Communications World International, Inc.
Form 10-SB
Exhibit 10 (a)
COMMUNICATIONS WORLD INTERNATIONAL, INC.
FRANCHISE AGREEMENT
Franchisee:_____________________________
Date of Agreement:______________________
Franchised Location:____________________
________________________________________
________________________________________
TABLE OF CONTENTS
Page
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1. RECITALS................................................................................... 1
2. GRANT OF FRANCHISE......................................................................... 1
2.1. Grant of Franchise................................................................. 1
2.2. Scope of Franchise Operations...................................................... 1
2.3. Franchised Location................................................................ 2
2.4. Marketing Area..................................................................... 2
2.5. Franchisor's Reservation of Rights................................................. 2
3. FRANCHISE FEES............................................................................. 3
3.1. Initial Franchise Fee.............................................................. 3
3.2. Cost-Up Royalty.................................................................... 3
4. FRANCHISEE'S DEVELOPMENT AND CONVERSION OBLIGATIONS........................................ 4
4.1. Conversion and Commencement of Operations.......................................... 4
4.2. Product Authorization.............................................................. 4
4.3. Franchised Location................................................................ 4
4.4. Acquisition of Inventory and Equipment............................................. 5
4.5. Licenses and Permits............................................................... 5
4.6. Coordination of Telecommunications Services........................................ 5
5. FRANCHISOR'S DEVELOPMENT AND CONVERSION ASSISTANCE......................................... 5
5.1. Orientation Program................................................................ 5
5.2. Operations Manual.................................................................. 6
5.3. Product Authorizations............................................................. 6
6. FRANCHISOR'S OPERATING ASSISTANCE.......................................................... 6
6.1. Franchisor's Assistance............................................................ 6
6.2. Franchisor's Optional Services..................................................... 6
6.3. Assistance in the Marketing Area................................................... 7
7. FRANCHISEE'S OPERATIONAL COVENANTS......................................................... 7
7.1. Franchised Location................................................................ 7
7.2. Compliance With Operations Manual.................................................. 8
7.3. Improvements to Licensed Methods................................................... 8
7.4. Confidentiality.................................................................... 8
7.5. Reports and Records................................................................ 8
7.6. Compliance With Laws............................................................... 8
7.7. Third Party Obligations............................................................ 8
7.8. Operation and Management of Business............................................... 9
7.9. Coordination of Related Telecommunications Services................................ 9
7.10. Continuing Training................................................................ 9
7.11. Insurance.......................................................................... 10
8. QUALITY CONTROL............................................................................ 10
8.1. Standards and Specifications....................................................... 10
8.2. Inspections........................................................................ 10
8.3. Categories of Inventory............................................................ 11
8.4. Additional Categories of Inventory................................................. 11
8.5. Approved Suppliers................................................................. 11
8.6. Modifications...................................................................... 12
9. PROPRIETARY MARKS.......................................................................... 12
9.1. Marks and Licensed Methods......................................................... 12
9.2. Franchisee's Business Name......................................................... 12
9.3. Trademark Infringement............................................................. 12
9.4. Change of Proprietary Marks........................................................ 13
10. ADVERTISING................................................................................ 13
10.1. Approved Advertising............................................................... 13
10.2. Advertising Fee.................................................................... 13
10.3. Regional Advertising Programs...................................................... 14
11. REPORTS AND RECORDS........................................................................ 15
11.1. Reporting and Record Keeping....................................................... 15
11.2. Verification and Disclosure........................................................ 15
11.3. Audit.............................................................................. 15
12. TRANSFER................................................................................... 15
12.1. Transfer by Franchisee............................................................. 15
12.2. Pre-Conditions to Franchisee's Transfer............................................ 16
12.3. Franchisor's Approval of Transfer.................................................. 16
12.4. Right of First Refusal............................................................. 17
12.5. Types of Transfers................................................................. 17
12.6. Franchisee's Death or Disability................................................... 18
12.7. Transfer By Franchisor............................................................. 18
13. TERM AND EXPIRATION....................................................................... 18
13.1. Term of the Franchise.............................................................. 18
13.2. Rights Upon Expiration............................................................. 18
13.3. Exercise of Option For Successor Franchise......................................... 19
13.4. Conditions of Refusal.............................................................. 19
14. DEFAULT AND TERMINATION................................................................... 19
14.1. Termination - Effective Upon Notice................................................ 19
14.2. Termination - Fifteen Days Notice.................................................. 19
14.3. Termination - Thirty Days Notice................................................... 20
14.4. Franchisee's Right to Terminate Without Cause...................................... 20
14.5. Obligations of Franchisee Upon Termination or Expiration........................... 21
14.6. Acknowledgement.................................................................... 21
14.7. Governing State Law................................................................ 22
15. BUSINESS RELATIONSHIP...................................................................... 22
15.1. Independent Businesspersons........................................................ 22
15.2. Payment of Third Party Obligations................................................. 22
15.3. Indemnification.................................................................... 22
16. RESTRICTIVE COVENANTS...................................................................... 22
16.1. Non-Competition During Term........................................................ 22
16.2. Confidentiality of Proprietary Information......................................... 23
16.3. Prohibition Against Reshipment..................................................... 23
16.4. Remedies and Attorneys' Fees....................................................... 23
17. MISCELLANEOUS PROVISIONS................................................................... 23
17.1. Modification....................................................................... 23
17.2. Injunctive Relief.................................................................. 24
17.3. Waiver............................................................................. 24
17.4. Governing Law/Consent to Venue and Jurisdiction.................................... 24
17.5. Binding Effect..................................................................... 24
17.6. Invalidity......................................................................... 24
17.7. Prohibition Against Nonpayment..................................................... 25
17.8. Notices............................................................................ 25
17.9. No Violation or Interference....................................................... 25
17.10. Integration........................................................................ 25
17.11. Review of Agreement................................................................ 25
17.12. Attorney's Fees.................................................................... 25
17.13. No Right to Set Off................................................................ 26
17.14. Effective Date..................................................................... 26
17.15. Notice............................................................................. 26
EXHIBITS
I Addendum to Franchise Agreement
II Personal Guaranty
III Statement of Ownership
COMMUNICATIONS WORLD INTERNATIONAL, INC.
FRANCHISE AGREEMENT
THIS AGREEMENT ("Agreement") is made effective_______________, 19___, by
and between Communications World International, Inc., a Colorado corporation,
located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
("Franchisor") and ____________________________________________________________
___________________________________ with its principal business address at:
___________________________________________________________ ("Franchisee"),
who, on the basis of the following understandings and recitals and in
consideration of the following promises, intending to be legally bound, agree as
follows:
1. RECITALS
1.1. The Franchisor is the owner and developer of certain business methods
("Licensed Methods") for operating businesses that market telephone and
telecommunications systems and equipment, and related products and services,
which Licensed Methods are used in connection with the Franchisor's service
marks "COMMUNICATIONS WORLD", "COMMWORLD" and other exclusive trademarks,
service marks, logotypes and trade names specifically associated with the
Franchisor ("Marks"). The Licensed Methods have been specially designed to
include, among other things, distinctive business methods for the conversion of
an existing, independent business into a business operated under the Marks.
1.2. The Franchisor utilizes the Marks and Licensed Methods in connection
with the franchising of businesses offering telephone and telecommunications
systems and equipment, and related products and services, for sale or lease to
customers.
1.3. The Franchisee desires to use the Marks and Licensed Methods in
connection with operation of a business offering telephone and
telecommunications systems and equipment, and related products and services for
sale or lease to customers, by obtaining from the Franchisor the right to
operate a franchised business ("COMMWORLD Business") under the Marks and in
accordance with the Licensed Methods.
1.4. The Franchisor desires to grant to the Franchisee the right and
license to operate a COMMWORLD Business under the terms and conditions which are
contained or otherwise referenced in this Agreement.
2. GRANT OF FRANCHISE
2.1. Grant of Franchise.
-------------------
The Franchisor grants to the Franchisee and the Franchisee accepts from the
Franchisor the right to use the Licensed Methods and Marks in connection with
the operation of a COMMWORLD Business. The Franchisee agrees to use the Marks
and Licensed Methods, as they may be changed, improved and further developed by
the Franchisor from time to time, only in accordance with the terms and
conditions of this Agreement.
2.2. Scope of Franchise Operations.
------------------------------
The Franchisee agrees to faithfully, honestly and diligently perform its
obligations hereunder, and to continuously use its best efforts to promote the
COMMWORLD Business. The Franchisee agrees to utilize the Marks and Licensed
Methods to operate all aspects of the business franchised hereunder, in
accordance with the methods and systems developed and prescribed from time to
time by the Franchisor, all of which are a part of the Licensed Methods. The
grant of a franchise for the operation of a COMMWORLD Business shall include,
without limitation, the right to purchase certain telephone and
telecommunications products and equipment as may be available from product and
equipment manufacturers, vendors and suppliers with whom the Franchisor has
established central purchase programs ("Equipment Vendors"). The Franchisee's
COMMWORLD Business shall offer the categories of products and services
designated or recommended by the Franchisor, which may include, without
limitation, telephone and telecommunications products and equipment, related
products and equipment, coordination with local telephone companies and
installation technicians for the installation of equipment ordered by customers
of the Franchisee, demonstration equipment, service calls for repairs,
maintenance, and system additions, moves and changes for the Franchisee's
customers. Except with respect to the marketing and sale of telephone and
telecommunications products and equipment and other mandatory services as may be
designated by the Franchisor from time to time, the Franchisee may, with the
prior approval of the Franchisor, utilize an approved third party to provide the
related support services and ancillary products to customers of the COMMWORLD
Business.
2.3. Franchised Location.
--------------------
The Franchisee's COMMWORLD Business office shall be located at one licensed
location ("Franchised Location"), approved by the Franchisor and designated in
the addendum, attached hereto as Exhibit I and incorporated herein by reference
---------
("Addendum"). The Franchised Location may not be relocated without the prior
written consent of the Franchisor, which shall not be unreasonably withheld.
