Exhibit 10.1

REGIONAL DEVELOPER AGREEMENT

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ESIO FRANCHISING, LLC

DEVELOPER AGREEMENT

TABLE OF CONTENTS

SECTION

PAGE

 

 

 

 

 

 

1.

GRANT OF RIGHTS.

1

 

 

 

2.

DEVELOPER’S OBLIGATIONS.

2

 

 

 

3.

DEVELOPER RIGHTS.

6

 

 

 

4.

TERM.

8

 

 

 

5.

ADDITIONAL OBLIGATIONS OF COMPANY AND DEVELOPER.

8

 

 

 

6.

DEVELOPMENT FEE.

10

 

 

 

7.

PAYMENTS TO DEVELOPER.

10

 

 

 

8.

RETURN OF COMMISSIONS TO FRANCHISOR.

11

 

 

 

9.

MARKS.

11

 

 

 

10.

CONFIDENTIAL INFORMATION.

 

 

 

 

11.

ASSIGNABILITY.

13

 

 

 

12.

NON-COMPETITION.

17

 

 

 

13.

TERMINATION.

17

 

 

 

14.

MEDIATION AND ARBITRATION.

19

 

 

 

15.

GENERAL CONDITIONS AND PROVISIONS.

22

EXHIBIT 1

DEVELOPMENT AREA

 

EXHIBIT 2

MINIMUM DEVELOPMENT OBLIGATIONS

 

EXHIBIT 3

OWNERSHIP STRUCTURE

 

EXHIBIT 4

[INTENTIONALLY DELETED]

 

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ESIO FRANCHISING, LLC

DEVELOPER AGREEMENT

THIS DEVELOPER AGREEMENT (the “Agreement”) is made and entered into this 14th
day of August, by and between ESIO FRANCHISING, LLC, a Delaware limited
liability company (“Franchisor” “ESIO, “us,” or “we”), and Tempco, Inc., a
Nevada corporation (“Developer” or “you”):

RECITALS

A.         We and our Affiliates (“Affiliates”) have designed, acquired, and
developed valuable and proprietary formats and systems for the development and
operation of businesses operating ESIO unit franchises (“Franchises”) and
developer franchises (“Regional Developer Franchises”).  ESIO Franchises offer
ESIO Beverage Systems for in-home use along with a wide variety of ESIO hot and
cold products for use with the ESIO Beverage System. ESIO Regional Developer
Franchises solicit, refer, qualify, train, assist and provide ongoing pre and
post opening support to ESIO Franchise owners within a defined territory. ESIO
Regional Developer Franchises have no rights to sell or negotiate ESIO
Franchises on their own behalf or on behalf of ESIO.

B.         We have developed and/or acquired and use, promote and license
certain trademarks, service marks and other commercial symbols in operating ESIO
Franchises, including ESIO®, and we may create, use and license other
trademarks, service marks and commercial symbols for use in operating ESIO
Franchises and ESIO Developer Franchises (collectively, the “Marks”).

C.         We offer prospective ESIO Franchise owners (“Prospective
Franchisees”) the right to own and operate an ESIO Franchise offering the
products and services we authorize (and only the products and services we
authorize) and using our business formats, methods, systems, procedures, signs,
designs and layouts, standards, specifications and Marks, all of which we may
improve, further develop and otherwise modify from time to time (collectively,
the “System”).

D.         We also offer prospective Regional Developer Franchise owners the
right to own and operate a Regional Developer Franchise which will solicit,
qualify, refer to us, train, and assist Franchise owners in opening and
operating ESIO Franchises (the “Developer Business”) within a defined geographic
development area (a “RDA” or “Protected Territory”).

E.         Developer desires to acquire the rights to operate an ESIO Regional
Developer Franchise, pursuant to this Agreement, where it will solicit, qualify,
train and assist ESIO Franchises within the RDA set forth in Exhibit 1.

F.         We desire to grant to Developer the right to operate one (1) Regional
Developer Franchise within the RDA set forth on Exhibit 1 in accordance with the
terms and upon the conditions contained in this Agreement.

WHEREFORE, FRANCHISOR AND DEVELOPER AGREE AS FOLLOWS:

1.         GRANT OF RIGHTS.

1.1        Grant of Development Rights.  Subject to the terms of this Agreement,
we hereby grant to Developer and Developer hereby accepts the rights, during the
Term and any Renewal Terms, to solicit, refer to us, qualify, train, assist and
provide ongoing pre and post opening support to prospective franchisees and ESIO
Franchisees to open and operate ESIO Franchises in the RDA set forth in Exhibit
1 (the “Developer Services”).

1.2        Grant of Pilot Franchise Rights.  Company hereby grants Developer the
right to open and operate three (3) franchise license territories within the RDA
(“Pilot Franchise”). Developer shall sign Franchisor’s current form of Franchise
Agreement for each of the Pilot Franchises in conjunction with Developer’s
execution of this Agreement.  The parties agree that the Initial Development Fee
paid by Developer in conjunction with this Development Agreement shall include
the Initial Franchise Fees for three (3) Pilot Franchises and that Developer
shall not be obligated to pay any additional Initial Franchise Fees to Developer
in conjunction with the three (3) Pilot Franchises.

1

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2.         DEVELOPER’S OBLIGATIONS.

2.1        Development Obligations.

(a)        Development of RDA. Developer shall solicit, qualify, refer to us,
train, and assist with opening ESIO Franchise owners within the RDA.

(b)        Accuracy of Information.  Developer shall confirm that the
information contained in any written materials, agreements and other documents
prepared by Developer related to the offer or sale of franchises is true,
correct and not misleading at the time of such offer or sale and that the offer
or sale of such franchise will not at that time be contrary to or in violation
of any applicable state law related to the registration of the franchise
offering.

(c)        Development Schedule.  Developer shall satisfy the Development
Schedule set forth in Exhibit 2, which is incorporated herein and by this
reference within each of the time periods (the “RD Development Period(s)”)
specified therein (the “RD Minimum Development Obligation”).

(d)        Each ESIO Franchise shall be the subject of a separate Franchise
Agreement (as defined herein).  We and each Franchisee shall enter into our then
current form of franchise agreement (the “Franchise Agreement”).

(e)        ESIO Franchises which are the subject of a Franchise Agreement
executed pursuant hereto, whether by Developer or by a Franchisee, shall be
counted in determining whether the RD Minimum Development Obligation shall have
been met within the applicable RD Development Periods.  

(f)         Developer Sales Office.  Developer shall establish and operate a
franchise sales office (“Developer Sales Office” or “Sales Office”) within the
RDA, which may be the same as the Pilot Franchise Site.  We will not approve or
disapprove the location of the Sales Office.

(g)        Approval of Advertising.  Prior to their use by Developer, samples of
all advertising and promotional materials not prepared or previously approved by
us shall be submitted to us for approval, which approval shall not be
unreasonably withheld.  Developer shall not use any advertising or promotional
materials that we have not approved or have disapproved.  Developer acknowledges
and understands that certain states require the filing of franchise sales
advertising materials with the appropriate state agency prior to dissemination.
 Developer agrees fully and timely to comply with such filing requirements at
Developer’s own expense unless such advertising has been previously filed with
the state by us.  We may charge Developer for the costs incurred by us in
printing large quantities of advertising and marketing materials supplied by us
to Developer at Developer’s request.

(h)        Pilot Franchise Units. In conjunction and contemporaneously with the
execution of this Agreement, Developer shall sign three (3) Franchise Agreements
(in the form currently being signed by ESIO  Franchisees) whereby Developer
agrees to open and operate, no later than six (6) months after the Effective
Date, three ESIO Pilot Franchise locations within the RDA. Developer’s operation
of each Pilot Franchise must successfully pass our operational review and be
able to serve as a prototype business and training facility before Developer may
perform any Regional Developer Franchise services under this Agreement.
 Developer will operate the Pilot Franchises or replacement therefore at all
times during the Term and any extension thereof.  The Pilot Franchise must be
located at a site within the RDA that is suitable for the operation of an ESIO
Franchise and may operate from the same location as the Developer Sales Office.
 We will not approve or disapprove of the Pilot Franchise Site.

2.2         Franchise Support Obligations.  Developer agrees to implement any
training programs developed by us for ESIO Franchises and to provide such
assistance and services as we shall reasonably request and require from time to
time.  All services and assistance provided to Franchisees in connection with
the operation of ESIO

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Franchises located in the RDA, and which are established by the Developer, will
be provided by Developer and such obligations of Developer will not be
transferred, delegated or subcontracted to any other person in connection with
the construction, equipping and opening of ESIO Franchises within the RDA
including but not limited to:

(a)        the sourcing of equipment, fixtures, furnishings, inventory and
supplies for such ESIO Franchises;

(b)        the supervision of the use, and compliance with our quality control
standards in the use of the Marks at such ESIO Franchises.

(c)        guidance and assistance with respect to specifications, standards,
and operating procedures used by Franchisees;

(d)        guidance and assistance with respect to purchasing approved
equipment, furniture, furnishings, signs, materials and supplies;

(e)        guidance and assistance with respect to development and
implementation of local advertising and promotional programs;

(f)        guidance and assistance with respect to general operating and
management procedures;

(g)        guidance and assistance with respect to establishing and conducting
employee training programs for Franchisee;

(h)        Additional special on-premises training of Franchisees’ personnel or
other assistance in operating Franchises within your RDA. If you are required to
provide such services, you shall be entitled to recover all reasonable expenses
incurred in providing such training or assistance, including any wages or
compensation owed to, and travel, lodging, transportation, and living expenses
incurred by your personnel. You may also, in our discretion, be paid a daily
training fee in an amount to be set by us’

(i)         Changes in any of the above that occur from time to time;

(j)         Additional guidance, assistance, services, and support Franchisor is
obligated to provide any Franchisee within the RDA at any time during the Term
of this Agreement.

2.3        Inspection of ESIO Franchises and Operations.  Developer shall
conduct quarterly inspections of all of the ESIO Franchises in the RDA.
Developer’s inspections shall be conducted utilizing information, documents and
forms provided by us in accordance with the standards established by us from
time to time and according to such procedures set forth by us.  Developer shall
provide reports to us with respect to the findings of such inspections, in such
form and at such time as we shall require.

2.4        Point of Contact; Communication with Franchisees.  Developer shall be
the main point of contact for all ESIO Franchises in the RDA.  Developer shall
instruct all Franchisees in the RDA that communication concerning services,
questions, problems, complaints, or otherwise shall be directed to Developer and
not Franchisor.

2.5        Standard of Service.  Developer shall, at all times, give prompt,
courteous and efficient service to ESIO Franchises.  Developer shall, in all
dealings with Franchisees, Prospective Franchisees and the public, adhere to the
highest standards of honesty, integrity, fair dealings and ethical conduct.

2.6        Compliance with Laws and Good Business Practices.  Developer shall
secure and maintain in force all required licenses, permits and certificates
relating to Developer’s activities under this Agreement and operate in full
compliance with all applicable laws, ordinances and regulations.  Developer
acknowledges being

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advised that many jurisdictions have enacted laws concerning the advertising,
sale, renewal and termination of, and continuing relationship between parties to
a franchise agreement, including, without limitation, laws concerning disclosure
requirements.  Developer agrees promptly to become aware of and to comply with
all such laws and legal requirements in force in the RDA and to utilize only
disclosure documents that we have approved for use in the applicable
jurisdiction.

2.7        Notification of Litigation.  Developer shall notify Franchisor in
writing within five (5) days after the commencement of any action, suit,
arbitration, proceeding, or investigation, or the issuance of any order, writ,
injunction, award and decree, by any court agency or other governmental
instrumentality, which names Developer or any of its Owners or otherwise
concerns the operation or financial condition of Developer, the Developer
Business or any Franchisee.

2.8        Insurance.

(a)        Developer shall at all times during the term of this Agreement
maintain in force, at Developer’s sole expense, insurance for the Developer
Business of the types, in the amounts and with such terms and conditions as we
may from time to time prescribe in the Manual for Developers, or otherwise.  All
of the required insurance policies shall name us and Affiliates designated by us
as additional insured, contain a waiver of the insurance company’s right of
subrogation against us and the designated Affiliates, and provide that we will
receive thirty (30) days’ prior written notice of termination, expiration,
cancellation or modification of any such policy.

(b)        Proof of Insurance Coverage.  Developer will provide proof of
insurance to us before beginning operations of its Developer Business.  This
proof will show that the insurer has been authorized to inform us in the event
any policies lapse or are cancelled or modified.  We may in our reasonable
business discretion change the types, amount and terms of insurance that
Developer is required to maintain by giving Developer prior reasonable notice.
 Noncompliance with these insurance provisions shall be deemed a material breach
of this Agreement, and in the event of any lapse in insurance coverage, we shall
have the right, in addition to all other remedies, to demand that Developer
cease operations of its Developer Business until coverage is reinstated or, in
the alternative, to pay any delinquencies in premium payments and charge the
same back to Developer.

2.9        Marketing; Local Advertising.

(a)        If we decide, in our sole discretion, to create an ESIO Advertising
Cooperative (“Co-op”) (which is an association of Developer whose ESIO
Franchises), including any Franchises in your RDA, you shall be required to
join, administer, lead and participate in the Co-op.  One function of the Co-op
is to establish a local advertising pool to be used by the Co-Op for advertising
for the mutual benefit of each Co-op member.  Developer must contribute to the
pool in accordance with the rules and regulations of the Co-op, as determined by
its members.  Amounts contributed to the advertising pool by Developer may be
considered as spent for local advertising, and therefore toward the minimum
local advertising requirement.  When making decisions related to the Co-op, we
shall seek and consider your input before making our decisions, but our
decisions in this regard shall be ours alone to make.

(b)        National Advertising.  Developer shall make contributions to our
Advertising Fund for each of the three Pilot Franchises operated by Developer as
set forth in the Franchise Agreements executed by Developer in conjunction with
its execution of this Agreement.  Developer shall make contributions to our
Advertising Fund in an amount set forth by us should such contributions be
required by Us.

