consideration of our signing this Agreement, you must pay to us the following fees, in addition to any others required under this Agreement, all payable in United States currency at our principal office:

(a)       Initial Unit Franchise Fee. You must pay to us an Initial Unit Franchise Fee payable upon signing this Agreement. The Initial Unit Franchise Fee is fully earned by us on receipt and, except as expressly provided otherwise in this Agreement, is non-refundable upon signing this Agreement. The Initial Unit Franchise Fee is uniform as to all Unit Franchisees currently purchasing a Unit Franchise selecting the same Program. The amount of the Initial Unit Franchise Fee and the Initial Business Portion are based on the Program selected of the 27

Programs available described in ITEM 5 of the FOC. You have selected Program number_____.

Should a part of the Initial Unit Franchisee Fee be financed, the scheduled monthly payments for

the amount financed will begin 120/150/180 days after the beginning of the Initial Offering Period or when you have been offered Initial Business totaling at least 50% of the Initial Business due you under this Agreement.

(b)       Royalty Fee. You will pay a continuing monthly non-refundable Royalty Fee during the Term of 10% of monthly Gross Revenues. This will be paid to us by retaining this Royalty Fee from the payments the Client makes and remitting the balance to you.

(c)        Administration Fee. You will also pay a continuing monthly non-refundable Administration Fee during the Term of 3% of monthly Gross Revenues to reimburse us for our costs of invoicing, receiving and disbursement of funds from your Clients. This will be paid to us by retaining this Administration Fee from the payments the Client makes and remitting the balance to you.

(d)      Advertising Contribution. Currently, there is no Adverting Contribution being charged. However, when we require, you must also pay a continuing monthly Advertising Contribution to us during the Term of 2% of monthly Gross Revenues for local advertising. You will pay this to us by retaining the Advertising Fee from the payments the Client makes to us and

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remitting the balance to you. We have the sole right to enforce this obligation and all our other Unit Franchisees' obligations that make Advertising Contributions. Neither you nor any other Unit Franchisee obligated to make Advertising Contributions, is a third party beneficiary of the funds or has any right to enforce any obligation to contribute the funds. We reserve the right to increase the Advertising Contributions you pay if: (i) the increase is reasonably necessary to provide greater advertising and promotional assistance to the System as we determine; (ii) all other Unit Franchise Units and Company Units are subject to the same relative percentage increase in the Advertising Contributions; and (iii) the Advertising Contributions do not exceed 2% of monthly Gross Revenues.

(e)        Insurance Program Fees. If you elect to participate in our insurance program, if available, rather than purchase on our own the insurance required under ARTICLE 9, you agree to pay us a fee equal to 8% of monthly Gross Revenues, including supplies, equipment and Day Porters plus $2.00 per month per client serviced.

(f)        C-Fees. For the assignment and assumption of any additional Accounts we obtain under Subsection 2.1(b), you will pay to us a non-refundable fee ("C-Fee"). The C-Fee is equal to 2.85 times the gross monthly billings of the additional Account and is payable in full at the time of the assumption of the Account or may be financed by us at our sole discretion under the terms listed below in Subsections (i) through (xiii).

(i) For any additional Account we secure having gross monthly billings of less than $2,000, the C-Fee is equal to 2.85 times the gross monthly billings payable: (A) 20% upon assumption of the Account; and (B) the balance payable in 11 equal monthly installments including interest at 12% per year.

(ii) For any additional Account we secure having gross monthly billings between $2,000 and $3,000, the C-Fee is equal to 2.85 times the gross monthly billings payable: (A) 20% upon assumption of the Account; and (B) the balance payable in 11 or

17 equal monthly installments including interest at 12% per year. Should, for any reason, the contract not be renewed after 12 months, and the financing was for 17 months, the remaining months owed is immediately due.

