Franchise Agreement

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Sample Franchise Agreement

FLICKO'S FRANCHISE CORP., INC. FRANCHISE AGREEMENT

This Franchise Agreement ("this Agreement"), made this____day of_______, 20____, by and between

FLICKO'S FRANCHISE CORPORATION., INC., a corporation formed under the laws of the State of Kentucky and having its principal place of business at 2209 Heather Lane, Louisville, Kentucky 40218 ("Franchisor"), and

____________________________________________, whose principal address is_______________________, an

individual/partnership/ corporation/limited liability company established in the State of__________________________

("Franchisee").

WITNESSETH:

WHEREAS, Franchisor and its Affiliate, AHEAD, INC. ("Affiliate"), over a period of time and as the result of time, skill, effort, and money, have developed, own, and franchise a system ("System"), which may be changed or further developed by Franchisor from time to time, identified by the Mark "FLICKO'S", relating to the establishment, development and operation of a business that provides video workshop services including video and audio: editing; conversion; duplication; montages; producing prints from other media; and rental of video and other equipment ("Franchised Business"):

WHEREAS, the distinguishing characteristics of the System include, without limitation, exclusively designed signage and materials, operating procedures and methods; the FLICKO'S Confidential Operations Manual ("Manual"); sales techniques; other confidential operations procedures; and methods and techniques for cost controls, record keeping and reporting, personnel management, sales promotion, marketing and advertising; all of which may be changed and further developed by Franchisor from time to time; and

WHEREAS, Affiliate, ASI, Inc. is the owner of the right, title and interest together with all the goodwill connected thereto in and to the trade name, trademarks and service mark "FLICKO'S", associated logos, commercial symbols, slogans, and such other trade names, trademarks and service marks, logos, commercial symbols and slogans, as are now, or in the future, designated by Franchisor as an integral part of the System ("Mark[s]") and has licensed to Franchisor the right to use and sublicense to Franchisor's Franchisees the right to use the Marks in the operation of a FLICKO'S Franchised Business; and

WHEREAS, Franchisor grants to qualified persons the right to own and operate FLICKO'S Franchised Businesses utilizing the System and Marks, and Franchisee desires to operate a FLICKO'S Franchised Business under the System and using the Mark and has applied for a franchise and has been approved by Franchisor in reliance upon all of the representations made therein; and

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WHEREAS, Franchisee understands and acknowledges the importance of Franchisor's high and uniform standards of quality, operations and service and the necessity of operating the FLICKO'S Franchised Business in strict conformity with Franchisor's specifications;

WHEREAS, Franchisor expressly disclaims the making of and Franchisee acknowledges that it has not received nor relied upon any warranty or guarantee, express or implied, as to the revenues, profits or success of the business venture contemplated by this Agreement. Franchisee acknowledges that it has read this Agreement and Franchisor's Uniform Franchise Offering Circular and that it has no knowledge of any representations by Franchisor, or its officers, directors, shareholders, employees or agents that are contrary to the statements made in Franchisor's Uniform Franchise Offering Circular or to the terms herein.

WHEREAS, Franchisor and Franchisee agree that in instances where the terms of this Agreement require the approval or consent of a party, such will not be unreasonably withheld.

NOW, THEREFORE, the parties, in consideration of the undertakings and commitments of each party to the other set forth in this Agreement, hereby agree as follows:

I. APPOINTMENT AND FRANCHISE FRF.

A. Franchisor hereby grants to Franchisee, upon the terms and conditions herein contained, the right, license and privilege to use the Mark "FLICKO'S," and Franchisee undertakes the obligation to operate a FLICKO'S Franchised Business, as designated or approved from time to time by Franchisor and to use the System solely in connection therewith, as it may be changed, improved and further developed from time to time, from the following location only:______________________________________________________________("Premises").

B. An exclusive protected Territory consisting of the larger of a four (4) square mile area OR area with a population of 250,000 persons, the center of which will be Franchisee's business location, is granted to franchisee. Franchisor will not, so long as the Franchise Agreement is in force and effect and Franchisee is not in default under any of the terms of the Franchise Agreement, license or establish another like FLICKO'S business to conduct business within Franchisee's Territory, or solicit or accept orders from within your territory. A map of the Area of Responsibility is attached to this Agreement as Exhibit C and made a part of this Agreement. Franchisee must operate from a single location. Franchisee does not receive the right to obtain additional franchises in the Territory. Franchisee may not conduct business outside of its Territory. Conducting business outside of Franchisee's Territory will be considered a default under the Franchise Agreement. In addition:

1. Franchisor and any affiliate, subsidiary or parent ("Related Entity") reserve the right to grant other

FLICKO'S franchises outside of the Territory as Franchisor, in its sole and exclusive discretion, deems appropriate. Franchisor will notify Franchisee prior to granting a franchise which would have a territory contiguous with Franchisee's. Additionally, subject to another franchisee's superior right of refusal, Franchisor will refrain from issuing a franchise or license for any territory contiguous with Franchisee's until Franchisor has offered to issue such franchise or license for that territory to Franchisee, and Franchisee has been given 5 business days to accept or reject

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it. Within and outside of the Territory, Franchisor, and any Related Entity, reserve the right to grant franchises that are distinct from the franchise offered herein which will not use the "FLICKO'S" Mark. Franchisor further reserves the right, both within and outside of the Territory, to sell all products and services that do not comprise a part of the System.

2. Franchisor reserves the right, both within and outside of the Territory, to offer and sell under or using

any marks, including the Marks, through any other distribution system, products and services that comprise, or may in the future comprise, a part of the System, which products and services may be resold through any other distribution channel to the general public by those entities.

C. In consideration of the franchise granted herein, Franchisee shall pay to Franchisor a franchise fee ("Franchise Fee") of THIRTEEN-THOUSAND-EIGHT-HUNDRED DOLLARS ($13,800) upon execution of this Agreement. The Franchise Fee shall be deemed fully earned and nonrefundable, except as may be specifically provided in this Agreement, upon payment thereof, as consideration to Franchisor for its expenses incurred in furnishing assistance and services to Franchisee and for Franchisor's lost or deferred opportunity to enfranchise others.

D. Because complete and detailed uniformity under many varying conditions may not be possible or practical, Franchisor specifically reserves the right and privilege, at its sole discretion and as it may deem in the best interests of all concerned in any specific instance, to vary standards for any System franchisee based upon the peculiarities of the particular site or circumstance, density of population, business potential, population of trade area, existing business practices or any other condition which Franchisor deems to be of importance to the successful operation of such franchisee's Franchised Business. Franchisee shall not be entitled to require Franchisor to disclose or grant to Franchisee a like or similar variation hereunder.

E. Franchisee at all times shall use its best efforts to promote and increase the sales and service of the Franchised Business and to effect the widest and best possible penetration throughout the Territory by soliciting and servicing all potential customers for FLICKO'S products and services.

II. TERM AND RENEWAL

A. This Agreement shall be effective and binding from the date of its execution. The length of the initial term shall be equal to five (5) years and shall commence upon the execution of this Agreement.

