EXHIBIT 10.11
FORM OF AFFILIATE
AGREEMENT
TABLE OF CONTENTS
Section Page
------- ----
1. DEFINITIONS................................................. 1
2. GRANT OF FRANCHISE.......................................... 4
3. TERM AND RENEWAL............................................ 5
4. MARKS....................................................... 6
5. AFFILIATE OPERATIONS........................................ 7
6. OPERATING STANDARDS......................................... 8
7. OTHER OBLIGATIONS OF USWEB.................................. 11
8. ADVERTISING................................................. 11
9. ACCOUNTING AND RECORDS...................................... 12
10. PAYMENTS AND FEE............................................ 13
11. COVENANTS................................................... 14
12. TRAINING AND ASSISTANCE..................................... 16
1
13. DEFAULT AND TERMINATION..................................... 16
14. OWNERSHIP AND TRANSFER...................................... 19
15. GENERAL PROVISIONS.......................................... 22
2
USWEB
AFFILIATE AGREEMENT
This Affiliate Agreement is made this _____ day of __________________,
19____, (the "Effective Date") by and between USWeb Corporation, a Utah
Corporation with its principal place of business at 0000 Xxxxxxxx Xxxxx, Xxxxx
Xxxxx, Xxxxxxxxxx 00000 ("USWeb"), and ____________________________________
_____________________________________________________________________
("Affiliate") (sometimes a "Party" or, collectively, "the Parties").
PREAMBLES
1. USWeb has developed and owns a proprietary business system (the
"USWeb System"), identified by the xxxx "USWeb/TM/", relating to the development
and operation of businesses offering services for the design, development,
operation, and maintenance of customer 's Intranets or sites on the Internet,
and providing customer education on related topics.
2. The USWeb System includes, and will include, without limitation,
software, products, and services for the development, operation, service, and
support of Internet Web sites for Affiliate's customers, including turnkey
development and deployment systems and specifications; development content,
aids, and templates; techniques and materials for promotion, advertising, and
marketing to customers; customer education programs, record keeping and
reporting methods; training in operation of the USWeb Business; and other
tangible and intangible property contributing to the continuity and uniformity
of the USWeb Network.
3. Affiliate's Application to become a USWeb Affiliate has been approved
by USWeb in reliance upon all of the representations made and information
contained in that Application.
4. The Parties intend this Agreement to establish the basis for ensuring
uniform standards of quality, performance, operation, and reputation of
Affiliate's USWeb business; enhancing and protecting the USWeb names and marks;
ensuring the full and fair collection of Affiliate's financial obligations to
USWeb; and, generally, providing an objective contractual basis for a fair and
mutually satisfactory business relationship between the Parties.
THEREFORE, the Parties, in consideration of the undertakings and
commitments of each Party to the other Party contained in this Agreement, and
for other good and valuable consideration, agree as follows:
1
1. DEFINITIONS
These terms shall have the following meanings in this Agreement:
1.1 "USWeb" means USWeb Corporation, the Franchisor under this Agreement, which
is a Utah Corporation with its principal place of business at 0000 Xxxxxxxx
Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000, and its successors and assigns
pursuant to this Agreement.
1.2 "Affiliate" shall mean the individual, corporation, partnership, or other
legal person which is the signatory to this Agreement.
1.3 "Affiliate Associates" shall mean:
a. any officer or director, or holder of ten percent (10%) or more of any
beneficial ownership interest in any corporation owning or controlling
Affiliate, if Affiliate is a corporation; or
b. any general partner or limited partner (including any corporation and
its officers, directors and holders of ten percent (10%) or more of
the ownership of any corporation which owns or controls, directly or
indirectly, any general partner or limited partner), if Affiliate is a
partnership.
1.4 "USWeb Business" shall mean the business operated by Affiliate pursuant to
this Agreement, utilizing the USWeb System in the design, development,
operation, and maintenance of customer's Intranets or sites on the
Internet, and providing customer education on related topics.
1.5 "USWeb Network" shall mean the network of USWeb and all USWeb Businesses
operated by all USWeb Affiliates.
1.6 "USWeb System" shall mean the Marks, USWeb Proprietary Information, and all
techniques, know-how, standards, specifications, policies, procedures, and
other methods of doing business used in the operation of a USWeb Business,
as developed and modified from time to time by USWeb, as set forth in the
Operations Manual.
1.7 "Adjusted Gross Revenues" shall mean Affiliate's gross revenues from the
operation of the USWeb Business, determined using United States Generally
Accepted Accounting Principles (USGAAP), adjusted for (a) the amount of
Affiliate's unburdened direct cost for (i) computer hardware products
resold to Affiliate's customers, (ii) commercial non-custom software not
developed by Affiliate (as described in the Operations Manual) resold to
Affiliate's customers, (iii) goods
2
and/or services purchased from USWeb and resold to Affiliate's customers,
and (iv) Internet access services purchased from USWeb-approved suppliers
and resold to Affiliate's customers; (b) bona fide refunds, credits, or
allowances resulting from customer change orders; and (c) taxes required to
be collected by Affiliate in connection with the operation of the USWeb
Business, which are added to the price of goods or services invoiced to
Affiliate's customers and actually paid to appropriate governmental
authorities. Adjusted Gross Revenues shall not be adjusted for any costs of
generating revenues, operating expenses (including the write off of
uncollectible accounts receivable or other bad debt expenses), non-
operating expenses, or other expenses relating to the operation of the
USWeb Business.
1.8 "Advertising & Marketing Fund" or "the Fund" shall mean the fund
administered by USWeb, pursuant to the provisions of Section 8.0 of this
Agreement.
1.9 "Authorized Offering" shall mean those products or services which are
authorized by USWeb, in its discretion from time to time during the term of
this Agreement and described in the Operations Manual, which are closely
related to accessing, establishing, or generating an Intranet or a presence
on the Internet.
1.10 "Incapacity" shall mean the inability of Affiliate to operate or oversee
the operation of the USWeb Business on a regular basis, by reason of any
continuing physical, mental, or emotional disability, chemical dependency,
or any other limitation resulting in Affiliate's inability to operate or
oversee the operation of the USWeb Business. Any dispute as to the
existence of Incapacity shall be resolved by majority decision of three
licensed medical physicians practicing in the state of the location of the
USWeb Business, with each Party selecting one medical physician, and the
two medical physicians so designated selecting the third medical physician.
The decision of the majority of the three medical physicians shall be
binding upon the Parties and all costs of making such decision shall be
borne by the Party against whom it is made.
1.11 "USWeb Intellectual Property" shall mean any and all patents, patent
applications (including any amendments, continuations, divisions,
subdivisions, substitutes, reissues, or re-examinations), inventions,
industrial models, designs, copyrights, trademarks, service marks
(including all registered, unregistered, and common law copyrights,
trademarks, or service marks), logos, slogans, characters, trade secrets,
know-how, show-how, licenses, sublicenses, and permissions to use
copyrighted materials of others ("Intellectual Property"), including USWeb
Proprietary Information and all forms of implementations incorporating
USWeb Intellectual Property, and including assignments of "derivative
works" [as defined in the U.S. Copyright Act, 17 U.S.C. (S)101 (1994)] of
USWeb Intellectual Property from Affiliate and other USWeb Affiliates,
which may be licensed or sublicensed by USWeb,
3
either to Affiliate or to Affiliate's customers. USWeb Intellectual
Property shall not include any Intellectual Property developed
independently or owned by Affiliate which does not include, or is not based
upon, any USWeb Intellectual Property.
1.12 "Xxxx" or "Marks" shall mean the trademark and service xxxx USWeb/TM/, in
approved form or style as set forth from time to time in the Operations
Manual or other communication from USWeb relating to the Marks, as well as
all other trademarks, service marks, trade names, slogans, designs,
packaging, trade dress, or other descriptive, distinctive, or identifying
characteristics which may be adopted and used by USWeb for use in the USWeb
System, as set forth from time to time in the Operations Manual.
1.13 "Operations Manual" shall mean the set of materials, however published and
delivered, which sets forth the standards, specifications, policies,
procedures, methods, approved products and services, and other USWeb
Proprietary Information relating to the operation of a USWeb Business, and
all amendments, supplements, bulletins, notices, and memoranda relating to
such materials which may be provided to Affiliate by USWeb in its sole
discretion, from time to time.
1.14 "USWeb Proprietary Information" shall mean all information, in any form,
relating to the USWeb System or the operation of a USWeb Business which (a)
is not generally available and known to the general public, (b) has not
been disclosed to Affiliate on a non-confidential basis by a third party,
(c) has not been developed independently by Affiliate, or (d) has not been
publicly disclosed by a duly authorized representative of USWeb. USWeb
Proprietary Information shall include, but not be limited to, the contents
of the Operations Manual, marketing and sales information and plans,
operations, specifications, procedures, Authorized Offerings, technical and
pricing information, and other items, tangible or intangible, which relate
to the USWeb System, as modified from time to time by USWeb in its sole
discretion, but which modifications shall not materially modify any term or
condition of this Agreement.
1.15 "SMSA Class" shall mean USWeb's classification of the Standard Metropolitan
Statistical Areas ("SMSA"), as defined by the U.S. Census Bureau or its
successor, in which Affiliate's USWeb Business is located.
