Registration No. 333-65069
As filed with the Securities and Exchange Commission on December 23, 1998
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 ________________
________________
FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
AMENDMENT NO. 1
________________
ACCESS POWER, INC.
(Name of small business issuer)
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<CAPTION>
<S> <S> <C>
Florida 4813 59-3420985
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(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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10033 Sawgrass Drive West
Suite 100
Ponte Vedra Beach, Florida, USA 32082
(904) 273-2980
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(Address and telephone number of principal executive offices)
____________________________________
Glenn A. Smith
10033 Sawgrass Drive West
Suite 100
Ponte Vedra Beach, Florida, USA 32082
(904) 273-2980
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(Name, address and telephone number of agent for service)
__________________
Copies to:
Dennis J. Stockwell
Kilpatrick Stockton LLP
1100 Peachtree Street, Suite 2800
Atlanta, Georgia 30309
(404) 815-6500
(404) 815-6555 (fax)
__________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes
effective.
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act of 1933,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for
the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to
Rule 434 check the following box. / /
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CALCULATION OF REGISTRATION FEE
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Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Registered Offering Price per Aggregate Offering Registration Fee
Share<F1> Price<F1>
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<S> <C> <C> <C> <C>
Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Registered Offering Price per Aggregate Offering Registration Fee
Share<F1> Price<F2>
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value 8,500,000 $0.3438 $2,922,300 $812.40 <F2>
<FN>
<F1> Estimated solely for the purpose of calculating the
registration fee in accordance with Rule 457(a) under the Securities
Act and based on the average of the high and low price per share of Access
Power, Inc. Common Stock as quoted on the OTC Bulletin Board on December 16,
1998.
<F2> The amount of $430.09, representing the registration fee for
the additional 4,500,000 shares being added to this registration, is
paid with this filing. A registration fee of $815.00 was paid upon
the initial filing of this registration statement.
</FN>
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__________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL
THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY
STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF
1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
8,500,000 Shares
[LOGO]
ACCESS POWER, INC.
Common Stock
____________
The shares of common stock, par value $.001 per share (the
"Common Stock"), of Access Power, Inc. (the "Company") offered hereby
(the "Offering") are being offered by stockholders of the Company (the
"Selling Stockholders"). The Company will not receive any proceeds
from the sale of shares by the Selling Stockholders. The Selling
Stockholders may sell their shares from time to time directly or
through underwriters, dealers or agents, in market transactions on the
OTC Bulletin Board, on any national securities exchange or automated
quotation system on which the Common Stock may be listed or traded,
including block trades or ordinary brokers transactions, or in
privately negotiated transactions. The price at which the Selling
Stockholders will sell their shares, and the commissions, if any, paid
in connection with any sale, may be privately negotiated, may be based
on then prevailing market prices and may vary from transaction to
transaction and as a result are not currently known. See "PLAN OF
DISTRIBUTION."
The Common Stock currently is traded over the counter ("OTC") ,
and bid and asked prices are quoted and the last sale is reported on
the OTC electronic bulletin board maintained by the National
Association of Securities Dealers (the "Bulletin Board") under the
symbol "ACCR." On December 11, 1998, the last bid price of the Common
Stock as reported on the Bulletin Board was $0.2188.
The Selling Stockholders and any broker-dealers participating in
the distribution of the shares may be deemed to be "underwriters"
within the meaning of the 1933 Act, and any commissions or discounts
given to any such broker-dealer may be regarded as underwriting
commissions or discounts under the 1933 Act. The shares have not been
registered for sale by the Selling Stockholders under the securities
laws of any state as of the date of this Prospectus. Brokers or
dealers effecting transactions in the shares should confirm the
registration thereof under the securities laws of the states in which
transactions occur or the existence of any exemption from
registration.
The Company will pay certain of the legal and other expenses of
this offering (estimated to be $40,000), except that the Selling
Stockholders will bear the cost of any brokerage commissions or
discounts or other selling expenses incurred by the Selling
Stockholders in connection with the sale of their shares.
No dealer, salesperson or other person has been authorized to
give any information or to make any representations not contained, or
incorporated by reference, in this Prospectus and, if given or made,
such information or representation must not be relied upon as having
been authorized by the Company or the Selling Stockholders. This
Prospectus does not constitute an offer to sell or the solicitation of
any offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer
in such jurisdiction. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create any
implication that the information herein is correct as of any time
subsequent to the date hereof or that there has been no change in the
affairs of the Company since such date.
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. (SEE "RISK
FACTORS" BEGINNING ON PAGE 5.)
_____________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_____________
The date of this Prospectus is December __, 1998
SUMMARY
The following summary is qualified in its entirety by the more
detailed information, including "Risk Factors" and financial
statements, including the notes thereto, appearing elsewhere in this
Prospectus. Unless otherwise indicated, the information contained in
this Prospectus assumes that all shares of Series A Convertible
Preferred Stock ("Preferred Stock") have been converted to Common
Stock.
Access Power, Inc. was formed to offer Internet-based
communications products and services in the U.S. and international
markets. The Company is one of the first companies to offer a means
for voice and multi-media communications over the Internet, a service
which is commonly referred to as Internet Protocol telephony or IP
telephony. The Company is in the development stage.
The Company's voice-over-IP service (known as Access Power
Advanced Communications (APAC)) integrates traditional functions with
advanced Internet-based communications technology. APAC enables users
to connect long distance over the Internet from a multi-media personal
computer (PC) to a regular telephone or from a regular telephone to
another regular telephone with a significant reduction in costs over
that of traditional long distance telephony. Through this service, a
long distance telephone call can be placed from over the Internet to
telephones in any area where Access Power provides gateway service
without the use of traditional long distance lines. Currently, the
Company has such service available for calls to telephones in ten
metropolitan cities in the states of Arizona, Florida, Texas and Utah.
Calls to other locations may be made through the Company's services,
but regular long-distance services will be necessary to complete the
call from the location of one of the Company's gateway servers, and
the cost to the user is slightly higher. At this time, telephone-to-
telephone calls may only be originated at locations near one of the
Company's gateways through a local call to the server.
In addition to the cost savings associated with Internet
telephony, the Company's customers will have available to them
services that are not available through traditional long distance
networks, such as interactive document and data sharing and multi-
media data transmissions (including video).
In connection with the telephony services, the Company will be
reselling to the customer a Netspeak Corporation PC telephone software
package called WebPhone. The Company also will be developing and
marketing e-button software, which provides a convenient means for
someone viewing a company's Website to be immediately connected by
telephone with the company's call center.
The Company has entered into an agreement with a Texas company to
provide international Internet telephone services between the U.S.
and Manila in the Phillipines. The Company intends to pursue other
international expansion via joint venture and other business arrangements
throughout South America, Europe, Africa and the Pacific Rim.
The Company's strategy to become one of the world's leading
providers of international IP telephony products and services
includes: continued expansion of its international IP telephony
gateway network through joint venture partnerships and other business
relationships in the targeted regions; leveraging of the network and
its inherent low operating costs to provide discount retail and
wholesale international calling services; exploitation of new
technology; and the continued development of enhanced products and
services to complement the Company's international IP telephony
gateway server network.
2
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The Company was incorporated in Florida in October 1996. The
Company's principal executive offices are located at 10033 Sawgrass
Drive West, Suite 100, Ponte Vedra Beach, Florida, USA 32082, and its
telephone number is (904) 273-2980.
The Offering
Common Stock offered by Selling 8,500,000 shares <F1>
Stockholders
Common Stock to be outstanding 19,768,950 shares <F1><F2>
after the Offering
OTC Bulletin Board symbol "ACCR"
___________________
[FN]
<F1> The offered shares include (i) 7,336,413 shares of Common Stock
that may be acquired by holders of the Preferred Stock upon
conversion thereof, based on a five-day average market price of
$0.2688 per share, for the period ended December 11, 1998, but subject
to adjustment for the applicable average market price at the time of
conversion under the conversion formula (see "Description of Capital
Stock - Preferred Stock"); (ii) 587,950 shares of Common Stock that
may be acquired pursuant to the exercise of an outstanding warrant;
and (iii) 225,000 shares which are currently issued and outstanding.
<F2> Does not include outstanding options to purchase 1,518,000 shares of
Common Stock (having a weighted average exercise price of $0.64 per
share).
</FN>
3<PAGE>
SUMMARY FINANCIAL DATA
The summary financial data of the Company set forth below for the
year ended December 31, 1997 is derived from the audited Financial
Statements of the Company for that period included elsewhere in this
Prospectus. The summary financial data for the nine months ended
September 30, 1997 and 1998 and as of September 30, 1998 are derived
from unaudited financial statements included elsewhere in this
Prospectus, which, in the opinion of the Company reflect all
adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the financial condition and
results of operations. These historical results are not necessarily
indicative of the results that may be expected in the future. The
summary financial data are qualified by reference to and should be
read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," the Financial
Statements and Notes thereto and other financial data included
elsewhere in this Prospectus.
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Year Ended Nine Months Ended September 30,
December 31,
1997 1997 1998
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Statement of Operations Data
Revenues
Product Sales . . . . . . . . . . - - $212,092
Services . . . . . . . . . . . . . - - 42,089
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Total revenues . . . . . . . . . - - 254,181
Cost of revenues
Product Sales . . . . . . . . . . - - 152,920
Services . . . . . . . . . . . . . - - -
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Total cost of revenues . . . . . - - 152,920
Gross margin . . . . . . . . . . - - 101,261
Total operating expenses . . . . . . 426,156 238,583 1,496,948
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Income (loss) from operations . . . . (426,156) (238,583) (1,395,687)
Interest expense, net . . . . . . . . 282 170 2,927
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Income (loss) before income taxes . . (426,438) (238,753) (1,398,614)
Income tax expense . . . . . . . . . - - -
---------- --------- ------------
Net income (loss) . . . . . . . . . $ (426,438) $(238,753) $(1,398,614)
========== ========= ===========
Income (loss) per share . . . . . . . $ (0.04) (0.03) $ 0.12)
========== ========= ============
Weighted average shares outstanding . 9,742,000 8,000,000 11,706,220
</TABLE>
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September 30, 1998
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(Unaudited)
BALANCE SHEET DATA
Cash and cash equivalents........................... $ 28,904
Working capital..................................... (1,221,060)
Total assets........................................ 1,416,772
Long-term debt, less current portion................ 100,000
Stockholders' equity (deficit) ..................... 81,970
________________
Access Power Advanced CommunicationsTM is a trademark of the
Company. All other trademarks and trade names referred to in this
Prospectus are the property of their respective owners.
4
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY
INVOLVES A DEGREE OF RISK. IN ADDITION TO THE OTHER INFORMATION IN
THIS PROSPECTUS, THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED
CAREFULLY IN EVALUATING AN INVESTMENT IN THE COMMON STOCK. THIS
PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS (AS SUCH TERM
IS DEFINED IN THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT")) CONCERNING THE COMPANY, INCLUDING, IN PARTICULAR, THE
LIKELIHOOD OF THE COMPANY'S SUCCESS IN DEVELOPING AND EXPANDING ITS
BUSINESS. THESE STATEMENTS ARE BASED UPON A NUMBER OF ASSUMPTIONS AND
ESTIMATES WHICH ARE INHERENTLY SUBJECT TO SIGNIFICANT UNCERTAINTIES,
MANY OF WHICH ARE BEYOND THE CONTROL OF THE COMPANY. ACTUAL RESULTS
MAY DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-
LOOKING STATEMENTS. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY INCLUDE, BUT ARE NOT LIMITED TO, THOSE SET FORTH BELOW.
DEVELOPMENT STAGE COMPANY; SHORT OPERATING HISTORY.
The Company was formed in October of 1996 and is in the
development stage. To date, the Company has had minimal revenue. The
Company has limited operating history upon which investors may base an
evaluation of its likely performance. The Company's prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in an early stage of development,
particularly companies in new and rapidly evolving industries. To
address these risks and achieve profitability and increased sales
levels, the Company must, among other things, establish and increase
market acceptance of its technology, products and services, expand the
deployment of its network, increase its customer base substantially,
and successfully market and support its products and services. There
can be no assurance that the Company will achieve or sustain
significant sales or profitability in the future.
UNCERTAINTY OF PRODUCT ACCEPTANCE; NEW PRODUCT DEVELOPMENT RISKS.
The markets for the Company's technology, products and services
have only recently begun to develop and are rapidly evolving. In
addition, the Company's products and services are new and based on
emerging technologies. As is typical in the case of new and rapidly
evolving industries, demand and market acceptance for recently
introduced technology and products are subject to a high level of
uncertainty. Broad acceptance of the Company's technology, products
and services is critical to the Company's success and ability to
generate revenues. There can be no assurance that the Company will be
successful in obtaining market acceptance of its technology, products
and services. Relative lower quality of voice transmissions through
the Company's network compared to traditional long-distance services
will be a factor in the early acceptance of the Company's services.
RISKS OF RAPID TECHNOLOGICAL CHANGE.
The introduction of products and systems which offer applications
incorporating new technologies could render the Company's products and
services less marketable or subject to downward price pressures.
Further, the markets for the Company's products and services,
including the market for voice transmission over packetized data
networks, are characterized by evolving industry standards and
specifications. As new standards or specifications are adopted, the
Company may be required to devote substantial time and expense in
order to adapt its technology, products and services. The Company's
ability to anticipate changes in technology and industry standards and
successfully develop and introduce enhanced products and services as
well as new products and services, in each case in a cost effective
and timely manner, will be a critical factor in the Company's ability
to grow and be competitive. There can be no assurance that the Company
will successfully develop enhanced or new products and services, that
any enhanced or new products and services will achieve market
acceptance, that the Company will be able to adapt its products and
services to comply with new standards or specifications, or that the
introduction of new products or services by others will not render the
Company's technology, products and services obsolete.
PRICING PRESSURES.
As a result of existing excess international transmission capacity,
the marginal cost of carrying an additional international call is often
very low for certain traditional long distance carriers. Industry observers
have predicted that these low marginal costs may result in significant
pricing pressures and that, within a few years after the end of
5<PAGE>
this century, there may be no charges based on the distance a call is
carried. If this type of pricing were to become prevalent in the markets
on which the Company focuses, it would likely have a material adverse
effect on the Company's prospects, financial condition and results of
operations.
LIMITED MARKETING EFFORTS; RELIANCE ON STRATEGIC PARTNERS.
The Company's marketing efforts primarily involve the development
of strategic alliances with partners in the United States and outside
of the United States and, to a lesser extent, in-house marketing. The
Company's performance is substantially dependent on its ability to
develop strategic alliances with marketing partners which will promote
the Company's technology, products and services. To date, the Company
has established a significant business relationship with only one
entity outside the U.S. There can be no assurance that the Company
will be successful in consummating any future strategic alliances. In
countries where the Company seeks to establish strategic alliances, it
must, among other things, recruit, hire and train personnel, establish
offices, obtain regulatory authorization, lease transmission lines
from, and obtain interconnection agreements with, telecommunications
carriers that own intra-national transmission lines and install
hardware and software. The Company has limited experience dealing with
these problems outside the U.S.
NEED FOR ADDITIONAL FINANCING.
The Company currently has almost no funding and no commitment for
funding. The Company's ability to expand its Internet telephony
network and to develop new products and services will depend on its
ability to obtain additional debt or equity funding. The Company may
need to seek additional capital regardless of market conditions if the
Company identifies desirable infrastructure investment, if the Company
experiences unanticipated costs or competitive pressures or if the net
proceeds from any capital-raising efforts prove to be insufficient for
the Company's operating needs. There can be no assurance that the
Company will be successful in securing any additional financing.
Factors which could affect the Company's access to the capital
markets, or the costs of such capital, include changes in interest
rates, general economic conditions and the perception in the capital
markets of the Company's business, results of operations, leverage,
financial condition and business prospects. Each of these factors is
to a large extent subject to economic, financial, competitive and
other factors beyond the Company's control. Additional funding, from
public or private debt or equity financing or from strategic alliances
may not be available at all, may not be available when needed or may
not be available on terms acceptable to the Company. Additional
equity financings may result in dilution to existing stockholders.
The Company has no policy involving the incurrence or maintenance of
any particular level of indebtedness, and its organizational documents
do not limit the amount of indebtedness that it may incur. The
Company may seek to borrow needed funds, rather than further diluting
its existing stockholders, if it were to have an opportunity to do so
deemed reasonable by management. If the Company were to incur
additional indebtedness, it would be subject to the risks normally
associated with debt financing, including the risk that the Company's
cash flow would be insufficient to meet required payments of principal
and interest, and to the extent that it cannot, the risk of the
Company would lose all or some of its assets or be forced to seek
protection from creditors, including protection under bankruptcy laws.
In addition, the Company may become subject to additional or more
restrictive financial covenants. Failure to secure additional
financing, if and when needed, may have a material adverse effect on
the Company's business, financial condition, and results of
operations. The failure to obtain additional funds may cause the
Company to cease or curtail operations and result in a complete loss
of any value of the Company's securities.
The Company will be seeking a new round of financing within the
next 12 months. The Company has made no determination as to whether
that round of financing, or any other financings over the next 12
months, would likely be in the form of equity, debt, or convertible
debt. The Company currently has no agreements or understandings with
any person with respect to the sale or issuance of any additional
securities during that period.
NO INTENTION TO PAY DIVIDENDS.
The Company presently intends to retain its earnings to finance
its growth and expansion and for general corporate purposes. In the
future, the declaration and payment of dividends on the Common Stock,
if any, will depend upon the earnings and financial condition of the
Company, liquidity and capital requirements, the general economic and
regulatory climate, the Company's ability to service any equity or
debt obligations senior to the Common Stock
6<PAGE>
and other factors deemed relevant by the Company's Board of Directors.
Holders of the Company's Preferred Stock have the right to dividends
declared with respect to the Common Stock on an as-converted basis.
LACK OF EXPERIENCE IN DOMESTIC TARGET MARKET.