B. Franchisee may renew this franchise at the expiration of the initial term of the franchise for additional successive terms of five (5) years each, provided that all of the following conditions have been fulfilled:

1. Franchisee has, during the entire term of this Agreement and any subsequent renewals, complied with all its provisions;

2. Franchisee maintains possession of the Premises in full compliance with the standards then applicable for new or renewing FLICKO'S Franchised Businesses and presents evidence satisfactory to Franchisor that

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it has the right to remain in possession of the Premises for the duration of any renewal term; or, if Franchisee is unable to maintain possession of the Premises, or if in the judgment of Franchisor the Franchised Business should be relocated, Franchisee secures substitute premises and has furnished and equipped such premises to bring the Franchised Business at its substitute premises into full compliance with the then-current standards by the expiration date of this Agreement;

3. Franchisee has given notice of renewal to Franchisor as provided below in Paragraph II.C;

4. Franchisee has satisfied all monetary obligations owed by Franchisee to Franchisee's suppliers, Franchisor and its Related Entity and has timely met these obligations throughout the term of this Agreement;

5. Upon renewal, Franchisee has executed Franchisor's then-current form of the Franchise Agreement or has executed renewal documents at Franchisor's election (with appropriate modifications to reflect the fact that the Franchise Agreement relates to the grant of a renewal franchise), which Franchise Agreement shall supersede in all respects this Agreement, and the terms of which may differ from the terms of this Agreement including, without limitation, a different percentage Continuing Services and Royalty Fee ("Royalty Fee"), and/or advertising contribution; provided, however, Franchisee shall not be required to pay the then-current initial franchise fee or its equivalent;

6. Franchisee has complied with Franchisor's then-current qualifications and training requirements; and

7. Franchisee has executed a general release, in a form prescribed by Franchisor, of any and all claims against Franchisor, its Related Entity and their respective officers, directors, agents and employees.

C. If Franchisee desires to renew this franchise at the expiration of this Agreement or any renewal period, Franchisee shall give Franchisor written notice of its desire to renew at least six (6) months, but not more than twelve (12) months, prior to the expiration of the initial term of this Agreement or any renewal period. Within sixty (60) days after its receipt of such timely notice, Franchisor shall furnish Franchisee with written notice of: (i) reasons which could cause Franchisor not to grant a renewal to Franchisee, including any deficiencies which require correction and a schedule for correction thereof by Franchisee; and (ii) Franchisor's then-current requirements relating to the image, appearance, decoration, furnishing and equipping of a FLICKO'S Franchised Business, and a schedule for effecting such modifications in order to bring the Franchised Business in compliance therewith, as a condition of renewal. Renewal of the franchise shall be conditioned upon Franchisee's curing of any deficiencies in a timely manner, as set forth in the schedule for correction, compliance with such requirements and continued compliance with all the conditions of this Agreement up to the date of termination of the initial term; provided, however, that in the event Franchisee is in the process of curing any deficiencies as required by Franchisor, the term of this Agreement may, in the sole discretion of Franchisor, be extended for a period of time equal to the number of days required to cure such deficiency.

D. If Franchisee gives Franchisor written notice of its desire to renew the franchise pursuant to Paragraph II.C. of this Agreement but Franchisee fails to meet all of the conditions for renewal of the franchise as set forth in Paragraphs II.B. and II.C. of this Agreement, Franchisor shall provide Franchisee with written notice of its election not

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to renew the franchise at least four (4) months before the expiration of the initial term or any renewal term of this Agreement. However, Franchisor is relieved of such notice requirement in the event that Franchisee has attempted, but failed, to timely effect any cure of a deficiency as provided for in Paragraph II.C.

III. BUSINESS LOCATION

A. Franchisee will be responsible for purchasing or leasing a suitable site for the Franchised Business. Franchisee may operate from only one location. Franchisor will not conduct site selection activities on Franchisee's behalf. Nothing contained herein shall be interpreted as a guarantee of success for said location nor shall any site recommendation made by Franchisor be deemed a representation that any particular site is available for use as a FLICKO'S Franchised Business. It shall be the sole responsibility of Franchisee to undertake site selection activities and otherwise secure premises for Franchisee's Franchised Business.

B. Prior to the acquisition by lease or purchase of any site for the Premises, Franchisee shall submit a description of the proposed site to Franchisor, together with a letter of intent or other evidence satisfactory to Franchisor which confirms Franchisee's favorable prospects for obtaining the proposed site. Franchisor shall provide Franchisee written notice of approval or disapproval of the proposed site within fifteen (15) business days after receiving Franchisee's written proposal.

C. After receiving Franchisor's written approval of the location of the Franchised Business, Franchisee shall execute a lease or a binding agreement to purchase the site, the terms of which have been previously approved by Franchisor. Franchisor's approval of the lease, which will not be unreasonably withheld or delayed, shall be conditioned upon inclusion in the lease of terms acceptable to Franchisor including, but not limited to:

1. A provision reserving to Franchisor the right, at Franchisor's election, to receive a transfer of the leasehold interest upon termination or expiration of the franchise grant;

2. A provision which expressly permits the landlord of the Premises to provide Franchisor all sales and other information it may have related to the operation of the Franchised Business, as Franchisor may request;

3. A provision which requires the landlord concurrently to provide Franchisor with a copy of any written notice of deficiency or default under the lease sent to Franchisee and which grants to Franchisor the right (but no obligation) to cure any deficiency under the lease should Franchisee fail to do so within fifteen (15) days after the expiration of the period in which Franchisee may cure the default;

4. A provision which evidences the right of Franchisee to display the Marks in accordance with the specifications required by the Manual, subject only to the provisions of applicable law;

5. A provision that the Premises shall be used only for the operation of the Franchised Business; and

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6. A provision which expressly states that any default under the lease shall constitute a default

under this Agreement.

D. If Franchisee is unable to find an acceptable site that is approved by the parties within sixty (60) days from the date of this Agreement, then and in that event, upon written application from either party, this Agreement shall be terminated and the Franchise Fee Franchisee paid to Franchisor shall be returned to Franchisee, less expenses Franchisor incurred in providing site selection guidance to Franchisee, however, Franchisor's expenses shall not exceed ONE THOUSAND DOLLARS ($1,000.00). Upon return of said amount, Franchisor shall be fully and forever released from any claims or causes of action Franchisee may have under or pursuant to this Agreement and any of Franchisee's right, title or interest in the Marks or the System and any rights shall automatically revert to Franchisor.

E. If applicable, promptly ("promptly" herein defined as within thirty [30] days) after obtaining possession of the Premises for the Franchised Business, Franchisee shall:

1. Obtain all required zoning changes; all required building, utility, sanitation and sign permits and licenses and any other required permits and licenses;

2. Purchase or lease equipment, fixtures, furniture and signs as provided herein;

3. Complete the construction and/or remodeling, equipment, fixture, furniture and sign installation and decorating of the Franchised Business in full and strict compliance with specifications therefore established and approved by Franchisor, and all applicable laws, ordinances, building codes and permit requirements;

4. Franchisee shall obtain all customary contractors' sworn statements and partial and final waivers of liens for construction and other services; and

5. Franchisee shall otherwise complete development of and have the Franchised Business ready to commence or continue the conduct of its business in accordance with this Agreement.