1.16 "Transfer" shall mean any act by Affiliate to sell, assign, transfer,
convey, give away, or encumber all or any part of its interest in this
Agreement or its interest in the franchise granted by this Agreement or a
controlling interest in any proprietorship, partnership, or corporation
that owns any interest in this Agreement or in the franchise, to any
person.
1.17 "Startup Date" shall mean the date, set forth in Exhibit A to this
Agreement, on
4
which Affiliate's obligations to pay Royalty & Service Fees and Advertising
& Marketing Fees shall commence.
2. GRANT OF FRANCHISE
------------------
2.1 Subject to all terms and conditions of this Agreement and to the continuing
good faith performance of such terms and conditions by Affiliate during the
term of this Agreement, USWeb grants to Affiliate a nonexclusive franchise:
a. to adopt and use the USWeb System to operate a USWeb Business in the
SMSA specified in Exhibit A to this Agreement;
b. to operate the USWeb Business continuously during business hours
necessary to complete projects in a timely manner and in compliance
with customer expectations, in accordance with the terms and
conditions of this Agreement and the Operations Manual;
c. to advertise the USWeb Business to the public as a USWeb Business; and
d. to promote, market, offer, sell, and provide to the public authorized
USWeb products and services ("Authorized Offerings"), in accordance
with the terms and conditions of this Agreement, the Operations
Manual, related licenses, and other communications from USWeb to
Affiliate from time to time.
2.2 USWeb also grants to Affiliate the following nonexclusive licenses, to be
used by Affiliate only during the term of this Agreement and only in
conjunction with the franchise granted by this Agreement:
a. a nonexclusive license to use the Marks, in accordance with USWeb's
standards and requirements for usage of the Marks, as set forth in
this Agreement, in the Operations Manual, and in other periodic
communications from USWeb to Affiliate relating to the Marks; and
b. a nonexclusive license to use USWeb Intellectual Property, as
distributed by USWeb to Affiliate from time to time during the term of
this Agreement, in accordance with the terms and conditions of any
related licenses for USWeb Intellectual Property, and in accordance
with USWeb's standards and requirements for USWeb Intellectual
Property, as set forth in this Agreement, in the Operations Manual,
and in other periodic communications from USWeb to Affiliate relating
to USWeb Intellectual Property; and
c. a nonexclusive license to use USWeb Proprietary Information, as
disclosed by USWeb to Affiliate from time to time during the term of
this Agreement,
5
in accordance with USWeb's standards and requirements for usage of
USWeb Proprietary Information, as set forth in this Agreement, in the
Operations Manual, and in other periodic communications from USWeb to
Affiliate relating to USWeb Proprietary Information.
2.3 USWeb shall deliver to Affiliate a current version of the Operations
Manual, which USWeb shall update and revise, from time to time during the
term of this Agreement in its sole discretion.
2.4 Subject only to Affiliate's SMSA Territory Rights, as may be set forth in
Exhibit D to this Agreement, the franchise and licenses granted to
Affiliate by this Agreement are nonexclusive and USWeb shall have, at all
times throughout the term of this Agreement and at all places, including in
the SMSA where Affiliate's USWeb Business is located, the unqualified right
to open and operate, or to franchise and license others to open and
operate, businesses utilizing the USWeb System.
3. TERM AND RENEWAL
----------------
3.1 The term of this Agreement shall be ten (10) years from the Effective Date.
3.2 If, prior to expiration of the term of this Agreement, Affiliate has
complied with Sections 3.2(a) and 3.2(b) of this Agreement, and is not
otherwise in default under this Agreement, then Affiliate may elect to
renew as a USWeb Affiliate, by complying with the provisions of Sections
3.2 and 3.3 of this Agreement, unless Affiliate has received notice from
USWeb in accordance with Section 3.5 of this Agreement that the franchise
will not be renewed. In order to qualify to renew as a USWeb Affiliate:
a. During the term of this Agreement, Affiliate must have substantially
complied with all material terms and conditions of this Agreement and
any other agreement between Affiliate and USWeb; and
b. Affiliate must have given written notice of its election to renew as a
USWeb Affiliate to USWeb not less than four (4) months and not more
than six (6) months prior to the expiration of the term of this
Agreement.
3.3 If Affiliate has complied with the requirements of Section 3.2 of this
Agreement, then the following additional conditions precedent must be
satisfied at least ninety (90) days prior to the expiration of the term of
this Agreement in order to renew as a USWeb Affiliate:
a. Affiliate must qualify under USWeb's then-current criteria for new
USWeb Affiliates, including all financial, operational, and business
suitability criteria
6
then-utilized by USWeb in evaluating and approving applications to
become a USWeb Affiliate. If USWeb is not offering new franchises at
the time of Affiliate's renewal, then the requirements of this Section
3.3(a) shall be deemed waived.
b. USWeb and Affiliate must execute the then-current form of USWeb
Affiliate Agreement, including all other ancillary agreements and
legal instruments then used by USWeb in connection with the granting
of USWeb franchises; refusal by Affiliate to execute such agreements
and instruments within thirty (30) days of delivery to Affiliate shall
be deemed an election by Affiliate not to renew as a USWeb Affiliate;
c. Affiliate must satisfactorily complete USWeb's renewal training
program, provided that such training shall not be longer than the
training period then required of new USWeb Affiliates;
d. The Parties must execute and deliver a mutual general release, in a
form satisfactory to USWeb, generally releasing any and all claims the
Parties may have against each other, or their respective subsidiaries,
affiliates, or predecessors, and their respective partners, officers,
directors, agents, shareholders, and employees, for any acts or
omissions that may have arisen from the relationship of the Parties
prior to the date of the release; and
e. Affiliate shall pay to USWeb a Renewal Fee of Two Thousand Five
Hundred Dollars ($2,500).
3.4 All supplements, additions, or other modifications to this Agreement of
whatever kind, nature, and description shall terminate upon the expiration
of this Agreement or execution of the then-current form of USWeb Affiliate
Agreement. No addenda, supplements, additions, or other modifications to
this Agreement shall survive expiration or termination of this Agreement.
3.5 If USWeb elects not to renew Affiliate as a USWeb Affiliate, then USWeb
shall give Affiliate written notice of its election not to renew,
specifying the reasons for non-renewal, not later than one hundred eighty
(180) days prior to the expiration of the term of this Agreement.
4. MARKS
-----
4.1 Affiliate acknowledges and shall not contest the validity of the Marks and
acknowledges that the Marks are the sole and exclusive property of USWeb.
All goodwill associated with the Marks, including any goodwill which might
be generated by Affiliate and all other USWeb Affiliates, shall remain the
sole property
7
of USWeb. Affiliate shall not oppose or seek to cancel any registration of
any of the Marks, in the United States or elsewhere, or aid or abet others
in such activities, during or after the term of this Agreement.
4.2 Affiliate shall use the Marks solely for the purposes and to the extent of
the rights, licenses, and franchise granted by this Agreement and only in
accordance with this Agreement and the Operations Manual. Affiliate shall
not use the Marks in the offering of any product or service which is not an
Authorized Offering, or in any other manner not expressly authorized by
this Agreement, by the Operations Manual, or separately in writing by
USWeb.
4.3 Affiliate shall not use the Marks, or any colorable imitation or similar
xxxx, directly or indirectly, for any purpose whatsoever, other than the
purposes intended by this Agreement, at any time during or after expiration
or termination of this Agreement.
4.4 Affiliate shall not license, sublicense, or grant, in any manner, any
interest in the Marks to any person at any time, during the term of, or
after expiration or termination of, this Agreement. Any such act by
Affiliate shall constitute irreparable harm to USWeb and other USWeb
Affiliates and shall constitute a material breach of this Agreement.
4.5 Affiliate shall notify USWeb immediately of any apparent infringement of or
challenge to Affiliate's use of any of the Marks or claim by any person of
any rights in any of the Marks. USWeb shall have sole discretion to take
such action, if any, as it deems appropriate, and Affiliate shall cooperate
with USWeb in all activities reasonably required by USWeb to preclude or
terminate unauthorized use of the Marks or any confusingly similar name or
Xxxx. Affiliate shall not be liable for attorney's fees, court costs, or
other legal expenses incurred by USWeb in pursuit of infringement actions.
Any and all damages or other amounts recovered in any such action or
proceeding shall be the sole property of USWeb.
4.6 USWeb shall indemnify and hold harmless Affiliate against all claims
arising from Affiliate's proper or authorized use of the Marks in
accordance with this Agreement and the Operations Manual. USWeb, in its
sole discretion, shall police and enforce its rights in the Marks.
4.7 Affiliate shall not use the Marks as part of any corporate or trade name,
or with any prefix, suffix, or other modifying words, terms, designs, or
symbols, or in any modified form, during or after expiration or termination
of this Agreement, except as a fictitious business name, which shall be in
the form prescribed by, and subject to the prior written approval of,
USWeb, in accordance with the policies and procedures set forth in the
Operations Manual.
8
4.8 USWeb in its sole discretion from time to time, may determine that use of
certain Marks should be modified or discontinued throughout the USWeb
Network, and/or that the USWeb Network shall use one or more additional or
substitute Marks. Subject to all other terms and conditions of this
Agreement, Affiliate shall comply with USWeb's directions to implement such
changes, within a reasonable time after notice to Affiliate by USWeb.