(iii) For any additional Account we secure having gross monthly billings above $3,000, the C-Fee is equal to 2.85 times the gross monthly billings repayable as negotiated by the parties as stated in the Account Assumption Agreement. For example, if for any reason, the contract is not renewed after 12 months, and the financing was for

18 months, the remaining months owed would be immediately due.

(iv) If the C-Fee is paid in full at the time of assumption, the C-Fee will be reduced by 15%.

(v) If the C-Fee is paid in full within 90 days of assumption, no interest

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charges will accrue.

(vi) The C-Fee of one-time cleans, initial cleans or extra work on additional Accounts we secure will be equal to 15% of the gross fee charged and will not be financed. There is no C-Fee on one-time cleans, initial cleans or extra work on additional Accounts you secure.

(vii) If you voluntarily relinquish an additional Account that you have assumed, after 10 days' written notice to us of your intent to relinquish, any C-Fee payment still due will be canceled if we are able to have another Unit Franchisee assume the Account and the Client does not cancel within 60 days after the transfer date; otherwise, the C-Fee remains due.

(viii) If you lose an additional Account for the reasons stated in either Subsections 2.1(c) or if you abandon your Anago Unit Franchise (for more than 2 days without at least 10 days' written notice and our consent) and the C-Fee was financed, the entire unpaid amount becomes due.

(ix) If the C-Fee amount owed cannot be precisely determined due to fluctuating monthly payments, then an average will be taken of the prior months on the additional Account before the time of loss or transfer. C-Fee payments are discontinued if the Client cancels the janitorial service contract through no fault of yours. No C-Fee credits are given if you desire to cease servicing the Client. Credits for C-Fee payments will be made if the Client cancels the janitorial service contract within 180 days from the date of commencement. C-Fees are non-refundable. There are no cash refunds. Any credit toward additional contract C-Fees is limited to 15% of paid C-Fee calculated for the contract and is at our sole discretion, provided you can verify that the contract was canceled through no fault of yours. The difference between the amount you have paid in C-Fees and the amount of credit applied will be deemed earned by us. If the contract is canceled as a direct result of you or your employees, no credit will be given.

(x) Should an additional Account request an increase in services and the monthly gross billings increase, no additional C-Fee will be charged.

(xi) There is no C-Fee assessed when you obtain an Account solely through your own marketing and sale efforts, without assistance from the Regional Office (excluding the preparation of the actual bid proposal).

(xii) Partial C-Fees may be assessed at 50% of normal schedule if you need a Regional Office representative to close the sale.

(xiii) All C-Fee credits must be requested in writing within 30 days after termination of an Account.

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(xiv) Accounts that must be transferred from you to another franchisee will incur the full month's C-Fee.

(g) Operations Fee. If we must provide service to an Account you are currently servicing in order to comply with the Account's requirements or you are unable or unwilling to provide the services, you will be assessed an Operations Fee of $50 plus any labor and materials cost.

(h) Account Transfer Fees. If a Client gives notice of pending cancellation or requests a transfer due to poor performance on your part, or poor Client relations, we will assign the Account to another Unit Franchisee or if we have received 3 or more complaints from a Client or our Operations Department within any 30-day period concerning your performance and we elect to transfer the Account, an Account Transfer Fee of $100 will be assessed. If the transferred Account requires additional work to bring the cleanliness up to acceptable standards, you will be given an opportunity to provide labor and materials, at your expense and you will be assessed an Additional Account Transfer fee of $50 or a total of $ 150. If you cannot or elect not to provide labor and materials, we will provide the necessary labor and materials to the Client and deduct the expense from monies due you. If we receive 3 or more complaints during a 30-day period, we may, at our sole discretion, transfer the account and assess a transfer fee of $100. If inspections by our operations department show a continued lack of proper service and/or poor quality of service, then we have the right to transfer the account without notice and assess a $100 transfer fee. All other transfers will be assessed a $50 transfer fee.

