Franchise Agreement

EXHIBIT 10.47


FRANCHISE AGREEMENT


BY AND BETWEEN


REMEDY INTELLIGENT STAFFING, INC.


AND


--------------


DATED


__________ __, 20__


TABLE OF CONTENTS


PAGE 1. DEFINITIONS. 1


2. GRANT OF FRANCHISE. 7


3. TERRITORIAL RIGHTS. 7


4. TERM AND RENEWAL. 10


5. FEES. 11


6. COMMENCEMENT AS A REMEDY FRANCHISEE. 16


7. TRAINING. 16


8. EMPLOYMENT, BILLING, COLLECTION AND PAYMENT OF TEMPORARY EMPLOYEE EXPENSES. 17


9. ADDITIONAL SERVICES TO BE PROVIDED BY FRANCHISOR. 19


10. MARKS. 20


11. RELATIONS. 22


12. INDEMNIFICATION. 23


13. CONFIDENTIAL INFORMATION. 24


14. MINIMUM PERFORMANCE STANDARDS AND OFFICE DEVELOPMENT REQUIREMENTS. 26


15. IMAGE AND OPERATING STANDARDS. 27


16. INSURANCE. 29


17. STRATEGIC NATIONAL ACCOUNT CUSTOMERS. 30


18. ADVERTISING AND BRAND DEVELOPMENT. 31


19. ACCOUNTING, REPORTS, FINANCIAL STATEMENTS. 34


20. PERIODIC REVIEWS, INSPECTIONS AND AUDITS. 35


21. COMPUTERIZED MANAGEMENT AND OPERATIONAL SYSTEM. 36


22. TRANSFER. 37


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23. TERMINATION. 41


24. RIGHTS AND OBLIGATIONS AFTER TERMINATION OR EXPIRATION. 44


25. ENFORCEMENT. 45


26. NOTICES AND PAYMENTS. 49


27. ACKNOWLEDGMENTS. 50


EXHIBIT "A" FRANCHISE LOCATIONS


EXHIBIT "B" TERRITORY


EXHIBIT "C" MINIMUM PERFORMANCE STANDARDS


EXHIBIT "D" OFFICE DEVELOPMENT REQUIREMENTS SCHEDULE


EXHIBIT "E" GUARANTY, INDEMNIFICATION AND ACKNOWLEDGMENTS


EXHIBIT "F" SOFTWARE LICENSE AGREEMENT


EXHIBIT "G" GROSS MARGIN SCHEDULE


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REMEDY INTELLIGENT STAFFING, INC.


FRANCHISE AGREEMENT


This Franchise Agreement (this "AGREEMENT"), is made effective as of _____________, 200__, ("EFFECTIVE DATE"), through ________, 20__, by and between Remedy Intelligent Staffing, Inc., a California corporation and wholly-owned subsidiary of RemedyTemp, Inc., having its principal place of business at 101 Enterprise, Aliso Viejo, California 92656 ("FRANCHISOR"), and ______________________________________________________________________ _____________________________________, (residing at / having its principal place of business at) __________________________________ ("FRANCHISEE") with reference to the following facts:


RECITALS


WHEREAS, Franchisor owns a unique format and system relating to the establishment and operation of personnel and employment staffing and placement businesses utilizing the Marks (hereinafter defined) (the "System");


WHEREAS, Franchisor identifies the System by means of the Marks, and Franchisor, through its advertising and marketing programs, its high-quality service, and the System, has established a national reputation and a demand for the personnel and employment-related services it makes available to business and industry under the Marks;


WHEREAS, Franchisee desires to obtain the benefits of the System and the right to operate a Franchised Business (hereinafter defined) using the Marks designated by Franchisor, upon the terms and conditions herein set out; and


WHEREAS, Franchisee understands and acknowledges the importance of Franchisor's high standards of quality and service and the necessity of operating the Franchised Business in conformity with Franchisor's standards and specifications.


NOW, THEREFORE, Franchisor and Franchisee agree as follows:


1. DEFINITIONS.


Terms used in this Agreement and not otherwise defined herein shall have the meanings set forth below:


"ACCOUNTING PERIOD" means Franchisor's monthly accounting period, which currently generally varies from twenty-eight (28) to thirty-five (35) days (but may be as long as forty-two (42) days), except that the first Accounting Period under this Agreement shall be the portion of Franchisor's monthly accounting period which commences on the Effective Date, and the last Accounting Period shall be the portion of Franchisor's monthly accounting period which ends with the term of this Agreement.