The Company will seek to market its products to the "SOHO" (small
office / home office) market and to institutions throughout the United
States. Although the Company's principals have had substantial
experience in other endeavors, there can be no assurance that the
Company will be successful in establishing this one.
DEPENDENCE ON ONE EQUIPMENT SUPPLIER.
The Company purchases all of its Internet telephony hardware,
software, firmware, including gateway servers, and network management
servers and client software from NetSpeak Corporation, which has
granted the Company volume discounts and also provides financing for,
and maintenance of, this equipment. NetSpeak provides twelve months
of maintenance and support services for the sum of eight percent (8%)
of the total purchase price of the NetSpeak products. For that Net
Speak provides all enhancements, upgrades and sufficient releases
for both hardware and software. NetSpeak offers extended maintenance
and support for an additional charge. Although the Company has not
experienced any significant problems with NetSpeak Corporation, there
can be no assurance that such relationship will continue or that, in
the event of a termination of the relationships with NetSpeak, the
Company would be able to obtain alternative sources of supply without
a material disruption in its ability to provide products and services
to its clients. Although replacement hardware and software may be
obtained from several alternative suppliers, the failure of the
Company to acquire compatible hardware and software from an
alternative source on a timely basis and of comparable quality and
price, could result in delays, operational problems or increased
expenses, which could have a material adverse effect on the Company's
business, results of operations and financial condition.
RISKS OF GROWTH AND EXPANSION.
Growth of the Company will require the Company to recruit and
hire new managerial, technical, sales and marketing personnel, as well
as people qualified in administration and finance. The Company's
inability to recruit and hire the necessary personnel or the emergence
of unexpected expansion difficulties could adversely affect the
Company's business plan.
COMPETITION.
The telecommunications business is highly competitive, and the
profitability of the Company depends principally upon the Company's
ability to compete in its target market areas. The Company expects
competition to persist, intensify and increase in the future. Many of
the Company's current and potential competitors have longer operating
histories, greater name recognition, larger customer bases and
significantly greater financial, technical and marketing resources
than the Company. Certain of these competitors may be existing or
potential strategic partners with others. There can be no assurance
that the Company will be able to compete effectively against its
competitors.
Prices for long distance calls have decreased substantially over
the last few years in most of the markets in which the Company does
business, and prices are expected to decline substantially over the
next several years in all of the markets where the Company does
business or expects to do business. In addition, many of the Company's
markets and expected future markets have deregulated or are in the
process of deregulating telephone services. Customers in many of these
markets are not familiar with the Company's technology, products and
services and may be reluctant to use new telecommunications providers,
such as the Company. In particular, the Company's target customers,
small and medium-sized businesses, may be reluctant to entrust their
telecommunications needs to new and unproven operators or may switch
to other service providers as a result of price competition.
Competition for customers in the target market is primarily on
the basis of price, the type and quality of services offered and
customer service. The Company attempts to price its services at a
discount to the prices charged by traditional long distance carriers
in each of its markets. The Company has no control over the prices set
by its competitors, and some of the Company's larger competitors may
be able to use their substantial financial resources to cause severe
price competition in the markets in which the Company intends to
operate. There can be no assurance
7<PAGE>
that severe price competition will not occur. Any significant price
competition could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, certain of the
Company's competitors will provide potential customers with a broader range
of services than the Company currently offers or can offer due to regulatory
restrictions.
CONCENTRATION OF OWNERSHIP.
After the offering, the directors and officers of the Company, in
the aggregate and including stock options will own beneficially
4,388,700 shares of Common Stock, or 22.1% of the outstanding shares
of the Company. Accordingly, these persons will have substantial
influence over the business, policies and affairs of the Company,
including the ability potentially to control or significantly
influence the election of directors and other matters requiring
stockholder approval by simple majority vote.
DILUTIVE AND OTHER POSSIBLE ADVERSE EFFECTS OF OUTSTANDING OPTIONS AND
OTHER RIGHTS TO ACQUIRE COMMON STOCK.
The Company has outstanding rights to acquire a substantial and
indeterminate number of shares of Common Stock in the form of
conversion rights under its Series A Preferred Stock and a floating 5%
warrant. Common Stock underlying those rights is being registered for
resale in the Registration Statement of which this Prospectus is a
part. A substantial number of additional rights in the form of
options have been granted to the Company's employees or affiliates,
under the Company's Stock Option Plan or otherwise, and are
exercisable at prices which are less than the market price for the
Common Stock at December 11, 1998. Under the terms of such rights,
the holders thereof are given an opportunity to profit from a rise in
the market price of the Common Stock with a resulting dilution in the
interests of other stockholders. The terms on which the Company may
obtain additional financing may be adversely affected by the
existence of such rights. For example, the holders of these rights
could exercise them at a time when the Company was attempting to
obtain additional capital through a new offering of securities on
terms more favorable than those provided by the rights. Additionally,
stockholders could suffer substantial dilution if the holders of
Series A Preferred Stock exercised their conversion right immediately
after a significant decrease in the market price of the Common Stock,
because the conversion rate is inversely proportional to the recent
average market price.
LIMITED TRADING MARKET.
The Company's securities trade over the counter with quotes on
the NASD OTC "bulletin board." Nonetheless, there can be no assurance
that an active public market will exist at any time or can be
sustained or that investors in the Common Stock will be able to resell
their shares. Making a market involves maintaining bid and asked
quotations for the Common Stock and being available as principal to
effect transactions in reasonable quantities at those quoted prices,
subject to various securities laws and other regulatory requirements.
A public trading market having the desired characteristics of depth,
liquidity and orderliness depends upon the presence in the marketplace
of willing buyers and sellers of the Common Stock at any given time,
which presence is dependent upon the individual decisions of investors
over which neither the Company, nor any market maker has any control.
Accordingly, an investor may be unable to sell his Common Stock when
he wishes to do so, if at all. In addition, the free transferability
of the Common Stock will depend on the securities laws of the various
states in which it is proposed that a sale of the Common Stock be
made.
POSSIBLE VOLATILITY OF STOCK PRICE.
The market price of the Company's Common Stock is likely to be
highly volatile and could be subject to wide fluctuations in response
to quarterly variations in operating results, losses of significant
customers, announcements of technological innovations or new products
by the Company or its competitors, changes in financial estimates by
securities analysts, or other events or factors, including the risk
factors described herein. In addition, the stock market has experienced
significant price and volume fluctuations that have particularly affected
the market prices of equity securities of many high technology companies
and that often have been unrelated to the operating performance of such
companies. In the past, following periods of volatility in the market
price of a company's securities, securities class action litigation
has often been instituted against such a company.
8<PAGE>
Such litigation, if instituted against the Company, could result in
substantial costs and a diversion of management's attention and resources,
which could have a material adverse effect on the Company's business,
operating results and financial condition.
PENNY STOCK REGULATION.
The Commission has adopted rules that regulate broker-dealer
practices in connection with transactions in "penny stocks." Penny
stocks generally are equity securities with a price of less than $5.00
(other than securities registered on certain national securities
exchanges or quoted on the NASDAQ system, provided that current price
and volume information with respect to transactions in such securities
is provided by the exchange or system). The penny stock rules require
a broker-dealer, prior to a transaction in a penny stock not otherwise
exempt from the rules, to deliver a standardized risk disclosure
document prepared by the Commission that provides information about
penny stocks and the nature and level of risks in the penny stock
market. The broker-dealer also must provide the customer with current
bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction and monthly
account statements showing the market value of each penny stock held
in the customer's account. The bid and compensation information, must
be given to the customer orally or in writing before or with the
customer's confirmation. In addition, the penny stock rules require
that prior to a transaction in a penny stock not otherwise exempt from
such rules the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and
receive the purchaser's written agreement to the transaction. These
disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that is subject
to the penny stock rules. Because the Company's Common Stock
initially is subject to the penny stock rules, purchasers of shares
under this prospectus may find it difficult to sell their Common
Stock.
DIRECTORS' LIABILITY LIMITED.
Under the Company's By-Laws, directors of the Company cannot be
held liable to the Company or its stockholders for monetary damages
for any act or omission unless it involves, among other things, (i)
the director's duty of loyalty to the Company or its stockholders,
(ii) acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) unlawful dividends or
stock purchases or redemptions by the Company, (iv) a transaction from
which the director derived an improper personal benefit, or (v) acts
or omissions for which liability of a director is expressly provided
by an applicable statute. This provision does not affect the
liability of any director under federal or state securities laws.
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS.
Significant annual and quarterly fluctuations in the Company's
results of operations may be caused by, among other factors, the
volume of revenues generated by the Company's strategic partners from
sales of products and services incorporating the Company's technology
or products, the mix of distribution channels used by the Company, the
timing of new product announcements and releases by the Company and
its competitors and general economic conditions. There can be no
assurance that the level of revenues and profits, if any, achieved by
the Company in any particular fiscal period will not be significantly
lower than in other, including comparable, fiscal periods. The
Company's expense levels are based, in part, on its expectations as to
future revenues. As a result, if future revenues are below
expectations, net income or loss may be disproportionately affected by
a reduction in revenues as any corresponding reduction in expenses may
not be proportionate to the reduction in revenues. As a result, the
Company believes that period-to-period comparisons of its results of
operations may not necessarily be meaningful and should not be relied
upon as indications of future performance. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations."
GOVERNMENTAL REGULATIONS.
One of the risks associated with the business of Internet
telephony involves the possible intervention of the government through
legislative action. Conventional telephone companies are challenging
the popularity of the Internet by pushing for legislative tariffs that
would impact the usage of the products and services such as those
9
<PAGE>
offered through the use of the Company's technology. At present,
there are few laws or regulations that specifically address access to
or commerce on the Internet. The increasing popularity and use of the
Internet, however, enhance the risk that the governments of the United
States and other countries in which the Company sells or expects to
sell its products and services will seek to regulate computer
telephony and the Internet with respect to, among other things, user
privacy, pricing, and the characteristics and quality of products and
services. The Company is unable to predict the impact, if any, that
future legislation, legal decisions or regulations concerning the
Internet may have on its business, financial condition or results of
operations. In the United States, the FCC has advised Congress that
it may, in the future, regulate IP telephony services as basic
telecommunications services. The regulation of the Company's
activities may have a material adverse effect on its financial
condition and results of operations.
In March 1996, the America's Carriers Telecommunication
Association (the "ACTA"), a group of telecommunications common
carriers, filed a petition (the "ACTA Petition") with the Federal
Communications Commission (the "FCC") arguing that providers (such as
the Company) of computer software products that enable voice
transmission over the Internet are operating as common carriers
without complying with various regulatory requirements and without
paying certain charges required by law. The ACTA petition argues that
the FCC has the authority to regulate both the Internet and the
providers of Internet "telephone" services and requests that the FCC
declare its authority over interstate and international
telecommunications services using the Internet, initiate rule-making
proceedings to consider rules governing the use of the Internet for
the provision of telecommunications services, and order providers of
Internet "telephone" software to immediately cease the sale of such
software. The FCC has thus far not granted relief sought under the
ACTA Petition, however, any action taken by the FCC to grant the
relief sought by ACTA or otherwise to regulate use of the Internet as
a medium of communication, including any action to permit local
exchange carriers to impose additional charges for connections used
for Internet access, likely would have a material adverse effect on
the Company's business, financial condition and results of operations.
QUALITY OF INTERNET SERVICE.
A significant risk involves the stability of the Internet itself.
Many networks through which Internet traffic moves are able to provide
more than five times the current level of traffic. However, many other
network providers do not have this capability, and as a result, the
Internet as a whole may suffer from poor service availability. If this
occurs, the viability of Internet telephony will be negatively
impacted.
DEPENDENCE UPON KEY PERSONNEL.
The continued success of the Company is substantially dependent
upon the efforts of the directors and executive officers of the
Company, in particular Glenn A. Smith, the Chief Executive Officer.
With the exception of an agreement with Howard Kaskel, the Company's
Chief Financial Officer, the Company has no employment agreements
with its officers or other key employees nor any understanding that
employment agreements will be entered into in the foreseeable future.
The Company currently has key man life insurance on Mr. Smith, but it
does not have such insurance on any other employee. The loss of the
services of any of its executive officers or other key employees could
have a material adverse effect on the Company's business, financial
condition and results of operations. The Company's future success also
depends on its continuing ability to attract and retain additional
highly qualified technical personnel. Competition for qualified
personnel is intense, and there can be no assurance that the Company
will be able to attract or retain qualified personnel in the future.
The inability to attract and retain the necessary technical and other
personnel could have a material adverse effect upon the Company's
business, operating results and financial condition.
SHARES ELIGIBLE FOR FUTURE SALE.
Sales of a substantial number of shares of Common Stock in the
public market following the Offering could adversely affect the market
price for the Common Stock. As of December 11, 1998, the Company had
a total of 19,768,950 shares of Common Stock outstanding (assuming the
conversion of all outstanding shares of Preferred Stock as described
in this Prospectus and the exercise of outstanding warrants to
purchase Common Stock). Shares in the amount of up to the 8,500,000
offered hereby will be freely tradable without restrictions under the
Securities Act. An additional 3,578,000 shares were sold under an
exemption from registration provided by Rule 504
10<PAGE>
promulgated under the Securities Act and are freely tradable. All of
the remaining shares are "restricted securities" as that term is defined
by Rule 144 promulgated under the Securities Act and will be eligible for
sale in compliance with Rule 144 after they have been held two years by
non-affiliates. There can be no assurance that an active trading
market for the Common Stock will develop or be sustained after the
Offering. Following the Offering, sales of substantial amounts of
Common Stock in the public market, pursuant to Rule 144, the
Registration, or otherwise, or even the potential of such sales, could
adversely affect the prevailing market price of the Common Stock and
impair the Company's ability to raise additional capital through sales
of equity securities. See "Shares Eligible for Future Sale."
As of the date of this Prospectus, options to purchase 1,518,000
shares of common stock and a warrant to purchase 587,950 shares of
Common Stock are issued and outstanding. Option exercise prices range
from $0.10 to $1.00, and all are currently exercisable. The warrant
exercise price is $0.01 per share.
INABILITY TO PREDICT TRAFFIC VOLUME.
The Company may enter into long-term agreements for leased
capacity in anticipation of traffic volumes which do not reach
expected levels and, therefore, may be obligated to pay for
transmission capacity without adequate corresponding revenues.
Conversely, the Company may underestimate its need for leased capacity
and, therefore, be required to obtain transmission capacity through
more expensive means. If the Company is unable to accurately project
its needs for leased capacity in the future, such inability may have a
material adverse effect on the Company's business and profitability.
DEPENDENCE ON OTHER CARRIERS.
The Company does not own any local exchange transmission
facilities or intra-national transmission facilities in the countries
in which it intends to provide services (and does not intend to
construct or acquire any of its own local exchange transmission
facilities). Consequently, the Company must continue to rely on
providers of intra-national and local exchange transmission
facilities. All of the telephone calls made by the Company's customers
are and will continue to be connected through transmission facilities
that the Company leases. To the extent that the Company leases local
exchange facilities in the U.S. and other countries, there is
currently some uncertainty involving the prices and nature of such
facilities.
The Company generally leases lines on a short-term basis. These
include leases on a per-minute basis (some with minimum volume
commitments) and, where the Company anticipates higher volumes of
traffic, leases of transmission capacity for point-to-point circuits
on a monthly or longer-term fixed cost basis. The negotiation of lease
agreements involves estimates regarding future supply and demand for
transmission capacity as well as estimates of the calling patterns and
traffic levels of the Company's existing and future customers. When
excess transmission capacity is present, as was the case for many
years in the United States, lease rates have declined and short term
leases have been advantageous. Recently, capacity has been somewhat
constrained in the United States and the decline in lease rates has
slowed. As a result, longer term leases may become more attractive.
Should the Company fail to meet its minimum volume commitments
pursuant to long-term leases, it will be obligated to pay 'under-
utilization' charges. See "Inability to Predict Traffic Volume." For
these reasons, the Company would suffer competitive disadvantages if
it entered into leases with inappropriate durations or leases based on
per-minute charges for high volume routes (or leases with fixed
monthly rates for low volume routes), or if it failed to meet its
minimum volume requirements. The Company is also vulnerable to service
interruptions and poor transmission quality from leased lines. The
deterioration or termination of the Company's relationships with one
or more of its carrier vendors could have a material adverse effect
upon the Company's business, financial condition and results of
operations.
DEPENDENCE ON EFFECTIVE INFORMATION SYSTEMS; YEAR 2000 TECHNOLOGY
RISKS.
Sophisticated information systems are vital to the Company's
growth and its ability to monitor costs, bill and receive payments
from customers, reduce credit exposure, effect least cost routing and
achieve operating efficiencies. A failure of any of the Company's
current systems, the failure of the Company to implement or
11<PAGE>
integrate new systems without difficulty, if at all, the failure of any
new systems or the failure to upgrade systems as necessary could have a
material adverse effect on the Company, its financial condition and
the results of operations.
The Company is in the process of reviewing its computer systems
and operations to identify and determine the extent to which any
systems will be vulnerable to potential errors and failures as a
result of the "Year 2000" problem. The Year 2000 problem is the result
of the use by computer programs of two digits, rather than four
digits, to define the applicable year. Any of the Company's programs
that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a major
system failure or miscalculations.
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS INCLUDED IN THIS
PROSPECTUS.
This Prospectus contains certain forward-looking statements
regarding the plans and objectives of management for future
operations, including plans and objectives relating to the development
of the Company's business. The forward-looking statements included
herein are based on current expectations that involve numerous risks
and uncertainties. The Company's plans and objectives are based on a
successful execution of the Company's business strategy and
assumptions that the Company will be profitable, that the market for
packetized voice transmission will not change materially or adversely,
and that there will be no unanticipated material adverse change in the
Company's operations or business. Assumptions relating to the
foregoing involve judgments with respect to, among other things,
future economic, competitive and market conditions and future business
decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company.