(i) Complaint Fees. If, regardless of discovery through a Client complaint or an operations department inspection, a lack of performance is found, we have 2 hours to contact you to report the complaint. If we are unable to make contact with you and our operations department must respond to the complaint, a Complaint Fee of $50 will also be assessed to you. If a complaint is made known to you by our operations department and you fail to correct the deficiency to our or the Client's satisfaction on or before your next contractually scheduled visit, our operations department will correct the deficiency. You will be assessed all costs we incur to correct the complaint.

(j) Advance Payment Fee. If we advance collected funds, but the funds are not yet payable to you, you will pay a processing fee of $25. If we loan you uncollected funds, you will pay a processing fee of $25 plus interest at the rate of 18% per annum until fully paid.

Section 3.2 Payment Schedule.

The Royalty Fee, Administration Fee, Advertising Contributions and C-Fee will be deducted by us by the 20th day of each month during the Term for the previous month. We will mail you a check of the net Gross Revenue within 5 days after making the deductions. You will be paid up to the last day of actual service to the Client if the Account is lost or transferred. All

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other amounts due to us from you will be paid at this time. If no time is specified, these amounts are due upon receipt of an invoice from us. Any payment we do not actually receive on or before the due date is overdue.

ARTICLE 4 - YOUR DUTIES

Section 4.1 Operational Requirements.

You agree to operate the Anago Unit Franchise in conformity with all uniform methods, standards and specifications required in the Manuals or otherwise, to ensure that the highest degree of quality and service is uniformly maintained. You agree to:

(a)        Open and maintain a separate bank account for the Anago Unit Franchise;

(b)        Purchase or lease and operate a digital paging system and plain paper facsimile machine as specified in the Manuals;

(c)        Perform all janitorial services and honor all Accounts you assume;

(d)        Comply with the procedures and systems we require both now and in the future, including those on sales, good business practices, advertising and other obligations and restrictions;

(e)        Not service or solicit any business until you have satisfied the conditions in Subsection 2.1(a);

(f)        Maintain in sufficient supply (as we require in the Manuals or otherwise in writing) and use at all times, only inventory, equipment, materials, advertising methods and formats, and supplies that conform with our standards and specifications, if any, at all times sufficient to meet the anticipated volume of business, and to refrain from deviating from these requirements without our written consent;

(g)        Adhere to the highest standards of honesty, integrity, fair dealing and ethical conduct in all dealings with Clients, suppliers, employees, independent contractors, us and the public;

(h) Sell or offer for sale only the products and services that meet our uniform standards of quality and quantity; have been approved for sale in the Manuals or otherwise in writing by us at retail to Clients; not sell any items for redistribution or resale; sell or offer for sale all approved products and services; refrain from any deviation from our standards and specifications for providing or selling the products and services without our written consent; and discontinue selling and offering for sale any products and services that we disapprove in writing

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at any time;

(i) Honor all standard operations covenants stated in the Manuals; and

(j) If you or one of your employees believe that one of our employees or agents has engaged in any act of sexual or racial harassment or discrimination, you agree to report the incident to us within 48 hours, you and your employees waive any claims against us or our employees and agents.

Section 4.2 Hiring, Training and Appearance of Employees.

You will maintain a competent, conscientious staff and employ the minimum number of employees necessary to meet the anticipated volume of business and to achieve the goals of the System. You will take all steps necessary to ensure that your employees meet the employment criteria and keep a neat appearance and comply with any dress code we require, subject to the requirements of landlords. You are solely responsible for the terms of their employment and compensation and the proper training of the employees in the operation of the Anago Unit Franchise. You are solely responsible for all employment decisions and functions, including hiring, firing, establishing wage and hour requirements, disciplining, supervising and record keeping. You will not recruit or hire any employee of an Anago Unit Franchise operated by us or another Unit Franchisee without obtaining the employer's written permission.

Section 4.3 Management of the Anago Unit Franchise.

You must devote your best full-time efforts to the management and operation of the Anago Unit Franchise. You agree that the Anago Unit Franchise requires your day-to-day supervision at all times.

