Franchise Agreement

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


Sample Franchise Agreement

THIS AGREEMENT {"Agreement"

FIGARO'S ITALIAN PIZZA, INC. an

SE, Suite 160, Salem, Oregon, 97302 ("Figaro

("Master").                                          '

j

I.           PREAMBLE.

MASTER FRANCHISEE AGREEMENT

is effective

_____, ____. It is by and between

Oregon ^orporatidrjj, with fts principal offices at 1500 Liberty Street ") and tl        I_________________________

1.1

Figaro's has developed and owns a ui ique S 'Stem, as defined below. Each Figaro's Store is owned and operated ercher by Figaro's, or by its Franchisees.

1.2 Figaro's is the owner Figaro's continues to

of the Marks, together with all the goodwill connected to the Marks. develop me N/larks hji order to identify for the public the source of the products and services marketed at Figaro's Stc res, and to represent the System's high

standards of products, operations,

quality! appearance and service.

1.3

It is the purpose of this Agreement to defifie the terms on which Master will act as Figaro's sales and operations 'representative with rathe Te ritory.

DEFINITIONS.

2.1

Commission. Commission me

ns all surrjs to b« MasteV will NOT rece

paid to Master under this Agreement as e any commission on interest income fees, transfer fees, continuing licensing

specified in Section 5.

earned by Figaro's on UnuutitJUijeu imilicii iiieuiuiiiba itJtss, iidiisiei ibhs, uuMLiiiuniy iiutiiibiiiy

fees, or on promissory notes from Franchisees. Waster will NOT receive any commission on any Franchisee payment other tha|rS for irStial franchise fees, transfer fees and

continuing licensing fees as outi nea1 in Section 51 Master only will rec_____......._____..

initial franchise fees, transfer fess and continuing licensing fees earned and collected by Figaro's in cash.

2.2

information means trade secret, confidential

3ther information! knowledge, or data of Figaro's (or any

Confidential Information. Confidential

commercial informatio'n, or any

affiliate of Figaro's) which is no generally known" to the public. This includes, but is not

limited to, information! relating Id research, financial information, product development,

manufacturing or mariufacturing processes, recipes and menus, maintenance or repair

processes, purchasing, product pr materia costsj sales or sales strategies or prospects,

pricing or pricing strategies, advertising dripromotional programs, product information, or

mailing or customer foregoing.

ists or any

2.3

intellectual property rights relating to each of the

2.4

Franchise. Franchisej means trie Store. "Figaro's Store,!' "Franchisee

enterprise that Figaro's operatesjat _ _..._____.___

operate under a Franchise Agreement at afsingle location.

Franchisee. Franchisee means & person oj legal e a Franchise Agreement.

rights grantedlby Figaro's to develop and operate a Storej and "Store" means the entire retail business a singPe locatfcn or its Franchisees are authorized to

person or legal entity that operates a Store pursuant to

2.5 Franchise Agreement.

Franchise Agreement means the form of agreement and the exhibits, addenda, guarantees, and relate* documents, as modified from time to time, used by Figaro's in grafting a Franchise fo'rjthe ownership and operation of a Store.

Franchise Development Marketing means services Figaro's '\a the Territory, as defined in section 3.3.1.

2.6 Franchise Development Marketir g.

performed by Master on behalf of

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2.7        Marks. "Marks" is defined in Figaro's most current Franchise Agreement as of the date of this Agreement, which Master has received.

2.8        Site Acquisition Services. Site Acquisition Services means services performed by Master on behalf of Figaro's, in the Territory, as defined in section 3.7.1 (a)-(d).

2.9        Quality Control. Quality Control means services performed by Master on behalf of Figaro's in the Territory, as defined in sections 3.7.1(e)-(j). This includes but is not limited to, regular quality assurance visits to each Store, initial classroom and subsequent on-site hands-on training of Franchisees, opening assistance and continuing support of Franchisees. Master will provide the level of Quality Control within the Territory required by Figaro's. Master understands that maintaining the required level of ongoing training, quality control and field support service is crucial to the success of the System in the Territory.

2.10      Quality Control. Site Acquisition and Training Fees. Upon Master's request, Figaro's or another certified master franchisee designated by Figaro's may provide Quality Control, Site Acquisition, mystery shopper or local training services on behalf of Master. If so, Master will pay Figaro's (or the designated master franchisee through Figaro's) for these services. When Figaro's or a designated master franchisee provides Quality Control, Site Acquisition, mystery shopper or local training services to a franchisee in the Territory, Master will compensate Figaro's (or the designated master franchisee through Figaro's) at Figaro's then current and standard rate for such assistance, training and supervision as outlined in the Operations Manual. Figaro's may deduct this payment from Master's share of franchise fees collected. These applicable fees and how they will be collected and distributed between Figaro's and designated master franchisees who are providing services, will be established in the Operations Manual. They may be changed at any time by Figaro's upon not less than 30 days prior written notice.

2.11       System. "System" is defined in Figaro's most current Franchise Agreement as of the date of this Agreement, which Master has received.

2.12      Term. Term means the term of this Agreement as defined in Section 3.2.

2.13      Territory. Territory will be that region described on Exhibit 1 attached to this Agreement.

2.14      Other Definitions. Except as otherwise stated in this Agreement, all capitalized, or otherwise defined, terms will have the same definition as defined terms contained in Figaro's most current form of Franchise Agreement as of the date of this Agreement. Master acknowledges receipt of the present form of Figaro's Uniform Franchise Offering Circular and Franchise Agreement.

3.           MASTERS' RIGHTS AND OBLIGATIONS.

3.1         Initial Fee. Master has paid to Figaro's a non-refundable Master Franchisee License Fee of $_____________.

3.2        Term and Renewal of Agreement. This Agreement will commence on the date first set forth above and will continue for ten years.

Master will have the right to renew this franchise before the expiration of the initial term of the franchise for successive five-year terms. Master will not be required to pay a renewal fee or additional Master Franchisee License Fee, providing all of the following conditions have been fulfilled.

A.          Master has, during the entire term of this Agreement, substantially

complied with all its provisions and system standards.

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B.

D.

E.

Master is in' substantial corrtpliance with the provisions of Master's franchise agreements for the individual store franchises owned by Master.

Master has cjiven notice of rjenewal to Figaro's as provided in this Agreement.

Master has satisfied all monetairy obligations owed by Master to Figaro's (and its subsidiaries and affiliates) and has timely met these obligations throughout the! term of this Agreement.

Master execu es, upon each i renewal, Figaro's then-current form of Master Franchisee Agreement fwith appropriate modifications to reflect the fact that the agreement relates to the grant of a renewal franchise). The renewal agreement will supersede in all respects this Agreement. The terms of (he renewal agreement may differ from the terms of this Agreement, including, without limitation, a different percentage for Continuing Licensing Fees and advertising contributions.

F.          Master has complied with Figarp's then-current qualification and training requirements.

G.          Master and Figaro's, prior to renewal and following applicable law, execute a general release, in a form Figaro's prescribes.

If Master desires to renew, Master will give Figaro's written notice at least 9 months, but

of this Agreement. Within 60 days after furnish Master with written notice of any

not more than 15 months, prior to the expiration Figaro's receipt of the timely no:ice, Figaro's will reasons that could cause Figaro's not to accept the renewal notice. Figaro's notice will include any deficiencies that require correction atid a schedule for correction by Master. Renewal will be conditioned upcn Master's compiance with these requirements within 60 days of Figaro's notice and cont nued compliancy with all the terms and conditions of this Agreement up to the date of germination of the initial term (or as Figaro's otherwise expresses in writing).