4.9 All issues relating to the Marks shall be governed by and construed in
accordance with the Xxxxxx Trademark Act (15 U.S.C. (S)1051, et seq.).
5. AFFILIATE OPERATIONS
--------------------
5.1 Affiliate shall comply with all terms and conditions of this Agreement and
the Operations Manual, in the operation of the USWeb Business.
5.2 The location and premises of the USWeb Business identified in Exhibit A
shall be approved in advance and in writing by USWeb. Affiliate shall
commence operations of the USWeb Business at the location, using the USWeb
System, within ninety (90) days of the Effective Date. Affiliate
acknowledges and agrees that time is of the essence in the commencement of
operations, and that Affiliate's failure to meet the time limits imposed in
this Section 5.2 of this Agreement, unless extended in writing by USWeb,
shall be a material breach of this Agreement and may be grounds for
termination of the Agreement at the sole option of USWeb, without further
liability to Affiliate.
5.3 Affiliate shall be solely responsible for compliance with applicable
federal, state, and local requirements with respect to the premises of the
USWeb Business, for the maintenance of suitable premises for the operation
of the USWeb Business during the term of this Agreement, and for all lease
payments or other financial obligations of Affiliate relating to the
premises or the USWeb Business. USWeb does not guarantee any such payments
or other financial obligations, and Affiliate may not act in any way which
might bind or obligate, or attempt to bind or obligate, USWeb to the terms
of any such lease or other financial obligations.
5.4 Affiliate shall not relocate the USWeb Business (a) from the location or
(b) outside the SMSA set forth in Exhibit A to this Agreement, without the
prior written consent of USWeb, which consent shall not be unreasonably
withheld. USWeb may impose conditions precedent to approval of any
relocation in its sole discretion. Any such relocation of the USWeb
Business shall be at Affiliate's sole expense, and USWeb shall have the
right to charge Affiliate for all costs incurred by USWeb in connection
with such relocation, including a reasonable fee for its services in
connection with any such relocation, as set forth in the Operations Manual.
9
6. OPERATING STANDARDS
-------------------
6.1 In order to maintain the high quality and consistent standards associated
with the USWeb System and Marks, Affiliate shall:
a. Devote full time and best efforts to establish and operate the USWeb
Business in accordance with all terms and conditions of this Agreement
and the Operations Manual; Affiliate may designate a qualified
employee for such purpose, and USWeb reserves the right to approve the
person so designated by Affiliate;
b. Maintain the condition and appearance of the premises of the USWeb
Business, consistent with USWeb's standards for USWeb Businesses; and
improve and upgrade the premises from time to time as may be required
or reasonably necessary, in accordance with standards and
specifications set forth by USWeb in the Operations Manual, the lease
for the premises, and in other communications from USWeb to Affiliate,
from time to time;
c. Promote the USWeb Business using the advertising and promotion
materials developed and made available by USWeb, from time to time.
d. Use only prescribed forms of customer agreements and licenses, as set
forth from time to time in the Operations Manual, and not enter into
any other forms of agreement with customers which would have the
effect of abrogating any provision in any prescribed form or of this
Agreement;
e. Complete and submit to USWeb, on a timely basis, the then-current
forms and reports prescribed for all USWeb Affiliates in the
Operations Manual.
f. Maintain an accounting and record keeping system, approved in
accordance with the standards and specifications set forth in the
Operations Manual, including the basic accounting information
necessary to prepare financial statements and a general ledger in
accordance with United States Generally Accepted Accounting Principles
(USGAAP) utilizing a standard chart of accounts as set forth in the
Operations Manual, with adequate and verifiable records and supporting
documentation, including, without limitation, invoices, payroll
records, check registers, sales tax records, cash receipts and
disbursements, journals, and general ledgers;
g. Except as otherwise provided in this Agreement, purchase products and
services for use in the USWeb Business that meet USWeb's standards and
specifications, as set forth in the Operations Manual; Affiliate shall
not offer to its customers any products or services through the USWeb
Business
10
which are not Authorized Offerings or otherwise in accordance with
USWeb's standards and specifications;
h. Provide Internet hosting services to Affiliate's customers which are
operated only by USWeb or by approved suppliers;
i. Comply at all times with all federal, state, and municipal laws,
regulations, bylaws, orders, rulings, permits, and licensing
requirements relating to, and pay promptly any and all taxes,
assessments, fees, fines, and penalties arising out of, the operation
of the USWeb Business;
j. Respond promptly to any and all customers' inquiries or complaints and
resolve, to the customer's reasonable satisfaction, all reasonable
complaints;
k. Operate the USWeb Business in compliance with the standards,
specifications, procedures, and other requirements of the USWeb
System;
l. Use the location of the USWeb Business solely for the purpose of
operating a USWeb Business, and not for any other purpose, without the
prior written consent of USWeb;
m. Notify USWeb in writing within three (3) business days of the
commencement of any action, suit, or legal proceeding by any person,
or of the issuance of any order, writ, injunction, award, or decree of
any court, agency, or other governmental instrumentality, which may
adversely affect the operation or financial condition of the USWeb
Business, or the reputation of the USWeb Network;
n. Hire and train only competent and qualified employees; and
o. Obtain and maintain in force, at its sole expense, a policy or
policies of liability insurance, in such form and such limits (of not
less than $1 million) as USWeb, in its sole discretion, deems
necessary (including motor vehicle liability insurance, if a motor
vehicle is employed in the operation of the USWeb Business), as set
forth in the Operations Manual. All such insurance policies shall
name USWeb Corporation as an additional insured and shall provide that
USWeb will receive ten (10) days prior written notice of termination,
expiration, or cancellation of any such policy; not less than
annually, Affiliate shall submit to USWeb a copy of the certificate or
other evidence of the renewal or extension of each such insurance
policy; if Affiliate fails to comply with the obligations of this
(S)6.1(o), then USWeb shall have the right to procure such insurance
and Affiliate shall reimburse USWeb for all related costs incurred.
11
6.2 Affiliate shall maintain the confidentiality, both during and after the
term of this Agreement, of all USWeb Proprietary Information disclosed to
Affiliate by USWeb pursuant to this Agreement, and not disclose, duplicate,
or otherwise use in an unauthorized manner any portion of the USWeb
Proprietary Information. Affiliate shall adopt and implement reasonable
policies and procedures to prevent unauthorized use or disclosure of USWeb
Proprietary Information, including those policies and procedures relating
to Affiliate Associates set forth in the Operations Manual. Affiliate
shall not use any USWeb Proprietary Information for any purpose or in any
business activity other than in the USWeb Business, or in any manner not
contemplated by this Agreement, unless such use has been specifically
authorized or approved in writing by USWeb.
6.3 USWeb Proprietary Information shall remain, at all times, the sole property
of USWeb and shall be returned to USWeb promptly upon the expiration or
termination of this Agreement.
6.4 Affiliate shall insure, at all times, that any authorized Affiliate copies
of the Operations Manual and other USWeb Proprietary Information are
maintained in their most current version, and in the event of any dispute
as to the contents of such materials, the terms of the master copy of such
materials maintained by USWeb shall be controlling. In the event of a
conflict between the Operations Manual and this Agreement, the provisions
of this Agreement shall prevail.
6.5 Affiliate may use USWeb Intellectual Property authorized by USWeb in the
delivery of products or services to Affiliate's customers, in accordance
with the terms and conditions of various license agreements pertaining to
USWeb Intellectual Property, including license agreements with third
parties, which licenses may grant to Affiliate the right to prepare
"derivative works" [as defined in the U.S. Copyright Act, 17 U.S.C. (S)101
(1994)] from such licensed USWeb Intellectual Property. With respect to
such derivative works, Affiliate hereby assigns to USWeb all right, title,
and interest in such derivative works, including any patent, copyright,
know-how, or similar rights relating to such derivative works, under
methods and procedures set forth in the Operations Manual, from time to
time, and shall do, execute, acknowledge, and deliver all such further
acts, transfers, assignments, conveyances, or assurances as USWeb may
require to better transfer, assign, convey, grant, and assure the
assignment of and delivery of code for such derivative works to USWeb.
12
7. OTHER OBLIGATIONS OF USWEB
--------------------------
7.1 USWeb will revise and update the Operations Manual, from time to time,
during the term of this Agreement and distribute such revisions and updates
to Affiliate.
7.2 USWeb will test and evaluate computer hardware and software products, and
recommend certain systems and configurations for use in various parts of
the USWeb Business, in USWeb's sole discretion, in accordance with the
standards, specifications, and procedures set forth from time to time in
the Operations Manual.
7.3 USWeb will test and evaluate products and services for designation as
Authorized Offerings, in accordance with the standards, specifications, and
procedures set forth from time to time in the Operations Manual.
7.4 USWeb will sell and/or distribute products and services, including products
and services developed by other USWeb Affiliates and assigned to USWeb
pursuant to Section 6.5 of this Agreement (or future equivalents), in
USWeb's sole discretion, in accordance with the standards, specifications,
and procedures set forth from time to time in the Operations Manual.
7.5 USWeb will provide such other ongoing consultation, advice, and assistance
as USWeb, in its sole discretion, deems appropriate to assist Affiliate in
the operation of the USWeb Business, the performance of Affiliate's
obligations under this Agreement, and the maintenance of high standards and
reputation of the USWeb Network.