2.4. Marketing Area.
---------------
The Franchisee shall devote its primary and best efforts to developing and
operating the COMMWORLD Business, through the marketing and sales of telephone
and telecommunications products, equipment and services within a geographic area
of primary responsibility described in the Addendum ("Marketing Area"). The
Franchisee shall obtain the Franchisor's consent, which consent shall not be
unreasonably withheld, prior to making any sales of products purchased through
the Franchisor's product purchase programs to customers located outside of the
Franchisee's Marketing Area. The Franchisee acknowledges that the designation
of the Marketing Area shall in no manner prevent the Franchisor or another
Franchisee from conducting a COMMWORLD Business from a location within the
Marketing Area, nor shall it give the Franchisee exclusive rights to any
particular market, customers or accounts.
2.5. Franchisor's Reservation of Rights.
-----------------------------------
The Franchisee acknowledges that the franchise granted hereunder is
nonexclusive and that the Franchisor retains the rights, among others: (1) to
use, and to license others to use, the Marks and Licensed Methods for other
COMMWORLD Businesses at any location; (2) to advertise for, solicit, sell to and
service local, regional or national customers or accounts wherever located,
within or outside of the Marketing Area, subject to any policies or limitations
as may be set forth in the Franchisor's Operations Manual, described in Section
5.2 below, regarding Franchisee participation in servicing certain customers and
accounts; (3) to use the Marks and Licensed Methods in connection with the sale
of equipment, services, products, promotional and marketing efforts or related
items, materials or services which are the same as or different from those
offered and sold by the Franchisee, at any location; and (4) to use and license
the use of other proprietary marks which are not the same as or confusingly
similar to the Marks in connection with the operation of any type of telephone
and telecommunications business at any location, which is the same as, similar
to or different from the COMMWORLD Business, on any terms and conditions as the
Franchisor deems advisable, and without granting the Franchisee any rights
therein.
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3. FRANCHISE FEES
3.1. Initial Franchise Fee.
----------------------
The Franchisee shall pay an initial franchise fee in an amount which is set
forth in the Addendum, which entitles the Franchisee to use the Marks and
Licensed Methods of the Franchisor, to purchase certain telephone and
telecommunications products and equipment as may be available through the
Franchisor's product purchase programs, subject in certain circumstances to
approval from Equipment Vendors, and to avail itself of the services provided by
the Franchisor or offered for sale by the Franchisor. The initial franchise fee
is due and payable as of the date of execution of this Agreement unless
otherwise set forth in the Addendum. The Franchisee acknowledges and agrees
that the initial franchise fee represents payment for the initial grant of the
rights to use the Marks and Licensed Methods and that the Franchisor has earned
the initial franchise fee upon receipt thereof. The initial franchise fee is
therefore not refundable after payment thereof under any circumstances.
3.2. Cost-Up Royalty.
----------------
a. If the Franchisee desires to purchase certain products and
equipment from or through the Franchisor's purchase programs, then the
Franchisee may be required to pay to the Franchisor a ▇▇▇▇-up ("Cost-Up
Royalty") based upon a percentage override of the cost incurred by the
Franchisor for the products or equipment ("Product Cost"). The Cost-Up
Royalty and those products and equipment on which it is charged shall be
designated by the Franchisor in the Operations Manual, described in Section
5.2 below, as may be updated periodically by the Franchisor. The Franchisor
does not require that the Franchisee purchase any products or equipment
from the Franchisor.
b. Payment for products and equipment purchased from or through the
Franchisor or its product purchase programs with Equipment Vendors shall be
due and payable within 30 days of the date of invoicing, if the Franchisee
has qualified for approved credit, or as may otherwise be established by
the Franchisor in the Operations Manual. The Franchisor may, in its sole
discretion, extend the time or manner of payment or change its invoicing
procedures in accordance with policies and procedures contained in its
Operations Manual. Delinquent payments shall be subject to a late charge
on any unpaid amounts equal to the lesser of: (1) 10% plus interest at 10
points over the prevailing prime interest rate at the Franchisor's
principal bank; or (2) the highest rate allowed by applicable law. In
addition, if the Franchisee is delinquent in the payment of any amounts due
for product or equipment purchases, the Franchisor shall have the right to
invoke such remedies as may be more fully described in the Operations
Manual, including without limitation, terminating this Agreement or
restricting the ability of the Franchisee to purchase products or equipment
from the Franchisor or its product purchase programs with Equipment
Vendors.
c. Nothing herein shall be construed to prevent the Franchisor from
marking up the cost of products and equipment sold to the Franchisee, or
from receiving commissions, cash or other items of benefit from any of the
Equipment Vendors, or from changing the manner in which the Franchisee's
costs for peripheral products purchased through the Franchisor's purchase
programs are calculated, including, without limitation, changing the
override calculation on peripheral products from a Cost-Up Royalty to a
published catalog price. "Peripheral" products refers to categories of
ancillary telecommunications products and parts offered through the
COMMWORLD Business, which shall be distinguished from categories of primary
and major products in the Operations Manual. Nor shall any provision
herein be construed to imply that the
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Franchisee shall receive a more favorable rate or price for products or
equipment purchased by or through the Franchisor and its purchase programs
than is available from other sources. The Franchisee acknowledges that
Product Cost may, in the Franchisor's sole determination, include direct
and indirect costs related to the acquisition of products and equipment by
the Franchisor and may be more or less than an Equipment Vendor's actual
price charged to the Franchisor.
d. The Franchisor may unilaterally change the Cost-Up Royalty which
is set by the Franchisor and charged to the Franchisee without prior
notice, but such change shall not be applicable to any orders placed by the
Franchisee prior to the date of the change.
4. FRANCHISEE'S DEVELOPMENT AND CONVERSION OBLIGATIONS
4.1. Conversion and Commencement of Operations.
------------------------------------------
The Franchisee shall have 90 days from the date of this Agreement within
which to commence operation of the COMMWORLD Business or convert any telephone
and telecommunications business and premises which it operates as of the date of
this Agreement ("Conversion Business") into a COMMWORLD Business. Conversion
will be considered to have occurred when all other terms and conditions for
development and conversion as described in this Article 4 are completed. The
Franchisor will extend the time in which the Franchisee has to convert its
operations into a COMMWORLD Business for a reasonable period of time in the
event factors beyond the Franchisee's reasonable control prevent the Franchisee
from meeting this development schedule, so long as the Franchisee has made
reasonable and continuing efforts to comply with such development and conversion
obligations and the Franchisee requests, in writing, before the end of the 90
day period, an extension of time within which to have the COMMWORLD Business
operating. The Franchisor will notify the Franchisee within seven business days
of approval or disapproval of the proposed Franchised Location and extend the 90
day time period for approval of Franchisee's Franchised Location for a
reasonable period of time if the Franchisee selects a site within 90 days and
the Franchisor disapproves of the Franchisee's site.
4.2. Product Authorization.
----------------------
The Franchisee, at its option, may determine the product and equipment
brands, if any, which it shall initially purchase from or through the
Franchisor's available product purchase programs and such product and equipment
brands shall be designated in the Addendum. The Franchisee shall then qualify
or otherwise obtain the authorization to purchase and resell such product and
equipment brands from the Equipment Vendor and/or from the Franchisor, as may be
applicable. The Franchisor will only supply the Franchisee with products if the
Franchisee has been authorized by the Equipment Vendor to receive, market and
resell products. Equipment Vendors may change their requirements for obtaining
and maintaining authorizations at any time and from time to time, without prior
notice. The Franchisor makes no guaranties, warranties or representations that
the Franchisee may be able to obtain or maintain any authorizations and the
Franchisor does not assume any liability in the event that authorizations are
terminated, cancelled, not obtained or otherwise not available to the
Franchisee. Any initial designation of product or equipment brands in the
Addendum shall in no way limit the Franchisee's right to discontinue such brands
or to attempt to obtain authorization to purchase additional product or
equipment brands from or through the Franchisor's available product purchase
programs.
4.3. Franchised Location.
--------------------
The Franchisee shall obtain the Franchisor's approval of its Franchised
Location, which approval shall not be unreasonably withheld, prior to commencing
operation of a COMMWORLD Business at the premises. The Franchisor will notify
the Franchisee within 7 business days of approval or disapproval of
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the Franchised Location and extend the 90 day time period for approval of the
Franchisee's Franchised Location for a reasonable period of time if the
Franchisee selects a site within 90 days and the Franchisor disapproves of the
Franchisee's site. In the case of a Conversion Business, execution of this
Agreement shall be deemed approval of the Franchised Location by the Franchisor,
unless additional obligations to convert or upgrade the business office at the
location are described in the Addendum.
4.4. Acquisition of Inventory and Equipment.
---------------------------------------
The Franchisee shall have available for such customer calls and resultant
customer orders all demonstration equipment, displays, vehicles, minimum
inventory and other products and equipment meeting the minimum standards and
specifications of the Franchisor. The Franchisee shall affix such signs
identifying its COMMWORLD Business, vehicle, demonstration equipment and other
items which display the Franchisor's Marks, in a manner which may be set forth
in the Operations Manual. The Franchisee shall use no name, ▇▇▇▇ or other
designation in connection with signs, vehicle identification and other items
displaying the Franchisor's Marks except as may be approved in writing by the
Franchisor. It is understood that the Marks shall be displayed in connection
with the COMMWORLD Business as prominently or more prominently than the
Franchisee's current legal name or trade name.
4.5. Licenses and Permits.
---------------------
The Franchisee shall be fully responsible for having in place prior to
commencement of operation as a COMMWORLD Business all required licenses to
conduct all business which is a part of the Licensed Methods, as may be required
by applicable federal, state or local law or ordinance and shall have supplied
the Franchisor with copies of or other documentation of such licenses.
4.6. Coordination of Telecommunications Services.
--------------------------------------------
The Franchisee shall, prior to commencement of operation of a COMMWORLD
Business, have established a relationship or made other arrangements with the
local telephone company as may be necessary to conduct the COMMWORLD Business.
The Franchisee, itself or through an agreement or arrangement with another third
party approved by the Franchisor, shall have in place prior to commencement of
operation of its COMMWORLD Business, the operational capability to provide
installation services, maintenance and repair calls, system additions, moves and
change services and parts and inventory for the benefit of its customers within
the Marketing Area.
5. FRANCHISOR'S DEVELOPMENT AND CONVERSION ASSISTANCE
5.1. Orientation Program.
--------------------
The Franchisor shall provide an initial orientation program to be held at
the Franchisor's principal offices or at such other location as may be
determined in the Franchisor's reasonable discretion. The orientation will last
approximately 2 to 5 days and will be scheduled from time to time when the
Franchisor determines, in its reasonable discretion, that a minimum number of
persons will attend. The orientation program will include an introduction to
the Franchisor's Licensed Methods and may, at the Franchisor's option, include
instruction in business planning, personnel training and management techniques.
