Franchise Agreement

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


Sample Franchise Agreement

THIS FRANCHISE AGREEMENT is made this day of

200

BETWEEN:

EQ3 FRANCHISE HOLDINGS, INC.

220 Elm Street

High Point, NC 27260

("EQ3FH")

-and-

("Franchisee")

who in consideration of the promises set forth below agree as follows:

Article 1 Nature and Scope of Agreement

1.1        The Franchisor. Palliser Furniture, Ltd. ("PFL"), the ultimate parent of EQ3FH, has developed and owns the rights to the retail furniture concept known as the EQ3 Store Program which is designed to enable the establishment and operation of an EQ3 Store for retail sale of specified furniture products to the general public, which PFL has licensed to EQ3 Holdings, Inc. ("Holdings") the parent of EQ3FH. EQ3FH has acquired the right from Holdings to use, offer and service franchises to others to develop, establish and operate and service EQ3 Stores utilizing the EQ3 Store Program.

1.2       The Trademarks, PFL owns and will own certain trademarks and other intellectual property, including such future trademarks and other intellectual property which may be developed, for use in connection with the EQ3 Store Program, and EQ3FH has also acquired the right through Holdings to use and the right to grant licenses to franchisees to use the aforementioned trademarks and other intellectual property in connection with franchised EQ3 Stores utilizing the EQ3 Store Program.

1.3       The Franchisee. Franchisee has independently investigated the business risks involved and such other matters as Franchisee deems important, including current and potential market conditions and competitive factors and risks, has read EQ3FH's Uniform Franchise Offering Circular, and has not relied on any representations not set forth in this Agreement. Aware of the relevant facts, Franchisee wishes to acquire from EQ3FH, and EQ3FH agrees to grant to Franchisee, a license to operate an EQ3 Store as a Franchised Business, upon the terms and conditions as hereinafter set out.

1.4       The EQ3 Store Program. The EQ3 Store Program is based on particular product design, presentation and value, which includes policies, procedures and techniques, and is used by retail furniture businesses that operate EQ3 Stores under the Trademarks. The

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EQ3 Store Program presently includes, but is not limited to: the Trademarks and associated marks, logos, color schemes and designs; advertising, publicity and other marketing programs; training programs and training materials; and other requirements as stated or referred to in this Agreement and from time to time in the EQ3 Operations Manual, or otherwise in writing by EQ3FH. The EQ3 Store Program will be applied to all Franchised Businesses, although EQ3FH in its business judgment may make exceptions based on local conditions, special circumstances or different contractual provisions. The EQ3 Store Program may be changed or modified from time to time by EQ3FH, in its sole discretion, and Franchisee agrees to comply with the EQ3 Store Program as it may exist from time to time (including all operational policies, procedures, programs and plans set forth in the EQ3 Operations Manual or otherwise in writing), all of which shall constitute provisions of this Agreement as if fully set forth herein.

Article 2 Interpretation

2.1 Definitions. Unless the context in which the following terms appear clearly require otherwise, the following terms, when used with an initial capital letter, shall have the following meanings, respectively:

"Accessories" means all non-furniture items, including both EQ3 Accessories and non-EQ3 Accessories purchased from Authorized Suppliers.

"Additional Outlets" is defined in Section 3.4.

"Advertising Fee" means the fees set out in Sections 8.3 and 11.4.

"Ad Fund" is defined in Section 8.3.

"Agreement" means this agreement and all schedules and instruments supplemental hereto and any amendment or confirmation hereof.

"Authorized Products" means those non-EQ3 Furnishings and non-EQ3 Accessories purchased from Authorized Suppliers approved by EQ3FH as product inventory for an EQ3 Store. EQ3FH shall have the right to approve specific stock keeping units ("skus") and shall from time-to time provide Franchisee with list of approved vendors and products. Such lists may change upon EQ3FH's discretion.

"Authorized Supplier" means those suppliers of non-EQ3 Products and services as approved by EQ3FH, from time to time, from whom Franchisee may purchase product inventory for the Franchised Business or from whom Franchisee may be required to purchase equipment and services to operate the Franchised Business pursuant to the EQ3 Operations Manual.

"Confidential Information" is defined in Section 14.2.

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"Customer Services" shall mean customer service, credit facility service and after sale service developed or approved by EQ3FH for use in conjunction with the sale of EQ3 Products as currently set out in the EQ3 Operations Manual.

"EQ3 Accessories" means accessories such as linens, cutlery, lamps, rugs and other like items, designated for retail sale in an EQ3 Store by EQ3FH and purchased from EQ3FH.

"EQ3 Distributors" means retailers (other than franchisees of EQ3FH) that carry EQ3 Products in the United States with respect to an EQ3 In-Store Gallery pursuant to product placement arrangements with PFL.

"EQ3FH" means EQ3 Franchise Holdings, Inc., a Delaware corporation, the franchisor under this Agreement.

"EQ3 Furnishings" means all furniture products designated for retail sale in an EQ3 Store by EQ3FH and purchased from EQ3FH.

"EQ3 In-Store Gallery" means floor space in a retail furniture store, department store or multi-line retailer, dedicated to certain EQ3 Products pursuant to product supply arrangements with PFL.

"EQ3 Operations Manual" is a guide for the establishment and operation of EQ3 Stores prepared by EQ3FH and provided to Franchisee that sets out, including, without limitation, a marketing program, staffing particulars, operation systems and store elements, including layout, design and product mix, and includes any and all operations or instruction manual or manuals and all books, pamphlets, memoranda, directives, bulletins and other material and updates prepared by or on behalf of EQ3FH from time to time (whether in written, machine readable or any other form), setting out the standards, methods, procedures, techniques and specifications of the EQ3 Store Program.

"EQ3 Products" means EQ3 Accessories and EQ3 Furnishings designated for retail sale in an EQ3 Store;

"EQ3 Store Program" means the program used to operate an EQ3 Store and is defined in Section 1.4.

"Force Majeure" means a fire, explosion, casualty, epidemic, act of God, earthquake, flood, torrential rain, strike, walkout, picketing, stoppage of labor, lock-outs, civil disturbance, embargo, riot, act of public enemy, terrorist act, war or armed conflict (whether or not there has been an official declaration of war), hostilities, sanctions, mobilization, blockade, detention, vandalism, revolution, looting, orders of governmental authorities, or any other cause or causes beyond the reasonable control of the affected party.

"Franchised Business" means the EQ3 Store to be developed and operated by Franchisee in accordance with the EQ3 Store Program at the Premises, pursuant to this Agreement.

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"Gross Revenues" means the entire amount of the actual sales price, whether for cash, credit or otherwise, of all sales of goods and services, including, without limitation, extended warranty packages, and revenue derived from delivery and installation services performed by Franchisee, all other revenue derived in respect of the Franchised Business, and all other receipts whatsoever from all business conducted upon or originating from the Premises, including the proceeds from any business interruption insurance received with respect to the Franchised Business, excluding taxes collected and paid to the appropriate taxing authority and refundable deposits until such time as they become nonrefundable and revenues collected for installation or delivery services if performed by a third party, and any Internet Sales. Each charge or sale upon installment or credit shall be treated as a sale for the full price during the reporting period in which such charge or sale is made, regardless of the time when Franchisee shall receive payment (whether full or partial) therefor.

"Guaranty and Indemnification Covenant" is attached as Schedule I.

"Holdings" means EQ3 Holdings, Inc., the parent of EQ3FH.

"Implementation Services" are defined in Section 5.4.

"Initial Franchise Fee" means the fee payable by Franchisee to EQ3FH upon the execution of this Agreement pursuant to Section 8.1.

"Internet" means the interactive, multimedia, global communications network and includes all linking and framing and Internet connections approved by EQ3FH.

"Opening Date" means the date that the EQ3 Store is to be completed and open to the general public as set out in Schedule B.

"PFL" means Palliser Furniture, Ltd., a Canadian corporation and ultimate parent of EQ3FH and owner of the Trademarks. PFL has (1) sublicensed the Trademarks to EQ3FH with respect to the operation of the franchised EQ3 Store Program in the United States, (2) retained rights to the Trademarks with respect to the supply of EQ3 Products to the EQ3 Distributors; (3) reserved the right to license the Trademarks to a Related Party for purposes of operating company owned EQ3 Stores in the United States, and (4) reserved the right to license the Trademarks to a Related Party for purposes of offering EQ3 Products for sale through the Internet and through other means anywhere in the United States.

"Premises" means the premises used for the operation of the EQ3 Store in the Territory as described in Schedule B hereto.

"Principal(s)" means the direct and indirect, legal and beneficial shareholders, members or owners of Franchisee as more particularly set out in Schedule E.

"Product Supply Agreement" means that agreement to supply EQ3 Products entered into by the parties concurrently with this Agreement.

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"Related Document" means any document that Franchisee executes with Franchisor or one of its affiliates relating to the operation of Franchised Business.

"Related Party" with respect to each party to this Agreement means each person, association or entity who or which directly, or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such party to this Agreement.

"Related Products" means goods other than EQ3 Products which Franchisee may purchase from EQ3FH or its Related Parties.

"Renewal Fee" means the renewal fee payable by Franchisee pursuant to Section 4.2(c).

"Royalty Fee" means the continuing royalty fee payable by Franchisee to EQ3FH pursuant to Section 8.2.

"Security Agreement" means that agreement pursuant to which Franchisee will grant to EQ3FH certain security interests to be entered into concurrently with this Agreement.

"Term" has the meaning set out in Section 4.1.

"Territory" shall mean the geographical area in which the Franchisee's EQ3 Store shall be established and as described in Schedule A.

"Trademarks" means, collectively, those trademarks, trade names, copyrights, designs, logos, color schemes and other commercial symbols authorized by EQ3FH for use in the United States from time to time in connection with the EQ3 Store Program including, without limiting the generality of the foregoing, EQ3.

"Transfer Fee" means the fee set out in Section 13.4(c) (vii) and Schedule D.

2.2       Gender and Number. The neuter of any pronoun shall include the feminine and/or the masculine thereof, and the singular of any noun or pronoun shall include the plural, or vice-versa, wherever the context shall require.

2.3       Headings. Section and paragraph headings are for convenience only, and shall not be construed as limiting or defining the meaning of any provision herein.

2.4       Representations and Warranties. Franchisee and each of its Principals hereby represent and warrant to EQ3FH as follows;

(a)        Franchisee is acquiring this franchise for Franchisee's own account for the operation of a Franchised Business, and not for the purpose of resale or redistribution or other speculative matter;

(b)        All information provided to EQ3FH in Franchisee's application and other documents to induce EQ3FH to grant this franchise was true, correct, complete

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and accurate as of the date made, and, as of the date of this Agreement, no material change has occurred in such information;

(c)        Franchisee and the Principals have sufficient skill, business experience, aptitude and financial resources to own and operate an EQ3 Store and that they have never been convicted of a criminal offense involving fraud or misappropriation of funds or property or pled guilty or no contest to such criminal offense;

(d)        Franchisee's execution, delivery and performance of this Agreement does not violate or constitute a breach under any agreement or commitment of Franchisee;

(e)        Franchisee is duly organized and validly existing, is qualified to do business in each state where Franchisee is or will conduct business, and is duly authorized to execute and deliver this Agreement and perform Franchisee's obligations pursuant to this Agreement; and

(f)        This Agreement represents a valid, binding obligation of Franchisee and each Principal. Schedule E constitutes a complete list of all Principals of Franchisee as of the date of this Agreement. Each Principal has fully read this Agreement and Franchisor's Uniform Franchise Offering Circular, and each Principal represents that he/she is capable of complying with all of the terms of this Agreement and the Principal's Guaranty and Indemnification Covenant.

2.5 Principal's Guaranty and Acknowledgment. If Franchisee is an entity, each Principal shall execute the Guaranty and Indemnification Covenant in favor of EQ3FH and the Principal's Acknowledgment which follows the signature block of this Agreement, and deliver the executed Guaranty and Indemnification Covenant and Principal's Acknowledgment to EQ3FH concurrently with execution of this Agreement, or if such ownership interest is acquired later, prior to obtaining the interest as a Principal.

Article 3 Grant And Location

3.1        Grant of License. Subject to the terms and conditions of this Agreement, EQ3FH hereby grants to Franchisee a license to operate one Franchised Business using the EQ3 Store Program and the Trademarks within the Territory at and only at the Premises set forth on Schedule B. Franchisee hereby accepts such grant and agrees to operate a Franchised Business in accordance with the EQ3 Store Program under the Trademarks at and only at the Premises set forth on Schedule B and to continuously exert its best efforts to promote and enhance the operation of the Franchised Business and the goodwill associated with the Trademarks.