Section 4.4 Approved Specifications and Sources of Supply.

(a)        Purchases from Us or Our Affiliates. You must purchase from us the items stated in Exhibits 2, 3, 4, and 5 (at no extra cost) and your ongoing needs for cleaning supplies and other items that we require if implemented on a System-wide basis,

(b)      Authorized Specifications and Suppliers. You must purchase or lease equipment, supplies, advertising materials, and other products and services used for the operation of the Anago Unit Franchise only from authorized manufacturers, contractors and other suppliers who demonstrate, to our continuing satisfaction: the ability to meet our standards and specifications for these items; possess adequate quality controls and capacity to supply your needs promptly and reliably; and have been approved in writing by us and not later disapproved. We may approve a single supplier for any brand and may approve a supplier only as to a certain brand or brands. In approving suppliers for the System, we may take into consideration factors like the price and quality of the products or services and the supplier's reliability. We may

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concentrate purchases with 1 or more suppliers to obtain the lowest prices and/or the best advertising support and/or services for any group of Unit Franchise Units or Company Units within the System. Approval of a supplier may be conditioned on requirements on the frequency of delivery, standards of service, warranty policies including prompt attention to complaints, and concentration of purchases, as stated above, and may be temporary, pending our additional evaluation of the supplier.

(c) Approval of New Specifications and Suppliers. If you propose to purchase or lease any equipment, supplies, advertising materials, or other products or services from an unapproved supplier, you must submit to us a written request for approval, or request the supplier to do so. We will have the right to require, as a condition of our approval, that our representatives be permitted to inspect the supplier's facilities, and that samples from the supplier be delivered, at our option, either to us or to an independent, certified laboratory we designate for testing. We are not liable for damage to any sample that results from the testing process. You will pay a charge not to exceed the reasonable cost of the inspection and the actual cost of the testing. We reserve the right, at our option, to re-inspect the facilities and products of any approved supplier and continue to sample the products at the supplier's expense and to revoke approval upon the supplier's failure to continue to meet our standards and specifications. We may also require as a condition to our approval, that the supplier present satisfactory evidence of insurance, for example, product liability insurance, protecting us and our Unit Franchisees against all claims from the use of the item within the System.

Section 4.5 Sales of Products and Services to Your Affiliates.

All sales of products and services to your affiliates, if any, must be on terms regularly applicable to your nonaffiliated Clients, and in all cases must be arm's-length.

Section 4.6 Compliance with Laws, Rules and Regulations.

You will comply with all federal, state, and local laws, rules and regulations, and will timely obtain, maintain and renew when required all permits, certificates, licenses or Unit Franchises necessary for the proper conduct of the Anago Unit Franchise under this Agreement, including qualification to do business, fictitious, trade or assumed name registration, occupational licenses, and OSHA requirements. You will provide copies of all inspection reports, warnings, certificates and ratings, issued by any governmental entity during the Term on the conduct of the Anago Unit Franchise that indicates your material non-compliance with any applicable law, rule or regulation, to us within 2 days of your receipt of these items.

Section 4.7 Tax Payments; Contested Assessments.

You will promptly pay when due all taxes required by any federal, state or local tax authority including unemployment taxes, withholding taxes, income taxes, tangible commercial personal property taxes, real estate taxes, intangible taxes and all other indebtedness you incur in

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the conduct of the Anago Unit Franchise. You will pay to us an amount equal to any sales tax, goods and services taxes, gross receipts tax, or similar tax imposed on us for any payments to us required under this Agreement, unless the tax is measured by or involves the net income or our corporate status in a state. If we pay any tax for which you are responsible, you will promptly reimburse us the amount paid. If there is any bona fide dispute as to liability for taxes assessed or other indebtedness, you may contest the validity or the amount of the tax or indebtedness in accordance with procedures of the taxing authority or applicable law. However, you will not permit a tax sale or seizure by levy or signing or similar writ or warrant, or attachment by a creditor, to occur against any assets used in the Anago Unit Franchise.