The Franchisee, or if the Franchisee is not an individual, the person designated
by the Franchisee to assume primary responsibility for the management of the
COMMWORLD Business ("Principal Operator") must attend and successfully complete
the initial orientation program, provided however, that if the Franchisee is
operating a Conversion Business, the Franchisee will not be required to attend
or complete the orientation program. The Franchisee acknowledges that it is
responsible for any of its employees' travel and living expenses associated with
attendance at such orientation.
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5.2. Operations Manual.
------------------
The Franchisor shall loan to the Franchisee during the term of this
Agreement one copy of the Franchisor's Operations Manual. The Operations Manual
may be contained in one or more designated written publications provided by the
Franchisor, all of which are collectively referred to in this Agreement as the
"Operations Manual." The Operations Manual is the sole property of the
Franchisor and is to be used by the Franchisee only during the term of this
Agreement and in accordance with the terms and conditions hereof. The
Operations Manual will be updated periodically by the Franchisor. The
Franchisee shall update the Operations Manual as instructed by the Franchisor
and shall conform its operations with the updated provisions within 30 days
thereafter or as may be otherwise agreed upon by the parties. Modifications to
the Operations Manual may reflect changes in the image, specifications,
standards, procedures, products and Licensed Methods to be utilized in the
COMMWORLD Business, provided that no such addition or modification shall alter
the Franchisee's fundamental status and rights hereunder. The master copy of
the Operations Manual maintained by the Franchisor at its principal office shall
be controlling in the event of a dispute relative to the content of any
provision therein.
5.3. Product Authorizations.
-----------------------
The Franchisor shall assist the Franchisee in the preparation and
submission of applications for authorization to sell the products and equipment
of Equipment Vendors whose products and equipment the Franchisee has designated
in the Addendum as being those brands it desires to initially sell through the
COMMWORLD Business.
6. FRANCHISOR'S OPERATING ASSISTANCE
6.1. Franchisor's Assistance.
------------------------
The Franchisor agrees to provide the Franchisee with the following
operating assistance:
a. Provision and updating of the Operations Manual, which contains
certain standards and specifications for the operation of the COMMWORLD
Business, information regarding Equipment Vendors, product and equipment
purchase information, standards for marketing and advertising the
COMMWORLD Business and guidelines for authorized products and services to
be offered through the COMMWORLD Business.
b. Provision of telephone and telecommunications product and
equipment price information, to be included in the Operations Manual or
other form as may be designated by the Franchisor, describing the items
available through Equipment Vendors and their current prices which are
available to the Franchisee from or through the Franchisor and its product
purchase programs.
c. When available, provision of sales leads on a non-exclusive basis
to the Franchisee in the Marketing Area, divided up amongst COMMWORLD
Businesses within the vicinity, in the Franchisor's sole discretion.
6.2. Franchisor's Optional Services.
-------------------------------
The Franchisor may make available to the Franchisee, at the Franchisor's
then current charges, if any, the following additional support services and
products:
6
a. Standardized business forms, including stationery and business
cards.
b. If reasonably requested to do so by the Franchisee, the
Franchisor may provide assistance to the Franchisee in coordinating the
availability of follow-up and support telecommunications services through
the local phone company, installation, repair and maintenance, system
additions, moves and changes and other telephone and telecommunications
services to support the Franchisee's customers within its Marketing Area.
c. Continuing sales training and other training and support services
as may be created or established by the Franchisor in the Franchisor's sole
discretion; provided, however, such training and support services may
require that certain standards, conditions or other requirements of uniform
application must be met in order to qualify for participation in the
training or for utilization of the services.
d. Ongoing assistance to the Franchisee in obtaining and maintaining
the requisite authorizations from the Equipment Vendors or otherwise
qualifying for participation in national or central purchase programs, in
order to establish and maintain the categories and brands of product and
equipment which the Franchisee desires to market and sell through the
COMMWORLD Business.
e. Special promotional advertising and marketing programs, as may be
developed by the Franchisor or Equipment Vendors and made available to the
Franchisee from time to time.
6.3. Assistance in the Marketing Area.
---------------------------------
In the event that the Franchisee desires additional assistance from the
Franchisor in operating its COMMWORLD Business which necessitates that the
Franchisor visit the Franchisee's Franchised Location or Marketing Area, the
Franchisee may request, in writing, that a representative of the Franchisor
visit the COMMWORLD Business to assist the Franchisee. Prior to such visit, the
Franchisee and the Franchisor shall agree in writing as to the compensation to
be paid for any such additional assistance.
7. FRANCHISEE'S OPERATIONAL COVENANTS
7.1. Franchised Location.
--------------------
The Franchisee shall obtain the Franchisor's prior written approval of a
location before entering into a lease or purchase agreement for the office
premises proposed as a Franchised Location hereunder. The execution of this
Agreement for a Conversion Business shall be deemed approval of the lease or
purchase agreement for the Franchised Location, unless otherwise noted in the
Addendum. The Franchisee shall not sublease or share any portion of the
Franchised Location with any business which is not the COMMWORLD Business
without the prior written consent of the Franchisor. The Franchisee shall
obtain a separate, dedicated telephone line for its COMMWORLD Business at the
Franchised Location. The Franchisee shall also obtain and maintain White Page,
Yellow Page, and information listings predominantly displaying the Franchisor's
Marks, in a manner as may be set forth in the Operations Manual. The COMMWORLD
Business office at the Franchised Location shall have available telephone
reception or answering service capabilities and shall be staffed in accordance
with the standards as may be set forth in the Operations Manual.
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7.2. Compliance With Operations Manual.
----------------------------------
The Franchisee shall maintain and operate the COMMWORLD Business in
compliance with this Agreement and the standards and specifications contained in
the Operations Manual, as it may be modified from time to time. The Franchisee
shall use the Marks and Licensed Methods only as specified in the Operations
Manual. The standards and specifications set forth in the Operations Manual are
incorporated into this Agreement, and a material breach of such standards and
specifications by the Franchisee may, in the sole discretion of the Franchisor,
be deemed a material breach of this Agreement. The Franchisee shall not
duplicate the Operations Manual or disclose its contents to persons other than
employees of its COMMWORLD Business, and then only to the extent the disclosure
of such information is necessary for the operation of the COMMWORLD Business.
The Franchisee shall return the Operations Manual to the Franchisor upon the
expiration or termination of this Agreement or transfer of the franchise.
7.3. Improvements to Licensed Methods.
---------------------------------
The Franchisee acknowledges that the Franchisor may supplement, improve or
otherwise alter the Licensed Methods, including the addition or elimination of
products or services offered to customers. The Franchisee acknowledges that
Franchisor shall have sole control and discretion over all supplements,
improvements, alterations and development of the Licensed Methods, and the
products and services offered thereunder; that this control and discretion is in
the best interests of the Franchisor and all of its Franchisees; and that
Franchisee will comply with all of Franchisor's requirements concerning the
Licensed Methods and improvements thereto.
7.4. Confidentiality.
----------------
The Franchisee shall maintain the confidentiality of all of the elements of
the Licensed Methods, the Operations Manual and the Franchisor's methods of
doing business. In furtherance of the foregoing, the Franchisee shall fully
comply with all restrictive covenants set forth in Article 16 of this Agreement.
7.5. Reports and Records.
--------------------
The Franchisee shall supply to the Franchisor reports and keep records in a
manner and form as the Franchisor may from time to time reasonably require, as
more fully described in Article 11 of this Agreement.
7.6. Compliance With Laws.
---------------------
The Franchisee shall operate its COMMWORLD Business in compliance with all
applicable federal, state and local laws, rules, regulations and statutes. The
Franchisee is responsible for acquiring and maintaining all local licenses,
approvals, permits and authorizations necessary for operation of the COMMWORLD
Business.
7.7. Third Party Obligations.
------------------------
The Franchisee shall promptly pay when due, all taxes and other third party
obligations incurred in the operation of the COMMWORLD Business and shall comply
with all agreements with third parties which affect or relate to the COMMWORLD
Business, including, in particular, all provisions of any agreements with
telecommunications support service providers and all commitments to customers
and accounts for the provision of telephones and telecommunications products and
equipment.
8
7.8. Operation and Management of Business.
-------------------------------------
The Franchisee shall cause a person who has been trained in and is
familiar with the Licensed Methods to be responsible for the management of the
COMMWORLD Business at all times during the Franchisee's hours of operation. The
Franchisee shall provide to the Franchisor a list of all management personnel
and keep the list updated to reflect changes in personnel. In addition:
a. The Franchisee shall refrain from operating or engaging in any
other type of business or profession through the COMMWORLD Business other
than has been previously authorized in writing by the Franchisor.
b. The Franchisee shall at all times operate the COMMWORLD Business
in such a manner so as to not detract from or adversely reflect upon the
name and reputation of the Franchisor and the goodwill associated with the
Marks.
c. The Franchisee shall at all times during the term of this
Agreement own and control the COMMWORLD Business authorized hereunder.
Upon request, the Franchisee shall promptly provide satisfactory proof of
such ownership to the Franchisor. The Franchisee represents that the
Statement of Ownership, attached hereto as Exhibit III and by this
-----------
reference incorporated herein, is true, complete, accurate and not
misleading, and, in accordance with the information contained in the
Statement of Ownership, the controlling ownership of the COMMWORLD
Business is to be held by the Franchisee executing this Agreement. The
Franchisee shall promptly provide the Franchisor with a written
notification if the information contained in the Statement of Ownership
changes at any time during the term of this Agreement and shall comply
with the applicable transfer provisions contained in Article 12 herein. If
the Franchisee is not an individual, an individual or individuals
designated by the Franchisor shall guaranty the performance of the
Franchisee hereunder by execution of the Guaranty attached hereto as
Exhibit II and by this reference incorporated herein.
----------
7.9. Coordination of Related Telecommunications Services.
----------------------------------------------------
The Franchisee shall at all times during the term of the Agreement
maintain the operational capability, itself or through an agreement or
arrangement with a third party approved by the Franchisor, to provide
installation services, maintenance and repair calls, system additions, moves and
changes and parts and inventory for the benefit of its customers within the
Marketing Area.