F. After operating the Franchised Business from a Premises, if the lease for the Premises expires or terminates without fault of Franchisee, or if the site is destroyed, condemned or otherwise rendered unusable, or as otherwise may be agreed upon in writing by Franchisor and Franchisee, Franchisee may relocate the Premises of the Franchised Business to another site within the Territory. Any such relocation shall be at Franchisee's sole expense and Franchisor shall have the right to charge Franchisee for all reasonable costs incurred by Franchisor in approving the new site.

IV. TRAINING AND ASS1STANPF.

A. Franchisor shall make an initial training program available to Franchisee. The initial training program

shall begin approximately two (2) to four (4) weeks after the Franchise Agreement is signed and shall be approximately two (2) weeks in duration. The initial training program shall be conducted at Franchisor's headquarters or such other place that Franchisor shall reasonably designate. Said training program shall cover all material aspects of the operation

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of a FLICKO'S franchise, including administrative, operational and sales/marketing matters and will include a liberal amount of on-the-job training. Company does not charge for this training or service, but Franchisee will incur costs in attending the program, including travel costs, and room and board expenses. These expenses are Franchisee's responsibility. Franchisee must attend and successfully complete this training to Franchisor's satisfaction. Franchisee may bring one additional person to also receive said training.

B. During the first (1^st) quarter of operation of the Franchised Business, Franchisor or one (1) of Franchisor's representatives will provide unlimited telephone support to Franchisee, at Franchisor's expense, to assist Franchisee in the operation of the Franchised Business. During this period, such representative will also assist Franchisee in establishing and standardizing procedures and techniques essential to the operation of a FLICKO'S Franchised Business. Should Franchisee request additional assistance from Franchisor in order to facilitate the opening or operation of the Franchised Business and should Franchisor deem it necessary, Franchisee shall reimburse Franchisor for Franchisor's expense in providing such additional assistance at Franchisor's then-current daily rate as published in the Manual, which is currently THREE HUNDRED DOLLARS ($300.00) per day, plus travel and living expenses Franchisor or Franchisor's representative incurs.

C. If Franchisor determines, in its sole discretion, that Franchisee is unable to satisfactorily complete the initial training program as set forth in Paragraph IV.A. of this Agreement, Franchisor shall have the right to: (i) require Franchisee to attend additional training, at Franchisee's expense; or (ii) terminate this Agreement. If this Agreement is terminated pursuant to this Paragraph IV., Franchisor shall return to Franchisee the franchise fee Franchisee paid to Franchisor less expenses Franchisor incurred in providing training, however, Franchisor's expenses shall not exceed FIVE THOUSAND DOLLARS ($5,000.00). Upon return of said amount, Franchisor shall be fully and forever released from any claims or causes of action Franchisee may have under this Agreement and any right, title or interest of Franchisee in the Marks, the System and any rights shall automatically revert to Franchisor.

D. If Franchisee designates new or additional managers, Franchisor shall provide training to such managers during Franchisor's regularly scheduled training program at Franchisor's headquarters or such other place that Franchisor shall reasonably designate at the then-current rate for the cost of training materials as published in the Manual, which is currently THREE HUNDRED DOLLARS ($300.00). Franchisee shall bear all costs including travel costs and room and board expenses Franchisee's managers incur in attending such training program.

E. Franchisor may provide previously-trained and experienced franchisees, their managers and/or employees refresher training programs or seminars to be conducted at such location as may be designated by Franchisor. Attendance at such refresher training programs or seminars shall be at Franchisee's sole expense and at Franchisees discretion.

V. PROPRIETARY MARKS

A. Franchisee acknowledges that Affiliate ASI, Inc. is the owner of all right, title and interest, together

with all the goodwill of the Marks. Franchisee acknowledges that its right to use the Marks is derived solely from this Agreement and is limited to the conduct of business by Franchisee in compliance with this Agreement and all applicable specifications prescribed by Franchisor from time to time during the term of the franchise. Franchisee acknowledges

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that any unauthorized use of the Marks by Franchisee is a breach of this Agreement and an infringement of the rights of Franchisor in and to the Marks. Franchisee acknowledges that all usage of the Marks by Franchisee and any goodwill established by Franchisee's use of the Marks shall inure to the exclusive benefit of Franchisor and that this Agreement does not confer any goodwill or other interests in the Marks upon Franchisee. Franchisee shall not, at any time during the term of this Agreement or after its termination or expiration, contest or assist any other person in contesting the validity or ownership of any of the Marks. All provisions of this Agreement applicable to the Marks apply to any additional trademarks, patents, service marks and commercial symbols authorized for use by Franchisor within the System after the date of this Agreement.

B. Other than as permitted in the Manual, Franchisee shall not use any Mark or portion of any of the Marks as part of any corporate or trade name or in any modified form. Franchisee shall not use any Marks in any manner not expressly authorized in writing by Franchisor.

C. Franchisee shall promptly notify Franchisor and/or Affiliate of any claim, demand or cause of action based upon or arising from any attempt by any third party to use the Marks or any colorable imitation thereof, Franchisee shall also notify Franchisor and/or Affiliate of any action, claim or demand against Franchisee relating to the Marks within ten (10) days after Franchisee receives notice of said action, claim or demand. Upon receipt of timely notice of an action, claim or demand against Franchisee relating to the Marks, Franchisor and/or Affiliate shall have the sole right and obligation to defend any such action at no expense to Franchisee. Franchisor and/or Affiliate shall have the exclusive right to contest or bring action against any third party regarding the third party's use of any of the Marks. In any defense or prosecution of any litigation relating to the Marks or components of the System, Franchisee shall cooperate with Franchisor and/or Affiliate and execute any and all documents and take all actions as may be desirable or necessary in the opinion of Franchisor's counsel to carry out such defense or prosecution. Both parties will make every effort consistent with the foregoing to protect and promote the Marks as identifying the System and only the System. FRANCHISOR MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE USE, EXCLUSIVE OWNERSHIP, VALIDITY OR ENFORCEABILITY OF THE MARKS.

D. If it becomes advisable at any time, in Franchisor's sole discretion, for Franchisor and/or Franchisee to modify or discontinue use of any of the Marks, and/or use one or more additional or substitute Marks, Franchisee shall comply with Franchisor's directions within a reasonable time after notice to Franchisee by Franchisor, and Franchisor shall have no liability or obligation whatsoever with respect to Franchisee's modification or discontinuance of any Mark.

E. In order to preserve the validity and integrity of the Marks and any copyrighted materials licensed herein and to assure that Franchisee is properly employing the same in the operation of its Franchised Business, Franchisor, Affiliate or their agents shall have the right of entry and inspection of Franchisee's Premises during normal business hours and, additionally, shall have the right to observe the manner in which Franchisee is rendering its FLICKO'S services and conducting its operations, to confer with Franchisee's employees and clients, and to inspect items and services to ensure that the quality control provisions and standards established by Franchisor and as set forth in the Manual are met.