Section 4.8 Client Surveys: Client List.

You will present to Clients all evaluation forms we require and will participate and/or request your Clients to participate in all marketing surveys performed by or for us. You will maintain a current Client list containing each Client's name, address, telephone number and zip code (9 digits) and supply a copy of the list to us on a quarterly basis. You must participate in any process we develop to record all Client information. We own all Client lists of your Unit Franchise. This list is our Confidential Information and will not be disclosed by you to any third party.

Section 4.9 Inspections.

You will permit us and/or our representatives to enter your Premises or buildings where you are providing janitorial services at any time for purposes of conducting inspections. You will cooperate fully with us and/or our representatives in inspections by rendering assistance as they reasonably request and by permitting them, at their option, to observe how you are rendering the services, to confer with your employees and Clients and to remove samples of any products, supplies and materials in amounts reasonably necessary to return to our office for inspection and record-keeping. The inspections may be conducted without notice at any time. The inspections will be performed in a manner that minimizes interference with the operation of the Anago Unit Franchise. We may videotape the inspections. Upon notice from us, and without limiting our other rights under this Agreement, you will take all steps necessary to correct immediately any deficiencies detected during inspections, including immediately stopping use of any equipment, advertising, materials, products, supplies or other items that do not conform to our then-current requirements. If you fail or refuse to correct any deficiency, we have the right, without you claiming to the contrary, to enter your Premises or office without being guilty of trespass or any other tort, for the purposes of making or causing to be made all corrections as required, at your expense, payable by you upon demand.

Section 4.10 Notices to Us.

(a) You must notify our local office of any Client complaint within 2 hours of actual receipt of the complaint.

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(b)

You must also notify us in writing within 5 days of any of the following events:

(i) The start of, any action, suit, counter suit or other proceeding against you or any of your employees;

(ii) Your, or any of your employees', receipt of any notice of noncompliance with any law, rule or regulation; or

(iii) The issuance of any order, writ, injunction, award or decree of any court, agency or other governmental instrumentality against you or any of your employees,

(c) You will provide us with any information we request, within 5 days of request, about the progress and outcome of events.

Section 4.11 Operational Suggestions.

You are encouraged to submit suggestions in writing to us for improving elements of the System, including products, services, equipment, service format, advertising and any other relevant matters that we consider in adopting or modifying standards, specifications and procedures for the System. You agree that any suggestions you make are our exclusive property. We have no obligation to use any suggestions and no obligation to provide compensation for any suggestion. You may not use any suggestions inconsistent with your obligations under this Agreement without our written consent.

Section 4.12 Liquidated Damages for Sale of Prohibited Products or Services.

You agree that the offer to sell or the sale of unauthorized or prohibited products and services will result in damages to us. You agree these damages will be measured as $100 for each day of the prohibited offer or sale, payable to us upon demand. These damages are in addition to our other rights including our right strictly to enforce or terminate this Agreement as provided in this Agreement and obtain injunctive relief, except to the extent any other rights are excluded by law in light of this Section. The parties agree that a precise calculation of the full extent of the damages that we will incur from the offer or sale of unauthorized products and services is difficult to determine and we and you desire certainty in this matter and agree that the liquidated damages are reasonable and are not a penalty.

Section 4.13 Cessation of Service to Clients Only.

You will surrender, as directed by the Regional Office, all keys, codes and pass cards to Clients' facilities, after the completion of the last scheduled day of service. You will remove only equipment and supplies belonging to you.

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ARTICLE 5 - PROPRIETARY PROPERTY Section 5.1 Your Use of the Proprietary Property.