Although the Company believes that its assumptions underlying the
forward-looking statements are reasonable, any of the assumptions
could prove inaccurate and, therefore, there can be no assurance that
the forward-looking statements included in this Prospectus will prove
to be accurate. In light of the significant uncertainties inherent in
the forward-looking statements included herein, the inclusion of such
information should not be regarded as a representation by the Company
or any other person that the objectives and plans of the Company will
be achieved.
DIVIDEND POLICY
The Company has not declared or paid any cash dividend on its
Common Stock, and the Board of Directors intends to continue a policy
of retaining future earnings to finance the Company's growth and for
general corporate purposes, and, therefore, it does not anticipate
paying any cash dividends on Common Stock in the foreseeable future.
12
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt, long-term
debt and capitalization of the Company as of September 30, 1998, and
pro forma as adjusted to reflect (1) the issuance subsequent to
September 30, 1998 of 100 additional shares of the Company's Series A
Convertible Preferred Stock, (2) the conversion subsequent to
September 30, 1998 of the Company's Series A Convertible Preferred
Stock at a conversion rate based on a $0.2688 market price for the
Common Stock (averaged over a five-day period) into 7,336,413 shares
of Common Stock, (3) the exercise of a warrant to purchase 587,950
shares of Common Stock at an exercise price of $0.01 per share, and
(4) the issuance of 60,587 shares of Common Stock on November 20,
1998. This table should be read in conjunction with the Financial
Statements of the Company and the related Notes thereto contained
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
September 30, 1998
----------------------------------
Actual Pro Forma
As Adjusted
----------- -------------
<S> <C> <C>
Current portion of long-term debt and capital lease
obligations<F1> . . . . . . . . . . . . . . . . . . . $ 10,136 $ 10,136
---------- ----------
Long-term obligations, less current portion<F1> . . . . . 100,000 100,000
Stockholders' equity:
Preferred Stock, par value $0.001 per share,
10,000,000 shares authorized; 1000 shares issued
and outstanding, 1100 shares issued and outstanding as 1 ---
adjusted . . . . . . . . . . . . . . . . . . . . . . .
Common Stock, par value $0.001 per share,
40,000,000 shares authorized; 11,784,000 shares
issued and outstanding; 19,768,950 shares issued
and outstanding, as adjusted . . . . . . . . . . . . . 11,784 19,769
Additional paid-in capital . . . . . . . . . . . . . . . 1,900,938 1,999,933
Retained earnings (deficit) (1,830,753) (1,830,753)
---------- ----------
Total stockholders' equity (deficiency) . . . . . . . 81,970 188,949
---------- ----------
Total capitalization . . . . . . . . . . . . . . . . $ 192,106 $ 299,085
========== ==========
</TABLE>
_______________________
[FN]
<F1> See Note 3 of Notes to Interim Financial Statements for
additional information relating to the Company's debt.
</FN>
13<PAGE>
CERTAIN MARKET INFORMATION
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded over-the-counter and quoted
on the Bulletin Board under the symbol "ACCR" on a limited and
sometimes sporadic basis. Quoting began in December 1997. The
reported high and low bid prices for the Common Stock are shown below
for the period through September 30, 1998. The prices presented are bid
prices which represent prices between broker-dealers and do not include
retail mark-ups and mark-downs or any commission to the broker-dealer.
The prices do not necessarily reflect actual transactions. As of
December 11, 1998 there were approximately 230 stockholders of record of
the Common Stock.
<TABLE>
<CAPTION>
BID
--------------------
LOW HIGH
------ -------
<S> <C> <C>
1998
First Quarter . . . . . . . . . . . . $0.81 $1.38
Second Quarter . . . . . . . . . . . $1.38 $4.06
Third Quarter . . . . . . . . . . . . $0.53 $2.19
</TABLE>
BUSINESS
Access Power, Inc. was formed to offer Internet-based
communications products and services to the global marketplace. The
Company is one of the first companies to offer a means for voice and
multi-media communications over the Internet, a service which is
commonly referred to as Internet Protocol telephony or IP telephony.
The Company believes that from its early start in this field it is a
leader in the U.S. in the deployment of IP telephony gateways and in
the offering of associated enhanced communications services. Access
Power currently has deployed its IP telephony servers in ten major
metropolitan service areas in the U.S., and it plans continued
expansion in the U.S. and abroad in 1999 to the extent it is
financially able to do so. See "Management's Discussion and
Analysis." Additional international expansion will be pursued via
joint venture and other business arrangements throughout South
America, Europe, Africa and the Pacific Rim.
INDUSTRY BACKGROUND
Long distance telephone services have historically been offered
through public switched telephone networks (PSTN) mainly utilizing
lines established for that purpose. Although those systems are well
established in the US and many other parts of the world and the
service provided is usually of good quality, voice and message traffic
through those systems is subject to tariffs, and the technology
driving those systems does not have nearly the capability for the
innovative features potentially available through IP telephony. With
the advent of the Internet and its increasing popularity, however, the
stage is being set to permit the commercial development of an
alternative means of telecommunication using the connectivity of the
Internet to provide a new and cheaper pathway. With the development
of Internet Telephony software for the personal computer and the
gateway servers the industry now has a viable means to provide
workable products in this field.
The emergence of the World Wide Web and the commercialization of
the Internet defined the potential for and has led to ever increasing
developments in the convergence of technologies involving computers
and telephones. The convergence that formed computer telephony
integration (CTI) in the 1980's has led to a new sector in the
14
<PAGE>
communications industry, and is generally referred to as computer
telephony (CT) or Internet Telephony (IT). The global marketplace is
quickly becoming familiar with the Internet and its value as a
communications mechanism, to date mainly with text graphics. Service
providers are expanding the Internet and users are demanding enhanced
services including voice, audio and video transmissions.
In the early 1990's applications allowing standard commercial
transmission of voice and audio using Internet protocols became
available enabling multi-media PC users to converse over the Internet.
This decade many companies have invested millions of dollars to
continue developing the applications that have improved the service
quality and lowered the implementation costs. The result has been the
emergence of a new communications sector, the Internet Telephony
Services Provider (ITSP), of which the Company was an early entrant.
THE ACCESS POWER SOLUTION
The Company is developing its Internet-based telephony service,
Access Power Advanced Communications(TM) ("APAC"), to provide a domestic
and international communications network allowing customers to place
calls through the Internet using traditional terminal equipment.
Unlike traditional long-distance telephone systems which use switch
based systems, the Company uses the Internet as the backbone to
complete the long distance connection. This eliminates the fees
associated with long distance carriers. The service allows users to
place long distance calls from their PC to an enabled PC for free, or
from their PC to a regular telephone at a significantly reduced cost
when compared to traditional long distance services. APAC customers
can take advantage of the cost savings associated with the Internet-
based telephony service even without a PC by placing a regular
telephone to regular telephone call through the Company's network of
gateway servers.
In addition to the cost savings associated with Internet
telephony, the Company's customers have the ability to use services
that are not available using the traditional public switched telephone
network. Such services include interactive document and data sharing
and multi-media data transmissions including video capability.
Accordingly, regional and multinational corporations can utilize a
single network integrating voice and data transmissions and realize
low cost interoffice communication through IP telephony.
The Company is committed to establishing a worldwide network of
gateway servers to provide for its alternative long distance service.
The gateway servers deployed by the Company at strategic locations
will serve as a bridge for communications traffic to or from customers
in those geographic locations between the public switched telephone
network or a private branch exchange (PBX) and the Internet. The
gateway server converts voice transmission to data packets, using less
bandwidth and eliminating separate voice network costs.
Communications traffic from or to standard telephone equipment (such
as in phone-to-phone and PC to phone calling) involves local telephone
pathways and, for those destinations not currently served by a local
gateway server, traditional long distance lines (usually through a
wholesale arrangement) at each end with the Internet as the pathway in
between.
STRATEGY
The Company believes a significant commercial opportunity is
emerging from the application of Internet-based products and services
to the transmission of voice, video and facsimile through the use of
packetized Internet Protocol (IP) networks and corporate intranets.
The Company's objective is to be one of the world's leading providers
of international IP telephony products and services. The Company's
strategy to achieve that objective includes the expansion of its
international IP telephony gateway network through joint venture
partnerships and other business relationships in the targeted regions;
the leveraging of the network and its inherent low operating costs to
provide discount retail and wholesale international calling services;
the exploitation of new technology including e-button to penetrate
the international corporate market; and the continued development of
enhanced products and services that utilize the Company's
international IP telephony gateway server network.
15<PAGE>
Expansion of International IP Telephony Gateway Network
- -------------------------------------------------------
[INSERT TEXT ON PHILIPPINE AGREEMENT]
In August 1998, the Company entered into nonexclusive
distributorship agreements with an independent distributor in Denmark
and China to market and sell the Company's products and services in
those countries. The agreements extend for one year with automatic
one-year renewals. They may be terminated upon 30 days notice after
the first year. The products and services offered consist of the PC
Client Dialer Product, gateway access at a per minute amount and
additional programming services on an hourly basis.
In October 1998, the Company entered into a non-exclusive agreement
with a Florida corporation, LDT Net Com Inc. LDT Net Com was appointed
as an independent agent to distribute the Company's services internationally
for a period of five years with automatic one-year renewals. To date LDT
Net Com has focused on establishing relationships required to do business
in South American and the Pacific Rim.
In November 1998, the Company entered into an agreement with a Texas
corporation, Access Universal, Inc., to Provide that business with Internet
telephone services through December 31, 2001. The Company an Access
Universal anticipate that their business relationship will begin to become
active in 1999, at which time they intend to commence developing a business
to process Internet Protocol communications traffic between the U.S. and the
Pacific Rim.
Leverage the Low Operating Costs of the Company's Network
- ---------------------------------------------------------
IP telephony calls are treated as data communications and are not
subject to expensive access fees like standard long-distance calls.
This is especially significant when it comes to international calls,
where extra fees can be a significant addition to the cost of a call.
The Company's technology will enable it to offer international calling
at reduced costs to customers. The Company anticipates that joint
ventures and other business relationships it intends to create
overseas will focus on marketing and selling the Company's services in
the international market.
The Company feels that the future of telecommunications is in the
value of the enhanced services a provider offers and that long-
distance telephony as we know it today will become a low-priced
commodity. This is the very premise that the Company feels will
propel IP telephony into the mainstream of communications. IP
telephony by definition operates within computers, a medium which
allows for the development of sophisticated user applications that
will differentiate IP telephony from traditional telephony systems.
This cost structure of the Company's IP telephony network also
allows the Company to offer wholesale rates at prices below standard
telephony carriers. Targeted clients of Access Power wholesale
carrier services are international telephone companies wishing to
terminate calls in the United States and domestic and foreign prepaid
services companies. The domestic prepaid market is one of the fastest
growing markets of the telecommunications industry and is served by
over 400 providers. The Company believes that a majority of these
providers are small to mid-sized resellers without telephony
infrastructure, which, therefore, are likely to be incurring high
network costs. Access Power believes it is well positioned to offer
low cost carrier services to such providers.
EXPLOIT E-BUTTON AND CONTINUE DEVELOPING ENHANCED SERVICES THAT
UTILIZE THE COMPANY'S NETWORK
The Company is a re-seller of certain third-party software which
it markets to its customers under the product name "e-button." The
Company believes this product is the best of its kind available in the
marketplace today. Its size (300KB) is small and thus quick to
download and install and easy to use. See " Products and Services; e-
button."
PRODUCTS AND SERVICES
In 1997 the Company became one of the first Internet Telephony
Service Providers (ITSP) in the world. It determined that network
expansion would best be accomplished by the Company's own deployment
of server hardware and through international joint venture or other
business arrangements aimed at expanding the Company's network.
16<PAGE>
The Company placed the first Access Power Internet telephony
gateway server on the market in August 1997. A gateway connects data
networks such as the Internet and corporate intranets to the public
telephone networks. The server has the capacity for twenty four lines
and can handle over 300,000 minutes of talk time per month. The
Company currently has ten such gateway servers, or 240 lines of
capacity, deployed, and it anticipates increasing the number of lines
installed in the near future by it or future business partners in the
United States and other international markets.
The Company's voice-over-IP service (known as Access Power
Advanced Communications (TM) (APAC)) integrates traditional functions
with advanced Internet-based communications technology. APAC enables
users to connect over the Internet from a personal computer to a regular
telephone or from a regular telephone to another regular telephone
with a significant reduction in costs over that of traditional
telephony. Through this service, a user anywhere in the world can
place long distance telephone calls from its personal computer over
the Internet to telephones in any area where Access Power provides
gateway service. Currently, the Company has such service available
for calls to telephones in ten metropolitan cities in the states of
Arizona, Florida, Texas and Utah. Calls to other locations may be
made through the Company's services, but regular long-distance
services will be necessary to complete the call from the location of
one of the Company's gateway servers, and the cost to the user is
slightly higher. At this time, telephone to telephone calls may only
be originated at locations near to one of the Company's gateways
through a local call to the server.
Voice-over-IP service is a significant development in the highly
attractive and growing Internet industry. New applications are being
developed every day. The cost of computer processing is decreasing
and customer demand is increasing. IP systems are more economical,
have more features and may become more reliable than traditional
mechanisms. They will allow companies to act faster and close the gap
between themselves and their customers, employees and vendors.
To complement its service, the Company intends to offer its
customers two third-party software products: WebPhone and net.caller (TM).
Either software package will enable customers to complete long
distance communications using their personal computers (multi-media
configured, with a microphone and sound system). The Company is a
reseller of the multi-featured WebPhone software. Net.caller, a more
basic calling utility, when available, may be downloaded without
additional charge.
Phone-to-phone
--------------
The Company offers domestic long distance from its ten service
areas covering a population of over 10 million people to a regular
telephone anywhere in the United States. The Company plans to broaden
its services geographically in the United States as well as add
international calling destinations over time. Customers can register
for the service on the Company's Web site or call the Company office
and provide the required credit information. Customers pay a one-time
activation fee and are assigned a password. To use the service from
within one of the Company's service areas, the customer simply dials
the gateway from a telephone (a local call number), enters the
password, and then dials in the long distance number in the usual way.
Customers are not required to own computer equipment of any kind nor
do they need their own Internet access to use Access Power's phone-to-
phone service. The Company's phone-to-phone rates currently are 7
cents per minute to destinations anywhere in the United States.
Billing is performed at the end of each month by charging the
customer's credit card.
PC-to-phone
-----------
The Company's PC-to-phone service offers customers the ability to
call a regular telephone utilizing software installed on their multi-
media personal computer. To initiate the service, a customer
registers on the Company's Web site and downloads either net.caller or
WebPhone software.
WebPhone
--------
WebPhone functions just like a traditional telephone, but uses software
as the dialing mechanism. The software installation is simple and once
completed enables users to engage in long distance voice communications
17<PAGE>
between multi-media personal computers anywhere in the world for only the
cost of the software plus the user's standard Internet access fee. More
importantly, the software also enables users to place calls from their PCs
to any regular telephone (PC-to-phone).
Upon installation of WebPhone software, the PC user may simply dial
up his or her local Internet Service Provider (ISP), WebPhone is
displayed on the monitor, and the user may proceed to join PC-to-PC
community chat rooms, create private rooms, dial directly to another
PC, or call a regular telephone using the APAC network. For some
customers, WebPhone could pay for itself within the first month of
usage through the avoidance of traditional long distance charges.
There are currently no access or tariff charges other than the monthly
charge from an Internet Service Provider (ISP). WebPhone and the
power of the gateway allow customers to do many things that simply
cannot be accomplished using PSTN.
WebPhone has the following features:
* Allows customers to communicate with users of traditional
telephone equipment through the APAC network;
* Call waiting, muting, holding, blocking, identification, and
screening;
* Full-duplex capabilities that enable real-time, two-way
conversations with WebPhone users worldwide;
* Voice Mail;
* Conference calling. Up to four simultaneous WebPhone users
may join a PC-to-PC multipoint conference;
* Direct calling allows the option of bypassing chat rooms to speak
directly with an individual; and
* Automatic Voice Activation that optimizes voice transmission
quality automatically.
WebPhone also includes a video component that allows users to
communicate face-to-face.
WebPhone is sold in English, Spanish and Portuguese. The current
users of WebPhone (estimated to be 600,000) will be solicited real-
time to activate an Access Power account in order to begin calling PC-
to-phone to anywhere in the United States for only 9 cents per minute
from anywhere in the world.
net.caller(TM)
--------------
Net.caller is a software product that is being built as a
modified or simpler WebPhone by NetSpeak Corporation, the owner and
developer of both software programs. It is designed for the Company's
customers who only need the basic PC-to-phone use. The Company is
planning to provide this product free of charge to encourage customers
to activate and use the Company's gateway service.
e-button(TM)
------------
The application of e-button software may differentiate Access
Power from many communications companies. Having e-button on their
Web site offers tremendous electronic commerce benefits to any company
with a traditional call-center. This technology allows consumers
using their multi-media PC to view a company's Web site to click the
e-button icon which (once installed on the consumer's PC) instantly
dials a designated representative of that company, usually someone
providing sales or support services. Access Power believes e-button
is the most advanced product of its kind. Its size (300KB) is small
and thus able to be quickly installed and easy to use. It is
downloaded and installed upon the first attempt to use it.
CUSTOMER SERVICE
The Company believes customer service is one of the Company's
greatest strengths. The customer service organization's leadership
team consists of proven professionals who have managed customer care
for some of the most demanding companies in the world. The Company's
sophisticated database and account tracking allows true "one-to-one"
service fulfillment and customer communication.
18<PAGE>
The Company has contracted with NetSpeak to provide technical
support for the WebPhone. The Company's operations and customer
service includes a call center and e-mail response, as well as the
mailing of correspondence.
In its customer service operations the Company has employed a
service representative who operates from a remote location to assist
with customer service inquiries. The call handling customer support
systems are being developed to reside on the Company's Web site. All
that a trained representative needs to deliver customer support is a
PC Internet connection and password. Calls to a 1-800 number will be
sent to the appropriate customer service representatives. The
representative and the customer may jointly access the Company home
page for information on topics of interest. The Company believes it
can reduce its costs through the use of such off-site representations.