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F. Franchisee shall not establish a Web site on the Internet using any domain name containing the words

"FLICKO'S" or any variation thereof without prior written consent from Franchisor. Franchisor and/or Affiliate retain the sole right to advertise on the Internet and create a Web site using the "FLICKO'S" domain name. Franchisee acknowledges that Franchisor and/or Affiliate is the owner of all right, title and interest in and to such domain names, as Franchisor shall designate in the Manual. Franchisor retains the right to pre-approve Franchisee's use of linking and framing between Franchisee's Web pages and all other Web sites. If requested by Franchisor, Franchisee shall, within five (5) days, dismantle any frames and links between Franchisee's Web pages and any other Web sites.

VI. CONFIDENTIAL OPERATIONS MANUAL

A. During the term of the franchise, Franchisor will loan to Franchisee one (1) or more copies of the Manual containing reasonable, mandatory and suggested specifications, standards, operating procedures and rules prescribed from time to time by Franchisor for FLICKO'S Franchised Businesses and information relative to other obligations of Franchisee hereunder and the operation of its Franchised Business. Franchisor shall have the right to add to and otherwise modify the Manual from time to time to reflect changes in the specifications, standards, operating procedures and rules prescribed by Franchisor for FLICKO'S Franchised Businesses.

B. The Manual shall at all times remain the sole property of Franchisor and shall promptly be returned upon the expiration or termination of this Agreement. Franchisee shall not make any disclosure, copy or other unauthorized use of any portion of the Manual.

C. The Manual contains proprietary information of Franchisor and shall be kept confidential by Franchisee both during the term of the franchise and subsequent to the expiration or termination of the franchise. Franchisee shall at all times ensure that its copy of the Manual be available at the Premises in an up-to-date manner. At all times that the Manual is not in use by authorized personnel, Franchisee shall maintain the Manual in a locked receptacle at the Premises and shall only grant authorized personnel, as defined in the Manual, access to the key or lock combination of such receptacle. In the event of any dispute as to the contents of the Manual, the terms of the master copy of the Manual maintained by Franchisor at Franchisor's office shall be controlling.

D. Franchisee acknowledges and agrees that the Manual contains confidential information which Franchisee will protect as a trade secret and that its loss will cause substantial damage to Franchisor and other franchisees, although the amount of such loss would be incalculable with any degree of accuracy.

VII. CONFIDF.NTIAI. INFORMATION

A. Franchisee acknowledges that its entire knowledge of the operation of a FLICKO'S Franchised

Business including the knowledge or know-how regarding the specifications, standards and operating procedures, is derived from information disclosed to Franchisee by Franchisor and that certain of such information is proprietary, confidential and a trade secret of Franchisor. "Trade Secrets" refer to the whole or any portion of know-how, knowledge, methods, specifications, processes, procedures and/or enhancements, adaptations, derivative works, modifications or new processes ("Improvements") regarding the business that is valuable and secret in the sense that it is not generally known to Franchisor's competitors. Franchisee shall maintain the absolute confidentiality of all such

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proprietary information during and after the term of the franchise and shall not use any such information in any other business or in any manner not specifically approved in writing by Franchisor.

B. Franchisee shall divulge such confidential information only to the extent and only to such of its employees as must have access to it in order to operate the Franchised Business. Any and all information, knowledge and know-how including, without limitation, application methods, materials, equipment, sales techniques and procedures and other data, which Franchisor designates as confidential shall be deemed confidential for purposes of this Agreement, except information which Franchisee can demonstrate lawfully came to its attention prior to disclosure thereof by Franchisor; or which, at the time of disclosure by Franchisor to Franchisee, had lawfully become a part of the public domain; or which, after disclosure to Franchisee by Franchisor, lawfully became a part of the public domain.

C. Due to the special nature of the confidential information, Marks, and Manual of Franchisor, Franchisee acknowledges that Franchisor and/or Affiliate shall be entitled to immediate equitable remedies including, but not limited to, restraining orders and injunctive relief in order to safeguard such proprietary, confidential, and special information of Franchisor and that money damages alone would be an insufficient remedy with which to compensate Franchisor for any breach of the terms of Paragraphs V., VI. and VII. of this Agreement. Furthermore, all employees of Franchisee having access to the confidential information of Franchisor shall be required to execute confidentiality and trade secret agreements in a form acceptable to Franchisor.

D. Franchisee acknowledges and agrees that Franchisor owns or is the licensee of the owner of patented processes and copyrighted works, and may further create, acquire or obtain licenses for certain copyrights in various works of authorship used in connection with the operation of the Franchised Business including, but not limited to, all categories of works eligible for protection under the United States Copyright Law, all of which shall be deemed to be "Copyrighted Works" under this Agreement. Such Copyrighted Works include, but are not limited to, the Manual, advertisements, promotional materials, posters and signs, and may include all or part of the Marks, Software, trade dress and other portions of the System. Franchisor intends that all works of authorship related to the System which are created in the future shall be owned by it or its Related Entity.

1. Franchisor will authorize Franchisee to use the Manual, marketing material, artwork and other items subject to copyright protection;

2. The Copyrighted Works, and Patented Processes are the valuable property of Franchisor or its licensors;

3. Franchisee's right to use the Copyrighted Works, and Patented Processes, are granted solely on the condition that Franchisee complies with the terms of Paragraph VII. of this Agreement; and

4. Franchisee will use the Copyrighted Works, and Patented Processes, only as Franchisor designates.

E. Franchisee must promptly notify Franchisor if you learn of an infringement or challenge to Franchisor's use of the Copyrighted Works, or Patent Processes. Franchisor does not have to take any action, but will

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respond to this information as Franchisor deems appropriate. Franchisee must also agree not to contest Franchisor's interest in these or our other trade secrets.

F. If Franchisee makes or acquires any Improvements in the operation of the Franchised Business,

Franchisee shall, unless otherwise agreed to by Franchisor, grant-back exclusive rights in such Improvements to Franchisor in consideration of the grant of the franchise made under this Agreement and without the payment of additional consideration by Franchisor. Franchisor shall include any Improvements made or acquired by Franchisor in the FLICKO'S Copyrighted Works, Manual and the System for use by all FLICKO'S Franchisees, Franchisor or its Related Entity. If Franchisor seeks patent protection or copyright registration for any Improvements, it shall do so at its own expense. Franchisee shall execute or have the creator execute all documents necessary to enable Franchisor to apply for intellectual property rights protection and to secure all rights to such Improvements. Franchisee shall assign or have the authors assign to Franchisor any intellectual property rights in such Improvements. Franchisee shall have each of Franchisee's employees execute an agreement requiring employee cooperation with the foregoing requirements. Franchisee agrees to the requirements of this Paragraph in recognition of the benefits that can be derived by FLICKO'S Franchisees from the Improvements made by other FLICKO'S Franchisees. The provisions of this Paragraph shall not constitute consent by Franchisor to the modification by Franchisee of any FLICKO'S Copyrighted Works, Manual or the System or the creation of any derivative work based on any FLICKO'S copyright and Franchisee must obtain Franchisor's express written consent prior to making such modification or derivative work. If Franchisor decides to add, modify, or discontinue the use of an item or process covered by a Copyright or Patent, Franchisee must also do so. In such event, Franchisor's sole obligation is to reimburse Franchisee for the tangible cost of complying with this obligation.