You may use the Proprietary Property only in accordance with standards and specifications we determine. You agree that:

(a)       You will use the Proprietary Property only for the operation of the Anago Unit Franchise;

(b)      You will use the Proprietary Marks as the sole service mark identifications for the Anago Unit Franchise and will display prominently the Proprietary Marks on and/or with all materials we designate and authorize, and in the manner we require;

(c)       You will not use the Proprietary Property as security for any obligation or indebtedness;

(d)      You will comply with our instructions in filing and maintaining any required fictitious, trade or assumed name registrations for the "Anago" trade name, and will sign all documents we or our counsel deems reasonably necessary to obtain protection for the Proprietary Property and our interest in the property, for example, John Jones d/b/a "Anago" or ABC, Inc. d/b/a "Anago;"

(e)       If you do not operate out of your residence and occupy a business premises, you will maintain a suitable sign or graphics package at, or near the front of the Premises, on any pylon sign, building directory or other area identifying the Premises only as "Anago." The signage must conform in all respects to our requirements except to the extent prohibited by local governmental restrictions or landlord regulations; and

(f)       You will exercise caution when using the Proprietary Property to ensure that the Proprietary Property is not jeopardized in any manner.

Section 5.2 Infringement by You.

You agree that the use of the Proprietary Property outside the scope of this Agreement, without our written consent, is an infringement of our rights in the Proprietary Property. You agree that during the Term, and after the expiration or termination of this Agreement, you will not, directly or indirectly, commit an act of infringement or contest or aid in contesting the validity of, or our right to, the Proprietary Property, or take any other action in derogation of our rights.

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Section 5.3 Claims Against the Proprietary Property.

If there is any claim of infringement, unfair competition or other challenge to your right to use any Proprietary Property, or if you become aware of any use of, or claims to, any Proprietary Property by persons other than us or our Unit Franchisees, you will promptly (within 7 days) notify us in writing. You will not communicate with anyone except us and our counsel on any infringement, challenge or claim except under judicial process. We have sole discretion as to whether we take any action on any infringement, challenge or claim, and the sole right to control any litigation or other proceeding involving any infringement of, challenge or claim to any Proprietary Property. You must sign all documents, render all assistance, and do all acts that our attorneys deem necessary or advisable in order to protect and maintain our interest in any litigation or proceeding involving the Proprietary Property or otherwise to protect and maintain our interests in the Proprietary Property.

Section 5.4 Your Indemnification.

We indemnify you against and will reimburse you for all damages you are held liable for in any proceeding from your use of any Proprietary Property in accordance with this Agreement, but only if you: (a) have timely notified us of the claim or proceeding in accordance with this Section; (b) have otherwise complied with this Agreement; and (c) allow us sole control of the defense and settlement of the action in accordance with this Section.

Section 5.5 Our Right to Modify the Proprietary Marks.

If we deem it advisable to modify or discontinue the use of any of the Proprietary Marks and/or use 1 or more additional or substitute names or marks, including due to the rejection of any pending registration or revocation of any existing registration of any of the Proprietary Marks, or due to the rights of senior users, your are obligated to do so at your sole expense within 30 days of our request. We are only liable to reimburse you for your reasonable direct printing and signage expenses in modifying or discontinuing the use of the Proprietary Marks and substituting different Proprietary Marks (these expenses will not include any expenditures you make to promote a modified or substitute Proprietary Mark).

Section 5.6 Ownership; Inurement Solely to Us.

You agree that: (a) you have no ownership or other rights in the Proprietary Property, except as expressly granted in this Agreement; and (b) we are the authorized sub-licensor of the Proprietary Property. You agree that all good will associated with the Anago Unit Franchise inures directly and exclusively to the Franchisor's benefit and is the Franchisor's exclusive property except through profit received from the operation or possible permitted sale of the Anago Unit Franchise during the Term. If you secure in any jurisdiction any rights to any of the Proprietary Marks (or any other Proprietary Property) not expressly granted under this Agreement, you will immediately notify us and immediately assign to Anago Franchising, Inc. all

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of your right, title and interest to the Proprietary Marks (or any other Proprietary Property) not expressly granted under this Agreement.