Access Power has simplified the traditional telephone billing
process. Customers are not charged normal business services or
monthly fees. They are billed only when they use the service to place
calls, and then only for the minutes they have accumulated throughout
the month. Itemized billing or usage statements are available to
customers via the Company's Web site, and written invoices are
available upon request.
CUSTOMERS
While in its technical development and deployment stage, the
Company has done minimal marketing. It has acquired approximately
2,000 customers mostly through the Company's Web site. The Company
intends to focus its marketing efforts in the future on wholesale
customers.
COMPETITION
The Company has nearly two years of experience building and fine-
tuning one of the largest IP telephony networks in the United States.
Because of the experience it has gained to date, the Company believes
it has the ability to deploy its technology at a faster rate and with
less missteps than new entrants. The Company has basic billing
capabilities in place and has already begun to develop more
sophisticated billing capabilities to accommodate the more complex
commercial transactions in which it intends to engage. It also
already has in place, network management tools and a secure Web site
capable of taking new account orders in real-time.
The Company believes its competitive strength will lie in being
first to market with IP telephony services. It also believes it is
likely to move faster than a giant telephone company. The opportunity
to fully develop the market and establish momentum to capture market
share means, however, that the Company has to aggressively build its
customer base now. The Company's network must be expanded in order to
handle higher volumes of traffic. Dependency on traditional long
distance telephone lines to complete calls must be reduced to protect
margins. Customer acquisition programs need to be further developed
to grow the customer base.
Competition for the Company may be direct, such as other
companies that offer IP telephony services, or indirect, such as
companies that offer traditional or other alternative long distance
telephony services.
DIRECT COMPETITION
Most companies currently offering IP telephony to their customers
are either small start-up companies, or Internet Service Providers (ISP)
looking for enhanced services primarily designed to help customer retention
in support of their core business.
The Company believes that today the most developed Internet Telephony
Service Providers are IDT Corporation's Net2Phone (www.net2phone.com) and RSL
Communications, Ltd.'s Delta Three (www.deltathree.com). Both IDT and RSL
are current long distance companies who have committed to IP telephony as an
important element of their future business. IDT is also a domestic ISP.
Neither company has the U.S. presence of Access Power, appearing to focus
rather on the near-term international long distance profit opportunity. The
Company believes that both companies are generating the bulk of their IP
revenues from the PC-to-phone market
19<PAGE>
with minimal networks built to support the same. Both companies seem to rely
heavily on their traditional PSTN long distance business to make the limited
PC-to-phone market viable.
The rest of the direct competition appears not nearly as
developed, but ITXC Corp. (www.itxc.com) is a competitor worthy of
mention.
The ITXC business model is to become a clearinghouse for ITSPs
all over the world that wish to become a global provider without
having to build out their own worldwide network. This means that ITXC
accepts calls originating from one ITSP, performs the routing, and
terminates the call on another participating ITSP network. ITXC's
business model has up to three different companies splitting consumer
revenue: the originating ITSP, the terminating ITSP and ITXC itself.
Access Power deems it more important to develop its own global
network, rather than join the ITXC program, so it can protect its
margins and maintain the assets of the network.
INDIRECT COMPETITION
All companies delivering long distance telephony through
traditional or other means are indirect competitors of Access Power,
at least for phone-to-phone and PC-to-phone services. Traditional
long distance telephone companies have the embedded customer base that
Access Power does not yet have, and they have the global network or
other arrangements for global access, and currently are in a better
position than Access Power for offering and delivering phone-to-phone
service. They may have difficulty competing on price with traditional
systems where Access Power service is available, however, and they
cannot in their traditional long distance service offer the full array
of enhanced services that Access Power can offer. Over time, they may
be unable to compete from a price standpoint, because IP telephony is
a cheaper technology and can support commodity pricing. More and more
indirect competitors will become direct competitors once they have
deployed IP telephony. This is the trend, and it is projected to
continue as long distance prices are forced down and IP telephony
becomes more fully developed.
The list of potential indirect competitors is immense, with
thousands of long distance companies, including resellers and calling
card distributors.
FUTURE COMPETITION
The most substantial competitors of Access Power are those
looming on the horizon. AT&T, the world's largest long distance
company has recently announced IP telephony trials in three U.S.
markets: Atlanta, San Francisco and Boston. They offer the service
at 8.5 cents per minutes to anywhere in the U.S. from any one of the
trial cities. If this trial is successful, AT&T will likely build out
their IP network and expand.
WorldCom, Inc. is a global business telecommunications company
and a potentially large provider of IP telephony. Operating in more
than 50 countries, the company is a provider of facilities-based and
fully integrated local, long distance, international and Internet
services. WorldCom would appear to have the total solution available
at its fingertips with ownership of MCI Telecommunications, Inc. and
UUNET Technologies. They have the network and they have the
customers.
All of the U.S. RBOCs (Regional Bell Operating Companies) have
either announced IP telephony testing or the Company expects they will
do so soon. IP telephony is a way to become a long distance carrier
without having to face FCC regulations. RBOCs also have the embedded
customer base, albeit regional in many cases, and generally have the
network to support IP telephony.
Qwest Communications International, Inc. (www.quest.com) is a
global communications company building a high-capacity, fiber optic,
Internet Protocol-based network designed to deliver the new generation
of multi-media, data and voice communications services and
applications. Slated for completion in the second quarter of 1999,
the Qwest domestic network will span 18,449 miles in 130 cities.
Internationally, Qwest is extending its network 1,400 miles into
Mexico, and has secured a significant amount of transatlantic capacity
enabling data and voice transmission between North America and Europe.
20<PAGE>
Qwest is a looming competitor. Currently offering high-speed
Internet access to 15 U.S. cities, and a stated future direction to
provide video conferencing, whiteboarding, multicasting, as well as
dedicated and virtual network applications, this company is in position
to be a dominant force in IP telephony and enhanced IP services.
SALES AND MARKETING
Access Power's market includes residential and business users of
advanced communications products and services. The services include
phone-to-phone communications, personal computer (PC) to phone
communications and PC-to-PC calling. For phone-to-phone and PC-to-
phone service, customers pay an activation fee and a per minute
charge. Access Power's current pricing for service is very
competitive and the Company is poised to balance new product
introductions with consumer demands and expectations. After a small
start up cost, the Company's long distance customers currently pay 9
cents per minute for PC-to-phone calling and 7 cents per minute
for phone-to-phone calling. For PC-to-PC calling, customers initially
purchase software from the Company but experience no additional costs
associated with long distance communications.
The Company's marketing strategy involves promoting advanced
Internet-based telecommunications products and services to both
businesses and consumers using market-specific sales methods developed
by the Company. The primary target market for these products and
services are the millions of consumers and business owners, from small
businesses to corporations, using the Internet.
Marketing will be accomplished through print advertising and
standard publicity methods as well as through Internet web sites.
Direct selling may be performed by direct mail campaigns, including e-
mail distributions. The Company may work with high technology
marketing firms to acquire customers through direct selling to
corporations, through trade show participation and through special
promotions.
The extent to which the Company is able to offer low
communication transmission rates affords the Company the opportunity
to enter the wholesale arena as well as the retail market. The
Company can offer telecommunications resellers bulk traffic rates at
highly competitive prices. By building partnerships and affiliations
with international resident partners, the Company will be able to
control its own network while benefiting from the regional awareness
and marketing of its partners.
ACCESS POWER MARKETING STRATEGY
The Company targets each of its products to a specific market.
The e-button will be sold to the business market that has a Web
site and call center. According to Internet research of which the
Company is aware, as of June 30, 1998 there were over 346,000
businesses worldwide who have a Web site. Many of these businesses
also have a call center for customer service, sales, or technical
support. The Company aims to capture a significant portion of this
business market for sales of the e-button product.
The target market for the Company's PC-to-phone and phone-to-
phone service is the small office and home office market. According
to the Bureau of Labor Statistics (BLS), there were more than 21 million
persons who did some work at home as part of their primary job as of May
1997. Nearly 9 out of 10 of these workers are in "white-collar"
occupations and 60% used a computer for the work they did at home. The
Company believes these are the early adopters of the Company's technology,
and they will be the primary target of marketing campaigns. An ancillary
market for Access Power phone-to-phone service is the large, long-distance
telephony consumer market.
ELECTRONIC COMMERCE (E-COMMERCE) AND INTERNET TELEPHONY
One of the key indicators for the Company's growth may be the
development of the Internet and Internet commerce. The Company believes
that by most measurements the Internet has grown at a rapid pace over the
last several years, and the Company believes commercial transactions on
the Web have steadily increased as well over that time period.
21<PAGE>
E-button will create new options for the way Internet users
conduct commerce, i.e., by providing less costly, more sophisticated
communications support. The Company has established a Web site for
its own e-commerce. Customers simply provide credit card information
to order products and services.
Using the World Wide Web maximizes the Company's ability to sell
its products and services 24 hours a day, 365 days a year, while
minimizing the need for direct sales contact. Currently, the
Company's customers come to the Company's Web site through Internet
search engines and Internet hyperlinks. Transactions transpire and
payment is procured online, which in the end reduces the ultimate cost
of the sale. With the Web site as a storefront, overall sales
expenses of the Company are decreased.
END USER MARKET
The personal computer user is generally higher than average in
income and education, younger, white collar, and considered
"independent" and a "trendsetter." The most sought-after segment in
this group is the "digital citizen," that is, those "super connected"
with a PC, Internet access, and at least one other personal
telecommunications device (e.g., pager, cellular telephone, laptop,
etc.). The Company believes based on its research that this is a group
committed to communicating on the Internet, Of the 40 million people that
have ready access to the Internet, according to International
Telecommunications Union's WORLD TELECOMMUNICATIONS DEVELOPMENT REPORT 1997,
the Company believes over 15 million are these digital citizens.
The Small Office/Home Office Market
- -----------------------------------
The Company believes the Small Office/Home Office (SOHO) market segment
accounts for a significant portion of new company formations. The Company also
believes that the evolution of "work life" will continue to grow the SOHO market
as corporations attempt to reduce operating costs and improve productivity with
telecommuting and "virtual offices." The Company feels self-employment will
continue to grow as a result of downsizing and outsourcing and as
individuals become less dependent on traditional career paths. The
changing workplace demands rapid telecommunications advancement with
the SOHO segment believed to be currently using the Internet in large
numbers.
INTERNATIONAL MARKETS
International opportunities are especially attractive for Access
Power. International growth of the Internet is believed to have
surpassed that of the United States, and by the year 2001, it is
projected that the international market will comprise a majority of
Internet telephony usage. Internet telephony's cost savings through
the avoidance of "settlement fees" will fuel this rapid expansion.
(Settlement fees are tariffs that foreign telephone companies charge
for access to their domestic networks.) The Company believes that the
biggest near-term revenue opportunities exist in the international
markets. A June 22, 1998 report, issued by Datamonitor, a global
strategic market analysis company, indicates that the international
voice market in particular presents a huge opportunity for Internet
telephony service providers. Profit margins are high for these
services. The report also indicates that IP telephony will account for
over 10 percent of international telephony traffic in Europe and the
U.S. by the year 2002.
FACILITIES
The Company headquarters, executive offices and customer service
center are located in facilities consisting of approximately 1,800
square feet in a 13,500 square foot office building in Ponte Vedra
Beach Florida. The three-year lease on the space started September
1997 and includes two successive extension options and first right of
refusal on 2,000 square feet of vacant contiguous space. The Company
will pay approximately $3000 per month rent under this lease during 1999.
The Company believes the office space is adequate for its current needs and
could easily be replaced with other suitable accommodations.
The Company maintains its server hardware through co-location
arrangements with local exchange carriers at locations where the Company desires
to maintain a gateway. These facilities must be climate controlled and offer
22
<PAGE>
the necessary telephone and electrical power services, but the Company
believes such facilities are generally available from more than one source.
EMPLOYEES
As of December 11, 1998 the Company retained eleven full time
employees.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS
OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND NOTES THERETO AND THE OTHER FINANCIAL INFORMATION
INCLUDED ELSEWHERE IN THIS PROSPECTUS.
PLAN OF OPERATION
Overview
- --------
Access Power, Inc. was formed in 1996 to offer Internet-based
communications products and services in the U.S. and international
markets. The Company is creating a network of Internet gateway
servers to provide voice and multimedia communications services, more
commonly referred to as Internet Protocol telephony or IP telephony.
Access Power has deployed its servers in ten major metropolitan
service areas in the U.S., and it has plans for continued expansion
throughout 1999.
From its inception the Company has devoted most of its efforts to
technical analysis, development, procurement, implementation and
testing, and the establishment of the corporate and technical policies
and procedures necessary to support its business requirements. The
Company is a development stage operation.
Access Power's IP telephony gateway network allows the Company to
offer competitive call rates while providing premium communications
features. Access Power products and services are based on Personal
Computer ("PC")-to-PC, PC-to-Phone, and Phone-to-Phone communications.
Customers anywhere in the world can use their PC and software from the
Company to place a call to a telephone anywhere in the United States
for 9 cents per minute. In addition, customers in one of the Company's
service areas can make a call with their telephone through the Company's
service to another telephone anywhere in the United States for 7 cents
a minute without the need for personal Internet access. The Company
charges $20 for account activation. Similar, low-cost pricing models
are being developed for the international markets.
The Company is a reseller of third-party PC telephone software
called WebPhone, and it is having a software product called "e-button"
developed for marketing to companies with Web sites. The e-button is
an icon residing on a Web site that connects a consumer browsing a Web
page to a company's call center. This technology allows corporate
customers to voice-activate their Web site, connecting consumers
directly with sales departments, customer service or technical
support.
While in its start-up and current development stages the Company
tested and preliminarily introduced certain products and services new
to both the Company and the communications industry. To date, the
Company has not realized revenues from sales of any products or
services in amounts necessary to support all of its cash operating
needs. Without additional outside funding, the Company will be unable
to carry out any of its expansion or marketing plans, and it may be
unable to continue operations.
23
<PAGE>
Expansion Plans
- ---------------
The Company believes it must expand its gateway network and its
customer base to achieve profitability. During the next twelve
months, the Company intends to add ten more gateway servers in the
U.S. market, expanding its presence to twenty cities. The Company
purchased sufficient equipment in June 1998 to bring those sites on
line and pursue international expansion. The Company still owes in
excess of $1,000,000 for this equipment. The new U.S. sites will
increase the Company's U.S. capacity by 288 lines to 428 lines. It is
anticipated that the additional capacity will permit significant
growth in the volume of traffic handled by the Company's network, and
a commensurate increase in revenues.
The Company intends to expand its network internationally through
joint ventures and other business relationships. Such expansion will
increase the Company's revenues without causing the Company to incur
significant capital expenditures. By selling the hardware and
software necessary for creating networks in other countries or regions
to its business partners, and through royalty or other fees from
international traffic realized through the international business
expansion, the Company expects to derive significant additional
revenues over the next year from international operations.
Software Sales
- --------------
To date, the Company has realized only small revenues from the
resale of software to its customers, and it does not expect such sales
to become a significant source of profit in the future. During the
next year, however, the Company does intend to begin marketing the
e-button software, and it expects to realize a fair amount of revenues
from those sales.
Marketing
- ---------
The Company has not yet engaged in any significant effort to
market its products and services. Over the next twelve months, the
Company intends to implement a comprehensive public relations and
marketing campaign along with establishing arrangements with
communications brokers or agents. Public relations and certain
marketing is expected to cost $50,000. Additional marketing may be
provided by a firm specializing in communications customer acquisition
and payment made on a per acquisition basis determined by the size of
the customer. International communications agents or brokers are
delivering wholesale traffic to the Company and will be compensated on
a commission basis. Without the benefit of significant marketing to
date, the Company already has attracted over 2000 customers to its
service just from the Company's Web site order process, test market
newspaper ads and word of mouth.
Raising Capital
- ---------------
The Company does not currently have the funds to remain in
operation or the capital to fund its current expansion and marketing
plans for the next twelve months. The Company anticipates that by the
end of that period it will be able to fund its operations from the
recurring revenue generated from network usage. To the extent such
recurring revenues fall short of the projected needs, the Company
would have to seek additional sources of outside funding.
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1998 Compared to Prior Periods
--------------------------------------------------------------
Because the Company was organizing and not operating during the
first nine months ended September 30, 1997, the Company believes a
comparison to the results from that period are of no informative
value.
Revenues and Cost of Revenues. The Company realized no revenues
- ------------------------------
from its inception through the end of fiscal year 1997. Through the
nine months ended September 30, 1998, revenues increased by $254,181
due to the initial fees received related to the Company's Canadian
venture ($24,000), the sale of equipment to that venture
24
<PAGE>
($188,092), and other sales and services ($42,089). The Canadian venture
has since been terminated by mutual agreement of the parties. The cost
of revenues increased for the nine months to $152,920 (or 60% of total
revenues), which represented the cost of equipment sold.
Operating Expenses. Product development and marketing expenses were
- -------------------
$710,533 for the nine months ended September 30, 1998, an increase of
more than 2000% over such expenses for the twelve months ended
December 31, 1997. This was due primarily to the development of the
Company's gateways in ten major metropolitan areas in the U.S. There
were also marketing efforts to develop a franchise effort in the U.S.
and internationally. General and administrative expenses increased
200% for the nine months ended September 30, 1998 to $786,415 as
compared to $391,520 in the twelve months ended December 31, 1997 as
the administrative structure was developed to serve customers being
solicited. Payroll expense was the major portion of this increase as
it totaled $338,483, an increase of $164,483, or 95%, from the twelve
months ended December 31, 1997 total of $174,000. Professional fees
increased $49,028 from $59,023 for the twelve months ended December 31
1996 to $108,051 for the nine months ended September 30, 1998 primarily
due to increased corporate legal fees relating to equity financing.