3.2       Territorial Rights. During the Term of this Agreement for as long as Franchisee is in full compliance with the terms and conditions of this Agreement, any other franchise agreements between EQ3FH and Franchisee, and all other agreements between Franchisee and EQ3FH or its Related Parties, and this Agreement has not been terminated or expired, subject to Sections 3.4 and 3.5, EQ3FH will not grant a franchise

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to any person or entity other than Franchisee to operate another EQ3 Store in the Territory.

3.3       Principal to Operate. At least one Principal (or Principal designee acceptable to EQ3FH) must participate personally in the active direct management of the EQ3 Store. Franchisee shall cause such Principal (or approved designee as the case may be) to attend and complete to EQ3FH's satisfaction the initial franchisee training program. The cost for such training is included in the Initial Franchise Fee; however, Franchisee shall be responsible for all travel and related expenses related to the Principal's or its designee's attendance at the training.

3.4       Additional Outlets. Franchisee shall own and operate only one Franchised Business in the Territory. However, Franchisee may be entitled to own and operate further EQ3 Store franchises in the Territory ("Additional Outlets") on certain terms and conditions set out in Schedule C.

3.5       Reserved Rights and Exceptions to Territorial Rights. EQ3FH and the Related Parties reserve all rights not specifically granted to Franchisee herein. This Agreement shall not limit the right of EQ3FH or its Related Parties to use or license the EQ3 Store Program and Trademarks or to engage in or license any business activity, including, without limitation: (a) the franchising of retail furniture store businesses under the Trademarks at any location outside the Territory; (b) the operation of EQ3 Stores and other retail store businesses under the Trademarks using the EQ3 Store Program and selling EQ3 Products within or outside the Territory; (c) the operation and/or franchising of retail furniture store businesses under any other trade name, trademark or service mark now or hereafter owned by or licensed to EQ3FH or its Related Parties at any location inside or outside the Territory; (d) the sale of EQ3 Products in any channel of distribution, including catalog sales or the Internet, either directly or through any affiliate or third party; and/or (e) the operation of any business other than a retail furniture store under any name or mark, including the Trademarks, within or outside the Territory. This Agreement shall not limit the right of PFL or any of its other Related Parties to offer for sale and sell furniture and any goods and services other than EQ3 Products in any channel of distribution and under any marks, including Palliser, within and outside the Territory. Franchisee acknowledges that EQ3FH's and the Related Parties' rights to use and/or license the EQ3 Store Program pre-date this Agreement and are not limited or changed by the terms of this Agreement. Franchisee agrees that by acknowledging those rights, the parties do not intend to make EQ3FH's or the Related Parties' exercise of such rights subject to rules applicable to contractual performance or the exercise of contractual discretion under this Agreement.

The territorial rights provided to Franchisee pursuant to Section 3.2 shall be with respect to the Franchised Business only, and shall be subject to:

(a) PFL's right to continue with current product placement arrangements with EQ3 Distributors in the Territory, if any;

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(b)        PFL's and the Related Parties' right to establish new product placement arrangements with current or new EQ3 Distributors on the condition that the location of such product placement is more than five (5) miles from franchised EQ3 Stores existing on the date of establishment, and at least forty-five (45) days' notice is provided to EQ3FH who shall provide thirty (30) days' notice to Franchisee if the location is in the Territory. The five (5) mile stipulation shall be based upon distance given population densities, traffic patterns, shopping patterns, market variation and will subject to EQ3FH's discretion;

(c)        In the event Franchisee subsequently establishes a franchised EQ3 Store within thirty five (5) miles of an existing EQ3 Distributor, the exception set out above in subparagraph (a) shall apply;

(d)        PFL's and the Related Parties' right to establish company-owned EQ3 Stores inside or outside the Territory; and

(e)        The rights with respect to Internet sales of EQ3 Products throughout the United States (including the Territory) reserved by PFL (or its Related Party) as provided in Section 10.3.

3.6 Territorial Restrictions. Franchisee shall offer for sale and sell EQ3 Products only at and from the Franchised Business. Franchisee shall advertise, market and promote the Franchised Business and its EQ3 Products only in the Territory.

Article 4 Term and Renewal

4.1       Term. Except as otherwise provided, this franchise shall be for a term of five (5) years from the date of this Agreement (the "Term"), unless sooner terminated pursuant to terms herein.

4.2       Renewal. Unless this Agreement has previously been terminated in accordance with its terms, this Agreement may be renewed by the Franchisee for two (2) successive additional terms of five (5) years each on the following terms and conditions:

(a)        Franchisee shall have substantially complied with all of the terms of this Agreement and any other agreements relating to the Franchised Business, whether with EQ3FH, Related Parties, Authorized Suppliers, the lessor at the Premises or third party lenders, and shall be in full compliance with all such terms at the time of renewal, which substantial compliance and full compliance shall be determined solely by EQ3FH;

(b)        Franchisee shall have given notice of its intent to renew to EQ3FH in writing at least one hundred eighty (180) days prior to the expiration of the then current Term;

(c)        Franchisee shall pay a renewal fee of $3,500 for the first renewal and $5,000 for the second renewal at the time of renewal;

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(d)        Franchisee and its Principals shall, at the option of EQ3FH and as a condition of such renewal, execute EQ3FH's then current form of franchise agreement together with all ancillary documents, agreements and guarantees then required by EQ3FH (the "Related Documents") which may have business and material terms different from the terms of this Agreement and its Related Documents but which will be for the renewal term described above, and which, upon commencement of the relevant renewal term, shall supercede in all respects this Agreement;

(e)        As an alternative to Section (d), and in EQ3FH's sole discretion, Franchisee shall execute an Amendment to this Agreement and its Related Documents for the renewal term incorporating such amendments as EQ3FH deems necessary to meet the terms and conditions of the then current franchise agreement and Related Documents governing franchisees;

(f)        EQ3FH shall provide Franchisee with its then current franchise agreement and Related Documents in accordance with subparagraph (d) or its Amendment to this Agreement and Related Documents in accordance with subparagraph (e) thirty (30) days after receipt of Franchisee's notice of intent pursuant to subparagraph (b), and Franchisee shall have sixty (60) days to provide EQ3FH with an executed copy thereof. In the event the parties have not concluded an executed current franchise agreement and Related Documents or Amendment to this Agreement and Related Documents as aforementioned ninety (90) days prior to the expiration of the then current term, the Franchise and this Agreement shall expire in accordance with the then current term, without further notice; and

(g)        Franchisee shall sign a release respecting any prior claims Franchisee may then have or may in the future have against EQ3FH and its Related Parties arising from or as a result of the operation of the Franchised Business pursuant to this Agreement as at the date of such renewal, the receipt of which shall be delivered to EQ3FH contemporaneously with the executed then current franchise agreement and Related Documents or Amendment to this Agreement and Related Documents in order to give effect thereto.