VIII. MODIFICATION OF THF SYSTEM

Franchisee recognizes that from time to time hereafter, Franchisor may change or modify the System presently identified by the Marks including, without limitation, the adoption and use of new or modified Marks or copyrighted materials, new computer programs and systems, new products, new services, new equipment or new techniques and that Franchisee will accept and use for the purpose of this Agreement any such changes in the System as if they were part of this Agreement at the time of execution hereof. Franchisee will make such expenditures as such changes or modifications in the System may reasonably require. Franchisee shall not change the System in any way without prior written permission of Franchisor. A Franchisee shall not be required to make an additional investment of more than THREE THOUSAND DOLLARS ($3,000.00). Provided, however, that such additional investment will not be required during the first year of the initial term of this Agreement; if it is required to be made within the last year of the initial term of this Agreement, then Franchisee may avoid making the investment by giving notice of nonrenewal.

IX. MARKETING

Recognizing the value of advertising and the importance of the standardization of advertising and promotion to the furtherance of the goodwill and the public image of FLICKO'S Franchised Businesses, Franchisee agrees as follows:

A. Franchisee will submit to Franchisor or its designated agency, for its prior approval, all

promotional materials and advertising to be used by Franchisee including, but not limited to, newspapers, radio

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scripts, mailers, press releases, television advertising, specialty and novelty items and signs. Newspaper classified recruiting advertising is excluded from this requirement. In the event written disapproval of said promotional material or advertising is not given by Franchisor to Franchisee within thirty (30) days from the date such materials are received by Franchisor, said materials shall be deemed approved. The submission of marketing to Franchisor for approval shall not affect Franchisee's right to determine the prices at which Franchisee sells its products or services.

B. Franchisor, has a systemwide FLICKO'S Marketing and Development Fund ("Marketing Fund").

Franchisees shall contribute to the Marketing Fund, on a monthly basis, two-tenths of one percent (.2%) of Gross Margin, as defined in Paragraph X. Each FLICKO'S business operated by Franchisor or any affiliate shall contribute an equal or greater percentage as required of Franchisees to the Marketing Fund. The Marketing Fund shall be maintained and administered by Franchisor or its designee, as follows:

1. Franchisor shall direct all marketing programs with sole discretion over the creative concepts, materials and media used in such programs and the placement and allocation thereof. Franchisee acknowledges that the Marketing Fund is intended to maximize general public recognition and acceptance of the Marks for the benefit of the System and that Franchisor and its designee undertake no obligation in administering the Marketing Fund to make expenditures for Franchisee which are equivalent or proportionate to its contribution, or to ensure that any particular Franchisee benefits directly pro rata from the placement of marketing. Franchisor agrees, however, that no marketing expenditures from the Marketing Fund will be devoted to the sale of new franchises;

2. Each FLICKO'S business offering products and services similar to the Franchised Business operated by Franchisor or its Related Entity shall make contributions to the Marketing Fund equivalent to the contributions required of Franchised Businesses within the System;

3. The Marketing Fund money may be used to meet any and all costs of maintaining, administering, directing, producing and preparing mass media marketing (including, without limitation, the cost of conducting public relations activities, conducting marketing and producing promotional brochures and other marketing materials for franchisees in the system). All sums Franchisee pays to the Marketing Fund shall be maintained in a separate account from Franchisor's other monies and shall not be used to defray any of Franchisor's general operating expenses, except for such reasonable administrative costs and overhead, if any, as Franchisor may reasonably incur in activities related to the administration or direction of the Marketing Fund and advertising programs including, without limitation, conducting market research, preparing marketing and advertising materials, and collecting and accounting for assessments for the Marketing Fund;

4. It is anticipated that all contributions to the Marketing Fund shall be expended for advertising and promotional purposes during Franchisor's fiscal year within which contributions are made. If, however, excess amounts remain in the Marketing Fund at the end of such fiscal year, all expenditures in the following fiscal year(s) shall be made first out of any current interest or other earnings of the Marketing Fund, next out of any accumulated earnings and finally from principal;

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5. Although Franchisor intends the Marketing Fund to be of perpetual duration, Franchisor maintains the right to terminate the Marketing Fund. The Marketing Fund shall not be terminated, however, until all monies in the Marketing Fund have been expended for advertising purposes or distributed back to franchisees; and

6. An accounting of the operation of the Marketing Fund shall be prepared annually and shall be made available to Franchisee upon request. Franchisor shall have the right to require that such annual accounting include an audit of the operation of the Marketing Fund prepared by an independent certified public accountant selected by Franchisor and prepared at the expense of the Marketing Fund.

C. A Franchisee shall spend a minimum of THREE-THOUSAND-DOLLARS ($3,000.00) on advertising during Franchisee's first month of operation of the Franchised Business ("Grand Opening Advertising"). Such Grand Opening Advertising shall be conducted in accordance with the Manual. Franchisor shall establish guidelines for Grand Opening Advertising and shall provide such guidelines to Franchisee.

D. Franchisee is required to maintain a listing in the white pages of the local telephone directory and advertise continuously in the separate Classified or Yellow Pages of the local telephone directory. Franchisee shall maintain a Yellow Pages listing under the listing(s) deemed appropriate by Franchisor.

E. Franchisee shall not use in advertising or any other form of promotion, the copyrighted materials, trademarks, service marks or commercial symbols of Franchisor without appropriate notices which may be required by applicable laws or as Franchisor may from time to time direct including, without limitation, , , or other copyright or trademark registration notices or the designations � or where applicable or an indication that the name "FLICKO'S" and the Mark are Franchisor's trade names, trademarks and service marks.

X. ROYALTY FF.F.

A. Franchisee shall pay to Franchisor a Royalty equal to five and one-half percent (5.5%) of Franchisee's

Gross Revenues, or a minimum of twenty-five dollars ($25) "Minimum Royalty," whichever is greater, each week. Sunday-to-Sunday shall be the applicable week for Royalty calculation purposes. All Royalties shall be paid to Franchisor from Franchisee's bank account via electronic funds transfer initiated by Franchisor on Wednesday of each week, and shall be based on the Gross Revenues of the preceding week, ending on Sunday. Franchisee will execute the Electronic Funds Transfer Agreement attached as Exhibit B, and any other documentation necessary to enable Franchisor to initiate such electronic fund transfers. Royalties shall be due and payable to Franchisor upon commencement of the Franchised business, however, Franchisor waives its right to collect the Minimum Royalty for the initial six (6) months following Franchisee's completion of the training program.

1. The term "Gross Revenues" shall be defined as all sales and other income, whether cash or

credit (regardless of collection in the case of credit), arising from the operation of the Franchised Business, after deducting: any refunds given to customers in accordance with Franchisor's policies; and any sales or excise tax which Franchisee is required to collect and pay to any taxing authority.