8. ADVERTISING
-----------
Affiliate acknowledges the value of advertising and the importance of the
standardization of advertising and promotion to the furtherance of the goodwill
and the public image of the USWeb Network. Therefore, it is agreed as follows:
8.1 USWeb, or its designee, shall develop, in its sole discretion, all creative
concepts, advertising campaigns, and marketing and promotional materials
used in the USWeb System. Affiliate shall utilize only USWeb-approved
concepts, campaigns, and materials, in accordance with this Agreement, the
Operations Manual, and other communications from USWeb, from time to time.
8.2 USWeb, or its designee, shall utilize The Advertising & Marketing Fund in
its sole discretion, for advertising, marketing, and public relations
activities to promote the sale of products or services offered by USWeb
Affiliates to produce advertising campaigns and marketing and promotional
materials for use by all USWeb Affiliates, and to assist specific USWeb
Affiliates, as well as to pay all costs
13
associated with the general marketing and promotion of the USWeb Network,
including, without limitation, corporate employee and other reasonable
administrative costs relating to advertising, marketing, and promotion;
engagement of advertising, public relations, and media buying firms; and
costs for development and placement of advertising campaigns in all forms
of media. The Fund will not be used directly to promote the sale of new
USWeb Affiliate Agreements.
8.3 In addition to the Advertising & Marketing Fee payable pursuant to Section
9.3 of this Agreement, Affiliate shall spend, on an annual basis, not less
than one percent (1%) of Adjusted Gross Revenues on marketing and
advertising activities related solely to Affiliate's USWeb Business.
Categories of such activities will be described, from time to time, in the
Operations Manual.
8.4 The Parties agree and acknowledge that the Advertising & Marketing Fund is
intended to maximize marketplace recognition of USWeb and acceptance of the
Marks for the benefit of the USWeb Network and that USWeb or its designee
undertake no obligation in administering the Fund to make expenditures for
any USWeb Affiliate that are equivalent or proportionate to its
contribution, or to ensure that any particular Affiliate benefits directly
or pro rata from the placement of such advertising. Affiliate shall have
no right to any refund of monies contributed to the Fund upon termination,
expiration, or transfer of this Agreement.
8.5 Affiliate shall maintain a business telephone and advertise continuously in
the classified or "Yellow Pages" of its local telephone directory under
such listing(s) and in such format as approved by USWeb. Where multiple
Affiliates serve a common geographic area covered by a common telephone
directory, such advertisements shall list all then-existing Affiliates
under a collective listing(s) and Affiliate shall contribute its equal
share in the cost of such advertising.
8.6 Affiliate shall advertise consistently with all standards, terms, and
conditions of this Agreement and the Operations Manual, and shall not
advertise or use, in advertising or any other form of promotion, the Marks
without displaying appropriate or approved copyright and trademark
registration marks or other designations, as required.
9. ACCOUNTING AND RECORDS
----------------------
9.1 Affiliate must maintain an accounting and record keeping system in
accordance with United States Generally Accepted Accounting Principles
(USGAAP), approved in accordance with the standards and specifications set
forth in the Operations Manual. This system shall utilize a standard chart
of accounts, as set forth in the Operations Manual, and shall include the
basic accounting information necessary to prepare financial statements, a
general ledger, and reports required by this
14
Agreement and the Operations Manual. Affiliate shall maintain adequate and
verifiable records and supporting documentation relating to such accounting
information, in accordance with USWeb's specifications, as set forth in the
Operations Manual, including vendor and customer invoices, payroll records,
check registers, cash receipts and disbursements journals, and general
ledgers.
9.2 Affiliate shall, at its expense, submit to USWeb within ninety (90) days of
the end of Affiliate's fiscal year during the term of this Agreement, an
income statement for such fiscal year and a balance sheet as of the last
day of such fiscal year, prepared on an accrual basis (unless otherwise
required by law), including all adjustments necessary for fair presentation
of the financial statements, as adjusted and reconciled after the closing
and review of Affiliate's books and records, all in accordance with USGAAP.
Such financial statements will be certified to be true and correct by
Affiliate. USWeb reserves the right to require annual financial
statements, prepared in accordance with USGAAP, reviewed or audited by an
independent certified public accountant.
9.3 Affiliate shall submit to USWeb, within five (5) days of the end of each
calendar month, a true, correct, and complete statement of Adjusted Gross
Revenues for the previous calendar month, containing all information
required and in the format prescribed, by USWeb, as set forth in the
Operations Manual, and certified as true, correct, complete and accurate by
Affiliate.
9.4 Affiliate shall provide to USWeb copies of Affiliate's annual federal
income tax returns (if Affiliate is obligated to report under the
Securities Exchange Act of 1934, then Forms 10-K and 10-Q may be provided
in lieu of annual federal income tax returns) and quarterly (or other
periodic) sales tax returns, including all schedules, exhibits, and tables
included in such returns, within thirty (30) days of the date of filing
each such return. In the event that such returns are not filed by
Affiliate in a timely manner, Affiliate shall provide to USWeb copies of
all extensions of time filed and granted within thirty (30) days of each
such filing or granting of such extension(s).
9.5 If any statement submitted to USWeb by Affiliate discloses any underpayment
of monthly Royalty & Service Fees or Advertising & Marketing Fees, then
Affiliate shall pay to USWeb, at the time such statement is submitted, the
amount of any such underpayment. Any overpayment shall be credited to
Affiliate's account with USWeb.
9.6 USWeb or its designated agents shall have the right at all reasonable times
to examine, at its expense, the books and records of Affiliate. USWeb
shall also have the right, at any time, to have an independent audit made
of Affiliate's books and records, by auditors selected by USWeb and at
USWeb's expense. In the event
15
any such inspection or audit shall disclose an under-reporting of Adjusted
Gross Revenues for any period which exceeds five percent (5%) of
Affiliate's Adjusted Gross Revenues during such period, then Affiliate
shall pay to USWeb, within ten (10) days of receipt of a demand based on
the report, the amount(s) due as a result of such under-statement, plus all
costs associated with the audit, not to exceed $10,000. Further, in the
event such audit is made necessary by the failure of Affiliate to furnish
reports or statements as required in this Agreement, Affiliate shall
reimburse USWeb for all costs of such inspection or audit, including
without limitation the charges of any independent accountant and all travel
expenses, room and board, and other reasonable expenses and compensation of
USWeb employees relating to such inspection or audit.
10. PAYMENTS AND FEE
----------------
10.1 INITIAL FRANCHISE FEE
a. Upon execution of the Agreement, Affiliate shall pay to USWeb a
nonrecurring Initial Franchise Fee in the amount of Fifty Thousand
Dollars ($50,000).
b. The Initial Franchise Fees are payable in full at the time of, and
deemed fully earned by USWeb and nonrefundable upon, Affiliate's
execution of this Agreement.
10.2 Affiliate shall pay to USWeb a monthly Royalty & Service Fee, calculated at
Five Percent (5%) of Adjusted Gross Revenues, but not less than the
following Monthly Minimum Royalty & Service Fee, determined by the SMSA
Class specified in Exhibit A to this Agreement:
============================================================================
SMSA Class 1 SMSA Class 2 SMSA Class 3 SMSA Class 4 SMSA Class 5
----------------------------------------------------------------------------
$3,800 $3,800 $3,100 $2,000 $1,400
============================================================================
10.3 Affiliate shall pay to USWeb a monthly Advertising & Marketing Fee equal to
Two Percent (2%) of Adjusted Gross Revenues, but not less than the
following Monthly Minimum Advertising & Marketing Fee, determined by the
SMSA Class specified in Exhibit A to this Agreement:
16
============================================================================
SMSA Class 1 SMSA Class 2 SMSA Class 3 SMSA Class 4 SMSA Class 5
----------------------------------------------------------------------------
$1,520 $1,520 $1,240 $800 $560
============================================================================
10.4 All amounts due to USWeb shall be payable on the tenth (10th) business day
of each calendar month.
10.5 Any amount properly owing from Affiliate to USWeb for Royalty & Service
Fees, Advertising & Marketing Fees, or any other purpose whatsoever, if not
paid when due, whether such amount has been shown on any report required to
be submitted by Affiliate or has subsequently been determined by
verification, examination, or audit to have been due for any month, shall
bear interest from the date such amount was due until paid, at the lesser
of one and one-half percent (1.5%) per month of delinquency or the maximum
rate permitted by law. Affiliate acknowledges that this provision does not
constitute USWeb's agreement to accept any payments after the due date or a
commitment by USWeb to extend credit for or otherwise to finance
Affiliate's operation of the USWeb Business.
10.6 Affiliate shall pay all costs incurred by USWeb due and owing to USWeb in
connection with the operation of Affiliate's USWeb Business, including,
without limitation, the costs of enforcing the provisions of this Agreement
and the cost of all related attorney's fees, accountant's fees, court
costs, and general and administrative expenses, including travel.
10.7 Notwithstanding any designation by Affiliate, USWeb shall have the sole
discretion to apply any receipts from or on the accounts of Affiliate for
any indebtedness to USWeb.
10.8 During the initial 4 calendar months after the Startup Date, Affiliate
shall not be obligated to pay the Monthly Minimum obligations set forth in
Sections 10.2 and 10.3, and shall be obligated to pay only the percentages
of Adjusted Gross Revenues payable pursuant to those Sections.