Rent expenses increased $19,941 from $15,183 for the twelve months ended
December 31, 1997 to $35,064 in the nine months ended September 30, 1998
due primarily to the start of the office lease rental commencing in the
last half of 1997. Insurance expense increased $15,926 from $6,444 for
the twelve months ended December 31, 1997 to $22,370 in the nine months
ended September 30, 1998 due to increased health insurance for the
increased headcount and property insurance coverage on the computer
hardware employed.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations
through the proceeds from the issuance of equity securities and loans
from stockholders. To date, the Company has raised approximately
$1,800,000 from the sale of common stock and preferred stock, and it
has borrowed approximately $310,000 from investors and stockholders.
Funds from these sources have been used as working capital to fund the
build-out of the Company's network and for internal operations,
including the purchases of capital equipment.
The Company generated negative cash flow from operating
activities for the period from inception (October 10, 1996) through
December 31, 1997. The Company realized lesser negative cash from
operating activities for the nine months ended September 30, 1998 due
to the sale of the franchise and equipment to APC.
Investing activities for the period from inception through
December 31, 1997 consisted primarily of equipment purchases to build
out the initial network. Investing activities in the first nine
months of 1998 increased by 260% over the entire period ended December
31, 1997 due to the replacement of the network infrastructure with new
technology. The Company currently has no commitment for capital
expenditures, but a significant amount would be expended if the
Company were to pursue its expansion plans.
The Company expects to invest approximately $2,000,000 over the
next twelve months in capital equipment for network expansion, if it
can raise at least that amount through the sale of equity or debt
securities. The Company has no commitments for such financing and
there can be no assurance that it will be able to raise that amount or
any part of it during that time period.
The Company's financing activities for the nine month period
ended September 30, 1998 provided $1,093,866. Cash at the end of that
period was $28,904. As of December 7, 1998 the Company had cash of
$29,420 and working capital of ($1,134,194). The Company is currently
expending approximately $150,000 per month, which amount includes
monthly co-location costs or network infrastructure, systems
maintenance and development, payments for equipment, general and
administrative costs. The Company believes that its cash used in
operating activities will increase over the next year. The Company
needs to raise additional funds through public or private financing.
The Company has no commitments for any additional financing, and there
can be no assurance that additional financing will be available as
needed or, if available, will be on terms acceptable to the Company.
Any additional equity financing may be dilutive to the Company's
existing stockholders, and debt financing, if available, may involve
pledging some or all of the Company's assets and may contain
restrictive covenants with respect to raising future capital and other
financial and operational matters.
25<PAGE>
The timing and amount of the Company's capital requirements will
depend on a number of factors, including demand for the Company's
products and services and the availability of opportunities for
international expansion through joint ventures or other business
relationships.
The Company is bearing the cost of this offering (other than any
commissions payable by the Selling Stockholders) in an amount
estimated to be $40,000. The Company will pay the costs out of its
available funds.
YEAR 2000
Since its inception and as a development stage company the
Company has implemented solutions to the year 2000 problem as it has
built its systems solutions and developed its policies and procedures
for both technical and administrative purposes.
The Company believes it is in a high state of readiness regarding
year 2000 and is at minimal risk. Costs associated with year 2000
solutions are incorporated in all the Company's computer
administrative information systems and technical development.
As standard operating procedure the Company inquires as to the
readiness of any customers and suppliers in handling potential year
2000 problems.
The Company does not foresee substantial direct or indirect costs
associated with its implementation or any affiliates implementation of
year 2000 solutions.
There are no assurances that the Company and all of its key
suppliers, customers or third parties upon which it relies will
completely address and solve the potential problem and by not doing so
could result in an adverse material effect on the company, its
financial condition or results on operations.
MANAGEMENT
Executive Officers and Directors
The executive officers and directors of the Company and their ages as
of September 25, 1998 are as follows:
Name Age Position
---- --- --------
Glenn A. Smith 42 President, Chief Executive Officer
and Director
Tod R. Smith 37 Chief Technology Officer, General
Counsel and Director
Maurice J. Matovich 39 Chief Operations Officer and
Director
Howard Kaskel 52 Chief Financial Officer
GLENN A. SMITH has served as the President, Chief Executive Officer
and a director of Access Power, Inc. since the Company's formation in
1996. He has over twenty years experience in developing interactive
systems and Internet-based businesses and services. From 1992 to 1996
Mr. Smith was self-employed as a developer of advanced computer
telephony systems and services.
26
<PAGE>
TOD R. SMITH has served as Chief Technology Officer, General Counsel
since 1998 and a director of the Company since 1997. Mr. Smith worked
at AT&T as a Technical Staff member specializing in computer
consulting and the development of software from 1988 to 1998.
MAURICE MATOVICH has served as Chief Operating Officer since 1998 and
a director for Access Power since 1997. Mr. Matovich served as a
manager at AT&T where he specialized in high-tech operations
management, client relations and stockholder relations from 1984-1997.
HOWARD KASKEL has served as the Chief Financial Officer for Access
Power since 1998. Mr. Kaskel also is currently a limited partner with
Tatum CFO Partners, LLP, a partnership of career chief financial
officers. Mr. Kaskel has been devoting his full time to the Company.
Mr. Kaskel served as the Chief Financial Officer of DeFalco
Advertising from 1996 to 1997 and as the Chief Financial Officer of
Pinnacle Site Development Inc. in 1998. He was a partner at Kaskel,
Solwiel & Associates, a financial consulting firm, from 1993 to 1996,
where he advised companies regarding acquisitions, divestitures and
business planning.
Executive Compensation
The following table sets forth certain information regarding the
annual compensation for services in all capacities to the Company for
the year ended December 31, 1997 with respect to the Chief Executive
Officers:
Long-Term
Compensation
Awards
Securities
Name and Annual Compensation Underlying
Principal Position Salary Options(#)
------------------ ------------------- -----------
Glenn A. Smith, Chief
Executive Officer $96,000 100,000
STOCK OPTIONS
The following table summarizes certain information regarding
options to purchase Common Stock granted to the Chief Executive
Officer during the year ended December 31, 1997. The Company did not
grant any stock appreciation rights in 1997.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
Number Of Percent Of
Securities Total Options/
Underlying SARs Granted Exercise Or
Options/SARs To Employees Base Price
Name Granted (#) In Fiscal Year ($/Sh) Expiration Date
---- -------------- -------------- ----------- ---------------
<S> <C> <C> <C> <C>
Glenn A. Smith 100,000 13% $0.11 6/16/02
</TABLE>
The following table summarizes the number and value of
unexercised options held by the Chief Executive Officer as of December 31,
1997. The Chief Executive Officer did not exercise any options in
the year December 31, 1997.
27
<PAGE>
FISCAL YEAR-END
OPTION VALUES
<TABLE>
<CAPTION>
Number Of Securities
Underlying Unexercised Value of Unexercised
Options/SARs At In-The-Money Options/
FY-End (#) SARs At FY-End ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------------------- -------------------------
<S> <C> <C>
Glenn A. Smith 100,000 /0 $118,000/0 <F1>
- --------------------------
<FN>
<F1> This value has been calculated based on the average of the last bid
and asked price of the Common Stock as quoted on the Bulletin Board on
December 31, 1997.
</FN>
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Howard
Kaskel. The agreement provides that Mr. Kaskel will serve as Chief
Financial Officer of the Company on a part-time basis (three days per
week) for a base salary of $6,000 per month. Additional days are paid
at the rate of $500 per day. The agreement is terminable by the
Company upon thirty (30) days written notice with all payments
required pursuant to the agreement to be paid on or before the
termination date. The Company does not have employment agreements
with any other of its executive officers.
DIRECTORS COMPENSATION
The directors have not received compensation for their duties as
such, and the Company has no current plans to compensate directors for
serving on the Board in the future.
STOCK INCENTIVE PLAN
In June, 1997, the Company adopted its Stock Incentive Plan (the
"Plan") to provide selected employees and affiliates providing
services to the Company or its affiliates an opportunity to purchase
Common Stock of the Company. The Plan promotes the success and
enhances the value of the Company by linking the personal interests of
participants to those of the Company's stockholders, and by providing
participants with an incentive for outstanding performance. Awards
under the Plan may be structured as "incentive stock options" (ISOs)
as defined in Section 422 of the Internal Revenue Code of 1986, as
amended ("IRC"), for employees or as non-qualified stock options for
any participant.
The Plan, as amended, provides that the aggregate number of
shares of Common Stock with respect to which options may be granted
pursuant to the Plan shall not exceed 2,500,000 shares.
ISOs are subject to certain limitations prescribed by the IRC,
including the requirement that such options be granted with an
exercise price no less than the fair market value of the Common Stock
at the date of grant and that the value of stock with respect to which
ISOs are exercisable by a participant for the first time in any year
under the terms of the Plan (and any other incentive stock option
plans of the Company and its subsidiaries) may not exceed $100,000,
based on the fair market value of the stock at the date of grant. In
addition, ISOs may not be granted to employees who own more than 10%
of the combined voting power of all classes of voting stock of the
Company, unless the option price is at least 110% of the fair market
value of the Common Stock subject to the option and unless the option
is exercisable for no more than five years from the grant date.
28<PAGE>
The compensation committee of the Board of Directors of the
Company has discretion to set the terms and conditions of options,
including the term, exercise price and vesting conditions, if any, to
determine whether the option is an ISO or a non-qualified stock
option, to select the persons who receive such grants and to interpret
and administer the Plan.
As of the date of this Prospectus, options to purchase an
aggregate of 1,518,000 shares of Common Stock have been granted under
the Plan and were outstanding, including options for 200,000 shares of
Common Stock issued to Glenn A. Smith. Mr. Smith's options have an
exercise price of $0.11 per share for 100,000 shares and $1.00 per
share for 100,000 shares.
PRINCIPAL AND SELLING STOCKHOLDERS
The table below sets forth certain information regarding the
beneficial ownership of the Common Stock, as of December 11, 1998 by
(i) each person known to the Company to be the beneficial owner of
more than 5% of the outstanding shares of Common Stock, (ii) each
director of the Company and the Chief Executive Officer, (iii) all
directors and executive officers of the Company as a group, and (iv)
the Selling Stockholders. Unless otherwise indicated, each of the
stockholders listed below has sole voting and investment power with
respect to the shares beneficially owned.
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Prior to the Owned
Offering After the Offering
-------------------- ---------------------
Number
of Shares
Beneficial Owner Number Percent to be Sold Number Percent
- ---------------------------------------- --------- ------- ---------- --------- -------
<S> <C> <C> <C> <C> <C>
Glenn A. Smith<F1> 2,982,200 15.4 50,000 2,932,200 15.1%
Mike Pitts<F2><F3> 2,892,800 14.9 150,000 2,742,800 14.2
Tod R. Smith<F4> 840,000 4.3 -- 840,000 4.3
Maurice Matovich<F4> 579,000 3.0 -- 579,000 3.0
Edwards Capital Corporation<F5> 338,204 1.8 338,204 -- --
Jimmy Dean Dowda<F5> 169,102 * 169,102 -- --
Olympus Capital, Inc.<F6><F7> 2,442,424 12.7 2,442,424 -- --
Hyman & Ethel Schwartz<F7> 1,413,401 7.4 1,413,401 -- --
Frederick Lenz<F5> 169,102 * 169,102 -- --
Arnold Zousmer<F5> 2,029,221 10.6 2,029,221 -- --
John T. Mitchell<F5> 169,102 * 169,102 -- --
Bruce R. Knox<F5> 169,102 * 169,102 -- --
Subramanian Sundaresan 50,000 * 50,000 -- --
Inman Company<F8><F9> 612,950 3.1 612,950 -- --
Chesterfield Capital Resources Ltd.<F5> 572,344 2.9 572,344
All directors and executive officers as a
group (4 persons)<F10> 4,438,700 22.4 50,000 4,388,700 22.1
</TABLE>
____________________
*Less than 1%.
[FN]
<F1> Includes 30,400 shares of Common Stock held for a minor child and
215,000 shares subject to presently exercisable options.
<F2> Mr. Pitts is the former Chief Financial Officer of the Company.
He no longer has any day-to-day involvement with the Company.
29<PAGE>
<F3> Includes 20,000 shares of Common Stock held in a custodial
account for a minor child and 200,000 shares subject to presently
exercisable options.
<F4> Includes 200,000 shares subject to presently exercisable options.
<F5> Shares of Common Stock issuable upon conversion of all shares of
Preferred Stock held by such stockholder based upon a five-day
average share price of $0.2688. The number of shares to be sold
is subject to adjustment to reflect the effect of the market
price of the Common Stock at the time of conversion on the
conversion rate under a formula. See "Description of Capital
Stock Preferred Stock."
<F6> Olympus Capital, Inc. is an investment banking firm that has
assisted the Company in the past in its raising of capital. None
of the Company's officers, directors or affiliates is affiliated
with Olympus Capital, Inc.
<F7> Includes shares of Common Stock issuable upon conversion of all
shares of Preferred Stock held by such stockholder based upon a
five-day average share price of $0.34. The number of shares to
be sold is subject to adjustment to reflect the effect of the
market price of the Common Stock at the time of conversion on the
conversion rate under a formula. See "Description of Capital
Stock Preferred Stock."
<F8> Inman Company is an investment banking and business advisory firm
that has assisted the Company in the past on organization and
personnel matters. None of the Company's officers, directors or
affiliates is affiliated with Inman Company.
<F9> Includes 587,950 shares of Common Stock issuable upon exercise of
a warrant.
<F10>Includes an aggregate of 652,500 shares of Common Stock subject
to presently exercisable options.
PLAN OF DISTRIBUTION
The Selling Stockholders have advised the Company that, prior to
the date of this Prospectus, they have not made any agreement or
arrangement with any underwriters, brokers or dealers regarding the
distribution and resale of the Shares. If the Company is notified by
a Selling Stockholder that any material arrangement has been entered
into with an underwriter for the sale of the Shares, then, to the
extent required under the Securities Act or the rules of the
Commission, a supplemental prospectus will be filed to disclose such
of the following information as the Company believes appropriate: (i)
the name of the participating underwriter; (ii) the number of the
Shares involved; (iii) the price at which such Shares are sold, the
commissions paid or discounts or concessions allowed to such
underwriter; and (iv) other facts material to the transaction.
The shares have not been registered for sale by the Selling
Stockholders under the securities laws of any state as of the date
of this Prospectus. Brokers or dealers effecting transactions in the
shares should confirm the registration thereof under the securities
laws of the states in which transactions occur or the existence of
any exempt from registration.
The Company expects that the Selling Stockholders will sell their
Shares covered by this Prospectus through customary brokerage
channels, either through broker-dealers acting as agents or brokers
for the seller, or through broker-dealers acting as principals, who
may then resell the Shares in the over-the-counter market, or at
private sale or otherwise, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at
negotiated prices. The Selling Stockholders may effect such
transactions by selling the Shares to or through broker-dealers, and
such broker-dealers may receive compensation in the form of
concessions or commissions from the Selling Stockholders and/or the
purchasers of the Shares for whom they may act as agent (which
compensation may be in excess of customary commissions). The Selling
Stockholders and any broker-dealers that participate with the Selling
Stockholders in the distribution of Shares may be deemed to be
underwriters and commissions received by them and any profit on the
resale of Shares positioned by them might be deemed to be underwriting
discounts and commissions under the Securities Act. There can be no
assurance that any of the Selling Stockholders will sell any or all of
the Shares offered by them hereunder.
Sales of the Shares on the OTC Bulletin Board or other trading system may
be by means of one or more of the following: (i) a block trade in which a broker
or dealer will attempt to sell the Shares as agent, but may position and resell
a portion of the block as principal to facilitate the transaction; (ii)
purchases by a dealer as principal and resale by such dealer for its account
pursuant to this Prospectus; and (iii) ordinary brokerage transactions and
30
<PAGE>
transactions in which the broker solicits purchasers. In effecting sales,
brokers or dealers engaged by the Selling Stockholders may arrange for other
brokers or dealers to participate.
The Selling Stockholders are not restricted as to the price or
prices at which they may sell their Shares. Sales of such Shares at
less than market prices may depress the market price of the Company's
Common Stock. Moreover, the Selling Stockholders are not restricted
as to the number of Shares which may be sold at any one time.
The Company has advised the Selling Stockholders that the anti-
manipulative rules under the Exchange Act, including Regulation M, may
apply to sales in the market of the Shares offered hereby. The
Company has also advised the Selling Stockholders of the requirement
for the delivery of this Prospectus in connection with resales of the
Shares offered hereby.
SHARES ELIGIBLE FOR FUTURE SALE
Through the date of this Prospectus, there has been only limited
over-the-counter trading of the Common Stock of the Company by certain
market makers who have registered to enter on the Common Stock on the
Bulletin Board. The Company has no plans to list the Common Stock on
NASDAQ or on any securities exchange. Sales of substantial amounts of
shares of the Company's Common Stock in the public market following
the offering, or the perception that such sales could occur, could
adversely affect the market price of the Common Stock prevailing from
time to time and could impair the Company's ability to raise capital
in the future through sales of its equity securities.
Assuming conversion of the Series A Preferred Stock and the
exercise of all outstanding warrants, the Company will have a total of
19,768,950 shares of Common Stock outstanding at the time of this
offering.<F1> Shares in the amount of up to 8,500,000 registered for
sale by the Selling Stockholders, if sold under this registration, and
3,578,000 shares of Common Stock previously sold by the Company
pursuant to an exemption under Regulation 504 will, after the
offering, be freely tradable without restriction or further
registration under the Securities Act, except that any shares
purchased by "Affiliates" of the Company, as that term is defined in
Rule 144 ("Rule 144") under the Securities Act ("Affiliates"), may
generally only be sold in compliance with Rule 144 described below.
The remaining shares of Common Stock are "Restricted Securities" as
defined in Rule 144. Restricted Securities may be sold in the public
market only if registered or if they qualify for an exemption from
registration under the Securities Act, such as under Rule 701 or
pursuant to Rule 144, which rules are summarized below.