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B. Franchisee shall pay to Franchisor two-tenths of one percent (.2%) of the Franchisee's Gross Revenues which Franchisor will deposit in the Marketing Fund, pursuant to Paragraph IX. The method and time of payment will be the same as for Royalty Fees, as set forth above.

C. Franchisee shall pay to Franchisor (or any Related Entity) promptly and when due the amount of all sales taxes, use taxes, personal property taxes and similar taxes imposed upon, required to be collected, or paid by Franchisor on the account of services or goods furnished by Franchisor to Franchisee through sale, lease or otherwise, or on account of collection by Franchisor of the initial Franchise Fee, all Royalty Fees, Marketing Fund contributions, amounts due for purchases by Franchisee from Franchisor, and other amounts which Franchisee owes to Franchisor as called for by this Agreement.

D. Franchisee shall pay to Franchisor a late fee in the amount of twenty-five dollars ($25) on each weeks Royalty or Marketing Fund payment that is not received by Franchisor within five (5) calendar days after the date the payment is due. Any payment that is not received by the Franchisor within thirty (30) days after the date the payment is due, shall bear interest at the rate of twelve percent (12%) per annum, or the highest rate allowed by law, whichever is lower, from the date the payment was due until payment is received by Franchisor.

XI. AfTOI nMTfNr, AND RECORDS

A. Franchisee shall maintain during the term of this Agreement, and shall preserve for the time period specified in the Manual, full, complete and accurate books, records and accounts in accordance with the electronic accounting system prescribed by Franchisor in the Manual, or otherwise in writing. Franchisee shall retain during the term of this Agreement and for such period of time thereafter, as required by applicable federal and state law, all books and records related to the Franchised Business including, without limitation, sales checks, purchase orders, invoices, payroll records, check stubs, sales tax records and returns, cash receipts and disbursement journals, computer spreadsheets, general ledgers and any other financial records designated by Franchisor or required by law.

B. You will supply to Franchisor on or before each Wednesday, a weekly report of sales and gross revenues, in a form prescribed by Franchisor. Franchisee will also provide Franchisor with access to any computer-based accounting programs it designates in the Manual, or otherwise in writing. Franchisor will use such access to calculate weekly Royalties and Marketing Fund Payments. Additionally, Franchisee shall, at its expense, submit to Franchisor within ninety (90) days of the end of each fiscal year during the term of this Agreement, a profit and loss statement for such fiscal year and a balance sheet for the last date of such year. Such annual statements shall be prepared and audited by an independent certified public accountant in accordance with generally accepted accounting principles applied on a consistent basis. Franchisee shall annually submit to Franchisor copies of the federal and state income tax returns for the Franchised Business at the same time such income tax returns are filed with the appropriate state and federal authorities. In addition, Franchisee shall submit copies and advise Franchisor of any proposed and final adjustments to any such

income tax returns.

C. Franchisee shall submit to Franchisor such other periodic reports, forms and records as specified, and in the manner and at the time specified in the Manual or otherwise in writing.

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D. Franchisee shall keep true, complete and correct records of each transaction of any activity affecting revenues and other related data, as required by Franchisor, of the Franchised Business. Franchisee may use computer hardware and software for such activities, as prescribed by Franchisor. Franchisor shall have full access to all of Franchisee's records, computer system, and related data and information by means of direct access whether in person or by telephone/modem.

E. Franchisor or its designated agents shall have the right at all reasonable times to examine and copy, at its expense, the books, records, and personal tax returns of Franchisee. Franchisor shall also have the right, at any time, to have an independent audit made of the books of Franchisee. Franchisor shall also have the right to verify the records of Franchisee through any other methods it elects, including, but not limited to, the use of mystery shoppers. If an inspection should reveal that Franchisor has not received any amount that is due, Franchisee shall immediately pay to Franchisor ten (10) times the amount of the understatement upon demand, with interest from the date such amount was due until paid, at the maximum rate permitted by law. In addition, Franchisee shall reimburse Franchisor for any and all reasonable costs and expenses connected with the inspection (including, without limitation, reasonable accounting and attorneys' fees). The foregoing remedies shall be in addition to any other remedies Franchisor may have.

XII. STANDARDS OF QUALITY AND PERFORMANCE

A. Franchisee shall comply with all requirements set forth in this Agreement, the Manual and other written policies supplied to Franchisee by Franchisor. Mandatory specifications, procedures and rules prescribed from time to time by Franchisor in the Manual or otherwise communicated to Franchisee in writing, shall constitute provisions of this Agreement as if fully set forth herein and shall be reasonably applied to all franchisees. All references herein to this Agreement shall include all such mandatory specifications, standards and operating procedures and rules. Franchisee shall comply with the entire System including, but not limited to, the provisions of this Paragraph XII.

B. Franchisee shall commence operation of the Franchised Business within ninety (90) days of signing this Agreement, unless otherwise agreed upon in writing by Franchisor. Prior to such commencement of operations, Franchisee shall have complied with all of Franchisor's pre-opening standards and specifications, including those related to the appearance of the Premises. If Franchisee for any reason fails to commence operation as herein provided, such failure shall be considered a default and Franchisor may terminate this Agreement as herein provided.

C. Franchisee shall maintain the condition and appearance of the Premises consistent with Franchisor's standards. Franchisee shall maintain the Premises as is from time to time required to maintain or improve the appearance and efficient operation of the Franchised Business including, but not limited to, replacement of worn out or obsolete equipment, fixtures and signs and repair of the exterior and interior of the Franchised Business. If at any time in Franchisor's judgment the general state of repair or the appearance of the Premises or its equipment, fixtures, signs or decor does not meet Franchisor's standards, Franchisor shall so notify Franchisee, specifying the action to be taken by Franchisee to correct such deficiency. If Franchisee fails or refuses to initiate within thirty (30) days after receipt of such notice, a good faith program to complete any required maintenance, Franchisor shall have the right, in addition to all other remedies, to enter upon the Premises and effect such maintenance on behalf of Franchisee, and Franchisee shall pay the entire costs thereof on demand.

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D. Franchisee shall not make any material alterations to the Premises nor shall Franchisee make any material replacements of or alterations to the equipment, fixtures or signs of the Franchised Business without the prior written approval by Franchisor.

E. Franchisee shall offer for sale, use, sell and provide through the Franchised Business the services and products that Franchisor from time to time authorizes and will not, without Franchisor's advance written approval, offer for sale, use, sell or provide through the Franchised Business or the Premises which it occupies, any other category of products or services, or use such Premises or Franchised Business for any purpose other than the operation of the Franchised Business in full compliance with this Agreement.