11. COVENANTS
---------
11.1 During the term of this Agreement, neither Affiliate nor any Affiliate
Associate shall:
a. engage in, or own any interest (except as a passive investor of less
than five percent (5%) of total debt and equity) in, any business or
other activity that would compete with the USWeb Business or otherwise
conflict with the performance of Affiliate's obligations under this
Agreement, except as a USWeb Affiliate; or
17
b. divert or attempt to divert any business or any customers of the USWeb
Business to any other person or entity, by direct or indirect
inducement or otherwise, or do or perform, directly or indirectly, any
other act injurious or prejudicial to the goodwill associated with
USWeb, the Marks, the USWeb Business, or the USWeb Network; or
c. solicit any person for employment with Affiliate who is at that time
already employed by USWeb or another USWeb Affiliate, or otherwise
directly or indirectly induce or seek to induce such person to leave
his or her employment.
11.2 For a period of two (2) years following expiration or termination of this
Agreement, neither Affiliate nor any Affiliate Associate shall:
a. engage in, or own any interest (except as a passive investor of less
than five percent (5%) of total debt and equity) in, any business or
other activity, in the SMSA where the USWeb Business was located, that
would compete with the former USWeb Business, except as a USWeb
Affiliate; or
b. divert or attempt to divert any business or any customers of the USWeb
Business to any other person or entity in the SMSA where the USWeb
Business was located, by direct or indirect inducement or otherwise,
or do or perform, directly or indirectly, any other act injurious or
prejudicial to the goodwill associated with USWeb, the Marks, the
USWeb Business, or the USWeb Network; or
c. solicit any person for employment who is at that time already employed
by USWeb or another USWeb Affiliate, or otherwise directly or
indirectly induce or seek to induce such person to leave his or her
employment.
11.3 Sections 11.1 and 11.2 of this Agreement shall not apply:
a. to any noncompetitive business activities of Affiliate, or of any
Affiliate Associate which have been conducted by such person(s) prior
to the Effective Date of this Agreement, as such activities are
described in Exhibit A to this Agreement; or
b. to any business activities of an Affiliate Associate which are not
conducted in any capacity as a consultant, manager, officer, or
director of any direct competitor of USWeb.
11.4 Section 11.2 of this Agreement shall not apply if Affiliate is in good
standing at the expiration of the term of this Agreement and USWeb elects
not to renew Affiliate,
18
pursuant to Section 3.5 of this Agreement.
11.5 Affiliate shall adopt and implement reasonable procedures to assure
compliance by any Affiliate Associates with the obligations set forth in
Sections 11.1 and 11.2, in accordance with the policies and procedures set
forth in the Operations Manual.
11.6 Affiliate's obligations under this Section 11 shall be interpreted and
construed in accordance with the laws of the State where Affiliate's USWeb
Business is located; Section 15.10 of this Agreement shall not apply to the
interpretation or enforcement of Affiliate's obligations under this Section
11.
12. TRAINING AND ASSISTANCE
-----------------------
12.1 Prior to opening of the USWeb Business, Affiliate, or Affiliate's
designated manager, shall attend and successfully complete to USWeb's
satisfaction, an Initial Training Course of not more than four (4) days
duration, to be conducted at a location designated by USWeb. Two
additional employees of Affiliate may attend the initial training course
without additional charge. The Initial Training Course shall cover all
material aspects of the operation of a USWeb Business.
12.2 USWeb may offer, from time to time, training programs for previously
trained and experienced Affiliate personnel, to be conducted at such place
as USWeb shall designate. The content and duration of such training shall
be in USWeb's sole discretion. USWeb may charge a reasonable fee for such
additional courses.
12.3 USWeb may provide additional optional training and assistance, including
on-location training and assistance, at Affiliate's request. The content
and duration of such training and assistance shall be in USWeb's sole
discretion and Affiliate may be required to pay per diem costs and expenses
for such training and assistance, as set forth in the Operations Manual.
12.4 Affiliate, and key Affiliate personnel as may be designated by USWeb, shall
attend the USWeb Annual Conference as mandatory annual training, in order
to remain current and informed about developments in the USWeb System
including, but not limited to, methods of operations, products and
services, marketing strategies, advertising campaigns and programs, and
other matters of topical interest. Affiliate may be required, from time to
time, to pay registration fees to attend the Annual Conference.
12.5 All expenses incurred by Affiliate and its employees in attending all USWeb
training programs, including the initial training course, any optional
training, and the mandatory USWeb Annual Conference, including, without
limitation, travel, room and board, and employee compensation, shall be the
sole responsibility of Affiliate.
19
13. DEFAULT AND TERMINATION
-----------------------
13.1 Except as otherwise provided in this Section 13.0, USWeb may terminate this
Agreement before the expiration of its term only for good cause. Good
cause shall include, but not be limited to, Affiliate's failure to comply
with any lawful requirement of this Agreement after being given notice of
Affiliate's failure to comply and a reasonable opportunity, which in no
event need be longer than thirty (30) days, to cure such failure.
13.2 In addition to USWeb's right to terminate this Agreement upon the failure
of Affiliate to complete development of or open the office(s) for business
(as provided in Section 4.2), USWeb may terminate this Agreement effective
immediately upon delivery of notice of termination to Affiliate without an
opportunity to cure if, during the term of this Agreement, any of the
following events occurs:
a. The discovery by USWeb that Affiliate made a material
misrepresentation in the Application or otherwise relating to the
acquisition of Affiliate's USWeb franchise or entering into this
Agreement, or that Affiliate and/or its USWeb Business has engaged in
conduct reflecting materially and unfavorably upon the operation and
reputation of USWeb, the Marks, or the USWeb Network; or
b. Affiliate is convicted of or pleads no contest to a felony or other
criminal or civil offense involving charges of moral turpitude or
that is otherwise likely to affect adversely the reputation of USWeb,
the Marks, or the USWeb Network; or
c. Affiliate and/or its USWeb Business makes any unauthorized use,
disclosure, or duplication of any portion of the Operations Manual,
any USWeb Intellectual Property, or any USWeb Proprietary Information;
or
d. Affiliate fails to obtain and maintain reasonable protection for USWeb
Proprietary Information, including the execution of appropriate
agreements with any Affiliate Associate;
e. Affiliate or any Affiliate Associate violates the covenants not to
compete in Sections 11.1 or 11.2 of this Agreement; or
f. Affiliate abandons, surrenders, or transfers control of, or fails or
refuses to actively operate the USWeb Business continuously for five
(5) days during any twelve (12) months period unless the USWeb
Business has been closed for a purpose approved by USWeb, or Affiliate
fails to relocate to an approved location within an approved period of
time following expiration or
20
termination of the lease for the premises of the USWeb Business; or
g. Affiliate surrenders or transfers control of the operation of the
USWeb Business, makes or attempts to make an unauthorized direct or
indirect Transfer not in accordance with Section 14 of this Agreement,
or fails or refuses to assign this Agreement or the interest in
Affiliate of a deceased or disabled controlling owner as required by
Section 14.6 of this Agreement; or
h. Affiliate files any petition or action for relief under any
bankruptcy, insolvency, reorganization, moratorium, creditor
composition law, or any other law for the relief of or relating to
debtors; or an involuntary petition is filed under any bankruptcy law
against Affiliate, or receives an appointment of a receiver or
trustee, or makes any assignment for the benefit of creditors, or
fails to vacate or dismiss within sixty (60) days after filing any
such proceedings commenced against Affiliate by a third party; or
i. Affiliate repeatedly fails to submit when due reports or other
information or supporting records, to pay when due Royalty & Service
Fees, Advertising & Marketing Fees, amounts due for license fees or
purchases from USWeb and/or its affiliates or any other USWeb
Affiliate, or any other payments due to USWeb and/or its affiliates or
any other USWeb Affiliate, or otherwise fails to comply with this
Agreement, whether or not such failures to comply are corrected after
notice is delivered to Affiliate.
13.3 Affiliate shall be evaluated annually, in comparison to all other USWeb
Affiliates in the same SMSA Class, on (a) Adjusted Gross Revenues, (b)
customer satisfaction, based upon Network-wide survey results, and (c)
customer retention. At the end of each annual period, if Affiliate fails
to perform in the top 90% of all USWeb Affiliates in its SMSA Class for any
two or more of the three categories, then Affiliate shall be deemed in
default of this Agreement and shall have twelve (12) months, until the next
annual evaluation, to cure such default. If, at the end of the cure
period, Affiliate again fails to perform in the top 90% of all USWeb
Affiliates in its SMSA Class in any two or more of the three categories,
then this Agreement shall be terminated.
13.4 If Affiliate is in substantial compliance with this Agreement and USWeb
materially breaches this Agreement and fails to cure such breach within a
reasonable time after written notice is delivered to USWeb, Affiliate may
terminate this Agreement. Such termination shall be effective thirty (30)
days after delivery to USWeb of notice that such breach has not been cured
and Affiliate elects to terminate this Agreement. If a court of first
instance with competent jurisdiction determines by final order that USWeb
materially breached this Agreement, then Sections 11.2 and 13.5(e) of this
Agreement shall not be enforced. Affiliate shall not be precluded from
21
seeking an injunction against enforcement of Sections 11.2 and 13.5(e)
pending a determination on the merits. A termination of this Agreement by
Affiliate for any reason other than a material breach of this Agreement by
USWeb and USWeb's failure to cure such breach, within a reasonable time
after USWeb's receipt of written notice from Affiliate, shall be deemed a
termination without cause.