"ADJUSTED GROSS MARGIN DOLLARS" means Gross Temporary Employment Billings minus all Temporary Employee Expenses attributable to Temporary Employees for a given time period.


"AFFILIATE" means any company directly or indirectly owned or controlled by or under common control with Franchisor.


"APPROPRIATE FRANCHISEE" means, with respect to any customer, the franchisee operating a Remedy franchised business within whose protected geographic area that customer's business is situated.


"CALCULATION YEAR" means, for the first Calculation Year, the twelve (12) fiscal month period beginning on the first day of the first fiscal month in which Franchisee commences operations of the Franchised Business, and, for subsequent Calculation Years, each consecutive twelve (12) month period thereafter during the term of this Agreement.


"COMPUTER SYSTEM" means (a) the computer hardware required by Franchisor for the operation of the Franchised Business and use of the Software, (b) data, audio, video, and voice storage, retrieval, and transmission systems for use at the Franchised Business; (c) printers and other peripheral devices; and (d) archival back-up systems.


"CONFIDENTIAL INFORMATION" means all customer and associate lists, sales and promotional information, employee lists, financial information furnished or disclosed to Franchisee by Franchisor, certain software and data contained therein, the Remedy Operating Manual, Websites, and all other information that Franchisor deems to be confidential or proprietary with respect to Franchisor, the System, or customers of Franchisor (i) of which Franchisee becomes aware as a result of its franchise relationship with Franchisor, (ii) which has actual or potential economic value to Franchisor from it not being generally known to other persons who could obtain economic value from its disclosure or use, and (iii) which is the subject of reasonable efforts by Franchisor to maintain its secrecy or confidentiality, whether assembled and compiled by Franchisee or produced and provided by Franchisor, and the physical embodiments of such information, all of which are the confidential and proprietary information of Franchisor.


"COVERED BUSINESS" means Temporary Employment services or Direct-Hire Employment services or similar businesses.


"DIRECT-HIRE BILLINGS" means for a given time period the amounts received, directly or indirectly, from or in connection with all Direct-Hire Employment services, consultation, assistance or sales provided from, through, or attributable to the Franchised Business regardless of where or to whom provided, including bona fide refunds and adjustments.


"DIRECT-HIRE EMPLOYEE" means an individual placed into a Direct-Hire Employment position by the Franchised Business.


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"DIRECT-HIRE EMPLOYMENT" means placement of an individual for employment directly with a company or firm during which time such individual is not an employee of Franchisor or Franchisee.


"FRANCHISED BUSINESS" means the business franchised under, and conducted in accordance with, this Agreement.


"FRANCHISEE'S SHARE" means an amount of money determined in accordance with Section 5.2. Franchisee's Share shall be calculated during each Accounting Period beginning with the Accounting Period in which Franchisee commences operations of the Franchised Business.


"FRANCHISEE'S SPLIT" means a percentage of Adjusted Gross Margin Dollars and Subcontractor Profit determined in the Gross Margin Schedule used to calculate Franchisee's Share (before any of the deductions set forth in Section 5.2 hereof).


"FRANCHISOR'S SHARE" shall be an amount of money, paid to Franchisor, equal to the sum of (i) Franchisor's Split of the Adjusted Gross Margin Dollars, determined according to the Gross Margin Schedule set forth in Section 5.6, (ii) ten percent (10%) of Direct-Hire Billings during an Accounting Period, (iii) Franchisor's Split of Subcontractor Profit during an Accounting Period, and (iv) ten percent (10%) of Temporary-to-Hire Conversion Fees during an Accounting Period.


"FRANCHISOR'S SPLIT" means a percentage of Adjusted Gross Margin Dollars and Subcontractor Profit as set forth in the Gross Margin Schedule used to calculate Franchisor's Share.


"GENERAL APPROVED SERVICES" means the services indicated below, by checking the appropriate box [ONLY ONE BOX SHOULD BE CHECKED], that Franchisee is approved to offer to customers from the Franchised Business under the Marks in accordance with the terms of this Agreement:


[ ] General Clerical Employment Services


[ ] General Light Industrial Employment Services


[ ] Both General Clerical Employment Services and General Light
Industrial Employment Services


"GENERAL CLERICAL EMPLOYMENT SERVICES" means general clerical and administrative Temporary Employment services, including such services as Franchisor shall from time to time designate in the Remedy Operating Manual, or otherwise in writing, as General Clerical Employment Services.