If Franchisee is renewing its Franchise Agreement, the number of renewal terms Franchisee may have and its renewal fee are described in the Renewal Rider attached as Schedule L.

Article 5 Development and Opening

5,1 Franchisee's Investment. In order to properly capitalize the set up of the Franchised Business, Franchisee shall have a minimum capitalization of $150,000, by way of shareholder or owner equity and/or shareholder or owner loans, which capitalization shall be subject to the following conditions:

(a) the capital investment shall not be reduced below the minimum required amount as long as this Agreement is in force; and

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(b) where the capitalization is by way of shareholder or owner loans, such loans shall not be secured against the assets of the Franchised Business and shall be subordinate to all rights of EQ3FH to receive payment and/or performance from Franchisee and/or the Principals.

Franchisee shall provide EQ3FH with evidence of its capitalization by providing a certified opening balance sheet for the Franchised Business and shall execute such further documentation in support of the foregoing as EQ3FH may require. Additionally, Franchisee is required to establish a line of credit in the amount of not less than $100,000, with a financial institution and provide EQ3FH with confirmation of such credit line, together with authorization to its financial institution that it shall provide information to EQ3FH on the status of the credit line, from time to time, at EQ3FH's request. Such capitalization requirement and credit line requirement shall not be construed as a representation by EQ3FH of the total cost to develop the EQ3 Store.

Further investment shall be required for renovations and upfltting for leasehold improvements, unless the required leasehold improvements are negotiated into the lease, as the case may be.

5.2       Initial EQ3 Inventory In order to facilitate Franchisee with set-up costs of the EQ3 Store, EQ3FH shall provide Franchisee with thirty (30) days credit (based upon credit approval) for Franchisee's initial order of EQ3 Products (the "Initial Order"). The EQ3 Store shall be stocked based on square footage of store up to $20-$30 per square feet, depending upon location. Franchisee shall enter into the Product Supply Agreement and Security Agreement concurrently with this Agreement.

5.3       Opening. Franchisee agrees, subject to the procedures set out in the EQ3 Operations Manual, to immediately proceed to take all actions necessary to establish the EQ3 Store and to have the same completed and open for business by the Opening Date. Franchisee shall create a grand opening event ("Grand Opening") for the EQ3 Store, at its sole cost and in accordance with the EQ3 Operations Manual, on a mutually agreeable date. EQ3FH's public relations manager will assist Franchisee in planning the Grand Opening and representatives of EQ3FH, including senior management and representatives from the area, will attend the launch.

5.4       Implementation Services. In furtherance of the foregoing, EQ3FH shall provide Franchisee with millwork, design, merchandising and on-site training services at Franchisee's EQ3 Store to develop and open its EQ3 Store (the "Implementation Services"). The Implementation Services are mandatory and shall be at the sole cost of the Franchisee. After the parties have agreed upon an acceptable location for the EQ3 Store in the Territory, EQ3FH will prepare a quotation for Implementation Services for the location listing the required goods and services and estimated costs and deliver it to Franchisee. EQ3FH shall have the discretion to request pre-payment by Franchisee of the Implementation Services; otherwise, goods included in the Implementation Services will be invoiced on shipment and payable thirty (30) days after the date of invoice. EQ3FH will invoice Franchisee for the remainder of the Implementation Services upon completion, also payable thirty (30) days after the date of invoice.

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5.5 Option to Terminate. If, at the time of execution of this Agreement, the location of the Premises has not been agreed upon by the parties, and if the parties are unable to agree, upon a mutually acceptable location for the EQ3 Store in the Territory within one hundred fifty (150) days from the date of execution of this Agreement, then either EQ3FH or Franchisee, on written notice to the other party, shall have the right to terminate this Agreement (without prejudice to the continuation in force of those provisions which survive termination hereof). If such notice is provided by EQ3FH, the termination shall be effective thirty (30) days from the effective date of the notice, unless the parties agree upon the location for the EQ3 Store within such thirty (30) day period, in which event, the notice shall be null and void and of no effect. If this Agreement is terminated under this Section 5.5, then EQ3FH, Franchisee and the Principals shall each execute and deliver such releases as may be required to terminate all agreements between them (without prejudice as aforesaid) in respect of and in accordance with the rights herein granted and Franchisee shall promptly return to EQ3FH all manuals and other documents (including any copies thereof) furnished to or otherwise obtained by Franchisee in connection with the Franchise herein granted. Upon compliance with the foregoing, EQ3FH shall refund to Franchisee any amounts received by it in respect of the Initial Franchise Fee, less $15,000, in consideration for the time, effort and expenses incurred by EQ3FH relating to third party expenses for site selection and site specific research, and with respect to its own administrative costs relating thereto. EQ3FH shall have no further liability to Franchisee or the Principals, including, without limitation, any liability for damages, consequential loss, loss of income or loss of expectation of profit or any other damages, loss or costs incurred in connection with the Franchise. The right provided herein shall expire (whether or not notice of termination has been provided) if the parties agree upon a mutually acceptable location.

Article 6 EQ3 Store Program Elements

6.1        Selection and Acquisition of Location. The exact location of Franchisee's Franchised Business shall be subject to the prior written approval of EQ3FH. EQ3FH shall provide its response to Franchisee within sixty (60) days of receipt of the location request setting out site details. The term of any lease respecting the Premises shall be consistent with the Term of this Agreement unless otherwise approved by EQ3FH in writing. The selection process and leasing arrangements shall be in accordance with the site selection obligations in Schedule F. The proposed lease must be provided to EQ3FH for approval and must contain the lease provisions disclosed in Schedule F-l as well as any other provisions reasonably required by EQ3FH, including a Landlord/Franchisor Agreement in the form of Schedule M attached herein; such agreement to be signed by the Franchisor, the Franchisee, any party guaranteeing the obligations of the Franchise (as tenant under the lease) and the landlord. Franchisee must provide a fully executed copy of the lease and Landlord/Franchisor Agreement to EQ3FH within thirty (30) days of its execution. Upon EQ3FH's acceptance of the lease, the location leased will be deemed the Premises and listed on Schedule B to this Agreement.

