ADVANCED COMMUNICATIONS
INTERNATIONAL MASTER FRANCHISE AGREEMENT
Between
ACCESS POWER, INC.,
a Florida corporation
(Franchisor)
and
ACCESS POWER CANADA, INC.,
a Federal corporation
(Master Franchisee)
Dated: April 26, 0000
Xxxxxx Xxxxxxxxx Xxxxxxxxx:
Xxxxxx
ACCESS POWER INTERNATIONAL MASTER FRANCHISE AGREEMENT
BACKGROUND 6
ARTICLE 1 - APPOINTMENT 7
SECTION 1.1 GRANT. 7
SECTION 1.2 MASTER FRANCHISE TERRITORY. 7
SECTION 1.3 EXCLUSIVITY. 7
ARTICLE 2 - DUTIES OF THE FRANCHISOR 8
SECTION 2.1 TRAINING. 8
SECTION 2.2 LOAN OF THE ACCESS POWER MANUALS. 8
SECTION 2.3 ASSISTANCE AND SUPPORT. 9
SECTION 2.4 PRIVATE LABEL PRODUCTS. 10
SECTION 2.5 LIQUIDATED DAMAGES FOR SALE OF PROHIBITED PRODUCTS OR
SERVICES. 10
SECTION 2.6 LICENSES. 11
SECTION 2.7 DUTIES SOLELY TO THE MASTER FRANCHISEE. 11
SECTION 2.8 THE FRANCHISOR'S RIGHT TO DELEGATE DUTIES. 11
ARTICLE 3 - DUTIES OF THE MASTER FRANCHISEE 12
SECTION 3.1 MANAGEMENT OF MASTER FRANCHISEE OPERATIONS. 12
SECTION 3.2 TRAINING OF EMPLOYEES AND FRANCHISEES. 12
SECTION 3.3 HIRING AND TRAINING OF EMPLOYEES. 12
SECTION 3.4 FRANCHISE SALES. 12
SECTION 3.5 PRE-OPENING ASSISTANCE TO FRANCHISEES. 13
SECTION 3.6 CONTINUED ASSISTANCE AND SUPPORT OF FRANCHISEES. 13
SECTION 3.7 OTHER OBLIGATIONS AND REQUIREMENTS. 14
SECTION 3.8 INSURANCE. 15
SECTION 3.9 WAIVER OF SUBROGATION. 16
SECTION 3.10 EFFECT OF FRANCHISOR INSURANCE. 16
SECTION 3.11 FAILURE TO MAINTAIN INSURANCE. 16
SECTION 3.12 CONFIDENTIALITY. 16
SECTION 3.13 COMPLIANCE WITH FRANCHISE AGREEMENTS. 16
ARTICLE 4 - FEES, COMPENSATION AND INCENTIVES 17
SECTION 4.1 MASTER FRANCHISE FEE. 17
SECTION 4.2 MASTER FRANCHISE FEE RELIEF. 17
SECTION 4.3 ADDITIONAL MASTER FRANCHISE FEE PAYMENT TERMS. 17
SECTION 4.4 POPULATION COVERAGE INCENTIVE. 18
SECTION 4.5 ROYALTIES AND OTHER FEES. 18
ARTICLE 5 - BILLING AND PAYMENTS 19
SECTION 5.1 STANDARD BILLING PRACTICES. 19
SECTION 5.2 SPECIAL SERVICES BILLING. 19
SECTION 5.3 BILLING OF USAGE ACROSS THE NETWORK. 19
SECTION 5.4 INTEREST ON LATE PAYMENTS; LATE CHARGE. 19
SECTION 5.5 PAYMENT TO THE FRANCHISOR; CURRENCY. 20
SECTION 5.6 WITHHOLDING TAXES; VALUE-ADDED TAXES AND OTHER TAXES. 20
SECTION 5.7 COLLATERAL ASSIGNMENT OF FRANCHISE AGREEMENTS. 21
2
ARTICLE 6 - OPERATION OF MASTER FRANCHISEE IP TELEPHONY UNITS 21
SECTION 6.1 ADVERTISING. 21
SECTION 6.2 LINK AND MONITOR OF IP TELEPHONY UNITS. 21
SECTION 6.3 FRANCHISOR TEMPORARY OPERATION OF MASTER FRANCHISEE IP
TELEPHONY UNIT(S). 21
SECTION 6.4 OPERATIONAL REQUIREMENTS. 22
ARTICLE 7 - PROPRIETARY PROPERTY 23
SECTION 7.1 THE FRANCHISOR'S REPRESENTATIONS AS TO THE PROPRIETARY MARKS. 23
SECTION 7.2 THE MASTER FRANCHISEE'S USE AND SUBLICENSE OF THE
PROPRIETARY PROPERTY. 24
SECTION 7.3 INFRINGEMENT BY THE MASTER FRANCHISEE. 24
SECTION 7.4 CLAIMS AGAINST THE PROPRIETARY PROPERTY. 25
SECTION 7.5 INDEMNIFICATION OF THE MASTER FRANCHISEE. 25
SECTION 7.6 THE FRANCHISOR'S RIGHT TO MODIFY THE PROPRIETARY MARKS. 25
SECTION 7.7 OWNERSHIP; INUREMENT SOLELY TO THE FRANCHISOR. 25
SECTION 7.8 FRANCHISOR RESERVATION OF RIGHTS. 26
ARTICLE 8 - ACCESS POWER MANUALS AND OTHER CONFIDENTIAL INFORMATION 26
SECTION 8.1 IN GENERAL. 26
SECTION 8.2 CONFIDENTIAL USE. 26
SECTION 8.3 PERIODIC REVISIONS. 27
SECTION 8.4 PRIOR INFORMATION. 27
ARTICLE 9 - ACCOUNTING AND RECORDS 27
SECTION 9.1 BOOKS AND RECORDS. 27
SECTION 9.2 REPORTS AND STATEMENTS. 28
SECTION 9.3 REVIEW AND AUDIT BY THE FRANCHISOR. 28
SECTION 9.4 CONFIDENTIALITY. 28
SECTION 9.5 MASTER FRANCHISEE NAME, HOME ADDRESS AND TELEPHONE NUMBER. 28
ARTICLE 10 - TRANSFER OF INTEREST 29
SECTION 10.1 TRANSFER BY THE FRANCHISOR. 29
SECTION 10.2 TRANSFER BY MASTER FRANCHISEE. 29
SECTION 10.3 THE FRANCHISOR'S RIGHT OF FIRST REFUSAL. 31
SECTION 10.4 SECURITIES OFFERINGS BY THE MASTER FRANCHISEE. 32
ARTICLE 11 - DEFAULT AND TERMINATION 33
SECTION 11.1 TERMINATION BY THE MASTER FRANCHISEE. 33
SECTION 11.2 TERMINATION BY THE FRANCHISOR - WITHOUT NOTICE. 34
SECTION 11.3 TERMINATION BY THE FRANCHISOR - AFTER NOTICE. 34
SECTION 11.4 TERMINATION BY THE FRANCHISOR - AFTER NOTICE AND RIGHT TO CURE. 35
SECTION 11.5 TERMINATION NON-PARTY INITIATED. 35
ARTICLE 12 - OBLIGATIONS OF THE MASTER FRANCHISEE UPON TERMINATION OR EXPIRATION 36
SECTION 12.1 PAYMENT OF OUTSTANDING AMOUNTS. 36
SECTION 12.2 RETURN OF MATERIALS. 36
SECTION 12.3 LOSS OF EXCLUSIVITY; CESSATION OF SALES; CESSATION OF SERVICES. 36
SECTION 12.4 CHANGE OF CORPORATE NAME. 37
SECTION 12.5 COMPETITION DIFFERENTIATION. 37
3
ARTICLE 13 - INDEPENDENT COVENANTS OF THE MASTER FRANCHISEE 37
SECTION 13.1 DEVOTION TO THE SALE AND SERVICE OF FRANCHISES. 37
SECTION 13.2 DIVERSION OF BUSINESS; COMPETITION AND INTERFERENCE WITH THE
FRANCHISOR. 37
SECTION 13.3 MODIFICATION OF COVENANTS. 39
SECTION 13.4 INDEPENDENT COVENANTS. 39
ARTICLE 14 - INDEPENDENT CONTRACTOR AND INDEMNIFICATION 39
SECTION 14.1 INDEPENDENT STATUS. 39
SECTION 14.2 INDEMNIFICATION. 39
ARTICLE 15 - REPRESENTATIONS AND WARRANTIES 40
SECTION 15.1 NO RELIANCE. 40
SECTION 15.2 REPRESENTATIONS OF THE FRANCHISOR. 40
SECTION 15.3 REPRESENTATIONS OF THE MASTER FRANCHISEE; OPINION OF COUNSEL. 40
SECTION 15.4 ACKNOWLEDGEMENT OF RISK. 41
ARTICLE 16 - MEDIATION AND ARBITRATION; EQUITABLE RELIEF 42
SECTION 16.1 MEDIATION AND ARBITRATION. 42
SECTION 16.2 EXCEPTIONS TO MEDIATION AND ARBITRATION; EQUITABLE RELIEF. 43
ARTICLE 17 - TERM 43
SECTION 17.1 MASTER FRANCHISE TERM. 43
SECTION 17.2 OPTION TO OBTAIN SUCCESSOR ACCESS POWER INTERNATIONAL MASTER
FRANCHISE AGREEMENT. 44
SECTION 17.3 REINSTATEMENTS AND EXTENSIONS. 44
ARTICLE 18 - DEFINITIONS 44
SECTION 18.1 DEFINITIONS. 44
SECTION 18.2 OTHER DEFINITIONAL PROVISIONS. 48
ARTICLE 19 -GENERAL PROVISIONS 48
SECTION 19.1 RELEASE OF PRIOR CLAIMS. 48
SECTION 19.2 AMENDMENTS. 48
SECTION 19.3 PROMOTIONAL ALLOWANCES. 49
SECTION 19.4 MODIFICATION OF THE SYSTEM. 49
SECTION 19.5 BINDING EFFECT. 49
SECTION 19.6 NOTICES. 49
SECTION 19.7 HEADINGS. 50
SECTION 19.8 SEVERABILITY. 50
SECTION 19.9 WAIVERS. 50
SECTION 19.10 ENFORCEMENT COSTS. 51
SECTION 19.11 JURISDICTION AND VENUE. 51
SECTION 19.12 REMEDIES CUMULATIVE. 51
SECTION 19.13 EFFECTIVENESS; COUNTERPARTS. 51
SECTION 19.14 CONSENTS, APPROVALS AND SATISFACTION. 52
SECTION 19.15 GOVERNING LAW. 52
SECTION 19.16 INTERPRETATION. 52
SECTION 19.17 ENTIRE AGREEMENT. 53
SECTION 19.18 SURVIVAL. 53
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SECTION 19.19 FORCE MAJEURE. 53
SECTION 19.20 THIRD PARTIES. 53
SECTION 19.21 RIGHT OF PARTIES. 53
SECTION 19.22 LANGUAGE. 53
SECTION 19.23 WAIVER OF PUNITIVE DAMAGES CLAIMS. 54
SECTION 19.24 WAIVER OF JURY TRIAL. 54
FORM OF ACCESS POWER FRANCHISE AGREEMENT 56
TRADEMARKS GRANTED AND FILED 57
VOCAL TEC GATEWAY SOFTWARE LICENSE AGREEMENT 58
DEPLOYMENT/PERFORMANCE SCHEDULE 59
COLLATERAL ASSIGNMENT OF FRANCHISE AGREEMENTS 60
RIDER TO UCC-1 FINANCING STATEMENT 64
5
ACCESS POWER INTERNATIONAL MASTER FRANCHISE AGREEMENT
THIS INTERNATIONAL MASTER FRANCHISE AGREEMENT IS SIGNED ON APRIL 26,
0000, XXXXXXX XXXXXX POWER, INC., A FLORIDA CORPORATION (THE
"FRANCHISOR") AND ACCESS POWER CANADA, INC., A FEDERAL CORPORATION
(THE "MASTER FRANCHISEE").
BACKGROUND
A. The Franchisor has developed and owns a special advanced
communications system under the trade name "Access Power Advanced
Communications" that offers Internet telephony products and services
to the global consumer marketplace, with an emphasis on marketing to
businesses and individual consumers.
B. The distinguishing characteristics of the System include:
Private Label Products; Software; uniform standards and procedures for
business operations; customer billing; training in the operation,
management and promotion of the Access Power Franchise; promotional
programs; customer development and service techniques; other technical
assistance; and ongoing research and development.
C. The Franchisor desires to engage the Master Franchisee as a
subfranchisor of Access Power Franchises in the Master Franchise
Territory and the Master Franchisee desires to be so engaged.
D. The Master Franchisee recognizes the benefits to be derived
from receiving a Master Franchise from the Franchisor to operate its
own IP Telephony Units, establish, sell and service Access Power
Franchises in the Master Franchise Territory and desires to enter into
this International Master Franchise Agreement subject to the
conditions and controls prescribed in this Agreement and to receive
the benefits provided by the Franchisor in connection with this
Agreement.
E. The Franchisor has reviewed the application of the Master
Franchisee and has decided to award an International Master Franchise
to the Master Franchisee pursuant to the terms of this Agreement.
F. The Master Franchisee has had sufficient opportunity to be
advised thoroughly of the terms and conditions of this Agreement by
advisors of the Master Franchisee's own choosing, has had an
opportunity to review the Franchisor's current U.S. form of Franchise
Offering Circular and has made an independent investigation of the
Franchisor's operations, and the Master Franchisee and the Franchisor
have concluded an agreement that they reduce to this written document,
which is intended to fully set forth as between the parties all of
their understanding and agreements, representations and warranties
pertaining to their relationship and which terms are acknowledged by
the parties to be material and reasonable.
G. The Franchisor is aware of the Master Franchisee's desire to
provide long distance telephone service Offnet (without use of the
Internet). Franchisor will permit the Master Franchisee to market and
sell Offnet services under the Access Power name. Master Franchisee
can offer Offnet long distance telephone service based upon least cost
routing and quality considerations.
The parties agree as follows:
6
ARTICLE 1 - APPOINTMENT
-----------------------
Section 1.1 Grant.
-----
The Franchisor grants to the Master Franchisee and the Master
Franchisee accepts from the Franchisor, subject to the terms contained
in this Agreement, the right to, within the Master Franchise
Territory, operate its own IP Telephony Units and sell Franchises to
Franchisees pursuant to the form of Franchise Agreement attached as
Exhibit A, as it may be amended from time to time only upon the mutual
written agreement of the parties. The Master Franchisee is permitted
to adapt the form of Franchise Agreement to reflect the laws,
commercial usage, customs and business realities of the federal and
provincial laws of Canada and to use a form of Franchise Agreement
that is consistent with the form of other commercial agreements in use
in Canada.
Section 1.2 Master Franchise Territory.
--------------------------
(a) DEFINITION. The Master Franchisee agrees that the Master
Franchise confers the exclusive right to operate its own IP Telephony
Units and sell Franchises to be located in Canada (the "Master
Franchise Territory").
(b) PROVINCE OF ALBERTA. The Master Franchisee shall not "trade in a
franchise" in the Province of Alberta, as such term is defined in the
Franchises Act of Alberta, as amended, nor engage in any conduct in or
related to the Province of Alberta which would be a violation of any
applicable law, rule or regulation thereof until: (seq level3
\*romani) the Franchisor has been granted an exemption in respect to
this Master Franchise; and (seq level3 \*romanii) the Master
Franchisee is properly registered as a subfranchisor or otherwise
complied with the Act. For application under the Franchises Act of
Alberta, the Franchisor shall be responsible for the development and
presentation of franchise documents, including costs associated
therewith. The Franchisor shall be responsible for obtaining the
exemption or approval and the Master Franchisee shall be responsible
for all expenses associated therewith, including, but not limited to
administrative costs, filing costs, and registration fees. Nothing
herein is intended to prevent the Master Franchisee from operating its
own IP Telephony Unit(s) in the Province of Alberta, if such operation
is not in violation of any applicable law, rule or regulation thereof,
including, but not limited to the Franchises Act of Alberta, as
amended.
Section 1.3 Exclusivity.
-----------
(a) IP TELEPHONY UNITS. During the Agreement Term and provided
that the Master Franchisee has not defaulted upon any of its
obligations under this Agreement, the Franchisor shall not itself, nor
grant the right to any third party to, sell any Franchises nor install
or operate any IP Telephony Units within the Master Franchise
Territory nor originate any traditional long distance service therein.
Upon termination or expiration of this Agreement, the Franchisor shall
not be bound by the restrictions in this Section, notwithstanding any
agreed upon continuation of this Agreement.
(b) SERVICE SALES. In addition, the Master Franchisee
understands the Franchisor network marketing program where independent
sales representatives sell Private Label Products and secure
subscriptions for Franchisor services within the Master Franchise
Territory. Master Franchisee receives no override or other commission
in connection with the sales by such independent sales
representatives. However, Master Franchisee recognizes the benefit to
be received in terms of additional usage of its own and its
Franchisee's IP Telephony Units.
7
ARTICLE 2 - DUTIES OF THE FRANCHISOR
------------------------------------
The Franchisor shall provide the Master Franchisee with the
following assistance and services so long as such assistance and
services are necessary for the operation of the Master Franchisee's
business and provided the Master Franchisee is not in default under
this Agreement:
SECTION 2.1 TRAINING.
--------
(a) INITIAL TRAINING. The Franchisor shall provide 5 days of
Initial Training for up to 4 Trainees at the Master Franchisee's
location in Toronto, Canada. All Trainees must be acceptable to
the Franchisor. In addition to a written test, Initial Training
includes instruction in marketing, promotion and advertising,
sales techniques, servicing of Franchisees and computer applications
at a time scheduled by the Franchisor. The Franchisor shall provide,
at its expense, instructors, facilities, training materials and
technical training tools in connection with Initial Training. The
Master Franchisee shall be responsible for all expenses of the
Trainees in attending Initial Training including all travel, lodging
and meal expenses. All costs and expenses incurred to have additional
employees or agents of the Master Franchisee attend Initial Training,
including reasonable training fees, shall be borne by the Master
Franchisee, and are subject to the prior written approval of the
Franchisor.
(b) FAILURE TO COMPLETE INITIAL TRAINING. In the event any
Trainee fails to complete satisfactorily Initial Training, as
determined by the Franchisor, the Master Franchisee must: (iii) have
the Trainee retrained; or (2) hire another Trainee to complete Initial Training.
Any Initial Training which is required as a result of the failure of any
Trainee to satisfactorily complete the training will be conducted at the
at the expense of the Master Franchisee including all travel, lodging and
meal expenses of attendee(s) and trainers and reasonable facility and
training fees.
(c) CONTENT. The content of, operation of, and manner of conducting
Initial Training shall be in the sole control of the Franchisor.
(d) ATTEND FRANCHISEE'S CORPORATE MANAGEMENT TRAINING. The Master
Franchisee must also attend at least one session of the Franchisor's
Corporate Management Training for Franchisees to learn to operate its
own IP Telephony units and to more fully understand and coordinate its
training of Franchisees. There shall be no fees or costs charged by
the Franchisor for such Corporate Management Training program.
(e) REFRESHER OR ADDITIONAL TRAINING. The Franchisor from time to
time may provide refresher training programs, seminars or advanced management
training for the Master Franchisee at a facility designated by the Franchisor
which may be required, at the option of the Franchisor. Such training shall
not be required more often than once a year. The Master Franchisee shall
be responsible for costs and expenses associated with all travel, meals
and lodging for the Master Franchisee's attendees but there shall be
no fees or costs charged by the Franchisor for the programs, seminars
or training. Required refresher or additional training may take any
form of training as the Franchisor may choose, including, but not
limited to CD-ROM and long distance learning via videoconference.
SECTION 2.1 LOAN OF THE ACCESS POWER MANUALS.
--------------------------------
The Franchisor shall loan to the Master Franchisee one registered
copy of the Access Power Manuals (with periodic revisions as
required), it being the Franchisor's practice to deliver to the Master
Franchisee the Access Power Manuals at or shortly before the time of
Initial Training. The Master Franchisee shall be responsible for any
translation of the Access Power Manuals and all future updates and
modifications into French and for dissemination of the Access Power
Manuals to Franchisees.