"GENERAL LIGHT INDUSTRIAL EMPLOYMENT SERVICES" means general light industrial and logistics Temporary Employment services, including such services as Franchisor shall from time


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to time designate in the Remedy Operating Manual, or otherwise in writing, as General Light Industrial Employment Services.


"GROSS TEMPORARY EMPLOYMENT BILLINGS" means the total amount of Gross Billings received or receivable from the placement of Temporary Employees with customers through the Franchised Business, including bona fide refunds and adjustments, during a particular time period.


"GROSS BILLINGS" means gross amounts received or receivable, directly or indirectly, from or in connection with all services, consultation, assistance or sales provided from, or through or attributable to the Franchised Business regardless of where or to whom provided, including, without limitation, services of Temporary Employees and Direct-Hire Employees, including bona fide refunds and adjustments.


"GROSS MARGIN FLOOR" means a Gross Margin Percentage of twenty-one percent (21%).


"GROSS MARGIN PERCENTAGE" means the percentage obtained by dividing Adjusted Gross Margin Dollars for a given time period by Gross Temporary Employment Billings for that period. For example, if Adjusted Gross Margin Dollars for a given time period are $250,000 and Gross Temporary Employment Billings for that time period are $1,000,000, then the Gross Margin Percentage is 25%.


"GROSS MARGIN SCHEDULE" means the schedule of Gross Margin Tiers, dollar amounts, and Franchisor's Split and Franchisee's Split as set forth in Exhibit G hereto.


"INITIAL FRANCHISE FEE" means a franchise fee of Twenty-Five Thousand Dollars ($25,000.00) for each Territory. If this Agreement is Franchisee's second or subsequent franchise agreement, the amount of the franchise fee shall be Ten Thousand Dollars ($10,000.00).


"INITIAL TERM" means a fifteen (15) year period beginning on the Effective Date, as further described in Section 4.1.


"LOCATION" means the office or location within the Territory (hereinafter defined) from which the Franchised Business shall be conducted. The Location shall be either (i) at the address set forth in Exhibit A attached hereto and incorporated herein by this reference, or (ii) at an address approved by Franchisor pursuant to Section 3.1. Franchisee may request, and Franchisor may approve, additional Location(s) for the operation of the Franchised Business within the Territory, and in such circumstances Exhibit A shall be amended to include the address(es) of such additional Location(s).


"MANAGER" means the person primarily responsible to coordinate and manage the Franchised Business for Franchisee and who will devote full time to the coordination and management thereof.


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"MARKS" means such trademarks, service marks, trade names, logotypes, or other commercial symbols, including but not limited to the marks "REMEDY" and "REMEDY INTELLIGENT STAFFING", and such other trademarks, service marks, trade names, logotypes, or other commercial symbols as are now designated (and may hereinafter be designated by Franchisor in writing) for use in connection with, and in identifying, the System. Franchisee acknowledges that the Marks do not include the trademarks, service marks, trade names, logotypes, or other commercial symbols used in connection with Non-Mark Businesses.


"MINIMUM PERFORMANCE STANDARDS" means the minimum required amount of Adjusted Gross Margin Dollars specified in Exhibit C attached hereto and incorporated herein by this reference.


"NATIONAL BUSINESS CONFERENCE" means a meeting of Franchisor's franchisees to be held from time to time at Franchisor's discretion.


"NON-MARK BUSINESSES" means Temporary Employment and Direct-Hire Employment service businesses, or any other business, that are not operated using the Marks, and that operate under other trademarks, service marks, trade names, logotypes, or commercial symbols including, but not limited to the mark, "RemX".


"PROTECTED CUSTOMER" means a customer situated within the geographic area that has been granted to another franchisee of Franchisor under a franchise agreement with Franchisor for all business other than Direct-Hire Employment services.


"REMEDY OPERATING MANUAL" means the Franchisor's confidential operations manual containing the Confidential Information, specifications, standards and procedures, as amended from time to time by Franchisor, by which the Franchisee shall conduct the Franchised Business. Franchisor shall have the right to provide the Remedy Operating Manual, including Franchisor's confidential automated library, procedural help system as well as any hardcopy operating manuals, in any format it chooses (including, but not limited to, hard copy, CD, or online).