If Master does not comply with Figaro's election not to renew th this Agreement. The notice will<

:igaro's notice, Fligaro's will give Master written notice of franchise at lea^t three months before the expiration of pecify the reasons for non-renewal.

with Figaro's Agreement, the

express

If Master continues to operate

expiration or termination of this

extension of this Agreement. Thife Agreement will

30 days written notice. Otherwise, all provisions

operations continue.

or implied consent, following the

continuation will be a month-to-month

i:hen be terminable by either party upon

of this Agreement will apply while

3.3 Appointment of Master. Figaro'? grants Master the exclusive right to advertise for and market to prospective Franchisees for Stores to be located within the Territory. Master may, in its sole discretion, provide Quality Control services. In this event, once Master has successfully passed all reqjired training, Master may perform Quality Control of Franchisee Stores located in the Territory and ,n other locations if so requested by Figaro's. Master may do so only is long as Master remains certified by Figaro's. Master may not sell or negotiate the sal 3 of franchises. Figaro's retains all right to specify the form of individual franchise agreement and to accept or reject ail franchise candidates. So long as Master is not in material default under jthis Agreement, Figaro's will not grant similar rights within the Territory to other parties,! provided however that Figaro's may grant certain franchise rights to trpse parties described on Exhibit 1. The exceptions to this exclusive territory are the same as contained in Section 2 of the Franchise

3 - FIGARO'S MASTER FRANCHISE AGREEMENT

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Agreement and in any Franchise Agreement in effect in the Territory. Figaro's may conduct Multi-Area Marketing Programs (as defined in the Franchise Agreement) within the Territory.

3.3.1      Franchise Development Marketing. Master will diligently market for new Franchisees in the Territory. Master must submit all ads, marketing materials and programs for prospective franchisees to Figaro's for approval prior to use. Approval will not be unreasonably withheld. Advertising to attract franchisee candidates is to be placed in media in the Territory and must be approved in advance by Figaro's. Except with Figaro's prior written permission, Master will not under any circumstances place advertisements using the Marks in or originating from any area other than the Territory.

Master may not advertise in any media whose primary circulation is outside the Territory, except with Figaro's prior written permission. All Internet marketing is part of Figaro's multi-area marketing programs described in the Operations Manual and defined in this Agreement and in the Franchise Agreement, and must be coordinated through Figaro's and approved by Figaro's. Master may not market independently on the Internet or acquire an independent Internet domain name or web site. Master may not independently market using any digital, electronic or computerized form or any form of media now or in the future developed (e.g. materials to be made available through the internet, interactive electronic transmissions, etc.).

All advertising placed by Master must follow the provisions of this Agreement.

Master is solely responsible for preparing and placing all advertising to attract franchisee candidates, at Master's expense. Beginning ninety (90) days after execution of this Agreement, Master must purchase, place and run not less than $1,000 in such advertising during each calendar quarter during the first twelve months this Agreement is in effect; $2,000 during each calendar quarter during the second year and $2,500 during each calendar quarter during each remaining year of this Agreement on advertising exclusively designed to attract franchisee candidates. If the Territory encompasses more than one million inhabitants, the minimum quarterly advertising placement is increased pro rata. i.e. - if the Territory contains three million inhabitants (200% more than one million), the minimum in the first twelve months is $3,000 during each quarter which is 200% more than $1,000. Upon renewal of this Agreement, the minimum advertising requirement will be based upon the then current standards for new Master franchisees.

On a periodic basis as specified by Figaro's, Master will provide copies of invoices representing the ads Master has purchased, placed and run during the period to meet the requirements above, and include copies of the actual advertising placed, including 'tear sheets' or other proof of performance.

Figaro's regional and national advertising may result in leads being generated for prospects within the Territory. Figaro's will deliver or direct these leads to Master. From time to time, Figaro's and Master may jointly elect to place advertisements to sell franchises in local media located in the Territory. Prior to placement of any such advertising, Figaro's and Master will negotiate the portion of the costs of such advertising each will be responsible to pay.

3.3.2     Master agrees to fully comply and cooperate with the following:

A.          Upon the sale of a franchise, the master franchisee in whose territory the

franchisee resides will be paid the applicable Commission on the Initial

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Franchise Fe franchise s Requirement sold within th a specific loc franchise agr resulting territ' in the Territo

. That master franchisee also will receive one credit for that Id towards the applicable Minimum Performance or that master franchisee. For example, many franchises Figaro's lystemldo not, at the time of the sale, provide for tioh for tine franchise. Subsequent to the execution of the anient; ftbe franchisee identifies a desired location. The jry assignment may lead to franchise stores being opened

Prior to commencing operations, if the franchisee receives permission to reassign the franchise to an available location outside the territory of the master franchisee wholmade [the original franchise sale, immediately upon the opening! of the] franchise store Figaro's will charge back to the selling masterHraijichisee and the selling master franchisee will refund to Figaro's withinlthirty dafe of invoice an amount equal to 50 percent of the Commission oigiipally paid for the sale (i.e. 25 percent of the net Initial Franchise Fee;. Within hnirty days of the end of the month following the month in whiclj the franehise store opens, Figaro's will remit the refund selling master franchisee to the master franchisee in franc'fiised st©re actually opens for business.

collected from whos'e territory

the

the

i

In this instance, the masjer franchisee which made the original sale will retain one credit I towards the! selling master franchisee's Minimum Perfojrmance Requirement and the master franchisee in whose territory the store opens also wiillreceivej one credit towards the opening master franchisee's Minimum Performance Requirement, effective as of the date the franchise storelopenkwor business.

chisee injjwhoselterritory the franchise store is physically e .ljull responsibmty to provide Quality Control services jot limited] to, initial training and opening support. That be will receive trie entire applicable Commission on the

sing Fee payments related to the franchise store as .hat master franchisee's agreement. The selling master lot receive] any Commission on the Continuing Licensing

lated to that franehise store.

D.         The rnaster frar

located will hai including, but maste(r franchis' Continuing Lice, provided for in franchisee will Fee payments r

3.3.3 Notwithstanding the exclusive ricjSts of Master within the Territory, Master may request, or Figaro's mayjrequire, mat Figaro's, or a master franchisee designated by Figaro's, handle some o'r all qflthe inifial store opening assistance and initial and ongoing training (Quality Con ml) efforts in the Territory as follows:

A.

Masterj may elea Figaro's to provi initial and ongoi Territory. If so, assistance and master franchise' addition, Masteij franchisee the a or the designated

A to handle onl^ franchise sales marketing and ask

e iirjiitial store prejopening and opening assistance and

g training and all Quality Control to franchisees in the

aster will pay trie applicable pre-opening and opening

initial anal ongoing training fees to Figaro's or to the

designated by Figaro's, as determined by Figaro's. In

will pay] to Figaro's or to the designated master

ipjioable (Quality Control fees. In this instance, Figaro's

master franchisee will provide:

1.

2.

| training scho'ol facilities ana coordinate the scheduling of trainees \ and training sessions, andf

istore pre&pening and opening assistance and Quality Control for jail franchisees in.the Territery.

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B.         Master may elect to handle franchise sales marketing and to offer local store pre-opening and opening assistance and all other initial and ongoing Quality Control to franchisees in the Territory, except for the initial training school. If so, Figaro's, or a master franchisee designated by Figaro's, will provide the initial training school. Master must be certified by Figaro's to provide initial store pre-opening and opening assistance and all other initial and ongoing Quality Control, except for the initial training school, on behalf of master franchisees and/or on behalf of Figaro's in consideration for the applicable Quality Control and Training fees established in the Operations Manual. In this instance, Figaro's or the designated master franchisee will provide training school facilities and coordinate the scheduling of trainees and training sessions.

C.          Master may elect to handle all franchise sales marketing, local store pre-opening and opening assistance, initial and ongoing training and site acquisition services and all other Quality Control services to franchisees in the Territory. In order to do so, Master must be certified by Figaro's to provide store pre-opening and opening assistance, initial and ongoing training and site acquisition services, and all other Quality Control on behalf of Figaro's and/or other master franchisees in consideration for the applicable fees established in the Operations Manual.

D.          Master may elect to not provide Site Acquisition Services in the Territory. If so, Site Acquisition Services will be provided by Figaro's or by a master franchisee designated by Figaro's in its sole discretion. Master will compensate Figaro's or the designated master franchisee by paying to Figaro's the standard fee for such services as outlined in the Operations Manual.

Currently, the quality control fees are: a) training school - $1,500 for up to two trainees for two weeks; b) through the first 90 days of a store's opening -including store pre-opening and opening assistance fees, site acquisition services fees, and initial and ongoing quality control fees - $5,000; c) ongoing servicing fees are $440 per service staff person per day, $220 per service staff person per half-day. Each fee is in addition to travel time and out-of -pocket travel costs. Master also incur the fully burdened costs of mystery shopping services and support and quality control programs. These fees are subject to change upon 30 days prior written notice as outlined in and more fully described in the Operations Manual.