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SECTION 2.3 ASSISTANCE AND SUPPORT.
----------------------
(a) SALE OF PRODUCTS AND EQUIPMENT. The Franchisor will sell
to the Master Franchisee for its use and resale to Franchisees the
Access Power Telephony Gateway Server at prevailing wholesale prices.
Gateway Server purchases are non-refundable and cannot be paid in
installments. Such sales will be inclusive of the necessary Gateway
software licensing fees. The sale shall occur and title shall pass
in the United States. All shipments shall be F.O.B. point of origin
or determined by the Franchisor. The Master Franchisee shall be
responsible for their shipment and importation into Canada. The
Master Franchisee is not required to obtain equipment for itself
nor its Franchisees from Franchisor, as long as any equipment to be
used in the provision of the services hereunder meets the specific
technical requirements set forth by Franchisor and are available to
the Master Franchisee upon written request. This fee includes the
licensing of the Gateway software if purchased from Franchisor.
(b) PURCHASES FROM FRANCHISOR OR FRANCHISOR AFFILIATES. Master
Franchisee must purchase or license from Franchisor or Franchisor Affiliates
the Private Label Products and other items that Franchisor require if
implemented on a System-wide basis.
(c) AUTHORIZED SPECIFICATIONS AND SUPPLIERS. Master Franchisee must
purchase or lease equipment, supplies, inventory, advertising materials and
other products and services used for the operation of Master Franchisee Access
Power Franchise solely from authorized manufacturers, contractors and
other suppliers who demonstrate, to Franchisor continuing reasonable
satisfaction: (seq level3 \*romani) the ability to meet Franchisor
standards and specifications for these items; (seq level3 \*romanii)
possess adequate quality controls and capacity to supply Master
Franchisee needs promptly and reliably; and (seq level3 \*romaniii)
have been approved in writing by Franchisor and not later disapproved.
Franchisor will use Franchisor best reasonable efforts to negotiate
agreements with suppliers that, in Franchisor good faith belief, are
in the best interest of all Access Power franchisees. Franchisor may
approve a single supplier for any brand and may approve a supplier
only as to a certain brand or brands. In approving suppliers for the
System, Franchisor may take into consideration factors like the price
and quality of the products or services and the supplier's
reliability. Franchisor may concentrate purchases with 1 or more
suppliers to obtain the lowest prices and/or the best advertising
support and/or services for any group of Franchise Units or Company
Units. Approval of a supplier may be conditioned on requirements on
the frequency of delivery, standards of service, warranty policies
including prompt attention to complaints, and concentration of
purchases, as stated above, and may be temporary, pending Franchisor
additional evaluation of the supplier.
(d) APPROVAL OF NEW SPECIFICATIONS AND SUPPLIERS. If Master
Franchisee propose to purchase or lease any equipment, supplies,
inventory, advertising materials or other products or services for the
provision of IP Telephony services from an unapproved supplier, Master
Franchisee must submit to Franchisor a written request for approval, or
request the supplier to do so. Franchisor will have the right to require,
as a condition of Franchisor approval, that Franchisor representatives
be permitted to inspect the supplier's facilities, and that samples from
the supplier be delivered, at Franchisor option, either to Franchisor
or to an independent, certified laboratory designated by Franchisor
for testing. Franchisor is not liable for damage to any sample that
results from the testing process. Master Franchisee will pay a charge
not to exceed the reasonable cost of the inspection and the actual
cost of the testing. Franchisor reserve the right, at Franchisor
option, to reinspect the facilities and products of any approved
supplier and continue to sample the products at the supplier's expense
and to revoke approval upon the supplier's failure to continue to meet
Franchisor standards and specifications. Franchisor may also require
as a condition to Franchisor approval, that the supplier present
satisfactory evidence of insurance, for example, product liability
insurance, protecting Franchisor and Franchisor franchisees against
all claims from the use of the item within the System.
(f) FIELD CONSULTANTS. Subject to the availability of special
consultants, as determined by the Franchisor, the Franchisor will,
upon written request by the Master Franchisee, assist and provide a
special consultant to render on-site assistance to the Master
Franchisee or its Franchisees at the Master Franchisee's cost,
including the costs of meals, lodging, travel and wages as determined
by the then standard hourly consultant fees charged by the Franchisor.
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(g) ADVISORY ASSISTANCE. The Franchisor shall provide
continuing advisory assistance to the Master Franchisee in the sale of
Franchises and the operation and promotion of a franchised business as
the Franchisor deems advisable, which will include telephone
assistance (provided that all telephone calls will be at the expense
of the Master Franchisee), and which may also include Software
training and assistance, communication of new developments,
improvements in equipment and supplies, and new techniques in
advertising, service and management which are relevant to the
operation of a franchised business.
(h) PROMOTIONS. The Franchisor will assist the Master
Franchisee in promotions as the Franchisor, in its discretion, deems
appropriate and will make available at no additional fee or cost to
the Master Franchisee copies or samples of all advertising and
promotional items used or developed by the Franchisor or in
association with the System, including novelty items, advertising
brochure, flyers and advertisements.
(j) RESEARCH AND DEVELOPMENT. The Franchisor shall continue to
research and develop new products and services, introductions and
techniques as deemed appropriate by the Franchisor in its sole and
absolute discretion. Franchisor must approve any additional products
that the Master Franchisee comes up with before sale thereof under the
Access Power tradename.
SECTION 2.4 PRIVATE LABEL PRODUCTS.
----------------------
Franchisor has developed certain Private Label Products for use
in the System. Due to the importance of quality control and
uniformity of these Private Label Products, it is to the mutual
benefit of the parties that Franchisor closely control the production
of the Private Label Products, Master Franchisee agree that Master
Franchisee will purchase from Franchisor or from an approved source
Franchisor designate and license, all of Master Franchisee needed
supplies of the Private Label Products. All products sold by or
through Franchisor or Franchisor Affiliates to Master Franchisee will
be sold in accordance with the terms expressly stated in writing by
Franchisor or the manufacturer of the products.
SECTION 2.5 LIQUIDATED DAMAGES FOR SALE OF PROHIBITED PRODUCTS OR
SERVICES.
------------------------------------------------------
The Franchisee agrees that the offer to sell or the sale of
unauthorized or prohibited products and services will result in
damages to the Franchisor. The Franchisee agrees these damages will
be measured as $1,500 for each day of the prohibited offer or sale,
payable to the Franchisor upon demand. These damages are in addition
to the Franchisor's other rights or remedies, including the
Franchisor's right strictly to enforce or terminate this Agreement as
provided in this Agreement and obtain injunctive relief, except to the
extent any other rights are excluded by law in light of this Section.
The parties agree that a precise calculation of the full extent of the
damages that the Franchisor will incur from the offer or sale of
unauthorized products and services is difficult to determine and the
Franchisor and the Franchisee desire certainty in this matter and
agree that the liquidated damages are reasonable and are not a
penalty.
SECTION 2.6 LICENSES.
--------
(a) PROPRIETARY MARKS. Subject to the terms of this Agreement,
the Franchisor licenses to the Master Franchisee the right to use and
to sublicense to its Franchisees the right to use the "Access Power
Advanced Communications" trade name and other Proprietary Property
as set forth currently in Exhibit B and as may be amended at the
discretion of the Franchisor.
(B) LICENSE OF THE VOCALTEC GATEWAY SOFTWARE. Subject to this
Agreement, the Master Franchisee agrees to enter into a license
agreement with VocalTec for its VocalTec Gateway Software pursuant
to the License Agreement stated in Exhibit C.
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SECTION 2.7 DUTIES SOLELY TO THE MASTER FRANCHISEE.
--------------------------------------
All of the duties and obligations of the Franchisor under this
Agreement are solely to the Master Franchisee. No other party is
entitled to rely on, enforce, or obtain relief for breach of such
obligations either directly or by subrogation.
SECTION 2.8 THE FRANCHISOR'S RIGHT TO DELEGATE DUTIES.
-----------------------------------------
The Master Franchisee acknowledges the Franchisor's right to
delegate any or all of the duties of the Franchisor under this
Agreement to a Designee. The Master Franchisee shall be required to
discharge its duties in all respects with such Designee to the extent
requested by the Franchisor, from time to time, in the same manner
with which the Master Franchisee is otherwise required to do so with
the Franchisor.
ARTICLE 3 - DUTIES OF THE MASTER FRANCHISEE
-------------------------------------------
The Master Franchisee shall perform the following duties on an
exclusive, full-time, best efforts basis:
SECTION 3.1 MANAGEMENT OF MASTER FRANCHISEE OPERATIONS.
------------------------------------------
The Manager must devote his or her best full-time efforts to the
management and operation of Master Franchisee business and such
related activities, which are approved in writing by the Franchisor.
Master Franchisee agree that Master Franchisee operations require the
day-to-day supervision of a Manager at all times Master Franchisee
operations are open for business. The Manager, and all successive
Managers, if any, are required to complete Corporate Management
Training before managing Master Franchisee operations, unless
Franchisor otherwise agree in writing.
SECTION 3.2 TRAINING OF EMPLOYEES AND FRANCHISEES.
-------------------------------------
The Master Franchisee shall train its and its Franchisee's
employees in accordance with the terms of the individual Franchise
Agreement for each Access Power Advanced Communications Franchise in
the Master Franchise Territory and shall train according to the
standards, policies and procedures prescribed by the Franchisor in the
Access Power Manuals and any other written communications from the
Franchisor to the Master Franchisee from time to time.
SECTION 3.3 HIRING AND TRAINING OF EMPLOYEES.
--------------------------------
Master Franchisee is solely responsible for the terms of their
employment and compensation and, except for training required under
this Agreement, for the proper training of the employees of the Master
Franchisee's operations. Master Franchisee is solely responsible for
all employment decisions and functions, including hiring, firing,
establishing wage and hour requirements, disciplining, supervising and
record keeping. Master Franchisee will not recruit or hire any
employee of an Access Power Franchise operated by Franchisor or
another franchisee within the System without obtaining the employer's
written permission.
Section 3.4 Franchise Sales.
---------------
(a) The Master Franchisee's responsibilities in this regard may
include advertising for prospective Franchises, screening of
prospective Franchises pursuant to standards prescribed by the
Franchisor and obtaining and reviewing completed franchise
applications. The Master Franchisee shall make no representations
inconsistent with any authorized materials delivered by the Master
Franchisee to prospective Franchisees.
11
(b) The Master Franchisee shall comply with all applicable
Canadian and provincial laws and regulations relating to the sale of
Franchises.
(c) The Master Franchisee shall maintain a detailed log as to
each prospective Franchisee including all letters, telephone contacts,
personal meetings, and other information required by the Franchisor.
The Master Franchisee shall make no oral or written statement,
promise, guarantee, representation, understanding or other agreement
which is outside of, or inconsistent with, the terms of the Franchise
Agreement. The Master Franchisee shall not use any marketing or
advertising materials that have not been previously supplied by the
Franchisor or previously approved, in writing, by the Franchisor.
(d) All advertising must receive the prior written approval of
the Franchisor before its use and Master Franchisee shall comply with
all laws regulating the content and use of such advertising.
SECTION 3.5 PRE-OPENING ASSISTANCE TO FRANCHISEES.
-------------------------------------
(a) With respect to a Franchisee's selection of a site for
the establishment and operation of a Franchised Business, the Master
Franchisee shall be required to:
(i) develop and provide standards and criteria for the
threshold consideration of possible sites;
(ii) develop meaningful information concerning possible
site selection and present such information to a Franchisee;
(iii) upon request of a Franchisee, consult with the Franchisee
regarding site selection and the negotiation of real estate leases; and
(iv) consider and evaluate applications presented by the Franchisees
for site approval.
The site for a Franchised Business must be located in the Master
Franchise Territory.
(b) The Master Franchisee shall provide the Franchisee with Corporate
Management Training, pre-opening inspections, pre-opening on-site training,
an opening supervisor, and grand opening assistance as set forth in the
Franchise Agreement. The Master Franchisee shall use its best efforts
to ensure that a Franchisee's Franchised Business opens within 120
days from the execution of the Franchise Agreement.
SECTION 3.6 CONTINUED ASSISTANCE AND SUPPORT OF FRANCHISEES.
-----------------------------------------------
(a) CUSTOMER SERVICE. The Master Franchisee will provide
customer service functions including customer activation, billing,
technical support and marketing assistance.
(b) FIELD VISITS. The Master Franchisee shall be required
to provide assistance to the Franchisees in the development and operation
of their respective Franchises by means of periodic visits by the Master
Franchisee at such time as the Master Franchisee considers reasonably
necessary. The Master Franchisee shall make itself available to the
Franchisees and sales agents for consultation on such matters as
operations, advertising and promotion, installation and business methods.
12
(c) ACCESS POWER MARKETING FUND. The Master Franchisee shall be
solely responsible for maintaining and administering the Access Power
(Canada) Marketing Fund (as defined in the Franchise Agreement). The
Master Franchisee shall administer the Access Power (Canada) Marketing
Fund for Canada in a similar manner as the Franchisor administers the
U.S. Access Power Marketing Fund and provide a semi-annual accounting
of the Access Power (Canada) Marketing Fund to the Franchisor and all
Franchisees. In addition, Master Franchisee will contribute to the
Access Power (Canada) Marketing Fund for all IP Telephony Units that
are operated by the Master Franchisee at the same rate as is required
of the Franchisees thereof.
(d) ADVICE ON LOCAL ADVERTISING. The Master Franchisee shall
provide suggestions and comments to Franchisees regarding regional and
local advertising, and direction regarding the proper usage of the
Franchisor's Proprietary Marks.
(e) PERIODIC FRANCHISEE MEETINGS. The Master Franchisee shall
conduct periodic meetings of all Franchisees in the Master Franchise Territory.
SECTION 3.7 OTHER OBLIGATIONS AND REQUIREMENTS.
----------------------------------
(a) LICENSES. The Master Franchisee shall be responsible for
complying with any and all licensing requirements and other applicable
laws concerning the performance of the Master Franchisee's duties, for
which the Franchisor makes no representations and warranties.
(b) TELEPHONES. The Master Franchisee shall at all times: (i)
maintain continuously a reasonable number of operating telephone lines and
telephone numbers to be used exclusively by the Master Franchisee for the
operation of its business with sufficient staff to handle telephone calls
in an efficient and courteous manner at all times during business hours;
and (ii) maintain an answering service after normal business hours.
(c) COMPLIANCE WITH LAWS. The Master Franchisee shall comply with
all Canadian, provincial and local laws, rules and regulations except where
the Master Franchisee is challenging the application of such to the operation
of the Franchised Business, and shall obtain, maintain and renew when required
any and all permits, certificates or franchises necessary for the full and
proper conduct of the its business under this Agreement, including
qualification to do business, fictitious, trade or assumed name
registration, occupational licenses and franchise salesperson
regulations. Copies of all inspection reports, warnings, certificates
and ratings, issued by any governmental entity during the Agreement
Term in connection with the conduct of its business which indicate
material non-compliance by the Master Franchisee with any applicable
law, rule or regulation, shall be forwarded to the Franchisor by the
Master Franchisee within 2 days of the Master Franchisee's receipt of
such items. The Master Franchisee shall have ten business days
following notification of or otherwise becoming aware of any material
non-compliance to cure, if possible, such non-compliance.
(d) TAX PAYMENTS; CONTESTED ASSESSMENTS. The Master Franchisee
shall promptly pay when due all taxes levied or assessed by any Canadian,
provincial or local tax authority. In the event of any bona fide dispute
as to liability for taxes assessed or other indebtedness, the Master
Franchisee may contest the validity or the amount of the tax or indebtedness
in accordance with procedures of the taxing authority or applicable law;
however, in no event shall the Master Franchisee permit a tax sale or
seizure by levy of execution or similar writ or warrant, or attachment
by a creditor, to occur against any assets used in connection with its
business.
(e) INSPECTIONS. The Master Franchisee shall permit the Franchisor
and/or its representatives to enter the office of the Master Franchisee and
its training facility at any time during normal business hours, for purposes
of conducting inspections including a review of the Master Franchisee's books
and records, shall cooperate fully with the Franchisor and/or its agents in
such inspections by rendering such assistance as they may reasonably
request and by permitting them, at their option, to observe the manner
in which the Master Franchisee is selling franchises and rendering its
13
services on behalf of the Franchisor. The inspections may be
conducted without prior notice at any time when the Master Franchisee
or one of its managing employees is at its business. The inspections
will be performed in a manner which minimizes interference with the
operation of its business. Upon notice from Franchisor, and without
limiting Franchisor other rights under this Agreement, Master
Franchisee will take all steps necessary to correct immediately any
deficiencies detected during inspections, including immediately
stopping use of any equipment, advertising, materials, products,
supplies or other items that have not been approved by Franchisor or
otherwise do not conform to Franchisor then-current requirements.
(f) MINIMUM PERFORMANCE REQUIREMENT. The Master Franchisee
acknowledges and agrees that its performance under this Agreement will
be measured, in part, by the capacity of IP Telephony provided by the
Master Franchisee and its Franchisees during the Agreement Term as a
result of the Master Franchisee's efforts in accordance with the
Deployment/Performance Schedule set forth in Exhibit D. The Master
Franchisee shall be relieved of its responsibilities with respect to
the Deployment/Performance requirements in Exhibit D during any period
of time in which Franchisor has not met its performance requirement as
stated in Exhibit D.
(g) NOTICES TO THE FRANCHISOR. The Master Franchisee shall notify
the Franchisor in writing within 10 days of each of the following events:
(i) The actual commencement of, any material action, suit or
proceeding against the Master Franchisee or any of its managerial
employees;
(ii) The issuance of any order, writ, injunction, award or
decree of any court, agency or other governmental instrumentality,
which, in any of the above instances, may materially adversely affect
the operation, financial condition or good will of the Master Franchisee;
or
(iii) Notice to the Master Franchisee of a violation of any law,
ordinance or regulation materially relating to its business.
If any action or proceeding is brought against the Master Franchisee
materially relating to its business, the Master Franchisee shall
immediately provide the Franchisor with copies of all pleadings,
papers and material correspondence relating to the action or
proceeding. The Master Franchisee shall keep the Franchisor informed
about the progress and outcome of such action or proceeding.
SECTION 3.8 INSURANCE.
---------
(a) The Master Franchisee shall procure and maintain in full
force and effect during the Agreement Term, at its sole expense, an
insurance policy or policies, as the Franchisor may reasonably require,
protecting the Master Franchisee and the Franchisor, and their officers,
directors, partners and employees, against any loss, liability, personal
injury, death, or property damage or expense whatsoever arising in
connection with the Master Franchisee's obligations under this Agreement.
All liability policies shall name the Franchisor as an additional named
insured and shall provide that the Franchisor will receive notice of the
Master Franchisee's default in payment of any premium and 30 days' prior
written notice of termination, cancellation, expiration or alteration
to provide less coverage. The insurance afforded by any liability
policy shall not be limited in any way by reason of any insurance
maintained by the Franchisor.
(b) The policy or policies procured by the Master Franchisee shall
be written by a licensed insurance company and shall include, at a minimum,
commercial general casualty insurance and general liability insurance,
including products liability, property damage, owned and non-owned motor
vehicle coverage, and personal injury coverage with a combined single limit
of at least $1,000,000, unless otherwise agreed in writing by the Franchisor,
an "Errors and Omissions" policy with at least $1,000,000 coverage, as
well as such other insurance as may be required by Canadian or
provincial statute or rule including workers' compensation insurance,
if applicable. The Franchisor may from time to time require that
additional coverage be procured or that minimum limits be increased as
reasonably necessary for the Master Franchisee's and the Franchisor's
protection.
14
(c) At least 2 weeks before commencing operation of the Master
Franchisee's obligations under this Agreement, the Master Franchisee
shall submit to the Franchisor one or more certificates showing that
the Master Franchisee has procured the required insurance. The Master
Franchisee shall submit evidence annually of the renewal or extension of
such policies.
(d) If the Master Franchisee fails to procure and maintain any
required insurance coverage or furnish satisfactory evidence of such
insurance, the Franchisor, in addition to its other remedies, may, but
need not, procure such insurance coverage on behalf of the Master
Franchisee, who shall pay the Franchisor on demand the amount of any
premiums and expenses incurred by the Franchisor in obtaining such insurance.