F. Franchisee acknowledges:

1. Each and every detail of client service, client relations, appearance and demeanor of Franchisee and its employees is important to Franchisor and to other FLICKO'S Franchised Businesses. Franchisor shall endeavor to maintain high standards of quality and service by all FLICKO'S Franchised Businesses. To this end, Franchisee agrees to cooperate with Franchisor by maintaining such high standards in the operation of the franchise and Franchisee shall at all times give prompt, courteous and efficient service to its clients. The Franchised Business shall, in all dealings with its clients and the public, adhere to the highest standards of honesty, fair dealing and ethical conduct. If in any situation Franchisor feels that Franchisee did not fairly handle a client complaint, Franchisor has the right to intervene and satisfy the client. Franchisee shall reimburse Franchisor for all costs incurred by Franchisor in servicing a client of the Franchised Business.

2. Each and every detail of employee relations and service to employees is important to Franchisor and to other FLICKO'S Franchised Businesses. Franchisor shall endeavor to maintain high standards of quality and service by all FLICKO'S Franchised Businesses. To this end, Franchisee agrees to cooperate with Franchisor by maintaining such high standards in the operation of the franchise and Franchisee shall at all times give prompt, courteous and efficient service to all employees. The Franchised Business shall, in all dealings with employees, adhere to the highest standards of honesty, fair dealing and ethical conduct.

G. Franchisee shall use only such contracts, invoices and other forms as are approved by Franchisor.

H. Franchisee must purchase from Franchisor, the initial required Audio and Video Equipment and

Fixtures; Computers and Software; and Signage to operate the Franchised Business. Franchisor will derive revenue from such purchase. In the event that Franchisee desires, and is approved by Franchisor, to lease such equipment through Franchisor's Affiliate, AHEAD, Inc., Franchisee will execute the Equipment Lease attached as Exhibit C. Default under the terms of said Lease will also be a default under the terms of this Agreement. Subsequent purchases or leases of approved equipment must be from Approved Suppliers, including Franchisor. Franchisor, or an Affiliate, will derive revenue from such leases.

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I. Franchisor will give Franchisee a list of the Audio and Video Equipment and Fixtures; Computers

and Software; and Signage that must be initially purchased from the Franchisor for use in the Franchised Business plus, in addition, and a list of approved other equipment, products, fixtures, furniture, signs, stationery, supplies and other items or services necessary to operate the Franchised Business (collectively, the "Approved Supplies List") that may be purchased from the Franchisor and/or from other third parties (collectively, the "Approved Suppliers List"). Franchisee is not required to purchase any such items from Approved Suppliers; however, Franchisor recommends that Franchisee do so Suppliers (it being clear understood, again, that Franchisee must purchase the specialized Audio and Video Equipment and Fixtures; Computers and Software; and Signage from the Franchisor). Franchisor, or an Affiliate, shall derive revenue from the purchase and/or lease of these items. If Franchisee does not purchase these items from an Approved Supplier, Franchisor must approve the quality of said items prior to Franchisee's purchase. If Franchisee would like to sell or use any product, material or supply or purchase any products from a supplier not on either of these lists, Franchisee must notify Franchisor and may need to submit samples and other information to Franchisor so that Franchisor can make an informed decision as to whether the product or supplier meets Franchisor's standards. Franchisee may be charged an amount not to exceed $50 or the current rate as published in the Manual for the costs of Franchisor's decision. The Franchisor's approval process is typically completed in 30 days. Franchisor may periodically update this list.

J. Franchisee shall secure and maintain in force all required licenses, permits and certificates relating to

the operation of the Franchised Business and shall operate the Franchised Business in full compliance with all applicable laws, ordinances and regulations including, without limitation, all government regulations relating to: video workshop businesses; occupational hazards and health; consumer protection; trade regulation; workers' compensation; unemployment insurance; and withholding and payment of federal and state income taxes, social security taxes, and sales, excise, use and property taxes. Franchisee shall refrain from any advertising or promotional practice which is unethical or may be injurious to the business of Franchisor and/or other Franchised Businesses or to the goodwill associated with the Marks.

K. In the operation of the Franchised Business, Franchisee shall use only displays, labels, forms and

other products and documentation imprinted with the Marks and colors as prescribed from time to time by Franchisor.

L. Franchisee (if Franchisee is a sole proprietorship), a general partner of Franchisee (if Franchisee is a

partnership or general partnership), a shareholder owning twenty-five percent (25%) or more of the outstanding shares of stock in Franchisee (if Franchisee is a corporation), or a manager, member or governor of Franchisee owning twenty-five percent (25%) or more of the membership interests in Franchisee (if Franchisee is a limited liability company) shall own and operate the business. Franchisee shall participate in the day-to-day activities of the Franchised Business. The Franchised Business shall at all times be under the direct, on-premises supervision of Franchisee as owner/operator. Franchisee shall keep Franchisor informed at all times of the identity of any employee(s) acting as manager(s) of the Franchised Business. Franchisee shall, at all times, faithfully, honestly and diligently perform its obligations hereunder and shall not engage in any business or other activities that will conflict with its obligations hereunder.

M. Franchisee shall notify Franchisor in writing within five (5) days of the commencement of any

investigation, action, suit or proceeding, and of the issuance of any order, writ, injunction, award or decree of any court,

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agency or other governmental instrumentality which may adversely affect the operation or financial condition of the Franchised Business.

N. Franchisor may form a FLICKO'S Regional Advisory Council ("Council") when more than one (1)

Franchised Business operates in any given region (the boundaries of each region will be determined in Franchisor's complete discretion). Franchisee must participate in all Council programs Franchisor approves for Franchisee's particular Council. The purposes of the Council(s) include exchanging ideas and problem-solving methods, advising Franchisor on expenditures for regional advertising and coordinating System franchisee efforts. Franchisee will pay all fees levied by the Council and Franchisor has the right to enforce this obligation. Amounts and expenditures may vary due to variations in Council participation and costs as determined by a particular Council and as Franchisor approves.

O. Franchisee shall maintain a current computer listing and database containing the name of the

company, principal contact, address, fax number, telephone number and e-mail address of all business clients of the Franchised Business ("Client List"). If Franchisee defaults or elects not to renew this franchise, Franchisor or its Related Entity shall have the right to continue doing business with the established client base until the Franchised Business is sold or transferred to another franchisee.

P. Franchisee shall solicit and perform video workshop services for individuals and businesses.

Franchisee is responsible for billing and collecting for its services.

Q. Franchisee must use a computer system/equipment and software meeting the specifications set

forth in the Manual. Franchisee must purchase the computer system/equipment and software, meeting the specifications set forth in the Manual, from Franchisor. Franchisee will be responsible for paying the annual computer/software support costs directly to a third party supplier. Franchisee will be responsible for the costs of all reasonable upgrades and updates to the computer system/equipment and software. Franchisor may in the future introduce software into the System, requiring Franchisee to lease or purchase such software, as well as compatible hardware and network peripherals, the specifications of which will be set forth in the Manual. The amount of any such additional investment in software or computer equipment required of Franchisee is limited, as provided in Paragraph VIII.

XIII. FRANCHISOR'S OPFRATIONS ASSISTANT

A. Franchisor may from time to time advise Franchisee relative to prices for services and products offered for sale by the Franchised Business that in Franchisor's judgment constitute good business practice. Franchisee shall not be obligated to accept any such advice and shall have the sole right to determine the prices to be charged from time to time by the Franchised Business and no such advice shall be deemed or construed to impose upon Franchisee any obligation to charge any fixed, minimum or maximum price for any service or product offered for sale by the Franchised Business.