In instances in which Figaro's handles some, but never all, of the marketing and sale of franchises in the Territory, Master will continue to be exclusively responsible for the ongoing advertising expenditures outlined in Subsection 3.3.1, above and to also actively handle sales and marketing activities in the Territory. In addition, Master will pay Figaro's for Figaro's sales efforts 10 percent of the initial franchise fees (net of any grand opening advertising allowance and franchise coordination fee) generated by sales handled by Figaro's. By way of example, a franchise sold at $47,500 initial fee which includes $12,500 grand opening allowance and a $10,000 franchise coordination fee will generate a payment to Figaro's of $2,500 (10 percent of $25,000). Figaro's will deduct this payment from Master's share of franchise fees collected.

If Figaro's is handling franchise sales marketing for Master, at any time Master may determine that Figaro's assistance is no longer desired. Provided that Master is performing at the franchise sales level established in Exhibit 2, upon 90 days advance written notice, Master may instruct Figaro's to no longer handle franchise sales marketing.

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3.3.4     Figaro's or its affiliates may open in Whole or part one additional Store in the Territory per year during the Term ancl any renewal terms of this Agreement. If Figaro's does not opeln a Store in any!given year, it may not open that Store in any future year. The^e Stores will qualify towards the Minimum Performance Requirement described below.               i

3.3.5     Master specifically acknowledges and agrees that any web site will be deemed "advertising" under this Agreement an<jl will be subject to (among other things) Figaro's approval. (Ap used in this Agreement, the term "web site" means an interactive electronic document, contained in a network of computers linked by communications software that Master (Operates or authorizes others to operate and that refers to the franchised business, proprietary marks or Figaro's. The term web site includes but is not limited to, Internet and World Wide Web home pages. "Internet" means any of one or more local or global interactive communications medial, that is now available, or that may become available, and includes web sites and domain names.l Unless the context otherwise indicates, Internet includes methods of accessing (imited access electronic networks, such as Intranets, Extranets, and WANs.) Jn connection to any web site, Master agrees to the following:

A.

B.

C.

D.

E.

F.

Figaro's will all<

site.

Master will not written approval

Before establish of the web page may reasonably

w Master to establish a web page as part of Figaro's web

establish or use the web page without Figaro's prior

ing the web paget Master will submit to Figaro's a sample format and information in the form and manner Figaro's

require.

In addition to any other applicable requirements, Master will comply with Figaro's standards and specifications for web sites as prescribed by Figaro's from tine to time in the Operations Manual or otherwise in writing or on a franchisee forum intranet system.

If Master proposes any material Revision to the web page or any of the information contained in the web site, Master will submit the revision to Figaro's for prior written approval, i

Master will use c

nly approved key words, meta tags and titles pertaining

to the pizza industry. Figaro's will e-mail or respond via facsimile approved key words, meta tags ^nd titles upon Master's request by e-mail or facsimile.!

G.         Subject to the

and use in any site. This included prospective referred to Master Master.

terhns of use on its Web site, Figaro's may gather, develop

lawful manner information about any visitor to the web

but is not limited to any customers, franchisees or

franchisees of Master regardless of whether they were

via the web site or were otherwise in contact with

H.          Figaro's has established an intranet or comparable on-line facility. Master

must utilize it in jhe manner required by Figaro's. Master understands and agrees that Figaro's may elect} to provide certain assistance, deliver information and materials or otherwise communicate with Master via the intranet. Master aj its sole expense will maintain and update as needed all computer system requirements and services necessary to access the

7 - FIGARO'S MASTER FRANCHISE AGREEMENT I                           I

,06 February 20 FA Master Franchisee - Cleen.doc


intranet in the manner required by Figaro's. Master is required to have DSL or other high speed Internet service to Master's business or home office where Master will be able to access downloads from Figaro's of advertising materials, operations manual revisions, training materials and corporate news.

I.           Training and training materials may be delivered in the formats or media

of Figaro's choosing. This includes but is not limited to course books or training exercises on paper, video, CD-ROM or other electronic format, via web cast or an intranet. Master will participate in the training and shall be solely responsible for the cost of doing so, including costs of computer equipment and services needed to participate.

J.          The Operations Manual may be delivered to Master by hard paper copy,

computer diskette, CD-ROM, via an intranet or other downloading mechanism to Master's computer or via another medium chosen at the discretion of Figaro's.

3.4        Master's Operating Form of Business. Master agrees to perform its obligations in full compliance with this Agreement. Master may hire representatives, employees or agents to assist it in performing the obligations under this Agreement. All persons so hired must agree to fully comply with Master's obligations and requirements pursuant to this Agreement.

3.5       Minimum Performance Requirement. Master will identify and assist prospective

Franchisees, perform Site Acquisition Services, and perform Quality Control of all Franchisee-operated Stores located in the Territory, except as otherwise provided in paragraph 3.3.3 above. If Figaro's acquires a competitor's operating Stores in the territory that are converted to Figaro's, Figaro's will assign these to Master for Quality Control and such stores will be credited towards the minimum performance requirements of this section as if they had been sold by Master. Master will comply with the minimum performance requirements of a minimum number of Stores sold as set forth in Exhibit 2 (the "Minimum Performance Requirement" or "MPR"). All Figaro's franchises that Master has sold in the Territory pursuant to this Agreement will be counted toward the Minimum Performance Requirement. Stores opened and/or sold in the territory prior to the execution of this Agreement will not be counted towards the Minimum Performance Requirement unless so specified in Exhibit 2. Figaro's may terminate this Agreement upon 30 days' written notice, at Figaro's option, if Master has failed to meet these minimum performance requirements during two out of any three consecutive 12-month periods commencing upon execution of this Agreement ("Agreement Year"). Upon termination for this cause, Master may not establish any new or additional Figaro's franchise or offer, assist or service any other party to establish or operate a Figaro's franchise pursuant to this Agreement. Master will cease training and support and all Quality Control services for the Figaro's Franchise Stores in the Territory and will not receive any portion of the Continuing Licensing Fees received from those Stores. Figaro's will be free to resell the master franchisee rights to the Territory and or to market Figaro's franchises directly within the Territory with no obligation to remit any of the revenues from sales or Continuing Licensing Fees of those franchises to Master. All of Master's rights under this Agreement will cease and Master will comply with terms and conditions of this Agreement related to its expiration or termination.

3.6        Franchise Development Compliance. Master will, at Master's expense, comply with all franchise registration and disclosure laws that pertain to Master (including registration as a franchise broker, if required). Figaro's will comply with all franchise registration and disclosure laws that pertain to Figaro's (including preparing and registering, if required, the offering circular). If laws or regulations governing Master's activities pursuant to this Agreement require the preparation, amendment, or filing of information or documents

8 - FIGARO'S MASTER FRANCHISE AGREEMENT

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together (including an appoi

circular), Figaro's and MasteJ . . ..            *                                       *,--.--

Figaro's and Masterlwill each pear theijj|>wn costs of compliance with such requirements.

Master will cooperate with Fig

registration information reque

any material misrepresentatio

Figaro's, its prospective Franc'

tment of broke| and broker information in the offering will prepare such documents and filings cooperatively.

}j>-'

ro's, ahdprovidelall complete and accurate disclosure and tec by Rigaro's ©r required by law. Master will not make s, omit Jo disease or fail to disclose material facts to governr

isees or

aental authorities.

3.7 Master's Service Obligations to] Franchisees.

3.7.1 Services. Alt of the Territory follqwing:

following [provisions apply to Master's operations in the

Master's successful completion of training and certification, and

The | opening Territory.

f the first Store! owned and operated by Master in the

Prior to successful traning andlcertifidation and the opening of Master's first store, Figaro's will dedi! ct fjfom monies cjue from Figaro's to Master Figaro's then current and standard Cl jality Control and Training fees. This deduction will cover Figaro's provision of sore pre-jqpeningland opening assistance, training, and other Quality bontrol se rvic.es to |igaro'J franchisees in the Territory. Thereafter, subject to the provisions of Subsection 3K3.3, above, all sales marketing, training, operational assistance enc supervision will be provided by Master at Master's

expense to franchisees.