SECTION 3.9 WAIVER OF SUBROGATION.
---------------------
Insofar as and to the extent that this Section may be effective
without invalidating it or making it impossible to secure insurance
coverage obtainable from responsible insurance companies, the parties
agree that, for any loss that is covered by insurance then being
carried by them, their respective insurance companies have no right of
subrogation against the other.
SECTION 3.10 EFFECT OF FRANCHISOR INSURANCE.
------------------------------
Master Franchisee obligation to maintain the policies in the
amounts required is not limited by reason of any insurance Franchisor
maintain, nor will Franchisor performance of Master Franchisee
obligations relieve Master Franchisee of liability under the indemnity
provisions in this Agreement.
SECTION 3.11 FAILURE TO MAINTAIN INSURANCE.
-----------------------------
If either party fails to maintain the insurance required by this
Agreement, the other party has the right and authority (without any
obligation to do so) to immediately procure the insurance and to
charge the cost of the insurance to the party obligated to maintain
the insurance, plus interest at the maximum rate permitted by law,
these charges, together with a reasonable fee for the party's expenses
in so acting, the other party agrees to pay immediately upon notice.
Section 3.12 Confidentiality.
---------------
During the Agreement Term and at all times thereafter, the Master
Franchisee shall not in any manner, either directly or indirectly,
divulge, disclose or communicate to any person or firm, except to or
for the Franchisor's benefit, any Confidential Information of any kind
concerning any matters affecting or relating to the business of the
Franchisor or its affiliates, which it may have acquired in the course
of or as incident to its engagement by the Franchisor, including the
terms of this Agreement, the terms of any other agreement between the
Franchisor and its employees or its Franchisees, or any Franchisee
lists, compilations or profiles or the name of any Franchisee, without
regard to whether such information would be deemed confidential or
material, the parties agreeing that such information affects the
successful and effective conduct of the Franchisor's business and its
good will, and that any breach of the terms of this Section shall be a
material breach of this Agreement. All of the records, files and
materials created or used by the Master Franchisee in performing its
duties under this Agreement shall be the Franchisor's sole and
exclusive property and any such items in the Master Franchisee's
possession shall be returned immediately to the Franchisor upon its
request, and in any event upon termination of this Agreement.
15
SECTION 3.13 COMPLIANCE WITH FRANCHISE AGREEMENTS.
------------------------------------
The Master Franchisee shall timely comply with all its
obligations under the respective Franchise Agreements executed between
the Master Franchisee and the Franchisees. The Master Franchisee is
required to use the Franchise Agreement attached as Exhibit A in
selling Franchises to Franchisees, shall not materially alter or amend
the Franchise Agreement (including any of its exhibits) at any time
without first obtaining the written consent of the Franchisor and
shall provide a copy of the Franchise Agreement executed by each
Franchisee, with all exhibits thereto, and all amendments thereto (if
any), to the Franchisor within 10 days after the execution of the
Franchise Agreement and each amendment, respectively. Any other
agreements or understandings between the Master Franchisee and the
Franchisees which materially contradict the Franchise Agreement shall
be a material breach of this Agreement unless the Master Franchisee
has first obtained written consent from the Franchisor to enter into
such agreement. The parties expressly agree that the Master
Franchisee may determine the amounts to be charged under the Franchise
Agreement to any Franchisee for the Initial Franchise Fee, Equipment
Fee, Monthly Internet Management Fee, Royalty Fee, Advertising
Contributions and other fees (and that the amounts currently specified
in the Franchise Agreement are merely recommended amounts, and the
Master Franchisee shall in no way suffer in its business relations
with the Franchisor or any other person over whom the Franchisor has
control if such recommended amounts are not followed), provided that
the portions of the payments owed to the Franchisor as specified in
Sections 4.1 and 4.5 shall not be changed, notwithstanding any
variation among the amounts charged to Franchisees.
ARTICLE 4 - FEES, COMPENSATION AND INCENTIVES
---------------------------------------------
SECTION 4.1 MASTER FRANCHISE FEE.
--------------------
The Master Franchisee shall pay to the Franchisor an initial fee
of U.S. $3,570,000 (the "Master Franchise Fee") payable: (i) U.S.
$24,000 payable at the same time this Agreement is signed (for the
first 120 Lines); and (ii) U.S. $1,000 for each additional Line but
not to exceed U.S. $3,570,000 regardless if more than 3,666 Lines are
deployed. The Master Franchise Fee or any portion thereof paid to the
Franchisor is non-refundable in consideration for administrative and
other costs incurred by the Franchisor and opportunities lost or
deferred as a result of the rights granted to the Master Franchisee in
this Agreement.
SECTION 4.2 MASTER FRANCHISE FEE RELIEF.
---------------------------
In the event of a termination of this Agreement, if Franchisor and
franchisees thereof have not deployed the number of Lines set forth in
Exhibit D, the Master Franchisee will not be required to continue
deployment nor pay any remaining Master Franchise Fee. However, all
Master Franchise Fee amounts paid up to such termination are non-
refundable and belong to Franchisor. In addition, as long as the
Master Franchisee continues deployment of Lines under this Agreement,
the Master Franchisee will pay U.S. $1,000 for each Line until the
maximum total Master Franchise Fee of $3,570,000 has been paid.
SECTION 4.3 ADDITIONAL MASTER FRANCHISE FEE PAYMENT TERMS.
---------------------------------------------
(a) Master Franchisee has the option to pay to Franchisor any
outstanding portions of the Master Franchise Fee at any time.
(b) In the event the Franchisor and franchisees thereof have deployed
the number of lines required in Exhibit D and the Master Franchisee
has not deployed the number of Lines required in Exhibit D, the unpaid
portion of the Master Franchise Fee, up to U.S. $2,300,000, becomes
due and payable to the Franchisor.
16
SECTION 4.4 POPULATION COVERAGE INCENTIVE.
-----------------------------
Upon provision of service to 8 distinct cities within the Master
Franchise Territory, Access Power Canada Inc. will be awarded a
100,000 share option of Access Power, Inc. common stock at an exercise
price of $1.00 per share. However, the option will be made available
earlier to the Master Franchisee, if, upon exercise and sale of all
such shares, the proceeds are to be used for the sole purpose of
purchasing hardware and software for the expansion of IP Telephony
coverage within the Master Franchise territory.
SECTION 4.5 ROYALTIES AND OTHER FEES.
------------------------
(a) The Master Franchisee shall pay to the Franchisor: (i) 5%
of Gross Revenues (in U.S. Dollars) relating to revenues from IP Telephony
products and services from Calls originating from Canada whether terminating
inside or outside Canada; (ii) 15% of Gross Revenues (in U.S. Dollars) relating
to revenues from IP Telephony services from Calls terminating in Canada but
originating outside of Canada; and (iii) 2.5% of Gross Revenues (in U.S.
Dollars) relating to revenues from Offnet Long Distance telephone service.
(the "Royalty Fee"). Payment of the Royalty Fee will be made in accordance
with the billing and payments provisions in Article 5. For the purchase of
any prepaid Calls, the assumption will be that these are for IP Telephony
services originating from Canada and thus the Royalty Fee will be 5% of
Gross Revenues (in U.S. Dollars). The Royalty Fee is not applicable to
non- prepaid calls that both originate and terminate without the use of
IP Telephony and/or a Gateway Server.
(b) After the first year of this Agreement, the Master Franchisee will
pay to the Franchisor a Monthly Internet Management Fee equal to $750 (in U.S.
Dollars) for each Province and Territory in which the Master Franchisee or
Franchisees thereof have IP Telephony Units.
(c) For billing and/or accounting services, the Franchisor shall receive
3% of the Master Franchisee's gross revenues on services originating on an IP
Telephony Unit outside of the Master Franchise Territory and terminating on a
Gateway Server within the Master Franchise Territory. This 3% is in addition to
any Royalty Fee associated with such services.
(d) Unless otherwise expressly provided to the contrary in this
Agreement, all expenses incurred by the Master Franchisee in connection with
soliciting prospective Franchisees and servicing the Franchisees as required
pursuant to ARTICLE 3 shall be the sole expense and obligation of the Master
Franchisee.
17
ARTICLE 5 - BILLING AND PAYMENTS
--------------------------------
SECTION 5.1 STANDARD BILLING PRACTICES.
--------------------------
The first 5 Business Days of each month will be used to conduct
the settlement process. The settlement process will generate
reporting which detail amounts owed and offsets thereto. Payments
required, whether from Master Franchisee to Franchisor or vice versa,
shall be made by electronic fund transfer by the 10th Business Day of
each month. All accounts and transactions, with the exception of
Business Accounts, will be included in the settlement process in the
month immediately following the month in which the charge was
incurred. Business Accounts will be included in the settlement
process of the second month following the month in which the charges
were incurred. For example, business usage of services in the month
of August will be included in the settlement process in the first 5
Business Days of October. Nothing herein is intended to prevent the
Franchisor or Master Franchisee from charging Consumer Accounts or
Business Accounts on a non-monthly cycle.
SECTION 5.2 SPECIAL SERVICES BILLING.
------------------------
Billing for special services will be done in the same fashion as
is described in Section 5.1. For example, the Royalty Fee due on the
sale of all prepaid Calls will be included in the settlement process
in the month immediately following the month in which the purchase of
such service was made. For services, such as Conference Calling and
Calling from Web sites, which are included in an arrears billing
process to businesses, will be billed on the same cycle as Business
Accounts.
SECTION 5.3 BILLING OF USAGE ACROSS THE NETWORK.
-----------------------------------
Non-Business Account customers will be billed by the Franchisor
or Master Franchisee based upon the origination Gateway or, if the
call is PC to Phone, the termination Gateway for such call. The fact
that the call is billed by one party or another, except with respect
to section 4.5(c), will not impact the treatment of that call during
the settlement process, as described in section 5.1. Business Account
usage information will be provided to the Franchisor, Master
Franchisee or Franchisee responsible for the billing of such Business
Account in the settlement period of the month immediately following
such usage. Both the Franchisor and the Master Franchisee will be
collecting payments for each other and other franchisees. Amounts
collected and owed to the non-collecting party will be calculated and
remitted for distribution during each monthly settlement process.
SECTION 5.4 INTEREST ON LATE PAYMENTS; LATE CHARGE.
--------------------------------------
Although each failure to pay monies when due will be a material
breach of this Agreement, to encourage prompt payment and to cover the
costs involved in processing late payments, if any payment under this
Agreement or any other agreement between the Franchisor and the Master
Franchisee is overdue for any reason, the party owing the monies must
pay to the party owed the monies, on demand, in addition to the
overdue amount, interest on such overdue amount from the date it was
due until paid equal to the lesser of: (seq level3 \*romani) 18% per
annum; or (seq level3 \*romanii) the maximum rate of interest
permitted by law. In addition to interest on overdue amounts, the
party owing the monies shall pay a late charge on demand of U.S.$500
for each payment which is more than 10 days overdue to cover the party
owed the monies costs in dealing with the late payment. Interest on
late payments and the late charge will be based upon the appropriate
"buying" foreign exchange rate on the date that is most favorable to
the party owed the monies between the date payment first became due
and the date such payment is actually made. Nothing in this Agreement
shall be construed to mean that either party is to pay, or has
contracted to pay, any sum in excess of that which may lawfully be
charged or contracted for under any applicable law. The intention of
the parties is to conform strictly to applicable usury laws and it is
agreed that if an excess is inadvertently collected it shall be
applied to reduce the amounts owed.
18
SECTION 5.5 PAYMENT TO THE FRANCHISOR; CURRENCY.
-----------------------------------
(a) All payments from the Master Franchisee to the Franchisor
shall be made directly from the Master Franchisee's bank to the
Franchisor's account at its designated bank. All payments from the
Franchisor to the Master Franchisee shall be made directly from the
Franchisor's bank to the Master Franchisee's account at its designated
bank. All references in this Agreement and all other agreements
between the parties to monetary amounts shall be with respect to U.S.
dollars, unless otherwise agreed in writing by both parties. Canadian
dollars shall be converted into U.S. dollars upon the prevailing
"buying" foreign exchange rates of Sun Trust on the date payment is
due. All costs associated with currency conversion shall be borne by
the Master Franchisee. In the event of the imposition of currency
controls or restrictions, the Master Franchisee is obligated to use
its best efforts to obtain any consents or authorizations that may be
necessary to effect such payment.
(a) For any and all bank accounts maintained by Master Franchisee
for Access Power operations, Master Franchisee must identify these accounts
to Franchisor and provide to Franchisor copies of the monthly statements
for all these accounts and the details of all deposits and withdrawals
to them.
(b) Master Franchisee will pay all charges imposed by Master
Franchisee financial institution. Franchisor will pay all charges
imposed by Franchisor financial institution.
SECTION 5.6 WITHHOLDING TAXES; VALUE-ADDED TAXES AND OTHER TAXES.
----------------------------------------------------
(a) If the payments by the Master Franchisee to the Franchisor
are subject to withholding taxes, the Master Franchisee shall withhold
the appropriate taxes required by the laws of Canada and pay such
taxes to the appropriate taxing authorities. The Master Franchisee
shall provide the Franchisor with evidence of payment of such taxes as
well as such other documentation as the Franchisor may require for use
in the United States in order to receive the appropriate foreign tax
credit. The Franchisor shall have the right to take whatever steps
are necessary to verify not only that taxes are withheld, but also
that payment of the amount withheld is actually made by the Master
Franchisee to the appropriate authorities.
(b) If the payments by the Franchisor to the Master Franchisee
are subject to withholding taxes, the Franchisor shall withhold the
appropriate taxes required by the laws of the United States and pay
such taxes to the appropriate taxing authorities. The Franchisor
shall provide the Master Franchisee with evidence of payment of such
taxes as well as such other documentation as the Master Franchisee may
require for use in Canada in order to receive the appropriate foreign
tax credit. The Master Franchisee shall have the right to take
whatever steps are necessary to verify not only that taxes are
withheld, but also that payment of the amount withheld is actually
made by the Franchisor to the appropriate authorities.
(c) The Master Franchisee shall be responsible for the payment
and remittance to the appropriate taxing authorities of any import
duties or tariffs, value-added taxes or other taxes that may be
imposed with respect to any payment from the Master Franchisee to the
Franchisor under this Agreement.
(d) The Franchisor shall be responsible for the payment and
remittance to the appropriate taxing authorities of any import duties
or tariffs, value-added taxes or other taxes that may be imposed with
respect to any payment from the Franchisor to the Master Franchisee
under this Agreement.
Section 5.7 Collateral Assignment of Franchise Agreements.
---------------------------------------------
19
The Master Franchisee shall collaterally assign to the Franchisor
its interest pursuant to the Collateral Assignment of Franchise
Agreements attached as Exhibit E. In the event of the termination of
this Agreement, exercise of the Collateral Assignment is subject to
the terms and time frame of section 12.3(a).
ARTICLE 6 - OPERATION OF MASTER FRANCHISEE IP TELEPHONY UNITS
-------------------------------------------------------------
SECTION 6.1 ADVERTISING.
-----------
Master Franchisee will not solicit business through the use of an
800 number, catalog, direct mail or other advertising method without
Franchisor consent. Additionally, all advertising involving the use
of the Access Power name and or trademark(s) must be pre-approved by
Franchisor.
SECTION 6.2 LINK AND MONITOR OF IP TELEPHONY UNITS.
--------------------------------------
All IP Telephony Units installed by the Master Franchisee or
Franchisees thereof will become part of the Access Power Gateway
Network which will be monitored and controlled from a centralized
location by the Franchisor. The Master Franchisee will have the
ability to access the machines, in a manner approved by Franchisor,
within the Master Franchise Territory for the purposes of monitoring,
billing and reporting of activity within the Master Franchise
Territory. Master Franchisee must be able to provide on-site
technical support should such a need arise. Franchisor will provide
periodic on-site assistance and inspection of the installation of the
equipment and will generally inspect the IP Telephony Unit Co-location
Facility. Franchisor reserves the right to terminate calls outside
of the Access Power Gateway Network if such termination is in the best
interest of the customer using the service as determined by the
Franchisor.
Section 6.3 Franchisor Temporary Operation of Master Franchisee IP
Telephony Unit(s).
------------------------------------------------------
At Franchisor option, if:
(a) Master Franchisee fails to be accessible to Franchisor or
Master Franchisee customers during normal business hours;
(b) Master Franchisee is unavailable to Master Franchisee
customers, prospective customers and Franchisor for more than 5 days;
(c) Service from one or more production IP Telephony Units is
unavailable for a continuous period of 2 days;
(d) Master Franchisee or the Franchise Owner dies or becomes
permanently incapacitated and the franchise or the ownership interest
in the franchise is not assigned promptly under Section 10.2;
(e) Master Franchisee materially breaches any of Franchisor
standards including customer satisfaction and specifications for the
operation of the IP Telephony Units; or
(f) Master Franchisee Agreement is terminated and Franchisor
elects to purchase Master Franchisee business assets as provided in
Section 10.3;
then, Franchisor is entitled (but has no obligation) to operate and
manage the IP Telephony Unit(s) for Master Franchisee (or Master
Franchisee estate) until this Agreement is terminated, transferred to
a party under Section 10.2, purchased by Franchisor, or until Master
Franchisee resume control over Master Franchisee operations and
operates in accordance with this Agreement. Franchisor operation and
20
management will not continue for more than 90 days without Master
Franchisee written consent or the consent of the representatives of
Master Franchisee estate. If Franchisor operates Master Franchisee IP
Telephony Unit(s), Franchisor will account to Master Franchisee or
Master Franchisee estate for all net income from the operation less
Franchisor reasonable expenses incurred in, and a reasonable
management fee for, Franchisor operation of Master Franchisee IP
Telephony Units.
Section 6.4 Operational Requirements.
------------------------
Master Franchisee agrees to operate Master Franchisee IP
Telephony Units in conformity with all uniform methods, standards and
specifications required in the Manuals or otherwise, to ensure that
the highest degree of quality and service is uniformly maintained.
Master Franchisee agrees to:
(a) Sell usage over the Access Power Gateway Network (System);
(b) Keep Master Franchisee IP Telephony Units continuously open
for business.
(c) Comply with the procedures and systems Franchisor reasonably
institute on a System-wide basis both now and in the future, including
those on sales, good business practices, advertising and other
obligations and restrictions;
(d) Insure highest reasonable standard with minimum blockage
base, on capacity standards described in the Manuals. Reasonable
minimum hardware and software standards for these connections will be
set by Franchisor and may be periodically revised, and Master
Franchisee will have reasonable time to upgrade when standards change.
The standards to comply satisfactorily will not exceed those
applicable to new Franchises and new Franchisor Units. Master
Franchisee will bear the entire cost of upgrades, changes or
additions, for any changes in, or additions of, equipment and other
items, or the taking of other actions Franchisor specify to satisfy
Franchisor then-current standards for IP Telephony Unit capacity
utilization, image, positioning, marketing strategy, or quality but
not to exceed total capital expenditures of $20,000 per IP Telephony
Unit for non-capacity enhancements every 18 months (the "Capital
Expenditure Limitation").
(e) Maintain in sufficient supply (as Franchisor may reasonably
prescribe in the Manuals or otherwise in writing) and use at all
times, only inventory, equipment, materials, advertising methods and
formats, and supplies that conform with Franchisor standards and
specifications, if any, at all times sufficient to meet the
anticipated volume of business, and to refrain from deviating from
these requirements without Franchisor written consent;
(f) Adhere to the highest standards of honesty, integrity, fair
dealing and ethical conduct in all dealings with customers, suppliers,
employees, independent contractors, Franchisor and the public;
(g) Sell or offer for sale only the products and services that
meet Franchisor reasonable standards of quality and quantity; have
been expressly approved for sale in the Manuals or otherwise in
writing by Franchisor and discontinue selling and offering for sale
any products and services that Franchisor reasonably disapproves in
writing at any time;
(h) Purchase and install, at Master Franchisee expense, all
equipment Franchisor reasonably specifies. The equipment must be
maintained in a condition that meets the operational standards
specified in the Manuals. As equipment becomes obsolete or
inoperable, Master Franchisee will replace the equipment with the
equipment that is then approved for use in the Access Power Franchise.
