EXHIBIT 10.1
NETSPACE(R)
FRANCHISE AGREEMENT
THIS FRANCHISE AGREEMENT (the "Agreement") is made and entered into
this ___ day of __________, by and between NETFRAN DEVELOPMENT CORP., a
corporation formed under Florida law, with its principal business address at
0000 X.X. 000xx Xxxxxxx, 0xx Xxxxx, Xxxxx, Xxxxxxx 00000 (referred to in this
Agreement as "we, "us" or "our"), and __________________________, whose
principal business address is _______________________________, (referred to in
this Agreement as "you", "your" or "owner").
1. PREAMBLES AND GRANT OF FRANCHISE.
1.1. PREAMBLES. We have expended considerable time and effort in developing
a business format franchise that provides Internet web site design,
hosting, yellowpage listing, updating, maintenance, administration,
e-mail marketing, consulting services, and web site promotions, as well
as related services, to businesses, professionals and individuals.
These businesses operate under the NETSPACE(R) name and under
distinctive business formats, methods, procedures, designs, layouts,
standards and specifications, all of which we may improve, further
develop or otherwise modify from time to time. We use, promote and
license certain trademarks, service marks and other commercial symbols
in the operation of NETSPACE(R) businesses, including the
NETSPACE(R) trademarks and service marks and associated logo
(collectively, the "Marks"). We grant franchises to persons who meet
our qualifications and are willing to undertake the investment and
effort required to own and operate an NETSPACE(R) business offering the
products and services we authorize and approve and utilizing our
business formats, methods, procedures, signs, designs, layouts,
equipment, standards and specifications and the Marks (the "System"),
irrespective of the media we use to document the System. You have
indicated to us by your actions and statements that you are desirous of
a franchise to own and operate a NETSPACE(R) business. The Marks,
together with the System and the franchise license granted herein are
referred to collectively herein as the "BUSINESS."
1.2. ACKNOWLEDGMENTS. You acknowledge that you have read this Agreement and
our Franchise Offering Circular and understand and accept the terms,
conditions and covenants contained in this Agreement as being
reasonably necessary to maintain our high standards of quality and
service and the uniformity of those standards at each NETSPACE(R)
business and thereby to protect and preserve the goodwill of the Marks.
You acknowledge that you have conducted an independent investigation of
the business venture contemplated by this Agreement and recognize that,
like any other business, the nature of the business conducted by a
NETSPACE(R) business may evolve and change over time,
that an investment in a NETSPACE(R) business involves business risks
and that your reception to training, business abilities and efforts are
vital to the success of the venture. Any information you acquire from
other NETSPACE(R) franchisees relating to their sales, profits or cash
flows does not constitute information obtained from us, nor do we make
any representations as to the accuracy of any such information. All
business dealings between you and our officers, directors and employees
as a result of this Agreement are solely between you and us. You
further acknowledge that we have advised you to seek franchise counsel
to review and evaluate this Agreement.
1.3. REPRESENTATION. You represent to us, as an inducement to your entry
into this Agreement, that all statements you have made and all
materials you have submitted to us in connection with your purchase of
the franchise are accurate and complete and that you have made no
misrepresentations or material omissions in obtaining the franchise. We
have approved of your purchasing a franchise in reliance upon all of
your representations.
1.4. CORPORATE OR PARTNERSHIP FRANCHISEE. If you are at any time a
corporation or partnership, you agree and represent that:
1.4.1. You will have the authority to execute, deliver and perform
your obligations under this Agreement and are duly organized
or formed and validly existing in good standing under the laws
of the state of your incorporation or formation. You will
notify us within five (5) days whenever there is a change in
your corporate status or whenever you receive service of
process for any reason;
1.4.2. Your organizational documents or partnership agreement will
recite that the issuance and transfer of any ownership
interests in you are restricted by the terms of this
Agreement, and all certificates and other documents
representing ownership interests in you will bear a legend
referring to the restrictions of this Agreement;
1.4.3. Appendix "A" to this Agreement will completely and accurately
describe all of your owners and their interests in you; and
1.4.4. Each of your owners, at any time during the term of this
Agreement, will execute an agreement in the form that we
prescribe (see Appendix "B" to this Agreement) undertaking to
be bound jointly and severally by all provisions of this
Agreement and any ancillary agreements between you and us that
bind you. You and your owners agree to execute and deliver to
us such revised copies of Appendix "A" as may be necessary to
reflect any changes in the information contained therein and
to furnish such other information about your organization or
information as we may request within five (5) days of change.
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1.5. GRANT OF FRANCHISE. You desire a franchise to own and operate a
NETSPACE(R) business. Subject to the terms of and upon the conditions
contained in this Agreement, we hereby grant you a franchise (the
"Franchise") to operate a NETSPACE(R) BUSINESS and a license to use the
Marks and the System in the operation thereof, for a term commencing on
the date of this Agreement and expiring on the tenth (10th)
anniversary, unless sooner terminated in accordance with Article 14
hereof.
1.6. YOUR PERFORMANCE. You agree that you will at all times faithfully,
honestly and diligently perform your obligations hereunder,
continuously exert your best efforts to promote and enhance the
BUSINESS and not engage in any other business or activity that
conflicts with your obligations to operate the BUSINESS in compliance
with this Agreement.
1.7. TERRITORY. You shall operate your franchise only within the Territory
described as follows:
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1.8. RIGHTS WE RESERVE. We (and our affiliates) retain the right in our sole
discretion to:
1.8.1. Open and establish, and grant to franchisees the right to
establish NETSPACE(R) businesses anywhere outside your
Territory, on such terms and conditions as we deem
appropriate.
2. BUSINESS DEVELOPMENT.
2.1. BUSINESS DEVELOPMENT. You are responsible for developing the BUSINESS.
We will furnish you with mandatory specifications for a NETSPACE(R)
business, including requirements for image, equipment, signs and other
suggestions. You acknowledge that, following your signing this
Agreement, we will approve a location (the "Location") for your
BUSINESS and office location. You acknowledge and agree that our
recommendation or approval of the Location, and any information
regarding the Location communicated to you, do not constitute a
representation or warranty of any kind, express or implied, as to the
suitability of the Location for a NETSPACE(R) business or for any other
purpose. Our recommendation or approval of the Location indicates only
that we believe that the Location falls within the acceptable criteria
for locations that we have established as of the time of our
recommendation or approval of the Location. You acknowledge and agree
that your acceptance of the Location is based on your own independent
investigation of the suitability of the Location. You acknowledge and
agree that our review and approval of any construction plans you submit
to us for approval under this paragraph (as well as any inspections we
make of your premises during construction of the BUSINESS) are solely
to assure your compliance with the System. You expressly represent and
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warrant to us that the BUSINESS will be built and operated in
compliance with all local, state and federal laws, ordinances, rules
and regulations.
2.2. YOUR OBLIGATIONS. You agree, at your own expense, to do the following
with respect to developing the BUSINESS:
2.2.1. Secure all financing required to develop and operate the
BUSINESS;
2.2.2. Research the requirements for and obtain all permits and
licenses required to operate the BUSINESS;
2.2.3. Purchase or lease all equipment required for the BUSINESS; and
2.2.4. Purchase an initial inventory of authorized and approved
ancillary goods, materials and supplies.
2.3. BUSINESS COMMENCEMENT. You agree not to commence operation of the
BUSINESS until:
2.3.1. Pre-commencement training has been completed to our
satisfaction;
2.3.2. The initial franchise fee and all other amounts then due to us
have been paid; and
2.3.3. We have been furnished with copies of all insurance polices
required by this Agreement, or such other evidence of
insurance coverage and payment of premiums as we request.
2.4. COMMENCEMENT DEADLINE. You agree to commence operation of the BUSINESS
within sixty (60) days after the execution of this Agreement and within
ten (10) days after you have completed initial training to our
satisfaction.
2.5. INITIAL LOCAL MARKETING. You agree to conduct initial local marketing
for the BUSINESS and to expend not less than Two Thousand Five Hundred
($2,500) Dollars (the "Initial Local Marketing Expense") for such
purpose. Such initial local marketing will utilize the marketing and
public relations programs and media and advertising materials we have
developed or approved. Such initial local marketing shall be conducted
at such times as we consider prudent.
3. FEES.
3.1. INITIAL FRANCHISE FEE. You agree to pay us a nonrecurring and
nonrefundable initial lump sum franchise fee in the amount of Thirty
Thousand ($30,000) Dollars, which, if fully paid by you, will be fully
earned by us upon the execution of this Agreement.
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3.2. ROYALTY. You agree to pay us a non-refundable royalty ("Royalty") in
the amount of ten (10%) percent of Gross Revenue each calendar month
(the "Accounting Period"), with a minimum required Royalty which shall
be no less than One Hundred ($100) Dollars. You are not required to pay
us a minimum required Royalty until after the completion of the first
full Accounting Period after ninety (90) days have expired from the
date of execution of this Agreement, at which time a minimum required
Royalty will be payable to us each Accounting Period during the
remainder of the term of the Agreement. We must receive the Royalty on
or before the third (3rd) day following the end of each preceding
Accounting Period via bank-wire transfer, or other form of delivery
that we approve, as well as your statement of Gross Revenue, in
approved form, via facsimile transmission or Internet e-mail.