;all Figarc

franc

usees 5n the Territory, including transferee

In consideration for the rights granted to faster by this Agreement, once Master's first Store has opened for business, Master or his representatives, employees or agents retained by him] agrees to perform the following services at Master's

expense, as directed by Figaro's:

A.

B.

C.

D.

E.

Identify and maintain a list for rfigaro's of possible locations for each Store in the Ternton}; I         [ I

Coordinate with franchisees in negotiating economic terms for leases for

the Territory;

each proposed location in

Coordinate with] Franchisee's seal estate counsel and architects, contractors, and] other ve'ndors with regard to the development and opening of each proposed locatiorlin the Territory;

I

Using procedure^ reasonably required by Figaro's, complete and submit to Figaro's all Eigaro's-pi-ovided (forms and Figaro's-specified reports relating! to site selection, je'ases, plans, and construction. All proposed sites for Stores will meet Figaro's tjen applicable site selection criteria;

Provide) the requfed| initial weeks for each franchise;

training] for up to two people for two six-day

F.          Provide training oj new empjoyeesrand assistance prior to and during the

opening! of each Franchise

Store loeated in the Territory;

required) by Figarc 9 - FIGARO'S MASTER FRANCHISE AGREEMENT

Make periodic quality! assurance visits to each Franchisee Store located in the Tjerritory, uliing suchischedujes, reports and methods as may be

s; I

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I


H.          Provide all other Quality Control, general ongoing assistance and support

to each Franchisee Store located in the Territory;

I.            Use and transmit to Figaro's the Figaro's-provided forms and Figaro's-

specified reports, and software and computer information and communication systems, as Figaro's prescribes from time to time. Master will purchase the necessary software and computer information and communications systems. Using procedures reasonably required by Figaro's, Master will complete and submit reports relating to Quality Control visits and mystery shopper programs, and store pre-opening and opening assistance; and

J.           Provide full ongoing assistance and training to all transferees. When an

existing franchisee sells a store to a new franchisee, a transfer fee is paid. The transferee is required to attend the training program. This training and all assistance needed for the transferee to assume operation of the franchise will be Master's responsibility.

3.7.2     Performance of Master's Duties. Master's duties must be performed in conformity with Figaro's responsibilities and duties to its Franchisees as set forth in this Agreement and in each applicable franchisee's franchise agreements. All required acts or occurrences of Master will conform, in all material respects, to the Confidential Operations Manual and the System. Master will provide such required services to all Stores operating in the Territory for which Master has been assigned Quality Control.

All service and support Master provides must comply with directives of Figaro's as issued from time to time. All service and support Master provides must be of the level of quality required by Figaro's. Master may not train or instruct franchisees to operate in a manner inconsistent in any way with Figaro's Confidential Operations Manual, policies and directives, as modified from time to time. Master's responsibility includes promptly reporting to Figaro's any non-complying franchisee, and to assist, using best efforts, to enforce Figaro's System standards.

Any and all data ever received by Figaro's or by Master from a franchisee, including but not limited to franchise purchase applications, payment history, sales reporting, audit reports, performance evaluations, etc. will all be made available on an ongoing basis to Master and Figaro's to the extent requested. Master shall keep franchise and franchisee information and data confidential and will use it only for purposes related to the evaluation, service and support of franchisees.

3.7.3     Prerequisites to Performing Services. The training school for master franchisees will be held for a minimum of ten days at training facilities designated by Figaro's. It is offered for up to four persons associated with Master. It is mandatory for Master or Master's Designated Director of Training to attend and complete this training to Figaro's satisfaction and Master must own, open and operate Master's first individual unit Franchisee Store before servicing or supporting any Franchisee Stores. In addition, Master must satisfactorily complete any aptitude or other qualification testing and any certification, retraining and recertification processes required by Figaro's.

Master and its trainers and field service personnel are required to attend Figaro's conventions that are held annually or less frequently and an up to two-day session Figaro's may hold for master franchisees and their field staffs just before or after the convention. Master also must attend, if Figaro's so requires, up to two

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F "'"7"

3.8

additional annual sessions of! up to ftiree days duration during each year, at Master's expense. Master agrees th|t that it will be a default constituting a substantial breach ofk materialiprovisijpn of this Agreement pursuant to relevant law, thus establishinglgood cause for termination, if Master (or Masters owners, officers, or key employees) doj hot attend the required convention sessions and additional annual sessions. ;

3.7.4 Master Elects Not to Rrovide Services d> is Incapable. If Master elects, at its sole discretion, not to provide the services outlined above in 3.7.1 to franchisees in the territory and/or for so long as Figaro's deems Master incapable of providing such services, the services will'be prpyided by Figaro's or other Masters designated by Figaro's. Figaro's will deduct its fee forfbrovision of such services from payments due to Master.                              I           j

Master's Owned Stores. Master; has, prior to [or simultaneously with execution of this Agreement, purchased and signed a Figaro's srandard form of Franchise Agreement for each of three stores. Each of tftese Franchise Agreements has been amended to require Master to open a Store within tpe Territqry withinrlS months, the second within 36 months and the third within 60 months of the date of thelfirst franchise agreement. 7he first Store to be opened by Master in th& Territory must be a dine-in model strictly conforming to Figaro's then current specificatipnsi for newly opened dine-in stores. Once the first Store is open, Master may open either Smaller dqlivery/take-out models or dine-in models for the second and third stores. Master agreesltnat Master's failure to open any of these three

stores when required; by and

strict complianc and Master's failure to maintain] at least one ope' from the date of this Agreement are material bra default constituting a substantial I breach of a pursuant to relevant law, thus establishing goo termination of this Agreement without refund. Master understands and agrees that an essential element of this Agreement and of the Relationship between the parties is that these three model stores will be, built ancfjopened for business in the Territory within the required time frames and that atjleast one Store remain operational at all times.

with the relevant Franchise Agreement store at all times beginning 24 months ches of this Agreement which will be a material provision of this Agreement cause for termination, that will result in

Any failure to commence operation'of the stores

natural disaster, a labor dispute'! control will be excused for a peri;

shortages or ot

! !l

od.of time that

the circumstances. As of 24 months of I the dat continuously thereafter!, Master must ownlthe maj least one Store open and continuing in op,eratio with the applicable Franchise Agreement] throu' transferred, the transferee must continuously fulfill required Stores from the transferor or b^ othe number of Stores in the Territory.'

opening services to Master for responsible for all out-of-pocketl relevant franchise agreement.

jcaused by a war or civil disturbance, a er events beyond Master's reasonable deemed reasonable by Figaro's under of the first franchise agreement and rity interest in and have and operate at in the 7erritory, and be in compliance hout the 7erm. If this Agreement is [this requirement by either acquiring the se owning and operating the required

Figaro's will provide at its expense its standard training school services and initial store

4.

the first Store costs to attend

opened by Master. Master will be the school, as described in Master's

FIGARO'S APPROVAL OF PROSPECTIVE FRANCHISEES.

4.1

Review of Prospective Franchisees. Masterjagrees" to refer each qualified applicant for a Franchise to Figaro's for its approval A qualified applicant is one that Master believes to be of good character, has adequate! financial resources, and otherwise meets Figaro's criteria for Franchisees.

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4.2        Application Process. Master agrees to assist qualified applicants to complete expeditiously the application process. Each application for a franchise must contain all information reasonably requested by Figaro's, including a site report for each site at which the applicant proposes to establish a Store, financial statements, and customary financial, business and personal information and references for each applicant.

4.3        Approval of Franchisees. Figaro's will conduct a pre-approval telephone or personal interview with each franchise applicant. By written notice to Master within ten business days from receipt of all information pertaining to an applicant and completion of the interview, Figaro's will approve or disapprove applicants for franchises. The grant of the Franchise will be evidenced by the execution by Figaro's and the applicant of Figaro's then current Franchise Agreement. Figaro's will have the absolute right and discretion to accept or reject the application, and any lease or site.