13.5 Upon expiration or termination of this Agreement for any reason, Affiliate
shall:
a. Within fifteen (15) days after the effective date of such expiration
or termination, pay to USWeb all liquidated and ascertainable sums
owing from Affiliate to USWeb or any of its affiliates or any other
USWeb Affiliate, including all damages, costs, expenses, and
attorneys' fees incurred by USWeb as a result of the termination or
expiration; and
b. Immediately and permanently discontinue the use of the Marks, the
USWeb System, all USWeb Intellectual Property and USWeb Proprietary
Information, and any other materials which may in any way indicate
that Affiliate is or ever was operating a USWeb Business; and
c. Immediately and permanently remove, destroy, or obliterate, at
Affiliate's expense, the Marks from all signs or other displays
containing any of the Marks; if Affiliate fails to remove the Marks
within a reasonable time following termination, then USWeb shall have
the right to remove the Marks; the cost of such removal shall be borne
by Affiliate; and
d. Immediately return to USWeb all copies of the Operations Manual, all
USWeb Intellectual Property, all USWeb Proprietary Information, and
any and all other materials relating to the USWeb System; and
e. Immediately deliver to USWeb all customer lists, customer information,
and customer content managed by Affiliate, and all architecture and
usage instructions for all customer Internet or Intranet sites under
management and/or being constructed by Affiliate, and take such other
and further steps to convert all Affiliate's customers to USWeb's
account;
f. Terminate and not renew all third party supplier agreements based upon
its former status as a USWeb Affiliate, unless such termination would
constitute an uncurable breach of such agreement(s) or cause Affiliate
to incur financial penalties to the supplier as a result of such
termination; and
g. Take such action as may be required to cancel all assumed names or
equivalent registrations relating to Affiliate's use of any Marks, and
notify the local telephone company and all telephone listing agencies
of the termination
22
or expiration of Affiliate's right to use any telephone number
associated with any Marks and with the USWeb Business, and to
authorize transfer of the telephone number to USWeb or its designee;
and
h. In the event Affiliate continues to operate or subsequently begins to
operate any other business, not to use any reproduction, counterfeit,
copy, or colorable imitation of the Marks either in connection with
such other business or the promotion of such business, which would be
likely to cause confusion, mistake, or deception, or to dilute USWeb's
exclusive rights in and to the Marks. Affiliate shall make such
modifications or alterations to the location of the USWeb Business
immediately upon termination or expiration of this Agreement, as may
be reasonably necessary to prevent any association between the USWeb
Network and any business subsequently operated by Affiliate or others,
subject to all other terms and conditions of this Agreement. Affiliate
shall make such specific additional changes to the location as USWeb
may reasonably request for that purpose, including, without
limitation, removal of all signage and any other distinctive physical
and structural features identifying the USWeb System.
13.6 Immediately upon the expiration or termination of this Agreement, for any
reason, all rights granted to Affiliate pursuant to this Agreement,
including all licenses of USWeb Intellectual Property and USWeb Proprietary
Information granted pursuant to Section 2.2 of this Agreement, shall
terminate immediately and concurrently with such expiration and
termination.
13.7 All obligations of USWeb and Affiliate 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 such expiration or
termination and until they are satisfied or by their nature expire.
14. OWNERSHIP AND TRANSFER
----------------------
14.1 This Agreement and all rights and obligations set forth in this Agreement
may be transferred by USWeb and, if so, shall be binding upon and inure to
the benefit of USWeb's successors and assigns; USWeb's transferee shall
assume all USWeb's obligations in this Agreement.
14.2 Subject to all terms and conditions of this Agreement, Affiliate may make a
Transfer of this Agreement and all of Affiliate's rights and obligations
under this Agreement, which Transfer shall be binding upon and inure to the
benefit of Affiliate's successors and assigns, and subject to the following
conditions and requirements:
a. Affiliate or any Affiliate Associate shall not Transfer, by operation
of law or
23
otherwise, the franchise granted by this Agreement, or any interest in
the franchise or this Agreement, without the prior written consent of
USWeb. Affiliate may not, without the prior written consent of USWeb,
fractionalize any of the rights or obligations of Affiliate under this
Agreement. Any purported assignment of any of Affiliate's rights or
obligations under this Agreement without the prior written consent of
USWeb shall be null and void and shall constitute a material breach
under this Agreement.
b. USWeb shall not unreasonably withhold its consent to any Transfer of
this Agreement when requested; provided, however, that such Transfer
shall be subject to the following conditions, in USWeb's sole
discretion:
(1) If Affiliate is an individual and desires to Transfer its rights
to a partnership or corporation, then such Transfer shall be
subject to the following conditions:
(a) The transferee corporation or partnership shall not conduct
any business other than a USWeb Business under agreement(s)
with USWeb.
(b) Affiliate shall actively manage the partnership or
corporation and shall own and/or control not less than
fifty-one percent (51%) of (i) the general partnership
interests in a partnership or (ii) the combined debt and
equity and voting power in a corporation.
(c) The transferee shall enter into a written assignment (in a
form satisfactory to USWeb), by which the transferee assumes
all of Affiliate's obligations under this Agreement.
(d) All then-outstanding financial obligations of Affiliate to
USWeb, or any of USWeb's subsidiaries, affiliates, or
assignees, or any other USWeb Affiliate, shall be satisfied
prior to Transfer.
(2) If any Transfer would be to a person other than an original
signatory to this Agreement, then such Transfer shall be subject
to the following conditions:
(a) The transferee(s) shall have a good credit rating and
competent business qualifications which meet then-current
standards for new USWeb Affiliates at the time USWeb's
approval is requested. Affiliate shall provide USWeb with
such information as USWeb may require to make such
24
determination concerning each such proposed transferee(s).
(b) The transferee(s) shall not be engaged in, or own any
interest in (except as a passive investor holding not
greater than five percent (5%) of total debt and equity),
any business which competes with, or could compete with,
USWeb, the USWeb Network, any USWeb Affiliate, or the USWeb
Business, except as a USWeb Affiliate.
(c) The transferee(s) or such other person as shall be the
actual manager of the USWeb Business shall have successfully
completed and passed the then-current initial training
course for USWeb Affiliates.
(d) The transferee shall execute USWeb's then-current form of
USWeb Affiliate Agreement for a term ending on the
expiration date of this Agreement, together with such other
ancillary documents as USWeb may require for the USWeb
Business, which agreements shall supersede this Agreement in
all respects. The terms of these agreements may differ in
material respects from the terms of this Agreement,
provided, however, that the transferee shall not be required
to pay any Initial Franchise Fee.
(e) All financial obligations of Affiliate to USWeb or its
affiliates, or to any other USWeb Affiliate, shall be
satisfied prior to Transfer, and Affiliate shall not be in
default under the terms of this Agreement.
(f) Prior to Transfer, the Parties shall execute and deliver a
mutual general release, in a form satisfactory to USWeb,
generally releasing any and all claims the Parties may have
against each other, or their respective subsidiaries,
affiliates, or predecessors, and their respective partners,
officers, directors, agents, shareholders, and employees,
for any acts or omissions that may have arisen from the
relationship of the Parties prior to the effective date of
the proposed Transfer, except such claims as may not be
permitted to be released by applicable law.
(g) USWeb's approval of any Transfer or any of Affiliate's
rights under this Agreement shall in no way be deemed a
release by USWeb of Affiliate's obligations pursuant to this
Agreement.
25
USWeb's consent to a Transfer shall not constitute or be
interpreted as consent for any future Transfer.
14.3 Affiliate shall have paid to USWeb a Transfer Fee equal to Five Thousand
Dollars ($5,000) for the training, supervision, administrative costs,
overhead, attorney fees, accounting, and other expenses of USWeb in
connection with such Transfer.
14.4 Affiliate shall give USWeb thirty (30) days written notice prior to any
Transfer by Affiliate, or such other period as reasonably may be required
to permit USWeb to comply with any applicable state or federal franchise
disclosure laws. Affiliate shall indemnify and hold harmless USWeb for
Affiliate's failure to comply with this Section 14.4. Payment of the
Transfer fee and all required documents must accompany this notice; the
thirty (30) days notice period shall commence upon USWeb's receipt of all
materials required by this Section 13.0.
14.5 USWeb shall have a Right of First Refusal to acquire the interest proposed
to be conveyed in any Transfer which would result in the proposed
transferee acquiring more than 20% of the equity in Affiliate. Upon
receipt of Affiliate's written notice of proposed Transfer and adequate
documentation for USWeb to determine the bona fides of the proposed
Transfer and such other information as USWeb reasonably may require to
evaluate the proposed Transfer in a diligent manner, USWeb shall have
thirty (30) days to exercise, or to decline to exercise, its Right of First
Refusal, on identical terms and conditions as those set forth in the
proposed Transfer. If the Transfer to the proposed transferee is not
completed, on materially identical terms and conditions described in the
notice of proposed Transfer and related documentation, within 120 days of
USWeb's declination of its Right of First Refusal, or if there is a
material change to the terms of the proposed Transfer, then USWeb's Right
of First Refusal shall be applicable to any subsequent proposed Transfer.