6.2       Planning, Layout and Construction of EQ3 Store. The exterior and interior appearance of Franchisee's Franchised Business, and the interior floor plan and decor of

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the Franchised Business, shall meet and be in accordance with the standards adopted from time to time by EQ3FH and as set out in the EQ3 Operations Manual, and shall be subject to EQ3FH's prior written approval, not to be unreasonably withheld. Additionally,

(a)        The size of the Franchised Business shall be as set out in Schedule F;

(b)        Franchisee shall equip the Franchised Business to EQ3FH's specifications as set out in the EQ3 Operations Manual and Franchisee shall be solely responsible for the final plans and specifications for its Franchised Business satisfactory to EQ3FH; provided further, that Franchisee shall consult with EQ3FH, or its designees (including builders, architects and designers), with respect to interior and exterior appearance, interior floor planning and other matters as may be from time to time necessary in order to facilitate the design and timely construction of Franchisee's Franchised Business in accordance with EQ3FH's specifications; and

(c)        Franchisee shall be responsible to undertake all renovations involved in setting up the Franchised Business and pay for any and all improvements to the Premises as requested by and/or approved by EQ3FH, to conform to the elements and standards set out in the EQ3 Operations Manual. Franchisee acknowledges and agrees that millwork and design are part of the Implementation Services provided by EQ3FH at Franchisee's cost, pursuant to Section 5.4.

6.3        Outlet Appearance and Design. Franchisee agrees:

(a)        that it shall make no change to the interior or exterior of its Franchised Business without the prior written approval of EQ3FH, which approval shall not be unreasonably withheld;

(b)        that it shall make no change to the floor plan layout of its Franchised Business without the prior written approval of EQ3FH, which approval shall not be unreasonably withheld;

(c)        that it shall, at its sole cost and expense, diligently maintain the interior and exterior decor of its Franchised Business and modify and update the same in such a manner as may be from time to time reasonably prescribed by EQ3FH; and

(d)        that it shall purchase and display only such signs, emblems, logos, lettering and the like as may be reasonably prescribed by EQ3FH from time to time. All such consents and approvals required from EQ3FH shall be given promptly where the matter requiring its approval is consistent with the EQ3 Operations Manual.

6.4       Premises Maintenance. Franchisee agrees at all times to maintain its Premises and related parking lots in clean, attractive and safe condition and in good maintenance and repair.

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6.5       Product Mix and Display. Franchisee shall sell at and from the Franchised Business only EQ3 Products and Authorized Products. The product line at the Franchised Business shall consist primarily of EQ3 Products; however, Franchisee may also be required to carry certain Authorized Products. Franchisee agrees at all times to strictly adhere to and follow the product mix and product display standards, methods and requirements from time to time established by EQ3FH and set out in the EQ3 Operations Manual.

6.6       Maintenance of Inventory. Franchisee agrees to display a full range and mix of current EQ3 Products and Authorized Products and to maintain in stock EQ3FH's required minimum inventory levels of EQ3 Products for the Franchised Business and agrees to follow EQ3FH's recommendations with respect to inventory selection, product mix and layout, as set out in the EQ3 Operations Manual.

6.1 Price Point. Because of EQ3FH's legitimate interest in its brand and the marketing of EQ3 Products, including their resale prices and other factors that affect supply, demand and consumer perception relating to those products, and in order to provide Franchisee with information relating to the marketing and sale of EQ3 Products which EQ3FH believes is relevant to sound marketing plans and decisions, EQ3FH may from time to time provide to Franchisee recommended price, promotion and other marketing information, including but not limited to its suggested retail prices. EQ3FH may exercise all rights of a manufacturer with respect to such matters, to the extent they are permitted by applicable law as of the time such rights are exercised, including rights that directly affect the price or price level at which EQ3 Products are promoted, advertised or sold.

6.8       Revisions to Product Mix and Inventory. EQ3FH and Franchisee acknowledge that the market analysis upon which product mix and inventory levels are based is not particularized to the Territory, but is a synthesis of information from varied sources. From time to time EQ3FH may, but shall not be obligated to, provide Franchisee with statistical averaging and best practices information. EQ3FH will have the right to modify Franchisee's product mix and required inventory levels from time to time on notice to Franchisee.

6.9       EQ3 Store Operations. Franchisee will give prompt, courteous and efficient service to the public. All business dealings with members of the public and advertising in connection therewith shall be governed by the highest standards of honesty, integrity, fair dealing and ethical conduct. Franchisee shall do nothing which would tend to discredit, dishonor, reflect adversely upon, or in any other manner injure the reputation of EQ3FH or the Trademarks.

6.10     Personnel. Franchisee shall at all times employ sufficient personnel appropriately trained to operate its EQ3 Store in accordance with the requirements from time to time prescribed by EQ3FH and shall require that such personnel conduct themselves and the Franchised Business operations in the manner required by Section 6.9. As part of the Implementation Services, EQ3FH shall provide initial on-site training to Franchisee's Principal (or approved designee responsible for the operation of the EQ3 Store) and

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Franchisee's personnel. EQ3FH shall also provide Franchisee with resource materials respecting EQ3 Products, policies and warranties.

6.11      Hardware & Software. In accordance with approved standards for EQ3 Store Program, EQ3FH will provide Franchisee with EQ3's required hardware and version of Point of Sale ("POS") software and will arrange for the installation of the POS software and hardware network, all of which will be at Franchisee's cost and payable by Franchisee to EQ3FH upon receipt of an invoice therefor. Franchisee shall enter into a software licensing agreement with the software Authorized Supplier and Franchisee will be required to pay annual licensing fees to the Authorized Supplier in accordance with the terms thereof. Additionally, Franchisee is required to upgrade the hardware and/or software on notice from EQ3FH and purchase the then-current minimum technical support package from EQ3FH or its designee. An overview of the current technical support package is set out in Schedule G.

6.12     Authorized Suppliers. EQ3FH may, from time to time, negotiate arrangements with third party Authorized Suppliers for supply of Authorized Products and other goods and services for use at the Franchised Business. All external third party suppliers must be approved by EQ3FH prior to them becoming an Authorized Supplier to the EQ3 Store Program and EQ3FH will provide Franchisee with an approved list of Authorized Products and Authorized Suppliers, which may be updated from time to time, in the sole discretion of EQ3FH. Franchisee shall purchase the Authorized Products and the categories of products or services using the Trademarks only from Authorized Suppliers so designated or approved by EQ3FH or from EQ3FH. Any rebates offered by Authorized Suppliers as a result of such arrangements shall be solely for the benefit and account of EQ3FH.