2.10      Websites.  As used in this Agreement, the term “Website” means an
interactive electronic document contained in a network of computers linked by
communications software that refers to the ESIO Franchise or ESIO Franchises or
the Marks.  The term “Website” includes, but is not limited to, Internet and
World Wide Web pages.  In connection with any Website, Developer agrees to the
following:

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(a)        Developer shall not establish a separate Website without our prior
written consent.  We shall have the right, but not the obligation, to designate
one or more web page(s) to describe Developer, such web pages(s) to be located
within our Website; and

(b)        You agree to maintain a microsite connected to and in conformity with
our Website.  Your microsite (as defined below) will be deemed “advertising”
under this Agreement, and will be subject to, among other things, the need to
obtain our prior written approval in accordance as to content and substance as
set forth in this Agreement.  As used in this Agreement, the term “microsite”
means an interactive Franchise specific electronic document(s), contained in a
network of computers linked by communications software that you operate or
authorize others to operate, and that refers to the Franchise, the Marks, us,
and/or the System.  In connection with your microsite, you agree to the
following:

(c)        In addition to any other applicable requirements, you will comply
with our standards and specifications for microsites and/or websites as we
prescribe in the Operations Manual or otherwise in writing.  

(d)        You will establish your microsite as part of our Website and/or
establish electronic links to our Website

(e)        If you propose any material revision to the microsite or any of the
information contained in the microsite, you will submit each such revision to us
for our prior written approval.

2.11      Accounting, Bookkeeping and Records.  Developer shall maintain at its
business premises within the RDA all original invoices, receipts, checks,
contracts, licenses, acknowledgement of receipt forms, and bookkeeping and
business records for Developer’s Business we require from time to time.
 Developer shall furnish to us, within one hundred twenty (120) days after the
end of Developer’s fiscal year, a balance sheet and profit and loss statement
(audited by a CPA, if requested by us) for Developer’s Business for such year
(or a monthly or quarterly statement if required by us, in which case such
statements also shall reflect year-to-date information).  In addition upon our
request, within ten (10) days after such returns are filed, exact copies of
federal and state income, sales and any other tax returns and such other forms,
records, books and other information as we periodically require regarding
Developer’s Business, shall be furnished to us.  Developer shall maintain all
records and report of the business conducted pursuant to this Agreement for at
least six (6) years after the date of termination or expiration of this
Agreement.

2.12      Reports.  Developer shall, on a quarterly basis, deliver to us a
written report of its Developer Business activities in such form and detail as
we may from time to time specify, including information about efforts to solicit
Prospective Franchisees, the status of pending real estate transactions and the
status of Franchises.

2.13      Investigation and Qualification of Prospective Franchisees.

(a)        Each ESIO Franchise opened by a Franchisee pursuant to this Agreement
shall be the subject of a separate Franchise Agreement with us, upon our then
current form of Franchise Agreement.  Developer shall have no right to modify or
offer to modify any Franchise Agreement or other contract;

(b)        Developer shall transmit execution copies of our then-current
Franchise Agreement pertaining to the approved site and providing for the
territory associated with said ESIO Franchise to any approved Franchisee;

(c)        Developer shall investigate the qualifications of each Prospective
Franchisee and the suitability of each prospective Franchise location in the RDA
in accordance with our standards, policies and procedures relating to
qualification of Franchisees then in effect, and shall obtain all information
required of Prospective Franchisees by us.

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(d)        After Developer is satisfied that a Prospective Franchisee meets the
standards established by us, Developer may recommend to us the approval of such
Prospective Franchisee.  Developer shall then furnish to us all information
relating to the Prospective Franchisee which shall be required by us in the form
and manner customarily required by us.

(e)        We may: (i) conduct or obtain such credit reports and background
checks on Prospective Franchisees as we deem necessary or convenient;  (ii)
approve or disapprove a Prospective Franchisee for any reason; and (iii) may
seek additional information from Developer with respect to the Prospective
Franchisee.  Developer shall cooperate with us in any additional evaluation or
investigation of the Prospective Franchisee.  If we shall reject a Prospective
Franchisee, we shall provide Developer with a written explanation of the reasons
therefore.

(f)        Developer shall deliver to us a copy of all correspondence with
Franchisees which is material to the franchise relationship, concurrently with
its being sent or received by Developer.

2.14      Marketing and Promotion.  

(a)        Developer shall participate in all promotion and marketing activities
required by us of our Developers, as required in the Franchise Agreements, or
otherwise. When setting up or modifying our marketing and promotion programs, we
shall seek and consider your input before making our decisions, but our
decisions in this regard shall be ours alone to make.

(b)        Should Franchisor determine, in Franchisor’s sole discretion, that a
regional or advertising cooperative (“Co-Op”) should be established in all or a
portion of Developer’s RDA, Developer shall be obligated to administer and
manage the Co-Op according to the guidelines provided by Franchisor in the
Operations Manual or otherwise in writing to Developer by Franchisee.

2.15      Identification of Suppliers.  Developer agrees to cooperate with us to
identify a supplier(s) to deliver ESIO products to ESIO Franchise customers
within the Developer’s RDA (“Co-packers”).

2.16      Guaranty of Developer’s Obligations.  If Developer is anything other
than an individual (for example, a corporation, partnership, limited liability
company or other entity), Developer must deliver to Franchisor, simultaneously
with the signing of this Agreement, a guaranty or guaranties signed by each
person (and his/her spouse) or entity owning, directly or indirectly, a 5% or
greater equity interest in Developer (for example, the general partners or the
shareholders) (individually a “Principal” and collectively, “Principals”), in
the form of Exhibit F to the Franchise Disclosure Document, pursuant to which
the Principals agree to perform, and guarantee, Franchisee’s obligations to
Franchisor and its Affiliates, and agree to be bound by the restrictive
covenants, the confidentiality provisions and certain other provisions contained
in this Agreement.

2.17      Franchisor’s Right to Cure Developer’s Defaults. If Developer fails to
pay any amount he is required to pay, or perform any obligation he is required
to perform, pursuant to this Agreement, Franchisor may, but will not be
obligated to, pay such amount and/or take any action necessary to cure the
default.  In this event, Developer must immediately pay to Franchisor the amount
so paid by Franchisor or the amount expended by Franchisor to cure such default,
plus interest at the rate of 18% per annum (or, if less, the highest amount
permitted by law) from the date paid or expended by Franchisor.  This right will
accrue whether or not Franchisor terminates this Agreement.

3.         DEVELOPER RIGHTS.

3.1       Developer Rights.  Except as provided in Section 3.2, as long as this
Agreement is in effect, and you are in compliance with this Agreement, and meet
the RD Minimum Development Obligations set forth in this Agreement, we and our
Affiliates will not operate, establish or grant in your RDA another Regional
Developer Franchise soliciting, referring to us, assisting or training ESIO
Franchises.  If at any time you are not in compliance with the requirements of
this Section 3.1, then we shall give you 30 days’ notice and right to cure

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before operating, establishing, or granting to a third party the right to
operate or establish a Regional Developer Franchise in your RDA, provided that
nothing in this sentence shall alter Section 13 of this Agreement.

3.2        Rights Maintained by Us.  We (and any Affiliates that we might have
from time to time) shall at all times have the right to engage in any activities
we deem appropriate that are not expressly prohibited by this Agreement,
whenever and wherever we desire, including, but not limited to:

(a)         establish and operate ESIO Franchises and Developer Franchises, and
granting right  to other persons to establish and operate ESIO Franchises or
Developer Franchises, on any terms and conditions we deem appropriate and at any
locations other than in your RDA;

(b)         to establish ESIO Franchises and grant rights to other persons to
solicit, qualify, train and assist ESIO Franchises, on any terms and conditions
we deem appropriate and at any locations within the RDA, provided however, that
Developer will be entitled to its share of the Initial Commissions, any Royalty
Fees and distribution income, as set forth more specifically in Section 8 of
this Agreement;

(c)         provide and grant rights to other persons to provide, goods and
services similar to and/or competitive with those provided by ESIO Franchises to
customers located within a RDA, whether identified by the Marks or other
trademarks or service marks, through any distribution channel other than ESIO
Franchises located within a RDA (including, but not limited to, sales of
products via mail order, catalogs, toll free telephone numbers and electronic
means including the Internet), provided that we shall ensure that all purchasers
of ESIO units sold by such means are referred to you for servicing;

(d)         provide and grant rights to other persons to provide, goods and
services dissimilar to and/or not competitive with those provided by ESIO
Franchises to customers located within a RDA, including but not limited to,
bottled water, office coffee, water filtration, and vending services;

(e)         acquire the assets or ownership interest of one or more businesses
providing products and services similar to those provided at ESIO Franchises,
and franchising, licensing or creating similar arrangements with respect to
these businesses once acquired, wherever these businesses (or the franchisees or
licensees of these businesses) are located or operating (including within a RDA;

(f)         be acquired (whether through acquisition of assets, ownership
interests or otherwise, regardless of the form of transaction), by a competitor
that operates a similar or identical business, or by another business, even if
such business operates or grants franchises and/or licenses in the RDA; and

(g)         create, place, and/or distribute or authorize others to create,
place and/or distribute any advertising and promotional materials, which may
appear in media, or be received by prospective customers located, within the
Protected Territory;

(h)         provide or offer ESIO products and services to customers within or
outside of a RDA through a holder of a national or regional bottler agreement
with ESIO.

3.3        Rights to Operate as Supplier to Franchises.  We also grant you the
option to act as a supplier of certain ESIO equipment and/or supplies for
Franchises in your RDA, provided that we have not designed ourselves or our
Affiliate(s), as the exclusive supplier of such items in your RDA.  If you
choose to act as a supplier of ESIO equipment and/or supplies to Franchisees in
your RDA, you may sell such equipment and/or supplies at prices exceeding your
costs of such items in order to make a profit; however, you may not mark up any
such items by more than 10%.  If at any time we choose to designate ourselves or
our Affiliate(s), as the exclusive supplier of ESIO equipment and/or suppliers,
you will no longer be permitted to act as a supplier of such items.  If we or
one of our Affiliates is acting as an exclusive supplier to you pursuant to this
Agreement, then neither we nor that exclusive supplier may raise our prices to
you except with good business reason to do so, or in proportion to the increase
in our costs related to those supplies you are required to purchase.

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4.          TERM.  The term of this Agreement (the “Term”) shall be for a period
of ten (10) years commencing on the Effective Date, unless sooner terminated in
accordance with the provisions of this Agreement.  Developer shall have the
right to extend the term for two (2) additional ten (10) year terms (“renewal
term(s)”) if:  (i) Developer notifies us in writing no more than one hundred
eighty (180) days and no less than ninety (90) days before expiration of the
Term or first renewal term would otherwise expire;  (ii) during the Term or
first renewal term, developer has substantially complied with the RD minimum
development obligations, and all of the other terms of this Agreement; (ii)
Developer and all of its owners and their spouses sign our general release form
waiving any and all claims against us, our Affiliates, and our and their owners,
officers, directors, employees, agents, successors and assigns; (iii) we and
Developer mutually agree on a new minimum or other development obligations for
the RDA during the renewal Term; and (iv) Developer has paid a renewal fee of
$40,000.

5.          ADDITIONAL OBLIGATIONS OF COMPANY AND DEVELOPER.

5.1        Pilot Franchise Training.  Prior to the opening of a Pilot Franchise,
we or our designee shall provide Developer with our initial training program and
opening assistance for ESIO Franchises pursuant to the terms of the Franchise
Agreement for the Pilot Franchise.  For each Franchise opened by Developer after
the initial three (3) Pilot Franchises, Developer will receive only the
classroom training portion of our initial training program, and we shall not
provide on-site training to Developer.

5.2        Developer Training.

(a)         Within ninety days (90) days after the Effective Date, but no later
than forty five (45) days before you open your Developer Franchise for business,
we or our designee will provide up to three (3) days of training to a Principal
Owner and one (1) additional person designated by Franchisee on the operation of
a Developer Business. This training program may include classroom training
and/or hands-on training and will be conducted at our corporate headquarters in
Mesa, Arizona, and/or at any other location(s) we designate.  Developer must
complete the initial training to our satisfaction and participate in all other
activities we require before soliciting Franchisees in the RDA.  Although we
provide this training at no additional cost to Developer, Developer must pay all
travel and living expenses which it and its attendees incur.  If you do not
complete the initial training to our satisfaction, then we have the option to
terminate this Agreement, in which case we shall refund your fees paid, minus
the reasonable cost spent by us to fulfill this Agreement prior to it being
terminated.

(b)         If we determine that Developer cannot complete initial training to
our satisfaction, we may, at our option, either (1) require Developer to attend
additional training at Developer’s expense (for which we may charge reasonable
fees), or (2) terminate this Agreement.

(c)         Developer shall participate in periodic webinars and sales calls
scheduled by us for Regional Developer Franchises and attend a national business
meeting or convention of up to three days each year.  We may also require
Developer to attend up to seven (7) days of additional or refresher training
courses each year. We may charge reasonable fees for these courses, conventions,
webinars, sales calls, and programs.  Developer is responsible for all travel
and living expenses.

5.3        Changes and Updates to Disclosure Documents.  We shall provide
Developer with any changes to our disclosure documents and other agreements on a
timely basis and, upon request, provide Developer with confirmation that the
information contained in any written materials, agreements or documents being
used by Developer are true, correct and not misleading, except for information
specifically relating to disclosures regarding Developer.  If Developer notifies
us of an error in any information in our documents, we shall have a reasonable
period of time to attempt to correct any deficiencies, misrepresentations or
omissions in such information.

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5.4        Developer Manual.

(a)         We shall loan to Developer one (1) copy of our Manual for Regional
and National Developers (the “Regional Developer Manual”) and one (1) copy of
our Operations Manual for ESIO Franchises (“Operations Manual”) (collectively
referred to as the “Manuals”).  Developer shall conduct all business activities
in strict accordance with our standard operational methods and procedures as
prescribed from time to time in the Manuals.  As used in the Agreement, the term
“Manuals” shall be deemed to include the Manuals so delivered to Developer, all
amendments to the Manuals, and all supplemental bulletins, notices and memoranda
which prescribe standard methods or techniques of operation, and which we may
from time to time deliver to Developer.

(b)         We shall have the right to modify or supplement the Manuals.  Such
modifications and supplements shall be effective and binding on Developer after
notice thereof is delivered (personally or via e-mail, web blast, United States
mail or overnight carrier) to Developer.  Developer acknowledges and agrees that
modifications of and supplements to the Manuals may obligate Developer to invest
additional capital or incur higher operating costs.

(c)         The Manuals are our property and may not be duplicated, copied,
disclosed or disseminated in whole or in part in any manner except with our
express prior written consent.  Developer shall maintain the confidentiality of
the Manuals.  Upon the termination of this Agreement, Developer shall return to
us all copies of the Manuals in its possession or control.  If Developer’s copy
of the Manuals is lost, destroyed or significantly damaged, Developer agrees to
obtain a replacement copy at our then applicable charge.