3.3. DEFINITION OF "GROSS REVENUE". As used in this Agreement, the term
"Gross Revenue" means all revenue you derive from operating the
BUSINESS, and whether from cash, check, credit, barter, or other
transactions, but excluding all federal, state or municipal sales, use
or service taxes collected from customers and paid to the appropriate
taxing authority and excluding customer refunds, adjustments, credits
and allowances actually made by the BUSINESS in compliance with "The
Methods of Operation" (defined in Article 4.5).
3.4. INTEREST ON LATE PAYMENTS. Interest at the highest rate allowed under
applicable law will be due on late payments in excess of thirty (30)
days past due by either party, calculated from the date due until the
date paid. In no circumstances will either party be responsible for
interest on late payments to the other party if such late payment is
due to circumstances that are beyond the party's control.
3.5. APPLICATION OF PAYMENTS. Notwithstanding any designation you might
make, we have sole discretion to apply any amounts collected from you
to any of your past due indebtedness to us. You acknowledge and agree
that we have the right to set off any amounts you or your owners owe us
against any amounts we might owe you or your owners.
3.6. WEB SITE SETUP FEE. For each of your client accounts ("Client
Accounts"), you agree to pay us a web site setup fee ("Web Site Setup
Fee") prior to the initiation of such service(s) to your Client
Accounts, at our then-current price for providing such services. See
Appendix D to the Agreement for our current pricing schedule.
3.7. ONGOING HOSTING AND MAINTENANCE FEE. You agree to pay us a
non-refundable ongoing hosting and maintenance fee ("Ongoing Hosting
and Maintenance Fee) in the amount of forty (40%) percent of Gross
Revenue each calendar month, pursuant to our Methods of Operation (see
Article 4.5. below). The Ongoing Hosting and Maintenance Fee is payable
at the same time and in the same manner as the Royalty.
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4. TRAINING.
4.1. TRAINING. Before the BUSINESS begins operating, we will furnish initial
training on the operation of a NETSPACE(R) business to you (or, if you
are a corporation or partnership, your managing shareholder or
partner), and one (1) additional employee you elect to enroll in the
training program. Initial training consists of five (5) working days of
training for you (or your managing shareholder or partner), and your
employee to be furnished at our training facility or at an operating
NETSPACE(R) business. No other additional or refresher courses are
required for you to commence operation of your franchise. You (or your
managing shareholder or partner), and your employee are required to
complete the initial training to our satisfaction. You also are
required to participate in all other activities required to operate the
NETSPACE(R) franchise. Although we will furnish initial training to you
(or your managing shareholder or partner) and one (1) additional
employee at no additional fee or other charge, you will be responsible
for all travel and living expenses which you (or your managing
shareholder or partner) and your employee incur in connection with
training. If we determine that you (or your managing shareholder or
partner) are unable to complete initial training to our satisfaction,
by written and/or oral exam or otherwise, we have the right to
terminate this Agreement pursuant to Article 14 hereof.
4.2. REFRESHER TRAINING. We may require you (or your managing shareholder or
partner) and/or previously trained and experienced employees to attend
refresher training courses at such times and locations that we
designate, and we may charge reasonable fees for such courses. We may
require you to pay us our then current fees for our training your new
employees hired after your BUSINESS commences operations.
4.3. GENERAL GUIDANCE. We will advise you from time to time regarding
operating issues concerning the BUSINESS disclosed by reports you
submit to us or on-site inspections we make. Such guidance will, at our
discretion, be furnished in our "Operations Manual" (defined in Article
4.5. below), bulletins or other written materials and/or during
telephone consultations and/or consultations at our office or the
BUSINESS. In addition, we will furnish guidance to you with respect to:
4.3.1. Standards, specifications and operating procedures and methods
utilized by the BUSINESS;
4.3.2. Purchasing required ancillary goods, equipment, materials,
supplies and services;
4.3.3. Advertising and marketing programs;
4.3.4. Employee training; and
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4.3.5. Administrative, bookkeeping and accounting procedures and
services.
4.4. ADDITIONAL GUIDANCE. During the term of this Agreement, additional
guidance may be provided in any of the following ways:
4.4.1. Telephone and Internet e-mail consultation during such times
as are outlined in the Operations Manual (see Article 4.5.
below);
4.4.2. Buying advisory services whereby we may provide you with lists
of sources and approved suppliers for our ancillary goods,
services, equipment, etc.;
4.4.3. Ongoing marketing programs to fulfill our obligations in
Articles 2.5. and 9. of this Agreement;
4.4.4. Newsletter services whereby we may inform you periodically
about the goings-on in the NETSPACE(R) franchise program;
4.4.5. Meetings, seminars or conventions whereby we may get together
with you and other NETSPACE(R) franchisees for business or
social purposes;
4.4.6. Research and development regarding Methods of Operation (see
Article 4.5. below); and/or
4.4.7. At your request, we will furnish additional guidance and
assistance and, in such a case, may charge the PER DIEM fees
and charges we establish from time to time. If you request, or
if we require, additional or special training for your
employees, all of the expenses that we incur in connection
with such training, including PER DIEM charges and travel and
living expenses for our personnel, will be your
responsibility.
4.5. OPERATIONS MANUAL. During the term of this Agreement, we will allow you
to use one (1) copy of our operations manual ("Operations Manual"),
consisting of such materials (possibly including, but not limited to,
audio tapes, videotapes, magnetic media, computer software, access to
our Internet home page, and written materials) that we furnish to
franchisees from time to time for use in operating a NETSPACE(R)
business. The Operations Manual contains the System and other
information and rules that we prescribe from time to time for the
operation of a NETSPACE(R) business and information relating to your
other obligations under this Agreement and related agreements, which,
taken together, we refer to as methods of operation ("Methods of
Operation"). The Operations Manual may be modified by us from time to
time to reflect changes in Methods of Operation. You agree to keep your
copy of the Operations Manual current and in a secure location at the
BUSINESS. In the event of a dispute relating to its contents, the
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master copy of the Operations Manual we maintain at our principal
office will be controlling. YOU MAY NOT AT ANY TIME COPY, DUPLICATE,
RECORD OR OTHERWISE REPRODUCE ANY PART OF THE OPERATIONS MANUAL. If
your copy of the Operations Manual is lost, destroyed or significantly
damaged, you agree to obtain a replacement copy at our then applicable
charge.
5. MARKS.
5.1. OWNERSHIP AND GOODWILL OF MARKS. Your right to use the Marks is derived
solely from this Agreement and limited to your operation of the
BUSINESS pursuant to and in compliance with this Agreement and Methods
of Operation, which we prescribe from time to time during its term.
Your unauthorized use of the Marks will be a breach of this Agreement
and an infringement of our rights in and to the Marks. You acknowledge
and agree that your usage of the Marks and any goodwill established by
such use will be exclusively for our benefit and that this Agreement
does not confer any goodwill or other interests in the Marks upon you
(other than the right to operate the BUSINESS in compliance with this
Agreement). All provisions of this Agreement applicable to the Marks
apply to any additional proprietary trademarks and service marks and
commercial symbols we authorize you to use.
5.2. YOUR CORPORATE NAME. You are to conduct the BUSINESS under the
NETSPACE(R) name or under such other nameS that we may specify from
time to time in accordance with our Methods of Operation. You may use
your own personal name or a name of your choosing, with our prior
approval, in registering the BUSINESS with state, local and county
authorities for licenses, permits, bonds, partnerships, or
corporations, or in establishing a bank account. Unless otherwise
specified in writing by us, the name chosen for said registration(s) or
bank account is to be followed by "dba, NETSPACE(SM)". Any bank account
related to the franchise business may not be established using the
NETSPACE(R) name without our prior permission.
5.3. LIMITATIONS ON YOUR USE OF MARKS. You agree to use the Marks as the
sole identification of the BUSINESS, except that you agree to identify
yourself as the independent owner thereof in the manner we prescribe.
You may not use any Marks as part of any corporate or legal business
name or as part of an Internet domain name or Internet e-mail address
or with any prefix, suffix or other modifying words, terms, designs or
symbols (other than logos licensed to you hereunder), or in any
modified form, nor may you use any Marks in connection with the
performance or sale of any unauthorized services or products or in any
other manner we have not expressly authorized in writing. You may use
the NETSPACE(R) name as part of a Internet domain name or e-mail
address as long as such domain name or e-mail address is approved by us
in
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writing prior to such use. No Marks may be used in any advertising
concerning the transfer, sale or other disposition of the BUSINESS or
an ownership interest in you. You agree to display the Marks
prominently in the manner we prescribe at the BUSINESS, on supplies or
materials we designate and in connection with forms and advertising and
marketing materials. You agree to give such notices of trademark and
service marks registrations; i.e., "(R)", "(TM)", as we specify and to
obtain any fictitiouS or assumed name registrations required under
applicable law. You agree to withdraw any fictitious or assumed name
registrations immediately upon termination or expiration of this
Franchise Agreement.