"RENEWAL AGREEMENT" means a franchise agreement between Franchisor and Franchisee for the Franchised Business, commencing immediately following the expiration of the Initial Term of this Agreement subject to the terms of Section 4, the term of which shall be ten (10) years.


"SOFTWARE" means such computer software designated from time to time by Franchisor for use in connection with the Franchised Business.


"SPECIAL SERVICES" means such Temporary Employment services, which may be some (but not all) of the services encompassed within, or services in addition to, General Clerical Employment Services or General Light Industrial Employment Services.


"STRATEGIC NATIONAL ACCOUNT CUSTOMERS" means any customer designated as such by Franchisor, based upon Franchisor's sole determination that, because such customer conducts its business at multiple locations and is deemed of strategic importance by Franchisor, the account,


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services and pricing of such customer shall be negotiated and secured either (i) by Franchisor or (ii) with Franchisor's assistance, approval and oversight.


"SUBCONTRACTOR PROFIT" means all amounts billed for a given time period to a customer for services provided to the customer by subcontractors, minus the amounts paid to subcontractors for the provision of Temporary Employee services to such customer through the Franchised Business.


"TECHNOLOGY FEE" means a monthly fee paid to Franchisor each Accounting Period in the amount of Three Hundred Dollars ($300) for the first Location of the Franchised Business, and One Hundred Fifty Dollars ($150) for each additional Location of the Franchised Business.


"TEMPORARY EMPLOYEE" means an employee placed into a Temporary Employment position by the Franchised Business.


"TEMPORARY EMPLOYEE EXPENSES" means all wages, payroll taxes, workers' compensation insurance premiums or accruals, expenses and related charges, longevity pay, sick pay, holiday pay, state employment charges, accruals and taxes, any additional expenses pursuant to contractual agreements with clients and, to the extent maintained by Franchisor, all insurance charges, including, without limitation, liability insurance, policy premiums, policy deductibles for covered losses or claim costs and expenses for any losses not covered by an insurance policy attributable to Temporary Employees furnished by the Franchised Business during the term of this Agreement, and any other costs and expenses attributable to Temporary Employees.


"TEMPORARY EMPLOYMENT" means employment with a company or firm other than for a Direct-Hire Employment position, during which time such employee remains the employee of Franchisor.


"TEMPORARY-TO-HIRE CONVERSION FEES" means for a given time period the amounts received, directly or indirectly, in connection with the conversion of employees from Temporary Employment positions to Direct-Hire Employment positions with the same customer through the Franchised Business, including bona fide refunds and adjustments.


"TERRITORY" means the protected geographic area, described or identified in Exhibit B to this Agreement and incorporated herein by this reference, within which the license granted under this Agreement is exclusive to the Franchisee.


"TERRORISM LAWS" means Executive Order 13224 issued by the President of the United States, the Terrorism Sanctions Regulations (Title 31, Part 595 of the U.S. Code of Federal Regulations), the Foreign Terrorist Organizations Sanctions Regulations (Title 31, Part 597 of the U.S. Code of Federal Regulations), the Cuban Assets Control Regulations (Title 31, Part 515 of the U.S. Code of Federal Regulations), the USA PATRIOT Act, and all other present and future federal, state and local laws, ordinances, regulations, policies, lists and any other requirements of any governmental authority (including, without limitation, the United States


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Department of Treasury Office of Foreign Assets Control) addressing or in any way relating to terrorist acts and acts of war.


"UNCOLLECTIBLE AMOUNTS" means all gross amounts receivable by Franchisor and due from a customer of the Franchised Business, which amounts remain uncollected for a period of one hundred twenty (120) days or more, or such other period of time as Franchisor may specify in the Remedy Operating Manual.


"WEBSITE" means a group of related documents that can be accessed through a common internet address.


2. GRANT OF FRANCHISE.


Franchisor hereby grants to Franchisee the right, and Franchisee hereby accepts the obligation, to establish and operate a Franchised Business according to the terms and conditions in this Agreement, and to use, solely in connection therewith, the Marks and the System, as they may be changed, improved, and further developed from time to time.


3. TERRITORIAL RIGHTS.


3.1. LOCATION. Franchisee shall conduct the Franchised Business from the Location. If, as of the Effective Date, the Location has not yet been selected, Franchisee shall select the Location, subject to Franchisor's written approval. If the Location is leased to the Franchisee, such lease must be fully assignable to Franchisor, at Franchisor's option, upon termination or expiration of this Agreement, and Franchisee shall provide copies of the executed lease to Franchisor. Franchisee shall commence operations at and from the Location within ninety (90) days after the date of this Agreement.