If Franchisor determine that additional or replacement equipment is
needed on a System-wide basis because of a change in technology,
customer concerns or health or safety considerations, Master
Franchisee will install the additional equipment or replacement
equipment within the time Franchisor specify, subject to the Capital
Expenditure Limitation in Section 6.4 (d).
21
(i) Franchisor will provide Master Franchisee with an E-mail
account. Standards will include current uniform communications
software in use by the System; word processing and spreadsheet
software that is either the same as that in use at Franchisor office
or capable of reading and converting files created by Franchisor
office; and a computer capable of running the software and containing
reasonable minimums for memory and data storage and a modem connected
via network links to Franchisor System. Master Franchisee will be
responsible for all normal communications charges from the networks
making connection to Franchisor System, for example, phone bills or
bills from an on-line service. Information important to the
Franchisor System will be sent to Master Franchisee computer address
electronically. In order to stay informed on developments affecting
the System, Master Franchisee agrees to check and respond to Master
Franchisee electronic mailbox for System communications on a regular
basis.
(j) Terminate all IP telephony calls within the Franchisor
Network.
ARTICLE 7 - PROPRIETARY PROPERTY
---------------------------------
SECTION 7.1 THE FRANCHISOR'S REPRESENTATIONS AS TO THE PROPRIETARY MARKS.
-------------------------------------------------------------
The Franchisor represents to the Master Franchisee with respect
to the Proprietary Marks that:
(a) The Franchisor is the owner of all right, title, and interest
in and to the Proprietary Marks subject to the rights of senior users, if any;
(b) The Franchisor is in the process of applying for trademark
registration in Canada; and
(c) The Franchisor will take all steps necessary to preserve and
protect the ownership and validity of such Proprietary Marks.
SECTION 7.2 THE MASTER FRANCHISEE'S USE AND SUBLICENSE OF THE
PROPRIETARY PROPERTY.
-------------------------------------------------
The Master Franchisee may use, and sublicense to Franchisees to
use, the Proprietary Property only in accordance with standards and
specifications determined from time to time by the Franchisor. With
respect to the Master Franchisee's use of the Proprietary Property
pursuant to this Agreement, the Master Franchisee agrees that:
(a) The Master Franchisee shall use only the Proprietary Property
as designated from time to time by the Franchisor and shall use them only
in the manner required or authorized and permitted by the Franchisor;
(b) The Master Franchisee shall use the Proprietary Property only
in connection with the business of selling and servicing Franchises or
operating IP Telephony Units, unless otherwise expressly authorized in
writing by the Franchisor;
(c) The Master Franchisee's right to use the Proprietary Marks
is limited to such uses as are expressly authorized under this Agreement,
and any unauthorized use thereof shall constitute an infringement of the
Franchisor's rights; and
(d) The Master Franchisee shall not use the Proprietary Property
as security for any obligation or indebtedness.
22
SECTION 7.3 INFRINGEMENT BY THE MASTER FRANCHISEE.
-------------------------------------
The Master Franchisee acknowledges that the use of the
Proprietary Property outside the scope of this Agreement, without the
Franchisor's prior written consent, is an infringement of the
Franchisor's rights in the Proprietary Property, and expressly
covenants that during the Agreement Term, and after the expiration or
termination of this Agreement, the Master Franchisee shall not,
directly or indirectly, commit an act of infringement or contest or
aid in contesting the validity or right of the Franchisor to the
Proprietary Property, or take any other action in derogation of such
rights.
23
SECTION 7.4 CLAIMS AGAINST THE PROPRIETARY PROPERTY.
---------------------------------------
In the event of any claim of infringement, unfair competition or
other challenge to the Master Franchisee's or any Franchisee's right
to use any Proprietary Property, or in the event the Master Franchisee
becomes aware of any use of or claims to, any Proprietary Property by
other persons, the Master Franchisee shall promptly (but in no event
more than 7 days later) notify the Franchisor in writing. The Master
Franchisee shall not communicate with anyone except the Franchisor and
its counsel in connection with any such infringement, challenge or
claim except pursuant to judicial process. The Franchisor will have
sole discretion as to whether it takes any action in connection with
any such infringement, challenge or claim, and the sole right to
control exclusively any litigation or other proceeding arising out of
any infringement, challenge or claim relating to any Proprietary
Property. The Master Franchisee must sign all instruments and
documents, render any assistance, and do any acts that the
Franchisor's attorneys deem reasonably necessary or advisable in order
to protect and maintain the Franchisor's interest in any litigation or
proceeding related to the Proprietary Property or otherwise to protect
and maintain the Franchisor's interests in the Proprietary Property.
SECTION 7.5 INDEMNIFICATION OF THE MASTER FRANCHISEE.
----------------------------------------
The Franchisor indemnifies the Master Franchisee against and will
reimburse the Master Franchisee for all damages for which it is held
liable in any proceeding arising out of its use of any Proprietary
Property in accordance with this Agreement, but only pursuant to and
in compliance with this Agreement, provided that the Master
Franchisee: (a) has timely notified the Franchisor of such claim or
proceeding in accordance with Section 7.4; (b) has otherwise complied
with this Agreement; and (c) allows the Franchisor sole control of
the defense and settlement of the action in accordance with Section
7.4.
Section 7.6 The Franchisor's Right to Modify the Proprietary Marks.
------------------------------------------------------
If it becomes advisable at any time in the sole and absolute
discretion of the Franchisor to modify or discontinue the use of any
Proprietary Xxxx and/or use one or more additional or substitute names
or marks, including due to the rejection of any pending registration
or revocation of any existing registration of any of the Proprietary
Marks, or the rights of senior users, the Master Franchisee is
obligated to do so at its sole cost and expense within 30 days of the
Franchisor's request. In such event the Franchisor shall be liable
solely to reimburse the Master Franchisee for its reasonable direct
printing and signage expenses in modifying or discontinuing the use of
the Proprietary Xxxx and substituting a different Proprietary Xxxx
(which expenses shall not include any expenditures made by the Master
Franchisee to promote a modified or substitute Proprietary Xxxx).
SECTION 7.7 OWNERSHIP; INUREMENT SOLELY TO THE FRANCHISOR.
---------------------------------------------
The Master Franchisee acknowledges that: (a) it has no ownership
or other rights in the Proprietary Property, except as expressly granted
in this Agreement; and (b) the Franchisor is the owner or authorized
licensee of the Proprietary Property. Master Franchisee agrees that
all good will associated with the Access Power Franchise inures
directly and exclusively to Franchisor benefit and is Franchisor sole
and exclusive property except through profit received from the
operation or possible permitted sale of Master Franchisee Franchises
during the Agreement Term. Master Franchisee will not in any manner
prohibit, or do anything that would restrict, Franchisor or any
existing or future franchisee from using the names or the Proprietary
Marks or from filing any trade name, assumed name or fictitious name
registration with respect to any business to be conducted outside the
Protected Territory or any business within the Protected Territory
24
that is permitted by this Agreement. If the Master Franchisee in the
operation of its Access Power business dealings secures in any
jurisdiction any rights whatsoever to any Proprietary Xxxx (or any
other Proprietary Property) not expressly granted under this
Agreement, the Master Franchisee shall immediately notify the
Franchisor and shall immediately assign all of the Master Franchisee's
right, title and interest to such Proprietary Marks to the Franchisor.
Franchisor, in writing and at its sole discretion can allow Master
Franchisee to maintain rights to specific Proprietary Marks or
Property.
Section 7.8 Franchisor Reservation of Rights.
--------------------------------
(a) Master Franchisee agrees that the license of the Proprietary
Marks granted to Master Franchisee has limited exclusivity and that,
in addition to Franchisor right to use and grant others the right to
use the Proprietary Marks outside the Protected Territory, all rights
not expressly granted in this Agreement to Master Franchisee
concerning the Proprietary Marks or other matters are expressly
reserved for Franchisor, including the right to sell services to
National and International Accounts located both outside or within the
Protected Territory without offering or providing the Master
Franchisee the right to participate.
(b) If Franchisor acquires a Competitive Business and units of
the Competitive Business encroach upon Master Franchise Territory,
Franchisor will have 1 year from the date of acquisition of the
Competitive Business to sell the encroaching units without being in
default under this Agreement. In the event that the Franchisor
receives an arm's-length written offer from an independent unrelated
third party, Master Franchisee has the right of first refusal for any
such sale.
ARTICLE 8 - ACCESS POWER MANUALS AND OTHER CONFIDENTIAL INFORMATION
SECTION 8.1 IN GENERAL.
----------
To protect the reputation and good will of the Franchisor, and to
maintain uniform standards of operation under the Proprietary Marks,
the Master Franchisee shall conduct its IP Telephony business and
cause the Franchisees to conduct his or her business in accordance
with the Access Power Manuals. The Access Power Manuals shall be
deemed to be an integral part of this Agreement with the same force
and effect as if fully set forth in this Agreement.
Section 8.2 Confidential Use.
----------------
The Master Franchisee shall at all times treat and maintain the
Confidential Information as confidential and trade secrets of the
Franchisor. The Access Power Manuals and Software shall, at all
times, be kept in a secure area within the offices of the Master
Franchisee. The Master Franchisee shall strictly limit access to the
Confidential Information to the employees of the Master Franchisee, to
the extent they have a "need to know" in order to perform their jobs.
The Master Franchisee shall report the theft, loss or destruction of
the Access Power Manuals or Software, or any portion thereof,
immediately to the Franchisor. Upon the theft, loss or destruction of
any of the Access Power Manuals or Software, a replacement copy will
be loaned to the Master Franchisee by the Franchisor at a fee of
$200.00 for each Access Power Manual or Software diskette. A partial
loss or failure to update any Access Power Manual or Software diskette
shall be considered a complete loss. The Master Franchisee shall not
at any time, without the Franchisor's prior written consent, copy,
record or otherwise reproduce any of the Confidential Information, in
whole or in part. All persons whom the Master Franchisee permits to
have access to the Access Power Manuals or any other Confidential
Information, shall first be required by the Master Franchisee to sign
the Franchisor's form of confidentiality agreement.
25
SECTION 8.3 PERIODIC REVISIONS.
------------------
The Franchisor may revise and change the contents of the Access
Power Manuals. The Master Franchisee agrees to comply and cause its
Franchisees to comply with each new or changed provision beginning on
the 30th day (or such longer time as specified by the Franchisor)
after written notice from the Franchisor. Revisions to the Access
Power Manuals shall be based on what the Franchisor, in its sole
discretion, deems is in the best interests of the System, including to
promote quality, enhance good will, increase efficiency, decrease
administrative burdens, or improve profitability of the Franchisor,
the Master Franchisee and its franchisees. The Master Franchisee at
its sole discretion and as it may deem in the best interests of all
concerned in any specific instance, to vary standards and the contents
of the Access Power Manuals for its Franchisees in the Master
Franchise Territory to reflect the laws, commercial usage, customs and
business realities of Canada and its provinces based upon the
peculiarities of the particular site or circumstances, density of
population, business potential, population of trade area, existing
business practices or any condition which the Master Franchisee deems
to be of importance to the successful operation of such Franchised
Businesses. The Master Franchisee shall at all times ensure that its
copy of the Access Power Manuals contains all updates received by the
Master Franchisee from the Franchisor and will be responsible for
translation thereof. In the event of any dispute as to the contents
of the Access Power Manuals, the terms contained in the Master Copy of
each of the Access Power Manuals maintained by the Franchisor at the
Franchisor's home office shall be controlling.
SECTION 8.4 PRIOR INFORMATION.
-----------------
The Master Franchisee further acknowledges that all Confidential
Information received prior to the Agreement Date was unknown to it
except through disclosure by the Franchisor in connection with the
grant of a Master Franchise and that the marketing practices and
operating procedures developed by the Franchisor for the operation of
the Franchised Business are important for the success of the System.
To the extent the Master Franchisee receives any Confidential
Information after the execution of this Agreement, and the Master
Franchisee does not object in writing to the Franchisor within 30 days
thereafter that any or all of the information comprising the
Confidential Information should not be considered Confidential
Information, then the Master Franchisee shall be deemed to have
irrevocably waived its right to make any such objection. The Master
Franchisee acknowledges that such representation and warranty is a
material inducement for the Franchisor to enter into this Agreement,
and any breach shall be a material breach of this Agreement.
ARTICLE 9 - ACCOUNTING AND RECORDS
SECTION 9.1 BOOKS AND RECORDS.
-----------------
The Master Franchisee shall maintain complete and accurate books
and records of its operations. Such books and records shall be
segregated from all other information not concerning the Master
Franchise and shall be preserved for at least 6 years from the dates
of their preparation (including the period after termination or
expiration of this Agreement).
26
SECTION 9.2 REPORTS AND STATEMENTS.
----------------------
The Master Franchisee shall submit to the Franchisor by the 4th
Business Day of each month during the Agreement Term, in the form
prescribed by the Franchisor, accurate records reflecting all revenues
of the preceding month and such other information as the Franchisor
may require from time to time. The Master Franchisee shall also
submit, an annual balance sheet and income statement, within 90 days
of end of the fiscal year of the Master Franchisee prepared in
accordance with generally accepted accounting principles consistently
applied. Each annual statement shall be audited by an independent
certified chartered accountant acceptable to the Franchisor, and shall
be signed by the Master Franchisee or by the Master Franchisee's
treasurer or chief financial officer attesting that the financial
statements are true and correct and fairly present the financial
position of the Master Franchisee as at and for the times indicated.
The Master Franchisee shall also supply to the Franchisor copies of
its income tax returns at the time such returns are filed with the
appropriate tax authorities. The financial statements and/or other
periodic reports described above must be prepared to segregate the
income and related expenses of the Master Franchise from those of any
other business which may be conducted by the Master Franchisee.
SECTION 9.3 REVIEW AND AUDIT BY THE FRANCHISOR.
----------------------------------
The Franchisor and its representatives shall have the right at
all reasonable times to examine and copy, at the Franchisor's expense,
the books and records of the Master Franchisee. The Franchisor shall
also have the right, at any time, to have an independent audit made of
the books and records of the Master Franchisee. If an inspection
should reveal that any financial information reported to the
Franchisor (such as revenues or payments owed to the Franchisor) has
been understated in any report to the Franchisor, the Master
Franchisee shall immediately pay to the Franchisor, upon demand, the
amount understated in addition to interest at the maximum rate
permitted by law commencing from the time the required payment was
due. If any inspection discloses an understatement of 2% or more of
revenues the Master Franchisee shall, in addition, reimburse the
Franchisor for the costs and expenses connected with the inspection
(including reasonable accounting and attorneys' fees and costs). The
foregoing remedies shall be in addition to any other remedies that the
Franchisor may have under this Agreement or under applicable law. If
the audit discloses an overpayment any amount paid by the Master
Franchisee to the Franchisor, the Franchisor will promptly pay to the
Master Franchisee the amount of such overpayment or offset such
overpayment against any amounts owed to the Franchisor.
SECTION 9.4 CONFIDENTIALITY.
---------------
Franchisor agrees to maintain the confidentiality of all
financial information Franchisor obtains about Master Franchisee
operations, and will not disclose this financial information to any
third party who is not bound to maintain the confidentiality of the
information; provided however, that: (i) Franchisor may use the
information in preparing any earnings claims or other information
required by federal or state franchise law; and (ii) Franchisor
may prepare a composite list of financial performances by Franchisor
franchisees for dissemination among the franchisees, identifying
Gross Revenues and advertising expenditures.
Section 9.5 Master Franchisee Name, Home Address and Telephone
Number.
--------------------------------------------------
Master Franchisee agrees that, under federal and state franchise
laws and other applicable laws, Franchisor may be required to disclose
Master Franchisee name, home address and telephone number and Master
Franchisee agrees to the disclosure of Master Franchisee name, home
address and telephone number. Master Franchisee must notify
Franchisor of any change in Master Franchisee name, home address and
telephone number within 10 days of the change. Master Franchisee
releases Franchisor and Franchisor officers, directors, stockholders,
agents and legal successors and assigns from all causes of action,
suits, debts, covenants, agreements, damages, judgments, claims and
demands, in law or in equity, that Master Franchisee ever had, now
have, or that Master Franchisee later may have, from Franchisor
disclosure of Master Franchisee name, home address and telephone
number.
27
ARTICLE 10 - TRANSFER OF INTEREST
---------------------------------
Section 10.1 Transfer by the Franchisor.
--------------------------
The Franchisor shall have the absolute right to transfer, assign
or delegate all or any part of its rights or obligations under this
Agreement to any person without the consent or approval of the Master
Franchisee. If the Franchisor's transferee assumes the Franchisor's
obligations under this Agreement and sends to the Master Franchisee
written notice of the assignment and assumption, the Master Franchisee
agrees within 7 days of such request to execute a release of the
Franchisor except for any liabilities from which the Franchisor may
not be released under any applicable law. Any such required release
will not diminish or eliminate any right that the Master Franchisee
may have against the Franchisor or Franchisor's successors or assigns
for any breach of obligation(s) under this Agreement. The Franchisor
can also transfer its stock, engage in public and private securities
offerings, merge, consolidate, acquire other businesses including
Competitive Businesses sell all or substantially all of its assets,
borrow money (secured or unsecured), deal in its assets or otherwise
operate its business without the consent or approval of the Master
Franchisee.
Section 10.2 Transfer by Master Franchisee.
-----------------------------
(a) PERSONAL RIGHTS. Master Franchisee agrees that, unless
otherwise expressly permitted by this Agreement, Master Franchisee
will not sell, assign, transfer, convey or give voluntarily, involuntarily,
directly or indirectly, by operation of law or otherwise (collectively
"transfer") any direct or indirect interest in this Agreement, in the
Franchise or in Master Franchisee without Franchisor written consent.
However, Franchisor written consent is not required for: (i) a single
transfer of less than a 5% interest in a publicly-held corporation; (ii) a
single transfer of all or any part of any interest in Master Franchisee
to one of Master Franchisee other original shareholders or partners; or
(iii) a single transfer to another existing franchisee of the System.
A transfer of 50% or more of the voting or ownership interests in
Master Franchisee corporation, partnership or limited liability
company, individually or in the aggregate, directly or indirectly, is,
for all purposes of this Agreement, considered a transfer of an
interest in this Agreement by Master Franchisee. Any purported
transfer by Master Franchisee, by operation of law or otherwise in
violation of this Agreement, is void and is an Event of Default on
Master Franchisee part.
(b) NO ENCUMBRANCE. The Master Franchisee understands that
neither the rights of the Master Franchisee under this Agreement nor
any voting or ownership interest of more than 25% in the Master Franchisee
(or in any owner of the Master Franchisee) may be pledged, mortgaged,
hypothecated, given as security for an obligation or in any manner
encumbered.
(c) PERMITTED TRANSFER. The Franchisor shall not unreasonably
withhold or delay its consent to a transfer of any interest in this
Agreement if the following requirements are satisfied, any of which
may be waived by the Franchisor in its sole discretion:
(i) The Franchisor shall not have exercised its right
of first refusal;
(ii) All of the Master Franchisee's accrued monetary
obligations and all other outstanding obligations to the
Franchisor shall have been satisfied;
28
(iii) The Master Franchisee shall not be in default of
any provision of this Agreement, any Franchise Agreement in
which the Master Franchisee is a party, or any other
agreement between the Master Franchisee and the Franchisor or its
affiliates;
(iv) The Master Franchisee shall have executed a general
release of any and all claims against the Franchisor, its affiliates,
and their respective officers, directors, shareholders, representatives,
agents and employees, in their corporate and individual capacities,
except for liabilities from which the Franchisor may not be released
under any applicable law;
(v) The transferee shall execute the standard form of Access
Power International Master Franchise Agreement then being offered to
new master franchisees and such other ancillary agreements as the
Franchisor may require which may differ from the terms of this Agreement
and the Master Franchisee shall pay a Transfer Fee equal to the
Franchisor's actual direct expenses in lieu of the initial master
franchise fee. If the transfer is a wholly owned corporation, spouse,
son or daughter of the transferor, no Transfer Fee will be charged;
(vi) The transferee shall be interviewed at the Franchisor's
principal office without expense to the Franchisor and shall demonstrate
to the Franchisor's satisfaction that the transferee has the business and
personal skills, reputation and financial capacity required by the
Franchisor for a master franchisee;
(vii) The transferee shall satisfactorily complete the Franchisor's
application procedures for new master franchisees;
(viii) The transferee shall demonstrate to the Franchisor's sole
satisfaction that it has properly assumed and will be able to comply
with all of its obligations in connection with the Master Franchise.
The Master Franchisee shall remain liable for all obligations to the
Franchisor in connection with the Master Franchise prior to the effective
date of the transfer and shall execute any and all instruments
reasonably requested by the Franchisor to evidence such
liabilities; and
(ix) The Franchisor must be reasonably satisfied that the proposed
terms of sale or other factors involved in the transfer do not materially
reduce the potential ability of the transferee effectively to assume and
carry out its obligations. The Franchisor has no duty to consider such
factors and approval of a proposed transfer shall not be considered an
expression of opinion of the appropriateness or fairness of the
terms of the transfer or the likelihood of success of the
transferee. No disapproval of the transferee for failure to
satisfy the transfer conditions described in this Subsection, or
of any other condition to transfer set forth in this Agreement
shall cause any liability of the Franchisor to such transferee.
The Franchisor's consent to a transfer shall not constitute a waiver
of any claims it may have against the Master Franchisee, nor shall it
be deemed a wavier of the Franchisor's right to demand exact
compliance with any of the terms of this Agreement by the transferee.
29
Section 10.3 The Franchisor's Right of First Refusal.
---------------------------------------
(a) If at any time during the Agreement Term: (i) any
person who owns at least a 25% ownership or voting interest in the
Master Franchisee (or in any entity with an ownership interest in the
Master Franchisee) receivesan arm's-length written offer from an independent
unrelated third party to purchase any portion or all of such person's interest
(the portion or all of such person's interest hereinafter referred to as
the "Interest," and such type of offer later referred to as the
"Interest Offer"); or (ii) the Master Franchisee shall receive an arm's-length
written offer from an independent unrelated third party to purchase any
portion or all of the Master Franchisee's interests under this Agreement or,
outside the ordinary course of business, a material part or all of the assets
used in the Master Franchisee's business (such assets subject to the offer
later referred to as the "Assets", and such type of offer later referred to
as the "Asset Offer"), then the Master Franchisee shall ensure that
such person receiving the Interest Offer, or the Master Franchisee
receiving the Asset Offer (as the case may be, and in either case the
person receiving such third party's offer is hereinafter referred to
as the "Offeror") shall, if it desires to accept such offer, first
offer to sell to the Franchisor the Interest or the Assets for the
consideration and on the terms and conditions set forth in such third
party's written offer. The Offeror's offer (the "Offer") shall be
made by written notice to the Franchisor setting forth the name and
address of the prospective purchaser, the price and terms of the Offer
together with a franchise application completed by the prospective
purchaser, and any other information that the Franchisor may
reasonably request in order to evaluate the Offer including any
purchase and sale and related agreements proposed to be executed or
executed by the Master Franchisee or the third party. The Franchisor
shall have the first option to purchase the Interest or the Assets by
accepting the Offer, within 30 days after its receipt of the Offer and
required information.
(b) If the Franchisor gives notice of acceptance of the Offer,
then the Offeror shall sell the Interest or the Assets to the Franchisor
and the Franchisor shall purchase the Interest or the Assets from the Offeror,
for the consideration and upon the terms and conditions set forth in the
Offer, less any broker's commission not due if the Franchisor
exercises its right of first refusal but due and payable by the
Offeror upon the sale to the prospective purchaser. The Franchisor's
creditworthiness shall be deemed at least equal to the
creditworthiness of any proposed purchaser. If the Franchisor is a
public company at such time having shares traded on a U.S. national
securities exchange, the Offeror must accept the then-current value of
the Franchisor's registered shares in lieu of cash or Unique
Consideration.
(c) If an independent third party's written offer (and the Offeror's
corresponding offer to the Franchisor) provides for the purchaser's payment of
a Unique Consideration which is of such a nature that it cannot reasonably
be duplicated by the Franchisor, then the Franchisor may, in its notice
of exercise, in lieu of such Unique Consideration, substitute a cash
or stock (if a public company with registered shares) consideration in
an amount determined by mutual agreement of the Offeror and the
Franchisor within 45 days after the Offer is made or, failing such
agreement, by an independent appraiser selected by the Franchisor.
(d) If the proposed sale includes assets of the Offeror not
related to the operation of the Master Franchisee's business, the
Franchisor may, at its option, elect to purchase only the assets related
to the operation of Master Franchisee's business and an equitable purchase
price shall be determined in the reasonable discretion of the Franchisor
and allocated to each asset included in the proposed sale.
(e) Unless otherwise agreed by the Offeror and the Franchisor, the
closing of the purchase of the Interest or the Assets shall be held at the
Franchisor's then principal office or other location designated by the
Franchisor, on no later than the 60th day after the Offer is delivered to the
Franchisor, provided that the closing of any such purchase for which a
cash or stock consideration is determined in accordance with
Subsection 10.3(c) shall be held on the 15th day after such cash or
stock consideration is finally determined. At any such closing, the
Offeror shall deliver to the Franchisor an assignment and other
documents reasonably requested by the Franchisor representing a
transfer of ownership of the Interest or the Assets free and clear of
all liens, claims, pledges, options, restrictions, charges and
encumbrances, in proper form for transfer and with evidence of payment
of all applicable transfer taxes by the Offeror. The Franchisor shall
simultaneously therewith make payment of any cash consideration for
the Interest or Assets by a cashier's check drawn on a bank or thrift
doing business in the county of the Franchisor's principal place of
business or payment by the issuance of the Franchisor's registered
shares, after set off against the amount due to the Offeror for all
amounts the Master Franchisee owes the Franchisor, if any. The
remaining terms and conditions of such purchase and sale shall be set
forth in the Offer.
30
(f) If the Franchisor does not accept the Offer as provided above,
the Offeror shall be free, for a period of 60 days after the Franchisor
has elected not to exercise its option, to sell the Interest or the
Assets to the independent third party for the consideration and upon
the terms and conditions specified in such third party's written offer,
subject to full compliance with all terms and conditions of transfer
required under this Agreement, including those set forth in Section 10.2.
It shall be a condition precedent to any sale of the Interest to an
independent third party that there is delivered to such third party an
acknowledgment that the Interest purchased by such third party is and
shall be subject to the terms and conditions of this Agreement and
that such third party agrees to be bound to the terms of this Section
with respect to transferring the Interest, in the same manner as the
Offeror. If the Offeror does not sell the Interest or the Assets as
provided above within the aforesaid 60-day period, then any transfer
by him or her of the Interest or the Assets shall again be subject to
the restrictions set forth in this Agreement.
(g) In the event a proposed transferee is the spouse, son, or
daughter of the Offeror, the Franchisor shall not have any right of first
refusal; provided, however, that all such transferees shall be subject to
all of the restrictions on transfer of ownership imposed on the Offeror under
this Agreement.
(h) The Franchisor may assign its right of first refusal to another
entity, if foreign investment restrictions would not allow the Franchisor to
purchase directly.
(i) The Franchisor's rights contained in this Section shall not be
deemed to have been exercised for purposes of the Investment Canada Act until
the time of actual exercise by the Franchisor of its rights.
SECTION 10.4 SECURITIES OFFERINGS BY THE MASTER FRANCHISEE.
---------------------------------------------
(a) Corporate securities or partnership interests in the Master
Franchisee may be offered to the public, by private offering or otherwise.
The Master Franchisee shall comply with all applicable laws, orders,
rules and regulations of the United States, Canada and all other applicable
jurisdictions and governmental agencies governing the offer and sale of
securities.
(b) All materials to be used for a public or private offering or
to be submitted to a governmental agency under United States and Canadian
law shall first be submitted to the Franchisor for review for their
content, veracity and impact upon the public image and name of the Franchisor.
No offering or press release by or for the benefit of the Master Franchisee
shall imply (by use of the Proprietary Marks or otherwise) that the Franchisor
is participating in an underwriting, issuance, or offering of the Master
Franchisee's or the Franchisor's securities. The Franchisor shall
thereafter promptly advise the Master Franchisee in writing as to its
approval or disapproval of the information to be contained in the
offering materials and instruct the Master Franchisee as to any
information which it believes may have a detrimental effect, and
therefore shall not be included in the offering materials. Upon
completion of the final draft, the Master Franchisee shall submit 2
copies of the final draft to the Franchisor for approval. The
Franchisor shall review the final draft for any detrimental or
misstated data, material or information and either approve or
31
disapprove the final draft. Only after written approval has been
given by the Franchisor may the Master Franchisee proceed to file,
publish, issue, release and make public the offering materials. Any
information found to be detrimental or misstated must be stricken from
the final draft before release or publication. It is specifically
understood, however, that any such review by the Franchisor is solely
for its own information. The Franchisor's approval shall not
constitute any kind of authorization, endorsement, approval or
ratification as to the legal or factual sufficiency on which the
Master Franchisee or any other person may rely, either expressly or
impliedly. The Master Franchisee shall make no oral or written
representations of any kind indicating or implying that the Franchisor
has any interest or relationship whatsoever with the proposed offering
other than acting as the Franchisor pursuant to the terms of this
Agreement. The Master Franchisee's offering materials and sales
literature shall include the following statement, in the appropriate
language:
ACCESS POWER, INC. HAS NOT BEEN ASKED TO AND HAS
NOT PASSED UPON THE ACCURACY OR ADEQUACY OF THE
STATEMENTS MADE HEREIN NOR IS IT NOR WILL IT BE
RESPONSIBLE FOR THE INACCURACY OR INADEQUACY OF
THE SAME. FURTHER, ACCESS POWER, INC. WILL NOT
AND HAS MADE NO RECOMMENDATION RESPECTING THE
QUALITY, SUITABILITY, ADVISABILITY, OR NATURE OF
THE INVESTMENT CONTEMPLATED BY THIS OFFERING.
(c) The Master Franchisee in the offering must fully indemnify
the Franchisor in connection with the offering other than for any liability
arising from material errors or omissions in information provided by the
Franchisor to the Master Franchisee and incorporated into the offering
materials and relied upon by the investors.
(d) For each proposed offering reviewed by Franchisor, the Master
Franchisee shall pay to the Franchisor such amount as is necessary to
reimburse the Franchisor for its reasonable costs and expenses associated
with reviewing the proposed offering materials, including legal and
accounting fees.
(e) The Master Franchisee shall give the Franchisor at least 30
days' written notice prior to the effective date of any offering or
other transaction covered by this Section.
ARTICLE 11 - DEFAULT AND TERMINATION
------------------------------------
Section 11.1 Termination by the Master Franchisee.
------------------------------------
If the Master Franchisee has substantially complied with this
Agreement and the Franchisor materially breaches this Agreement, the
Master Franchisee will have the right to terminate this Agreement
effective 10 days after delivery of written notice of termination, if
the Franchisor does not cure such breach within 30 days after the
Franchisor receives a written notice of default from the Master
Franchisee, unless the breach cannot reasonably be cured within 30
days, in which case the Master Franchisee will have the right to
terminate this Agreement if, after the Franchisor's receipt of a
written notice of default from the Master Franchisee, the Franchisor
does not within 10 days undertake and continue efforts to cure such
breach and continue until completion. Any termination of this
Agreement by the Master Franchisee other than as provided above, will
be deemed a wrongful termination by the Master Franchisee.
32
SECTION 11.2 TERMINATION BY THE FRANCHISOR - WITHOUT NOTICE.
----------------------------------------------
Subject to applicable law, this Agreement shall automatically
terminate without notice or opportunity to cure on the date of the
occurrence of any of the following events, which shall be considered
defaults under this Agreement by the Master Franchisee. In addition,
the Master Franchisee shall notify the Franchisor in writing within 3
days of each of the following events: the Master Franchisee becomes
insolvent or makes a general assignment for the benefit of creditors;
a petition in bankruptcy is filed by the Master Franchisee or such a
petition is filed against or consented to by the Master Franchisee and
such petition is not dismissed within 45 days; the Master Franchisee
is adjudicated as bankrupt; a xxxx in equity or other proceeding for
the appointment of a receiver of the Master Franchisee or other
custodian for the Master Franchisee's business or assets is filed and
consented to by the Master Franchisee; a receiver or other custodian
(permanent or temporary) of the Master Franchisee's business or assets
is appointed by any court of competent jurisdiction; proceedings for a
composition with creditors under United States law is instituted by or
against the Master Franchisee; a final judgment in excess of
U.S.$5,000 remains unsatisfied or of record for 30 days or longer
(unless a supersedeas bond is filed); execution is levied against the
Master Franchisee's operation or property, or suit to foreclose any
lien against the assets of the Master Franchisee is instituted against
the Master Franchisee and not dismissed within 45 days; or a
substantial portion of real or personal property of the Master
Franchisee used in the Master Franchisee's business is sold after levy
thereupon by any sheriff, marshal or constable.
SECTION 11.3 TERMINATION BY THE FRANCHISOR - AFTER NOTICE.
--------------------------------------------
The Master Franchisee shall be deemed to be in default and the
Franchisor may, at its option, terminate all rights granted to the
Master Franchisee under this Agreement, without affording the Master
Franchisee any opportunity to cure the default, effective immediately
upon notice to the Master Franchisee, upon the occurrence of any of
the following events:
(a) If the Master Franchisee ceases to operate its business for
more than 14 days in any calendar year or for more than 7 consecutive
days or otherwise forfeits the right to do or transact business in Canada;
(b) If a serious or imminent threat or danger to public health or
safety results from the operation of the Master Franchisee's business and
such threat or danger remains uncorrected for 5 days after receipt by the
Master Franchisee of written notice from the Franchisor or a governmental
authority, unless a cure cannot be reasonably completed in such time, in
which event all reasonable steps to cure must be commenced within such time,
but a cure must be completed promptly thereafter, in no event later than 30
days after receipt of such written notice;
(c) If the Master Franchisee fails to maintain the Minimum Performance
Requirement;
(d) If the Master Franchisee, or any officer, director, owner or
managerial employee of the Master Franchisee, is convicted of a felony, a
crime of moral turpitude or any other crime or offense that the Franchisor
reasonably believes is likely to have a material adverse effect on the
System, the Proprietary Property, the good will associated with the Proprietary
Marks, or the Franchisor's interest in any of the Proprietary Property
unless the Master Franchisee immediately and legally terminates such
individual as an officer, director, owner and employee of the Master
Franchisee;
(e) The Master Franchisee denies the Franchisor the right to inspect
the Master Franchisee's business or to audit the sales and accounting records
of the Franchised Business;
(f) Conduct by the Master Franchisee which is deleterious to or
reflects unfavorably on the Master Franchisee or the System by exhibiting a
reckless disregard for the physical and mental well being of employees,
customers, the Franchisor's representatives or the public at large, including
battery, assault, sexual harassment or discrimination, racial
harassment or discrimination, alcohol or drug abuse or other forms of
threatening, outrageous or unacceptable behavior as determined in the
Franchisor's sole discretion;
33
(g) If the Master Franchisee, contrary to the terms of this Agreement,
purports to transfer any rights or obligations under this Agreement, without
the Franchisor's prior written consent as required under this Agreement;
(h) If any breach occurs under Sections 8.2 or 13.2;
(i) If the Master Franchisee knowingly maintains false books or
records, or knowingly submits any false reports to the Franchisor;
(j) If the Master Franchisee misuses or makes any unauthorized
use of the Proprietary Property or otherwise materially impairs the good
will associated with the Proprietary Property or the Franchisor's rights
in the Proprietary Property; or
(k) If the Master Franchisee has received from the Franchisor 3
or more prior Notices of Default for the same or similar defaults during
any 6 consecutive-month period, notwithstanding the fact that such
defaults were cured.
Section 11.4 Termination by the Franchisor - After Notice and Right to
Cure.
---------------------------------------------------------
Except as otherwise provided above, the Master Franchisee shall
have 30 days after delivery from the Franchisor of a written Notice of
Default specifying the nature of the default within which to remedy
any default other than as set forth above, and provide evidence of
cure satisfactory to the Franchisor. If any such default is not cured
within that time, or such longer period as applicable law may require,
all the rights of the Master Franchisee under this Agreement shall
terminate without further notice to the Master Franchisee effective
immediately upon the expiration of the 30-day period or such longer
period as applicable law may require. In addition to the events
specified in Sections 11.2 and 11.3, the Master Franchisee shall be in
default under this Section for any failure to comply with any of the
requirements imposed by this Agreement, as it may from time to time
reasonably be revised or supplemented by the Access Power Manuals, or
to carry out the terms of this Agreement in good faith. The Master
Franchisee shall have the burden of proving it properly and timely
cured any default, to the extent such cure is permitted under this
Agreement.
SECTION 11.5 TERMINATION - NON-PARTY INITIATED.
----------------------------------
Neither the Franchisor nor Master Franchisee shall be considered
in breach of this Agreement for termination of this Agreement as a
result of actions taken outside of the reasonable control of the
parties hereto. Both parties acknowledge that in the future, as a
result of changes in the Internet's technical capacity or the
Regulatory environment surrounding the provision of IP Telephony
services this Agreement may be terminated with neither party
considered in breach. In the event of a termination of this
Agreement pursuant to this section, the limitations upon the Master
Franchisee under section 13.2(b) shall not apply.
ARTICLE 12 - OBLIGATIONS OF THE MASTER FRANCHISEE UPON
TERMINATION OR EXPIRATION
Upon termination by the Franchisor or expiration of this
Agreement, all rights granted under this Agreement to the Master
Franchisee shall terminate immediately, and the Sections of this
ARTICLE shall apply to the rights and obligations of the parties.
34
Section 12.1 Payment of Outstanding Amounts.
------------------------------
The Franchisor may retain all fees paid pursuant to this
Agreement except for refunds expressly required in this Agreement. In
addition, within 10 days after the effective date of the termination
or expiration, or such later dates as it is determined that amounts
are due to the Franchisor, the Master Franchisee shall pay to the
Franchisor all Master Franchise Fee Payments (up to the US $2,300,000
minimum), Royalty Fees, amounts owed for products or services
purchased by the Master Franchisee from the Franchisor or its
affiliates, and all other amounts owed to the Franchisor or its
affiliates which are then unpaid.
Section 12.2 Return of Materials.
-------------------
Except for those materials necessary to continue to service
Franchisees if the Master Franchisee is allowed or retains such
rights, the Master Franchisee shall immediately turn over to the
Franchisor in an organized manner all materials, including the Access
Power Manuals, records, files, instructions, correspondence, all
materials related to operating Access Power, including all Authorized
Materials and other materials relating to solicitation of prospective
Franchisees, and any and all other materials relating to the operation
of a Master Franchisee's business in the Master Franchisee's
possession or control, and all copies and any other forms of
reproductions thereof (all of which are acknowledged to be the sole
and exclusive property of the Franchisor), and shall retain no copy or
record of any of the foregoing, excepting only the Master Franchisee's
copy of this Agreement and related agreements and of correspondence
between the parties, copies of all Franchise Agreements with the
Franchisees in the Master Franchise Territory entered into during the
Agreement Term, and copies of any other documents which the Master
Franchisee reasonably needs for compliance with any law. The
Franchisor shall reimburse the Master Franchisee for the reasonable
cost of shipping the foregoing materials to the Franchisor promptly
after receipt of invoices or other reasonable evidence of such costs.
Section 12.3 Loss of Exclusivity; Cessation of Sales; Cessation of
Services.
-----------------------------------------------------
(a) Upon the expiration of this Agreement, the Master Franchisee
shall: (i) cease selling Franchises; (ii) cease using all advertising
materials, forms and other materials bearing the Franchisor's Proprietary
Marks; (iii) cease holding itself out as a sales representative of the
Franchisor; and (iv) take all steps necessary to disassociate itself from
the Franchisor. As to all existing Access Power operations under this
Agreement, the Master Franchisee shall continue to operate as required in
this Agreement until such operations are sold to an independent third party,
approved by the Franchisor, or to the Franchisor. Should the Franchisor
not approve a sale to an independent third party, the Franchisor must
purchase the Master Franchisee's interests in the organization on the
terms and conditions set forth in the independent third party's
written offer. Any such written independent third party offer must be
received by the Master Franchisee within 4 months of the termination
of the Agreement.
(b) Upon the early termination of this Agreement due to the Master
Franchisee's default, the Master Franchisee shall: (i) cease selling Franchises
on behalf of the Franchisor; (ii) cease using all advertising materials,
forms and other materials bearing the Franchisor's Proprietary Marks; (iii)
cease holding itself out as a representative of the Franchisor; and
(iv) take all steps necessary to disassociate itself from the
Franchisor. At the option of the Franchisor, the Master Franchisee
shall cease providing services to existing Franchisees. In such event
the Master Franchisee shall not be entitled to any further fees from
existing Franchisees. The Franchisor shall also be free to sell new
Franchises, renew existing Franchises, and enter into master franchise
agreements or other arrangements within the Master Franchise Territory
without further obligation to the Master Franchisee.
(c) The Franchisor shall be free to sell new Franchises, enter
into new master franchise agreements or other arrangements within the
Master Franchise Territory without further obligation to the Master
Franchisee.
35
SECTION 12.4 CHANGE OF CORPORATE NAME.
------------------------
The Master Franchise agrees to file all necessary amendments and
other documents to change its corporate name to exclude the "Access
Power" trade name to a name not confusingly similar to the "Access
Power" trade name.
Section 12.5 Competition Differentiation.
---------------------------
Master Franchisee agrees, if Master Franchisee continues to
operate or later begins to operate any other business, not to use any
reproduction or colorable imitation of the Proprietary Marks, methods
of operation or undertake any other conduct either in any other
business or the promotion of any other business, that is likely to
cause confusion, mistake or deception, or that is likely to dilute
Franchisor rights in and to the Proprietary Marks. In addition,
Master Franchisee agrees not to utilize any designation of origin or
description or representation that falsely suggests or represents an
association or connection with Franchisor, or any of Franchisor
Affiliates.
ARTICLE 13 - INDEPENDENT COVENANTS OF THE MASTER FRANCHISEE
SECTION 13.1 DEVOTION TO THE SALE AND SERVICE OF FRANCHISES.
----------------------------------------------
The Master Franchisee covenants that during the Agreement Term,
except as otherwise approved in writing by the Franchisor, the Master
Franchisee shall faithfully, honestly and diligently devote full time,
energy and best efforts in carrying out the Master Franchisee's
obligations under this Agreement in support of the business of the
Franchisor and refrain from engaging in any business or other activity
that will conflict with its obligations under this Agreement, whether
or not such activity is pursued for gain, profit, or other pecuniary
advantage; provided, however, that this shall not be construed as
preventing the Master Franchisee from investing its assets in
businesses which do not compete with the Franchisor where the form or
manner of such investment will not require services on the part of the
Master Franchisee in the operation of the business in which such
investments are made and in which his or her participation is solely
that of a passive investor.
Section 13.2 Diversion of Business; Competition and Interference
With the Franchisor.
---------------------------------------------------
The Master Franchisee agrees that the Franchisor would be unable
to protect the Confidential Information against unauthorized use or
disclosure and would be unable to encourage a free exchange of ideas
and information among the franchisees within the System if master
franchisees were permitted to hold interests in any Competitive
Business.
(a) IN-TERM. The Master Franchisee covenants that during the
Agreement Term except as otherwise approved in writing by the Franchisor,
that the Master Franchisee will not:
(i) directly or indirectly, solicit or otherwise attempt to
induce, by combining or conspiring with, or attempting to do so, or
in any other manner influence any Business Affiliate of the Franchisor
to terminate or modify his, her or its business relationship with the
Franchisor or to compete against the Franchisor;
(ii) directly or indirectly, as owner, officer, director,
employee, agent, lender, broker, consultant, franchisee or in any
other similar capacity whatsoever be connected in any manner with
the ownership, management, operation or control of or conduct a
Competitive Business (provided that this restriction shall not
apply to a 5% or less beneficial interest in a publicly-held
corporation); and
36
(iii) in any manner knowingly interfere with, disturb,
disrupt, decrease or otherwise jeopardize the business of the
Franchisor or any of its other franchisees.
(b) POST-TERM. The Master Franchisee also covenants that for
a 24-month period after the expiration or termination of this
Agreement, except as otherwise approved in writing by the Franchisor,
that the Master Franchisee will not:
(i) directly or indirectly, solicit or otherwise attempt to
induce, by combining or conspiring with, or attempting to do so,
or in any other manner influence any Business Affiliate of the
Franchisor to terminate or modify his, her or its business
relationship with the Franchisor or to compete against the
Franchisor;
(ii) directly or indirectly, as owner, officer, director,
employee, agent, lender, broker, consultant, franchisee or in
any other similar capacity whatsoever be connected in any manner
with the ownership, management, operation or control of or
conduct a Competitive Business in Canada (provided that this
restriction shall not apply to a 5% or less beneficial interest
in a publicly-held corporation); and
(iii) in any manner interfere knowingly with, disturb, disrupt,
decrease or otherwise jeopardize the business of the Franchisor or
any of its other franchisees.
(c) The Master Franchisee acknowledges and confirms that the length of
the term and geographical restrictions contained in this Section are fair
and reasonable and not the result of overreaching, duress or coercion
of any kind. The Master Franchisee further acknowledges and confirms
that its full, uninhibited and faithful observance of each of the
covenants contained in this Section will not cause any undue hardship,
financial or otherwise. The Master Franchisee acknowledges and
confirms that its special knowledge of the business of a business that
is engaged, wholly or partially, directly or indirectly, in the sale
or resale of long distance or internet telephony service (and anyone
acquiring such knowledge through the Master Franchisee) is such as
would cause the Franchisor and its franchisees serious injury and loss
if it (or anyone acquiring such knowledge through the Master
Franchisee) were to use such ability and knowledge to the benefit of a
competitor or were to compete with the Franchisor or any of its
franchisees.
(d) In the event that any court of competent jurisdiction shall
finally hold that the time or territory or any other provision stated in this
Section constitutes an unreasonable restriction upon the Master Franchisee,
the Master Franchisee agrees that the provisions of this Agreement shall
not be rendered void, but shall apply as to time and territory or to
such other extent as such court may judicially determine or indicate
constitutes a reasonable restriction under the circumstances involved.
(e) In the event of a termination of this Agreement pursuant to
section 11.1, the period in subsection (b) above shall be reduced from
24 months to 6 months.
SECTION 13.3 MODIFICATION OF COVENANTS.
-------------------------
The Master Franchisee acknowledges that the Franchisor shall have
the right, in its sole discretion, to reduce the scope of any
covenants set forth in this ARTICLE without the Master Franchisee's
consent, effective immediately upon receipt by the Master Franchisee
of written notice. The Master Franchisee agrees that it shall comply
immediately with any covenant as so modified, which shall be fully
enforceable to the extent permitted by applicable law.
37
Section 13.4 Independent Covenants.
---------------------
The parties agree that the foregoing covenants in this ARTICLE
shall be construed as independent of any other covenant or provision
of this Agreement. The Master Franchisee further agrees that the
existence of any claim it may have against the Franchisor or any of
its affiliates, regardless of whether arising from this Agreement,
shall not constitute a defense to the enforcement of the foregoing
covenants by the Master Franchisee.
ARTICLE 14 - INDEPENDENT CONTRACTOR AND INDEMNIFICATION
Section 14.1 Independent Status.
------------------
It is understood and agreed by the parties that this Agreement
does not create a fiduciary relationship between them. The Master
Franchisee shall be an independent contractor, and, unless expressly
provided to the contrary, nothing in this Agreement is intended to
constitute either party an agent, legal representative, subsidiary,
joint venturer, partner, employee, affiliate or servant of the other
party for any purpose whatsoever. It is understood and agreed that
nothing in this Agreement authorizes the Master Franchisee to make any
contract, agreement, warranty or representation on the Franchisor's
behalf, nor to incur any debt or other obligation in the Franchisor's
name. The Master Franchisee agrees to take such affirmative action as
may be requested by the Franchisor to indicate that the Master
Franchisee is an independent contractor, including a notice on all
stationery, business cards, sales literature, contracts and similar
documents which states that the Master Franchisee's business is
independently owned and operated by the Master Franchisee. The
content of the notice is subject to the prior written approval of the
Franchisor.
Section 14.2 Indemnification.
---------------
The Master Franchisee indemnifies and holds harmless the
Franchisor from any and all costs, losses and damages (including
reasonable attorneys' fees and costs, even if incident to appellate,
post-judgment or bankruptcy proceedings), from claims brought by third
parties arising out of or in any way incidental to or in connection
with the ownership or operation by the Master Franchisee of the Master
Franchisee's business unless caused by the Franchisor's gross
negligence or intentional misconduct. This indemnity obligation
continues in full force and effect and notwithstanding the expiration
or termination of this Agreement.
ARTICLE 15 - REPRESENTATIONS AND WARRANTIES
Section 15.1 No Reliance.
-----------
Except as expressly provided to the contrary in this Agreement,
the Franchisor makes no representations, warranties or guarantees upon
which the Master Franchisee may rely, and assumes no liability or
obligation to the Master Franchisee, by providing any waiver,
approval, consent or suggestion to the Master Franchisee in connection
with this Agreement, or by reason of any neglect, delay or denial of
any request therefor unless such conduct would otherwise constitute a
breach of an express obligation of the Franchisor under this
Agreement.
Section 15.2 Representations of the Franchisor.
---------------------------------
The Franchisor makes the following representations and warrants
to the Master Franchisee, which shall be true and correct upon the
execution of this Agreement and throughout the Agreement Term:
38
(a) ORGANIZATION. The Franchisor is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida.
(b) AUTHORIZATION. The Franchisor has the corporate power to
execute, deliver, and carry out the terms and conditions of the
Agreement. The Franchisor has taken all necessary action with respect
thereto. This Agreement has been duly authorized, executed and delivered
by the Franchisor and constitutes its valid, legal and binding agreement
and obligation in accordance with the terms of this Agreement, except as
may be limited by applicable bankruptcy, insolvency, reorganization and
other laws and equitable principles affecting creditors' rights generally
from time to time in effect.
(c) NO VIOLATION. Performance by the Franchisor of its obligations
under the Agreement will not result in: (i) the breach of any term or condition
of, or constitute a default under, any term or condition of any contract or
agreement to which the Franchisor is a party or by which it is bound,
or constitute an event which, with notice, lapse of time or both,
would result in such a breach or event of default; nor (ii) result in the
violation by the Franchisor of any statute, rule, regulation, ordinance,
code, judgment, order, injunction or decree.
Section 15.3 Representations of the Master Franchisee; Opinion of Counsel.
------------------------------------------------------------
The Master Franchisee makes the following representations and
warranties to the Franchisor, which shall be true and correct upon the
execution of this Agreement and throughout the Agreement Term:
(a) ORGANIZATION. The Master Franchisee is a corporation
duly organized, validly existing and in good standing under the laws
of Canada.
(b) AUTHORIZATION. The Master Franchisee has the power to
execute, deliver, and carry out the terms and conditions of the Agreement.
The Master Franchisee has taken all necessary action with respect thereto.
This Agreement has been duly authorized, executed and delivered by the
Master Franchisee and constitutes its valid, legal and binding agreement
and obligation in accordance with the terms of this Agreement, except as may
be limited by applicable bankruptcy, insolvency, reorganization and other
laws and equitable principles affecting creditors' rights generally from
time to time in effect.
(c) NO VIOLATION. Performance by the Master Franchisee of its
obligations under this Agreement will not result in: (i) the breach of any
term or condition of, or constitute a default under, any term or condition
of any contract, agreement or other commitment to which the Master Franchisee
is a party or by which it is bound, or constitute an event which, with notice,
lapse of time or both, would result in such a breach or event of default;
nor (ii) result in the violation by the Master Franchisee of any statute, rule,
regulation, ordinance, code, judgment, order, injunction or decree.
(d) LITIGATION. There is not now pending against the Master Franchisee,
nor to the knowledge of the officers of the Master Franchisee, is
there threatened, any litigation, investigation or proceeding the
outcome of which would in any cause, or in the aggregate, adversely
affect the assets or financial condition of the Master Franchisee or
seriously affects its continued operations.
(e) CONSENT OR FILING. All consents, approvals or authorization
of, or registrations, declarations or filings with any court, any governmental
body or authority or other person or entity that is required in connection
with the valid execution, delivery or performance of this Agreement or any
document required by this Agreement or in connection with any of the
transactions contemplated thereby have been completed.
(f) DISCLOSURE. No representation or warranty made by the Master
Franchisee in this Agreement or in any other document furnished or to be
furnished from time to time in connection herewith or therewith contains
or will contain any misrepresentation of a material fact or omits or will
omit to state any material fact necessary to make the statements herein or
39
therein not misleading. There is no fact known to the Master Franchisee
which materially adversely affects, or which would in the future materially
adversely affect, the business, assets, property, prospects or financial
condition of the Master Franchisee.
(g) BROKERAGE. The Master Franchisee has dealt with no broker or
finder in connection with the master franchise rights and the Master
Franchisee indemnifies the Franchisor against and to hold the Franchisor
harmless from any claims for finders' or brokerage fees or commission
in connection with the master franchise rights and agrees to pay all
expenses (including attorneys' fees and expenses) incurred by the
Franchisor in connection with the defense of any action or proceeding
brought to collect any such fees or commissions or otherwise relating
to any such brokerage claims resulting from or arising out of any claim
that the Master Franchisee consulted, dealt or negotiated with the person
or entity making such brokerage claim.
SECTION 15.4 ACKNOWLEDGEMENT OF RISK.
-----------------------
The Master Franchisee acknowledges and agrees to the following:
(a) THE SUCCESS OF THE MASTER FRANCHISEE IN OWNING AND OPERATING
THE MASTER FRANCHISEE'S BUSINESS IS SPECULATIVE AND WILL DEPEND ON MANY
FACTORS INCLUDING, TO A LARGE EXTENT, THE MASTER FRANCHISEE'S INDEPENDENT
BUSINESS ABILITY. NO REPRESENTATIONS OR PROMISES, EXPRESS OR IMPLIED, HAVE
BEEN MADE BY THE FRANCHISOR OR ANY EMPLOYEE, BROKER OR REPRESENTATIVE OF
THE FRANCHISOR, TO INDUCE THE MASTER FRANCHISEE TO ENTER INTO THIS
AGREEMENT EXCEPT AS SPECIFICALLY INCLUDED IN THIS AGREEMENT. NO
EMPLOYEE, OFFICER, DIRECTOR, BROKER OR REPRESENTATIVE IS AUTHORIZED TO
DO OTHERWISE.
(b) THE MASTER FRANCHISEE ACKNOWLEDGES THAT IN ALL OF ITS DEALINGS
WITH THE FRANCHISOR, ITS EMPLOYEES, BROKERS (IF ANY), AND OTHER
REPRESENTATIVES ACT ONLY IN A REPRESENTATIVE CAPACITY AND NOT IN AN
INDIVIDUAL CAPACITY. THE MASTER FRANCHISEE FURTHER ACKNOWLEDGES THAT THIS
AGREEMENT, AND ALL BUSINESS DEALINGS BETWEEN THE MASTER FRANCHISEE AND SUCH
INDIVIDUALS AS A RESULT OF THIS AGREEMENT, ARE SOLELY BETWEEN THE MASTER
FRANCHISEE AND THE FRANCHISOR.
(c) IN ADDITION, THE FRANCHISOR MAKES NO WARRANTY AS TO THE MASTER
FRANCHISEE'S ABILITY TO SELL AND SERVICE THE FRANCHISED BUSINESS IN THE
JURISDICTION IN WHICH THE FRANCHISED BUSINESSES ARE TO BE OPERATED. IT IS
INCUMBENT UPON THE MASTER FRANCHISEE TO SEEK OR OBTAIN ADVICE OF COUNSEL
SPECIFICALLY WITH RESPECT TO THIS ISSUE. IN THE EVENT THAT LEGISLATION
ENACTED BY, OR REGULATION OF, ANY GOVERNMENTAL BODY PREVENTS THE MASTER
FRANCHISEE OR A FRANCHISEE FROM OPERATING THE FRANCHISED BUSINESS, THE
FRANCHISOR SHALL NOT BE LIABLE FOR DAMAGES NOR BE REQUIRED TO INDEMNIFY
THE MASTER FRANCHISEE IN ANY MANNER WHATSOEVER OR TO RETURN ANY MONIES
RECEIVED FROM THE MASTER FRANCHISEE.
40
ARTICLE 16 - MEDIATION AND ARBITRATION; EQUITABLE RELIEF
SECTION 16.1 MEDIATION AND ARBITRATION.
-------------------------
(a) In connection with any dispute arising under this
Agreement, prior to any arbitration proceeding taking place,
either party may, at its option, submit the controversy or claim to
non-binding mediation before FAM or other mutually agreeable mediator,
in which event both parties shall execute a confidentiality agreement
reasonably satisfactory to the Franchisor. Upon submission, the
obligation to attend mediation shall be binding on both parties.
(b) Except as specifically modified by this Section and
excepting matters involving remedies as set forth in Section 16.2,
any controversy or claim arising out of or relating to this Agreement,
including any claim that this Agreement, or any part thereof, is
invalid, illegal or otherwise voidable or void, shall be submitted
to arbitration before and in accordance with the arbitration
rules of FAM, or if FAM is unable to conduct the arbitration for any
reason or if both parties agree, before the American Arbitration
Association in accordance with its commercial arbitration rules, or
any other mutually agreeable arbitration association.
(c) The provisions of this Section shall be construed as
independent of any other covenant or provision of this Agreement;
provided that if a court of competent jurisdiction determines that
any such provisions are unlawful in any way, such court shall modify
or interpret such provisions to the minimum extent necessary to have
them comply with the law. Notwithstanding any provision of this
Agreement relating to under which state laws this Agreement shall
be governed by and construed under, all issues relating to
arbitrability or the enforcement of the agreement to arbitrate
contained in this Agreement shall be governed by the United States
Arbitration Act (9 U.S.C. Section 1 et seq.) and the Federal common
law of arbitration.
(d) Judgment upon an arbitration award may be
entered in any court having competent jurisdiction and shall be
binding, final and non-appealable. The Franchisor and the Master
Franchisee (and their respective 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 them each shall be limited to the recovery of any actual
damages sustained by it.
(e) Prior to any arbitration proceeding taking place, the
Franchisor or the Master Franchisee may, at its respective option,
elect to have the arbitrator conduct, in a separate proceeding
prior to the actual arbitration, a preliminary hearing, at which
hearing testimony and other evidence may be presented and briefs may
be submitted, including a brief setting forth the then applicable
statutory or common law methods of measuring damages in respect of the
controversy or claim being arbitrated.
(f) This arbitration provision shall be deemed to be
self-executing and shall remain in full force and effect after
the expiration or termination of this Agreement. In the event either
party fails to appear at any properly noticed arbitration proceeding,
an award may be entered against such party by default or otherwise
notwithstanding such failure to appear.
(g) Mediation and/or arbitration shall take place in Xxxxx County,
Florida.
(h) The Master Franchisee acknowledges and agrees that it is the
intent of the parties that mediation or arbitration between the Franchisor
and the Master Franchisee shall be of the Franchisor's and the Master
Franchisee's individual claims, and that none of the Master Franchisee's
claims shall be mediated or arbitrated on a class-wide basis.
41
SECTION 16.2 EXCEPTIONS TO MEDIATION AND ARBITRATION; EQUITABLE
RELIEF.
--------------------------------------------------
(a) The obligation to mediate or arbitrate shall not be binding
upon either party with respect to claims relating to the Proprietary
Property; the obligations of the Master Franchisee upon termination
or expiration of this Agreement; any transfers restricted under this
Agreement concerning interests in the Master Franchisee and this
Agreement; matters relating to actions which may impair the good
will associated with the Proprietary Marks; matters involving claims
of danger, health or safety involving the Master Franchisee, the
employees, customers or the public; or requests for restraining
orders, injunctions or other procedures in a court of competent
jurisdiction to obtain specific performance when deemed
necessary by such court to preserve the status quo or prevent
irreparable injury pending resolution by mediation or arbitration of
the actual dispute between the parties.
ARTICLE 17 - TERM
SECTION 17.1 MASTER FRANCHISE TERM.
---------------------
The Term of this Agreement shall run for 30 years from the
Agreement Date, unless otherwise sooner terminated pursuant to ARTICLE
9. This Agreement shall remain in full force and effect so long as
the Master Franchisee has any obligations to the Franchisor under this
Agreement or to any Franchisee under a Franchise Agreement, unless
sooner terminated in accordance with the terms of this Agreement (the
"Agreement Term"). The Agreement Term refers to the term during which
this Agreement is in full force and effect and the Master Franchisee
is either obligated to the Franchisor or to a Franchisee.
SECTION 17.2 OPTION TO OBTAIN SUCCESSOR ACCESS POWER
INTERNATIONAL MASTER FRANCHISE AGREEMENT.
----------------------------------------
(a) The Master Franchisee is granted an option to obtain
a Successor Access Power Franchise Agreement for a period of 5
years. The Master Franchisee may exercise its option to obtain
a Successor Access Power International Master Franchise
Agreement only if it complies with the following conditions at the
time the option is exercised and immediately before the commencement
of the Succeeding Term, unless another time is specified below:
(i) One year before the end of the Term, the Franchisor
will give the Master Franchisee written notice that its Franchise
Agreement will expire in one year.
(ii) The Master Franchisee shall give the Franchisor written
notice of its intention to exercise the option to obtain a Successor
Access Power Franchise Agreement by submitting its application for a
Successor Access Power Franchise Agreement not less than 9 months
nor more than 12 months prior to the end of the Agreement Term;
(iii) The Master Franchisee shall have satisfied all monetary
obligations owed by the Master Franchisee to the Franchisor and its
affiliates and shall not be in default of any provision of this
Agreement including the Minimum Performance Requirement or any other
agreement between the Master Franchisee and the Franchisor or its
affiliates;
(iv) The Master Franchisee, within 90 days prior to the expiration
of the Agreement Term, shall execute and deliver to the Franchisor a
Successor Access Power Master Franchise Agreement which agreement may
differ from the terms of this Agreement; and
42
(v) The Master Franchisee shall execute a general release of any
and all claims against the Franchisor and its affiliates, and their
respective officers, directors, shareholders, agents and employees
except for liabilities from which the Franchisor may not require a
release under any applicable law.
SECTION 17.3 REINSTATEMENTS AND EXTENSIONS.
-----------------------------
If any termination or expiration of the Term would violate any
applicable law, Franchisor may reinstate or extend the Term for the
purpose of complying with the law, for the duration provided by
Franchisor in a written notice to Master Franchisee, without waiving
any of Franchisor rights under this Agreement or otherwise modifying
this Agreement.
ARTICLE 18 - DEFINITIONS
SECTION 18.1 DEFINITIONS.
-----------
As used in this Agreement, the Exhibits attached to this
Agreement and any other document executed incidental to this Agreement
and any exhibits to such documents, the following terms shall have the
following meanings:
"ACCESS POWER GATEWAY NETWORK" means the IP Telephony Units
connected together by the Franchisor for the origination and/or
termination of IP traffic, whether such unit was established by
Franchisor or franchisee thereof, Master Franchisee or franchisee
thereof, or any other entity which the Franchisor may have an
agreement with for the origination and/or termination of IP traffic.
"ACCESS POWER MANUALS" means all manuals produced by, or for the
benefit of, the Franchisor and loaned to the Master Franchisee, now
existing or later produced, and any revisions prepared for the
internal use of the Franchised Business.
"ACCESS POWER MARKETING FUND" means the fund described in
Subsection 3.6(c) into which Advertising Contributions from
Franchisees will be deposited for use in regional and national
marketing activities in Canada to promote the System.
"AFFILIATE" means a company related to Franchisor as a parent
corporation, brother/sister corporation or subsidiary corporation.
"AGREEMENT" means this Access Power International Master
Franchise Agreement, as it may be amended, supplemented or otherwise
modified by an agreement in writing signed by the Master Franchisee
and the Franchisor.
"AGREEMENT DATE" means the execution date of this Agreement.
"AGREEMENT TERM" means the term of the Agreement described in
Section 17.1.
"AUTHORIZED MATERIALS" means: (i) those written or recorded
materials provided by the Franchisor to the Master Franchisee
for purposes of soliciting prospective Franchisees, including
the Franchise Agreement and exhibits, brochures and applications;
(ii) written or recorded materials prepared by the Master Franchisee
upon the specific written request of, or which have previously been
43
approved in writing by Franchisor; and (iii) general written
correspondence prepared by the Master Franchisee which is based
upon, and not inconsistent with (i) or (ii) above, nor inconsistent
with policies and procedures of the Franchisor specified in this
Agreement and otherwise set forth in writing by the Franchisor
from time to time. No materials shall be considered Authorized
Materials if the Franchisor has notified the Master Franchisee
(or the Master Franchisee is otherwise aware) that such materials
are no longer Authorized Materials; such materials are not current
or are misleading and the Franchisor has notified the Master
Franchisee (or the Master Franchisee is otherwise aware) that
such materials are no longer correct or are misleading; or such
materials subsequently become inconsistent with facts, policies or
procedures the Franchisor specifies in writing to the Representative.
The Master Franchisee shall make no representations which would not,
if written, constitute Authorized Materials. The Representative shall
be responsible for the translation of the Authorized Materials into
the appropriate language.
"BUSINESS AFFILIATE" means any employee, officer, director,
agent, consultant, representative, contractor, supplier, distributor,
franchisee or other business contact of the Franchisor.
"BUSINESS DAY " means any day other than Saturday, Sunday or a
day upon which open trading does not take place on the New York Stock
Exchange
"CALLS" mean any usage of the System IP Telephony Units for any
services thereunder.
"COMPANY-OWNED FRANCHISE" means a Franchise owned by the Master
Franchisee or an affiliate. "Access Power Franchise" means the
distributorship Master Franchisee is authorized to establish and
operate under this Agreement.
"COMPANY UNIT" means an Access Power Advanced Communications
Business operated under the System and owned by Franchisor.
"COMPETITIVE BUSINESS" means a business that is engaged, wholly
or partially, directly or indirectly, in the sale or resale of long
distance or Internet Telephony services.
"CONFIDENTIAL INFORMATION" means any oral or written information
and data of a confidential nature, including but not limited to
proprietary, technical, development, marketing, sales, operating,
performance, cost, know-how, business and process information,
computer programming techniques, and all record bearing media
containing or disclosing such information and techniques, which is
disclosed by one party to the other party pursuant to this Agreement.
Confidential Information shall not include any information which (a)
is already in the public domain through no breach of confidentiality;
(b) was lawfully in a party's possession prior to receipt from the
other party; (c) was received by a party independently from a third
party free to lawfully disclose such information to such party; or (d)
had been independently developed by a party as of the time of
disclosure.
"DESIGNEE" means one or more representatives of the Franchisor
who are independent contractors and are appointed by the Franchisor to
perform certain of the Franchisor's duties under this Agreement as
described in ARTICLE 2.
"EVENT OF DEFAULT" means a breach of this Agreement including
those situations requiring the giving of notice, the lapse of time, or
both, or any other condition is satisfied.
"FAM" means Franchise Arbitration and Mediation, Inc.
"FRANCHISE AGREEMENT" means agreements entered into for the
operation of an Access Power franchise substantially in the form
attached as Exhibit A.
"FRANCHISE OWNERS" If a corporation, partnership or other entity
is to own Master Franchisee operations, Master Franchisee will notice
certain provisions that are applicable to Master Franchisee
shareholders, partners or members, upon whose business skill,
44
financial capability and personal character Franchisor are relying in
entering into this Agreement. Those individuals will be referred to
in this Agreement as "Franchise Owners."
"FRANCHISE UNIT" means an Access Power Advanced Communications
Business operated under the System and owned by other than the
Franchisor.
"FRANCHISOR NETWORK" means the services coverage area of the
entire network, as established and maintained by the Franchisor, for
the termination of traffic originating through local Gateway servers
or via the Internet.
"GATEWAY CO-LOCATION FACILITY" means the actual facility housing
an Access Power IP Telephony Gateway Server and VocalTec Gateway
Software, and connection to the public switched telephone networks.
"GATEWAY SERVER" means a combination of hardware and software
which permits the changing of communications from analog to digital
and/or digital to analog for delivery over a network.
"GROSS REVENUE(S)" means the entire amount of all of Master
Franchisee revenues from the ownership or operation of the Access
Power Master Franchise or any business at or about the Gateway Co-
location Facility including the proceeds of any business interruption
insurance and any revenues received from the lease or sublease of a
portion of the Gateway Co-location Facility, whether the revenues are
evidenced by cash or credit, services, property or other means of
exchange, excepting only the amount of any sales taxes that are
collected and paid to the taxing authority (based on the cash method
of accounting). Cash refunded and credit given to customers and
receivables uncollectible from customers will be deducted in computing
Gross Revenues to the extent that the cash, credit or receivables
represent amounts previously included in Gross Revenues where Royalty
Fees were paid. Gross Revenues are deemed received by Master
Franchisee at the time the goods, products, merchandise or services
from which they derive are delivered or rendered or at the time the
relevant sale takes place, whichever occurs first, unless otherwise
specified herein. Gross Revenues consisting of property or services
(for example, "bartering" or "trade outs") are valued at the prices
applicable, at the time the Gross Revenues are received, to the
products or services exchanged for the Gross Revenues.
"INITIAL FRANCHISE FEE" means the fee paid by a franchisee to a
franchisor for the right to operate an Access Power Franchise.
"INITIAL TRAINING" means the training described in Subsection
2.1(a).
"IP TELEPHONY UNIT" means a Gateway Server or set of Gateway
Servers providing service to a specific market.
"MASTER FRANCHISE" means the rights granted to the Master
Franchisee under this Agreement.
"MASTER FRANCHISE FEE" means the fee described in Section 4.1.
"MASTER FRANCHISE OWNER" means: (i) if the Master Franchisee is
an individual, such individual; (ii) if the Master Franchisee is a
corporation, the individual who owns a majority of the voting and
ownership interests in such corporation; and (iii) if the Master
Franchisee is a partnership, each individual who is, or owns a
majority of the voting and ownership interest in an entity which is, a
general partner of such partnership.
"MASTER FRANCHISE TERRITORY" means all of Canada.
"MASTER FRANCHISEE" means all persons signing the signature page
of this Agreement as Master Franchisee, jointly and individually.
45
"NOTICE OF DEFAULT" means the notices described in Article 11.
"OFFNET" means traditional long distance telephone services that
do not use IP protocol or the Internet.
"PROPRIETARY MARKS" means the service xxxx and logo "Access
Power" and all other trademarks, service marks, trade names, logos and
commercial symbols authorized by the Franchisor as part of the System.
"PROPRIETARY PROPERTY" means the Proprietary Marks, Confidential
Information and copyrighted information of the Franchisor or its
affiliates which the Master Franchisee is entitled to use under this
Agreement.
"ROYALTY FEE" means the fee described in Subsection 4.5(a).
"SOFTWARE" means the computer software licensed to the Master
Franchisee by VocalTec Gateway.
"SUCCEEDING TERM" means the period described in Subsection
17.2(a).
"SUCCESSOR ACCESS POWER INTERNATIONAL MASTER FRANCHISE AGREEMENT"
means the current form of international master franchise agreement for
new Access Power master franchisees at the time the Master Franchisee
elects to enter into such agreement in accordance with Section 17.2.
"SYSTEM" means the Franchisor's system for operating an Access
Power Franchise, which System includes, specific standards and
procedures and Proprietary Property all of which may be improved,
further developed or otherwise modified.
"TRAINEES" means the persons approved by the Franchisor who
attend Initial Training.
"TRANSFER FEE" means the fee described in Subsection 10.2(c)(v).
"UNIQUE CONSIDERATION" means the consideration described in
Subsection 10.3(c).
"UNIT" means either a Company Unit or a Franchise Unit.
SECTION 18.2 OTHER DEFINITIONAL PROVISIONS.
-----------------------------
(a) All of the terms defined in this Agreement shall have
such defined meanings when used in other documents issued under,
or delivered pursuant to, this Agreement unless the context shall
otherwise require or unless specifically otherwise defined in
such other document; and
(b) The term "person" includes any corporation, partnership,
estate, trust, association, branch, bureau, subdivision, venture,
associated group, individual, government, institution, instrumentality
and other entity, enterprise, association or endeavor of every nature
and kind.
46
ARTICLE 19 - GENERAL PROVISIONS
SECTION 19.1 RELEASE OF PRIOR CLAIMS.
-----------------------
By executing this Agreement, the Master Franchisee, and each
successor of the Master Franchisee under this Agreement forever releases
and discharges the Franchisor and its affiliates, its Designees, franchise
sales brokers, if any, or other agents, and their respective officers,
directors, representatives, employees and agents, from any and all
claims of any kind, in law or in equity, which may exist as of the
Agreement Date relating to, in connection with, or arising under this
Agreement or any other agreement between the parties, or relating in
any other way to the conduct of the Franchisor, its affiliates, its
Designees, franchise sales brokers, if any, or other agents, and their
respective officers, directors, representatives, employees and agents
prior to the Agreement Date, including any and all claims, whether
presently known or unknown, suspected or unsuspected, arising under
the franchise, business opportunity, securities, antitrust or other
laws of the United States or Canada.
SECTION 19.2 AMENDMENTS.
----------
Except as specifically provided in this Agreement, the provisions
of this Agreement may not be amended, supplemented, waived or changed
orally, but only by a written document signed by the party as to whom
enforcement of any such amendment, supplement, waiver or modification
is sought and making specific reference to this Agreement. With
respect to the Franchisor, only the President of the Franchisor shall
have the authority to execute any amendment on behalf of the
Franchisor. No other officer, employee or agent of the Franchisor
shall have authority to execute any amendment. This Section is
expressly subject by the terms of Sections 19.4 and 19.8.
SECTION 19.3 PROMOTIONAL ALLOWANCES.
----------------------
Master Franchisee grants Franchisor the right to freely use, with
prior approval, any pictures, information, or biographical material
relating to Master Franchisee or Master Franchisee Access Power
Franchise for use in promotional literature or in any other way
beneficial to the Access Power organization as a whole. Master
Franchisee will cooperate in securing photographs, including obtaining
consents from any persons appearing in photographs. If Franchisor
publishes anything Master Franchisee feels reflects unfairly or
inaccurately on Master Franchisee, Access Power Franchise or an
individual, Franchisor will take all reasonable steps in Franchisor
power to retract the material.
Section 19.4 MODIFICATION OF THE SYSTEM.
--------------------------
THE MASTER FRANCHISEE RECOGNIZES AND AGREES THAT FROM TIME TO
TIME AFTER THE AGREEMENT DATE THE FRANCHISOR MAY REASONABLY CHANGE OR
MODIFY THE SYSTEM. THE MASTER FRANCHISEE AGREES TO ACCEPT AND BE
BOUND BY, ANY SUCH CHANGES IN THE SYSTEM AS IF THEY WERE PART OF THIS
AGREEMENT AT THE TIME OF EXECUTION OF THIS AGREEMENT. THE MASTER
FRANCHISEE WILL MAKE SUCH EXPENDITURES AS SUCH CHANGES OR
MODIFICATIONS OF THE SYSTEM AS THE FRANCHISOR MAY REASONABLY REQUIRE.
47
SECTION 19.5 BINDING EFFECT.
--------------
All of the terms and provisions of this Agreement, whether so
expressed or not, shall be binding upon, inure to the benefit of, and
be enforceable by the parties and their respective personal
representatives, legal representatives, heirs, successors and
permitted assigns.
SECTION 19.6 NOTICES.
-------
All notices, requests, consents and other communications required
or permitted under this Agreement shall be in writing (including
telex, telecopied and telegraphic communication) and shall be (as
elected by the person giving such notice) hand delivered by messenger
or courier service, telecopied, telecommunicated, or mailed (airmail
if international) by registered or certified mail (postage prepaid),
return receipt requested, addressed to:
If to the Franchisor: With a copy to:
Access Power, Inc. Xxxxx X. Xxxxxxx, Esq.
00000 Xxxxxxxx Xxxxx Xxxx Xxxxx X. Xxxxxxx, P.A.
Xxxxx 000 0000 Xxxxx Xxxxxxx Xxxxxxx, Xxxxx 000
Xxxxx Vedra Beach, FL 32082 Xxxx Xxxxx, XX 00000
Attn: Xxxxx Xxxxx, President
If to the Master Franchisee:
__________________________ _________________________
__________________________ _________________________
__________________________ _________________________
Attn: ___________________ Attn: ___________________
or to such other address as any party may designate by notice
complying with the terms of this Section. Each such notice shall be
deemed delivered: (a) on the date delivered if by personal delivery;
(b) on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method; and (c) on the date upon
which the return receipt is signed or delivery is refused or the
notice is designated by the postal authorities as not deliverable, as
the case may be, if mailed.
SECTION 19.7 HEADINGS.
--------
The headings and subheadings contained in this Agreement are for
convenience of reference only, are not to be considered a part of this
Agreement and shall not limit or otherwise affect in any way the
meaning or interpretation of this Agreement.
SECTION 19.8 SEVERABILITY.
------------
48
(a) If any provision of this Agreement or any other agreement
entered into pursuant to this Agreement is contrary to, prohibited by
or deemed invalid under applicable law or regulation, such provision
shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder of this Agreement shall not
be invalidated thereby and shall be given full force and effect so
far as possible. If any provision of this Agreement may be construed
in two or more ways, one of which would render the provision invalid
or otherwise voidable or unenforceable and another of which would
render the provision valid and enforceable, such provision shall
have the meaning that renders it valid and enforceable.
(b) If any applicable law of any jurisdiction requires a
greater prior notice of the termination of or non-renewal of this
Agreement (if permitted) than is required under this Agreement, or
the taking of some other action not required under this Agreement,
or if under any applicable law of any jurisdiction, any provision
of this Agreement or any requirement prescribed by the Franchisor
is invalid or unenforceable, the prior notice and/or other action
required by such law shall be substituted for the comparable
provisions of this Agreement. The Franchisor shall have the right,
in its sole discretion, to modify such invalid or unenforceable
requirement to the extent required to be valid and enforceable.
Such modifications to this Agreement shall be effective only in such
jurisdiction, unless the Franchisor elects to give them greater
applicability, and this Agreement shall be enforced as originally
made and entered into in all other jurisdictions.
SECTION 19.9 WAIVERS.
-------
The failure or delay of any party at any time to require
performance by another party of any provision of this Agreement, even
if known, shall not affect the right of such party to require
performance of that provision or to exercise any right, power or
remedy under this Agreement. Any waiver by any party of any breach of
any provision of this Agreement should not be construed as a waiver of
any continuing or succeeding breach of such provision, a waiver of the
provision itself, or a waiver of any right, power or remedy under this
Agreement. No notice to or demand on any party in any case shall, of
itself, entitle such party to any other or further notice or demand in
similar or other circumstances.
SECTION 19.10 ENFORCEMENT COSTS.
-----------------
If any arbitration, legal action or other proceeding is brought
for the enforcement of this Agreement, or because of an alleged
dispute, breach, default or misrepresentation in connection with any
provision of this Agreement, the successful or prevailing party or
parties shall be entitled to recover reasonable attorneys' fees,
arbitration costs, court costs and all expenses even if not taxable as
arbitration or court costs (including all such fees, costs and
expenses incident to arbitration, appellate, bankruptcy and
post-judgment proceedings), incurred in that action or proceeding, in
addition to any other relief to which such party or parties may be
entitled. Attorneys' fees include paralegal fees, administrative
costs, investigative costs, costs of expert witnesses, court reporter
fees, sales and use taxes, if any, and all other charges billed by the
attorneys to the prevailing party. If the Franchisor is required to
engage legal counsel in connection with any failure by the Master
Franchisee to pay when due any monies owed under this Agreement or
submit when due any reports, information or supporting records, or in
connection with any failure otherwise to comply with this Agreement,
the Master Franchisee must reimburse the Franchisor on demand for all
of the above-listed costs and expenses incurred by it. If the Master
Franchisee is required to engage legal counsel in connection with any
failure by the Franchisor to pay when due any monies owed under this
Agreement or submit when due any reports, information or supporting
records, or in connection with any failure otherwise to comply with
this Agreement, the Franchisor must reimburse the Master Franchisee on
demand for all of the above-listed costs and expenses incurred by it.
SECTION 19.11 JURISDICTION AND VENUE.
----------------------
49
The parties acknowledge that a substantial portion of the
negotiations, anticipated performance and execution of this Agreement
occurred or shall occur in Xxxxx County, Florida, and that, therefore,
without limiting the jurisdiction or venue of any other Federal or
state court, each of the parties irrevocably and unconditionally: (a)
agrees that any suit, action or legal proceeding arising out of or
relating to this Agreement shall be brought in the District Court of
the United States, Northern District of Florida or, if such court
lacks jurisdiction, the courts of record of the State of Florida in
Xxxxx County, Florida; (b) consents to the jurisdiction of each such
court in any suit, action or proceeding; (c) waives any objection
which it may have to the laying of venue of any such suit, action or
proceeding in any of such courts; and (d) agrees that service of any
court paper may be effected on such party by mail at the last known
address, as provided in this Agreement, or in such other manner as may
be provided under applicable laws or court rules in the State of
Florida.
SECTION 19.12 REMEDIES CUMULATIVE.
-------------------
Except as otherwise expressly provided in this Agreement, no
remedy in this Agreement conferred upon any party is intended to be
exclusive of any other remedy. Each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under
this Agreement or now or later existing at law or in equity or by
statute or otherwise. No single or partial exercise by any party of
any right, power or remedy under this Agreement shall preclude any
other or further exercise of such right, power or remedy.
SECTION 19.13 EFFECTIVENESS; COUNTERPARTS.
---------------------------
This Agreement shall not be effective or be binding and
enforceable against the Franchisor until it is accepted by the
Franchisor at its home office in Ponte Vedra Beach, Florida and
executed by the President of the Franchisor. No other officer,
employee or agent of the Franchisor shall have authority to accept
and/or execute this Agreement on behalf of the Franchisor and the
Master Franchisee is advised not to incur any expenses with respect to
opening the Master Franchisee's business until the Master Franchisee
has received a final executed copy of this Agreement from the
Franchisor's home office executed by its President. This Agreement
may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and
the same instrument. Confirmation of execution by telex or by
telecopy or telefax of a facsimile signature page shall be binding
upon any party to such confirmation.
SECTION 19.14 CONSENTS, APPROVALS AND SATISFACTION.
------------------------------------
Whenever the consent or approval of the Franchisor is required
under this Agreement, such consent or approval shall not be
unreasonably withheld or delayed unless specifically stated in this
Agreement to the contrary. All consents or approvals required of the
Franchisor shall not be binding upon the Franchisor unless the consent
or approval is in writing and signed by the President of the
Franchisor. No other officer, employee or agent of the Franchisor
shall have authority to execute any consent or approval on behalf of
the Franchisor. The Franchisor's consent or approval, whenever
required, may be withheld if any default by the Master Franchisee
exists under this Agreement. Anytime the satisfaction of the
Franchisor is required under this Agreement, unless the Agreement
expressly states otherwise such satisfaction shall be determined in
the sole discretion of the Franchisor.
SECTION 19.15 GOVERNING LAW.
-------------
Except to the extent governed by the United States Trademark Act
of 1946 (Xxxxxx Act, 15 U.S.C. Sections 1051 et seq. or the United States
Arbitration Act, 9 U.S.C. Sections 1 et seq.), this Agreement and any other
agreement relating to this Agreement and all transactions contemplated
by this Agreement and any other agreement relating to this Agreement
shall be governed by, and construed and enforced in accordance with,
the internal laws of the State of Florida without regard to principles
of conflicts of laws.
50
SECTION 19.16 INTERPRETATION.
--------------
Each of the parties acknowledge that they have been or have had
the opportunity to have been represented by their own counsel
throughout the negotiations and at the execution of this Agreement and
all of the other documents executed incidental to this Agreement and,
therefore, none of the parties shall, while this Agreement is
effective or after its termination, claim or assert that any
provisions of this Agreement or any of the other documents should be
construed against the drafter of this Agreement or any of the other
documents.
51
SECTION 19.17 ENTIRE AGREEMENT.
----------------
This Agreement, its Exhibits and all other written agreements
related to this Agreement and expressly referenced in this Agreement,
represent the entire understanding and agreement between the parties
with respect to the subject matter of this Agreement, and supersedes
all other negotiations, understandings and representations, if any,
made by and between the parties. No representations, inducements,
promise or agreements, oral or otherwise, if any, not embodied in this
Agreement shall be of any force and effect.
SECTION 19.18 SURVIVAL.
--------
All obligations of the Franchisor and the Master Franchisee which
expressly or by their nature survive the expiration or termination of
this Agreement shall continue in full force and effect subsequent to
and notwithstanding its expiration or termination and until they are
satisfied or by their nature expire.
SECTION 19.19 FORCE MAJEURE.
-------------
Neither the Franchisor nor the Master Franchisee shall be liable
for loss or damage or deemed to be in breach of this Agreement if its
failure to perform its obligations results solely from the following
causes beyond its reasonable control, specifically: (a) transportation
shortages or inadequate supply of equipment, merchandise, supplies,
labor, material, or energy; (b) the imposition of quotas or other import
restrictions; (c) compliance with any applicable law; or (d) war, strikes,
natural disaster or acts of God. Any delay resulting from any of said
causes shall extend performance accordingly or excuse performance, in
whole or in part, as may be reasonable, except that said causes shall
not excuse payments of amounts owed to the Franchisor for any reason.
However, if any such force majeure shall continue for a period in
excess of 6 months, the Franchisor may terminate this Agreement upon
written notice to the Master Franchisee.
SECTION 19.20 THIRD PARTIES.
-------------
Except as provided in this Agreement to the contrary with respect
to any affiliates of the Franchisor, nothing in this Agreement,
whether express or implied, is intended to confer any rights or
remedies under or by reason of this Agreement on any persons
(including other Access Power franchisees) other than the parties and
their respective personal representatives, other legal representatives,
heirs, successors and permitted assigns. Further, except as provided
in this Agreement to the contrary with respect to any Designee of
the Franchisor, nothing in this Agreement is intended to relieve
or discharge the obligation or liability of any third persons to
any party to this Agreement, nor shall any provision give any third
persons any right of subrogation or action over or against any
party to this Agreement.
SECTION 19.21 RIGHT OF PARTIES.
----------------
In the event that the Master Franchisee defaults in performing
any of its obligations under this Agreement, the Franchisor shall have
the right (but not the obligation) to perform the Master Franchisee's
obligations and shall be reimbursed by the Master Franchisee for the
actual costs of so performing, together with accrued interest
permitted under this Agreement on overdue amounts. Interest shall
accrue commencing on the 10th day after demand by the Franchisor for
reimbursement.
Section 19.22 Language.
--------
52
The parties acknowledge having required that this Agreement as
well as all notices, documents, comments and other agreements related
hereto be drafted in the English language: les parties aux presentes
reconnaissent avoir exige que cette convention ainsi que tous avis,
documents, engagements, ou autres ententes s'y rapportant soient
rediges en anglais.
Section 19.23 WAIVER OF PUNITIVE DAMAGES CLAIMS.
---------------------------------
THE PARTIES MUTUALLY AND WILLINGLY 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 THEM, EACH SHALL BE LIMITED TO THE RECOVERY OF ACTUAL DAMAGES
SUSTAINED BY IT.
Section 19.24 WAIVER OF JURY TRIAL.
--------------------
THE PARTIES MUTUALLY AND WILLINGLY WAIVE THE RIGHT TO A TRIAL BY
JURY OF ANY AND ALL CLAIMS MADE BETWEEN THEM WHETHER NOW EXISTING OR
ARISING IN THE FUTURE, INCLUDING ANY AND ALL CLAIMS, DEFENSES,
COUNTERCLAIMS, CROSS CLAIMS, THIRD PARTY CLAIMS AND INTERVENOR'S
CLAIMS WHETHER ARISING FROM OR RELATED TO THE SALE, NEGOTIATION,
EXECUTION, OR PERFORMANCE OF THE TRANSACTIONS TO WHICH THIS AGREEMENT
RELATES.
IN WITNESS WHEREOF, the parties have duly executed and delivered
this Agreement.
Witnesses:
MASTER FRANCHISEE:
____________________________________ ACCESS POWER CANADA ____________
____________________________________ By:__________________________________
Xxx Xxxxx, President
FRANCHISOR:
____________________________________ ACCESS POWER, INC.
____________________________________ By:__________________________________
Xxxxx Xxxxx, President
XXXXX XX XXXXXXX
XXXXXX XX XX. XXXXX
XXXXX XX XXXXXXX
The foregoing instrument was acknowledged before me on April 22,
1998, by Xxxxx Xxxxx, as President of Access Power, Inc., a Florida
corporation, on behalf of the corporation. He personally appeared
before me at the time of notarization.
NOTARY PUBLIC - STATE OF FLORIDA:
sign ____________________________________
53
print ____________________________________
Personally Known _____ OR Produced Identification _____
Type of Identification Produced:
________________________________
The foregoing instrument was acknowledged before me this _____
day of April, 1998, by ____________________, as ___________ of Access
Power Canada, a ____________ corporation, on behalf of the
corporation. He or she personally appeared before me at the time of
notarization.
NOTARY PUBLIC - ___________________________:
sign ____________________________________
print ____________________________________
Personally Known _____ OR Produced Identification _____
Type of Identification Produced:
________________________________
54
Exhibit A to Access Power
International Master Franchise Agreement
FORM OF ACCESS POWER FRANCHISE AGREEMENT
Exhibit B to Access Power
International Master Franchise Agreement
TRADEMARKS GRANTED AND FILED
Exhibit C to Access Power
International Master Franchise Agreement
VOCAL TEC GATEWAY SOFTWARE LICENSE AGREEMENT
Exhibit D to Access Power
International Master License Agreement
DEPLOYMENT/PERFORMANCE SCHEDULE
Period Minimum Minimum Number Network
Cumulative Lines Deployed by other than
Operational Master Franchisee and
Lines Franchisees thereof
--------------------------------------------------------------------------
By September 30, 1999 240 1920
By September 30, 2000 480 3840
By September 30, 2001 720 5760
By September 30, 2002 960 7680
By September 30, 2003 1200 9600
By September 30, 2004 1440 11,520
By September 30, 2005 1680 13,440
By September 30, 2006 1920 15,360
By September 30, 2007 2160 17,280
By September 30, 2008 2400 19,200
Lines refers to number of Internet Telephony lines available for
production service.
The deployment requirement of the Master Franchisee is in effect as
long as: a) Franchisor and its franchisees, excluding Lines deployed
by the Master Franchisee and the franchisees thereof, have deployed
eight times the number of Lines that have been deployed by the Master
Franchisee and the franchisees thereof; and b) The number of Lines
deployed by the Master Franchisee and the franchisees thereof are
below 2400.
Any Lines deployed, by the Master Franchisee, outside of the Master
Franchise Territory, pursuant to subsequent Agreements with the
Franchisor, excluding Lines in the United States or South America, are
to be counted towards the Minimum Cumulative Operational Lines
required of the Master Franchisee.
* Minimum Performance Requirement. THIS MINIMUM PERFORMANCE STANDARD
IS IN NO WAY INTENDED TO INFER THAT THE FRANCHISEE WILL EXPERIENCE
GROSS REVENUES OF ANY PARTICULAR LEVEL.
58
Exhibit E to Access Power
International Master Franchise Agreement
COLLATERAL ASSIGNMENT OF FRANCHISE AGREEMENTS
THIS COLLATERAL ASSIGNMENT OF FRANCHISE AGREEMENTS is signed on
__________________, 199__ by Access Power Canada __________ (the
"Master Franchisee") to Access Power, Inc., a Florida corporation (the
"Franchisor").
BACKGROUND
A. The Franchisor and the Master Franchisee are in the process of
entering into an International Master Franchise Agreement (the
"International Master Franchise Agreement").
B. Section 5.7 of the International Master Franchise Agreement
requires, as security for the obligation of the Master Franchisee to
the Franchisor, that the Master Franchisee collateral assign to the
Franchisor the Master Franchisee's interest, as franchisor, in all
franchise agreements entered into by the Master Franchisee.
The parties agree as follows:
Section 1. Grant of Security Interest.
--------------------------
As security for Master Franchisee monetary and other
obligations to Franchisor or Franchisor Affiliates, Master Franchisee
grants to Franchisor a first priority security interest in all Master
Franchisee business assets, including all telephony hardware and
software, furniture, fixtures, machinery, equipment, inventory and all
other property, (tangible or intangible), Master Franchisee now owns
or later acquires used in Master Franchisee Access Power Franchise and
wherever located, and all Master Franchisee contractual and related
rights under this Agreement and all other agreements between the
parties. Master Franchisee will sign all financing statements,
continuation statements, notices of lien, assignments, or other
documents as required to perfect and maintain Franchisor security
interest. Franchisor agrees to subordinate Franchisor security
interest to: (i) the landlord's lien; (ii) the security interest
of a reputable institutional lender for a loan to Master Franchisee
for working capital purposes; or (iii) the purchase money security
interest of an approved equipment vendor for any equipment Master
Franchisee purchase or lease and use in the operation of Master Franchisee
Access Power Franchise.
Section 2. Master Franchisee's Affirmative Covenants.
-----------------------------------------
(iv) The Master Franchisee covenants and
agrees that it shall faithfully observe and perform all of the
obligations and agreements imposed upon the Master Franchisee under
the franchise agreements.
(v) The Master Franchisee will provide the Franchisor with
copies of all franchise agreements and all notices received in
connection with the franchise agreements.
(vi) From and after the date of this Agreement, the Master
Franchisee's Interest in Franchise Agreements may not be materially
altered, amended or canceled without the prior written consent of
the Franchisor.
59
(vii) The Master Franchisee shall not sell, assign, encumber,
grant or permit any other security interest in or lien or encumbrance
upon the Interest in Franchise Agreements without the written
consent of the Franchisor which shall be at the Franchisor's
sole discretion to grant.
Section 3. Master Franchisee's Representations and Warranties.
--------------------------------------------------
The Master Franchisee represents and warrants:
(i) The Master Franchisee is the sole franchisor under each
franchise agreement free and clear of all liens, security interests
or other encumbrances and has the power and authority to assign and
grant the security interest in the Interest in Franchise Agreements
to the Franchisor; and
(ii) The Master Franchisee has made no prior assignments of
the Interest in Franchise Agreements.
Section 4. Remedies for Default.
--------------------
(i) Upon the occurrence of an Event of Default under the
International Master Franchise Agreement, the Franchisor shall have
any and all rights and remedies available to the Franchisor under
applicable law and pursuant to the International Master Franchise
Agreement, in such order of application as the Franchisor may
determine, all without further notice to the Master Franchisee,
and may execute any documents necessary to effect the foregoing.
(ii) Upon the occurrence of an Event of Default under the
International Master Franchise Agreement, the Franchisor may enforce
this Collateral Assignment by notifying a franchisee under a franchise
agreement in accordance with the notice provision in the Franchise
Agreement. The affidavit or written statement of an officer, agent
or attorney of the Franchisor stating that there has been an Event
of Default by the Master Franchisee shall constitute conclusive
evidence thereof, and a franchisee or any other person is
authorized and directed to rely thereon.
(iii) Upon the occurrence of an Event of Default under the
International Master Franchise Agreement, the Franchisor may elect
to exercise any and all of the Master Franchisee's rights and remedies
under the franchise agreements, without any interference or objection
from the Master Franchisee including receiving any receipt of royalties
and other payments from franchisees.
(iv) The Franchisor may, at its option, take over and enjoy the
benefits of the franchise agreements, exercise the Master Franchisee's
rights under the franchise agreements as franchisor, and perform all
acts in the same manner and to the same extent as the Master Franchisee
might do. The Master Franchisee releases any and all claims which
it has or might have against the Franchisor arising out of such
performance by the Franchisor.
Section 5. Miscellaneous.
-------------
(i) The Franchisor will not be deemed in any manner to have
assumed the Interest in Franchise Agreements, nor shall the Franchisor
be liable to the Master Franchisee by reason of any default by any
party. The Master Franchisee indemnifies and holds the Franchisor
harmless of and from any and all liability, loss or damage that
it may or might incur by reason of any claims or demands against
it based on its alleged assumption of the Master Franchisee's duty and
obligation to perform and discharge the terms, covenants and
agreements of the Franchise Agreements arising prior to actual
assumption of the Interest in Franchise Agreements by the Franchisor.
(ii) All of the foregoing powers granted in this Agreement
to the Franchisor shall be liberally construed. The Franchisor need
not expend its own funds in the exercise of such powers, but if it
does, such amount shall be considered as advances for and on behalf
of the Master Franchisee secured by this Collateral Assignment.
60
(iii) The Franchisor is not the agent, partner, or joint
venturer of the Master Franchisee.
(iv) This Collateral Assignment may be enforced from time to time
by the Franchisor at its discretion, with or without order of any court.
The Franchisor may also at any time cease to enforce this Collateral
Assignment. Any failure on the part of the Franchisor promptly to exercise
any option given or reserved by this Agreement shall not prevent the
exercise of any such option at any time thereafter. The Franchisor
may pursue and enforce any remedy or remedies accorded it in this
Agreement independently of, in conjunction or concurrently with, or
subsequent to its pursuit of enforcement of any remedy or remedies that
it may have under the International Master Franchise Agreement.
IN WITNESS WHEREOF, the Master Franchisee has caused this
Collateral Assignment to be duly executed on the day first above
written.
MASTER FRANCHISEE:
ACCESS POWER CANADA
By:_________________________________
FRANCHISOR:
ACCESS POWER, INC.
By:__________________________________
Xxxxx Xxxxx, President
STATE OF ______________
COUNTY OF _____________
The foregoing instrument was acknowledged before me this _____
day of March, 1998, by __________________, as ______________ of Access
Power Canada _______________, a __________________ corporation, on
behalf of the corporation. He or she personally appeared before me at
the time of notarization.
NOTARY PUBLIC - STATE OF _______________:
sign ____________________________________
print ____________________________________
Personally Known _____ or Produced Identification _____
Type of Identification Produced:
________________________________
STATE OF FLORIDA
61
The foregoing instrument was acknowledged before me this 22nd day
of April, 1998, by Xxxxx Xxxxx, as President of Access Power, Inc., a
Florida corporation, on behalf of the corporation. He personally
appeared before me at the time of notarization.
NOTARY PUBLIC - STATE OF FLORIDA:
sign ____________________________________
print ____________________________________
Personally Known _____ or Produced Identification _____
Type of Identification Produced:
62
Exhibit F to Access Power
International Master Franchise Agreement
RIDER TO UCC-1 FINANCING STATEMENT
The Debtor (Franchisee) grants to the Secured Party (Franchisor)
a security interest in the following described property:
A. All of the Debtor's right, title and interest as Franchisee under
the Access Power Franchise Agreement with the Secured Party of even date
herewith and all related documents;
B. All of the Debtor's Inventory, of whatever type or description,
wherever located now owned or later acquired;
C. All of the Debtor's Accounts, including all notes receivable,
accounts receivable, contract rights and all other forms of customer
obligations now existing and that may at any time come into existence;
D. All of the Debtor's equipment, machinery, furniture, fixtures and
other items of personal property, whether now or later acquired;
E. All of the Debtor's permits, licenses and other governmental
approvals;
F. The Debtor's business on an ongoing basis, together with all good
will of the business, and all of the Debtor's contract rights, customer
lists, price lists, patents, trademarks, service marks, trade names, trade
secrets and other proprietary information;
G. All of the Debtor's cash, certificates of deposit, securities,
instruments and general intangibles, including all cash in the Debtor's
operating accounts;
H. The right to all insurance proceeds of all insurance covering the
Collateral;
I. All proceeds, products, replacements, additions, substitutions
and accessions of and to all the foregoing; and
J. All personal property of the Debtor, whether now or later existing
or now owned or later acquired,of every kind and description, tangible or
intangible, now or later in the possession, custody or control of the Secured
Party, now or later existing.
The Debtor's personal assets including consumer goods are not subject
to this security interest
63