14.6 In the event of the death or Incapacity of an individual Affiliate, or any
partner of an Affiliate that is a partnership or any shareholder owning
fifty percent (50%) or more of the total debt and equity of an Affiliate
that is a corporation, the heirs, beneficiaries, devisees, or legal
representatives of such individual, partner, or shareholders, within ninety
(90) days of such event, shall apply to USWeb for the right to continue to
operate the USWeb Business for the duration of the term of this Agreement,
which right shall be granted upon the fulfillment of all of the conditions
set forth in Section 14.2 of this Agreement.
15. GENERAL PROVISIONS
------------------
15.1 This Agreement does not constitute Affiliate as an agent, legal
representative, joint venturer, partner, employee, or servant of USWeb for
any purpose whatsoever; and
26
it is understood between the Parties to this Agreement that Affiliate shall
be an independent contractor and is in no way authorized to make any
contract, agreement, warranty, or representation on behalf of USWeb, or to
create any obligation, express or implied, on behalf of USWeb.
15.2 Affiliate shall defend and indemnify and hold harmless USWeb, and USWeb's
shareholders, directors, officers, employees, and agents, at Affiliate's
sole cost and expense from and against any and all claims, losses, costs,
expenses (including USWeb's reasonable attorneys' fees, in accordance with
Section 14.5 of this Agreement), damages, and liabilities ("Claims"),
however caused or incurred, whether in preparation for, response to, or
conduct or settlement (whether before or after filing of any court or other
proceeding) of actual litigation, resulting directly or indirectly from or
pertaining to the use, condition, or construction, equipping, maintenance,
or operation of the USWeb Business. Such Claims may include, without
limitation, those arising from latent or other defects in the products or
services provided in the operation of the USWeb Business, including any
Authorized Offerings, whether or not discoverable by USWeb, and those
arising from the death or injury to any person or arising from damage to
the property or business of Affiliate or USWeb, and their respective
officers, directors, employees, and agents, or any third person, firm, or
corporation, whether or not such Claims were actually or allegedly caused
wholly or in part through the active or passive negligence, or resulted
from any strict liability being imposed upon USWeb or any of its officers,
directors, employees, or agents. The indemnities and assumptions of
liabilities and obligations in this Agreement shall continue in full force
and effect subsequent to the expiration or termination of this Agreement
for any reason.
15.3 No failure of USWeb to exercise any power reserved to it by this Agreement,
or to insist upon strict compliance by Affiliate with any obligation or
condition of this Agreement, and no custom or practice of the Parties in
variance with the terms of this Agreement, shall constitute a waiver of
USWeb's right to demand exact compliance with any term or condition of this
Agreement. Waiver by USWeb of any particular default by Affiliate shall not
be binding unless in writing and executed by and shall not affect or impair
USWeb's right with respect to any subsequent default of the same or of a
different nature.
15.4 Any and all notices required or permitted under this Agreement shall be in
writing and shall be delivered personally, by air courier, or mailed by
certified mail, return receipt requested, to the respective Parties at the
following addresses unless and until a different address has been
designated by written notice to the other Party:
27
Notices to USWeb:
USWeb Corporation
0000 Xxxxxxxx Xxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
Notices to Affiliate:
______________________________________________
______________________________________________
Any notice by certified mail shall be deemed to have been given three (3)
business days after the date and time of mailing. Any notice delivered
personally or sent by facsimile or electronic mail is deemed given upon
delivery or completion of transmission.
15.5 In the event that either Party to this Agreement is required to employ
legal counsel or to incur other expenses to enforce any obligation of the
other Party under this Agreement, or to defend against any claim, demand,
action, or proceeding by reason of the other Party's failure to perform any
obligation imposed upon such other Party by this Agreement, and provided
that legal action is filed and a final order in such action or the
settlement of such action establishes the other Party's default under this
Agreement, then the prevailing Party shall be entitled to recover from the
other Party the amount of all reasonable fees of such counsel (including
the cost of in-house counsel, calculated at outside counsel rates for
attorneys of comparable background and experience) and all other expenses
incurred in enforcing such obligation or in defending against such claim,
demand, action, or proceeding, whether incurred prior to, or in preparation
for, or in contemplation of the filing of such action or thereafter.
15.6 Each section, subsection, part, term, and/or provision of this Agreement
shall be considered severable, and if, for any reason, any section,
subsection, part, term, and/or provision of this Agreement is determined in
a final order by a court of competent jurisdiction to be invalid and
contrary to, or in conflict with, any existing or future law or regulation,
then such determination shall not impair the operation of or affect the
remaining sections, subsections, portions, parts, terms, and/or provisions
of this Agreement, and, to the fullest extent possible, such remainder
shall continue to be given full force and effect and to bind the Parties,
and any invalid or illegal sections, subsections, portions, parts, terms,
and/or provisions shall be deemed not part of this Agreement; provided,
however, that if such court
28
determines that its determination adversely affects the basic
consideration of this Agreement, then the court, at its option, may order
termination of this Agreement.
15.7 No amendment, change, or variance from this Agreement shall be binding on
either Party unless executed in writing by both Parties.
15.8 All captions used in this Agreement are intended solely for the
convenience of the Parties, and none shall be deemed to affect the meaning
or construction of any provision of this Agreement. Pronouns are used
without regard to gender or number. References to numbers of days refer to
calendar days. References to "including" are not exclusive and should be
read as "including, without limitation."
15.9 Except as otherwise provided in this Agreement, this Agreement shall be
interpreted and construed in accordance with the laws of the State of
California, excluding its conflicts of laws principles.
15.10 Any action commenced for the purpose of interpreting or enforcing any term
or condition of this Agreement shall be commenced in either the United
States District Court for the Northern District of California, San Xxxx
Division or the Superior Court of the State of California for the County
of Santa Xxxxx. The Parties submit to and accept the jurisdiction and
venue of these courts and agree to be bound by any judgments and orders
rendered by these courts.
15.11 No right or remedy conferred upon or reserved to USWeb or Affiliate by
this Agreement is intended to be, nor shall be deemed, exclusive of any
other right or remedy provided in this Agreement or otherwise provided or
permitted by law or equity, but each shall be cumulative of every other
right or remedy.
15.12 This Agreement, and any Exhibits attached to this Agreement, shall be
construed together and constitute the entire, full, and complete agreement
between USWeb and Affiliate concerning the subject matter of this
Agreement, and shall supersede all prior agreements. This Agreement shall
be binding upon the Parties and their respective heirs, representatives,
and permitted assignees. This Agreement may be executed in multiple
counterparts, and each copy so executed shall be deemed an original.
15.13 USWeb expressly reserves any and all rights not explicitly granted to
Affiliate by the provisions of this Agreement.
15.14 USWeb and Affiliate acknowledge that the USWeb System and the franchise
and other licenses and rights granted by this Agreement are undertaken by
the Parties in the context of the present nature of the Internet. USWeb
and Affiliate acknowledge that the rapidly evolving nature of business
activities relating to the
29
Internet and the World Wide Web makes comprehensive foresight impossible:
neither USWeb nor Affiliate can anticipate marketplace response to the
evolution of the Internet or the World Wide Web and, therefore, the
prospects for the USWeb Business. USWeb and Affiliate acknowledge their
fundamental mutual interest in providing high quality content and service
to customers and that achievement of these goals will require flexibility,
resources, and commitment to the development of the USWeb System.
15.15 Affiliate represents and acknowledges as follows:
a. Affiliate has not received, or relied upon, any warranty or guaranty,
express or implied, as to the revenues, profits, or success of the
business venture contemplated by this Agreement, including any oral or
written representations that USWeb will (1) provide customers or
locate customers for Affiliate; (2) purchase any portion of
Affiliate's products or services; (3) guarantee to Affiliate that
Affiliate will derive income in excess of any price paid for this
franchise, or refund any portion of such payment; or (4) provide any
sales program or marketing plan which will enable Affiliate to derive
income in excess of any price paid for this franchise.
b. Affiliate has received, read and understood this Agreement and USWeb's
Uniform Franchise Offering Circular and that it has no knowledge of
any representations by USWeb or its officers, directors, stockholders,
employees, or agents that are contrary to the statements made in
USWeb's Uniform Franchise Offering Circular or to the terms of this
Agreement; and that USWeb has fully and adequately explained the
provisions of each of these documents to Affiliate's satisfaction; and
that USWeb has accorded Affiliate ample time and opportunity to
consult with its own advisors about the potential benefits and risks
of entering into this Agreement.
c. Affiliate has received (i) a copy of this Agreement and all Exhibits
to this Agreement, at least five (5) business days prior to the date
on which this Agreement was executed and (ii) the disclosure document
required by the Trade Regulation Rule of the Federal Trade Commission
entitled Disclosure Requirements and Prohibitions Concerning
Franchising and Business Opportunity Ventures (the "FTC Rule"), at
least ten (10) business days prior to the date on which this Agreement
was executed.
d. Other than the information contained in USWeb's Uniform Franchise
Offering Circular, no other representation has induced Affiliate to
execute this Agreement, and there are no representations, inducements,
promises, or agreements, oral or otherwise, between the Parties not
embodied in this Agreement, which are of any force or effect with
reference to this Agreement
30
or otherwise.
e. The success of the business venture contemplated to be undertaken by
Affiliate by virtue of this Agreement is speculative and depends, to a
large extent, upon the ability of Affiliate as an independent business
operator and the active participation of Affiliate in the daily
affairs of the UsWeb Business, as well as other factors. USWeb does
not make any representation or warranty, express or implied, as to the
potential success of the business venture contemplated by this
Agreement.