___________
[FN]
<F1> Assumes the conversion of all outstanding shares of Preferred Stock into
7,336,413 shares of Common Stock based on a conversion rate, as set forth in
the formula described in "Preferred Stock" below and an average market price of
Common Stock at $0.2688. Also assumes exercise of the warrant to purchase
587,950 shares of Common Stock.
</FN>
SALES OF RESTRICTED SECURITIES
In general, under Rule 144 as currently in affect, a person who
has beneficially owned Restricted Securities for at least one year,
including a person who may be deemed an Affiliate of the Company, is
entitled to sell, within a three-month period, a number of shares of
Common Stock of the Company that does not exceed the greater of one
percent of the then-outstanding shares of Common Stock (approximately
197,690 shares on a diluted basis) and the average weekly reported
trading volume of the Company's Common Stock during the four calendar
weeks preceding such sale. Sales under Rule 144 are subject to
certain restrictions relating to manner of sale, notice and
availability of current public information about the Company. In
addition, under Rule 144(k), a person who is not an Affiliate and has
not been an Affiliate at any time during the ninety days preceding a
sale, and who has beneficially owned shares for at least two years,
would be entitled to sell such shares immediately following the
offering, without regard to the volume limitations, manner of sale
provisions or notice or other requirements of Rule 144. In meeting
the one-and two-year holding periods described above, the holder of
Restricted Securities can include the holding periods of a prior owner
who is not an Affiliate. The one-and two-year holding periods
described above do not begin to run until the full purchase price or
other consideration is paid by the person acquiring the Restricted
Securities from the issuer or/an Affiliate.
31
<PAGE>
Rule 701 under the Securities Act provides that shares of Common
Stock acquired on the exercise of outstanding options may be resold by
persons other than Affiliates, subject only to the manner of sale
provisions of Rule 144, and by Affiliates under Rule 144 without
compliance with its one-year minimum holding period, subject to
certain limitations.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of
40,000,000 shares of Common Stock, $0.001 par value and 10,000,000
shares of preferred stock, $0.001 par value, of which 1200 shares has
been designated as Series A Convertible Preferred Stock.
The following summary of the Company's capital stock does not
purport to be complete and is qualified in its entirety by reference
to the Articles of Incorporation, as amended and restated, and Bylaws,
as amended and restated, of the Company that are included as exhibits
to the Registration Statement of which this Prospectus forms a part,
and the applicable provisions of the Florida Business Corporation Act.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on any
issue submitted to a vote of the stockholders and do not have
cumulative voting rights in the election of directors. Accordingly,
the holders of a majority of the outstanding shares of Common Stock
voting in an election of directors can elect all of the directors then
standing for election, if they choose to do so. Subject to any
outstanding shares of Preferred Stock, all shares of Common Stock are
entitled to share equally in such dividends as the Board of Directors
of the Company may, in its discretion, declare out of sources legally
available therefor. See "Dividend Policy." Upon dissolution,
liquidation, or winding up of the Company, holders of Common Stock are
entitled to receive on a ratable basis, after payment or provision for
payment of all debts and liabilities of the Company and any
preferential amount due with respect to outstanding shares of
Preferred Stock, if any, all assets of the Company available for
distribution, in cash or in kind. Holders of shares of Common Stock
do not have preemptive or other subscription rights, conversion or
redemption rights, or any rights to share in any sinking fund. All
currently outstanding shares of Common Stock are fully paid and
nonassessable.
PREFERRED STOCK
The Company has designated one series of preferred stock
consisting of 1,200 shares of Series A Convertible Preferred Stock
(the "Preferred Stock"). In the event of any liquidation, dissolution
or winding up of the Company, whether voluntary or involuntary, the
Preferred Stockholders shall be entitled to receive an amount equal to
One Thousand Five Hundred ($1,500.00) Dollars per share of Preferred
Stock. In the event the assets of the Company available for
distribution to its stockholders are insufficient to pay the full
preferential liquidation amount per share required to be paid to the
Company's Preferred Stockholders, the entire amount of assets of the
Company available for distribution to stockholders shall be paid up to
their respective full liquidation amounts first to the Preferred
Stockholders, all of which amounts shall be distributed ratably among
holders of Preferred Stock, and the Common Stock shall receive
nothing. Each share of Preferred Stock shall be convertible into a
number of shares of Common Stock of the Company equal to the quotient
obtained by dividing $1,000 by the lower of (i) Sixty-five (65%) of
the average market price of the Common Stock for the five trading days
immediately prior to the conversion date, subject to an additional 10%
discount under certain circumstances, which are applicable to 1000 of
the shares (e.g., a division by 55% of the average market price) or
(ii) $3.00, increased proportionately for any reverse stock split and
decreased proportionately for any forward stock split or stock
dividend. The market price shall be the average of the closing bid
prices of the Common Stock, as quoted on the Bulletin Board over the
five trading days prior to the date of conversion.
32
<PAGE>
CERTAIN PROVISIONS OF THE ARTICLES AND BYLAWS
The Company's Amended and Restated Bylaws ("Bylaws") contain
certain provisions, described below, that could delay, defer or
prevent a change in control of the Company if the Board determines
that such a change in control is not in the best interests of the
Company and its stockholders, and could have the effect of making it
more difficult to acquire the Company or remove incumbent management.
Classified Board. Under the Company's Bylaws, the Board of
-----------------
Directors of the Company is divided into three classes, with staggered
terms of three years each. Each year the term of one class expires.
The Bylaws provide that any director may be removed from office, but
only for cause by an affirmative vote of at least two-thirds of the
outstanding capital stock entitled to vote in the election of
directors. The Bylaws also provide that any vacancies on the Board of
Directors shall be filled only by the affirmative vote of a majority
of the directors then in office, even if less than a quorum.
Special Voting Requirements. The Company's Bylaws provide that
----------------------------
all actions taken by the stockholders must be taken at an annual or
special meeting of the stockholders or by unanimous written consent.
The Bylaws provide that special meetings of the stockholders may be
called by only a majority of the members of the Board of Directors.
Under the Company's Bylaws, stockholders will be required to comply
with advance notice provisions with respect to any proposal submitted
for stockholder vote, including nominations for elections to the Board
of Directors. The Bylaws of the Company contain provisions requiring
the affirmative vote of the holders of at least two-thirds of the
outstanding shares of each class and series, if any, of capital stock
of the Corporation entitled to vote in the election of directors cast
at a meeting of the stockholders for that purpose.
Indemnification and Limitation of Liability. The Florida
--------------------------------------------
Business Corporations Act (the "Florida Act") authorizes Florida
corporations to indemnify any person who was or is a party to any
proceeding (other than an action by, or in the right of, the
corporation), by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation or other entity, against
liability incurred in connection with such proceeding, including any
appeal thereof, if he or she acted in good faith and in a manner he or
she reasonably believed to be in, or not opposed to, the best
interests of the corporation and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his or her conduct
was unlawful. In the case of an action by or on behalf of a
corporation, indemnification may not be made if the person seeking
indemnification is adjudged liable, unless the court in which such
action was brought determines such person is fairly and reasonably
entitled to indemnification. The indemnification provisions of the
Florida Act require indemnification if a director or officer has been
successful on the merits or otherwise in defense of any action, suit
or proceeding to which he or she was a party by reason of the fact
that he or she is or was a director or officer of the corporation.
The indemnification authorized under Florida law is not exclusive, and
is in addition to any other rights granted to officers and directors
under the Articles of Incorporation or Bylaws of the corporation or
any agreement between officers and directors and the corporation. A
corporation may purchase and maintain insurance or furnish similar
protection on behalf of any officer or director against any liability
asserted against the officer or director and incurred by the officer
or director in such capacity, or arising out of the status, as an
officer or director, whether or not the corporation would have the
power to indemnify him or her against such liability under the Florida
Act. The Company's Bylaws provide for the indemnification of
directors and executive officers of the Company to the maximum extent
permitted by Florida law and for the advancement of expenses incurred
in connection with the defense of any action, suit or proceeding that
the director or executive officer was a party to by reason of the fact
that he or she is or was a director or executive officer of the
Company upon the receipt of an undertaking to repay such amount,
unless it is ultimately determined that such person is not entitled to
indemnification. Under the Florida Act, a director is not personally
liable for monetary damages to the Company or any other person for
acts or omissions in his or her capacity as a director except in
certain limited circumstances such as certain violations of criminal
law and transactions in which the director derived an improper person
benefit. As a result, stockholders may be unable to recover monetary
damages against directors for actions taken by them which constitute
negligence or gross negligence or which are in violation of their
fiduciary duties, although injunctive or other equitable relief may be
available. The foregoing provisions of the Florida Act and the Bylaws
could have the effect of preventing or delaying a person from
acquiring or seeking to acquire a substantial equity interest in, or
control of, the Company.
33
<PAGE>
Such indemnification may be available for liabilities arising in
connection with this Offering. Insofar as indemnification for
liabilities under the Securities Act may be permitted to directors,
officers or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that, in the opinion of the
Commission, such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable.
Amendments of the Articles and Bylaws. Certain provision of the
--------------------------------------
Articles and Bylaws, including those pertaining to a classified board,
special meetings of stockholders, removal of directors and director
liability and indemnification, may be amended only by the affirmative
vote of two-thirds of the shares of the capital stock of the Company
entitled to vote in the election of directors.
CERTAIN STATUTORY PROVISIONS
The Florida Act provides for special voting requirements to
approve affiliated transactions unless the transaction falls under one
or more enumerated exceptions.
REGISTRATION RIGHTS
The Company granted shares of the Preferred Stock certain
registration rights. Such registration rights grant the holders
thereof the right to have the Company file a registration statement
covering the resale of shares of Common Stock received upon conversion
of the Preferred Stock.
TRANSFER AGENT
The Transfer Agent and Registrar for the Common Stock is Atlas
Stock Transfer & Trust Company, Salt Lake City, Utah.
LEGAL MATTERS
The validity of the Common Stock being offered hereby is being passed
upon for the Company by L. Van Stillman, Boca Raton, Florida.
EXPERTS
The financial statements of the Company at December 31, 1997 and
for the year ended December 31, 1997 and the period from the Company's
inception appearing in this Prospectus and the Registration Statement
have been audited by Parks, Tschopp, Whitcomb & Orr, independent
auditors, as indicated in their report thereon appearing herein and in
the Registration Statement, and are included in reliance upon such
report given upon the authority of such firm as experts in accounting
and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration
Statement on Form SB-2 under the Securities Act with respect to the
Common Stock offered hereby. As used herein, the term "Registration
Statement" means the initial Registration Statement and any and all
amendments thereto. This Prospectus, which is a part of the
Registration Statement, does not contain all of the information set
forth in the Registration Statement and the exhibits thereto. For
further information with respect to the Company and the Common Stock,
reference is made to the Registration Statement, including the
exhibits and schedules thereto. Statements contained in this
Prospectus concerning the contents of any contract or any other
document are not necessarily complete and such instance reference is
made to such contract or other document filed with the Commission as
an exhibit to the Registration Statement. Each such statement is
qualified in its entirety by such reference.
34<PAGE>
A copy of the Registration Statement, including the exhibits
thereto, may be inspected without charge at the Public Reference
section of the commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the following regional
offices of the Commission: New York Regional Office, Seven World
Trade Center, 13th Floor, New York, New York 10048; and Chicago
Regional Office, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of the Registration Statement and the
exhibits and schedules thereto can be obtained from the Public
Reference Section of the Commission upon payment of prescribed fees,
or at the Commission's web site at http://www.sec.gov.
Prior to filing the Registration Statement of which this
Prospectus is a part, the Company was not subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Upon effectiveness of the
Registration Statement, the Company will become subject to the
informational and periodic reporting requirements of the Exchange Act,
and in accordance therewith, for a period of up to one year will file
periodic reports, proxy statements, and other information with the
Commission. Such periodic reports, proxy statements, and other
information will be available for inspection and copying at the public
reference facilities and other regional offices referred to above.
35
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Accountants ..................................... F-2
Financial Statements:
Year Ended December 31, 1997 (Audited)
Balance Sheet at December 31, 1997 .................................... F-3
Statements of Operations For the year ended December 31, 1997
and the (date of inception) through December 31, 1996;
October 10, 1996 (date of inception) through
December 31, 1997 ................................................... F-4
Statements of Stockholders' Equity For the year ended
December 31, 1997 and the period from October 10, 1996
(date of inception) through December 31, 1997 ...................... F-5
Statements of Cash Flows For the year ended December 31, 1997
and the period from October 10, 1996 (date of inception)
through December 31, 1996 and the cumulative period from
October 10, 1996 (date of inception) through
December 31, 1997 .................................................. F-6
Notes to Financial Statements from October 10, 1996
(date of inception) to December 31, 1997 ........................... F-7
Quarter Ended September 30, 1998 (Unaudited):
Balance Sheet (September 30, 1998 - Unaudited)
and December 31, 1997 ............................................. F-10
Statement of Operations For the nine months ended
September 30, 1998 (unaudited) and the year ended
December 31, 1997 and the cumulative period from October 10, 1996
(date of inception) through September 30, 1998...................... F-11
Statement of Stockholder's Equity For the nine months
ended September 30, 1998 (unaudited) and the year ended
December 31, 1997 and the cumulative period from October 10,
1996 (date of inception) through September 30, 1998................. F-12
Statement of Cash Flows For the nine months ended September 30, 1998
(unaudited) and the year ended December 31, 1997 and the
cumulative period from October 10, 1996 (date of inception)
through September 30, 1998.......................................... F-13
Notes to Interim Financial Statements ................................. F-14
F-1
<PAGE>
PARKS, TSCHOPP,
WHITCOMB & ORR, P.A.
Certified Public Accountants
2600 Maitland Center Parkway
Suite 330
Maitland, Florida 32751
Independent Auditors' Report
The Board of Directors
Access Power, Inc.:
We have audited the accompanying balance sheet of Access Power, Inc.
(a development stage company) as of December 31, 1997, and the related
statements of operations, stockholders' equity, and cash flows for the
year then ended, the period from October 10, 1996 (date of inception)
through December 31, 1996 and the cumulative period from October 10,
1996 (date of inception) through December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Access
Power, Inc. (a development stage company) as of December 31, 1997, and
the results of its operations and its cash flows for the year ended,
the period from October 10, 1996 (date of inception) through December
31,1996 and the cumulative period from October 10, 1996 (date of
inception) through December 31, 1997, in conformity with generally
accepted accounting principles.
Parks, Tschopp, Whitcomb & Orr, P.A.
April 1, 1998
Maitland, Florida
F-2
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
Balance Sheet
December 31, 1997
<TABLE>
<CAPTION>
Assets
------
<S> <C>
Current assets:
Cash $ 54,086
Accounts receivable 9,596
Note receivable, stockholder 24,096
-----------
Total current assets 87,778
-----------
Property and equipment, net (note 2) 392,592
Other assets 16,834
-----------
Total assets $ 497,204
===========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 350
Notes payable, stockholders (note 3) 10,136
-----------
Total current liabilities 10,486
-----------
Stockholders' Equity:
Common stock, $.001 par value, authorized 40,000,000 shares, issued
and outstanding 11,484,000 shares. 11,484
Additional paid in capital 907,373
Preferred stock, $.001 par value, authorized 10,000,000 shares, no
shares issued -
Deficit accumulated during the development stage (432,139)
-----------
Total stockholders' equity 486,718
-----------
Commitments (notes 3 and 4)
Total liabilities and stockholders' equity $ 497,204
==========
</TABLE>
See accompanying notes to financial statements.
F-3<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
<TABLE>
<CAPTION>
Statements of Operations
For the year ended December 31, 1997 and the period from October 10, 1996
(date of inception) through December 31, 1996 and the cumulative period from
October 10, 1996 (date of inception) through December 31, 1997
For the period For the period
October 10, 1996 October 10, 1996
For year ended through through
December 31, 1997 December 31, 1996 December 31, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Revenues - - -
Costs and expenses:
Product development and marketing $ 34,636 2,848 37,484
General and administrative 391,520 2,853 394,373
------------ ----------- ------------
Total costs and expenses 426,156 5,701 431,857
------------ ----------- ------------
Other income (expense)
Interest income 1,888 - 1,888
Interest expense (2,170) - (2,170)
------------ ----------- ------------
Total other income (expense) (282) - (282)
------------ ----------- ------------
Net loss $ (426,438) (5,701) (432,139)
============ =========== ============
Net loss per share $ (0.04) - (0.05)
============ =========== ============
Weighted average number of
shares $ 9,742,000 8,000,000 8,000,000
============ =========== ============
</TABLE>
See accompanying notes to financial statements.
F-4<PAGE>
<TABLE>
<CAPTION>
ACCESS POWER, INC.
(A Development Stage Company)
Statement of Stockholders' Equity
For the year ended December 31, 1997 and the period from October 10, 1996
(date of inception) through December 31, 1997
Additional Total
Common Stock Paid in Accumulated Stockholders'
Date Shares Amount Capital Deficit Equity
---- ------ ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Common stock issued to founding directors 8,000,000 $ 8,000 $ (7,200) - 800
Net loss - - - (5,701) (5,701)
---------- -------- --------- -------- -------
Balances at December 31, 1996 8,000,000 8,000 (7,200) (5,701) (4,901)
Common stock issued for cash 5/23/97 750,000 750 35,000 - 35,000
Common stock issued for cash 6/30/97 1,000,000 1,000 100,000 - 100,000
Common stock issued for cash 7/97-10/97 1,734,000 1,734 854,573 - 854,573
Stock issuance cost - - (75,000) - (75,000)
Net loss - - - (426,438) (426,438)
---------- -------- --------- -------- -------
Balances at December 31, 1997 11,484,000 $ 11,484 $ 907,373 (432,139) 483,234
========== ======== ========= ======== =======
</TABLE>
See accompanying notes to financial statements.