5.4. NOTIFICATION OF INFRINGEMENTS AND CLAIMS. You agree to notify us
immediately of any apparent infringement or challenge to your use of
any Marks, or of any claim by any person of any rights in any Marks,
and agree not to communicate with any person other than us, our
attorneys and your attorneys in connection with any such infringement,
challenge or claim. We have sole discretion to take such action as we
deem appropriate and the right to control exclusively any litigation,
United State Patent and Trademark Office ("USPTO") proceeding or any
other administrative proceeding arising out of any such infringement,
challenge or claim or otherwise relating to any Marks. You agree to
sign any and all instruments and documents, render such assistance and
do such acts and things as, in the opinion of our attorneys, may be
necessary or advisable to protect and maintain our interests in any
litigation or USPTO proceeding or other proceeding or otherwise to
protect and maintain our interests in the Marks.
5.5. DISCONTINUANCE OF USE OF MARKS. If it becomes advisable at any time in
our sole discretion for us and/or you to modify or discontinue the use
of any Marks and/or use one or more additional or substitute trademarks
or service marks, you agree to comply with our directions within a
reasonable time after receiving notice thereof. We will not be
obligated to reimburse you for any loss of revenue attributed to any
modified or discontinued Marks or for any expenditures you make to
promote a modified or substitute trademark or service xxxx.
6. CONFIDENTIAL INFORMATION.
6.1. DETERMINATION OF CONFIDENTIAL INFORMATION. We possess (and will
continue to develop and acquire), and may disclose to you, certain
confidential information (the "Confidential Information") relating to
the development and operation of NETSPACE(R) businesses, which may
include (without limitation):
6.1.1. The System, the Operations Manual, any other proprietary
materials, the sales and marketing techniques used, and
knowledge of and experience in developing and operating
NETSPACE(R) businesses;
6.1.2. Marketing and advertising programs for NETSPACE(R)
businesses;
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6.1.3. Knowledge of specifications for and suppliers of certain
ancillary goods, services, equipment, materials and supplies;
and
6.1.4. Knowledge of the operating results and financial performance
of NETSPACE(R) businesses other than the BUSINESS.
6.2. FOR BUSINESS USE ONLY. You acknowledge and agree that you will not
acquire any interest in Confidential Information, other than the right
to utilize Confidential Information disclosed to you in operating the
BUSINESS during the term of this Agreement, and that the use or
duplication of any Confidential Information in any other business would
constitute an unfair method of competition. You further acknowledge and
agree that Confidential Information is proprietary, includes our trade
secrets and is disclosed to you solely on the condition that you agree,
and you do hereby agree, that you:
6.2.1 Will not use Confidential Information in any other business
capacity;
6.2.2 Will maintain the absolute confidentiality of Confidential
Information during and after the term of this Agreement;
6.2.3 Will not make unauthorized copies of any portion of
Confidential Information disclosed via electronic medium or in
written or other tangible form; and
6.2.4 Will adopt and implement all reasonable procedures that we
prescribe from time to time to prevent unauthorized use or
disclosure of Confidential Information, including, without
limitation, restrictions on disclosure thereof to BUSINESS
personnel and others.
6.3 IDEAS, CONCEPTS, TECHNIQUES OR MATERIALS. All ideas, concepts,
techniques or materials relating to a NETSPACE(R) business, whether or
not constituting protectable intellectual property, and whether createD
by or on behalf of you or your owners, will be promptly disclosed to
us, deemed to be our sole and exclusive property and part of the System
and deemed to be works made for hire for us. You and your owners agree
to sign whatever assignment or other documents we may request from time
to time to evidence our ownership or to assist us in securing
intellectual property rights in such ideas, concepts, techniques or
materials.
6.4. USE OF CONFIDENTIAL INFORMATION. During the term or any extension or
renewal or after termination (regardless of the cause of termination)
or expiration of this Agreement, you shall not communicate with the
clients of the BUSINESS, divulge, or use for the benefit of any other
party any Confidential Information, techniques, or Methods of Operation
of the BUSINESS. However, to assist you in operating the BUSINESS,
normal operating procedures may be divulged to individuals who are
specifically employed by you.
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7. EXCLUSIVE RELATIONSHIP.
7.1 EXCLUSIVE DEALINGS. You acknowledge and agree that we would be unable
to protect Confidential Information against unauthorized use or
disclosure or to encourage a free exchange of ideas and information
among NETSPACE(R) businesses if franchised owners of NETSPACE(R)
businesses were permitted to hold interests in or perform services for
a Competitive Business (defined below). You also acknowledge that we
have granted the Franchise to you in consideration of and reliance upon
your agreement to deal exclusively with us. You therefore agree that,
during the term of this Agreement, neither you nor any of your owners
(nor any of your or your owners' spouses, children or other relatives
by blood or marriage) will:
7.1.1 Have any direct or indirect interest as a disclosed or
beneficial owner in a Competitive Business;
7.1.2 Perform services as a director, officer, manager, employee,
consultant, representative, agent or otherwise for a
Competitive Business; or;
7.1.3. Recruit or hire any person who is our employee or the employee
of any NETSPACE(R) business, oR otherwise directly or
indirectly induce such person to leave his or her employment,
without obtaining the prior written permission of that
person's employer; or;
7.1.4. Divert or attempt to divert any business, revenue, or any
former or existing clients of the BUSINESS to any Competitive
Business, by direct or indirect inducement or in any other
manner.
7.2. COMPETITIVE BUSINESS. The term "Competitive Business" as used in this
Agreement means any business operating, or granting franchises or
licenses to others to operate, any BUSINESS which is similar to this
business (other than a NETSPACE(R) business operated under a franchise
agreement with us).
8. METHODS OF OPERATION.
8.1. COMPLIANCE WITH METHODS OF OPERATION. You acknowledge and agree that
your operation and maintenance of the BUSINESS in accordance with
Methods of Operation (defined in Article 4.5.) is essential to preserve
the goodwill of the Marks and all NETSPACE(R) businesses. Therefore, at
all times during the term of thiS Agreement, you agree to operate and
maintain the BUSINESS in accordance with Methods of Operation, as we
periodically modify and supplement them during the term of this
Agreement. Methods of Operation may regulate any one or more of the
following with respect to the BUSINESS:
8.1.1. Replacement of obsolete or worn out equipment;
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8.1.2. Types, models and brands of required equipment, materials and
supplies;
8.1.3. Required or authorized services, ancillary goods and
categories for same;
8.1.4. Designated or approved suppliers (which may be limited to or
include us) of ancillary goods, services, equipment, materials
and supplies;
8.1.5. Terms and conditions of the sale and delivery of, and terms
and methods of payment for, ancillary goods, services,
including direct labor, materials and supplies that you obtain
from us, our affiliates or others;
8.1.6. Sales, marketing, advertising and promotional programs and
materials and media used in such programs;
8.1.7. Use of the Marks;
8.1.8. Staffing levels for the BUSINESS and matters relating to
managing the BUSINESS; communication to us of the identities
of the BUSINESS' personnel; and qualifications, training,
dress and appearance of employees;
8.1.9. Days and hours of operation of the BUSINESS;
8.1.10. Participation in market research and testing and services and
ancillary goods development programs;
8.1.11. Acceptance of credit cards, other payment systems and check
verification services;
8.1.12. Bookkeeping, accounting, data processing and record keeping
systems and forms; methods, formats, content and frequency of
reports to us of sales, revenue, financial performance and
condition; and furnishing tax returns and other operating and
financial information to us;
8.1.13. Types, amounts, terms and conditions of insurance coverage
required to be carried for the BUSINESS and standards for
underwriters of policies providing required insurance
coverage; our protection and rights under such policies as an
additional named insured; required or impermissible insurance
contract provisions; assignment of policy rights to us;
periodic verification of insurance coverage that must be
furnished to us; our right to obtain insurance coverage for
the BUSINESS at your expense if you fail to obtain required
coverage; our right to defend claims; and similar matters
relating to insured and uninsured claims;
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8.1.14. Complying with applicable laws; obtaining required licenses
and permits; adhering to good business practices; observing
high standards of honesty, integrity, fair dealing and ethical
business conduct in all dealings with customers, suppliers and
us; and notifying us if any action, suit or proceeding is
commenced against you or the BUSINESS; and
8.1.15. Regulation of such other aspects of the operation and
maintenance of the BUSINESS that we determine from time to
time to be useful to preserve or enhance the efficient
operation, image or goodwill of the Marks and NETSPACE(R)
businesses.
8.2. PROVISIONS OF THIS AGREEMENT. You agree that Methods of Operation
prescribed from time to time in the Operations Manual, or otherwise
communicated to you in writing or other tangible form, constitute
provisions of this Agreement as if fully set forth herein. All
references to this Agreement include all Methods of Operation as
periodically modified.
8.3. MODIFICIATION OF METHODS OF OPERATION. We may periodically modify
Methods of Operation, as we determine, and any such modifications may
obligate you to invest additional capital in the BUSINESS ("Capital
Additions") and/or incur higher operating costs; provided, however,
that such modifications will not alter your fundamental status and
rights under this Agreement. We will not obligate you to make any
Capital Additions when such investment cannot, in our reasonable
judgement, be amortized during the remaining term of this Agreement,
unless we agree to extend the term of this Agreement so that such
additional investment, in our reasonable judgment, may be amortized, or
unless such investment is necessary in order to comply with applicable
laws.