Master agrees that all future franchise sales whether to existing or prospective Franchisees will be subject to the following:

A.   The written approval of Figaro's, which approval may not be unreasonably or in bad faith withheld. Figaro's will give Master reasonable written notice of business or financial circumstances that might require Figaro's to reject sales to otherwise qualified franchise candidates or to limit Master's franchise sales efforts. .

B.   Approval by Figaro's evidencing that the promotion, development, negotiation and sale of each franchise was done in strict compliance with all applicable state and federal franchise, antitrust, contract, real estate and business laws.

C.    Figaro's' may monitor the use, delivery and acknowledgment of receipt of all Uniform Franchise Offering Circulars, Franchise Agreements, advertising and promotional materials, and written and oral representations made to all existing or prospective franchisees by Master.

D.    Master and Figaro's will fully comply with good business practices and all applicable state and federal franchise, antitrust, contract, real estate and business laws associated with the promotion, development, negotiation and sale of franchises and the establishment of franchise locations. Each will hold the other harmless for and defend the other against any damages directly or indirectly accruing as a result of any breach of this obligation.

E.    Figaro's may approve or reject any franchise candidate presented by Master, based upon FIGARO'S's franchisee qualification requirements generally in force as from time to time established and of which Master has previously been given notice in writing. Approval or rejection will be based upon Figaro's reasonable judgment as to the qualifications and probabilities of success for any franchise candidate. Figaro's approval will not be unreasonably withheld.

F.   If Figaro's rejects a franchise candidate presented by Master, Figaro's will give Master notice in writing of the reasons for the rejection.

Master has no authority to and will not negotiate the terms of any Franchise Agreement or grant any Franchise. Neither Master nor Master's principals will, personally or in concert with other parties, purchase Figaro's franchise agreements for the purpose of resale prior to the Store commencing operations. If Figaro's believes that is an issue, Figaro's may refuse to sell or may terminate the franchise agreements in question.

5.           PAYMENTS TO MASTER.

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5.1

5.2

7

Commission on Sale or Transfer of Franchise, vlaster will receive a Commission of 50% of the Initial Franchise Fee and applicable transfer fees, collected from each franchise sold or transferred in the Territory! while ithis Agreement is in effect. Initial Franchise Fees are so designated in the Franchise Agreement and are limited to initial payments by Franchisees for the right to ent'er into a Franchise Agreement to own and operate a Store. Master will not be entitled to] any share of amounts paid or received for advertising (including the Granci Opening Fee), qualification, site selection, and similar services (including the Franchise Coordination Fee), golds, inventory, equipment, real estate, or fixtures. Master will not be entitled to a commission on franchises sold/acquired pursuant to Section 3.8, above. The above fees and cosfe, including the Grand Opening Fee and the Franchise Coordination Fee, may bf separately identified and incorporated by the relevant Franchise Agreement intojthe Initial Franchise Fee. However, the Master will not receive a Commission for any of these fees and costs.

I                  I] I

Commissions on transfers will! be deemed earned by the master franchisee in whose territory the store being transfeyedis orjwill be located. Master's Commission wiil be due and payable to Master within 15]days after; each and all of the following has occurred:

(i)

receipt of the executed Franchise Agreement by Figaro's,

receipt of the applicable paymenflby Figaro's,

!             I [ ll

completion of the pre-appfoval telephone interview and

(iv) satisfaction of all conditions precedent to the entitlement of Figaro's to use such payment.

If Figaro's refunds any initial franchise fe!3, Masjer will refund the related Commission

paid to it within 10 days after notice the next payments due to Master;

or Figaro's will make the appropriate deduction from

wil

Commission on Continuing Licensing Feest Figaro's agrees to pay Master a Commission of 50% of Continuing Licensing fsees received froJi each Franchisee Store located within

the Territory that commences operations) while this Agreement is in effect. Figaro's will assign its company-owned and all other Stores that open while this Agreement is in effect

and that are located within the |"ernitory to Master for Quality Control and for Master's Services if appropriate as outlined in this Agreement. For such Stores assigned to Master, Master will perform Quality Control (and fester's] Services and will be paid the same amount as the Commission o§n Continuing Licensing Fees. The Commission on continuing license fees will be paid to Master on thje 25th day of each month based upon the Continuing Licensing Fees pajd to Figaro's for the previous month. If Figaro's refunds any Continuing Licensing Fee, Rigaro's will deduct the Commission previously paid to Master related to the refunded fee from the'Jext payments due to Master.

i               lit!          |

Except for Stores that commenced operations prior to the execution of this Agreement,

regardless of the source! of any franchise sold, and

provided the franchise Store] is locaSed within the Territory, and

provided that Master is not provided that this Agreeme'

irj default under this Agreement, and nit

n

it has net been terminated or expired,

Master will receive the Commission from every Store operating within the Territory. This also applies to commissions on ContinuingJLicens ig Fees received from Stores in the Territory owned by Master. However, if a St'ore is w lolly owned and operated by Figaro's and Figaro's has expressly requested that Ivlaster not provide services, no commission or

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25


payment will be made to Master for that store.

With respect to Stores opened within the Territory prior to the execution of this Agreement, it is Figaro's intention to assign the rights and responsibilities for servicing and performing quality control of those Stores to Master at the earliest practical date. Figaro's and Master will determine in good faith the relative costs and profitability of Master providing the services and quality control in reference to the geographic and economic distribution of all Figaro's Stores in the Territory. Based upon that mutual assessment, in its sole discretion, Figaro's may offer the rights and responsibility to Master together with the appropriate share of the Continuing Licensing Fee. If Master does not accept the offer, these Stores will not be assigned to Master and will continue to be serviced by Figaro's and no portion of the Continuing Licensing Fees for these Stores will be shared with Master.

5.3        Interest and Reports. Figaro's will pay Master 10% per annum interest on past due Commissions owed. Figaro's will provide to Master with the Commission, a report setting forth:

     the Franchisees who have paid Figaro's;

     the amounts paid;

     the date the Franchisee made the payment, and

     a computation of the payment.

Figaro's payments to Master will be based on the amounts Figaro's actually collects from Franchisees during the previous month. No Commission will be paid on accrued or earned but uncollected fees. All fees or other monies due from Franchisees are first paid to Figaro's and Figaro's will subsequently calculate and process the payment due to Master.

5.4        Collection and Disputes. Master will cooperate with Figaro's to collect all amounts owed by Franchisees and to enforce the Franchise Agreements. If Figaro's files an action to collect Continuing Licensing Fees against a Franchisee in the Territory, the Commission payable to Master will be computed from the net proceeds of any monetary award against the Franchisee actually received by Figaro's. Net proceeds,.for the purposes of this paragraph, is defined as the gross award or settlement payment actually received by Figaro's, less unreimbursed attorneys' fees, costs and expenses incurred by Figaro's in any such action.

5.5        Continuing Licensing Fee Deferral or Waiver. Nothing contained in this Agreement will in any way limit Figaro's right to defer, reduce, waive or forgive any franchise or continuing licensing fee or to otherwise modify any Franchise Agreement, provided that Figaro's acts with reasonable business judgment.

5.6        Commissions on Continuing Licensing Fees Upon Non-renewal or Termination. If this Agreement is not renewed, expires or is terminated for cause, Master will receive only the Commission earned and accrued through the date of expiration or termination.

5.7        Amounts Owed to Figaro's May be Offset from Amounts Due to Master. At any time, Figaro's may deduct from amounts it owes to Master any sums that Master owes to Figaro's.

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ACCOUNTING, REPORTS RND FINANCIAL STATEMENTS.

I I I II J

6.1 Reports. Within 25 days oflthe end of eachi month, Figaro's will furnish to Master a summary of the franchisee reports furnished Jo Figaro's by each Franchisee within the Territory.

6.2

Retention of Records. During the TerrnJ Figaro's and Master will maintain full, complete and accurate book's, record| a'nd accounts in accordance with generally accepted accounting principles ("GAAPJ). iFigarbjs and Master will retain the books, records and accounts for a period of sevenlyears duWig, ana following, the expiration or termination of this Agreement. Said booksj rejcordsJFand accounts will include, without limitation, all sales and income tax returns which reflect operations of Stores, reports from franchisees reflecting their gross receipts, and reports or schedules reflecting Commissions payable.