5.5        General Guidance.  We will provide guidance to Developer in the
Manuals and other bulletins or other written materials, by electronic media,
and/or by telephone consultation.  If Developer requests and we agree to provide
additional or special guidance, assistance or training, Developer must pay our
then applicable charges, including our personnel’s per diem charges and any
travel and living expenses.

5.6        Franchise Registration and Disclosure.  Neither Developer nor any
representative of Developer shall solicit prospective franchisees of ESIO
Franchises: (i) until we have provided Developer with written notice that we
have registered our current Franchise Disclosure Document in applicable
jurisdictions in the RDA; (ii) or at any time when we notify Developer that our
registration is not effective or our documents are not then in compliance with
applicable law.  If Developer’s activities pursuant to this Agreement require
the preparation, amendment, registration, or filing of information or any
disclosure or other documents, then all requisite disclosure documents,
ancillary documents, and registration applications shall be prepared and filed
by us or our designee, and registration secured, at your expense, before
Developer may solicit Prospective Franchisees for ESIO  Franchises.  Costs of
such registration applicable to Developer shall be borne by Developer.  In
particular, Developer shall:

(a)         prepare and forward to us audited financial statements prepared in
accordance with Generally Accepted Accounting Principles (GAAP) of Developer in
such form and for such periods as shall be designated by us, if necessary and
appropriate to comply with applicable legal disclosure, filing or other legal
requirements;

(b)         promptly provide all information reasonably required by us to
prepare all requisite disclosure documents and ancillary documents for the
offering of franchises; and

(c)         execute all documents required by us for the purpose of registering
Developer and us to offer franchises throughout the RDA.

(d)         diligently review and verify the accuracy of all information
pertaining to Developer prepared by Franchisor to comply with legal requirements
for selling franchises in the RDA.  Developer acknowledges that we and our
Affiliates and designees shall not be liable to Developer for any errors,
omissions or delays which occur in the preparation of such materials.

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6.          DEVELOPMENT FEE.  DEVELOPER SHALL PAY TO US A NON-REFUNDABLE
“DEVELOPMENT FEE” IN THE AMOUNT SPECIFIED ON EXHIBIT 1 TO THIS AGREEMENT PAYABLE
UPON EXECUTION OF THIS AGREEMENT.  IF WE REQUIRE DEVELOPER TO ACQUIRE AN
IN-DEPTH DEMOGRAPHIC ANALYSIS OF THE RDA, DEVELOPER SHALL ALSO PURCHASE THE
DEMOGRAPHIC ANALYSIS FROM US OR OUR DESIGNATED SUPPLIER FOR THE THEN-APPLICABLE
FEE.  

7.          PAYMENTS TO DEVELOPER.  

7.1        Developer.

(a)        Initial Fee Commission and Conditions of Payment.  During the Term of
this Agreement, Developer shall be paid a commission, as set forth in this
Section, based on a percentage of Initial Franchise Fees and/or Renewal Fees
paid by Franchisees for the purchase or renewal of ESIO Franchises located
within the RDA (the “Initial Fee Commission”) as long as Developer has satisfied
the Initial Fee Commission Conditions at the time such Initial Fee Commission
would be due to Developer.   For purposes of this Agreement, the term “Initial
Fee Commission Conditions” shall mean: (a) the Franchisee executes a Franchise
Agreement with us and pays us an initial franchise fee (we shall not be deemed
to have received any fees until our bank confirms receipt of the fees or fees
paid into escrow, if applicable, until such fees actually have been remitted to
us); and (b) Developer has complied with all of its other obligations under this
Agreement with respect to such transaction and has verified the same to us in
writing in a form prescribed by us.  Initial Fee Commissions shall be an amount
equal to (1) fifty percent (50%) of the total Initial Franchise Fees and renewal
fees paid to us minus broker’s fees or sales commissions, if any; and (2) fifty
percent (50%) of transfer fees, but only if training of the transferee is
required and you do all of that training.

(b)        Commissions on Royalty Fees.  Excepted as provided below, we shall
pay to Developer forty percent (40%) of the Royalty Fees (which excludes
advertising and marketing fees) actually received by us from each ESIO Franchise
located in the RDA (and from Developer for each Regional Developer Franchise)
during the applicable period pursuant to their Franchise Agreement (“Royalty
Commissions”).  Notwithstanding the foregoing, if Developer has failed to
conduct the periodic inspections described in Section 2.3 and failed to perform
in any material respect, its obligations under this Agreement as to one or more
Franchisees located in the RDA during any applicable month, Developer shall not
be entitled to receive commissions on Royalty Fees with respect to such
Franchisees for the period during which reports or services were not provided.

7.2        Timing of Payments.  We shall make payments to Developer on a monthly
basis on the 15th of each month for the Initial Fee Commissions and Royalty
Commissions earned by Developer during the previous calendar month.  Payments
shall be made by electronic funds transfer.  Each payment made by us to
Developer shall include a report detailing the Fees being paid and any offset or
setoff applied by us.

7.3        Commissions After Termination.  All payments under this Section 7
shall immediately and permanently cease after the expiration or termination of
this Agreement, although Developer shall receive all amounts which have accrued
to Developer as of the date of expiration or termination of this Agreement.

7.4        Application of Payments.  Our payments to Developer shall be based on
amounts actually collected from Franchisees, not on payments accrued, due or
owning.  In the event of termination of a Franchise Agreement for an ESIO
Franchise within the RDA, we shall apply any payments received from a Franchisee
to pay past due indebtedness of that Franchisee for Royalty Fees, advertising
contributions, purchases from us or our Affiliates, interest or any other
indebtedness on that Franchisee to us or our Affiliates.  To the extent that
such payments are applied to a Franchisee’s overdue Royalty Fee payments,
Developer shall be entitled to its pro rata share of such payments, less its pro
rata share of the costs of collection paid to third parties.

7.5        Setoffs.  Developer shall not be allowed to set off amounts owed to
use for fees or other amounts due under this Agreement against any monies owed
to Developer by us, which right to set off is hereby expressly waived by
Developer.  We shall be allowed to set off against amounts owed to Developer for
commissions, Royalty Fees or other amounts due under this Agreement any monies
owed to us by Developer.

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8.          RETURN OF COMMISSIONS TO FRANCHISOR.

8.1        DEVELOPER SHALL BE RESPONSIBLE FOR FIFTY PERCENT (50%) OF THE
FOLLOWING AMOUNTS PAID BY FRANCHISOR:

(a)         If Franchisor is required, or decides to, return all or a part of a
Franchisee’s Initial Franchise Fee;

8.2        DEVELOPER SHALL BE RESPONSIBLE FOR FORTY PERCENT (40%) OF THE
FOLLOWING AMOUNTS PAID BY FRANCHISOR:

(a)         If Franchisor is required, or decides to, return any Royalty Fees
paid by a Franchisee;

8.3        If a Franchisee’s Franchise Agreement is terminated and Franchisor,
in its sole discretion, agrees to pay that Franchisee any amount (or Franchisor
waives collection of any amount to which it is entitled), or if a court of
competent jurisdiction determines that Franchisor must pay that Franchisee any
amount (or that Franchisor must waive collection of any amount to which it is
entitled), Developer must promptly pay to Franchisor fifty percent (50%) of the
amount that Franchisor so pays or waives;  

8.4        If in relation to any Franchise or ESIO business within the RDA:

(a)         Franchisor or any of its Affiliates, in its sole discretion, agrees
to pay any person any amount;

(b)         A court of competent jurisdiction determines that Franchisor or any
of its Affiliates must pay any person any amount; or

(c)         Franchisor or any of its Affiliates otherwise suffers a loss or
damages

Developer must promptly pay any to Franchisor fifty percent (50%) of the amount
of that payment, loss or damages.  For example, if Franchisor pays any amount to
any a landlord or vendor based upon a Location within Developer’s Protected
Territory, Developer would be obligated to pay Franchisor fifty percent (50%) of
that amount.

9.          MARKS.

9.1        Ownership and Goodwill of Marks.  Developer’s right to use the Marks
is derived only from this Agreement and is limited to Developer’s operation of
its Developer Business.  Developer’s unauthorized use of the Marks is a breach
of this Agreement and infringes our rights in the Marks.  Developer acknowledges
and agrees that Developer’s use of the Marks and any goodwill established by
that use are for our exclusive benefit and that this Agreement does not confer
any goodwill or other interests in the Marks upon Developer (other than the
right to operate a Developer Business under this Agreement).  All provisions of
this Agreement relating to the Marks apply to any additional and substitute
trademarks and service marks we authorize Developer to use.

9.2        Limitations on Developer’s Use of Marks.  Developer may not use any
Mark:  (1) as part of any corporate or legal business name; (2) with any prefix,
suffix or other modifying words, terms, designs, symbols other than logos we
have licensed to Developer; (3) in selling any unauthorized services or
products; (4) as part of any domain name, electronic address or search engine,
without our consent; or (5) in any other manner we have not expressly authorized
in writing.  Developer may not use any Mark in advertising the transfer, sale or
other disposition of Developer’s business under this Agreement or an ownership
interest in Developer (if a corporation, partnership, limited liability company
or another business entity holds the franchise at any time during this
Agreement’s term) without our prior written consent.

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9.3        Notification of Infringements and Claims.  Developer agrees to notify
us immediately of any apparent infringement of or challenge to Developer’s use
of any Mark, or of any person’s claim of any rights in any Mark, and not to
communicate with any person other than us and our attorneys and Developer’s
attorneys regarding any infringement, challenge or claim. We may take action we
deem appropriate (including no action) and control exclusively any litigation,
U.S. Patent and Trademark Office proceeding or other administrative proceeding
arising from any infringement, challenge or claim or otherwise concerning any
Mark.  Developer agrees to sign any documents and take any actions that, in the
opinion of our attorneys, are necessary or advisable to protect and maintain our
interests in any litigation or Patent and Trademark Office or other proceeding
or otherwise to protect and maintain our interests in the Marks, provided that
if any such actions impose additional out-of-pocket costs on you, then we will
pay such out-of-pocket costs.

9.4        Discontinuance of Use of Marks.  If we believe at any time that it is
advisable for us and/or Developer to modify or discontinue using any Mark and/or
use one or more additional or substitute trademarks or service marks, Developer
shall promptly comply with our directions within a reasonable time after
receiving notice of our decision.  We need not reimburse Developer for
Developer’s expenses in complying with these directions, for any loss of revenue
due to any modified or discontinued Mark, or for Developer’s expenses of
promoting a modified or substitute trademark or service mark.

9.5        Indemnification For Use of Marks.  We shall indemnify and reimburse
Developer against and for all damages for which Developer is held liable in any
trademark infringement proceeding arising out of Developer’s authorized use of
any Mark pursuant to and in compliance with this Agreement, and for all costs
Developer reasonably incurs in the defense of any such claim in which Developer
is named as a party, so long as Developer has timely notified us of the claim,
and have otherwise complied with this Agreement.  At our option, we may defend
and control the defense of any proceeding relating to any Mark.

10.         CONFIDENTIAL INFORMATION.  WE POSSESS (AND MAY CONTINUE TO DEVELOP
AND ACQUIRE) CERTAIN CONFIDENTIAL INFORMATION RELATING TO THE DEVELOPMENT AND
OPERATION OF ESIO FRANCHISES AND DEVELOPER BUSINESSES (“CONFIDENTIAL
INFORMATION”), WHICH INCLUDES (WITHOUT LIMITATION).

10.1      “Confidential Information” shall include: (a) patents, patentable
materials, copyrights, copyrightable materials, trademarks, service marks, and
other valuable intellectual property rights related to the ESIO Business; (b)
site selection criteria; (c) the Manuals, methods, formats, specifications,
standards, systems, procedures, sales and marketing techniques, knowledge and
experience used in developing and operating ESIO Franchises and Developer
Businesses; (d) marketing research and promotional, marketing and advertising
programs for ESIO Franchises and Developer Businesses; (e) knowledge of
specifications for and suppliers or, and methods of ordering, certain operating
assets and products that ESIO Franchises and Developer Businesses use; (f)
knowledge of the operating results and financial performance of ESIO Franchises
and Developer Businesses; (g) customer lists, lead generation lists, customer
information, demographic analysis and information, customer communication and
retention programs, along with data used or generated in connection with those
programs; graphic designs and related intellectual property; (h) information
generated by or used or developed in the operation of ESIO Franchises and
Developer Businesses, including customer names, addresses, telephone numbers and
related information; and (i) any other information designated “Confidential” or
“Proprietary” by us.

10.2      Developer acknowledges and agrees that by entering into this
Agreement, Developer will not acquire any interest in Confidential Information,
other than the right to use certain Confidential Information in accordance with
this Agreement, and that Developer’s use of any Confidential Information in any
other business would constitute an unfair method of competition with us and our
franchisees.  Developer further acknowledges and agrees that the Confidential
Information is proprietary, includes our trade secrets, and is disclosed to
Developer based upon Developer’s representation, warranty and covenant that
Developer:

(a)         will not use any Confidential Information in any other business or
capacity;

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(b)         will keep the Confidential Information absolutely confidential
during and after this Agreement’s term;

(c)         will not make unauthorized copies of any Confidential Information
disclosure via electronic medium or in written or other tangible form;

(d)         will adopt and implement all reasonable procedures that we
periodically prescribe to prevent unauthorized use or disclosure of Confidential
Information, including, without limitation:  (i) restricting its disclosure to
Developer’s personnel and Franchisees needing to know such Confidential
Information in order to develop and operate the ESIO Franchises; and (ii)
requiring those having access to Confidential Information to sign
confidentiality and non-disclosure agreements.  We have the right to regulate
the form of agreement that Developer uses and to be a third party beneficiary of
that agreement with independent enforcement rights; and

(e)         will not sell, trade or otherwise profit in any way from the
Confidential Information, except using methods approved by us.

10.3      Developer’s Assignment of Intellectual Property Rights.  All ideas,
concepts, techniques equipment, or materials relating to a ESIO Franchise or
Developer Business, whether or not protectable intellectual property and whether
created by or for Developer or its employees, must be promptly disclosed to us
and will be deemed to be our sole and exclusive property and works made-for-hire
for us.  In addition, Developer hereby grants, assigns and sets over (“assigns”)
to Franchisor, its successors and assigns, all patent, copyright or other rights
and the unencumbered right to exercise these by any manner and means, whether
now or later devised throughout the universe in perpetuity, in those ideas,
concepts, techniques, equipment, or materials created by Developer including,
but not limited to all: (i) patents and patentable material created or resulting
from Developer’s Business, (ii) present information and know-how related to the
Developer Business, (iii) and any advertising or marketing materials related to
the Developer Business. To the extent requested by Us, you agree to execute any
and all documents and information necessary to effectuate such rights.