F-5<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
<TABLE>
<CAPTION>
Statements of Cash Flows
For the year ended December 31, 1997 and the period from October 10, 1996
(date of inception) through December 31, 1996 and the cumulative period from October 10, 1996
(date of inception) through December 31, 1997
For the period from For the period
October 10, 1996 October 10, 1996
For the year ended through through
December 31, 1997 December 31, 1996 December 31, 1997
------------------ ------------------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (426,438) (5,701) (432,139)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amoritization 26,757 256 27,013
Change in operating assets and liabilities:
Accounts receivable (9,596) - (9,596)
Accounts payable 350 - 350
Other assets (20,000) - (20,000)
----------- --------- ----------
Net cash used in operating activities (428,927) (5,445) (434,372)
----------- --------- ----------
Cash flows from investing activities:
Purchase of property and equipment (406,154) (10,285) (416,439)
Note receivable (19,001) (5,095) (24,096)
----------- --------- ----------
Net cash used in investing activities (425,155) (15,380) (440,535)
----------- --------- ----------
Cash flows from financing activities:
Proceeds from issuance of common stock 918,057 800 918,857
Proceeds from issuance of notes payable - 20,025 20,025
Principal payments on notes payable (9,889) - (9,889)
----------- --------- ----------
Net cash provided by financing activities 908,168 20,825 928,993
----------- --------- ----------
Net increase in cash 54,086 - 54,086
Cash, at beginning of period - - -
----------- --------- ----------
Cash at end of period $ 54,086 - 54,086
=========== ========= ==========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
Notes to Financial Statements
Period from October 10, 1996 (date of inception) to December 31, 1997
(1) Summary of Significant Accounting Policies
(a) Nature of development stage operations
--------------------------------------
Access Power, Inc., (API or the Company) was formed on October 10,
1996. The Company offers Internet Telephony (IT) which will
provide advanced computer telephony solutions to the global
consumer market place, with an emphasis on marketing to the small
office and home office worker.
Operations of the Company through the date of these financial
statements have been devoted primarily to product development and
marketing, raising capital, and administrative activities.
(b) Property and equipment
----------------------
Property and equipment are recorded at cost and depreciated over
the estimated useful lives of the assets which range from three to
five years, using the straight-line method.
(c) Intangible assets
-----------------
Organization costs are amortized over a five-year period using the
straight-line method.
(d) Income taxes
------------
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to temporary differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and
tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. Changes in tax rates are
recognized in the period that includes the enactment date.
Development stage operations for the period ended December 31, 1997
resulted in a net operating loss. It is uncertain whether any tax
benefit of net operating loss will be realized in future periods.
Accordingly, no income tax provision has been recognized in the
accompanying financial statements. At December 31, 1997, the
Company has net operating loss carryforwards of approximately
$432,000, which will expire in years beginning in 2011. A
valuation allowance equal to the tax benefit of the net operating
loss has been established, since it is uncertain that future
taxable income will be realized during the carryforward period.
Accordingly, no income tax provision has been recognized in the
accompanying financial statements.
(e) Financial Instruments Fair Value, Concentration of Business and Credit
----------------------------------------------------------------------
Risks
-----
The carrying amount reported in the balance sheet for cash,
accounts and notes receivable, accounts payable and accrued
expenses approximates fair value because of the immediate or short-
term maturity of these financial instruments. The carrying amount
reported in the accompanying balance sheet for notes payable
approximates fair value because the actual interest rates do not
significantly differ from current rates offered for instruments
with similar characteristics. Financial instruments, which
potentially subject the Company to concentrations of credit risk,
consist principally of accounts and note receivable which amounts
to approximately $30,000. The Company performs periodic credit
evaluations of its trade customers and generally does not require
collateral. Currently, all of the Company's hardware and software
is purchased from one supplier, however, management believes there
are other alternatives to this supplier.
F-7
<PAGE>
(Continued)
ACCESS POWER, INC.
(A Development Stage Company)
Notes to Financial Statements
Period from October 10, 1996 (date of inception) to December 31, 1997
(1), Continued
(f) Use of Estimates
----------------
Management of the Company has made certain estimates and
assumptions relating to the reporting of assets and liabilities and
the disclosure of contingent assets and liabilities to prepare
these financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those
estimates.
(g) Cash Flows
----------
For purposes of cash flows, the Company considers all highly liquid
debt instruments with original maturities of three months or less
to be cash equivalents.
(h) Prepaid Offering Costs
----------------------
Prepaid offering costs represent direct costs and expenses incurred
in connection with the offering of securities. Upon completion of
the offering, such amounts are offset against the proceeds from the
offering, in the event of an offering of equity securities, and
capitalized and amortized using the interest method in the event of
an offering of debt securities.
(i) Revenue Recognition
-------------------
The principal sources of revenues are expected to be Internet
telephone charges which will be recognized as incurred, and
franchise licensing fees which will be recognized when the
franchise commences operations.
(j) Software and Development Costs
------------------------------
The Company capitalizes purchased software which is ready for
service and software development costs incurred from the time
technological feasibility of the software is established until the
software is ready for use to provide services to customers.
Research and development costs and other computer software
maintenance costs related to software development are expensed as
incurred.
The carrying value of a software and development asset is regularly
reviewed by the Company, and a loss is recognized when the net
realizable value falls below the unamortized cost.
F-8
<PAGE>
ACCESS POWER, INC.
(A Development Stage Company)
Notes to Financial Statements
Period from October 10, 1996 (date of inception) to December 31, 1997
(2) Property and Equipment
----------------------
<TABLE>
<CAPTION>
Property and equipment consist of the following at December 31, 1997:
<S> <C>
Office furniture and equipment $ 52,842
Computer hardware 131,811
Computer software 231,786
-------------
416,439
Less accumulated depreciation and amortization 23,847
-------------
$ 392,592
=============
(3) Notes Payable
-------------
Notes payable consist of the following at December 31, 1997:
Promissory notes to individuals bearing interest at 6% payable upon the
closing of an initial public offering. Unsecured. $ 10,136
-----------
$ 10,136
===========
</TABLE>
(4) Commitments
-----------
The Company leases its office space under a non-cancelable
operating lease with a remaining term of three years. Future
minimum payments under this lease are as follows:
Year Amount
---- ------
1998 35,200
1999 36,270
2000 21,500
Rent expense for the year ended December 31, 1997 amounted to $15,183.
F-9<PAGE>
<TABLE>
<CAPTION>
Access Power, Inc
(A Development Stage Company)
Balance Sheet
September 30,1998
(Unaudited) December 31, 1997
----------- -----------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 28,904 $ 54,086
Inventory 30,000 -
Accounts receivable 27,743 9,596
Due from stockholders 25,095 24,096
Employee receivables 2,000 -
------------ ----------
Total current assets 113,742 87,778
------------ ----------
Property, plant & equipment - net 1,292,707 392,592
Other assets 10,323 16,834
------------ ----------
Total assets $ 1,416,772 $ 497,204
============ ==========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 1,191,790 $ 350
Notes payable 100,000 -
Due to stockholders 10,136 10,136
Payroll taxes payable 32,875 -
------------ ----------
Total current liabilities 1,334,802 10,486
------------ ----------
Stockholder's Equity:
Common stock, $.001 par value, authorized
40,000,000 shares, issued
and outstanding 11,784,000 shares and 11,484,000 11,784 11,484
respectively
Preferred stock, $.001 par value, authorized
10,000,000 shares, issued
and outstanding 1,000 shares and none respectively 1 -
Additional paid in capital 1,900,938 907,373
Retained earnings (deficit) (1,830,753) (432,139)
------------ ----------
Total stockholders' equity 81,970 486,718
------------ ----------
Total liabilities and stockholders' equity $ 1,416,772 $ 497,204
============ ==========
</TABLE>
F-10<PAGE>
<TABLE>
<CAPTION>
Access Power, Inc
(A Development Stage Company)
Statement of Operations
For the nine months ended September 30, 1998 (unaudited) and
the year ended December 31, 1997 and the cumulative period from
October 10, 1996 ( date of inception) through September 30, 1998
For the period
October 10, 1996
For the nine months For the year ended through
ended September 30, 1998 December 31, 1997 September 30, 1998
------------------------ ------------------ ----------------
<S> <C> <C> <C>
Revenues:
Product sales $ 212,092 $ - $ 212,092
Services 42,089 - 42,089
------------------- ---------------- ---------------
Total revenue 254,181 - 254,181
------------------- ---------------- ---------------
Costs and expenses:
Cost of sales 152,920 - 152,920
Product development and marketing 710,533 34,636 748,017
General and administrative 786,415 391,520 1,180,788
------------------- ---------------- ---------------
Total costs and expenses 1,649,868 426,156 2,081,725
------------------- ---------------- ---------------
Other income (expense):
Interest income 407 1,888 2,295
Interest expense (3,333) (2,170) (5,503)
------------------- ---------------- ---------------
Total other income (expense) (2,927) (282) (3,209)
------------------- ---------------- ---------------
Net loss $ (1,398,614) $ (426,438) $ (1,830,753)
=================== =============== ===============
Net loss per share $ (0.12) $ (0.04) $ (0.23)
=================== =============== ===============
Weighted average number of shares 11,706,220 9,742,000 8,000,000
=================== =============== ===============
</TABLE>
F-11
<PAGE>
<TABLE>
<CAPTION>
Access Power, Inc
(A Development Stage Company)
Statement of Stockholders Equity
For the nine months ended September 30, 1998 (unaudited) and
the year ended December 31, 1997 and the cumulative period from October 10, 1996
(date of inception) through September 30, 1998
Additional Total
Common Stock Preferred Stock Paid in Accumulated Stockholders'
Shares Amount Shares Amount Capital Deficit Equity
------ ------ ------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Common stock issued to founding directors 8,000,000 $ 8,000 -- -- $ (7,200) $ -- $ 800
Net loss -- -- -- -- -- (5,701) (5,701)
----------- -------- ------ ------ -------- ------- --------
Balances at December 31, 1996 8,000,000 8,000 -- -- $ (7,200) (5,701) (4,901)
Common Stock issued for cash 5/23/97 750,000 750 -- -- 35,000 -- 35,000
Common Stock issued for cash 6/30/97 1,000,000 1,000 -- -- 100,000 -- 100,000
Common Stock issued for cash 7/97-10/97 1,734,000 1,734 -- -- 854,573 -- 854,573
Stock issuance cost -- -- -- -- (75,000) -- (75,000)
Net loss -- -- -- -- -- (426,438) (426,438)
----------- -------- ------ ------ -------- ------- ---------
Balances at December 31, 1997 11,484,000 11,484 -- -- 907,373 (432,139) 486,718
----------- -------- ------ ------ -------- ------- ---------
Preferred Stock issued for cash 5/98 -- -- 1,000 $ 1 999,999 -- 1,000,000
Common Stock issued as additional
interest 2/2/98 50,000 50 -- -- -- -- 50
Common Stock issued as additional
interest 2/19/98 125,000 125 -- -- -- -- 125
Common Stock issued as finder's fee 2/19/98 75,000 75 -- -- -- -- 75
Common Stock issued for cash 9/24/98 50,000 50 -- -- 24,950 -- 25,000
Stock issuance cost -- -- -- -- (31,384) -- (31,384)
Net loss -- -- -- -- -- (1,398,614) (1,398,614)
----------- -------- ------ ------ ---------- ----------- ----------
Balances at September 30, 1998 11,784,000 $ 11,784 1,000 $ 1 $1,900,938 $(1,830,753) $ 81,970
============ ======== ====== ====== ========== ============ =========
</TABLE>
F-12<PAGE>
<TABLE>
<CAPTION>
Access Power, Inc
(A Development Stage Company)
Statement of Cash Flows
For the nine months ended September 30, 1998 (unaudited) and
the year ended December 31, 1997 and the cumulative period from
October 10, 1996 (date of inception) through September 30, 1998
For the period
October 10, 1996
For the nine months For the year through
ended September 30, 1998 December 31, 1997 September 30, 1998
------------------------ ----------------- ------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (1,398,614) $ (426,438) $ (1,830,753)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 210,287 26,757 237,300
Change in operating assets and liabilities:
Accounts receivable (20,147) (9,596) (29,743)
Inventory (30,000) - (30,000)
Accounts payable 1,224,316 350 1,224,666
Other assets - (20,000) (20,000)
--------------- ----------- -------------
Net cash provided by operating activities (14,158) (428,927) (448,530)
--------------- ----------- -------------
Cash flows from investing activities:
Purchase of property and equipment (1,103,891) (406,154) (1,520,330)
Note receivable (999) (19,001) (25,095)
--------------- ----------- -------------
Net cash used in investing activities (1,104,890) (425,155) (1,545,425)
--------------- ----------- -------------
Cash flows from financing activities:
Proceeds from issuance of stock 993,866 918,057 1,912,723
Proceeds from issuance of notes payable 300,000 - 320,025
Principal payments on notes payable (200,000) (9,889) (209,889)
--------------- ----------- -------------
Net cash provided by financing activities 1,093,866 908,168 2,022,859
--------------- ----------- -------------
Net increase in cash (25,182) 54,086 28,904
Cash, at beginning of period 54,086 - -
--------------- ----------- -------------
Cash at end of period $ 28,904 $ 54,086 $ 28,904
=============== =========== =============
</TABLE>
F-13
<PAGE>
Notes to Interim Financial
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
(a) Nature of development stage operations
--------------------------------------
Access Power, Inc., (API or the Company) was formed on October 10,
1996. The Company offers Internet Telephony (IT) which
will provide advanced computer telephony solutions to the
global consumer market place, with an emphasis on marketing to
the small office and home office worker.
Operations of the Company through the date of these financial
statements have been devoted primarily to product development
and marketing, raising capital, and administrative activities.
(b) Property and equipment
----------------------
Property and equipment are recorded at cost and depreciated
over the estimated useful lives of the assets which range from
three to five years, using the straight-line method.
(c) Intangible assets
-----------------
Organization costs are amortized over a five-year period using
the straight-line method.
(d) Income taxes
------------
Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to temporary differences
between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases and
operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled. Changes in tax rates are recognized in the period
that includes the enactment date.
Development stage operations for the nine months ended
September 30, 1998 resulted in a net operating loss. It is
uncertain whether any tax benefit of net operating loss will
be realized in future periods. Accordingly, no income tax
provision has been recognized in the accompanying financial
statements. At September 30, 1998, the Company has net
operating loss carryforwards of approximately $432,000, which
will expire in years beginning in 2011. A valuation allowance
equal to the tax benefit of the net operating loss has been
established, since it is uncertain that future taxable income
will be realized during the carryforward period. Accordingly,
no income tax provision has been recognized in the
accompanying financial statements.
(e) Financial Instruments Fair Value, Concentration of Business and
---------------------------------------------------------------
Credit Risks
------------
The carrying amount reported in the balance sheet for cash,
accounts and notes receivable, accounts payable and accrued
expenses approximates fair value because of the immediate or
short-term maturity of these financial instruments. The
carrying amount reported in the accompanying balance sheet for
notes payable approximates fair value because the actual
interest rates do not significantly differ from current rates
offered for instruments with similar characteristics.
Financial instruments, which potentially subject the Company
to concentrations of credit risk, consist principally of
accounts and note receivable which amounts to approximately
$21,000. The Company performs periodic credit evaluations of
its trade customers and generally does not require collateral.
Currently, all of the Company's hardware and software is
purchased from one supplier, however, management believes
there are other alternatives to this supplier.
(f) Use of Estimates
----------------
Management of the Company has made certain estimates and
assumptions relating to the reporting of assets and
liabilities and the disclosure of contingent assets and
liabilities to prepare these financial statements in
conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
(g) Cash Flows
----------
F-14
<PAGE>
For purposes of cash flows, the Company considers all highly
liquid debt instruments with original maturities of three
months or less to be cash equivalents.
(h) Prepaid Offering Costs
----------------------
Prepaid offering costs represent direct costs and expenses
incurred in connection with the offering of securities. Upon
completion of the offering, such amounts are offset against
the proceeds from the offering, in the event of an offering of
equity securities, and capitalized and amortized using the
interest method in the event of an offering of debt
securities.
(i) Revenue Recognition
-------------------
The principal sources of revenues are expected to be internet
telephone charges which will be recognized as incurred, and
franchise licensing fees which will be recognized when the
franchise commences operations.
(j) Software and Development Costs
------------------------------
The Company capitalizes purchased software which is ready for
service and software development costs incurred from the time
technological feasibility of the software is established until
the software is ready for use to provide services to
customers. Research and development costs and other computer
software maintenance costs related to software development are
expensed as incurred.
The carrying value of a software and development asset is
regularly reviewed by the Company, and a loss is recognized
when the net realizable value falls below the unamortized
cost.
(k) Interim Financial Information
-----------------------------
In the opinion of management, the interim financial statements have
been prepared on the same basis as the annual financial statements
and include all adjustments (consisting only of normal recurring
adjustments) necessary to state fairly the financial information set
forth herein, in accordance with generally accepted accounting
principles.
The results of operations for the nine months ended September 30, 1998
are not necessarily indicative of results to be expected for the full
fiscal year.
(2) PROPERTY AND EQUIPMENT
----------------------
Property and equipment consist of the following at September 30,
1998 and December 31, 1997:
<TABLE>
<CAPTION>
9/30/98 12/31/97
------- --------
<S> <C> <C>
Office furniture and equipment $ 58,909 $ 52,842
Computer hardware 1,203,515 131,811
Computer software 257,906 231,786
----------- --------
1,520,330 416,439
Less accumulated depreciation and amortization 227,623 23,847
----------- --------
$ 1,292,707 $392,592
=========== ========
(3) NOTES PAYABLE
-------------
Notes payable consist of the following at September 30, 1998 and
December 31, 1997:
9/30/98 12/31/97
------- --------
Promissory notes to individuals bearing interest at 6% payable
upon the closing of an initial public offering. Unsecured $ 10,136 $ 10,136
Bridge loans at various interest rates from 10% to 12% 100,000 $ -
----------- ------------
$ 110,136 $ 10,136
=========== =============
</TABLE>
(4) PREFERRED STOCK
---------------
In 1998, Access Power issued 1,100 shares of convertible preferred
stock (Preferred Series A). Preferred stockholders have preference
over common stockholders in dividends and liquidation rights. Each
preferred share is convertible into common shares equal to $1000
divided by 65% (which percentage may drop, and has dropped with
respect to 1000 shares of Preferred Series A stock, to 55% because
of certain penalties related to the timing of the Company's
registration of the underlying shares for resale) of the preceding
five day average closing market bid price of the common stock.