3.2. TERRITORY. During the term of this Agreement, Franchisee shall have the right to provide General Approved Services within the Territory under the Marks and System. During the term of this Agreement Franchisor shall not: (a) establish, nor license any other person to establish, another Remedy franchise or license from a location within the Territory providing all General Approved Services (although certain General Clerical Employment Services and General Light Industrial Employment Services may be provided); (b) conduct, or license any other person to conduct, all General Approved Services (although certain General Clerical Employment Services and General Light Industrial Employment Services may be provided) within the Territory under any marks or system, including the Marks and System; or (c) conduct, or license any other person to conduct, Special Services under the Marks; in each case except as otherwise provided in this Agreement.


3.3. RESTRICTIONS.


3.3.1. TEMPORARY EMPLOYEES. Franchisee's license under this Agreement with respect to Temporary Employees is limited to providing only General Approved Services (and, if approved, Special Services) within the Territory. Franchisee may, upon receiving prior written approval from Franchisor, provide General Approved Services (and, if approved, Special


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Services) for Temporary Employees outside the Territory, subject to the provisions of Sections 3.3.2 and 3.3.3 below. Franchisee shall not provide Temporary Employment services to any customer located in a geographic area granted to another franchisee of Franchisor.


3.3.2. PROTECTED CUSTOMERS. If Franchisee provides Temporary Employment services to a customer located outside the Territory, but in a geographic area which subsequently becomes a geographic area granted to another franchisee of Franchisor, such customer shall become a Protected Customer of the other franchisee. If Franchisee sells Temporary Employment services to a Protected Customer, upon being notified thereof, Franchisee shall immediately relinquish all sales and service rights associated with such Protected Customer to the Appropriate Franchisee for such Protected Customer in the manner provided in Section 3.3.3 below.


3.3.3. PROTECTED CUSTOMER RELINQUISHMENT PROCEDURES. In the event Franchisee is notified that it is providing Temporary Employment services to a Protected Customer, Franchisee shall:


(i) Coordinate the replacement of temporary employees by the
Appropriate Franchisee for those placed with the
Protected Customer by Franchisee in such a manner as to
minimize the impact of the replacement on the Protected
Customer; and


(ii) Within ten (10) days of notification, and prior to the
replacement, (a) notify the Protected Customer that
further requests for Remedy temporary staffing services
should be directed to the Appropriate Franchisee and (b)
provide the Protected Customer with a schedule for
replacement of temporary employees.


3.3.4. DIRECT-HIRE EMPLOYMENT. Franchisee may offer and sell Direct-Hire Employment services to customers with physical locations within the Territory, or upon receipt of Franchisor's prior written consent, outside the Territory. Franchisee may not, however, provide to any customer located in the geographic territory of another franchisee of Franchisor, a Direct-Hire Employee who is already employed within such geographic area as a Temporary Employee of such other franchisee.


3.3.5. ADVERTISING AND PROMOTIONAL MATERIALS. In addition to the provisions of Section 18 in this Agreement regarding advertising and promotional materials, Franchisor and Franchisee agree, with respect to the placement of advertising and promotional materials:


(i) By Franchisor. All advertising and promotional materials
created, placed, and/or distributed by Franchisor may
appear in media distributed in, or may be directed to
customers and associates and prospective customers and
associates located within, the Territory, including on
Franchisor's website or any related website.


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(ii) By Franchisee. All advertising and promotional materials
created, placed, and/or distributed in connection with
the Franchised Business shall be directed primarily
toward customers and associates or prospective customers
and associates located within the Territory, but may not
be placed and/or distributed to geographic areas outside
the Territory that have been granted to another
franchisee of Franchisor, or that are serviced by a
Franchisor-owned office offering Temporary Employment or
Direct-Hire Employment services.


3.4. RESERVED RIGHTS. Franchisor reserves all rights not expressly granted to Franchisee hereunder. Without limiting the generality of the foregoing, Franchisor reserves the right, without geographic or other limitation, to:


(i) Own and operate, and license others to own and operate, any
businesses outside the Territory, including Temporary
Employment and Direct-Hire Employment service businesses,
under any marks and systems, including the Marks and System;


(ii) Own and operate, and license others to own and operate,
businesses under other marks and other systems (including
Non-Mark Bu ...