ARTICLE 6 - THE MANUALS AND OTHER CONFIDENTIAL INFORMATION Section 6.1 In General.

To protect our reputation and good will and to maintain uniform standards of operation under the Proprietary Marks, you will conduct your Anago Unit Franchise in accordance with the Manuals. The Manuals are deemed an integral part of this Agreement with the same effect as if fully stated in this Agreement.

Section 6.2 Confidential Use.

(a)        You will treat and maintain the Confidential Information as our confidential and trade secrets. The Manuals will be kept in a secure area. You will strictly limit access to the Confidential Information to your employees, to the extent they have a "need to know" in order to perform their jobs. You will report the theft, loss or destruction of the Manuals immediately to us. Upon the theft, loss or destruction of the Manuals, we will loan to you a replacement copy at a fee of $125 for each Manual. A partial loss or failure to update any Manual is considered a complete loss.

(b)       You agree that, during and after the Term, you, your owners and employees will:

(i) not use the Confidential Information in any other business or capacity, including any derivative or spin-off of the Anago concept;

(ii) maintain the absolute secrecy and confidentiality of the Confidential Information during and after the Term;

(iii) not make unauthorized copies of any portion of the Confidential Information disclosed or recorded in written or other tangible form; and

(iv) adopt and implement all procedures we require to prevent unauthorized use or disclosure of, or access to, the Confidential Information.

(c)        You must require all persons whom you permit to have access to the Manuals or any other Confidential Information to sign our form of confidentiality agreement.

Section 6.3 Periodic Revisions.

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We may change the contents of the Manuals. You will comply with each new or changed provision beginning on the 30th day (or any longer time we specify) after written notice from us. Revisions to the Manuals will be based on what we in our sole discretion, deem is in the best interests of the System, us and our Unit Franchisees, including to promote quality, enhance good will, increase efficiency, decrease administrative burdens, or improve profitability. You agree that because complete and detailed uniformity under many varying conditions may not be possible or practical, we reserve the right, in our sole discretion and as we deem in the best interests of all concerned in any specific instance, to vary standards for any Unit Franchisee due to the peculiarities of the particular site or circumstances, density of population, business potential, population of trade area, existing business practices or any condition that we deem important to the successful operation of a Unit Franchise. You are not entitled to require us to grant to you a similar variation under this Agreement. You will ensure that your copy of the Manuals contains all updates you receive from us. In any dispute as to the contents of the Manuals, the terms contained in our master copy of each of the Manuals we maintain at our home office is controlling.

Section 6.4 Prior Information.

You agree that all Confidential Information received before the Agreement Date was unknown to you except through our disclosure and that the marketing practices and operating procedures we develop and Unit Franchise to you for the operation of the Anago Unit Franchise are important for the success of the System. To the extent you receive any Confidential Information after the Agreement Date, and you do not object in writing to us within 30 days after you receive the Confidential Information that any of the information comprising the Confidential Information should not be considered Confidential Information, then you irrevocably waive your right to make any objection. You agree that this representation is a material inducement for us to enter into this Agreement, and any breach is an Event of Default.

ARTICLE 7 - ADVERTISING

You must submit to us for approval, all materials to be used for Local Advertising, unless they have been approved before or they consist only of materials we provided. All materials on which the Proprietary Marks are used must include the applicable designation service mark SM, trademark , registered ® or copyright ©, or any other designation we specify. If you have not received the written or oral disapproval of materials submitted within 10 days from the date we received the materials, the materials are deemed approved. We may require you to withdraw and/or discontinue the use of any promotional materials or advertising, even if previously approved, if in our judgment, the materials or advertising may injure or be harmful to the System. We must make this requirement in writing, and you have 5 days after receipt of notice to withdraw and discontinue use of the materials or advertising, unless otherwise agreed in writing. The submission of advertising to us for approval does not affect your right to determine the prices at which you sell your products or services.

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The original documents were scanned as an image. The original file can be downloaded at the link above.