EQ3FH may approve a supplier for any products or services using the Trademarks and may approve a supplier only as to certain products or services, including supplies to be used in the Franchised Business. EQ3FH may concentrate purchases with one or more Suppliers to obtain lower prices, better advertising support and/or better services for any group of Franchised Businesses. If Franchisee proposes to contract for or purchase products or services using the Trademarks from any supplier that EQ3FH has not previously approved for such products or services, Franchisee must notify EQ3FH in writing and submit to EQ3FH all information, specifications and samples that EQ3FH requests. EQ3FH will have the right to require that its representatives be permitted to inspect the proposed Supplier's facilities and that samples from the proposed Supplier be delivered to EQ3FH or its designated testing facility for evaluation and testing. EQ3FH will have sole discretion as to whether or not to approve any Supplier. Approval of a Supplier as to any products or services using the Trademarks must be made by EQ3FH in writing and may also be conditioned on requirements relating to the frequency of delivery, standards of service, including prompt attention to complaints, concentration of purchases and other criteria, and may be conditioned on the Supplier providing EQ3FH with adequate insurance protection, the Supplier's execution of reasonable indemnity and confidentiality agreements, and the Supplier's payment of reasonable license fees to EQ3FH, and may be temporary or conditional, pending EQ3FH's further evaluation of the Supplier. EQ3FH reserves the right to re-inspect, at any time, the facilities, products

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and/or services of any Approved Supplier and to revoke its approval upon the Approved Supplier's failure to continue to meet any of EQ3FH's then-current criteria.

6.13 Conventions. From time to time, but no more often than twice each year, EQ3FH may organize a convention in the United States or Canada to create a forum for networking, continued education and information about the EQ3 Store Franchise system. Franchisee shall cause one of its Principals (or other approved designee) that is personally participating in the operation of the Franchised Business to attend all such conventions and Franchisee shall be responsible for such individual's travel costs, compensation and expenses to attend the conventions in such locations as EQ3FH determines, from time to time, in its sole discretion.

Article 7 Intellectual Property

7.1 Trademark License. Franchisee acknowledges EQ3FH's and its Related Parties' right, title and interest, either as owner or sublicensee of PFL, to the Trademarks. EQ3FH hereby grants Franchisee the non-exclusive right and license to use the Trademarks in connection with the Franchised Business, subject to the following terms and conditions:

(a)        Franchisee hereby acknowledges EQ3FH's or PFL's rights in and control of the Trademarks and agrees that it shall use the Trademarks only for so long as this Agreement remains in force, and only in connection with the operation of the Franchised Business and the sale of EQ3 Products in the manner and for the purposes specified by EQ3FH. Franchisee acknowledges and agrees that the Trademarks and goodwill associated with them are each very valuable and that it shall not, either during or after the term of this Agreement, do anything, or aid or assist any other party to do anything, directly or indirectly or by omission, which would infringe upon, harm, or dilute the value thereof, or to impair the right, title, and interest of EQ3FH therein, or contest EQ3FH's or Holding's rights in and control of any Trademark or in any other mark or name which incorporates all or any portion of any Trademark. All use of the Trademarks by Franchisee and any and all goodwill established by Franchisee's use of the Trademarks will be the exclusive property of EQ3FH and its Related Parties. Franchisee agrees not to contest the validity of EQ3FH's and its Related Parties' ownership of the Trademarks.

(b)        Franchisee acknowledges and agrees that it shall have a right to use the Trademarks during the term of this Agreement, provided in all such cases (i) Franchisee shall not use the Trademarks, or any other marks or names, in such a way as is likely to lead any third person to believe that Franchisee is, or may be, an agent or representative of or have the power to bind EQ3FH; (ii) Franchisee shall use such Trademarks in all advertising and on all stationery, letterheads, invoices and other business forms only in such a manner and form as shall be approved by EQ3FH; (iii) Franchisee agrees to promptly and fully follow all directions and instructions of EQ3FH as to use of each of such Trademarks and to promptly cease and desist any particular use of any Trademark determined to be

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inappropriate by EQ3FH; and (iv) Franchisee agrees to advise EQ3FH within five (5) days of the appearance of any infringement of the Trademarks or any mark which is confusingly similar to the Trademarks, any challenge to Franchisee's use of any of the Trademarks, or any claim of any third party of an interest in the Trademarks and agrees to render such reasonable assistance in connection therewith as EQ3FH may require.

(c)        Franchisee acknowledges that its failure to cease using the Trademarks, or any confusingly similar mark(s), following the termination or expiration of this Agreement will result in immediate and irreparable harm to EQ3FH, its Related Parties and the rights of all other franchisees. Franchisee agrees that in the event of such failure, EQ3FH shall be entitled to immediate injunctive relief, without bond, from a court of competent jurisdiction in addition to any other remedies to which EQ3FH or its Related Parties may be entitled. Franchisee expressly consents and agrees that in addition to any other remedies EQ3FH or its Related Parties may have, at law or under this Agreement, EQ3FH may obtain an injunction from a court of competent jurisdiction without bond to prevent the continuation of any existing default, to prevent the occurrence of any threat of default by Franchisee of this Agreement, or to restrain any infringement by Franchisee or the Principals of the Trademarks.

(d)        It is understood by the parties to this Agreement that EQ3FH may adopt new, modified or changed service marks, trade names, trademarks or indicia of origin. Franchisee agrees, at Franchisee's sole cost and expense, to adopt, use, and display any such new, modified, or changed indicia of origin within the period of time specified by EQ3FH, as if they were part of the Trademarks pursuant to this Agreement.

(e)        Franchisee shall not cause or allow the Trademarks or any of them, to be used or displayed, in whole or in part, in or as part of an Internet domain name, electronic mail or address or in connection with any Internet home page, web site or other Internet related activity without the prior written approval of EQ3FH and then only in such manner and in accordance with such procedures, standards and specification as EQ3FH may establish.