6.3

Audit Rights. During normal business ihpurs arid with reasonable prior notice to Figaro's and Master, either party will have the irigrit to inspect and audit, or cause to be inspected and audited, the otrler party's] businessl recoraV bookkeeping and accounting records, sales and income tax records and- returns, land other records for the purpose of determining compliance with this Agreement. Ffoaro's and Master will fully cooperate with representatives of the other party and their independent accountants to conduct any such inspection or audit. In the event such ihsoection or audit discloses an underpayment, the other party will pay to the wrongecj partylwithin |5 days after receipt of the inspection or audit report, the amount of such underpayment! This payment will include interest at the lesser of 10% per annum, or Jhe then [current maximum interest rate allowable by law, from the date originally due until the datepf payment.

MASTER'S USE OF THE MARKS.

']

Master: may use the Marks only as specified in this Agreement. Master may idenfify itself as a masteij franchisee of Figaro's. Master may not use the Marks or similar words or synjibols as part of any Segal entity name, nor as part of a domain name or other Internet address. Figaro's owns [the rignts to Ise of the Marks and similar words and symbols used on the Internet for domain inames, locators, metatags, and links and otherwise. Figaro's may change the Maijks or their permitted use, in its sole discretion, at any time. Master

will assist Figaro's in attaining each Territory.

franchisee's compliance with such changes within the

TERMINATION OR EXPIRATION. Master may less than 60 days prior written notice.

i erminaie this Agreement at any time upon not

In addition to all other remedies availab e at lawjc r in equity, Figaro's will have the option to cure Master's breaches at Master's expense.] If rilasterlbreaches or defaults in any of the terms of this Agreement, Figaro's has the right to appoint a receiver fo take possession, manage and control assets, collect profits, and pay the net income for the operation of the master franchise as ordered by a court of jurisdiction. The right to appo'int a! receiver] will be available regardless of whether waste or danger of loss or destruction of the assets existg, and without the necessity of notice to Master.                                     I               |

Figaro's will have the right to terminate this Agreement) only for "cause." For purposes of this Agreement, among other things, Master] agrees itfoat it wi I be a default constituting a substantial

of this Agreej|nent|p"ursuan to relevant law, thus establishing good "cause" is] defined as:

breach of a material provision cause for termination, and that

A.          Master's material breach] of [this Agreement, if such breach is not cured within 60

days after notice from Rtaaiio's toiMasteiJ specifying the nature of the breach. If the termination is for (failure tol meet Iminimum performance requirements, Section 3.5 of this Agreement sha'l goverrjthe cause and timing of termination.

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B.

Master's conviction of any felony that reflects disfavorably upon Figaro's or the

Marks.

C.          Master's commission of a material act of dishonesty that results in direct or indirect damage to Figaro's or the Marks.

D.          Master's abandonment of the business by failing to operate continuously and actively for a period after which it is reasonable under the facts and circumstances to conclude that Master does not intend to continue business under this Agreement.

E.          Master's failure at any time to be in full compliance with paragraph 3.8 of this Agreement or in full compliance with any of the individual unit franchise agreements related to paragraph 3.8.

F.          Master's failure on three or more separate occasions within any period of 36 consecutive months to submit when due reports or other information or supporting records; to purchase, place and run advertising when due; to pay amounts due for purchases from Figaro's, its affiliates or suppliers or other payments due to Figaro's or its affiliates; or otherwise fail to comply with this Agreement, whether or not Master's failures to comply are corrected after Figaro's delivers notice to Master.

G.          Master's material breach of a Franchise Agreement or any other agreement between Figaro's and Master, which is not cured upon the notice, if any, specified in the Franchise Agreement or the other agreement. If Master or any of Master's shareholders, partners, or officers violate any material provision of any other franchise or similar agreement with Figaro's, that breach will be considered a breach of this Agreement and of the other agreements. Figaro's then may terminate or otherwise enforce this Agreement and the other agreements.

After termination or expiration of this Agreement, Master will cease all use of the Marks and Confidential Information. Master will abide thereafter by all post-termination covenants in this Agreement, including without limitation confidentiality, non-competition, and indemnity.

9.          RELATIONSHIP OF THE PARTIES; COMPLIANCE WITH LAWS. This Agreement does not create a fiduciary relationship between the parties. The parties are independent contractors and nothing in this Agreement is intended to make either of them an agent, subfranchisor, joint venturer, partner or employee of the other for any purpose. Neither Figaro's nor Master will make any express or implied agreements, guaranties or representations, or incur any debt, in the name of or on behalf of the other or represent that their relationship is other than independent contractors. Neither Figaro's nor Master will be obligated by or have any liability under any agreements or representations made by the other that are not expressly authorized under this Agreement or otherwise expressed in a signed writing. Master will conduct its business in compliance with all applicable laws, will pay all applicable taxes, and will obtain all required licenses and permits, all at its own expense. Master will prominently display on its business cards and stationary and on any office premises It uses a statement that clearly indicates that its business is independently owned and operated by Master as an independent franchisee and not as Figaro's agent.

10.         INDEMNIFICATION.

10.1 By Master. Master agrees to indemnify, defend and hold harmless Figaro's and its subsidiaries, affiliates, owners, directors, officers, employees, managers, agents, members, personal representatives and assignees, and to reimburse them for any loss, liability, expense or damages (actual, consequential and exemplary) that any of them may suffer, sustain or incur by reason of, arising from or in connection with Master's conduct of

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10.2

10.3

business pursuant to this Agreement. jThis in ;ludes without limitation any matters for which Master is responsible including ttoose brought against Master and Figaro's jointly alleging that Masterjand Figaro's were negligent or otherwise liable. Figaro's will not be liable to Master or to any other person] because of Master's act, omission, neglect, or breach. If it is established that rjoth; li/Taster arid Figaro's were negligent or otherwise liable, Master and | Figaro's Ewilll contribute te the relevant award based upon the adjudicated and assigned respective de'gree of fault.

1 i > it I

By Figaro's. Figaro's' agrees to indemnify, defend and hold Master, and its subsidiaries, affiliates, owners, directors, J officers,! iemplovees, managers, agents and assigns, harmless against and to reimburse them for pny loss, liability, expense or damages (actual, consequential and exemplary) vvhjch arw of them may suffer, sustain or incur by

reason of, arising from or in connection Agreement.

with Figaro's conduct of business pursuant to this

Survival and Expenses. Any iijderjinification obligation under this Section 10 will survive the termination or expiration of this Agreement! Indemnification obligations will include the obligation for the| indemnitor to pay! fall reasonable costs and attorneys' fees of the indemnitee. The obligation of fhe (indemnitor wi[l be joint and several among all parties collectively constituting the indemnitor. [ f

10.4 Insurance.

Master will obtain liability [insurance res Figaro's and Master against Master's act

B.

sonably required by Figaro's to protect /ities.

Immediately upon execution of this Agre sment, Figaro's will name Master as an additional insured partvj under<aVj errors!& omissions insurance policy. Figaro's obtains this insurance coverage to protept Figaro's, Master and other interested parties against various lets and omissior

Figaro's will charge Master forJa pro

insurance and a reasonable admfmistratic charges within 30 days after receipt of

by Master and others.

rata portion of the premiums for this n fee. Master will pay Figaro's for these Figaro's invoice.

As the number of master franchisees grojvs in the Figaro's system, it is expected that Master's pro rata p(ortiJ3n ofjfhe total premium and administration costs will decrease accordingly, o fset by any increase in the gross premium amount. In its sole discretion, Figaro's may elecfjto disc >ntinue, modify or not obtain insurance. This includes Figaro's dscijetion "          - - ...          -.-                   ...

deductibles, etc.

In addition to participation

in an^

obtain similar coverage to protect Master's] interests.