10.4      “Confidential  Information” does not include information, knowledge or
know-how which is or becomes generally known in business consulting industry or
which Developer knew from previous business experience before we provided it to
Developer (directly or indirectly) or before Developer attended our initial
training program.  If we include any matter in Confidential Information, anyone
who claims that it is not Confidential Information must prove that the exclusion
in this paragraph is fulfilled.

11.         ASSIGNABILITY.

11.1      Assignability by Us.

(a)         We shall have the right, but not the obligation, to cause a
subsidiary or Affiliate of ours to perform any or all of our obligations and
exercise any or all of our rights under this Agreement and under any Franchise
Agreement, and to require Developer to perform any or all of its obligations
hereunder, in favor or such subsidiary or Affiliate, by delivery of written
notice thereof to Developer.

(b)         We have the absolute, unrestricted right, exercisable at any time,
to change our ownership or form and/or transfer and assign all or any part of
our rights and obligations under this Agreement to any person or legal entity
without your consent as long as such person or legal entity expressly assume the
obligations under this Agreement.

(c)         After our transfer or assignment of this Agreement to a third party
who expressly assumes the obligations under this Agreement, we no longer will
have any performance or other obligations under this Agreement.

11.2      Assignments by Developer.

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(a)         We have entered into this Agreement in reliance upon and in
consideration of the singular personal skills, character, aptitude, business
ability, financial capacity and qualifications of Developer and the trust and
confidence reposed in Developer or, in the case of a business entity Developer,
its owners (individually, an “Owner”).  Therefore, neither Developer’s interest
in this Agreement nor any of its rights or privileges hereunder shall be
assigned or transferred, voluntarily or involuntarily, in whole or in part, by
operation of law or otherwise, in any manner, without our prior written
approval, provided that transfers to immediate family members that are motivated
solely by good-faith estate planning purposes shall be approved by us
(notwithstanding Section 11(b)(5) below), and provided that in no case shall our
approval to a transfer be unreasonably withheld.  If we permit any transfer, and
if are involved in training the transferee, then you or the transferee shall
first pay the then-current transfer fee, training fee and the transferee shall
be responsible to pay all travel, food and lodging required to attend the
training.

(b)         “Transfer” means any voluntary, involuntary, direct or indirect
assignment, sale, gift, exchange, grant of a security interest, or occurrence of
any other event which would or might change the ownership of any Interest, and
includes, without limitation:  (1) the Transfer of ownership of capital stock,
partnership interest or other ownership interest; (2) merger or consolidation,
or issuance of additional securities representing an ownership interest in
Franchisee; (3) sale of common stock of Franchisee sold pursuant to a private
placement or registered public offering; (4) Transfer of an Interest in a
divorce proceeding or otherwise by operation of law; or (5) Transfer of an
Interest by will, declaration of or transfer in trust, or under the laws of
intestate succession.

(c)         Any attempted assignment or transfer of your rights under this
Agreement without our written approval is a breach of this Agreement and has no
effect.

11.3      Conditions for Approval of Assignment or Transfer.  We may impose any
reasonable condition(s) to the granting of our consent to an assignment of your
rights under this Agreement.  Without limiting the generality of the foregoing,
the imposition by us of any or all of the following conditions to our consent to
any such assignment shall be deemed to be reasonable:

(a)         that the assignee (or the principal officers, shareholders,
directors or general partners of the assignee in the case of a business entity
assignee) demonstrates that it has the skill, qualifications and economic
resources necessary, in our judgment, reasonably exercised, to own and operate
the Developer Business;

(b)         that Developer has paid all amounts owed to us;

(c)         that the assignee shall expressly assume in writing for our benefit
all of the  obligations of Developer under this Agreement and any other
agreements proposed to be assigned to such assignee;

(d)         that neither the assignee nor its owners or Affiliates operates, has
an ownership interest in or performs services for a Competitive Business
(defined in Section 12.2);

(e)         that the assignee shall have completed (or agreed to complete) our
training program;

(f)         that the assignee signs our then current form of Developer
Agreement, the provisions of which may differ materially from any and all of
those contained in this Agreement, and the term of which shall be the remaining
term of this Agreement;

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(g)        that as of the date of any such assignment, the assignor shall have
strictly complied with all of its obligations to us, whether under this
Agreement or any other agreement, arrangement or understanding with us;

(h)        that the assignee is not then in default of any of the obligation to
us under any agreement between such assignee and us;

(i)         that the assignor shall pay to us a transfer fee, except for
transfers pursuant to Section 11.4 below;

(j)         that the assignor and the assignor’s spouse (if any) shall sign a
general release, in a form satisfactory to us, of any and all claims against us
and our Affiliates and our and their respective shareholders, officers,
directors, employees, representatives, agents, successors and assigns; and

(k)        that assignor will not directly or indirectly at any time or in any
manner identify himself, herself or itself or any business as a current or
former ESIO Franchise or as one of our Franchisees or Developers, use any Mark,
any colorable imitation of a Mark, or other indicia of a ESIO Franchise or
Developer Business in any manner or for any purpose, or utilize for any purpose
any trade name, trademark, service mark or other commercial symbol that suggests
or indicates a connection or association with us.

Developer shall not in any event have the right to pledge, encumber, charge,
hypothecate or otherwise give any third party a security interest in this
Agreement in any manner whatsoever without our express prior written permission,
which permission may be withheld for any reason whatsoever in our sole
subjective judgment.

11.4      Assignment to Entity Principally Controlled By You.  The Developer
franchise business and its assets and liabilities may be assigned to a
newly-formed corporation or other legal entity that conducts no business other
than the operation of the franchise and in which you and any of your principals
own and control in the aggregate not less than ninety percent (90%) of the
equity and voting power of all outstanding capital stock or ownership interest,
provided as follows:

(a)        that the proposed transferee complies with the provisions of this
Agreement; and

(b)        that you are empowered to act for said  corporation or other legal
entity; and

(c)        that you shall submit to us documentation that we may reasonably
request to effectuate the transfer, including the approving and acknowledging
execution of this Agreement; and

(d)        that you shall submit to us a true and complete list of the
shareholders, members or partners, showing number of shares or interests owned,
and a list of the officers and directors if a corporation or managers if a
limited liability company, or managing partners if a partnership.  We shall be
promptly notified of any changes in said lists; and

(e)        that all certificates of shares or interests issued by transferee at
any time shall be endorsed thereon the appropriate legend to conform with state
law, referring to this Agreement  by date and name of parties hereto and stating
“Transfer to This Certificate is Limited by the Terms and Conditions of a
Developer Agreement;” and

(f)        that a copy of this Agreement shall be given to every shareholder,
member or partner; and

(g)        that a copy of the organizational documents and any corporate
resolutions and a Certificate of Good Standing will be furnished to us at our
reasonable request, and prompt notification in writing of any amendments thereto
will be provided to us; and

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(h)        that the number of shares or interests issued or outstanding in the
transferee will not be increased or decreased without prior written notice to
us, which notice will in its terms guarantee compliance with this Agreement.  In
addition, new shareholders, members of partners must be approved by use and
agree to be bound by this entire Agreement.  Shareholders, members or partners
may make a separate agreement among them providing for purchase by the survivors
amount them of the shares of any shareholders or interests of any members or
partners upon death, or other agreements affecting ownership or voting rights,
so long as voting control and a majority representation of the board of
directors or members or partners remains with those individuals who initially
applied for and were approved as Franchisees under this Agreement.
 Shareholders, members or partners must notify us in writing of any such
agreement which affects control of the transferee.

11.5      Death or Disability.

(a)        Upon the death or disability of Developer or an Owner, the executor,
administrator, conservator, guardian or other personal representative must
assign, sell, or transfer Developer’s interest in this Agreement, the Developer
Business and its assets, or the Owner’s ownership interest in Developer, to a
third party approved by us.  That transfer (including, without limitation,
transfer by bequest or inheritance) must occur, subject to our rights, within a
reasonable time, not to exceed twelve (12) months from the date of death or
disability, and is subject to all of the terms and conditions in this Section
11.  A failure to transfer such interest within this time period is a breach of
this Agreement.  The term “disability” means a mental or physical disability,
impairment or condition that is reasonably expected to prevent or actually does
prevent Developer from supervising the RDA management and operation for ninety
(90) or more consecutive days.

(b)        If, upon the death or disability of Developer or an Owner, a trained
manager who we approve is not managing the day-to-day operations, then the
executor, administrator, conservator, guardian or other personal representative
must, within a reasonable time not to exceed thirty (30) days from the date of
death or disability, appoint a manager that we must approve to operate the
Developer Business.  The manager must, at Developer’s or the Owner’s estate’s
expense, satisfactorily complete the training we designate with the specified
time period.

11.6      Company’s Right of First Refusal.  If Developer at any time determines
to sell or transfer an interest in this Agreement or the Developer Business, or
if Owner determines to sell or transfer a controlling ownership interest in
Developer, then Developer or the Owner, as applicable (the “Seller”) must obtain
from a responsible and fully disclosed buyer, and send us a true and complete
copy of a bona fide, executed written offer relating exclusively to an interest
in Developer or this Agreement and the Developer Business.  The offer must
include details of the payment terms of the proposed sale and the sources and
terms of any financing for the proposed purchase price.  To be a valid, bona
fide offer, the proposed purchase price must be in a fixed dollar amount and
without any contingent payments of purchase price (such as earn-out payments).

We may, by delivering written notice to the Seller within fifteen (15) days
after we receive both an exact copy of the offer and all other information
requested, elect to purchase the interest for the price and on the terms and
conditions contained in the offer, provided that: 1) we may substitute cash for
any form or payment proposed in the offer; (2) our credit will be deemed equal
to the credit of any proposed buyer; (3) the closing will be not less than
thirty (30) days after notifying the Seller of our election to purchase or, if
later, the closing date proposed in the offer; and (4) we must receive, and the
Seller agrees to make, all customary representations and warranties, given by
the seller of the assets of a business or ownership interests in a legal entity,
as applicable, including, without limitation, representations and warranties
regarding ownership and condition of, and title to, assets and (if applicable)
ownership interests and validity of contracts and the liabilities, contingent on
otherwise, relating to the assets or ownership interests being purchased. If we
exercise our right of first refusal, the Seller agrees that, for two (2) years
beginning on the closing date, the Seller and members of its immediate family
will be bound by the non-competition covenant contained in Section 12.2 below.

If we do not exercise our right of first refusal, the Seller may complete the
sale to the proposed buyer on the original offer’s terms, subject to our
approval of the transfer as provided above.  If the Seller does not complete the
sale to the proposed buyer within sixty (60) days after we notify the Seller
that we do not intend to exercise

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our right of first refusal, or if there is a material change in the terms of the
sale (which the Seller must let us know promptly), we will have an additional
right of first refusal during the thirty (30) day period following either the
expiration of the sixty (60) day period or receipt of notice of the material
change(s) in the sale’s terms, either on the terms originally offered or the
modified terms, at our option.

11.7      Ownership Structure.  Developer represents and warrants that each
person holding direct or indirect, legal or beneficial ownership interests in
Developer and their respective interests and ownership structure (collectively,
the “Owners’”) are listed in Exhibit 3to this Agreement.  In consideration of,
and as an inducement to, the execution of this Agreement, each Owner of the
Developer and their respective spouses shall personally and unconditionally sign
our form Guaranty and Acceptance of Obligations, attached as Exhibit 4,
guarantying to us and our successors and assigns that the punctual payment and
performance of each and every undertaking, agreement and covenant set forth in
this Agreement; and agreeing to be personally bound by, and personally liable
for the breach of, each and every provision in the Agreement.  Developer shall
not change its ownership structure without complying with all of the terms and
conditions of this Section 11.  Any proposed change in ownership structure,
membership interest, or shareholders must be approved by us in writing.

12.        NON-COMPETITION.  

12.1      In Term.  During the term of this Agreement, neither Developer, any of
the Principals, nor any member of Developer’s or a Principal’s immediate family
will have any direct or indirect interest (e.g., through a spouse) as a
disclosed or beneficial owner, investor, partner, director, officer, controlling
shareholder, employee, consultant, representative or agent, or in any other
capacity, in a Competitive Business (defined below), whether located within or
outside the RDA, without our prior written consent.

12.2      Post-Term.  For a twelve (12) month period following the assignment,
expiration or termination of this Agreement, for any reason, neither Developer,
any Owner, nor any member of Developer’s or an Owner’s immediate family will
have any direct or indirect interest (e.g., through a spouse, child or trust) as
a disclosed or beneficial owner, investor, partner, director, officer, employee,
consultant, representative or agent, or in any other capacity, in any
Competitive Business located or operating: (a) within the RDA; (b) within the
development area of any of our other Developers; or (c) within twenty-five (25)
miles of any ESIO Franchise or Developer franchise in operation or development
on the date of assignment, expiration or termination. The term “Competitive
Business” means any business which derives more than Fifty-Thousand Dollars
($50,000) of revenue per year from: the distribution and sale of water,
beverages, water and beverage equipment (including coolers, heaters, and other
related equipment), services (including maintenance and repair) or products
(including beverage packets), or any business which grants franchises or
licenses to others to operate such a business, other than a ESIO Franchise
operated under a franchise agreement with us.

13.        TERMINATION.

13.1      Termination by Company.  We may terminate this Agreement, effective
upon written notice of termination to Developer, if:

(a)         Developer or one of its Owners makes or attempts to make a transfer
in violation of Section 11;

(b)         Developer fails to meet the RD Minimum Development Obligation for
any Development Period;

(c)         Developer has made or makes a material misrepresentation or omission
in acquiring the rights under this Agreement or in operating the Developer
Business;

(d)         Developer does not satisfactorily complete initial training;

(e)         Developer is convicted by a trial court of, or pleads no contest to,
a felony;

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(f)         Developer fails to maintain the insurance we require from time to
time;

(g)        Developer or an Owner engages in any dishonest, unethical or illegal
conduct or any other conduct which, in our opinion, adversely affects our
reputation, the reputation or other ESIO Franchises or the goodwill associated
with the Marks;

(h)        Developer knowingly makes any unauthorized use or disclosure of any
part of the Manuals or any other Confidential Information;

(i)         Developer fails on three (3) or more separate occasions within any
twelve  (12) consecutive month period to submit when due reports or other data,
information or supporting records, pay when due any amounts due to us (or our
Affiliates), or otherwise comply with this Agreement, whether or not Developer
corrects any of these failures after we deliver written notice to Developer,
whether or not Developer corrects either of the failures after we deliver
written notice to Developer;

(j)         Developer makes an assignment for the benefit of creditors or admits
in writing insolvency or inability to pay debts generally as they become due;
Developer consents to the appointment of a receiver, trustee or liquidator of
all or the substantial part of the assets of the Developer Business; or the
assets of the Developer Business are attached, seized, subjected to a writ or
distress warrant, or levied upon, unless the attachment, seizure, writ, warrant
or levy is vacated within thirty (30) days following the order’ entry;

(k)        Developer fails to comply with any other provision of this Agreement
and does not correct the failure within thirty (30) days after we deliver
written notice of the failure to Developer; or

(l)         Developer fails to pay any sums due to us and does not correct the
failure within ten (10) days after we deliver written notice of that failure to
Developer.

13.2      Cross-Termination. Notwithstanding anything contained in this
Agreement to the contrary, at any time that Developer or any of his Affiliates
is in breach of his obligations under this Agreement, or any other agreement
between Developer or any of his Affiliates and Franchisor or any of its
Affiliates, Franchisor (or its Affiliate) may elect to defer the performance of
Franchisor’s (or its Affiliate’s) obligations under this Agreement or such other
agreement until Developer’s (or his Affiliate’s) breach has been cured.
 Franchisor’s (or its Affiliate’s) exercise of that right will not constitute a
waiver of its rights under this Agreement or such other agreement, including
Franchisor’s (or its Affiliate’s) right to terminate this Agreement or such
other agreement.  In addition, Franchisor’s (or its Affiliate’s) exercise of
that right will not serve as a basis for any claim by Developer (or his
Affiliate) that Franchisor did not perform its obligations in a timely manner.

13.3      Rights and Obligations Upon Termination or Expiration.  Upon the
expiration of the Term or any Renewal Term, or upon the earlier termination of
this Agreement, Developer shall have no further right to construct, equip, own,
open or operate additional ESIO Franchises (except pursuant to a Franchise
Agreement between Developer and us which is in full force and effect on the date
of expiration or termination and is not terminated pursuant to Section 13.2).
 Upon expiration or termination of this Agreement, we may ourselves construct,
equip, open, own or operate, or license others to construct, equip, open, own or
operate ESIO Franchises in the RDA, except as provided in any Franchise
Agreement executed pursuant to this Agreement.  When this Agreement expires or
is terminated for any reason and except as required to perform Developer’s
obligations under a valid Franchise Agreement with us, Developer shall:

(a)        Forfeit to Franchisor all fees paid by Developer to Franchisor,
except as expressly set forth in Section 7 of this Agreement.

(b)        All goodwill associated with Developer’s operations is, and will be,
the property of Franchisor, and Developer will receive no payment therefor.

(c)        Developer will receive no further payments except as set forth in
Section 7.

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(d)        Not directly or indirectly at any time thereafter or in any manner:
(i)  identify itself or any business as a current or former Developer or ours;
(ii) use any Mark, any colorable imitation of a Mark, any trademark, service
mark or commercial symbol that is confusingly similar to any Mark or other
indicia of an ESIO Franchise in any manner or for any purpose; or (iii) use for
any purpose any trade name, trademark, service mark or other commercial symbol
that indicates or suggests a connection or association with us;

(e)        Take the actions required to cancel all fictitious or assumed name or
equivalent registrations relating to Developer’s use of any Mark;

(f)         Deliver to us within thirty (30) days all advertising, marketing and
promotional material, forms and other materials containing any Mark or otherwise
identifying or relating to the Developer Business or to an ESIO Franchise;

(g)        If applicable, notify all search engines of the termination or
expiration of Developer’s right to use all domain names, Websites and other
search engines associated directly or indirectly with the Marks or ESIO
Franchises and authorize those search engines to transfer to us or our designee
all rights to the domain names, Websites and search engines relating to the
Marks or ESIO Franchises.  We have the absolute right and interest in and to all
domain names, Websites and search engines associated with the Marks or ESIO
Franchises, and Developer hereby authorizes us to direct all applicable parties
to transfer Developer’s domain names, Websites and search engines to us or our
designee if this Agreement expires or is terminated for any reason whatsoever.
 All parties may accept this Agreement as conclusive of our right to such domain
names, Websites and search engines and this Agreement will constitute the
authority from Developer for all parties to transfer all such domain names,
Websites and search engines to us;

(h)        Immediately cease using any of the Confidential Information in any
business or otherwise and return to us all copies of the Manuals and any other
confidential materials that we have loaned Developer; and

(i)         Provide us, within thirty (30) days after the expiration or
termination of this Agreement, evidence satisfactory to us of Developer’s
compliance with these obligations.

13.4      Right to Seek Injunctive Relief.  Upon any breach by Developer of any
of the terms of this Agreement, Franchisor may institute and prosecute
proceedings, at law or in equity, in any court of competent jurisdiction, to
obtain an injunction to enforce the provisions of this Agreement and to pursue
any other remedy to which Franchisor may be entitled.  Developer agrees that the
rights conveyed by this Agreement are of a unique and special nature and that
Franchisor’s remedy at law for any breach would be inadequate and agrees and
consents that temporary or permanent injunctive relief may be granted in any
proceeding that may be brought to enforce any provision of this Section 15,
without the necessity of posting bond therefor or proof of actual damages.

14.         MEDIATION AND ARBITRATION.

14.1      Specific Performance; Injunctive Relief. Provided we give you the
appropriate notice, we will be entitled, without being required to post a bond,
to the entry of temporary and permanent injunctions and orders of specific
performance to: (1)  enforce the provisions of this Agreement relating to your
use of the Marks and non-disclosure and non-competition obligations under this
Agreement; (2)  prohibit any act or omission by you or your employees that
constitutes a violation of any applicable law, ordinance, or regulation;
constitutes a danger to the public; or may impair the goodwill associated with
the Marks or ESIO franchises; or (3)  prevent any other irreparable harm to our
interests.  If we obtain an injunction or order of specific performance, then
you shall pay us an amount equal to the total of our costs of obtaining it,
including without limitation reasonable attorneys’ and expert witness fees,
costs of investigation and proof of facts, court costs, other litigation
expenses and travel and living expenses, and any damages we incur as a result of
the breach of any such provision.  You further agree to waive any claims for
damage in the event there is a later determination that an injunction or
specific performance order was issued improperly.

14.2      Mediation and Arbitration.  The parties acknowledge it is in their
best interest to resolve any dispute which arises in a consistent and orderly
manner.  Therefore, the parties agree to diligently pursue informal

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negotiations, internal appeal procedure, or other informal methods (“Informal
Methods”) to resolve any such dispute.  In the event such Informal Methods are
unsuccessful, the parties agree as follows.

(a)         Non-Binding Mediation.  All claims, controversies or disputes that
arise between the parties which relates in any way to this Agreement, the
purchase or operation of the Developer Business or the relationship between you
and us, must be submitted to non-binding mediation before an action may be
brought in in arbitration or a court of competent jurisdiction.  At the request
of either party, the mediation will be conducted in secrecy.  The parties to the
mediation will share equally in its cost and expenses, except those costs and
expenses incurred separately by each party.  The mediation process will be
deemed “Completed” when the parties agree that it has been completed, the
mediator declares that any impasse exists or 60 days have elapsed since the date
of the initiating party’s notice to the other party that it is initiating the
mediation process, whichever occurs first.

(b)         Arbitration.  Once the mediation has been Completed, the parties
must submit any unresolved dispute to arbitration administered by the American
Arbitration Association (“AAA”) under its Commercial Arbitration Rules.  All
claims, controversies or disputes arising out of or relating in any way to this
Agreement, the purchase or operation of the Franchised Business or the
relationship between you and us will, to the fullest extent permitted by Federal
Arbitration Act, be resolved by binding arbitration administered by the American
Arbitration Association (“AAA”) under its Commercial Arbitration Rules in
Maricopa County, Arizona.

(c)         Arbitration Procedures.  The demand for Arbitration (“Demand”) will
contain a description of the claim, dispute, or controversy and the remedy
requested.  In no event may a Demand be made after the date when the institution
of a legal or equitable proceeding based on the claim, dispute or controversy in
question would be barred by the applicable statute of limitations or laches.
 The appointed arbitrator shall have the authority to dismiss claims for failure
to comply with the applicable statute of limitations or laches. Any claim
requesting relief or an award of less than One hundred thousand and 00/100
Dollars ($100,000.00) will be conducted before a single independent and
impartial arbitrator selected pursuant to the Commercial Arbitration Rules of
the AAA.  For any claim requesting relief or an award of greater than one
hundred thousand and 00/100 Dollars ($100,000.00), the arbitration will be
conducted before a panel of three (3) independent and impartial arbitrators
selected pursuant to the Commercial Arbitration Rules of the AAA.  Unless
otherwise mutually agreed, all arbitrators shall be lawyers licensed by the
State of Arizona, with five (5) or more years’ experience in the practice of
commercial law and approved to be on an AAA Panel.  The arbitrator(s) will issue
a reasoned award, with findings of fact and conclusions of law.  Actions to
enforce an express obligation to pay monies may be brought under the Expedited
Procedures of the AAA’s Commercial Arbitration Rules.  The Federal Arbitration
Act shall govern, excluding all state arbitration laws.  Arizona law will govern
all other issues.  With respect to discovery, the arbitrator shall require each
party to make a good cause showing before such discovery will be granted.

(d)         Appealability of Award.  Either party may appeal the final award of
the arbitrator(s) to the appropriate U.S. District Court.  The Court’s review of
the arbitrator’s findings of fact will be under the clearly erroneous standard,
and the Court’s review of all legal rulings will be de novo.  If it should be
determined that this provision regarding appealability of the award is not
enforceable, then either party may appeal the arbitrator’s final award to a
panel of three arbitrators chosen under AAA procedures, which will employ the
same standards of review stated immediately above.

(e)         Certain Disputes Exempted.  Notwithstanding anything contained in
this Agreement to the contrary, the provisions of Sections 14.2 do not apply in
cases where (i) Franchisor brings an action for an express obligation to pay
monies, declaratory relief, preliminary or permanent equitable relief, any
action at law for damage to Franchisor’s goodwill, the Proprietary Information,
the Service Marks or other property or for fraudulent conduct by Franchisee;
(ii) the delay resulting from the mediation process may adversely affect
Franchisor’s financial condition or endanger or adversely affect the public (for
example, unhealthy, unsafe or

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unsanitary conditions would continue to exist) or (iii) Franchisor in good faith
believes that the controversy or dispute would not be resolved through the
mediation process.

(f)         Other Disputes.  Disputes concerning the validity or scope of
arbitration, including whether a dispute is subject to arbitration, are beyond
the authority of the arbitrator(s) and will be determined by a court of
competent jurisdiction pursuant to the Federal Arbitration Act, 9 U.S.C. §1 et
seq., as amended from time to time.

(g)        Survives Termination.  The provisions of this Section 14 will
continue in full force and effect subsequent to and notwithstanding the
expiration or termination of this Agreement, however effected.

(h)        Election to Resolve Claims.  This Section 14 is an election to
resolve claims, disputes, and controversies by mediation and arbitration rather
than the judicial process.  The parties agree and understand that they are
waiving certain rights to seek redress before state and federal courts. It is
understood that this will you and us to waive any right to a jury trial or a
trial in court.  The parties understand that the rules applicable to
arbitrations and the rights of parties in arbitrations differ from the rules and
rights applicable in court.

14.3      Governing Law/Consent To Jurisdiction.  Except to the extent governed
by the United States Trademark Act of 1946 (Lanham Act, 15 U.S.C. §§ 1051 et
seq.) and except that all issues relating to arbitrability or the enforcement or
interpretation of the agreement to arbitrate set forth in Section 14.2 which
will be governed by the United States Arbitration Act (9 U.S.C. § 1 et seq.) and
the federal common law relating to arbitration, this Agreement and the Franchise
will be governed by the internal laws of the State of Arizona (without reference
to its choice of law and conflict of law rules), except that the provisions of
any Arizona law relating to the offer and sale of business opportunities or
franchises or governing the relationship of a franchisor and its franchisees
will not apply unless their jurisdictional requirements are met independently
without reference to this Section.  You agree that we may institute any action
against you arising out of or relating to this Agreement (which is not required
to be arbitrated hereunder or as to which arbitration is waived) in any state or
federal court of general jurisdiction in Maricopa County, Arizona, and you
irrevocably submit to the jurisdiction of such courts and waive any objection
you may have to either the jurisdiction or venue of such court.

14.4      Binding Effect. This Agreement is binding on and will inure to the
benefit of our successors and assigns and, subject to the Transfers provisions
contained in this Agreement, will be binding on and inure to the benefit of your
successors and assigns, and if you are an individual, on and to your heirs,
executors, and administrators.

14.5      No Liability to Others; No Other Beneficiaries.  We will not, because
of this Agreement or by virtue of any approvals, advice or services provided to
you, be liable to any person or legal entity who is not a party to this
Agreement, and no other party shall have any rights because of this Agreement.

14.6      Construction.  All headings of the various Sections of this Agreement
are for convenience only, and do not affect the meaning or construction of any
provision.  All references in this Agreement to masculine, neuter or singular
usage will be construed to include the masculine, feminine, neuter or plural,
wherever applicable.  Except where this Agreement expressly obligates us to
reasonably approve or not unreasonably withhold our approval of any of your
actions or requests, we have the absolute right to refuse any request by you or
to withhold our approval of any action or omission by you.  The term “Affiliate”
as used in this Agreement is applicable to any company directly or indirectly
owned or controlled by you or your Principal Owners, or any company directly or
indirectly owned or controlled by us that sells products or otherwise transacts
business with you.

14.7      Joint and Several Liability. If two (2) or more persons are the
Developer under this Agreement, their obligation and liability to us shall be
joint and several.

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14.8      Multiple Originals. This Agreement will be executed using multiple
copies, each of which will be deemed an original.

15.       GENERAL CONDITIONS AND PROVISIONS.

15.1      Relationship of Developer to Company.  It is expressly agreed that the
parties intend by this Agreement to establish between us and Developer the
relationship of franchisor and franchisee.  Except as expressly provided herein,
it is further agreed that Developer has no authority to create or assume in our
name or on our behalf, any obligation, express or implied, or to act or purport
to act as agent or representative on our behalf for any purpose whatsoever.  In
no event shall either party be deemed to be fiduciaries of the other.  Neither
we nor Developer is the employer, employee, agent, partner or co-venturer of or
with the other, each being independent contractors.  Developer agrees that it
will not hold himself out as the agent, employee, partner or co-venturer of
ours, or as having any of the aforesaid authority.  All Employees hired by or
working for Developer shall be the employees of Developer and shall not, for any
purpose, be deemed employees of us or subject to our control.

15.2      Indemnification.

(a)        Indemnification by Developer.  To the fullest extent permitted by
law, Developer agrees to indemnify, defend and hold harmless us, our Affiliates,
and our and their respective shareholders, directors, officers, employees,
agents, representatives, successors and assigns (“Our Indemnified Parties”) from
and against, and to reimburse any one or more of Our Indemnified Parties for any
and all claims, obligations and damages directly or indirectly arising out of:
(i) the Developer Business; (ii) Developer’s breach of this Agreement, or (3)
Developer’s non-compliance or alleged non-compliance with any law, ordinance,
rule or regulation.  For purposes of this indemnification, “claims” include all
obligations, damages (actual, consequential, punitive or otherwise) and costs
that any Indemnified Party reasonably incurs in defending any claim against it,
including, without limitation, reasonable accountants’, arbitrators’, attorneys’
and expert witness’ fees, costs of investigation and proof of facts, court
costs, travel and living expenses and other expenses of litigation, arbitration
or alternative dispute resolution, regardless of whether litigation or
alternative dispute resolution is commenced.  Each Our Indemnified Party may
defend and control the defense of any claim against it which is subject to this
indemnification at Developer’s expense, and Developer may not settle any claim
or take any other remedial, corrective or other actions relating to any claim
without our consent. This indemnity will continue in full force and effect
subsequent to and notwithstanding this Agreement’s expiration or termination.
 An Our Indemnified Party need not seek recovery from an insurer or other third
party, or otherwise mitigate its losses and expenses, in order to maintain and
recover fully a claim against Developer.  Developer agrees that a failure to
pursue a recovery or mitigate a loss will not reduce or alter the amounts that
an Our Indemnified Party may recover from Developer.

(b)        Indemnification by Us.  To the fullest extent permitted by law, we
agree to indemnify, defend and hold harmless you, your Affiliates, and your and
their respective shareholders, directors, officers, employees, agents,
representatives, successors and assigns (“Your Indemnified Parties”) from and
against, and to reimburse any one or more of Your Indemnified Parties for any
and all claims, obligations and damages directly or indirectly arising out of:
(1) the business conducted by us pursuant to this Agreement, (2) our breach of
this Agreement, or (3) our non-compliance or alleged non-compliance with any
law, ordinance, rule or regulation.  For purposes of this indemnification,
“claims” include all obligations, damages (actual, consequential, punitive or
otherwise) and costs that any Your Indemnified Party reasonably incurs in
defending any claim against it, including, without limitation, reasonable
accountants’, arbitrators’, attorneys’ and expert witness’ fees, costs of
investigation and proof of facts, court costs, travel and living expenses and
other expenses of litigation, arbitration or alternative dispute resolution,
regardless of whether litigation or alternative dispute resolution is commenced.
 Each Your Indemnified Party may defend and control the defense of any claim
against it which is subject to this indemnification at our expense, and we may
not settle any claim or take any other remedial, corrective or other actions
relating to any claim without your consent. This indemnity will continue in full
force and effect subsequent to and notwithstanding this Agreement’s expiration
or termination.  A Your Indemnified Party need

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not seek recovery from an insurer or other third party, or otherwise mitigate
its losses and expenses, in order to maintain and recover fully a claim against
us.  We agree that a failure to pursue a recovery or mitigate a loss will not
reduce or alter the amounts that a Your Indemnified Party may recover from us.

15.3      Waiver and Delay.  Except as otherwise expressly provided to the
contrary, no waiver by us of any breach or series of breaches or defaults in
performance by the Developer, and no failure, refusal or neglect of or by us to
exercise any right, power or option given to us under this Agreement or under
any other agreement  between us and Developer, whether entered into before,
after or contemporaneously with the execution of this Agreement (and whether or
not related to this Agreement) or to insist upon strict compliance with or
performance of the Developer’s obligations under this Agreement or any other
agreement between us and Developer, whether entered into before, after or
contemporaneously with the execution of this Agreement (and whether or not
related to this Agreement), shall constitute a novation, or a waiver of the
provisions of this Agreement with respect to any subsequent breach thereof or a
waiver of our right at any time thereafter to require exact and strict
compliance with the provisions thereof.

15.4      Survival of Covenants.  The covenants contained in this Agreement
which, by their terms, require performance by the parties after the expiration
or termination of this Agreement or ancillary agreements shall be enforceable
notwithstanding said expiration or other termination of this Agreement for any
reason whatsoever.

15.5      Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the legal representatives, successors and assigns of us
and Developer.

15.6      Joint and Several Liability.  If either party consists of more than
one person or entity, or a combination thereof, the obligations and liabilities
of each such person or entity to the other under this Agreement are joint and
several.

15.7      Consent to Jurisdiction.  Subject to Section 14 and the provisions
below, Developer and its owners agree that all actions arising under this
Agreement or otherwise as a result of the relationship between Developer and us
must be commenced in the State of Arizona, and in the state or federal court of
general jurisdiction closest to where our principal business address then is
located, and Developer (and its Owners) irrevocably submits to the jurisdiction
of those courts and waives any objection Developer (or its owners) might have
with either the jurisdiction of or venue in those courts. Nonetheless, Developer
and any of its Owners agree that we may enforce this Agreement and any
arbitration orders and awards in the courts of the state or states in which
Developer or its Owners are domiciled.

15.8      Waiver of Punitive Damages and Jury Trial.  Except for the Parties’
indemnification obligation under Section 15.2 above and except where authorized
by federal statute, we and Developer and its Owners waive to the fullest extent
permitted by law any right to or claim for any punitive or exemplary damages
against the other and agree that, in the event of a dispute between us and
Developer, the party making a claim will be limited to equitable relief and to
recovery of any actual damages it sustains.  We and Developer irrevocably waive
trial by jury in any action, proceeding or counterclaim, whether at law or in
equity, brought by either party.

15.9      Limitation of Claims.  Any and all claims arising out of or relating
to this Agreement or our relationship with Developer, except for claims for
indemnification under Section 15.2 above, will be barred unless a judicial or
arbitration proceeding is commenced within one (1) year from the date on which
the party asserting the claim knew or should have known of the facts giving rise
to the claims.

15.10    Entire Agreement.  This Agreement and the Exhibits incorporated in the
Agreement contain all of the terms and conditions agreed upon by the parties to
this Agreement with reference to the subject matter of this Agreement.  No other
agreements, and all prior agreements, understanding and representations are
merged in this Agreement and superseded by this Agreement.  Each party
represents to the other that there are no contemporaneous agreements or
understandings between the parties relating to the subject matter of this
Agreement that are not contained in this Agreement.  This Agreement cannot be
modified or changed except by written instrument signed by all of the parties to
this Agreement, provided that we may modify or amend the Manuals at any time
without notice to, or approval of, Developer or any other person.  Nothing in
this Agreement

Regional Developer Agreement 04/12

C-23

 

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shall have the effect of disclaiming any of the information in the Franchise
Disclosure Document or its attachments or addenda.

15.11    Title for Convenience. Article and Section titles used in this
Agreement are for convenience only and shall not be deemed to affect the meaning
or construction of any of the terms, provisions, covenants or conditions of this
Agreement.

15.12    Gender.  All terms used in any one number or gender shall extend to
mean and include any other number and gender as the facts, context or sense of
this Agreement or any section or paragraph hereof may require.

15.13    Severability.  Except as expressly provided to the contrary in this
Agreement, each Section, paragraph, term and provision of this Agreement is
severable, and if, for any reason, any part thereof, to be invalid or contrary
to or in conflict with any applicable present or future law and regulation in a
final, unappealable ruling issued by any court, agency or tribunal with
competent jurisdiction, that ruling will not impair the operation or, or
otherwise affect, any other portions of this Agreement, which will continue to
have full force and effect and bind the parties.  If any covenant which
restricts competitive activity is deemed unenforceable by virtue of its scope in
terms of area, business activity prohibited, and/or length of time, but would be
enforceable if modified, we and Developer agree that the covenant will be
enforced to the fullest extent permissible under the laws and public policies
applied in the jurisdiction whose law determines the covenant’s validity.  If
any applicable and binding law or rule of any jurisdiction requires more notice
than this Agreement requires of this Agreement’s termination or of our refusal
to enter into a successor agreement, or if, under any applicable and binding law
or rule of any jurisdiction, any provision of this Agreement is invalid or
unenforceable or unlawful, the notice and/or other action required by the law or
rule will be substituted for the comparable provisions of this Agreement, and we
may modify the invalid or unenforceable provisions to the extent required to be
valid and enforceable or delete the unlawful provision in its entirety.
 Developer agrees to be bound by any promise or covenant imposing the maximum
duty the law permits which is subsumed within any provision of this Agreement,
as though it were separately articulated in and made a part of this Agreement.

15.14    Fees and Expenses.  Should any party to this Agreement commence any
action or proceeding for the purpose of enforcing, or preventing the breach of,
any provision of this Agreement, whether by arbitration, judicial or
quasi-judicial action or otherwise, or for damages for any alleged breach of any
provision of this Agreement, or for a declaration of such party’s rights or
obligations under this Agreement, then the prevailing party shall be reimbursed
by the losing party for all costs and expenses incurred in connection therewith,
including, but not limited to, reasonable attorneys’ fees for the services
rendered to such prevailing party.

15.15    Notices.  Except as otherwise expressly provided herein, all written
notices and reports permitted or required to be delivered by the parties
pursuant to this Agreement shall be deemed so delivered at the time delivered by
hand, one (1) business day after transmission by mail, via registered or
certified mail, return receipt requested; or one (1) business day after
placement with Federal Express, or other reputable air courier service,
requesting delivery on the most expedited basis available, postage prepaid and
addressed as follows:

 

If to Company:

ESIO FRANCHISING, LLC

Attn: Chief Operating Officer

1740 W. Broadway

Mesa, Arizona 85202

If to Developer:

Or to such other addresses any such party may designate by ten (10) days’
advance written notice to the other party.

15.16    Time of Essence.  Time shall be of the essence for all purposes of this
Agreement.

Regional Developer Agreement 04/12

C-24

 

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5.17      Lien and Security Interest.  To secure your performance under this
Agreement and indebtedness for all sums due us or our Affiliates, we shall have
a lien upon, and you hereby grant us a security interest in, the following
collateral and any and all additions, accessions, and substitutions to or for it
and the proceeds from all of the same: (a) all inventory now owned or
after-acquired by Developer and the Developer Business, including but not
limited to all inventory and supplies transferred to or acquired by Developer in
connection with this Agreement; (b) all accounts of Developer and/or the
Developer Business now existing or subsequently arising, together with all
interest in Developer and/or the Developer Business, now existing or
subsequently arising, together with all chattel paper, documents, and
instruments relating to such accounts; (c) all contract rights of Developer
and/or the Developer Business, now existing or subsequently arising; and (d) all
general intangibles of Developer and/or the Developer Business, now owned or
existing, or after-acquired or subsequently arising.  You agree to execute such
financing statements, instruments, and other documents, in a form satisfactory
to us, that we deem necessary so that we may establish and maintain a valid
security interest in and to these assets.

15.18    Submission of Agreement.  This Agreement shall not be binding upon us
unless and until it shall have been submitted to and signed by our President or
Chief Executive Officer, and the date of said signing as set forth on the first
page of this agreement shall be the effective date of this agreement.

15.19    Developer’s Acknowledgement of Business Risk and Absence of Guarantee.

A.         Developer acknowledges and represents that Franchisor, itself or
through any officer, director, employee, or agent, has not made, and Developer
has not received or relied upon, any oral or written, visual, express or implied
information, representations, warranties, guarantees, or promises regarding the
amount of sales levels or income Developer might expect to earn from the rights
granted hereby, except as set forth in the Franchise Disclosure Document. _____
(Initialed by Developer)

B.         The business venture contemplated by the Developer Agreement involves
business risks.  _____ (Initialed by Developer)

C.         Developer’s success will be largely dependent upon Developer’s
ability as an independent businessperson.  _____ (Initialed by Developer)

D.         The Developer has received, read, and understands this Regional
Developer Agreement and any attachments.  _____ (Initialed by Developer)

E.         Developer understands and agrees that the beverage distribution
industry is highly competitive, cyclical, seasonal and volatile with constantly
changing market conditions.  _____ (Initialed by Developer)

F.         Developer acknowledges and agrees that Franchisor has answered any
questions it or its representatives have posed to Franchisor regarding this
Developer Agreement to Developer’s satisfaction.  _____ (Initialed by Developer)

G.         Developer has been advised to consult with Developer’s own advisors
with respect to the legal, financial, and other aspects of this Regional
Developer Agreement, the business franchised hereby, and the prospects for such
business.  Developer either has consulted with such advisors or has deliberately
declined to do so.  _____ (Initialed by Developer)

H.         Any written inquiries made to Franchisor by Developer pertaining to
the nature of this Regional Developer Agreement have been answered in writing to
the satisfaction of Developer.  _____ (Initialed by Developer)

I.          Developer has had the opportunity and adequate time to independently
investigate, analyze, and construe both the business opportunity being offered
hereunder and the terms and provisions of this

Regional Developer Agreement 04/12

C-25

 

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

Regional Developer Agreement, utilizing the services of legal counsel,
accountants, and other advisors (if Developer so elects).  _____ (Initialed by
Developer)

J.          Any and all applications, financial statements, and representations,
whether oral or in writing, submitted to Franchisor by Developer were complete
and accurate when submitted and are complete and accurate as of the date of
execution of this Regional Developer Agreement, unless the same have been
otherwise amended in writing.  Developer states that he/she is not presently
involved in any business activity that could be considered competitive in
nature, unless heretofore disclosed to Franchisor in writing.  _____ (Initialed
by Developer)

K.         Developer agrees not to contest, directly or indirectly, Franchisor’s
ownership, title, right, or interest in its names or Proprietary Marks, trade
secrets, methods, procedures, know-how, and advertising techniques which are
part of Franchisor’s business or contest Franchisor’s sole right to register,
use, or license others to use such names and Proprietary Marks, trade secrets,
methods, procedures, and techniques.  _____ (Initialed by Developer)

L.         Developer’s signature to this Regional Developer Agreement has not
been induced by any representation inconsistent with the terms of this Regional
Developer Agreement or inconsistent with the Franchise Disclosure Document given
to Developer by Franchisor. _____ (Initialed by Developer)

M.        Developer represents and warrants that Developer is not a party to or
subject to any order or decree of any court or government agency which would
limit or interfere in any way with the performance by Developer of the
obligations under this Regional Developer Agreement, and that Developer is not a
party, and has not within the last ten (10) years been a party, to any
litigation, bankruptcy, or legal proceedings other than those heretofore
disclosed to Franchisor in writing.  _____ (Initialed by Developer)

IN WITNESS WHEREOF, the parties to this Agreement have caused this Agreement to
be executed as of the first date set forth above.