7.2 Proceedings, Infringing Uses and Agreements. EQ3FH is advised that PFL has applied for registration in the United States Patent and Trademark Office for certain of the Trademarks. EQ3FH is a licensed user of the Trademarks with the right to sublicense such use to Franchisee and all franchisees of EQ3FH. EQ3FH is advised that PFL shall exert reasonable efforts to secure trademark registrations for its Trademarks not so registered, but that it does not warrant or represent, and Franchisee so acknowledges, that registrations for all and any of the Trademarks will issue or that the owner has the right or exclusive right to use any such Trademarks in the Territory, and that it may be necessary to modify the Trademarks to obtain approval, provided if any such registration is denied without the possibility of further appeal, or there is a need for a change or modification in any Trademark to permit its use in any jurisdiction in the United States, then PFL and/or Holdings shall reimburse EQ3FH and Franchisee in the Territory for any and all costs

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incurred in connection with the modification or abandonment of any Trademark, including reasonable costs of new signage, stationery and other items that display the trademark and promotional costs incurred in connection with the change. Otherwise, as determination of likelihood-of confusion and identification of senior users is a subjective standard, EQ3FH and its Related Parties make no representation or warranty as to validity or non-infringement of the Trademarks in the Territory. EQ3FH and its Related Parties will have sole discretion and the exclusive right to take such action as they deem appropriate and to control any litigation, U.S. Patent and Trademark Office or other proceeding or other administrative proceeding arising out of any infringement of, challenge to or claim related to the Trademarks or the validity or ownership thereof. Franchisee and its Principals must not directly or indirectly communicate with any person other than EQ3FH and its counsel in connection with any such matter. Franchisee and its Principals will execute any and all instruments and documents, render such assistance, and do all acts and things as may, in the opinion of EQ3FH's counsel, be necessary or advisable to protect and maintain the interests of EQ3FH and its Related Parties in any such litigation or administrative proceedings, or to otherwise protect and maintain the interests of EQ3FH and its Related Parties in the Trademarks.

7.3 Obligations of Franchisee Respecting the Trademarks.

(a)        Franchisee shall promptly execute and deliver all documents as may be required by EQ3FH in connection with Franchisee's right to use the Trademarks hereunder.

(b)        Franchisee shall register, with the consent and approval of EQ3FH, the business name "EQ3 location"', for example "EQ3 Spokane", with the appropriate governmental authority if required by applicable law of the jurisdiction in which Franchisee has its Franchised Business. The Franchisee shall use the business name in its business operations and marketing and advertising campaigns. Upon termination of this Agreement, Franchisee hereby agrees, at its own expense, to immediately dissolve or withdraw the registered business name registration and to provide EQ3FH with confirmation of dissolution or withdrawal. Franchisee will not use nor permit any person subject to its control to use any of the Trademarks or any variations thereof as part of its corporate or firm name or for any purpose.

(c)        Although Franchisee shall use the trademark EQ3 on store signage, both on the interior and on the exterior of the Franchised Business, as well as on purchase orders and invoices and other forms provided to the buying public, Franchisee must ensure that the Authorized Suppliers and public are aware that the Franchised Business is owned and operated by Franchisee. Where the trademark EQ3 is used, for example, in the interior of the Franchised Business, as well as on all purchase orders, invoices, letterhead and other forms provided to the buying public, the following identifier is to be used in advising the Authorized Suppliers and public of the Franchisee's use of the trademark EQ3 :

"EQ3 is a trademark owned by Palliser Furniture, Ltd. and sublicensed to EQ3 Franchise Holdings, Inc. [Name of Franchisee] is An

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Independently Owned and Operated Franchise and licensee of EQ3 Franchise Holdings, Inc."

(d) Upon termination of this Agreement for any reason whatsoever, Franchisee shall, at its expense, execute such documents and take such reasonable action as PFL, EQ3FH or Holdings may deem necessary or reasonable to evidence the fact that Franchisee has ceased using any or all of the Trademarks, including all specific color combinations, designs, symbols or slogans included in the Trademarks, and any and all domain names, electronic mail addresses and Internet web sites that display or use the Trademarks or any such specific color combinations, designs, symbols, or slogans and that Franchisee has no further rights therein. Franchisee shall refrain from doing anything by word or action which might mislead anyone into believing that Franchisee may still have some association with PFL, EQ3FH or EQ3 Products, and toward this end> Franchisee hereby irrevocably appoints a representative of EQ3FH to be Franchisee's attorney in fact to execute any reasonable document or commit any legal act reasonably necessary to protect the Trademarks from unauthorized use by Franchisee, including cancellation of any business or trade name registrations and any agreements with respect to the Trademarks, in the event Franchisee fails to do so. Franchisee acknowledges and agrees that the unauthorized use of the Trademarks will likely constitute irreparable damage for which EQ3FH and its Related Parties may apply to obtain injunctive relief in addition to monetary damages.

7.4 Third Party Beneficiaries. Each of the Related Parties is intended to be a third party beneficiary of Article 7 and each may independently enforce the provisions thereof.

Article 8 Franchise Fees

8.1        Initial Franchise Fee. In consideration of the right to operate an EQ3 Store as granted in Section 3.1, Franchisee agrees to pay to EQ3FH an Initial Franchise Fee in the amount set forth in Schedule D attached hereto, less any deposit previously paid by Franchisee to EQ3FH. The Initial Franchise Fee shall be paid in full by check or bank draft upon execution of this Agreement, or in accordance with any of the terms of any promissory installment note, and shall be deemed to be fully earned upon execution of this Agreement by Franchisee and, except as provided in Section 5.5, is non-refundable in whole or in part by EQ3FH for any reason whatsoever.

8.2       Royalty Fee. During the Term, Franchisee hereby agrees, at its option, either (i) to pay to EQ3FH a continuing Royalty Fee in the amount set forth in Schedule D, payable monthly by the 15th day of the following month, and delivered by Franchisee to EQ3FH concurrently with the monthly records, or (ii) a fixed amount per calendar quarter in the amount set forth in Schedule D, payable by the 15th day of the first month following the end of the calendar quarter.

8.3       Advertising Fee. If EQ3FH implements an Advertising Fund ("Ad Fund") as provided in Section 11.4, Franchisee hereby agrees to pay to EQ3FH an annual Advertising Fee in

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the amount specified by EQ3FH from time to time under Section 11.4, not to exceed one percent (1%) of Gross Revenues, payable four (4) times a calendar year, on the 30th day of the month following the preceding three (3) months, together with the quarterly report required by Section 9.12(b). The Ad Fund shall be used as provided in Sections 11.4 and 11.5.

8.4 Failure to Pay Royalty, Fees, Advertising Fees and Other Amounts. Franchisee is prohibited from offsetting or deducting any amounts from the required Royalty Fee, Advertising Fees or any other amounts due to EQ3FH or its Related Parties and any attempt to do so shall be a breach or default of this Agreement.