11.

to raise or lower coverage amounts and limits,

coverage obtained by Figaro's, Master may

RIGHT TO CURE. In the event Master jails to perform any material obligation of, or to pay any amounts owing under, this Agreement oijanjjr agreement contemplated hereby, then Figaro's may perform such obligation or pay|such amounts owirjig, afterfeo days notice to Master. Any payment so made will be reimbursed to Figaro's by Master upon demand.

any provision of this" Agreement that is curable and Figaro's gives

In addition, If Master breaches Master notice of the breach, in of $1,000 to help defray Figaro remedy.

addition to curing tfjie breach Master must pay Figaro's a Cure Fee o's administrative aad coroorate costs related to the breach and

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12.         RESTRICTED ACTIVITIES.

12.1       Confidential Information. Both during and after the Term, Master will not divulge or communicate to any person, corporation, governmental agency, or other entity (except in performing Master' duties hereunder), or use for Master's own purposes, any Confidential Information. Master will use its best efforts to prevent the publication or disclosure by any other person or entity of any Confidential Information. During the Term, all Confidential Information will remain Figaro's property and will be delivered or returned by Master to Figaro's upon the termination or expiration of this Agreement. After termination or expiration of this Agreement, Master will not use or divulge any part of the Confidential Information. Master will take all steps reasonably necessary to grant back to Figaro's all rights to any Confidential Information that Master may have acquired in the performing of this Agreement.

12.2       Irreparable Injury. Master agrees and acknowledges that, by virtue of this Agreement; Master will have access to and maintain an intimate knowledge of Figaro's activities and affairs, including Confidential Information. As a result of such access and knowledge, and because of the special, unique, and extraordinary services that Master is capable of performing for Figaro's or one of Figaro's competitors, Master acknowledges that the access and knowledge received and the services to be rendered pursuant to this Agreement are of a character giving them a peculiar value. The loss of this access, knowledge and service cannot adequately or reasonably be compensated by money damages. Master agrees that any materia! breach by Master of its obligations under this Agreement, may cause irreparable injury to Figaro's, and that Figaro's will be entitled to seek preliminary and permanent injunctions enjoining Master from violating such provisions.

12.3      Nonsolicitation. Master and Figaro's agree that during, and for a period of two years after the termination of this Agreement, Master and Figaro's will not, directly or indirectly, solicit any person as an employee or agent who is or was employed by or an agent of the other during the Term.

12.4      Non-Competition. Master will not, directly or indirectly compete or assist in competition with any business selling pizza, during and for two years after the termination or expiration of this Agreement. This covenant applies within the Territory and within a 10 mile radius of any Store or of any other Figaro's master franchisee territory.

12.5      Inducement to Contract. Master and Figaro's acknowledge, and by execution of this Agreement affirm, that the provisions set forth in this Section, and each of its subsections, are a material inducement to Figaro's decision to enter into this Agreement with Master and that without the protections afforded herein, Figaro's would not have entered into this Agreement.

12.6      Master agrees that the existence of any claims Master may have will not constitute a defense to the enforcement by Figaro's of any of the confidentiality requirements and covenants not to compete described in this Agreement. Master acknowledges that any violation of the confidentiality requirements and covenants not to compete would result in irreparable injury to Figaro's for which no adequate remedy at law may be available and Master accordingly consent to the issuance of an injunction prohibiting any conduct by Master in violation of the terms of the covenants not to compete.

Master agrees that each of the confidentiality requirements and covenants not to compete described in this Agreement will be constructed as independent of any other covenant or provision. If all, parts or any portion of any covenant in this Agreement is held unreasonable or unenforceable by a court or agency having valid jurisdiction in an unappealed final decision to which Figaro's is a party, Master expressly agrees to be bound by any lesser covenant subsumed within the terms of that covenant that imposes

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13.

the maximum duty permitted by law, as if the re suiting covenant were separately stated in this Agreement. Each of the kovenants] described in this Agreement is a separate and independent covenant in each]of the separate <?ounties and states in the United States in which Figaro's transacts business, To Me extent that any covenant may be determined to be judicially unenforceable in any,county or staje, that covenant will not be affected with respect to any other county or state. Waster understands and acknowledges that Figaro's will have the right, iiji Figaro's sol'e disiscetion, ro reduce the scope of any of covenants, confidentiality requirements or covenants not tolcompete set forth in this Agreement that apply to Master or [to any ot ler of Figaro's franchisees. Figaro's may do so without Master's consent, effective immediately upon Master's receipt of written notice. Master agrees that Master will comply with an^ ;ovenarit that pertains to Master as Figaro's so modifies it.                 j               1              '             I

Master acknowledges Figaro'slwiil suffer immediate and irreparable harm that will not be compensable by dam'ages alone if Master repudiates or breaches any of the provisions of any part of this Agreement that relatesJto the confidentiality or protection of confidential information and trade secrets ©r Masters covenants to not compete against Figaro's or Figaro's franchise system or Master's threats or attempts to do so. For this reason, under those circumstances, Figaro's,] in addition to arjd without limitation of any other rights, remedies or damages available to] Figaro's at law or in equity, will be entitled to obtain temporary, preliminaijy and permanent injunctions in order to prevent or restrain the breach, and Figaro's will not bejrequiredjtp post a bond as a condition for the granting of this relief. Master also agreeslthat a vipjation <5f any of Figaro's confidentiality or noncompetition covenants will entitle Figarois, in acraition to all other remedies available at law or equity, to recover from! Master any andjall funds, including, without limitation, wages, salary, and profits, which will be 'held by Master in constructive trust for Figaro's, received by Master in connection with such violation.

Master specifically acknowledges the receipt! of adequate consideration for the confidentiality and no'n-competition covenants contained in this Agreement and that Figaro's is entitled to require Master to csmply with these covenants. Those covenants will survive termination or expiration of Mis Agreement. Master represents that if this Agreement expires or, is terminated, whether voluntarily or involuntarily, Master has experience and capabilities sufficient to! enable Master to find employment or otherwise earn a livelihood in areas which do! riot violale this Agreement and that Figaro's enforcement of a remedy by way ot injunction vjill not prevent Master from earning a livelihood.

GOVERNING LAW.

governed by the substantive

This Agreement is [accepted] by Figaro's i itantive laws of Ore.qon without regard to

in the State of Oregon and will be

regara to Oregon choice of law provisions.

Provided, however, that any law of the State ofOcegon tjat regulates the sale of franchises or business opportunities or governs the relationship [of a franchisor and its franchisee will not apply unless its jurisdictional requirements are" met independently without reference to this Section. Oregon laws will prevail, except to the extent governed by the United States Trademark Act of 1946 (Lanham Act, 15 U.S.C. Sections 1051, et sedu and except in those states whose franchise

laws require exclusive application of those laws. T^ls choirfe of laws will not include and does not extend the scope of application of any Otjegon franchise or business opportunity laws except as they may otherwise apply pursuant to their terms and definitions. No franchise or business opportunity, antitrust, "implied covenant," unfair corrfpetitiorj fiduciary or any other doctrine of law statute, law or regulation of Oregon or anv other! s&te is intended to be made applicable to this Agreement unless it would otherwise apply absent this paragraph. The foregoing will not be construed as a waiver of any of Master's rights! funder any applicable franchise registration, disclosure or relationship law of anotherlterritoryj state oj commonwealth. Any portion of this Agreement that requires enforcement in any other state, ana is enforceable under the laws of that state but not of Oregon, will be [construed] and erjifojced according to the laws of that state. All issues or disagreements relating to this Agreement! will be mediated, arbitrated, tried, heard, and decided in Salem, Marion Count^, Oregonjwr/ich Master ag ees is the most convenient venue for

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these purposes. Master acknowledges and agrees that this location for venue is reasonable and the most beneficial to the needs of and best meets the interest of, all of the members of the Figaro's franchise network.

14. DISPUTES. The laws of the State of Oregon will govern the legal relations of the parties, and all other matters under this Agreement. Any dispute arising out of or relating to this Agreement shall first be the subject of good faith negotiation between the parties. Failing successful negotiation, any dispute then shall be mediated in Marion County, Oregon, in accordance with the rules of the American Arbitration Association or its successor. If the dispute is not resolved after good faith negotiation and mediation, it shall be submitted to binding arbitration in Marion County, Oregon, in accordance with the rules of the American Arbitration Association or its successor with one arbitrator being appointed pursuant to its rules. Judgment upon the award may be entered in any court having jurisdiction. Nothing contained in this Agreement shall bar the right of either party to seek and obtain temporary injunctive relief from a court of competent jurisdiction in accordance with applicable law against threatened conduct that will cause loss or damage, pending completion of the arbitration. Any arbitration between Figaro's and Master shall be of Master's individual claim and Master and Figaro's agree that the claim subject to arbitration shall not be arbitrated on a class-wide basis.