IN WITNESS WHEREOF, the Parties, intending to be legally bound, have duly
executed, sealed, and delivered this Agreement effective on the day and year
first above written.
USWEB CORPORATION AFFILIATE: _________________________
BY: BY:
31
Name/Title Name/Title
32
DATE: DATE:
33
USWEB
AFFILIATE AGREEMENT
EXHIBIT A
1. AFFILIATE NAME:
2. AFFILIATE COMPANY NAME:
ADDRESS:
3. AFFILIATE #:
4. SMSA NAME:
5. SMSA CLASS:
6. APPROVED LOCATION:
7. STARTUP DATE: _______________ 1, 199___
8. EXISTING GOODS AND SERVICES ((S)11.3):
_________________________________________________________________
DATE:
ACCEPTED AND AGREED TO:
USWEB CORPORATION AFFILIATE:___________________
By:___________________________ By:__________________________
Name/Title Name/Title
DATE:_________________________ DATE:________________________
ADDENDUM TO AFFILIATE AGREEMENT
EXHIBIT B
The Affiliate Agreement dated ________________, 1996, is amended as follows:
A. The Initial Franchise Fee shall be reduced for Affiliates 1-50. These
reductions shall be allocated equally between Affiliates located in
"registration states" and "non registration" states. If Affiliate is among
USWeb Affiliates 1-10, then the Initial Franchise Fee is Zero ($0.00). If
Affiliate is among USWeb Affiliates 11-50, then the Initial Franchise Fee
is Twenty-Five Thousand Dollars ($25,000).
PLEASE CIRCLE AND INITIAL THE REDUCED INITIAL FRANCHISE FEE IN THE
FOLLOWING TABLE:
If Affiliate is
Aggregate Then The Initial
Nos. Franchise Fee is
------------------------------------------------------
Registration
1 - 5
1 - 10 - or - $ 0.00
Non-Registration
1 - 5
------------------------------------------------------
Registration
1 - 20
11 - 50 - or - $25,000.00
Non-Registration
1 - 20
------------------------------------------------------
B. All other terms and conditions of the Affiliate Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the Parties, intending to be legally bound, have duly
executed, sealed, and delivered this Addendum effective on the day and year
first above written.
USWEB CORPORATION AFFILIATE:
By: By:
Name/Title Name/Title
DATE: DATE:
ADDENDUM TO AFFILIATE AGREEMENT
EXHIBIT C
The Affiliate Agreement dated ________________, 1996, is amended as follows:
A. For all accounting periods prior to April 1,1997, Affiliate shall not be
required to pay the Monthly Minimum Royalty & Service Fee or Monthly
Minimum Advertising & Marketing Fee. During the period prior to April 1,
1997, Affiliate shall pay the Royalty & Service Fee and Advertising &
Marketing Fee, calculated at Five Percent (5%) and Two Percent (2%) of
Adjusted Gross Revenues pursuant to Sections 10.2 and 10.3 of the Affiliate
Agreement.
B. The Minimum Royalty and Service Fee and the Minimum Advertising and
Marketing Fee shall not be payable during the initial 4 calendar months
following the Startup Date. During the initial 4 calendar months following
the Startup Date Affiliate shall pay the Royalty & Service Fee and
Advertising & Marketing Fee, calculated at Five Percent (5%) and Two
Percent (2%) of Adjusted Gross Revenues pursuant to Sections 10.2 and 10.3
of the Affiliate Agreement.
C. During Months 5-8 following the Startup Date the Minimum Royalty and
Service Fee and the Minimum Advertising and Marketing Fee ("Minimum Monthly
Fees") payable pursuant to Section 10.2 and 10.3 of the Affiliate
Agreement, shall be reduced; during Months 5-8 following the Startup Date,
the following percentages of the Monthly Minimum Fees shall be payable:
Month 5 Month 6 Month 7 Month 8
--------------------------------------
Percentage of 50% 62.5% 75% 87.5%
--------------------------------------
Minimum Monthly Fees shall be payable in accordance with Sections 10.2 and
10.3 of this Agreement in Month 9 and thereafter.
D. All other terms and conditions of the Affiliate Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the Parties, intending to be legally bound, have duly
executed, sealed, and delivered this Addendum effective on the day and year
first above written.
USWEB CORPORATION AFFILIATE:
BY: BY:
Name/Title Name/Title
DATE: DATE:
SMSA TERRITORY RIGHTS
ADDENDUM
EXHIBIT D
The Affiliate Agreement dated ___________________, 1996, is amended as follows:
"SMSA Territory Rights" shall mean the rights of Affiliate to be the sole USWeb
Affiliate authorized to establish a USWeb Business in a designated SMSA,
subject to Affiliate's continuing compliance with Section D of this Addendum.
For so long as Affiliate's SMSA Territory Rights remain in full force and
effect in the designated SMSA, USWeb shall not grant additional USWeb
Affiliate Agreements, or open USWeb company-owned locations, in the designated
SMSA, except pursuant to USWeb's exercise of its Right of First Refusal to
acquire another Affiliate's USWeb Business.
Affiliate has been approved to acquire SMSA Territory Rights, and USWeb hereby
grants SMSA Territory Rights to Affiliate, in the following SMSA:
________________________________________________________________
The Fee for SMSA Territory Rights acquired by this Agreement is set forth in the
following table:
---------------------------------------------------------------------------------------
Reduced Initial Fee for SMSA Standard Initial Fee for SMSA
Territory Rights (until 1/31/97) Territory Rights (after 1/31/97)
---------------------------------------------------------------------------------------
SMSA Class 1 $100,000 $150,000
---------------------------------------------------------------------------------------
SMSA Class 2 $100,000 $150,000
---------------------------------------------------------------------------------------
SMSA Class 3 $ 50,000 $ 75,000
---------------------------------------------------------------------------------------
SMSA Class 4 $ 50,000 $ 75,000
---------------------------------------------------------------------------------------
SMSA Class 5 $ 50,000 $ 50,000
---------------------------------------------------------------------------------------
Affiliate shall pay, concurrently with the execution of this Addendum, the
following SMSA Territory Rights Fee, which shall be deemed fully earned and
non-refundable by USWeb upon Affiliate's execution of this Addendum:
$___________________________.
Affiliate's SMSA Territory Rights shall be subject to the following performance
requirements and procedures:
In order to preserve the SMSA Territory Rights in the SMSA, the ratio of
Affiliate's Adjusted Gross Revenues in any calendar quarter (plus the
Adjusted Gross
Revenues of any other USWeb Affiliate in the SMSA), divided by the total
number of businesses in the SMSA with more than 10 employees (as reported
by the US Bureau of the Census or comparable reporting agency) ("Adjusted
Gross Revenues Ratio"), must be equal to or greater than 66% of the
Adjusted Gross Revenues Ratios of other SMSAs served by USWeb Affiliates,
in the same SMSA Class or, for Affiliates in SMSA Class 1, the ratio for
all USWeb Affiliates in both SMSA Classes 1 and 2.
If Affiliate's Adjusted Gross Revenues Ratio falls below the 66th Percentile at
the end of any calendar quarter beginning 9 months after the Effective
Date, then Affiliate's SMSA Territory Rights shall be in default. If
Affiliate is not in default in at least one (1) of the succeeding (two)
calendar quarters, then such default shall be deemed cured. If such default
is not cured within that cure period, or if Affiliate's SMSA Territory
Rights are in default more than 12 months during any 18 months period, then
Affiliate's SMSA Territory Rights shall terminate immediately upon notice
from USWeb.
Notwithstanding any of the provisions of Section D.2 of this Addendum, UsWeb
shall not terminate Affiliate's SMSA Territory Rights earlier than 12
months after the Startup Date.
In conjunction with the purchase of these SMSA Territory Rights, Affiliate has
acquired Rights of First Refusal for SMSA Territory Rights ("RFR/STR"),
exercisable during the initial term of this Agreement, to purchase additional
SMSA Territory Rights in the following identified SMSA(s) which is/are
contiguous to the SMSA identified in paragraph B of this Addendum.
________________________________________________________________
________________________________________________________________
In order to exercise these RFR/STR, Affiliate must be in good standing under
this Agreement and this SMSA Territory Rights Addendum and otherwise qualified
to acquire SMSA Territory Rights under USWeb's then-current criteria for
granting SMSA Territory Rights. The RFR/STR may be exercised only once: if
Affiliate declines to exercise this Right and USWeb enters into an Affiliate
Agreement in the subject SMSA with the proposed USWeb Affiliate that was the
subject of USWeb's notice to Affiliate, then the RFR/STR shall expire
immediately.
All other terms and conditions of this Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the Parties, intending to be legally bound, have duly
executed, sealed, and delivered this Addendum effective on the day and year
first above written.
USWEB CORPORATION AFFILIATE:
BY: BY:
Name/Title Name/Title
DATE: DATE:
