What does the 'System' encompass for an Anago janitorial and facilities-related services business?

Purchasers of programs 0 and 500 will not receive these supplies as part of the Initial | | | Fee and must | purchase them separately). This is in addition to Your ongoing needs for cleaning | | supplies and other items that We require, if implemented on a System-wide basis. | |

BACKGROUND

• A. Anago Cleaning Systems, Inc. ("ACS"), a Florida corporation, owns a distinctive System, including certain Proprietary Property and Proprietary Marks, to be used in the operation of commercial service businesses providing janitorial and other approved services under the trade name "Anago." ACS has granted a license to Anago Franchising, Inc. ("AFI" or "Franchisor"), a Florida corporation, to sublicense the use of the System to subfranchisors and their franchisees.
• B. We and AFI entered into a subfranchise rights agreement (the "Subfranchise Rights Agreement") under which AFI granted Us the right to operate as an Anago subfranchisor and to grant Anago Unit Franchises in the state of State, in the counties of territory (our "Subfranchise Territory").
• C. You desire to operate a Unit Franchise subject to the terms of this Agreement and to receive the benefits We provide to You under this Agreement.
• D. We have reviewed Your application and have decided to award an Anago Unit Franchise to You as evidenced by this Agreement.
• E. You understand that ACS and AFI are not parties to this Agreement and have no obligation to You.
• F. All defined terms having the meaning given to them in Section 17.1 or when first used.

The parties agree as follows:

ARTICLE 1 - APPOINTMENT

SECTION 1.1 GRANT OF UNIT FRANCHISE.

We grant You the right, and You undertake the obligation, to operate 1 Anago Unit Franchise under the System, subject to the terms of this Agreement.

SECTION 1.2 NO PROTECTED TERRITORY.

You are not obtaining any exclusive or protected territory. You may only operate your Unit Franchise anywhere within the counties of (Your counties) in the state of (Your State) (the "Area") under the name Anago. You cannot operate your Unit Franchise outside the Area. We may open and operate Company Units and franchise the Anago Unit Franchise to other Unit Franchisees or engage in any other method of distribution in Our complete discretion whenever, however and wherever We determine, including within the Area. You must designate your own Premises within the Area from which you will manage and administer Your Unit Franchise. If You do not operate Your Anago Unit Franchise out of Your residence but instead occupy a business premises, such business premises and lease agreement will be subject to our prior written approval, which will not be unreasonably withheld.

SECTION 1.3 NATURE OF RELATIONSHIP.

The parties expressly agree that this Agreement is an independent contractor relationship. Nothing in this Agreement shall be deemed to constitute or otherwise create an employment, partnership, joint venture or other formal business entity of any kind and the rights and obligations of the parties shall be as expressly set forth herein. We require only that you complete the work assigned to your Unit Franchise and, while we might make suggestions or recommendations, from time to time, we do not direct or control the manner and means in which you perform the tasks necessary to complete the work or the hours you set aside to perform the work.

ARTICLE 2 - OUR DUTIES

We will provide You with the following assistance and services necessary for the operation of Your Anago Unit Franchise, if You are not in default under this Agreement:

SECTION 2.1 ASSIGNMENT OF ACCOUNTS.

At Our option, You will join in as a party to the Accounts secured by Us through a contract with a Client or those contracts will be assigned to You, in either case until the earlier of (a) the expiration or termination of this Agreement, (b) the contract with the Client is terminated, cancelled, or transferred, or (c) any situation arises whereby You errantly cease service to the Account. All Accounts will initially be between Us and the Client. All payments made by a Client under an Account will be sent directly to Us. You will receive the gross monthly revenues from the Account less the fees owed to Us as stated in Section 3.1 and any other liability You may have to Us. You are not permitted to offer, exchange or transfer Accounts that have been assigned to Your Unit Franchise or to which Your Unit Franchise has become a party by joinder except pursuant to a third-party's purchase of Your Anago business in accordance with this Agreement. You are not permitted to perform or invoice for janitorial or other services offered through Your Unit Franchise directly to those Accounts or to perform or invoice the Account for such services outside of the contract. You may however solicit and negotiate additional business with Clients assigned to You. All such additional business must be reflected on an amendment to the contract with the Account and will be subject to the provisions of the assignment of the contract, including Our appointment as Your agent for billing and collections related to the additional business. We will invoice for those services retaining Our fees earned under this Agreement. All Accounts We

assign to You or to which you become a party by joinder must be serviced in accordance with the times, frequency of service and cleaning specifications as determined by the Client.

You acknowledge and agree that we or AFI may negotiate contracts with third parties that provide that their products and services will be the only such products or services that are offered by the Anago System. If we notify you that such a contract has been executed, you agree that you will offer only that third party's products or services and will not provide any products or services to Clients that are competitive with that third party's products or services.

• (a) Offering Period of Initial Business. We will offer to You Accounts generating Gross Monthly Billing under the Program You select in Subsection 3.1(a) within the time period described, after the conditions described below have been satisfied. These Accounts will not be offered nor will the Initial Offering Period begin until You have satisfied the following conditions:
  • (i) You have successfully completed the Anago Orientation Program having obtained an 85% or better on the business operations examination.
  • (i) Our orientation officer has certified You as qualified to operate an Anago Unit Franchise.
  • (ii) You have signed an orientation acknowledgment in the form attached as Exhibit 1 to this Agreement.
  • (iiii) You have proof of all necessary business licenses, tax registrations, insurance and permits and have forwarded copies to Us.
  • (iv) You have purchased, leased or currently own the major equipment described in Exhibit 5 and have furnished proof of purchase (for example, serial numbers and sales slips) to Us.
  • (vi) You have formed your Corporation or LLC business entity. You have received registration of your fictitious name and EIN number and delivered copies to Our office.
  • (vii) You have opened a commercial business checking account in the name of your Corporation or LLC business entity with your fictitious name listed and delivered a voided check to Our office.

You are under no obligation to accept Initial Business offered. Our obligation is only to "offer" Initial Business to You within the Initial Offering Period. Should You decline an offer, You must sign a written statement stating that You have declined the offer. A refusal to sign a statement of decline is a material breach under this Agreement and We then have the option of immediately terminating this Agreement. All declined offers will satisfy Our obligation to offer those portions of Initial Business within the Initial Offering Period. Should You decline all Initial Business offered during the Initial Offering Period, then We have the right to terminate this Agreement. If We terminate this Agreement, We will keep all fees You paid to Us and, if You financed a portion of the Initial Fee, the unpaid portion will be forgiven.

Source: Item 23 — RECEIPTS (FDD pages 62–298)