If Master is an entity with more than one owner, the partnership agreement, shareholders agreement, limited liability operating agreement or other similar agreement for the entity ("Owners Agreement") must contain the following provisions which will supersede any contrary provisions in that agreement:

1.            Master's owners ("Owners") agree to submit any dispute they cannot resolve relating to the operation and management of the franchise business to arbitration by Figaro's president or his designee. If the arbitration submission is accepted by Figaro's president, it must be held at Figaro's headquarters or at another location the Owners and the arbitrator agree. The decision of the arbitrator will be final and subject to enforcement by the courts of competent jurisdiction. If the submission to arbitration is not accepted by Figaro's president, the Owners must resolve their disputes in accordance with the other provisions of this Master Franchisee Agreement.

2.            The term "operations and management" includes, but is not limited to, questions relating to:

1.           Allocations of management responsibilities between the Owners;

2.            Contributions to capital for purposes of business operations, repairs and remodeling;

3.           The reasonable salaries of the Owners;

4.           Marketing efforts;

5.           The termination of the employment of an Owner;

6.            Procedures for making and implementing management decisions;

7.           Whether on Owner has performed duties with respect to the operation or management of the franchise business.

3.            Unless the Owners and the arbitrator agree in writing otherwise, "operation and management" does not include questions relating to:

1.           Allocations, computations or distributions of profit or loss:

2.           Accounting issues;

3.            Elections of officers of the entity;

4.           Investments of cash not necessary for the operation of the business;

5.            Determining whether an Owner is disabled or incompetent within the meaning of the Owners Agreement;

6.           The fair market value of the Owners' interests in the entity;

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62


16.

7.

1

9. 10.

Whether an event has occurred, whidh gives rise to a right to buy the

interest of an Owner other thanla rightlresulting from an Owner's default

determined to exist under; 2, aboVe; I

Whether anj Owner hps met riis obligations to purchase the interest of

any current or former Owner; I j          1

Matters relating to thewvinding ug of thelentity after a dissolution;

Matters relating to thejegal valibjty of thg Owners Agreement.

4.

5.

The Owner's agreement must provide that {he Owner or Owners who are to be responsible for on premises operation of the franchise business must own 50% or more of the capital interests in the [entity anojthat thjs Owners of the entity must have voting rights proportionate to their interests in capital.

The Owners agree to notify Figarois in wrating offtheir intent to enter into, modify or amend any Owners Agreement. Notice mist bej given a| least 10 business days before they enter into that agreement, |modificatiS>n or anMidmenf. The purpose of this notice is to enable Figaro's to review it for compliance! with inis sectpn.

6.

Inclusion of these provisions in the Owner's Agreement will be a condition to Figaro's consent to the transfer of the franchise toran entif

15.         CUMULATIVE RIGHTS. Th^e rights oj Figaro'siand Ivraster hereunder are cumulative and no

exercise or enforcement by Figaro's or Master of any right or remedy will preclude the exercise or enforcement by Figaro's or Ivjaster of any other eight orlremedy hereunder or which Figaro's or

Master is entitled by law to enforce.

ENTIRE AGREEMENT. This entire understanding of the

Agreement, including the oreambles and the exhibits, contains the . parties. There arejfno other representations, warranties or other agreements express or implied. This [Agreement will supersede all prior existing agreements between the parties concerning the subject matterpf this Agreement. This Agreement may not be modified except by written agreement signed by both Master and Figaro's.

17. CONSTRUCTION. The captions used in this Ag'neemena are intended for convenience only and

will not in any way affect the words used in this Agreement,

meaning jor constffiction df any provision of this Agreement. All egardless of theirjnumber and gender, include any number and any other gender, as the context requires) the same as_ if the words were fully written in the number and gender. Any use! of the wo'rd "iihcludes," or |including," or other various forms does not limit in any way the antecedent word or phrase. The rule of construction that a written agreement is construed against the partyjpreparingjor drafting such agreement will specifically not be applicable to the interpretation of this Agreement.

This document including any exhibits attached to this Agreement and the documents referred to in this Agreement will be construed togetjiertandleonstitufe the entire agreement between the parties. There are no other oral or implied understandings between the parties with respect to the subject matter of this Agreement. Except as [expressly ana otherwise provided in this Agreement, this Agreement may not be modified, ntr may aray right! be waived or abridged, orally or by course of dealing, but only by a written instrument signed by the parties. The words "this Agreement" include any future modifications unle|s otherwise suggested by the context. No

other person! has ;ttoe authority to bind or obligate Figaro's in any or a vice] president] at Figaro's home office by an instrument in

salesperson, representative, or way, except Figaro's president writing.

This document supersedes all communicatioras andniegotiations between the parties that relate to the subject matter of this Agreement. nJ) previous course of dealing or usage in the trade not

specifically set forth in this Agreement will be admissible Agreement. The parties intend to confer no benefit Dr right

21 - FIGARO'S MASTER FRANCHISE AGREEMENT

to explain, modify, or contradict this on any person or entity not a party to

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this Agreement and no third party will have the right to claim the benefit of any provision of this Agreement as a third party beneficiary of that provision.

The words "will," "shall' and "must" used in this Agreement indicate a mandatory obligation.

All captions and headings are for reference purposes only and are not part of this Agreement. The recitals set forth in this Agreement are specifically incorporated into and constitute a part of the terms of this Agreement. If there is any typographical, word processing, printing or copying error in this Agreement, the error will be interpreted and corrected consistent with the following order of interpretation:

1.          The content and expressed intent and exhibits of Figaro's Uniform Franchise Offering Circular(s) previously delivered to Master.

2.          The content and expressed intent of franchise agreements Figaro's has executed with Figaro's other franchises reasonably contemporaneous to this Agreement.

If, any part of this Agreement is declared invalid, that declaration will not affect the validity of the remaining portion which will remain in full force and effect as if this Agreement had been executed with the invalid portion omitted. The parties declare their intention that they would have executed the remaining portion of this Agreement without including any part, parts, or portions which may be declared invalid in the future. Provided, however, that if Figaro's determines that the finding of invalidity materially and adversely affects the basic consideration of this Agreement, Figaro's may, at Figaro's option, terminate this Agreement.

If applicable law shall imply a covenant of good faith and fair dealing in this Agreement, the parties agree that covenant shall not imply any rights or obligations that are inconsistent with a fair construction of the terms of this Agreement. If applicable law shall imply such a covenant, the parties acknowledge and agree that:

A.          This Agreement (and the relationship of the parties which is inherent from this Agreement) grants us the discretion to make decisions, take actions or refrain from taking actions not inconsistent with Figaro's explicit rights and obligations under this Agreement that may favorably or adversely affect Master's interests.

B.          Figaro's will use Figaro's business judgment in exercising Figaro's discretion based on Figaro's assessment of Figaro's own interests and balancing those interests against the interests of the owners of other Figaro's businesses generally (including us, Figaro's franchisees and parties related to us) and specifically without considering the individual interests of Master or any other particular franchisee;

C.          Figaro's will have no liability to Master for the exercise of Figaro's discretion in this manner, so long as Figaro's discretion is not exercised in bad faith toward Master; and

D.          In the absence of bad faith, no trier of fact in any judicial or arbitration proceeding will substitute its judgment for the business judgment Figaro's exercises.

If, at any time during the term of this Agreement, Master consists of two or more persons (whether acting in partnership or otherwise and whether or not all have signed this Agreement), the rights, privileges and benefits granted to Master in this Agreement may only be exercised and enjoyed jointly; and Master's obligations, liabilities and responsibilities under this Agreement will be joint and several obligations of each such person.

18. NOTICES. All notices permitted or required to be delivered under this Agreement will be in writing and will be deemed delivered by private messenger or by registered or certified mail, postage

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