B. Upon commencement and during the operation of the Franchised Business, and during the term of this Agreement and any renewal period thereof, Franchisor shall do the following:

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1. If applicable, provide to Franchisee the Approved Supplies List and Approved Suppliers Lists; however, Franchisor makes no representation or warranty that any particular approved supplier will be willing or able to sell to all franchisees;

2. Regulate quality standards in conformance with the System specifications throughout the network of Franchised Businesses;

3. Provide ongoing support for unit operations and maintenance, client service techniques and administrative procedures; and

4. Coordinate development of marketing materials and strategies for the benefit of all members of the franchise network.

C. Franchisor shall furnish Franchisee with assistance in connection with the operation of the Franchised Business as is reasonably determined to be necessary by Franchisor from time to time. Operations assistance may consist of advice and guidance with respect to:

1. Proper utilization of procedures by the Franchised Business regarding the services and products to be offered from the Franchised Business as Franchisor approves;

2. The institution of proper administrative, supervisory and general operating procedures for the effective operation of the Franchised Business;

3. Additional products and services authorized for sale from FLICKO'S Franchised Businesses;

4. Advertising and promotional programs; and

5. Ongoing research and development of new procedures, new techniques, new products, new services, new materials and other enhancements to the System.

D. Franchisor or Franchisor's representative may make periodic visits to the Franchised Business for the purpose of consultation and assistance to Franchisee in all aspects of the operation of the Franchised Business. Franchisor and Franchisor's representatives who visit the Franchised Business will prepare, for the benefit of both Franchisor and Franchisee, written reports in respect to such visits outlining any suggested changes in the operation of the Franchised Business and detailing any defaults in such operations which become evident as a result of any such visit. A copy of each such written report shall be provided to both Franchisor and Franchisee. Franchisor shall advise Franchisee of problems arising out of the operation of the Franchised Business as disclosed by reports submitted to Franchisor by Franchisee or by inspections conducted by Franchisor of the Franchised Business.

E. All of the specifications, Approved Suppliers Lists, Approved Supplies Lists and the Manual to be provided by Franchisor to Franchisee pursuant to this Agreement shall be delivered at the initial training program.

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XIV. INSURANCE.

A. Franchisee shall procure at its expense, and maintain in full force and effect during the term of this Agreement, insurance policies, as set forth below, protecting Franchisee, Franchisor, their officers, directors, members, partners and employees against any loss, liability, personal injury, death or property damage or expense whatsoever arising from, occurring upon or in connection with the Franchised Business, as Franchisor may reasonably require for its own and Franchisee's protection. Franchisor shall be an Additional Named Insured in such policy or policies.

B. Such policy or policies shall be written by an insurance company licensed in the state in which Franchisee operates and having at least an "A" Rating Classification as indicated in A M. Rest's Key Rating Guide in accordance with the specifications set forth in the Manual or otherwise in writing and shall include, at a minimum (except as additional coverages and higher policy limits may reasonably be specified for all franchisees from time to time by Franchisor in the Manual or otherwise in writing) the following:

1. All "Risks" personal property coverage insurance on the Franchised Business and all fixtures, equipment, supplies and other property used in the operation of the Franchised Business (which coverage may include flood and/or earthquake coverage where there are known exposures to either peril, and theft insurance) for full repair as well as replacement value coverage;

2. Workers' Compensation and Employer's Liability insurance for Franchisee's staff, as well as such other insurance as may be required by statute or rule of the state or county in which the Franchised Business is located and operated;

3. Commercial General Liability insurance and product liability insurance including a per premises aggregate, if more than one Premises, with the following coverages: broad form contractual liability; personal and advertising injury; products/completed operations; medical payments and fire damage liability; insuring Franchisor and Franchisee against all claims, suits, obligations, liabilities and damages, including attorneys' fees, based upon or arising out of actual or alleged personal injuries or property damage resulting from, or occurring in the course of, or on or about or otherwise relating to Franchisee's property and the actions of Franchisee, its agents, employees or representatives, including General Aggregate coverage in the following limits:

Minimum Limits Recommended Coverage of Coverage

General Aggregate...............................................................................................................$1,000,000.00

Products/Completed Operations Aggregate........................................................................$1,000,000.00

Personal and Advertising Injury..........................................................................................$1,000,000.00

Each Occurrence..................................................................................................................$1,000,000.00

Fire Damage (any one fire).......................................................................................................$50,000.00

Medical Expense (any one person)............................................................................................$5,000.00

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The amounts required herein may be modified from time to time by Franchisor to reflect inflation or future experience with claims.

4. Automobile Liability Insurance, including owned, hired and non-owned vehicle coverage, with a combined single limit of at least ONE MILLION DOLLARS ($1,000,000.00); and

5. Such insurance and types of coverage as may be required by the terms of any lease for the Franchised Business, or as may be required from time to time by Franchisor or by any statute or regulation.

C. The insurance afforded by the policy or policies respecting liability shall not be limited in any way by reason of any insurance which may be maintained by Franchisor. Within thirty (30) days of the signing of this Agreement, but in no event later than the date on which Franchisee acquires an interest in the real property from which it will operate the Franchised Business, a Certificate of Insurance showing compliance with the foregoing requirements shall be furnished by Franchisee to Franchisor for approval. Such certificate shall state that said policy or policies will not be canceled or materially altered without at least thirty (30) days prior written notice to Franchisor and shall reflect proof of payment of premiums. Maintenance of such insurance and the performance by Franchisee of the obligations under this Paragraph XIV. shall not relieve Franchisee of liability under the indemnity provision set forth in this Agreement. Minimum limits as required above may be modified from time to time, as conditions require, by written notice to Franchisee.

D. Should Franchisee, for any reason, not procure and maintain such insurance coverage as required by this Agreement, Franchisor shall have the right and authority (without, however, any obligation to do so) to procure such insurance coverage immediately and to charge same to Franchisee, which charges, together with a reasonable fee for expenses incurred by Franchisor in connection with such procurement, shall be payable by Franchisee immediately upon notice. Notwithstanding the foregoing, Franchisee's failure may be considered a material default and the basis for termination of the Franchise Agreement.

XV. mvPNANTS

A. Unless otherwise specified, the term "Franchisee" as used in this Paragraph XV. shall include, collectively and individually, Franchisee as defined in Paragraph XXX.

B. Franchisee covenants that during the term of this Agreement and any renewals thereof, except as otherwise approved in writing by Franchisor, Franchisee shall devote full-time energy and best efforts, to the management and operation of the Franchised Business. For purposes of this Paragraph XV., "Franchisee" includes an individual or sole proprietor who acts in the capacity of Franchisee, a shareholder of a beneficial interest of twenty-five percent (25%) or more of the securitiesof Franchisee (if Franchisee is a corporation), a general partner of Franchisee (if

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

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Franchise Agreement

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