9. MARKETING.
9.1. BY US. Recognizing the value of advertising and marketing to the
goodwill and public image of NETSPACE(R) businesses, we have
established an advertising fund (the "Advertising Fund") for such
advertising, marketing and public relations programs and materials as
we deem necessary or appropriate in our sole discretion. You agree to
contribute to the Advertising Fund one (1%) percent of Gross Revenue
(the "Ad Fee), payable in the same manner as the Royalty due hereunder.
We will direct all programs financed by the Advertising Fund, with sole
discretion over the creative concepts materials and endorsements used
therein and the geographic market and media placement and allocation
thereof. You agree that the Advertising Fund may be used to pay the
costs of preparing and producing video, audio and written advertising
materials, administering regional and multi-regional advertising
programs, including, without limitation, purchasing direct mail and
other media advertising and employing advertising, promotion and
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marketing agencies to assist therewith and supporting public relations,
market research and other advertising promotion and marketing
activities and amounts expended pursuant to Article 9.2. below. The
Advertising Fund will furnish you with samples of advertising,
marketing formats, promotional formats and other materials at no
additional cost to you when we deem appropriate. Multiple copies of
such materials will be furnished to you at our direct cost of producing
them plus any related shipping handling and storage charges.
9.2. ACCOUNTING. The Advertising Fund will be accounted for separately from
our other funds and will not be used to defray any of our general
operating expenses, except for such reasonable salaries, administrative
costs, travel expenses and overhead as we may incur in activities
related to the administration of the Advertising Fund and its programs
including, without limitation, conducting market research, preparing
advertising promotion and marketing materials, and collecting and
accounting for contributions to the Advertising Fund. We may spend, on
behalf of the Advertising Fund, in any fiscal year, an amount that is
greater or less than the aggregate contribution of all
NETSPACE(R) businesses to the Advertising Fund in that year and the
Advertising Fund may borrow from us or others to cover deficits or
invest any surplus for future use. All interest earned on monies
contributed to the Advertising Fund will be used to pay advertising
costs before other assets of the Advertising Fund are expended. We will
prepare an annual statement of monies collected and costs incurred by
the Advertising Fund and furnish the statement to you upon written
request. We have the right to cause the Advertising Fund to be
incorporated or operated through a separate entity at such time as we
deem appropriate and such successor entity will have all of the rights
and duties specified herein.
9.3. PROPORTIONALITY. You acknowledge that the Advertising Fund is intended
to maximize recognition of the Marks and patronage of NETSPACE(R)
businesses. Although we will endeavor to utilize the Advertising Fund
to develop advertising and marketing materials and programs and to
place advertising that will benefit all NETSPACE(R) businesses, we
undertake no obligation to ensure that expenditures by the Advertising
Fund in or affecting any geographic area are proportionate or
equivalent to the contributions to the Advertising Fund by NETSPACE(R)
businesses operating in that geographic area. Nor are we under any
obligation to ensure that any NETSPACE(R) business will benefit
directly or in proportion to its Ad Fees paid to the Advertising Fund
from the development of advertising and marketing materials or the
placement of advertising. Except as expressly provided in this Article,
we assume no direct or indirect liability or obligation to you with
respect to collecting amounts due to, or maintaining, directing or
administering the Advertising Fund.
9.4. DEFERRALS OR REDUCTIONS. We reserve the right to defer or reduce
contributions of a NETSPACE(R) business franchisee and, upon thirty
(30) days' prior written notice to you, to reduce or suspend your
payment of Ad Fees to and suspend operations of the Advertising Fund
for one or more periods of any length and to terminate (and if
terminated to reinstate) the Advertising Fund. If the Advertising Fund
is terminated, all unspent monies on the date of termination will be
distributed to
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our franchisees in proportion to their respective contributions to the
Advertising Fund during the preceding three (3) month period, and
amounts required to be paid pursuant to Article 9.1. above shall be
added to amounts required to be expended pursuant to Article 9.5.
below.
9.5. BY YOU. In addition to the Ad Fees you pay to the Advertising Fund and
the Start-Up Marketing Expense, you agree to spend annually for
advertising and promotion of the BUSINESS not less than Six Hundred
($600) Dollars a month. We may reasonably increase this amount from
time to time. You agree as part of your advertising and promotion of
the business to participate in local business to business trade shows.
9.6. PROOF OF EXPENDITURE. We may review your books and records from time to
time to determine your expenditures for such advertising and promotion.
Proof of expenditures is nevertheless your burden during the term of
this Agreement.
9.7. NOTHING BUT THE TRUTH. You agree that any advertising, promotion and
marketing you conduct will be completely clear and factual and not
misleading and conform to the highest standards of ethical marketing
and the promotion policies which we prescribe from time to time.
Samples of all advertising, promotional and marketing materials which
we have not prepared or previously approved must be submitted to us for
approval before you use them. If you do not receive written disapproval
within thirty (30) days after our receipt of such materials, we will be
deemed to have given the required approval. You may not use any
advertising or promotional materials that we have disapproved. We own
the copyrights to anything so submitted, whether approved by us or not.
10. RECORDS, REPORTS, AND FINANCIAL STATEMENTS.
10.1. BOOKKEEPING. You agree to establish and maintain at your own expense a
bookkeeping, accounting and record keeping system conforming to the
requirements and formats we prescribe from time to time. We may require
you to use approved computer hardware and software in order to maintain
certain sales data and other information. We may require you to use an
accountant approved by us in advance by us. You agree to furnish to us,
upon our request, on such forms that we prescribe, without limitation,
such records, reports, annual federal tax returns, and financial
statements as we may require from time to time.
10.2. VERIFICATION. You agree to verify and sign each report and financial
statement in the manner we prescribe. We have the right to disclose
data derived from such reports without identifying you. We also have
the right to require you to have reviewed or audited financial
statements prepared on an annual basis. Moreover, we have the right, as
often as we deem appropriate, including on a daily basis, to access the
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computer systems that you are required to maintain in connection with
the operation of the BUSINESS and to retrieve all information relating
to the BUSINESS' operations.
11. INSPECTIONS AND AUDITS.
11.1. OUR RIGHTS TO INSPECT THE BUSINESS. To determine whether you and the
BUSINESS are complying with this Agreement and Methods of Operation, we
and our designated agents have the right at any time during your
regular business hours, and without prior notice to you, to:
11.1.1. Inspect your operation of the BUSINESS;
11.1.2. Observe, photograph and videotape the operations of the
BUSINESS for such consecutive or intermittent periods, as we
deem necessary;
11.1.3. Remove samples of any ancillary goods, materials or supplies
for testing and analysis;
11.1.4. Interview personnel and customers of the BUSINESS; and
11.1.5. Inspect and copy any books, records and documents relating to
your operation of the BUSINESS.
11.2. COOPERATION. You agree to cooperate with us fully in connection with
any such inspections, observations, photographing, videotaping, product
removal and interviews. You agree to present to your customers such
evaluation forms that we periodically prescribe and to participate
and/or request your customers to participate in any surveys performed
by us or on our behalf.
11.3. OUR RIGHT TO AUDIT. We have the right at any time during regular
business hours, and without prior notice to you, to inspect and audit,
or cause to be inspected and audited, your (if you are a corporation or
partnership) and the BUSINESS' business, bookkeeping and accounting
records, sales and income tax records and returns and other records.
You agree to cooperate fully with our representatives and independent
accountants we hire to conduct any such inspection or audit. In the
event such inspection or audit is made necessary by your failure to
furnish reports, supporting records or other information as herein
required, or to furnish such items on a timely basis, you agree to
reimburse us for the reasonable cost of such inspection or audit,
including, without limitation, the charges of attorneys and independent
accountants and the travel expenses, room and board and compensation of
our employees. In the event an inspection or audit reveals that any
payments have been understated in any report to us, then you shall
immediately pay to us the amount understated upon demand, in addition
to interest from the date such amount was due until paid, at the
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highest contract rate of interest permitted by law. If an inspection or
audit discloses an understatement in any report of two (2%) percent or
more, you shall, in addition to repayment of monies owed with interest,
reimburse us for any and all costs and expenses connected with the
inspection or audit, including, without limitation, the charges of
attorneys and independent accountants and the travel expenses, room and
board and compensation of our employees. The foregoing remedies are in
addition to our other remedies and rights under this Agreement and
applicable law.
12. TRANSFER.
12.1. BY US. This Agreement and each of our rights under it are fully
transferable by us and will inure to the benefit of any transferee or
other legal successor to our interests herein. We have the right to
delegate any of our obligations under this Agreement to any person or
entity.
12.2. BY YOU. You understand and acknowledge that the rights and duties
created by this Agreement are personal to your owners and that we have
granted the franchise to you in reliance upon our perceptions of your
owners' individual or collective character, skill, aptitude, attitude,
business ability, acumen and financial capacity. Accordingly, neither
this Agreement (or any interest therein) nor any ownership or other
interest in you or the BUSINESS may be transferred without our prior
written approval. Our approval is conditioned on the prospective
transferee agreeing to sign a then-current franchise agreement with us.