ESIO FRANCHISING, LLC

 

 

 

 

By:

Lyle W. Myers

 

 

Its:

President

TEMPCO, INC.

 

 

 

 

By:

Anthony Silverman

 

 

Its:

 

Regional Developer Agreement 04/12

C-26

 

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

EXHIBIT 1

DEVELOPMENT AREA AND INITIAL DEVELOPMENT FEE

DEVELOPMENT AREA

Dallas/Ft. Worth/Tyler

County

Number of
qualified HH

Cost if sold
separately

Cost of area

Households

Population

Anderson

6,725

$6,500.83

$1,625.21

15,936

58,458

Angelina

12,535

$12,117.48

$3,029.37

31,735

86,771

Bosque

2,915

$2,817.79

$704.45

6,732

18,212

Camp

1,633

$1,578.88

$394.72

4,588

12,401

Cherokee

6,529

$6,311.14

$1,577.78

17,091

50,845

Colin

192,070

$185,668.12

$46,417.03

278,363

782,341

Comanche

1,898

$1,834.70

$458.68

5,243

13,974

Cooke

6,917

$6,686.12

$1,671.53

14,623

38,437

Dallas

401,466

$388,083.82

$97,020.95

843,416

2,368,139

Delta

798

$770.97

$192.74

2,045

5,231

Denton

154,161

$149,022.44

$37,255.61

237,903

662,614

Ellis

28,618

$27,664.11

$6,916.03

49,598

149,610

Erath

18,500

$17,883.39

$4,470.85

49,598

37,890

Fannin

5,143

$4,971.99

$1,243.00

11,824

33,915

Franklin

1,684

$1,627.90

$406.97

3,734

10,605

Freestone

3,163

$3,057.19

$764.30

7,107

19,816

Grayson

20,737

$20,045.64

$5,011.41

44,885

120,877

Gregg

17,947

$17,348.93

$4,337.23

44,314

121,730

Hamilton

1,219

$1,178.82

$294.71

3,064

8,517

Henderson

9,658

$9,336.49

$2,334.12

29,810

78,532

Hill

5,258

$5,082.68

$1,270.67

13,379

35,089

Hood

11,134

$10,763.16

$2,690.79

20,543

51,182

Hopkins

5,494

$5,310.84

$1,327.71

13,175

35,161

Huston

2,611

$2,523.96

$630.99

7,794

23,732

Hunt

12,640

$12,218.20

$3,054.55

31,520

86,129

Jack

1,382

$1,335.54

$333.88

2,984

9,044

Johnson

27,543

$26,625.08

$6,656.27

51,579

14,075

Kaufman

20,552

$19,866.75

$4,966.69

34,599

103,350

Lamar

7,497

$7,246.91

$1,811.73

19,272

49,793

Nacogdoches

8,117

$7,846.30

$1,961.58

22,929

64,524

Navarro

7,391

$7,144.79

$1,786.20

17,598

47,735

Palo Pinto

4,774

$4,615.14

$1,153.78

10,447

28,111

Regional Developer Agreement

Exhibit 1- Development Area and Initial Development Fee

04/2012

C-27

 

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

County

Number of
qualified HH

Cost if sold
separately

Cost of area

Households

Population

Parker

22,821

$22,060.36

$5,515.09

43,140

116,927

Rains

1,697

$1,640.21

$410.05

4,069

10,914

Red River

1,742

$1,683.77

$420.94

5,108

12,860

Rockwell

19,495

$18,845.33

$4,711.33

26,488

78,337

Rusk

8,551

$8,266.25

$2,066.56

18,272

53,330

Sabine

1,325

$1,280.42

$320.10

4,430

10,834

San Augustine

934

$902.70

$225.67

3,691

8,865

Smith

35,783

$34,590.03

$8,647.51

79,341

209,714

Somervell

1,482

$1,432.56

$358.14

2,923

8,490

Tarrant

346,639

$335,084.77

$83,771.19

655,273

1,809,034

Upshur

6,762

$6,536.53

$1,634.13

14,927

39,309

Van Zandt

8,153

$7,881.64

$1,970.41

19,838

52,579

Wise

11,255

$10,879.68

$2,719.92

20,279

59,127

Wood

6,301

$6,090.97

$1,522.74

15,792

41,964

Total

1,481,650

$1,432,261.33

$358,065.33

2,860,999

7,739,124

TOTALS

 

$1,345,261.33

$250,000.00

 

 

INITIAL DEVELOPMENT FEE

THE INITIAL DEVELOPMENT FEE FOR THE DEVELOPMENT AREA DESCRIBED ABOVE IS
$250,000.  

THE INITIAL DEVELOPMENT SHALL BE PAID BY CASHIER’S CHECK OR WIRE TRANSFER UPON
EXECUTION OF THIS AGREEMENT AND IS NOT REFUNDABLE.

TEMPCO, INC.

 

 

 

 

By:

Anthony Silverman

 

 

Its:

 

Regional Developer Agreement

Exhibit 1- Development Area and Initial Development Fee

04/2012

C-28

 

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EXHIBIT 2

ESIO REGIONAL DEVELOPER

DEVELOPMENT OBLIGATIONS

Year

Annual

Total

Notes

Year 1

3

3

(Includes Developer’s Pilot Franchises)

Year 2

0

3

 

Year 3

2

5

 

Year 4

2

7

 

Year 5

2

9

 

Year 6

2

11

 

Year 7

1

12

 

Year 8

1

13

 

Year 9

1

14

 

Year 10

1

15

 

TEMPCO, INC.

 

 

 

 

By:

Anthony Silverman

 

 

Its:

 

Regional Developer Agreement

Exhibit 2- Development Obligations

04/2012

C-29

 

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EXHIBIT 3

OWNERSHIP STRUCTURE

[INTENTIONALLY LEFT BLANK]

Regional Developer Agreement 10/11

C-30

 

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FIRST AMENDMENT TO REGIONAL DEVELOPER AGREEMENT

THIS FIRST AMENDMENT TO REGIONAL DEVELOPER AGREEMENT (the “Amendment”) is made
and entered into this 14th day of August 2012, by and between ESIO Franchising,
LLC, a Delaware limited liability company (“ESIO, “us,” or “we”), and Tempco,
Inc., a Nevada corporation (“Developer” or “you”):

WHEREAS, ESIO and Developer have entered into a Regional Developer Agreement
(the “Agreement”) granting Developer certain development rights and obligations
with respect to a defined geographical area (the “RDA”);

WHEREAS, Developer has agreed to acquire six (6) Regional Developer Areas
(“RDA”) from ESIO and ESIO, in turn, has agreed to offer Developer special terms
and pricing arrangements in conjunction with Developer’s acquisition of multiple
RDAs;

WHEREAS, ESIO and Developer desire to amend the Agreement to reflect certain
changes ESIO and Developer have agreed to with respect to their respective
rights and obligations pursuant to the Agreement;

THEREFORE, ESIO and Developer agree to amend the Agreement as follows:

For purposes of the Agreement, the term “Principal” shall mean all officers and
directors of Developer as well as any shareholder owning more than 5% of the
company’s outstanding capital stock.

Section 2.1(c) of the Agreement is deleted in its entirety and replaced with the
following:

(c)        Development Schedule.  Developer shall satisfy the Development
Schedule set for in Exhibit 2, which is incorporated herein and by this
reference within each of the time periods (the “RD Development Period(s)”)
specified therein (the “RD Minimum Development Obligation”).  ESIO and Developer
agree that the RD Minimum Development Obligations set forth in Exhibit 2 to the
Agreement shall begin on the one (1) year anniversary of the Effective Date of
the Agreement.

Section 2.1(h) of the Agreement is deleted in its entirety and replaced with the
following:

(h)        Pilot Franchise Units. In conjunction with the execution of this
Agreement, Developer shall sign three (3) Franchise Agreements (in the form
currently being signed by ESIO Unit Franchisees) whereby Developer agrees to
open and operate, no later than twelve (12) months from the Effective Date of
the Agreement, three (3) ESIO Pilot Franchise locations within the RDA.
Developer’s operation of each Pilot Franchise must successfully pass our
operational review and be able to serve as a prototype business and training
facility before Developer may perform any Regional Developer Franchise services
under this Agreement.  Developer will operate the Pilot Franchises or
replacements therefore at all times during the Term and any extension thereof.
 The Pilot Franchise must be located at a site within the RDA that is suitable
for the operation of an ESIO Unit Franchise and may operate from the same
location as the Developer Sales Office.  We will not approve or disapprove of
the Pilot Franchise Site.

Section 2.4 of the Agreement is deleted in its entirety and replaced with the
following:

2.4        Point of Contact; Communication with Franchisees.  Developer shall
appoint one or more persons within Developer’s organization to be the main point
of contact for all ESIO Franchises in the RDA.  Developer shall instruct all
Franchisees in the RDA that communication concerning services, questions,
problems, complaints, or otherwise shall be directed to Developer’s appointed
representatives in the RDA and not Franchisor.

Section 2.16 of the Agreement is deleted in its entirety.

Section 4 of the Agreement is deleted in its entirety and replaced with the
following:

First Amendment to

Regional Developer Agreement

1

 

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

TERM.  The term of this Agreement (the “Term”) shall be for a period of eleven
(11) years commencing on the Effective Date of the Agreement.  The Development
Obligations set forth in Exhibit 2 shall begin on the one (1) year anniversary
of the Effective Date. Unless sooner terminated in accordance with the
provisions of this Agreement,  Developer shall have the right to extend the term
for two (2) additional ten (10) year terms (“Renewal Term(s)”) if:  (i)
Developer notifies us in writing no more than one hundred eighty (180) days and
no less than ninety (90) days before the Term or first Renewal Term would
otherwise expire;  (ii) during the Term or first Renewal Term, Developer has
substantially complied with the RD minimum development obligations, and all of
the other terms of this Agreement; (iii) Developer and each Principal signs our
general release form waiving any and all claims against us, our Affiliates, and
our and their owners, officers, directors, employees, agents, successors and
assigns; (iv) we and Developer mutually agree on a new minimum or other
Development Obligations for the RDA during the Renewal Term; and (v) Developer
has paid a renewal fee of $40,000.

Section 6 of the Agreement is deleted in its entirety and replaced with the
following:

6.         DEVELOPMENT FEE.  Developer shall pay ESIO a non-refundable fee (the
“Development Fee”) upon execution of the Agreement and Amendment.

A.         The Development Fee for the RDA is $250,000.

B.         If we require Developer to acquire an in-depth demographic analysis
of the RDA, Developer shall also purchase the demographic analysis from us or
our designated supplier for the then-applicable fee.

Section 7.1 of the Agreement is deleted in its entirety and replaced with the
following:

7.1        Developer.

 

(a)

Initial Fee Commission and Conditions of Payment.  During the Term of this
Agreement, Developer shall be paid a commission, as set forth in this Section,
based on a percentage of Initial Franchise Fees and/or Renewal Fees paid by Unit
Franchisees for the purchase or renewal of ESIO Unit Franchises located within
the RDA (the “Initial Fee Commission”) as long as Developer has satisfied the
Initial Fee Commission Conditions at the time such Initial Fee Commission would
be due to Developer.  For purposes of this Agreement, the term “Initial Fee
Commission Conditions” shall mean: (a) the Unit Franchisee executes a Franchise
Agreement with us and pays us an initial franchise fee (we shall not be deemed
to have received any fees until our bank confirms receipt of the fees or fees
paid into escrow, if applicable, until such fees actually have been remitted to
us); and (b) Developer has complied with all of its other obligations under this
Agreement with respect to such sale and has verified the same to us in writing
in a form prescribed by us.  Initial Fee Commissions shall be an amount equal
to:

 

i.

20 percent (20%) percent of the Initial Franchise Fees, renewal fees and
transfer fees paid to us minus broker’s fees or sales commissions during any
period of time in which Developer is not actively involved in the referral of
prospective franchisees to ESIO;

 

 

 

 

ii.

fifty percent (50%) of the total Initial Franchise Fees, renewal fees and
transfer fees paid to us minus broker’s fees or sales commissions during any
period of time in which Developer is actively involved in the referral of
prospective franchisees to ESIO

First Amendment to

Regional Developer Agreement

2

 

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

 

iii.

Developer shall only be entitled to any share of transfer fees if Developer is
providing all of the required training to the transferee.

 

(b)

Commissions on Royalty Fees.  We shall pay to Developer:

 

i.

twenty percent (20%) of the Royalty Fees (which excludes advertising and
marketing fees) actually received by us from each ESIO Unit Franchise located in
the RDA during any period where Developer is not actively involved in the
referral of prospective franchisees and substantially providing the services set
forth in Section 2 of the Agreement;

 

 

 

 

ii.

forty percent (40%) of the Royalty Fees (which excludes advertising and
marketing fees) actually received by us from each ESIO Unit Franchise located in
the RDA (and from Developer for each Regional Developer Franchise) pursuant to
their Franchise Agreement (“Royalty Commissions”) during any period of time in
which Developer is actively involved in the referral of prospective franchisees
and substantially providing services set forth in Section 2 of the Agreement.
 Notwithstanding the foregoing, if Developer has failed to conduct the periodic
inspections described in Section 2.3 and failed to perform in any material
respect, its obligations under this Agreement as to one or more Unit Franchisees
located in the RDA during any applicable month, Developer shall not be entitled
to receive Royalty Commissions with respect to such Unit Franchisees for the
period during which reports or services were not provided.

Section 8.1 and 8.2 are deleted in their entirety and replaced with the
following.

8.1        DEVELOPER SHALL BE RESPONSIBLE FOR FIFTY PERCENT (50%) OF THE
FOLLOWING AMOUNTS PAID BY FRANCHISOR:

(a)        If Franchisor is required, or decides to, return all or a part of a
Franchisee’s Initial Franchise Fee of which Developer received a portion
pursuant to Section 7.1.