Article 9 Operation of the EQ3 Store

9.1 Insurance. Franchisee shall be solely responsible for all loss or damage of any nature whatsoever arising out of or relating to the operation of Franchisee's Franchised Business, or arising out of the acts or omissions of Franchisee or any of its agents, servants, employees, contractees or customers in connection with the operation of the Franchised Business, including, without limitation, the sale of EQ3 Products or the rendering of Customer Services to the public, and for all claims for damage to property or for the injury of or the death of any person directly or indirectly resulting therefrom, and Franchisee agrees:

(a) to obtain and at all times during the Term of this Agreement maintain in full force and effect, and to pay the premiums for, any insurance coverage which may be required under the lease of the Premises, and such other insurance as EQ3FH requires from time to time currently including, without limitation, public liability insurance in the amount of $2,000,000 per occurrence including owned and non-owned vehicle coverage, full replacement property damage insurance, all risks coverage insurance on the fixtures, furnishings, inventory, equipment and leasehold improvements of the EQ3 Store, business interruption insurance, rental insurance and product liability insurance from a reputable North American insurance provider rated A or better in "Best's Insurance Guide", which provider shall be qualified to do business in the state(s) in which the Franchise Territory is located. The policies providing such coverage shall name EQ3FH as loss payee and additional insured on the property damage and all risks insurance and as additional insured on all other insurances, together with a notice provision that provides as follows:

"This policy shall not be cancelled or modified during the period of coverage as stated hereon, in such a manner as to affect this endorsement or policy unless thirty (30) days' prior written notice has been given to EQ3 Franchise Holdings, Inc."

and provide Certificates of Insurance and the insurance policies to evidence same. All policies must contain a cross-liability insurance clause; and

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(b) to apply all insurance proceeds paid to it under all property damage and all risks insurance referred to herein to repair, replace, restore, relocate or rebuild the leasehold improvements on the Premises so that the same will be substantially in the same or better condition as existed prior to the damages occurring, and to replace all inventory lost or damaged as a result of an occurrence. In the event damage is substantial as set out in the lease of the Premises and is subject to Franchisee's or lessor's option to terminate the lease as a result thereof, the exercise of Franchisee's option to terminate the lease, together with the relocation of the EQ3 Store, shall be subject to EQ3FH's approval.

9.2       Franchisee as Independent Contractor. Franchisee is an independent contractor and shall not be deemed an agent, partner, joint venturer or employee of EQ3FH. Franchisee shall exhibit at the Franchised Business, in such places and in such forms as may be designated by EQ3FH, a notification that Franchisee is the owner of the Franchise.

9.3        EQ3FH's Right of Reasonable Access. To insure compliance with the terms and conditions of this Agreement and the EQ3 Operations Manual, EQ3FH and its authorized representatives or agents shall have the right at all reasonable and necessary times to enter Franchisee's Franchised Business for the purpose of inspecting the same, including, but not limited to, inspecting the appearance, types, quantities and displays of products on hand, the appearance of the Premises, the nature and quality of Customer Services rendered and the general manner or method of operating the EQ3 Store. If EQ3FH ascertains that Franchisee has failed to operate its Franchised Business in accordance with any of the standards and requirements set forth in this Agreement and the EQ3 Operations Manual, or as may be requested by EQ3FH, from time to time, EQ3FH may require Franchisee, at Franchisee's expense, to employ such contractors or others necessary to assist Franchisee and Franchisee's managers in effecting full compliance with all such standards and requirements in lieu of or in addition to exercising any other right or remedy available to it under this Agreement.

9.4       Wholesaling. The EQ3 Store Program is intended to promote the retail sale of EQ3 Products to the general public and specifically the targeted market. Accordingly, Franchisee covenants and agrees that all EQ3 Products shall be marketed by it at retail to the general public through operation of Franchisee's Franchised Business in the ordinary and usual course of business, and that Franchisee shall not sell, assign, transfer or otherwise distribute EQ3 Products to any person or entity in a wholesale manner or in any other manner as would facilitate the further distribution or resale thereof in connection with the business of any person or entity acquiring the same.

9.5       Business Hours. Franchisee must have the Franchised Business open for business on such days and during such hours as to be competitive and consistent with those generally kept by competitive furniture stores located within the Franchised Business's market area. Franchisee decides what hours to maintain, and whether or not to be open on Sundays, subject to approval by the lessor and EQ3FH.

9.6       Maintaining Client Lists. Franchisee shall actively collect personal information from customers for the purposes of order fulfillment and marketing. Franchisee shall ensure

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that the collection of personal information from its customers conforms to the requirements of all applicable federal and state laws, regulations and rules pertaining to the collection of personal information from its customers (hereinafter "Privacy Laws"). In furtherance thereof, Franchisee shall ensure that prior to collecting personal information from its customers, it advises the customer:

(i) why it is collecting personal information;

(ii) the purposes for the collection of personal information;

(iii) how Franchisee will use the personal information; and

(iv) that for initial service and secondary marketing purposes, Franchisee will disclose the personal information to Franchisee's successors and assigns and to EQ3FH and its Related Parties.

In addition, Franchisee shall specifically ask customers to provide their email address if they wish to receive promotional information and newsletters from EQ3FH and/or if they wish to participate in surveys, from time to time.

9.7       Payment of Fees. Franchisee shall promptly pay, as they become due, any and all sums, fees and amounts to EQ3FH and its Related Parties as specified in this Agreement, together with all applicable state and other sales taxes.

9.8       Payment of Trade Accounts. Franchisee shall promptly pay, as they become due, all obligations and trade accounts of the Franchised Business.

9.9       Payment of Rent. Franchisee shall promptly pay lease or rental payments for the Premises as such payments become due. Franchisee shall keep the lease for the Premises in good standing.

9.10     Payment of Taxes, Etc. Franchisee shall promptly pay all employer remittances, and federal, state and local taxes when due, including, without limitation, remittances for workers' compensation, unemployment insurance and withholdings, federal and state income taxes and withholdings, and social security taxes, sales, use and property taxes, and all other statutory remittances (which are capable of forming a lien or charge against the assets of Franchisee in the event of non-payment). Upon request by EQ3FH, copies of all state sales and use tax returns shall be made available to EQ3FH.

9.11      Protection of Proprietary Rights. Franchisee shall operate the Franchised Business so as to protect the integrity of the Trademarks and other proprietary rights and shall maintain a high standard of quality and reputation with respect to use of the Trademarks.

9.12     Business Records and Expense Budgets and Financial Statement Reporting.

Franchisee shall maintain true and accurate accounts and records of all sales of goods and services in the operation of the Franchised Business and all costs with respect thereto, according to generally accepted accounting principles and in a form satisfactory to EQ3FH. Without limitation, Franchisee shall deliver to EQ3FH:

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