7.10. Continuing Training.
--------------------
The Franchisee or its Principal Operator shall attend any on-going
mandatory national, regional or local training programs or meetings as may be
offered by the Franchisor. The Franchisor shall give the Franchisee at least
30 days prior written notice of any on-going programs or meetings which are
deemed mandatory. Any such mandatory training programs shall be offered without
fee or tuition; however, the Franchisee shall be responsible for traveling and
living expenses associated with its attendance. Certain Equipment Vendors may
also require that the Franchisee attend training sessions as a condition of
giving their authorization to the Franchisee to sell such Equipment Vendor's
products and equipment. The Franchisee shall comply with all training standards
of the vendors it chooses to utilize in connection with the particular products
and equipment sold through the COMMWORLD Business.
9
7.11. Insurance.
----------
The Franchisee agrees to purchase and maintain at all times, and at its
own expense, the following policies of insurance with respect to the COMMWORLD
Business:
a. Commercial general liability insurance for the COMMWORLD Business
premises and operations covering bodily injury and property damage,
including without limitation, premises/operations, independent
contractors, product/completed operations, personal injury and blanket
contractual liability, with a limit of not less than One Million Dollars
($1,000,000) combined single limit per occurrence, Two Million Dollars
($2,000,000) annual aggregate;
b. Automobile liability insurance covering all owned, hired and non-
owned vehicles of the COMMWORLD Business in an amount not less than One
Million Dollars ($l,000,000) per occurrence;
c. Unemployment and workers' compensation insurance with a broad
form all-states endorsement coverage sufficient to meet the requirements
of the law including employer's liability; and
d. All-risk replacement cost personal property insurance in an
amount equal to at least one hundred percent (100%) of the replacement
cost of the contents and tenant improvements of the COMMWORLD Business.
All of the above policies of insurance shall name the Franchisor as an
additional insured and loss payee and shall contain a requirement of 30 days
advance written notice to the Franchisor of cancellation. The Franchisee shall
provide the Franchisor with certificates of insurance on an annual basis showing
such policies to be in full force and effect (or a continuous certificate of
insurance) and evidence that such policies have been renewed and premiums paid
prior to expiration. The Franchisor reserves the right to require the
Franchisee to notify the Franchisor of all claims made under the policies.
8. QUALITY CONTROL
8.1. Standards and Specifications.
-----------------------------
The Franchisor will make available to the Franchisee standards and
specifications for services, products, equipment and parts offered at or through
the COMMWORLD Business and the marketing techniques, telephone and
telecommunications products, equipment and parts, ancillary products,
installation, repair and maintenance, and system additions, moves and change
services, materials, forms, and supplies used in connection with the franchised
business. The Franchisor reserves the right to change standards and
specifications regarding the COMMWORLD Business upon 30 days prior written
notice to the Franchisee. The Franchisor may, but shall not be obligated to,
implement, employ and enforce any minimum standards and specifications as may be
required by Equipment Vendors whose products or equipment the Franchisee has
chosen to purchase and offer for sale through its COMMWORLD Business, as a part
of the Licensed Methods of the Franchisor.
8.2. Inspections.
------------
The Franchisor shall have the right to examine the Franchised Location,
including the inventory, products, equipment, materials or supplies, to ensure
compliance with all standards and specifications set by the Franchisor. The
Franchisor shall conduct such inspections during regular business hours and the
Franchisee may be present at such inspections.
10
8.3. Categories of Inventory.
------------------------
In order to maintain the quality of inventory and service standards
consistent with the COMMWORLD Business image, the categories of inventory
offered by the Franchisee through the COMMWORLD Business shall be subject to the
Franchisor's prior approval. The term "category" shall be considered a broad
description of a type of product offered and is not meant to restrict the brands
of products which may be carried, except to the extent certain brands may not
meet the minimum standards and specifications of the Franchisor. For the
purposes of this Agreement, approved categories of inventory shall include, at a
minimum, telephone and telecommunications products and equipment, ancillary
products and equipment as may be listed in the Operations Manual and
demonstration equipment. Within a particular category, the selection of
inventory brands shall be up to the discretion of the Franchisee, provided that
the Franchisee notifies the Franchisor of the product brands which are to be
sold at or through the COMMWORLD Business, and that the product and equipment
quality standards and specifications of the Franchisor are met. The Franchisee
shall be notified of any such standards through written communications from the
Franchisor, and such standards shall become effective 30 days from the date of
mailing of the written communication. The Franchisee shall not offer or sell
any products or services to other COMMWORLD Businesses without obtaining the
Franchisor's prior written approval.
8.4. Additional Categories of Inventory.
-----------------------------------
If the Franchisee proposes to purchase and resell a category of inventory
not previously approved by the Franchisor as meeting its specifications, the
Franchisee shall first notify the Franchisor requesting approval. The
Franchisor shall not unreasonably withhold its approval, provided that the
category of inventory does not conflict with or is not inconsistent with the
COMMWORLD Business image associated with the Marks and Licensed Methods, and
meets the Franchisor's minimum product quality standards. The Franchisor will
advise the Franchisee within a reasonable time whether such additional
categories of inventory meet its specifications.
8.5. Approved Suppliers.
-------------------
The Franchisee shall purchase all products, equipment, parts, services,
supplies and materials required for the operation of the COMMWORLD Business
licensed herein, from vendors, manufacturers, suppliers or distributors
(collectively referred to herein as "Suppliers") approved by the Franchisor as
meeting the Franchisor's specifications and standards as to quality,
technological capability, composition, appearance and service, and adequately
demonstrating their capacity and facilities to supply the Franchisee's needs in
the quantities, at the times, and with the reliability requisite to an efficient
operation. In the event the Franchisee intends to purchase products, equipment,
parts, services, supplies or materials from Suppliers other than those
previously approved by the Franchisor, the Franchisee shall submit to the
Franchisor a written request for approval of the proposed Supplier and such
Supplier must meet the minimum standards and specifications of the Franchisor.
Upon submission of such written request, the Franchisee may begin to use the
proposed Supplier. Provided however, that the Franchisor reserves the right to
reject the intended new Supplier within 60 days after the receipt of the
Franchisee's notice, by notifying the Franchisee in writing of its rejection.
Any products, equipment, parts, services, supplies and materials purchased by
the Franchisee from the Supplier prior to notification of rejection by the
Franchisor will not be considered to be a violation of this provision. Failure
to notify the Franchisee within such time period shall constitute a waiver of
any and all objections by the Franchisor to the new Supplier. The Franchisor's
approval of the Franchisee's intended Suppliers shall not be unreasonably
withheld, so long as the minimum standards and specifications of the Franchisor
are met. The Franchisor
11
reserves the right to revoke such approval if such Supplier subsequently fails
to meet the Franchisor's standards and specifications.
8.6. Modifications.
-------------
The Franchisor reserves the right to change its published standards and
specifications regarding the development and operation of the COMMWORLD Business
from time to time upon 30 days prior written notice to the Franchisee, except
with respect to changes in pricing on which Cost-Up Royalty is based, in which
case, there will be an immediate change in Cost-Up Royalty cost to the
Franchisee, without prior notice.
9. PROPRIETARY MARKS
9.1. Marks and Licensed Methods.
--------------------------
The Franchisee acknowledges that the Marks and the Licensed Methods are the
Franchisor's sole and exclusive property and they may not be duplicated or
distributed to or used by anyone unless the Franchisor first gives its
permission, and that the Franchisee's only rights in the Marks and the Licensed
Methods are as set forth in this Agreement. The Franchisee shall not offer or
sell any products or services related to telephone or telecommunications systems
or equipment or related products or services except in connection with the Marks
and the Franchisee shall not offer or sell any products or services in
connection with the Marks without the Franchisor's prior written consent. The
Franchisor warrants that it will use diligence and best efforts to insure that
its use of the Marks and Licensed Methods shall be of a high standard and be
adequate and suited to the protection and enhancement of the Marks and Licensed
Methods. Except as permitted in the Operations Manual, the Franchisee agrees
not to use any of the Marks as part of an electronic mail address or on any
sites on the Internet or World Wide Web and the Franchisee agrees not to use or
register any of the Marks as a domain name on the Internet. Any unauthorized
use by the Franchisee of the Marks and Licensed Methods shall constitute an
infringement of the rights of the Franchisor, for which the Franchisee may be
liable for damages or subject to equitable relief for the benefit of the
Franchisor. The Franchisee acknowledges and agrees that its use of the Marks
and any goodwill established thereby shall inure to the Franchisor's exclusive
benefit and that this Agreement does not confer any goodwill or similar interest
in the Marks upon the Franchisee.
9.2. Franchisee's Business Name.
--------------------------
The Franchisee acknowledges that the Franchisor has a prior and superior
claim to the COMMUNICATIONS WORLD and COMMWORLD trade names. The Franchisee
shall not use the words "COMMUNICATIONS WORLD" or "COMMWORLD" in the legal name
of its corporation, partnership or any other business entity used in conducting
the business provided for in this Agreement. The Franchisee also agrees not to
register or attempt to register a trade name using the words "COMMUNICATIONS
WORLD" or "COMMWORLD", in the Franchisee's name or that of any other person or
business entity, without prior written consent of the Franchisor. When this
Agreement is terminated, the Franchisee shall execute any assignment or other
document the Franchisor requires to transfer to itself any rights the Franchisee
may possess in a trade name utilizing the words "COMMUNICATIONS WORLD" or
"COMMWORLD" or any other ▇▇▇▇ owned by the Franchisor.
9.3. Trademark Infringement.
----------------------
The Franchisee shall notify the Franchisor in writing of any possible
infringement or illegal use by others of a trademark, service ▇▇▇▇ or logotype,
the same as or confusingly similar to the Marks covered by this Agreement which
may come to its attention. The Franchisee acknowledges that the
12
Franchisor shall have the right to determine whether action will be taken on
account of any possible infringement or illegal use. The Franchisor shall
commence or prosecute such action in the Franchisor's own name and may join the
Franchisee as a party thereto, if the Franchisor determines it to be reasonably
necessary for the continued protection and quality control of the Marks and
Licensed Methods. The Franchisor shall bear the reasonable cost of any such
action, including attorneys' fees. In no event may the Franchisee institute any
action on account of any possible infringement or illegal use of the Marks.
9.4. Change of Proprietary Marks.
---------------------------
In the event that the Franchisor, in its sole discretion, shall determine
to modify or discontinue use of the Marks, or to develop additional or
substitute proprietary marks, the Franchisee shall, within a reasonable time
after receipt of written notice of such a modification or discontinuation from
the Franchisor, take such action, at the Franchisee's sole expense, as may be
necessary to comply with such modification, discontinuation, addition or
substitution. The Franchisor shall not be obligated to reimburse the Franchisee
for any loss of goodwill associated with any modifications or discontinuance of
the Marks or for any expenditures made by the Franchisee to promote a modified
or substitute trademark or service ▇▇▇▇.
10. ADVERTISING
10.1. Approved Advertising.
--------------------
The Franchisee shall use only written advertising or other marketing or
promotional programs in connection with the COMMWORLD Business which have been
previously approved by the Franchisor as being in accordance with minimum
standards and specifications for advertising and marketing, including, without
limitation, minimum standards and specifications for telephone directory
advertising, direct mail pieces, Internet and World Wide Web sites and telephone
sales programs. If the general form or content of proposed advertising or
marketing items have not been previously approved by the Franchisor, then such
proposed written advertising or a description of the marketing or promotional
program shall be submitted to the Franchisor at least 10 days prior to
publication, broadcast or use. The Franchisee shall only advertise within the
Franchisee's Marketing Area and shall place advertising only in publications
which have more than one half of their circulation within the Franchisee's
Marketing Area. The Franchisee acknowledges that advertising and promoting the
COMMWORLD Business in accordance with the Franchisor's standards and
specifications is an essential aspect of the Licensed Methods, and the
Franchisee agrees to comply with all advertising standards and specifications.
10.2. Advertising Fee.
---------------
The Franchisor reserves the right to charge the Franchisee, in addition to
Royalties, an advertising fee of up to 0.5% of the total amount of the
Franchisee's gross sales ("Advertising Fee"). For purposes of this Section,
"Gross Sales" shall be defined as the aggregate amount received by the
Franchisee from all sales, services, products and merchandise which is sold from
or through the Franchised Business, less sales taxes. The Franchisor will
provide the Franchisee with no less than 30 days prior written notice before
commencing the collection of all or a portion of the Advertising Fee chargeable
hereunder. In the event that the Franchisor charges all or a portion of the
Advertising Fee, the following terms and conditions will apply:
a. The Advertising Fee shall be mailed to the Franchisor, postmarked
no later than the 15th day of each month, for all Advertising Fees based on
Gross Sales for the immediately preceding month.
13
b. In the event that the Franchisee fails to pay any Advertising Fees
within 10 days after they are due, the Franchisee shall be required to pay
interest on the amount of unpaid Advertising Fees at the rate of 1.5%
percent per month, provided however, that in no event shall the Franchisee
be required to pay interest at a rate greater than the maximum interest
rate permitted by applicable law.
c. Any Advertising Fee collected by the Franchisor will be deposited
by the Franchisor in one or more separate bank accounts, commercial
accounts or savings accounts (referred herein collectively as "Account"),
all designated as "COMMWORLD Franchise Advertising Account."
d. Upon written request by the Franchisee, the Franchisor will make
available to the Franchisee, no later than 120 days after the end of each
calendar year, an annual financial statement for the Account which
indicates how deposits to the Account have been spent.
e. The Account, if and when established, will be administered by the
Franchisor, in its sole discretion, and may be used for production and
placement of media advertising, direct response literature, direct
mailings, brochures, collateral material advertising, surveys of
advertising effectiveness, or other advertising or public relations
expenditures relating to advertising the Franchisee's services and
products.
f. The Franchisor may reimburse itself for independent audits,
reasonable accounting, bookkeeping, reporting and legal expenses, taxes,
overhead expenses, salaries and other reasonable direct and indirect
expenses as may be incurred by the Franchisor or its authorized
representatives in connection with the programs funded by the Account. The
Franchisor will not be liable for any act or omission with respect to such
Account which is consistent with this Agreement and is done in good faith.
The Advertising Fee will be charged to and collected from the Franchisee only in
the event and to the extent the Franchisor implements the change on either a
regionwide or national basis; provided, however, the Franchisor makes no
guarantee to the Franchisee that the Account will ever be established or that
COMMWORLD Franchisees will ever be charged for the Advertising Fees and that, if
established, the advertising expenditures from the Account will benefit the
Franchisee directly on a pro rata basis.
10.3. Regional Advertising Programs.
-----------------------------
Although not obligated to do so, the Franchisor reserves the right to
allocate all or a portion of the Advertising Fees as may be collected in
accordance with Section 10.2 above toward a regional advertising program for the
benefit of COMMWORLD franchisees located within a particular region. The
Franchisor has the right, in its sole discretion, to determine the composition
of all geographic territories and market areas for the implementation of such
regional advertising and promotion campaigns and to require that the Franchisee
participate in such regional advertising programs and campaigns as and when they
may be established by the Franchisor. If a regional advertising program is
implemented on behalf of a particular region by the Franchisor, the Franchisor,
to the extent reasonably calculable, will only use contributions from COMMWORLD
franchisees within such region for the particular regional advertising program.
The Franchisor also reserves the right to establish an advertising cooperative
for a particular region to enable the cooperative to self-administer the
regional advertising program. If a regional advertising cooperative is
established by the Franchisor, the Franchisee agrees that it will participate in
the same.
14
11. REPORTS AND RECORDS
11.1. Reporting and Record Keeping.
-----------------------------
The Franchisee agrees to comply with such reporting and record keeping
requirements as may be specified by the Franchisor and as may be reasonably
necessary to confirm the Franchisee's compliance with this Agreement or to
compile studies and surveys relating to the Franchisor's evaluation and
improvement of the Licensed Methods. Books and records of the COMMWORLD
Business shall be kept at the Franchisee's Franchised Location or some other
alternative location as may be approved by the Franchisor. The Franchisee shall
furnish to the Franchisor such information regarding the COMMWORLD Business in a
form as the Franchisor may reasonably request from time to time which may
include, but not be limited to, monthly reports showing gross sales of products
and equipment purchased and sold by the COMMWORLD Business, according to product
vendor, and a quarterly profit and loss statement and balance sheet for the
COMMWORLD Business, prepared in accordance with generally accepted accounting
principles.
11.2. Verification and Disclosure.
---------------------------
Each report and financial statement shall be signed and verified by the
Franchisee. The Franchisor shall have the right to disclose data derived from
such sales reports, without identifying the Franchisee, except to the extent
required by law. The Franchisor shall have the right to independently verify
the information received from the Franchisee, in any reasonable manner and upon
reasonable prior notice given to the Franchisee and the Franchisee agrees to
cooperate with the Franchisor and/or its representatives in the event that the
Franchisor deems such verification necessary.
11.3. Audit.
-----
Commencing at such time that the Franchisor begins collection of the Advertising
Fee as described in Section 10.2, it shall have the right to review, inspect
and/or audit the COMMWORLD Business books and records at any time during regular
business hours, at the Franchisor's expense. "Books and records" includes, but
is not limited to, all books and records of the COMMWORLD Business, local, state
and federal tax returns and reports, cash register tapes, sales slips and bank
statements. In the event that any audit discloses an understatement of the
Franchisee's Gross Sales of the COMMWORLD Business, the Franchisee shall
immediately pay all deficiencies which may be due and owing to the Franchisor,
including interest at 18% per annum. In addition, if such audit reflects
underpayment to the Franchisor by 5% or more, the Franchisee will bear the
entire cost of such audit and all related reasonable expenses.
12. TRANSFER
12.1. Transfer by Franchisee.
----------------------
The franchise granted herein is personal to the Franchisee and, except as
stated below, the Franchisor shall not allow or permit any transfer, assignment,
subfranchise or conveyance of this Agreement or any interest hereunder. The
failure of the Franchisee to abide by the provisions of this Article 12 may be
considered by the Franchisor to be a material default by the Franchisee under
the terms of this Agreement. As used in this Agreement, the term "transfer"
includes the Franchisee's voluntary, involuntary, direct or indirect assignment,
sale, gift or other disposition of any interest in (1) this Agreement; (2) the
Franchisee entity; (3) the COMMWORLD Business governed by this Agreement; or (4)
all or a substantial portion of the assets, including but not limited to the
customer list, of the Franchisee's COMMWORLD Business.
15
12.2. Pre-Conditions to Franchisee's Transfer.
---------------------------------------
The Franchisee shall not engage in a transfer unless the Franchisee
obtains the Franchisor's written consent and the Franchisee and the proposed
transferee comply with the following conditions:
a. All amounts due and owing pursuant to this Agreement by the
Franchisee to the Franchisor or its affiliates or to third parties whose
debts or obligations the Franchisor has guaranteed on behalf of the
Franchisee, if any, are paid in full;
b. The proposed transferee agrees to operate the business as a
COMMWORLD Business and agrees to satisfactorily complete the initial
training program described in this Agreement, which training may be
completed by the transferee either prior to or immediately after the
transfer is effective;
c. The proposed transferee agrees to execute the then current form of
franchise agreement which shall supersede this Agreement in all respects.
If a new franchise agreement is signed, the terms thereof may differ from
the terms of this Agreement; provided however, the transferee will not be
required to pay any initial franchise fees;
d. The Franchisee provides written notice to the Franchisor 30 days
prior to the proposed effective date of the transfer and includes
information reasonably detailed to enable the Franchisor to evaluate the
terms and conditions of the proposed transfer which, at a minimum, includes
a written offer from the proposed transferee;
e. The proposed transferee provides information to the Franchisor
sufficient for the Franchisor to assess the proposed transferee's business
experience, aptitude and financial qualification, and the Franchisor
approves the proposed transferee as a franchisee;
f. The Franchisee and each of the Owners (defined in Section 12.6
below) of the Franchisee execute a general release, in a form satisfactory
to the Franchisor, of any and all claims against the Franchisor, its
affiliates and their respective officers, directors, employees and agents;
g. The Franchisee or the proposed transferee pay a transfer fee equal
to 20% of the then current initial franchise fee charged to new franchisees
or, if no franchises are then currently being offered by the Franchisor,
the sum of $2,000;
h. The Franchisee agrees to abide by all covenants set forth herein,
including, without limitation, the confidentiality provision in Section
16.2 below; and
i. Prior to the effective date of the transfer, the proposed
transferee shall have received all Equipment Vendor's authorizations as may
be required by the Franchisor pursuant to Section 4.2 of this Agreement.
12.3. Franchisor's Approval of Transfer.
---------------------------------
The Franchisor shall have 30 days from the date of the written notice to
approve or disapprove in writing, of the Franchisee's proposed transfer. The
Franchisee acknowledges that the proposed transferee shall be evaluated for
approval by the Franchisor based on the same criteria as is currently being used
to assess new franchisees of the Franchisor and such proposed transferee shall
be provided, if appropriate, with such disclosures as may be required by state
or federal law. If the Franchisee and its proposed
16
transferee comply with all conditions for transfer set forth herein and the
Franchisor has not given the Franchisee notice of its approval or disapproval
within such 30 day period, approval is deemed granted.
12.4. Right of First Refusal.
----------------------
In the event that the Franchisee wishes to engage in a transfer, the
Franchisee hereby grants to the Franchisor or its designee, a 30 day right of
first refusal to purchase the interest proposed to be transferred on the same
terms and conditions as are contained in the written notice set forth in Section
12.2.d; provided however, the following additional terms and conditions shall
apply:
a. The parties acknowledge that the Franchisor's right of first
refusal shall include the right of first refusal to purchase any and all of
the Franchisee's interest in the Franchised Location premises if such
premises are owned by the Franchisee.
b. The 30 day right of first refusal period shall run concurrently
with the period during which the Franchisor has the right to approve or
disapprove of the proposed transferee;
c. The right of first refusal will be effective for each proposed
transfer and any material change in the terms or conditions of the proposed
transfer shall be deemed a separate offer on which the Franchisor shall
have a new 30 day right of first refusal;
d. If the consideration or the manner of payment offered by a proposed
transferee is such that the Franchisor may not reasonably be required to
furnish the same, then the Franchisor may purchase the interest which is
proposed to be sold for the reasonable cash equivalent. If the parties
cannot agree within a reasonable time on the cash consideration, an
independent appraiser shall be designated by the Franchisor, whose
determination shall be binding upon the parties. All expenses of the
appraiser shall be paid for equally between the Franchisor and the
Franchisee; and
e. If the Franchisor chooses not to exercise its right of first
refusal, the Franchisee shall be free to complete the transfer subject to
compliance with Sections 12.2 and 12.3 above. Absence of a reply to the
Franchisee's notice of a proposed transfer with the 30 day period may be
deemed a waiver of such right of first refusal.
12.5. Types of Transfers.
------------------
The Franchisee acknowledges that the Franchisor's right to approve or
disapprove of a proposed transfer as provided for above, shall apply (1) if the
Franchisee is a partnership, corporation or other business association, (i) to
the addition or deletion of a partner, shareholder or members of the association
or the transfer of any ownership interest among existing partners, shareholders
or members; (ii) to any proposed transfer of 25% or more of the interest
(whether stock, partnership interest or membership interest) to a third party,
whether such transfer occurs in a single transaction or several transactions;
and (2) if the Franchisee is an individual, to the transfer from such individual
or individuals to a corporation or other entity controlled by them, in which
case the Franchisor's approval will be conditioned upon: (i) the continuing
personal guarantee of the individual (or individuals) for the performance of
obligations under this Agreement; and (ii) a limitation on the corporation's or
other entity's business activity to that of operating the COMMWORLD Business and
related activities provided that with respect to such transfer, the Franchisor's
right of first refusal to purchase shall not apply and the Franchisor will not
charge any transfer fee.
17
12.6. Franchisee's Death or Disability.
--------------------------------
If the Franchisee or any Owner of the Franchisee, hereinafter defined,
dies or becomes permanently disabled, the personal representative of such person
shall transfer the Franchisee's interest in this Agreement or such interest in
the Franchisee entity to an approved third party. Such disposition of this
Agreement or such interest (including without limitation, transfer by bequest or
inheritance) shall be completed within a reasonable time, not to exceed 120 days
from the date of death or permanent disability (unless extended by probate
proceedings), and shall be subject to all terms and conditions applicable to
transfer contained in this Article 12. Failure to transfer the interest within
said period of time shall constitute a breach of this Agreement. For the
purposes hereof, the term "permanent disability" shall mean a mental or physical
disability, impairment or condition that is reasonably expected to prevent or
actually does prevent the Franchisee or Owner from supervising the management
and operation of the COMMWORLD Business for a period of 120 days from the onset
of such disability, impairment or condition. For the purposes of this Section
12.6, "Owner" shall be defined as any individual owning 25% or more of, or
controlling the Franchisee entity.
12.7. Transfer By Franchisor.
----------------------
The Franchisor has the right to assign or transfer this Agreement to a
third party and such assignment or transfer shall inure to the benefit of any of
its assignees or other legal successors in interest and the Franchisor shall in
such event be fully released from the same.
13. TERM AND EXPIRATION
13.1. Term of the Franchise.
---------------------
The term of this Agreement is for a period of 10 years from the date that
the Franchisor executes this Agreement. This Agreement may be terminated before
the expiration of the 10 year period in accordance with the provisions of
Article 14 herein.
13.2. Rights Upon Expiration.
----------------------
At the end of the initial 10 year term of this Agreement, the Franchisee
shall have the option to renew its franchise rights for an additional term of 10
years, by acquiring successor franchise rights, if the Franchisor does not
exercise its right not to offer a successor franchise in accordance with Section
13.4 below and if the Franchisee:
a. Executes the then current form of Franchise Agreement being offered
to new prospective Franchisees, or at the option of the Franchisor, in
writing acknowledge the continued effectiveness of this Agreement;
b. Has "Substantially Complied" with all provisions of this Agreement
during the current term, in a manner more fully described in Section 13.4
below;
c. Upgrades the COMMWORLD Business and operations (the necessity of
which shall be in the sole discretion of the Franchisor) to conform with
the then current standards as may be set forth in the Operations Manual;
d. Pays a successor franchise fee equal to 10% of the then current
initial franchise fee customarily charged by the Franchisor for the grant
of a franchise for a COMMWORLD Business operated under the Marks and
Licensed Methods; and
18
e. Executes a general release, in a form satisfactory to the
Franchisor, of any and all claims against the Franchisor and its
affiliates, and their respective officers, directors, employees and agents,
arising out of or relating to this Agreement.
13.3. Exercise of Option For Successor Franchise.
------------------------------------------
The Franchisee may exercise its option for a successor franchise by
giving notice of such exercise to the Franchisor not less than 90 days prior to
the scheduled expiration of this Agreement. The Franchisee acknowledges that the
Franchisor may change any terms of this Agreement when the Franchisee signs the
then current form of Franchise Agreement for a successor franchise, including
the terms of the Franchisee's Marketing Area. The Franchisee's successor
franchise rights shall become effective by signing the form of Franchise
Agreement then currently being offered to new prospective franchisees of the
Franchisor and by paying the successor franchise fee; however, an additional
initial franchise fee will not be charged.
13.4. Conditions of Refusal.
---------------------
The Franchisor shall not be obligated to offer the Franchisee a successor
franchise upon the expiration of this Agreement if the Franchisee has not
"Substantially Complied" with all provisions of this Agreement. "Substantial
Compliance" shall mean that:
a. The Franchise shall have received less than 5 written notices of
breach of this Agreement during the term hereof; and
b. No default shall exist at the time the offer of the successor
franchise would otherwise be made which would enable the Franchisor to
terminate this Agreement under the terms and conditions contained in
Article 14 herein.
Under any of the above circumstances, the Franchisor shall give notice of
expiration of the franchise 180 days prior to the expiration of the term, and
such notice shall set forth the reasons for such refusal to offer successor
franchise rights. Upon the expiration of this Agreement, the Franchisee shall
comply with the provisions of Section 14.5 below.
14. DEFAULT AND TERMINATION
14.1. Termination - Effective Upon Notice.
-----------------------------------
The Franchisor has the right to terminate this Agreement, effective upon
written notice to the Franchisee, if the Franchisee: (a) is declared bankrupt
or insolvent or voluntarily institutes a bankruptcy proceeding under the Federal
Bankruptcy Code or is adjudicated bankrupt as a result of an involuntary
petition in bankruptcy being filed against it if, under the circumstances,
termination is permissible under applicable bankruptcy laws and regulations, or
(b) if Franchisee is convicted of a felony or any crime or offense that is
reasonably likely, in the sole opinion of the Franchisor, to materially and
unfavorably affect the Franchisor's Licensed Methods, Marks, goodwill or
reputation thereof, or (c) the Franchisee has made any material
misrepresentation or omission in its application for the franchise.
14.2. Termination - Fifteen Days Notice.
---------------------------------
The Franchisor has the right to terminate this Agreement, effective after
15 days written notice to the Franchisee, such notice to contain a right to cure
the default, if:
19
a. The Franchisee defaults in payment of any indebtedness due to the
Franchisor or any of its affiliated or related entities and such default
continues for 10 days after the date such indebtedness is due; or
b. The Franchisee closes, abandons or loses the right to occupy the
Franchised Location of the COMMWORLD Business for a 5 day period or longer,
in which case the Franchisor shall have the right to terminate this
Agreement, unless the closure, abandonment or loss is reasonably
unavoidable due to war conditions, government regulations, strikes, fire,
flood or other casualty or government order.
14.3. Termination - Thirty Days Notice.
--------------------------------
The Franchisor shall have the right to terminate this Agreement,
effective after 30 days written notice to the Franchisee, if the Franchisee
breaches any other provision of this Agreement (other than as set forth in
Sections 14.1 and 14.2 herein), including, but not limited to the following:
a. The Franchisee surrenders or transfers control of or ownership of
the COMMWORLD Business's operation without the Franchisor's prior written
consent or otherwise fails to comply with the provisions for assignment set
forth in Article 12 of this Agreement;
b. The Franchisee materially breaches any other agreement with the
Franchisor directly or indirectly related to the COMMWORLD Business,
including without limitation, any credit agreement, product or equipment
purchase agreement or support service agreement with the Franchisor;
c. The Franchisee makes any unauthorized use of the Marks or
unauthorized use or disclosure of any of the Franchisor's proprietary or
confidential information which is a part of the Licensed Methods, or uses,
duplicates or discloses any portion of the Operations Manual in violation
of this Agreement;
d. The Franchisee relocates the Franchised Location without the
Franchisor's written approval; or
e. The Franchisee fails to timely submit any reports and records
required hereunder.
Under circumstances where the breach is of the nature that it may be cured
through the actions of the Franchisee, the Franchisor shall permit the
Franchisee the same 30 day period to cure any such breach or default, after
which time, if the breach or default has not been cured, the Franchisor may
terminate this Agreement immediately. Notwithstanding the foregoing, if the
breach is curable, but is of the nature which cannot be reasonably cured within
such 30 day period and the Franchisee has commenced and is continuing to make
good faith efforts to cure the breach during such 30 day period, then the
Franchisee shall be given an additional reasonable period of time to cure the
same and the Agreement shall not terminate. Under no circumstances will the
Franchisor terminate this Agreement without good cause.
14.4. Franchisee's Right to Terminate Without Cause.
---------------------------------------------
During the initial 12 month period after the date of full execution of
this Agreement, the Franchisee may terminate this Agreement, at any time, with
or without cause, by giving 60 days prior written notice to the Franchisor,
which notice is received by the Franchisor within that 12 month period.
20
Upon termination under these circumstances, the Franchisee shall be subject to
compliance with Section 14.5 below and shall not be entitled to a refund or
return of any portion of the initial franchise fee.
14.5. Obligations of Franchisee Upon Termination or Expiration.
--------------------------------------------------------
The Franchisee is obligated upon termination or expiration of this
Agreement to:
a. Pay to the Franchisor and its affiliated or related entities all
royalties, other fees, any and all amounts or accounts payable which are
then owed and unpaid pursuant to this Agreement or pursuant to any other
agreements or arrangements between the parties, within 15 days of the
effective date of such termination;
b. Immediately cease to identify itself, the COMMWORLD Business or any
other business as being, or having been, associated with the Franchisor, or
to use any of the Marks of the Franchisor or colorable imitation thereof
for any purpose;
c. Immediately deliver to the Franchisor all signs, sign-faces,
catalogs, advertising materials, forms and other materials bearing any of
the Marks of the Franchisor or otherwise identified with the Franchisor;
d. Immediately deliver to the Franchisor the Operations Manual and all
other information proprietary to the Franchisor;
e. Promptly take such action as may be required to cancel all
fictitious or assumed names or equivalent registrations relating to its use
of any of the Marks of the Franchisor;
f. Notify the telephone company and all telephone directory publishers
of the termination or expiration of the Franchisee's right to use the Marks
or any name containing the Marks;
g. Immediately refrain from using or copying any of the advertising
shells and/or advertising styles and designs, supplied or made available by
the Franchisor or using or containing references to the Marks in any manner
or form;
h. Notify Equipment Vendors and other product supply vendors of the
termination or expiration of the franchise; and
i. Abide by all restrictive covenants set forth in Article 16 of this
Agreement.
The Franchisee shall within 30 days of the effective date of termination or
expiration give written notice and satisfactory evidence to the Franchisor that
it has complied with each of the above provisions.
14.6. Acknowledgement.
---------------
In the event this Agreement is terminated by the Franchisor prior to its
expiration as set forth in Sections 14.1, 14.2 or 14.3 above, the Franchisee
acknowledges and agrees that, in addition to all other available remedies, the
Franchisor shall have the right to recover lost future Cost-Up Royalties during
any period in which the Franchisee fails to pay such Cost-Up Royalties through
and including the remainder of the then current term of this Agreement.
21
14.7. Governing State Law.
-------------------
If any mandatory provisions of the governing state law prohibit
termination of this Agreement or limit the Franchisor's rights to terminate to
some other basis or terms than are herein provided, or require renewal hereof,
or require repurchase hereof, then said mandatory provisions of state law shall
be deemed incorporated in this Agreement by reference and shall prevail over any
inconsistent terms hereof.
15. BUSINESS RELATIONSHIP
15.1. Independent Businesspersons.
---------------------------
The parties agree that each of them are independent businesspersons,
their only relationship is by virtue of this Agreement and that no fiduciary
relationship is created hereunder. Neither party is liable or responsible for
the other's debts or obligations, nor shall either party be obligated for any
damages to any person or property directly or indirectly arising out of the
operation of the other party's business authorized by or conducted pursuant to
this Agreement. The Franchisor and the Franchisee agree that neither of them
will hold themselves out to be the agent, employer or partner of the other and
that neither of them has the authority to bind or incur liability on behalf of
the other.
15.2. Payment of Third Party Obligations.
----------------------------------
The Franchisor shall have no liability for the Franchisee's obligations
to pay any third parties, including without limitation, any product vendors, or
any sales, use, service, occupation, excise, gross receipts, income, property or
other tax levied upon the Franchisee, the Franchisee's COMMWORLD Business, the
Franchisee's property or upon the Franchisor in connection with the sales made
or business conducted by the Franchisee (except any taxes the Franchisor is
required by law to collect from the Franchisee with respect to purchases from
the Franchisor).
15.3. Indemnification.
---------------
The Franchisee agrees to indemnify, defend and hold harmless the
Franchisor, its subsidiaries and affiliates, and their shareholders, directors,
officers, employees, agents, successors and assignees, (the "Indemnified
Parties") against, and to reimburse them for all claims, obligations and damages
described in this Section 15.3, any and all third party obligations described in
Section 15.2 and any and all claims and liabilities directly or indirectly
arising out of the operation of the COMMWORLD Business or arising out of the use
of the Marks and Licensed Methods in any manner not in accordance with this
Agreement. For purposes of this indemnification, claims shall mean and include
all obligations, actual and consequential damages and costs reasonably incurred
in the defense of any claim against the Indemnified Parties, including, without
limitation, reasonable accountants', attorneys' and expert witness fees, costs
of investigation and proof of facts, court costs, other litigation expenses and
travel and living expenses. The Franchisor shall have the right to defend any
such claim against it. This indemnity shall continue in full force and effect
subsequent to and notwithstanding the expiration or termination of this
Agreement.
16. RESTRICTIVE COVENANTS
16.1. Non-Competition During Term.
---------------------------
The Franchisee acknowledges that, in addition to the license of the Marks
hereunder, the Franchisor has also licensed commercially valuable information
which comprises and is a part of the Licensed Methods, including without
limitation, operations, marketing, advertising and related information and
materials and that the value of this information derives not only from the time,
effort and
22
money which went into its compilation, but from the usage of the same by all
Franchisees of the Franchisor using the Marks and Licensed Methods. The
Franchisee therefore agrees that other than the COMMWORLD Business licensed
herein, the Franchisee and any officers and directors of a corporate Franchisee,
are restricted during the term of this Agreement directly or indirectly, for
themselves, or through, on behalf of, or in conjunction with any person, persons
or legal entity, from: (1) operating any other business or profession which is
directly or indirectly involved in the distributing or selling of any telephone
or telecommunications products or equipment or from providing telephone
installation, repair and maintenance, or system additions, moves and changes, or
telephone parts and inventory, or telecommunications consulting services other
than through the COMMWORLD Business licensed hereunder, without the prior
written consent of the Franchisor; or (2) diverting or attempting to divert any
business or customer of the COMMWORLD Business, the Franchisor's business or any
other COMMWORLD franchisee's business, to any competitor, by direct inducement
or otherwise, or diverting or attempting to divert the employment of any
employee of the Franchisor or another franchisee licensed by the Franchisor to
use the Marks and Licensed Methods, to any competitor by any direct inducement
or otherwise.
16.2. Confidentiality of Proprietary Information.
------------------------------------------
The Franchisee shall treat all information it receives which comprises or
is a part of the Licensed Methods licensed hereunder as proprietary and
confidential and will not disclose the same to any person without first
obtaining the Franchisor's written consent. The Franchisee acknowledges that
the Marks and the Licensed Methods have valuable goodwill attached to them, that
the protection and maintenance thereof is essential to the Franchisor and that
any unauthorized use of the Marks and Licensed Methods will result in
irreparable harm to the Franchisor.
16.3. Prohibition Against Reshipment.
------------------------------
The Franchisee shall not in any manner reship, transship, distribute or
sell any products or equipment purchased from or through the Franchisor and its
purchase programs to any reseller of said products or equipment, including but
not limited to, other COMMWORLD franchisees. The Franchisee shall sell products
or equipment purchased from or through the Franchisor and its purchase programs
only to end users and only from or through the authorized Franchised Location
and the COMMWORLD Business.
16.4. Remedies and Attorneys' Fees.
----------------------------
The Franchisee shall reimburse the Franchisor for attorneys' fees and
other reasonable costs incurred in the reasonable enforcement of the
restrictions imposed by this Article 16. The Franchisee acknowledges that the
provisions hereof may, in addition to all other available remedies, be enforced
through an action for injunctive relief.
17. MISCELLANEOUS PROVISIONS
17.1. Modification.
------------
The Franchisor and/or the Franchisee may modify this Agreement only upon
execution of a written agreement between the parties. The Franchisee
acknowledges that the Franchisor may modify its standards and specifications set
forth in the Operations Manual unilaterally under any conditions and to the
extent to which the Franchisor, in its sole discretion, deems necessary to
protect, promote, or improve the Marks and the quality of the Licensed Methods,
but under no circumstances will such modifications
23
be made without good cause therefor. The Franchisee agrees to accept and utilize
any such changes or modifications which are reasonably requested as if they were
a part of this Agreement.
17.2. Injunctive Relief.
------------------
Nothing herein shall prevent the Franchisor or the Franchisee from seeking
injunctive relief to prevent irreparable harm in addition to all other remedies.
If the Franchisor seeks an injunction, the Franchisor will not be required to
post a bond in excess of $500.
17.3. Waiver.
-------
No waiver of any condition or covenant in this Agreement or failure to
exercise a right or remedy of the Franchisor or the Franchisee shall be
considered to imply or constitute a further waiver by the Franchisor or the
Franchisee of the same or any other condition, covenant, right or remedy.
17.4. Governing Law/Consent to Venue and Jurisdiction.
------------------------------------------------
Except to the extent governed by the United States Trademark Act of 1945
(▇▇▇▇▇▇ Act, 15 U.S.C. Sections 1051 et seq.) or other federal law, this
-------
Agreement shall be interpreted under the laws of the state of Colorado and any
disputes between the parties shall be governed by and determined in accordance
with the substantive laws of the state of Colorado, which laws shall prevail in
the event of any conflict of law. The Franchisee and the Franchisor have
negotiated regarding a forum in which to resolve any disputes which may arise
between them and have agreed to select a forum in order to promote stability in
their relationship. Therefore, if a claim is asserted in a legal proceeding
involving the Franchisee, its officers, directors, partners or managers
(collectively, "Franchisee Affiliates") and the Franchisor, its officers,
directors or sales employees (collectively, "Franchisor Affiliates") all parties
agree that the exclusive venue for disputes between them shall be in the state
and federal courts of Colorado and each waive any objections they may have to
the personal jurisdiction of or venue in the state and federal courts of
Colorado. The Franchisor, the Franchisor Affiliates, the Franchisee and the
Franchisee Affiliates each waive their rights to a trial by jury.
17.5. Binding Effect.
---------------
The provisions of this Agreement shall inure to the benefit of and be
binding upon each of the parties respective representatives, successors, assigns
and heirs.
Delegation by the Franchisor.
----------------------------
The Franchisor has the right in its sole discretion to delegate the
performance of all or any portion of its obligations and duties, or assign any
or all of its rights, under this Agreement to third parties, whether such third
parties are agents or affiliates of the Franchisor or independent contractors
which the Franchisor has contracted with to fulfill such obligations and duties,
or to participate in such rights.
17.6. Invalidity.
-----------
If any provision of this Agreement is held invalid by any tribunal in a
final decision from which no appeal is or can be taken, such provision shall be
deemed modified to eliminate the invalid element and, as so modified, such
provision shall be deemed a part of this Agreement as though originally
included. The remaining provisions of this Agreement shall not be affected by
such modification.
24
17.7. Prohibition Against Nonpayment.
-------------------------------
The Franchisee agrees to consult with the Franchisor with respect to any
alleged nonperformance of the Franchisor and the Franchisee will not, on the
grounds of any alleged nonperformance by the Franchisor of its obligations
hereunder, withhold payment of any Cost-Up Royalties or other payment of fees
payable by the Franchisee pursuant to the terms of this Agreement.
17.8. Notices.
--------
All notices required to be given under this Agreement shall be given in
writing, by certified mail, return receipt requested, or by delivery to a
commercial carrier service for next business day delivery, to each party at
their respective addresses set forth in the first Section of this Agreement, or
at such other addresses as the Franchisor or the Franchisee may designate from
time to time, and shall be effectively given when deposited with the commercial
carrier or in the United States mail, postage prepaid.
17.9. No Violation or Interference.
-----------------------------
By execution of this Agreement the Franchisee warrants and represents to
the Franchisor that neither the execution of this Agreement nor any of the terms
hereof in any way violate or interfere with the terms of any other contractual
arrangements and agreements to which the Franchisee may be a party.
17.10. Integration.
------------
This Agreement, including all exhibits and addenda, contains the entire
agreement between the parties and supersedes any and all prior agreements
concerning the subject matter hereof. The Franchisee agrees and understands that
the Franchisor shall not be liable or obligated for any oral representations or
commitments made prior to the execution hereof or for claims of negligent or
fraudulent misrepresentation based on any such oral representations or
commitments and that no modifications of this Agreement shall be effective
except those in writing and signed by both parties. The Franchisor does not
authorize and will not be bound by any representation of any nature other than
those expressed in this Agreement. The Franchisee further acknowledges and
agrees that no representations have been made to it by the Franchisor regarding
projected sales volumes, market potential, revenues, profits of the Franchisee's
COMMWORLD Business, or operational assistance other than as stated in this
Agreement or in any disclosure document provided by the Franchisor or its
representatives.
17.11. Review of Agreement.
--------------------
The Franchisee acknowledges that it has had a copy of this Agreement in
its possession for a period of time not less than ten full business days, during
which time the Franchisee has had the opportunity to submit same for
professional review and advice of the Franchisee's choosing prior to freely
executing this Agreement.
17.12. Attorney's Fees.
----------------
In the event of any default on the part of either party to this
Agreement, in addition to all other remedies, the party in default will pay the
aggrieved party all amounts due and all damages, costs and expenses, including
reasonable attorney's fees incurred by the aggrieved party in any legal action,
arbitration or other proceeding as a result of such default, plus interest at
the highest rate allowable by law, accruing from the date of such default.
25
17.13. No Right to Set Off.
--------------------
The Franchisee shall not be allowed to set off amounts owed to the
Franchisor for Cost-Up Royalties, fees or other amounts due hereunder, against
any monies owed to the Franchisee, nor shall the Franchisee, in any event,
withhold such amounts due to any alleged nonperformance by the Franchisor
hereunder, which right of set off is hereby expressly waived by the Franchisee.
17.14. Effective Date.
---------------
This Agreement will not become effective until it has been fully executed
by both the Franchisor and the Franchisee. Any insertions to the Agreement or
any Addendum hereto must be initialed by both the Franchisor and Franchisee to
be effective.
17.15. Notice.
-------
BEFORE SIGNING THIS AGREEMENT, THE FRANCHISEE SHOULD READ IT CAREFULLY
WITH THE ASSISTANCE OF LEGAL COUNSEL. THE FRANCHISEE ACKNOWLEDGES THAT:
A. THE SUCCESS OF THE BUSINESS VENTURE CONTEMPLATED HEREIN INVOLVES
SUBSTANTIAL RISKS AND DEPENDS UPON THE FRANCHISEE'S ABILITY AS AN
INDEPENDENT BUSINESSPERSON AND ITS ACTIVE PARTICIPATION IN THE DAILY
AFFAIRS OF THE BUSINESS, AND
B. NO ASSURANCE OR WARRANTY, EXPRESSED OR IMPLIED, HAS BEEN GIVEN AS
TO THE POTENTIAL SUCCESS OF SUCH BUSINESS VENTURE OR THE EARNINGS LIKELY
TO BE ACHIEVED, AND
C. NO STATEMENT, REPRESENTATION OR OTHER ACT, EVENT OR COMMUNICATION,
EXCEPT AS SET FORTH IN THIS DOCUMENT, AND IN ANY OFFERING CIRCULAR
SUPPLIED TO THE FRANCHISEE IS BINDING ON THE FRANCHISOR IN CONNECTION
WITH THE SUBJECT MATTER OF THIS AGREEMENT.
26
Fully executed this ____ day of _______________, 19__.
COMMUNICATIONS WORLD
INTERNATIONAL, INC.
By:___________________________________
Title:________________________________
Date:_________________________________
FRANCHISEE: (if an individual)
______________________________________
Individually
______________________________________
OR:
(if a corporation or partnership)
______________________________________
Company Name
By:___________________________________
Its:__________________________________
Date:_________________________________
27
EXHIBIT I
TO FRANCHISE AGREEMENT
ADDENDUM
TO
FRANCHISE AGREEMENT
This is an Addendum to the Franchise Agreement dated _____________, 199__,
(the "Agreement") by and between Communications World International, Inc.,
hereinafter "Franchisor" and _________________________________________________,
hereinafter "Franchisee." This Addendum modifies the terms of the Agreement and
in the event of a conflict in terms between the Agreement and this Addendum, the
terms of this Addendum shall be controlling.
The parties agree as follows:
1. Franchised Location. The Franchisee's Franchised Location, as
-------------------
referred to in Section 2.3 of the Agreement, shall be the following address:
___________________________________________________________________________.
2. Franchise Name. The Franchisee shall be entitled to begin using the
--------------
trade name and doing business as _________________________ pursuant to the terms
of the Agreement upon execution of this Addendum.
3. Marketing Area. The Franchisee's Marketing Area, as referred to in
--------------
Section 2.4 of the Agreement, shall be as follows:.
4. Initial Franchise Fee. The initial franchise fee paid by the
---------------------
Franchisee to the Franchisor is $______________, payable as follows:.
5. Product Authorization. The following shall be added to Section 4.2 of
---------------------
the Agreement:
The product and equipment brands which the Franchisee desires to request
authorization to purchase from or through the Franchisor's available
purchase programs from Equipment Vendors are as follows:
Executed this ________ day of __________________________, 19___.
COMMUNICATIONS WORLD FRANCHISEE:
INTERNATIONAL, INC.:
By:_________________________ By:__________________________
Title:______________________ Title:_______________________
EXHIBIT II
TO FRANCHISE AGREEMENT
GUARANTY
The undersigned, whether one or more, hereby jointly and severally
unconditionally guarantee the full payment of all fees, costs, expenses and
damages and any and all other amounts which by virtue of this Agreement become
payable by the Franchisee to the Franchisor.
This guarantee shall continue in force until all obligations of Franchisee
under the Agreement shall have been satisfied, or until the Franchisee's
liability under the Agreement has been completely discharged, whichever first
occurs. The undersigned shall not be discharged from liability hereunder as long
as any claim by the Franchisor against the Franchisee remains outstanding.
Notice of acceptance by the Franchisor is waived. Notice of default on the part
of the Guarantor is waived. Notice of default on the part of the Franchisee is
not waived. This guarantee shall be binding on the undersigned and/or their
successors and assigns.
__________________________________________________
Date:_____________________________________________
__________________________________________________
Date:_____________________________________________
__________________________________________________
Date:_____________________________________________
EXHIBIT III
TO FRANCHISE AGREEMENT
STATEMENT OF OWNERSHIP
Franchisee:_____________________________________________________________________
Trade name (if different from above):___________________________________________
Form of Ownership
(Check One)
Limited
_____ Individual _____ Partnership _____ Corporation _____ Liability
Company
If a Partnership or limited liability company, provide name and address of
each partner or member showing percentage owned, whether active in management,
and state in which partnership or limited liability company was formed.
If a Corporation, give the state and date of incorporation, the names and
-------------
addresses of each officer and director, and list the names and addresses of
--------------------------------------
every shareholder showing what percentage of stock is owned by each.
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
Use additional sheets if necessary. Any and all changes to the above
information must be reported to the Franchisor.
FRANCHISEE
By:____________________________________
_____________________ Title:_________________________________
Date
OR
_______________________________________
Individual Signature
_______________________________________
Print Name