Any transfer without such approval constitutes a breach of this
Agreement and is void and of no effect. As used in this Agreement, the
term "transfer" includes your (or your owners') voluntary, involuntary,
direct or indirect assignment, sale, gift or other disposition of any
interest in: this Agreement; you; or the BUSINESS. All of the following
conditions must be met prior to or concurrently with the effective date
of the transfer:
12.2.1. You or the transferee pay us a transfer fee equal to Five
Thousand ($5,000) Dollars to defray expenses we incur in
connection with the transfer. You also agree to pay us our
reasonable legal fees and administrative costs incurred,
commissions, if any, and our reasonable out-of-pocket
expenses, including, without limitation, travel, meals,
lodging, advertising and other investigative expenses involved
in meeting with or qualifying the transferee.
12.2.2. You transfer to the transferee all licenses, permits, and/or
agreements that may be assigned or transferred.
12.3. OUR RIGHT OF FIRST REFUSAL. We have the right, exercisable by written
notice delivered to you or your selling owners within thirty (30) days
from the date of the delivery to us of both an exact copy of such BONA
FIDE offer and all other information we request, to purchase such
interest for the price and on the terms and conditions contained in
such BONA FIDE offer, provided that:
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12.3.1. We may substitute cash for any form of payment proposed in
such offer;
12.3.2. Our credit will be deemed equal to the credit of any proposed
purchaser;
12.3.3. We will have not less than sixty (60) days after giving notice
of our election to purchase to prepare for closing; and
12.3.4. We are entitled to receive, and you and your owners agree to
make, all customary representations and warranties given by
the seller of the assets of a business or the capital stock of
an incorporated business, as applicable, including, without
limitation, representations and warranties as to:
12.3.4.1. Ownership and condition of and title to stock or
other forms of ownership interest and/or assets;
12.3.4.2. Liens and encumbrances relating to the stock or
other ownership interest and/or assets; and
12.3.4.3. Validity of contracts and the liabilities,
contingent or otherwise, of the corporation whose
stock is being purchased.
12.4. EXERCISE. If we exercise our right of first refusal, you and your
selling owner(s) agree that, commencing on the date of the closing, you
and they will be bound by the noncompetition covenant contained in
Article 15.4. hereof.
13. EXPIRATION OF THIS AGREEMENT.
13.1. ACQUISITION OF A SUCCESSOR FRANCHISE. Upon expiration of the term of
this Agreement, if you (and each of your owners) have substantially
complied with this Agreement during its term, subject to the terms and
conditions set forth in this Article 13, you will have the right to
acquire a successor franchise to operate the BUSINESS as a NETSPACE(R)
business on the terms and conditions of the franchise agreement we are
then using in granting successor franchises for NETSPACE(R) businesses,
provided you add or replace equipment and otherwise modify the BUSINESS
as we require to bring it into compliance with specifications and
standards then applicable for NETSPACE(R) businesses and provided you
pay our successor franchise fee of Two Thousand Five Hundred ($2,500)
Dollars.
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13.2. GRANT OF A SUCCESSOR FRANCHISE. You agree to give us written notice of
your election to acquire a successor franchise during the last year of
the term of this Agreement, but not less than eight (8) months prior to
the date of expiration of this Agreement. We agree to give you written
notice ("Our Notice"), not more than one hundred eighty (180) days
after we receive your notice, of our decision, in accordance with
Article 13.1:
13.2.1. To grant you a five (5) year successor franchise;
13.2.2. To grant you a successor franchise on the condition that
deficiencies of the BUSINESS or in your operation of the
BUSINESS, are corrected; or
13.2.3. Not to grant you a successor franchise based on our
determination that you and your owners have not substantially
complied with this Agreement during its term.
13.3. OUR NOTICE. If applicable, Our Notice will:
13.3.1. Describe the improvements or modifications required to bring
the BUSINESS into compliance with then applicable
specifications and standards for NETSPACE(R) businesses; and
13.3.2. State the actions you must take to correct operating
deficiencies and the time period in which such deficiencies
must be corrected.
13.4. NO GRANT. If we elect not to grant a successor franchise, Our Notice
will describe the reasons for our decision. Your right to acquire a
successor franchise is subject to your continued compliance with all of
the terms and conditions of this Agreement through the date of its
expiration, in addition to your compliance with the obligations
described in Our Notice.
13.5. 90 DAY CURE. If Our Notice states that you must cure certain
deficiencies of the BUSINESS or its operation as a condition to the
grant of a successor franchise, we will give you written notice of a
decision not to grant a successor franchise, based upon your failure to
cure such deficiencies, not less than ninety (90) days prior to the
expiration of this Agreement, provided, however, that we will not be
required to give you such notice if we decide not to grant you a
successor franchise due to your breach of this Agreement during the one
hundred eighty (180) day period prior to its expiration. If we fail to
give you:
13.5.1. Notice of deficiencies in the BUSINESS, or in your operation
of the BUSINESS, within one hundred eighty (180) days after we
receive your timely election to acquire a successor franchise;
or
13.5.2. Notice of our decision not to grant a successor franchise at
least ninety (90) days prior to the expiration of this
Agreement if such notice is required, we may extend the term
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of this Agreement for such period of time as is necessary in
order to provide you with either reasonable time to correct
deficiencies or the ninety (90) day notice of our refusal to
grant a successor franchise required hereunder.
13.6. AGREEMENTS/RELEASES. If you satisfy all of the other conditions to the
grant of a successor franchise, you and your owners agree to execute
the form of franchise agreement and any ancillary agreements we are
then customarily using in connection with the grant of successor
franchises for NETSPACE(R) businesses. You and your owners further
agree to execute general releases, in form satisfactory to us, of any
and all claims against us and our shareholders, officers, directors,
employees, agents, successors and assigns. Failure by you or your
owners to sign such agreements and releases and deliver them to us for
acceptance and execution one hundred eighty (180) days after their
delivery to you will be deemed an election not to acquire a successor
franchise.
14. TERMINATION OF AGREEMENT.
14.1. BY YOU. You and your owners may not terminate this Agreement except by
operation of law. Your termination of this Agreement for any other
reason or without availing yourself of legal redress will be deemed a
termination without cause.
14.2. BY US. We have the right to terminate this Agreement, effective upon
delivery of written notice of termination to you, if:
14.2.1. You (or your managing shareholder or partner) fail to
successfully complete initial training to our satisfaction;
14.2.2. You fail to begin operating the BUSINESS within sixty (60)
calendar days after the execution of this Agreement;
14.2.3 You abandon or fail actively to operate the BUSINESS, for
fourteen (14) or more consecutive business days, unless the
BUSINESS has been closed for a purpose we have approved or
because of a major and significant casualty or by reason of a
lawful government order;
14.2.4. You surrender or transfer control of the operation of the
BUSINESS without our prior written consent;
14.2.5 You (or any of your owners) have made any material
misrepresentation or omission in connection with your purchase
of the Franchise;
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14.2.6. You (or any of your owners) are or have been convicted by a
trial court of, or plead or have pleaded no contest to, a
felony or any crime involving moral turpitude;
14.2.7. You (or any of your owners) engage in any dishonest or
unethical conduct which may adversely affect the reputation of
the BUSINESS or another NETSPACE(R)business or the goodwill
associated with the Marks;
14.2.8. You (or any of your owners) make an unauthorized assignment of
this Agreement or of an ownership interest in you or the
BUSINESS;
14.2.9. In the event of your death or permanent disability or the
death or permanent disability of the owner of a controlling
interest in you, this Agreement or such owner's interest in
you is not transferred within six (6) months of such death or
permanent disability;
14.2.10. You (or any of your owners) make any unauthorized use or
disclosure of any Confidential Information or use, duplicate
or disclose any portion of the Operations Manual in violation
of this Agreement;
14.2.11. You violate any health, safety or sanitation law, ordinance or
regulation and do not immediately begin to cure the
non-compliance or violation, and correct such non-compliance
or violation within twenty four (24) hours after written
notice thereof is delivered to you;
14.2.12. You fail to make payments of any amounts due to us and do not
correct such failure within seven (7) days after written
notice of such failure is delivered to you;
14.2.13. You fail to pay when due any federal or state income, service,
sales, employment related or other taxes due on the operations
of the BUSINESS, unless you are, in good faith, legally
contesting your liability for such taxes;
14.2.14. You (or any of your owners) fail to comply with any other
provision of this Agreement or Methods of Operation and do not
correct such failure within thirty (30) days after written
notice of such failure to comply is delivered to you;
14.2.15. You (or any of your owners) fail on three (3) or more separate
occasions within any period of twelve (12) consecutive months
to submit when due reports or other data, information or
supporting records, or to pay when due any amounts due to us
or otherwise to comply with this Agreement, whether or not
such failures to comply were corrected after written notice of
such failure was delivered to you; or
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14.2.16. You make an assignment for the benefit of creditors or admit
in writing your insolvency or inability to pay your debts
generally as they become due; you consent to the appointment
of a receiver, trustee or liquidator of all or the substantial
part of your property; the BUSINESS or any of its assets is
attached, seized, subjected to a writ or distress warrant or
levied upon, unless such attachment, seizure, writ, warrant or
levy is vacated within thirty (30) days; or any order
appointing a receiver, trustee or liquidator of you or the
BUSINESS is vacated within thirty (30) days following the
entry of such order.
15. OUR AND YOUR RIGHTS AND OBLIGATIONS UPON TERMINATION OR EXPIRATION OF
THIS AGREEMENT.
15.1. PAYMENT OF AMOUNTS OWED TO US AND ASSIGNMENT OF CUSTOMER ACCOUNTS. You
agree to pay us within fifteen (15) days after the effective date of
termination, for any reason, or expiration of this Agreement, or on
such later date that the amounts due to us are determined, such
Royalties, amounts owed for purchases from us, interest due on any of
the foregoing and all other amounts owed to us which are then unpaid.
You agree to assign all of your customer accounts to us or to our
designee within fifteen (15) days after the effective date of
termination or expiration of this Agreement.
15.2. MARKS. Upon the termination, for any reason, or expiration of this
Agreement:
15.2.1. You may not directly or indirectly at any time or in any
manner (except with respect to other NETSPACE(R) businesses
you own and operate) identify yourself or any business as a
current oR former NETSPACE(R) business, or as one of our
licensees or franchisees; nor use any Marks, anY colorable
imitation thereof or other indicia of a NETSPACE(R) business
in any manner or for anY purpose or utilize for any purpose
any trade name, trademark or service xxxx or other commercial
symbol that indicates or suggests a connection or association
with us;
15.2.2. You agree to take such action as may be required to cancel all
fictitious or assumed name or equivalent registrations
relating to your use of any Marks;
15.2.3. If we do not exercise our option to purchase the BUSINESS
pursuant to Article 15.6., you agree to deliver to us within
thirty (30) days after the Notification Date (as defined in
Article 15.6.) the Operations Manual, all signs, sign-faces,
sign-cabinets, marketing materials, forms, packaging and other
materials containing any Marks or otherwise identifying or
relating to a NETSPACE(R) business and allow us, without
liability to you or third parties, to remove all such items
from the BUSINESS;
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15.2.4. If we do not exercise our option to purchase the BUSINESS
pursuant to Article 15.6., you agree that, after the
Notification Date, you will promptly and at your own expense
make such alterations we may specify to distinguish the
BUSINESS clearly from its former appearance and from other
NETSPACE(R) businesses so as to prevent confusion therewith by
the public;
15.2.5. If we do not exercise our option to purchase the BUSINESS
pursuant to Article 15.6., you agree that, after the
Notification Date, you will notify any Internet service
companies of the transfer of any Internet address you may be
using to us, and you will notify the telephone company and all
telephone directory publishers of the termination or
expiration of your right to use any telephone, telecopy or
other numbers and any regular, classified or other telephone
directory listings associated with any Marks, authorize the
transfer of such numbers and directory listings to us or at
our direction and/or instruct the telephone company to forward
all calls made to your telephone numbers to numbers we
specify, and pursuant to Appendix C to this Agreement, duly
appoint us Attorney-In-Fact to do same; and
15.2.6. You agree to furnish us, within thirty (30) days after the
Notification Date, with evidence satisfactory to us of your
compliance with the foregoing obligations.
15.3. CONFIDENTIAL INFORMATION. You agree that, upon termination or
expiration of this Agreement, you will immediately cease to use any of
our Confidential Information in any business or otherwise and return to
us all copies of the Operations Manual and any other confidential
materials, including, without limitation, computer software and any
mechanisms (electronic key) used to access the software, that we have
allowed you to use.
15.4. COVENANT NOT TO COMPETE. Upon:
15.4.1. Our termination of this Agreement in accordance with its terms
and conditions, including the transfer or assignment of this
Agreement or any interest in the BUSINESS, or
15.4.2. Your termination of this Agreement without cause, or
15.4.3 Expiration of this Agreement (if we refuse to grant, or you
elect not to acquire, a successor franchise), you and your
owners agree that, for a period of twenty four (24) months
(the "Restriction Period") commencing on the effective date of
termination or expiration or the date on which a person
restricted by this Article begins to comply with this Article,
whichever is later, neither you nor any of your owners will
have any direct or indirect interest (i.e., through a spouse
23
or child) as a disclosed or beneficial owner, investor,
partner, director, officer, employee, consultant,
representative or agent or in any other capacity in any
Competitive Business (as defined in Article 7.2. above)
operating within one hundred (100) miles of your center of
operations or fifty (50) miles from the center of operations
of any other NETSPACE(R) business in operation or under
construction on the later of the effective date of the
termination or expiration or the date on which a person
restricted by this Article complies with this Article.
15.5. COMMENCEMENT BY ORDER. If any person restricted by this Article refuses
voluntarily to comply with the foregoing obligations, the Restriction
Period will commence with the entry of an order of an arbitrator, or
court if necessary, enforcing this provision. You and your owners
expressly acknowledge that you possess skills and abilities of a
general nature and have other opportunities for exploiting such skills.
Consequently, enforcement of the covenants made in this Article will
not deprive you of your personal goodwill or ability to earn a living.
15.6. OUR RIGHT TO PURCHASE BUSINESS.
15.6.1. EXERCISE OF OPTION. Upon our termination of this Agreement in
accordance with its terms and conditions or your termination
of this Agreement without cause, we have the option,
exercisable by giving written notice thereof to you within
sixty (60) days from the date of such termination or
expiration, to purchase the BUSINESS from you. (The date on
which we notify you whether or not we are exercising our
option is referred to in this Agreement as the "Notification
Date.") We have the unrestricted right to assign this option
to purchase the BUSINESS. We will be entitled to all customary
warranties and representations in connection with our asset
purchase, including, without limitation, representations and
warranties as to ownership and condition of and title to
assets; liens and encumbrances on assets; validity of
contracts and agreements; and liabilities affecting the
assets, contingent or otherwise.
15.6.2. PURCHASE PRICE. The purchase price for the BUSINESS will be
its fair market value, determined in a manner consistent with
reasonable depreciation of the BUSINESS' equipment, signs,
inventory, materials and supplies, provided that the BUSINESS
will be valued as an independent business and its value will
not include any value for the Franchise or any rights granted
by this Agreement; the Marks; or participation in the network
of NETSPACE(R) businesses.
15.6.3. FAIR MARKET VALUE. The BUSINESS' fair market value will
include the reasonable goodwill you developed in the Territory
24
since your commencement of operations that exists independent
of the goodwill of the Marks and the System.
15.6.4. EXCLUSIONS. We may exclude from the assets purchased hereunder
cash or its equivalent and any equipment, signs, inventory,
materials and supplies that are not reasonably necessary (in
function or quality) to the BUSINESS' operation or that we
have not approved as meeting standards for NETSPACE(R)
businesses, and the purchase price will reflect such
exclusions.
15.6.5. APPRAISAL. If we and you are unable to agree on the BUSINESS'
fair market value, its fair market value will be determined by
three (3) independent appraisers who collectively will conduct
one (1) appraisal. We will appoint one appraiser, you will
appoint one appraiser and the two party appointed appraisers
will appoint the third appraiser. You and we agree to select
our respective appraisers within fifteen (15) days after the
date we determine that we are unable to agree on the BUSINESS'
fair market value, and the two appraisers so chosen are
obligated to appoint the third appraiser within fifteen (15)
days after the date on which the last of the two party
appointed appraisers was appointed. You and we will bear the
cost of our own appraisers and share equally the reasonable
fees and expenses of the third appraiser chosen by the two
party appointed appraisers. You and we will take reasonable
actions to cause the appraisers to complete their appraisal
within thirty (30) days after the third appraiser's
appointment.
15.6.6. CLOSING. The purchase price will be paid at the closing of the
purchase, which will take place not later than ninety (90)
days after determination of the purchase price. We have the
right to set off against the purchase price, and thereby
reduce the purchase price by, any and all amounts you or your
owners owe to us and by Gross Revenue since the date we
determined the purchase price.
15.6.7. INSTRUMENTS. At the closing, you agree to deliver instruments
transferring:
15.6.7.1. Good and merchantable title to the assets
purchased, free and clear of all liens and
encumbrances (other than liens and security
interests acceptable to us), with all sales and
other transfer taxes paid by you; and
15.6.7.2. All licenses and permits of the BUSINESS which may
be assigned or transferred; and
15.6.7.3. Current customer and prospect lists with company
name, contact name, e-mail address, brick and
mortar address and all phone numbers.
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15.6.8. ESCROW. If you cannot deliver clear title to all of the
purchased assets, or if there are other unresolved issues, the
closing of the sale will be accomplished through an escrow.
You and your owners further agree to execute general releases,
in form satisfactory to us, of any and all claims against us
and our shareholders, officers, directors, employees, agents,
successors and assigns.
15.7. CONTINUING OBLIGATIONS. All of our and your (and your owners' and
affiliates') obligations which expressly or by their nature survive the
expiration or termination of this Agreement will continue in full force
and effect subsequent to and notwithstanding its expiration or
termination and until they are satisfied in full or by their nature
expire.
16. RELATIONSHIP OF THE PARTIES AND INDEMNIFICATION.
16.1. INDEPENDENT CONTRACTORS. You and we understand and agree that this
Agreement does not create a fiduciary relationship between you and us,
that we and you are and will be independent contractors and that
nothing in this Agreement is intended to make either you or us a
general or special agent, joint venturer, partner or employee of the
other for any purpose. You agree to conspicuously identify yourself in
all dealing with customers, suppliers, public officials, BUSINESS
personnel and others as the owner of the BUSINESS under a franchise we
have granted and to place such notices of independent ownership on such
forms, checks, business cards, stationery and advertising and other
materials as we may require from time to time.
16.2. NO LIABILITY FOR ACTS OF OTHER PARTY. You agree not to employ any of
the Marks in signing any contract or applying for any license or
permit, or in a manner that may result in our liability for any of your
indebtedness or obligations, and that you will not use the Marks in any
way we have not expressly authorized. Neither we nor you will make any
express or implied agreements, warranties, guarantees or
representations or incur any debt in the name or on behalf of the
other, represent that our respective relationship is other than
franchiser and franchisee or be obligated by or have any liability
under any agreements or representations made by the other that are not
expressly authorized in writing. We will not be obligated for any
damages of any nature whatsoever to any person or property directly or
indirectly arising out of the BUSINESS' operation or the business you
conduct pursuant to this Agreement.
16.3. TAXES. We will have no liability for any sales, use, service,
occupation, employment related, excise, gross receipts, income,
property or other taxes, whether levied upon you or the BUSINESS, in
connection with the business you conduct (except any taxes we are
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required by law to collect from you with respect to purchases from us).
Payment of all such taxes are your responsibility.
16.4. INDEMNIFICATION. You agree to indemnify, exculpate, defend and hold us,
our affiliates and our respective shareholders, directors, officers,
employees, agents, successors and assignees (the "Indemnified Parties")
harmless from and against and to reimburse any one or more of the
Indemnified Parties for all claims, obligations and damages described
in this Article, any and all taxes described in Article 16.3. and any
and all claims and liabilities directly or indirectly arising out of
the BUSINESS' operation or your breach of this Agreement. For purposes
of this indemnification, "claims" includes all obligations,
liabilities, costs, damages (actual, consequential or otherwise) and
costs reasonably incurred in the defense of any claim against any of
the Indemnified Parties, including, without limitation, reasonable
accountants', arbitrators', attorneys' and expert witness fees, costs
of investigation and proof of facts, court costs, other expenses of
litigation, arbitration or alternative dispute resolution and travel
and living expenses. We have the right to defend any such claim against
us. This indemnity will continue in full force and effect subsequent to
and notwithstanding the expiration or termination of this Agreement.
16.5. MITIGATION NOT REQUIRED. Under no circumstances will we or any other
Indemnified Party be required to seek recovery from any insurer or
other third party, or otherwise to mitigate our, their or your losses
and expenses, in order to maintain and recover fully a claim against
you. You agree that a failure to pursue such recovery or mitigate a
loss will in no way reduce or alter the amounts we or another
Indemnified Party may recover from you.
17. ENFORCEMENT.
17.1. SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS. Except as expressly
provided to the contrary herein, each provision of this Agreement, and
any portion thereof, will be considered severable, and if, for any
reason, any such provision is held to be invalid or contrary to or in
conflict with any applicable present or future law or regulation in a
final, unappealable ruling issued by any court, agency or tribunal with
competent jurisdiction in a proceeding to which we are a party, that
ruling will not impair the operation of, or have any other effect upon,
such other portions of this Agreement as may remain otherwise
intelligible, which will continue to be given full force and effect and
bind the parties hereto, although any portion held to be invalid will
be deemed not to be a part of this Agreement from the date the time for
appeal expires, if you are a party thereto, otherwise upon your receipt
from us of a notice of non-enforcement thereof.
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17.2. LESSER COVENANT ENFORCEABLE. If any covenant herein which restricts
competitive activity is deemed unenforceable by virtue of its scope in
terms of area, business activity prohibited and/or length of time, but
would be enforceable by reducing any part or all thereof, you and we
agree that such covenant will be enforced to the fullest extent
permissible under the laws and public policies applied in the
jurisdiction whose law is applicable to the validity of such covenant.
17.3. GREATER NOTICE. If any applicable and binding law or rule of any
jurisdiction requires a greater prior notice than is required hereunder
of the termination of this Agreement or of our refusal to enter into a
successor franchise agreement, or the taking of some other action not
required hereunder, or if, under any applicable and binding law or rule
of any jurisdiction, any provision of this Agreement or any of Methods
of Operation is invalid or unenforceable, the prior notice and/or other
action required by such law or rule will be substituted for the
comparable provisions hereof, and we will have the right in our sole
discretion to modify such invalid or unenforceable provision or
unenforceable part of Methods of Operation to the extent required to be
valid and enforceable. You agree to be bound by any promise or covenant
imposing the maximum duty permitted by law which is subsumed within the
terms of any provision hereof as though it were separately articulated
in and made a part of this Agreement, that may result from striking
from any of the provisions hereof, or any part of Methods of Operation,
any portion or portions which a court or arbitrator may hold to be
unenforceable in a final decision to which we are a party, or from
reducing the scope of any promise or covenant to the extent required to
comply with such a court order or arbitration award. Such modifications
to this Agreement will be effective only in such jurisdiction, unless
we elect to give them greater applicability, and will be enforced as
originally made and entered into in all other jurisdictions.
17.4. WAIVER OF OBLIGATIONS. We and you may by written instrument
unilaterally waive or reduce any obligation of or restriction upon the
other under this Agreement, effective upon delivery of written notice
thereof to the other or such other effective date stated in the notice
of waiver. Any waiver we grant will be without prejudice to any other
rights we may have, will be subject to our continuing review and may be
revoked, in our sole discretion, at any time and for any reason,
effective upon delivery to you of ten (10) days' prior written notice.
17.5. NON-WAIVER. We and you will not be deemed to have waived or impaired
any right, power or option reserved by this Agreement (including
without limitation the right to demand exact compliance with every
term, condition and covenant herein or to declare any breach thereof to
be a default and to terminate this Agreement prior to the expiration of
its term) by virtue of any custom or practice at variance with the
terms hereof; our or your failure, refusal or neglect to exercise any
right under this Agreement or to insist upon exact compliance by the
other with our and your obligations hereunder including without
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limitation Methods of Operation; our waiver, forbearance, delay,
failure, or omission to exercise any right, power or option whether of
the same, similar or different nature with respect to other NETSPACE(R)
businesses; the existence of other franchise agreements for
NETSPACE(R) businesses which contain different provisions from those
contained herein; or our acceptance of any payments due from you after
any breach of this Agreement. No special or restrictive legend or
endorsement on any check or similar item given to us will constitute a
waiver, compromise, settlement, or accord, and satisfaction. We are
authorized to remove or obliterate any legend or endorsement, and such
legend or endorsement will have no effect.
17.6. FORCE MAJEURE. Neither we nor you will be liable for loss or damage or
deemed to be in breach of this Agreement if our failure to perform our
or your obligations results from:
17.6.1 transportation shortages, inadequate supply of equipment,
products, merchandise, supplies, labor, material or energy or
the voluntary foregoing of the right to acquire or use any of
the foregoing in order to accommodate or comply with the
orders, requests, regulations, recommendations or instructions
of any federal, state or municipal government or any
department or agency thereof;
17.6.2. Acts of nature;
17.6.3 Fires, strikes, embargoes, war or riot; or
17.6.4. Any other similar event or cause.
17.7. EXTEND PERFORMANCE. Any delay resulting from any of said causes will
extend performance accordingly or excuse performance, in whole or in
part, as may be reasonable, except that said causes will not excuse
payments of amounts owed at the time of such occurrence or payment of
Royalties due on any sales thereafter.
17.8. DISCONTINUED PROGRAMS/PROMOTIONS. We are not liable to you for any loss
or damage, or deemed to be in breach of this Agreement, if we
discontinue any programs or promotions and they are no longer a part of
our Methods of Operation or if we cannot deliver, or cause to be
delivered, or if our affiliates or designated sources or approved
suppliers cannot deliver, all of your orders for products, merchandise,
equipment, supplies, etc., where such things are out-of-stock or
discontinued.
17.9. COSTS AND ATTORNEYS' FEES. If we incur expenses in connection with your
failure to pay when due amounts owed to us, to submit when due any
reports, information or supporting records or otherwise to comply with
29
this Agreement, you agree to reimburse us for any of the costs and
expenses which we incur, including, without limitation, reasonable
accounting, attorneys', arbitrators' and related fees.
17.10. YOU MAY NOT WITHHOLD PAYMENTS DUE TO US. You agree that you will not
withhold payment of any amounts owed to us on the grounds of our
alleged nonperformance of any of our obligations hereunder. You agree
that all such claims will, if not otherwise resolved by us, be
submitted to arbitration as provided in Article 17.12.
17.11. RIGHTS OF PARTIES ARE CUMULATIVE. Our and your rights hereunder are
cumulative, and no exercise or enforcement by us or you of any right or
remedy hereunder will preclude our or your exercise or enforcement of
any other right or remedy hereunder which we or you are entitled by law
to enforce.
17.12. ARBITRATION. Except for money you owe us, our affiliates, designated
sources or approved suppliers and except for controversies, disputes or
claims related to or based on your use of the Marks after the
expiration or termination of this Agreement, all controversies,
disputes or claims between us and our shareholders, officers,
directors, agents and employees and you (your owners, guarantors,
affiliates and employees, if applicable) arising out of or related to:
17.12.1. This Agreement or any other agreement between you and us or
any provision of any such agreement; our relationship with
you; the validity of this Agreement or any other agreement
between you and us or any provisions of any such agreement; or
any part of Methods of Operation relating to the establishment
or operation of the BUSINESS, will be submitted for
arbitration to the office of the American Arbitration
Association that is nearest to our principal business address
on demand of either party. Such arbitration proceedings will
be conducted in such office, except as otherwise provided in
this agreement, and will be heard by one arbitrator in
accordance with the then current commercial arbitration rules
of the American Arbitration Association. All matters relating
to arbitration will be governed by the Federal Arbitration Act
(9 U.S.C.ss.ss.1 ET. SEQ.) and not by any state arbitration
law.
17.12.2. The arbitrator will have the right to award or include in his
award any relief which he deems proper in the circumstances,
including, without limitation, money damages (with interest on
unpaid amounts from the date due), specific performance,
injunctive relief and attorney's fees and costs, provided that
the arbitrator will not have the right to declare any Marks
generic or otherwise invalid or, except as otherwise provided
in Article 17.15., to award exemplary or punitive damages. The
award and decision of the arbitrator will be conclusive and
binding upon all parties hereto, and judgment upon the award
may be entered in any court of competent jurisdiction.
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17.12.3. We and you agree to be bound by the provisions of any
limitation on the period of time in which claims must be
brought under applicable law or this Agreement, whichever
expires earlier. We and you further agree that, in connection
with any such arbitration proceeding, each must submit or file
any claim which would constitute a compulsory counterclaim (as
defined by Rule 13 of the Federal Rules of Procedure) within
the same proceeding as the claim to which it relates. Any such
claim which is not submitted or filed as described above will
be forever barred.
17.12.4. We and you agree that arbitration will be conducted on an
individual, not class- wide, basis, and that an arbitration
proceeding between us and our shareholders, officers,
directors, agents and employees and you (and/or your owners,
guarantors, affiliates and employees, if applicable) may not
be consolidated with any other arbitration proceeding between
us and any other person, corporation or partnership.
17.12.5. Notwithstanding anything to the contrary contained in this
Article, we and you each have the right in a proper case to
obtain temporary restraining orders and temporary or
preliminary injunctive relief from a court of competent
jurisdiction; provided, however, that we and you must
contemporaneously submit our dispute for arbitration on the
merits as provided herein.
17.12.6. The provisions of this Article are intended to benefit and
bind certain of your third party non-signatories and will
continue in full force and effect subsequent to and
notwithstanding the expiration or termination of this
Agreement. The provisions of this Article 17.12. will in no
cases apply to our parent company(ies), subsidiary
company(ies), or affiliated company(ies).
17.13. GOVERNING LAW. All matters relating to arbitration will be governed by
the FEDERAL ARBITRATION ACT (9 U.S.C. sec. sec. 1 ET. SEQ.). Except to
the extent governed by the Federal Arbitration Act as required hereby,
the UNITED STATES TRADEMARK ACT OF 1946 (XXXXXX XXX, 00 U.S.C. sec.
sec. 1051 ET. SEQ.) or other federal law, this Agreement, the franchise
and all claims arising from the relationship between us and you will be
governed by the laws of Florida, without regard to its conflict of laws
principles, except that any law regulating the sale of franchises or
governing the relationship of a franchisor and its franchisee will not
apply unless jurisdictional requirements are met independently without
reference to this Article.
17.14. CONSENT TO JURISDICTION. Subject to Article 17.12. hereof, you and your
owners agree that we may institute any action against you or your
owners in any state or federal court of general jurisdiction in Miami,
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Dade County, Florida, and you (and each owner) irrevocably submit to
the jurisdiction of such courts and waive any objection you (or her or
she) may have to either the jurisdiction of or venue in such courts.
17.15. WAIVER OF PUNITIVE DAMAGES AND JURY TRIAL. Except with respect to your
obligation to indemnify us pursuant to Article 16.4. and 16.5. hereof
and claims we bring against you for your unauthorized use of the Marks
or unauthorized use or disclosure of any Confidential Information, we
and you and your 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 us, the party making a claim will be limited to equitable
relief and to recovery of any actual damages it sustains. We and you
irrevocably waive trial by jury in any action, proceeding or
counterclaim, whether at law or in equity, brought by either of us.
17.16. BINDING EFFECT. This agreement is binding upon us and you and our
respective executors, administrators, heirs, beneficiaries, assigns and
successors in interest and may not be modified except by written
agreement signed by you and us.
17.17. LIMITATIONS OF CLAIMS. Except for claims arising from your nonpayment
or underpayment of amounts you owe us pursuant to this Agreement, any
and all claims arising out of or relating to this Agreement or our
relationship with you will be barred unless a judicial or arbitration
proceeding is commenced within one (1) year from the date on which the
party asserting such claim knew or should have known of the facts
giving rise to such claims.
17.18. CONSTRUCTION. The preambles and appendices are a part of this Agreement
which, together with the Operations Manual and our other written
policies, constitutes our and your entire agreement except as provided
below, and there are no other oral or written understandings or
agreements between us and you relating to the subject matter of this
Agreement, except that you acknowledge that we justifiably have relied
on your representations made prior to the execution of this Agreement
as set forth in Article 1 hereof. Except as contemplated by the
arbitration provisions of Article 17.2. hereof, nothing in this
Agreement is intended, nor is deemed, to confer any rights or remedies
upon any person or legal entity not a party hereto.
17.19. WITHHOLD APPROVAL. Except where this Agreement expressly obligates us
reasonably to approve or not unreasonably to withhold our approval of
any of your actions or requests, we have the absolute right to refuse
any request you make or to withhold our approval of any of your
proposed or effected actions that require our approval.
17.20. HEADINGS. The headings of the several Articles hereof are for
convenience only and do not define, limit or construe the contents of
such Articles.
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17.21. WE, US, OUR. Unless expressed to the contrary, references in this
Agreement to "we," "us" and "our," with respect to all of our rights
and all of your obligations to us under this Agreement, will be deemed
to include any of our affiliates with whom you deal. The term
"affiliate," as used herein with respect to you or us, means any person
or entity directly or indirectly owned or controlled by, under common
control with or owning or controlling you or us. For purposes of this
definition, "control" means the power to direct or cause the direction
of management and policies.
17.22. JOINT AND SEVERAL OWNERS' LIABILITY. If two or more persons are at any
time the owner of the BUSINESS hereunder, whether as partners or joint
venturers, their obligations and liabilities to us will be joint and
several. References to "owner" mean any person holding a direct or
indirect, legal or beneficial ownership interest or voting rights in
you (or a transferee of this Agreement and the BUSINESS or an interest
in you) including without limitation, any person who has a direct or
indirect interest in you (or a transferee), this Agreement, the
Franchise or the BUSINESS and any person who has any other legal or
equitable interest, or the power to vest in himself any legal or
equitable interest, in the revenue, profits, rights or assets thereof.
References to a "controlling interest" in you mean five (5%) percent or
more of your voting shares or other voting rights if you are a
corporation or partnership. "Person" means any natural person,
corporation, general or limited partnership, unincorporated
association, cooperative or other legal or functional entity.
17.23. "BUSINESS". The term "BUSINESS" as used herein includes all of the
assets of the NETSPACE(R) business you operate pursuant to this
Agreement, including its revenue and income.
17.24. MULTIPLE COPIES. This Agreement may be executed in multiple copies,
each of which will be deemed an original.
17.25. "CORPORATION OR PARTNERSHIP". The term "corporation or partnership" as
used herein to describe your business entity shall, if applicable,
include reference to your formation as a limited liability company,
limited liability partnership, or any other type of limited liability
entity.
18. NOTICES AND PAYMENTS.
18.1. NOTICES. All written notices and reports permitted or required to be
delivered by the provisions of this Agreement or the Operations Manual
will be deemed so delivered:
18.1.1. At the time delivered by hand;
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18.1.2. One (1) business day after transmission by telecopy, facsimile
or other electronic system;
18.1.3. One (1) business day after being placed in the hands of a
commercial courier service for next business day delivery; or
18.1.4. Three (3) business days after placement in the United States
Mail by Registered or Certified Mail, Return Receipt
Requested, postage prepaid; and must be addressed to the party
to be notified at its most current principal business address
of which the notifying party has been notified. Any required
payment or report which we do not actually receive during
regular business hours on the date due (or postmarked by
postal authorities at least two (2) days prior thereto) will
be deemed delinquent.
18.2. PAYMENTS. All payments required to be delivered by the provisions of
this Agreement or the Operations Manual will be deemed so delivered as
provided in Article 18.1. above and will be deemed delivered by
bank-wire transfer upon telephone or electronic confirmation with the
receiving bank.
[THE SPACE BELOW IS LEFT BLANK BY INTENTION]
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the date stated on the first page hereof.
NETFRAN DEVELOPMENT CORP.
By:
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Name Printed: Xxxxxx Xxxxxxx
Title: President
Dated:
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EACH OF THE UNDERSIGNED PARTIES WARRANTS AND REPRESENTS THAT HE/SHE HAS NOT
RELIED UPON ANY GUARANTEES CONCERNING REVENUE, PROFIT OR THE SUCCESS OF THIS
FRANCHISE IN SO SIGNING.
[OWNER CORPORATION OR PARTNERSHIP]
By:
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Name Printed:
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Title:
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Dated:
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AS INDIVIDUALS:
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Name Printed:
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Dated:
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Name Printed:
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Dated:
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