8.2.1     DEVELOPER SHALL BE RESPONSIBLE FOR FORTY PERCENT (40%) OF THE
FOLLOWING AMOUNTS PAID BY FRANCHISOR:

(a)        If Franchisor is required, or decides to, return any Royalty Fees
paid by a Franchisee of which Developer received a portion pursuant to Section
7.2.

The following sentence is added to the end of Section 10.2(b)

The parties agree that Developer’s disclosure of Confidential Information in
securities filing required by the securities laws of the United States and the
states in which it is required to make securities filings shall not be a
violation of this Section 10.2.  Developer shall provide Franchisor no less than
forty eight (48) hours (and more time if practical) to review and object to the
disclosure of any Confidential Information.  If Franchisor does not object, in
writing, within the stated time period (never less than 48 hours), Developer may
submit the proposed filing that includes Franchisor Confidential Information.
 If Franchisor objects to any or all of the proposed disclosure, Developer shall
make such amendments as reasonably requested by Franchisor.

Section 11.1 of the Agreement is deleted in its entirety and replaced with the
following:

11.1      Assignability by Us.

First Amendment to

Regional Developer Agreement

3

 

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

(a)         We shall have the right, but not the obligation, to cause a
subsidiary or Affiliate of ours to perform any or all of our obligations and
exercise any or all of our rights under this Agreement and under any Franchise
Agreement, and to require Developer to perform any or all of its obligations
hereunder, in favor or such subsidiary or Affiliate, by delivery of written
notice thereof to Developer.

(b)         We have the right, exercisable at any time, upon notice to you and
your provision of written consent, which shall not be unreasonably withheld, to
change our ownership or form and/or transfer and assign all or any part of our
rights and obligations under this Agreement to any person or legal entity as
long as such person or legal entity expressly assume the obligations under this
Agreement.

(c)         After our transfer or assignment of this Agreement to a third party,
in a manner consistent with this Agreement, who expressly assumes the
obligations under this Agreement, we no longer will have any performance or
other obligations under this Agreement.

Sections 11.2, 11.4, 11.5 and 11.7 are deleted in their entirety.

Section 11.3 is deleted in its entirety and replaced with the following.

11.3      Conditions for Approval of Assignment or Transfer.  Our consent to a
Transfer of your rights under this Agreement shall be conditioned on your
compliance and the proposed assignee’s compliance with the conditions set forth
below.  For purposes of this Agreement, “Transfer” means any voluntary,
involuntary, direct or indirect assignment, sale, gift, exchange, grant of a
security interest, or occurrence of any other event which would or might change
the controlling ownership of Developer, and includes, without limitation:
 (1) the Transfer of a controlling interest of capital stock, partnership
interest or other ownership interest of Developer; (2) merger or consolidation,
in which Developer is not the surviving entity, of a majority interest in
Developer; (3) sale, to a single individual or entity, of more than 50% of the
common stock of Developer, pursuant to a private placement or registered public
offering; (4) Transfer of an controlling interest in Developer in a divorce
proceeding or otherwise by operation of law; or (5) Transfer of an controlling
interest by will, declaration of or transfer in trust, or under the laws of
intestate succession.

(a)         that the assignee (or the principal officers, shareholders,
directors or general partners of the assignee in the case of a business entity
assignee) demonstrates that it has the skill, qualifications and economic
resources necessary, in our judgment, reasonably exercised, to own and operate
the Developer Business;

(b)         that Developer has paid all amounts owed to us;

(c)         that the assignee shall expressly assume in writing for our benefit
all of the  obligations of Developer under this Agreement and any other
agreements proposed to be assigned to such assignee;

(d)         that neither the assignee nor its owners or Affiliates operates, has
an ownership interest in or performs services for a Competitive Business
(defined in Section 12.2);

(e)         that the assignee shall have completed (or agreed to complete) our
training program;

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(f)         that the assignee signs our then current form of Developer
Agreement, the provisions of which may differ materially from any and all of
those contained in this Agreement, and the term of which shall be the remaining
term of this Agreement;

(g)        that as of the date of any such assignment, the assignor shall have
strictly complied with all of its obligations to us, whether under this
Agreement or any other agreement, arrangement or understanding with us;

(h)        that the assignee is not then in default of any of the obligation to
us under any agreement between such assignee and us;

(i)         that the assignor shall pay to us a transfer fee;

(j)         that the assignor shall sign a general release, in a form
satisfactory to us, of any and all claims against us and our Affiliates and our
and their respective shareholders, officers, directors, employees,
representatives, agents, successors and assigns; and

(k)        Any attempted assignment or transfer of your rights under this
Agreement without complying with the conditions set forth in this Section 11.3
is a breach of this Agreement and has no effect.

Section 11.6 is deleted in its entirety and replaced with the following.

11.6      Company’s Right of First Refusal.  If Developer, a Principal or
Principals, or Developer’s shareholders (the “Seller”), at any time, determine
to sell or transfer a controlling interest in Developer, this Agreement or the
Developer Business, as applicable, the Seller must obtain from a responsible and
fully disclosed buyer, and send us a true and complete copy of a bona fide,
executed written offer relating exclusively to an interest in Developer or this
Agreement and the Developer Business.  For purposes of this Agreement, a
“controlling interest” shall mean “more than 50% of Developer’s voting shares.”
The offer must include details of the payment terms of the proposed sale and the
sources and terms of any financing for the proposed purchase price.  To be a
valid, bona fide offer, the proposed purchase price must be in a fixed dollar
amount and without any contingent payments of purchase price (such as earn-out
payments).

We may, by delivering written notice to the Seller within fifteen (15) days
after we receive both an exact copy of the offer and all other information
requested, elect to purchase the interest for the price and on the terms and
conditions contained in the offer, provided that: (1) we may substitute cash for
any form or payment proposed in the offer; (2) our credit will be deemed equal
to the credit of any proposed buyer; (3) the closing will be not less than
thirty (30) days after notifying the Seller of our election to purchase or, if
later, the closing date proposed in the offer; and (4) we must receive, and the
Seller agrees to make, all representations and warranties required by us, given
by the seller of the assets of a business or ownership interests in a legal
entity, as applicable, including, without limitation, representations and
warranties regarding ownership and condition of, and title to, assets and (if
applicable) ownership interests and validity of contracts and the liabilities,
contingent on otherwise, relating to the assets or ownership interests being
purchased. If we exercise our right of first refusal, the Seller agrees that,
for two (2) years beginning on the closing date, the Seller, its Principals and
members of the Principals’ immediate family will be bound by the non-competition
covenant contained in Section 12.2 below.

If we do not exercise our right of first refusal, the Seller may complete the
sale to the proposed buyer on the original offeror’s terms.  If the Seller does
not complete the sale to the proposed buyer within: (i) one hundred eighty (180)
days if the buyer is a publicly traded company (for purposes of this Agreement a
publicly traded company is a company issuing stocks, which are traded on the
open market, either

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on a stock exchange or on the over-the-counter market); or (ii) sixty (60) days
if the buyer is a privately held company; after we notify the Seller that we do
not intend to exercise our right of first refusal, or if there is a material
change in the terms of the sale (which the Seller must let us know promptly), we
will have an additional right of first refusal during the thirty (30) day period
following either the expiration of the applicable period or receipt of notice of
the material change(s) in the sale’s terms, either on the terms originally
offered or the modified terms, at our option.

Section 11.7 is deleted in its entirety.

The following is added to Section 15.15.

If to Developer

TEMPCO, INC.

7625 E. Via Del Reposo

Scottsdale, AZ 85258

Section 12 is terminated in its entirety and replaced with the following.

12.1      In Term.  During the term of this Agreement, neither Developer, any
Principal, or any member of a Principal’s immediate family will have any direct
or indirect interest (e.g., through a spouse) as a disclosed or beneficial
owner, investor, partner, director, officer, controlling shareholder, employee,
consultant, representative or agent, or in any other capacity, in a Competitive
Business (defined below), whether located within or outside the RDA, without our
prior written consent.

12.2      Post-Term.  For a twelve (12) month period following the assignment,
expiration or termination of this Agreement, for any reason, neither Developer,
any Principal, or any member of a Principal’s  immediate family will have any
direct or indirect interest (e.g., through a spouse, child or trust) as a
disclosed or beneficial owner, investor, partner, director, officer, employee,
consultant, representative or agent, or in any other capacity, in any
Competitive Business located or operating: (a) within the RDA; (b) within the
development area of any of our other Developers; or (c) within twenty-five (25)
miles of any ESIO Franchise or Developer franchise in operation or development
on the date of assignment, expiration or termination. The term “Competitive
Business” means any business which derives more than Fifty-Thousand Dollars
($50,000) of revenue per year from: the distribution and sale of water,
beverages, water and beverage equipment (including coolers, heaters, and other
related equipment), services (including maintenance and repair) or products
(including beverage packets), or any business which grants franchises or
licenses to others to operate such a business, other than a ESIO Franchise
operated under a franchise agreement with us.

Section 13.1 is deleted in its entirety and replaced with the following.

13.1      Termination by Company.  We may terminate this Agreement, effective
upon written notice of termination to Developer, if:

(a)        Developer makes or attempts to make a transfer in violation of
Section 11;

(b)        Developer fails to meet the RD Minimum Development Obligation for any
Development Period;

(c)        Developer or a Principal has made or makes a material
misrepresentation or omission in acquiring the rights under this Agreement or in
operating the Developer Business;

(d)        Developer does not satisfactorily complete initial training;

(e)        Developer or a Principal is convicted by a trial court of, or pleads
no contest to, a felony;

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(f)         Developer fails to maintain the insurance we require from time to
time;

(g)        Developer or a Principal engages in any dishonest, unethical or
illegal conduct or any other conduct which, in our opinion, adversely affects
our reputation, the reputation or other ESIO Franchises or the goodwill
associated with the Marks;

(h)        Developer knowingly makes any unauthorized use or disclosure of any
part of the Manuals or any other Confidential Information;

(i)         Developer fails on three (3) or more separate occasions within any
twelve  (12) consecutive month period to submit when due reports or other data,
information or supporting records, pay when due any amounts due to us (or our
Affiliates), or otherwise comply with this Agreement, whether or not Developer
corrects any of these failures after we deliver written notice to Developer,
whether or not Developer corrects either of the failures after we deliver
written notice to Developer;

(j)         Developer makes an assignment for the benefit of creditors or admits
in writing insolvency or inability to pay debts generally as they become due;
Developer consents to the appointment of a receiver, trustee or liquidator of
all or the substantial part of the assets of the Developer Business; or the
assets of the Developer Business are attached, seized, subjected to a writ or
distress warrant, or levied upon, unless the attachment, seizure, writ, warrant
or levy is vacated within thirty (30) days following the order’ entry;

(k)        Developer fails to comply with any other provision of this Agreement
and does not correct the failure within thirty (30) days after we deliver
written notice of the failure to Developer; or

(l)         Developer fails to pay any sums due to us and does not correct the
failure within ten (10) days after we deliver written notice of that failure to
Developer.

Section 13.2 is deleted in its entirety and replaced with the following.

13.2      Cross-Termination. Notwithstanding anything contained in this
Agreement to the contrary, at any time that Developer or any of its Affiliates
or Principals are in breach of his obligations under this Agreement, or any
other agreement between Developer or any Principal or Developer’s Affiliates and
Franchisor or any of its Affiliates, Franchisor (or its Affiliate) may elect to
defer the performance of Franchisor’s (or its Affiliate’s) obligations under
this Agreement or such other agreement until Developer’s (or its Principal’s or
Affiliate’s) breach has been cured.  Franchisor’s (or its Affiliate’s) exercise
of that right will not constitute a waiver of its rights under this Agreement or
such other agreement, including Franchisor’s (or its Affiliate’s) right to
terminate this Agreement or such other agreement.  In addition, Franchisor’s (or
its Affiliate’s) exercise of that right will not serve as a basis for any claim
by Developer, a Principal (or Developer’s Affiliate) that Franchisor did not
perform its obligations in a timely manner.

Section 14.6 is deleted in its entirety and replaced with the following.

14.6      Construction.  All headings of the various Sections of this Agreement
are for convenience only, and do not affect the meaning or construction of any
provision.  All references in this Agreement to masculine, neuter or singular
usage will be construed to include the masculine, feminine, neuter or plural,
wherever applicable.  Except where this Agreement expressly obligates us to
reasonably approve or not unreasonably withhold our approval of any of your
actions or requests, we have the absolute right to refuse any request by you or
to withhold our approval of any action or omission by you.  The term “Affiliate”
as used in this Agreement is applicable to any company directly or indirectly
owned or

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controlled by you or any Principal, or any company directly or indirectly owned
or controlled by us that sells products or otherwise transacts business with
you.

Section 15.7 is deleted in its entirety and replaced with the following.

15.7      Consent to Jurisdiction.  Subject to Section 14 and the provisions
below, Developer and its Principals agree that all actions arising under this
Agreement or otherwise as a result of the relationship between Developer and us
must be commenced in the State of Arizona, and in the state or federal court of
general jurisdiction closest to where our principal business address then is
located, and Developer (and its Owners) irrevocably submits to the jurisdiction
of those courts and waives any objection Developer (or its owners) might have
with either the jurisdiction of or venue in those courts. Nonetheless, Developer
and any its Principals agree that we may enforce this Agreement and any
arbitration orders and awards in the courts of the state or states in which
Developer or a Principal is domiciled.

Section 15.8 is deleted in its entirety and replaced with the following.

15.8      Waiver of Punitive Damages and Jury Trial.  Except for the Parties’
indemnification obligation under Section 15.2 above and except where authorized
by federal statute, we and Developer and its Principals waive to the fullest
extent permitted by law any right to or claim for any punitive or exemplary
damages against the other and agree that, in the event of a dispute between us
and Developer, the party making a claim will be limited to equitable relief and
to recovery of any actual damages it sustains.  We and Developer irrevocably
waive trial by jury in any action, proceeding or counterclaim, whether at law or
in equity, brought by either party.

Except as set forth herein, the Agreement by and between Developer and ESIO
shall remain in full force and effect.  Unless explicitly modified, deleted, or
changed above, the parties to the Agreement intend for the rights and
obligations set forth therein to remain in full force and effect.

If the Amendment contradicts any provision of the Agreement, the parties intend
for the Amendment to control.

[SIGNATURES ON FOLLOWING PAGE]

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IN WITNESS WHEREOF, the parties to this First Amendment to Regional Developer
Agreement to have caused it to be executed as of the first date set forth above.

ESIO FRANCHISING, LLC

 

 

 

 

By:

Lyle W. Myers

 

 

Its:

President

TEMPCO, INC.

 

 

 

 

By:

Anthony Silverman

 

 

Its:

 

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