F-15
<PAGE>
<TABLE>
<CAPTION>
======================================================== ===================================================
<S> <C>
No dealer, salesperson or other person has been 8,500,000 Shares
authorized to give any information or to make any
representations other than those contained in this
Prospectus in connection with the offer made by this
Prospectus and, if given or made, such information or
representations must not be relied upon as having been
authorized by Access Power, Inc. Neither the delivery
of this Prospectus nor any sale made hereunder shall ACCESS POWER, INC.
under any circumstances create an implication that
there has been no change in the affairs of Access LOGO
Power, Inc. since the date hereof or that the
information herein is correct as of any time subsequent
to the date of this Prospectus. This Prospectus does
not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby by
anyone in any jurisdiction in which such offer or
solicitation is not authorized or in which the person
making such offer or solicitation is not qualified to COMMON STOCK
do so or to anyone to whom it is unlawful to make such
offer or solicitation.
TABLE OF CONTENTS
Item Page __________________
Summary . . . . . . . . . . . . . . . . . . . . . 2
Summary Financial Data . . . . . . . . . . . . . 4 PROSPECTUS
Risk Factors . . . . . . . . . . . . . . . . . . 5 __________________
Dividend Policy . . . . . . . . . . . . . . . . . 12
Capitalization . . . . . . . . . . . . . . . . . 13
Certain Market Information . . . . . . . . . . . 14
Business . . . . . . . . . . . . . . . . . . . . 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . 23
Management . . . . . . . . . . . . . . . . . . . 26
Principal and Selling Stockholders . . . . . . . 29
Plan of Distribution . . . . . . . . . . . . . . 30
Shares Eligible for Future Sale . . . . . . . . . 31
Description of Capital Stock . . . . . . . . . . 32
Legal Matters . . . . . . . . . . . . . . . . . . 34
Experts . . . . . . . . . . . . . . . . . . . . . 34
Additional Information . . . . . . . . . . . . . 34
Index to Financial Statements . . . . . . . . . . F-1
__________________________, 1998
======================================================== ===================================================
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is an estimate of the approximate amount of
the fees and expenses payable by the Company in connection with the resale
of the shares of Common Stock.
Securities and Exchange Commission Registration Fee . . . . . . $ 1,090
NASD Filing Fees and Blue Sky Fees and Expenses . . . . . . . . 5,000
Printing and Engraving Expenses . . . . . . . . . . . . . . . . 1,000
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . . 35,000
Accounting Fees and Expenses . . . . . . . . . . . . . . . . . 2,000
Transfer Agent Fees and Expenses . . . . . . . . . . . . . . . 500
------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 44,590
_________________
* To be filed by amendment.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The following provides information of all sales of outstanding
stock which were not registered under the Securities Act of 1933 (the
"Act").
In connection with the Registrant's organizational activities,
8,000,000 shares of common stock were issued to founders and officers,
Glenn A. Smith, Michael L. Pitts, Tod R. Smith and Maurice J. Matovich
on April 25, 1997 in connection with the organization of the Company.
The founders provided nominal consideration for these shares and the shares
had little, if any, value at the time of organization. Exemption from
registration is claimed under Section 4(2) of the Act.
On May 23, 1997 the Company undertook a private offering and sold
750,000 shares of common stock for $35,000. Exemption from
registration is claimed under Rule 504 of Regulation D, which does not
require investors to be accredited or sophisticated. The Company sold
the shares through officers and directors and did not use the services
of a selling agent.
From June 6, 1997 to June 30, 1997 the Company undertook a
private offering and sold 1,000,000 shares of common stock for
$100,000. Exemption from registration is claimed under Rule 504 of
Regulation D, which does not require investors to be accredited or
sophisticated. The Company sold the shares through officers and
directors and did not use the services of a selling agent.
From July 1, 1997 to October 1, 1997 the Company undertook a
private offering and sold 1,728,000 shares of common stock for
$864,000. Exemption from registration is claimed under Rule 504 of
Regulation D, which does not require investors to be accredited or
sophisticated. The Company sold the shares through officers and
directors and did not use the services of a selling agent.
On August 4, 1997 the Company borrowed $200,000 from Olympus Capital,
Inc., an investor the Company believed to be accredited, and issued thereto
a note for the principal amount at an interest rate of 12% percent per annum,
payable monthly. In partial consideration for making such loan, the Company
also issued 100,000 shares of common stock to the lender. The note was paid
off in October 1997. Exemption from registration for this sale is claimed
under Section 4(2) of the Act. The Company sold the shares through officers
and directors and did not use the services of a selling agent.
On February 2, 1998 the Company borrowed $100,000 from Subramanian
Sundaresan, an investor the Company believed to be accredited, and issued
thereto a note for the principal amount at an interest rate of 1 percent per
month simple interest. The note is due upon the Company closing a financing
of at least $3 million. In partial consideration for making such loan, the
Company also issued 50,000 shares of common stock to the lender. Exemption
II-1<PAGE>
from registration for this sale is claimed under Section 4(2) of the Act.
The Company sold the shares through officers and directors and did not use
the services of a selling agent.
On February 19, 1998 the Company borrowed $200,000 from Ethel and Hyman
Schwartz, accredited investors, and issued thereto a note for the principal
amount at an interest rate of 10% percent per annum, payable monthly.
In partial consideration for making such loan, the Company also issued
125,000 shares of common stock to the lenders. The note was paid off
in May 1998. Exemption from registration for this sale is claimed under
Section 4(2) of the Act. Olympus Capital, Inc. acted as the exclusive
placement agent in connection with the financing and received a finder's
fee in the amount of 75,000 shares of common stock in connection with
such sale. The Company believes Olympus Capital, Inc. was an accredited
investor.
On March 23, 1998 the Inman Company was issued 25,000 shares of
common stock in consideration for providing financial consulting
services to the Company. The Company believes the Inman Company was
an accredited investor. The services provided by the Inman Company
included writing a private placement memorandum for future offerings,
so the investor had become fully informed about the Company. Exemption
from registration for this sale is claimed under Section 4(2) of the Act.
In a private placement which commenced in May, 1998 and concluded
the same month, the Company sold 1,000 shares of its Preferred Stock, Series
A (the "Preferred Stock"), at an offering price of $1,000 per share.
Exemption from registration for this sale is claimed under Rule 506 of
Regulation D because of the limited number of participants in the
transaction and the relationship of such participants to the Company.
In November 1998 the Company sold 100 shares of Preferred Stock
at an offering price of $1000 per share to Chesterfield Capital Resources
Ltd. The Company claims an exemption from registration under Section 4(2)
of the Act for this offer and sale. The securities were offered and sold
to one investor who the Company believes is an accredited investor. In
connection with this transaction and at the same time, the Company also
issued 60,587 shares of Common Stock to Ethel Schwartz, an existing
stockholder of the Company, as payment of a finder's fee. The Company
believes that stockholder is an accredited investor and the Company
claims an exemption from registration under Section 4(2) of the Act
for this transaction.
Sales of securities in all of the above offerings for which an exemption
under Section 4(2) of Rule 506 of Regulation D is claimed were made only to
persons who were "accredited investors" within the meaning of Rule 501
promulgated under the Act. In addition, all such participants agreed to
acquire their securities for investment and not with a view to the
distribution thereof, and the certificates representing the securities issued
to each such participant contained a legend to the effect that such securities
are not registered under the Act and may not be transferred except pursuant
to a registration statement which has become effective under the Act, or an
exemption from such registration requirement. The issuance of such
securities was not underwritten.
II-2
<PAGE>
Item 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
<C> <C>
3.1 Amended and Restated Articles of Incorporation of the
Registrant*
3.1.1 Amendment to the Articles of Incorporation filed on
November 23, 1998
3.2 Bylaws of the Registrant*
4.1 Form of Common Stock Certificate of the Registrant*
5.1 Opinion of L. Van Stillman with respect to the legality
of the securities being registered **
10.1 International Master Franchise Agreement Between Access
Power, Inc. and Access Power Canada, Inc.
10.2 Access Power, Inc. Stock Option Plan*
10.3 Amendment No. 1 to Stock Option Plan*
10.4 Purchase and Sale Agreement between Access Power, Inc.
and Netspeak Corporation dated as of June 17, 1998
10.5 Employment Agreement with Howard Kaskel dated
July 1, 1998
10.6 Agreement to terminate Master Franchise Agreement
between Access Power, Inc. and Access Power Canada,
Inc. dated December 11, 1998
10.7 Internet Telephony Services Agreement dated December 14,
1998, between Access Power, Inc. and Access
Universal Inc. ***
10.8 Internet Telephony Services Agreement dated October 2, 1998
between Access Power, Inc. and Ldt Net Com, Inc. ***
10.9 Office Lease Agreement between Douglas Partnerships II, Ltd.
and Access Power, Inc. dated August 1, 1997
23.1 Consent of Independent Auditors
23.2 Consent of L. Van Stillman (included in opinion filed
as Exhibit 5.1) **
24.1 Power of Attorney*
27.1 Financial Data Schedule (for SEC use only)
</TABLE>
_________________________
* Previously filed.
** To be filed by amendment.
*** Certain portions of this exhibit have been omitted pursuant to a
request for confidential treatment.
II-3<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of
1933, the Registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form SB-2
and authorized this amendment to Registration Statement to be signed
on its behalf by the undersigned, in the city of Ponte Vedra, State of
Florida, on the 22 day of December, 1998.
ACCESS POWER, INC.
By:/s/ Glenn Smith
Glenn Smith
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
amendment to Registration Statement has been signed by the following
persons on the 22 day of December, 1998, in the capacities
indicated.
Signature Position
--------- --------
/s/ Glenn A. Smith President and Chief Executive
Glenn A. Smith Officer and Director
(Principal Executive Officer)
/s/ Howard Kaskel Chief Financial Officer
Howard Kaskel (Principal Financial and
Accounting Officer)
________________________ Director
Tod R. Smith
/s/ Maurice J. Matovich Director
Maurice J. Matovich
II-4
ARTICLES OF AMENDMENT
OF
ACCESS POWER, INC.
Glenn Smith, certifies that he is the President and a Director
ACCESS POWER, INC., a Florida corporation (hereinafter referred to as
the "Corporation"); that the Board of Directors of the Corporation
adopted the following amendments to the Articles of Incorporation on
November 19, 1998 without the need for the approval of stockholders:
The name of the corporation is ACCESS POWER, INC.
Article III of the Articles of Incorporation of the Corporation,
as previously amended, is further amended by changing
paragraph 1 of the designation of the Corporation's Series A
Convertible Preferred Stock to provide that the number of
shares of authorized Preferred Stock designated as Series A
Convertible Preferred Stock shall be increased from 1000 to
1,200 shares.
In witness whereof, the undersigned President and Director of the
Corporation has executed these articles of amendment on November 19,
1998.
/s/ Glenn Smith
Glenn Smith, Chairman
ADVANCED COMMUNICATIONS
INTERNATIONAL MASTER FRANCHISE AGREEMENT
Between
ACCESS POWER, INC.,
a Florida corporation
(Franchisor)
and
ACCESS POWER CANADA, INC.,
a Federal corporation
(Master Franchisee)
Dated: April 26, 1998
Master Franchise Territory:
Canada
<PAGE>
ACCESS POWER INTERNATIONAL MASTER FRANCHISE AGREEMENT
<TABLE>
<S> <C>
BACKGROUND 6
ARTICLE 1 - APPOINTMENT 7
SECTION 1.1 GRANT. 7
SECTION 1.2 MASTER FRANCHISE TERRITORY. 7
SECTION 1.3 EXCLUSIVITY. 7
ARTICLE 2 - DUTIES OF THE FRANCHISOR 8
SECTION 2.1 TRAINING. 8
SECTION 2.2 LOAN OF THE ACCESS POWER MANUALS. 8
SECTION 2.3 ASSISTANCE AND SUPPORT. 9
SECTION 2.4 PRIVATE LABEL PRODUCTS. 10
SECTION 2.5 LIQUIDATED DAMAGES FOR SALE OF PROHIBITED PRODUCTS OR
SERVICES. 10
SECTION 2.6 LICENSES. 11
SECTION 2.7 DUTIES SOLELY TO THE MASTER FRANCHISEE. 11
SECTION 2.8 THE FRANCHISOR'S RIGHT TO DELEGATE DUTIES. 11
ARTICLE 3 - DUTIES OF THE MASTER FRANCHISEE 12
SECTION 3.1 MANAGEMENT OF MASTER FRANCHISEE OPERATIONS. 12
SECTION 3.2 TRAINING OF EMPLOYEES AND FRANCHISEES. 12
SECTION 3.3 HIRING AND TRAINING OF EMPLOYEES. 12
SECTION 3.4 FRANCHISE SALES. 12
SECTION 3.5 PRE-OPENING ASSISTANCE TO FRANCHISEES. 13
SECTION 3.6 CONTINUED ASSISTANCE AND SUPPORT OF FRANCHISEES. 13
SECTION 3.7 OTHER OBLIGATIONS AND REQUIREMENTS. 14
SECTION 3.8 INSURANCE. 15
SECTION 3.9 WAIVER OF SUBROGATION. 16
SECTION 3.10 EFFECT OF FRANCHISOR INSURANCE. 16
SECTION 3.11 FAILURE TO MAINTAIN INSURANCE. 16
SECTION 3.12 CONFIDENTIALITY. 16
SECTION 3.13 COMPLIANCE WITH FRANCHISE AGREEMENTS. 16
ARTICLE 4 - FEES, COMPENSATION AND INCENTIVES 17
SECTION 4.1 MASTER FRANCHISE FEE. 17
SECTION 4.2 MASTER FRANCHISE FEE RELIEF. 17
SECTION 4.3 ADDITIONAL MASTER FRANCHISE FEE PAYMENT TERMS. 17
SECTION 4.4 POPULATION COVERAGE INCENTIVE. 18
SECTION 4.5 ROYALTIES AND OTHER FEES. 18
ARTICLE 5 - BILLING AND PAYMENTS 19
SECTION 5.1 STANDARD BILLING PRACTICES. 19
SECTION 5.2 SPECIAL SERVICES BILLING. 19
SECTION 5.3 BILLING OF USAGE ACROSS THE NETWORK. 19
SECTION 5.4 INTEREST ON LATE PAYMENTS; LATE CHARGE. 19
SECTION 5.5 PAYMENT TO THE FRANCHISOR; CURRENCY. 20
SECTION 5.6 WITHHOLDING TAXES; VALUE-ADDED TAXES AND OTHER TAXES. 20
SECTION 5.7 COLLATERAL ASSIGNMENT OF FRANCHISE AGREEMENTS. 21
2<PAGE>
ARTICLE 6 - OPERATION OF MASTER FRANCHISEE IP TELEPHONY UNITS 21
SECTION 6.1 ADVERTISING. 21
SECTION 6.2 LINK AND MONITOR OF IP TELEPHONY UNITS. 21
SECTION 6.3 FRANCHISOR TEMPORARY OPERATION OF MASTER FRANCHISEE IP
TELEPHONY UNIT(S). 21
SECTION 6.4 OPERATIONAL REQUIREMENTS. 22
ARTICLE 7 - PROPRIETARY PROPERTY 23
SECTION 7.1 THE FRANCHISOR'S REPRESENTATIONS AS TO THE PROPRIETARY MARKS. 23
SECTION 7.2 THE MASTER FRANCHISEE'S USE AND SUBLICENSE OF THE
PROPRIETARY PROPERTY. 24
SECTION 7.3 INFRINGEMENT BY THE MASTER FRANCHISEE. 24
SECTION 7.4 CLAIMS AGAINST THE PROPRIETARY PROPERTY. 25
SECTION 7.5 INDEMNIFICATION OF THE MASTER FRANCHISEE. 25
SECTION 7.6 THE FRANCHISOR'S RIGHT TO MODIFY THE PROPRIETARY MARKS. 25
SECTION 7.7 OWNERSHIP; INUREMENT SOLELY TO THE FRANCHISOR. 25
SECTION 7.8 FRANCHISOR RESERVATION OF RIGHTS. 26
ARTICLE 8 - ACCESS POWER MANUALS AND OTHER CONFIDENTIAL INFORMATION 26
SECTION 8.1 IN GENERAL. 26
SECTION 8.2 CONFIDENTIAL USE. 26
SECTION 8.3 PERIODIC REVISIONS. 27
SECTION 8.4 PRIOR INFORMATION. 27
ARTICLE 9 - ACCOUNTING AND RECORDS 27
SECTION 9.1 BOOKS AND RECORDS. 27
SECTION 9.2 REPORTS AND STATEMENTS. 28
SECTION 9.3 REVIEW AND AUDIT BY THE FRANCHISOR. 28
SECTION 9.4 CONFIDENTIALITY. 28
SECTION 9.5 MASTER FRANCHISEE NAME, HOME ADDRESS AND TELEPHONE NUMBER. 28
ARTICLE 10 - TRANSFER OF INTEREST 29
SECTION 10.1 TRANSFER BY THE FRANCHISOR. 29
SECTION 10.2 TRANSFER BY MASTER FRANCHISEE. 29
SECTION 10.3 THE FRANCHISOR'S RIGHT OF FIRST REFUSAL. 31
SECTION 10.4 SECURITIES OFFERINGS BY THE MASTER FRANCHISEE. 32
ARTICLE 11 - DEFAULT AND TERMINATION 33
SECTION 11.1 TERMINATION BY THE MASTER FRANCHISEE. 33
SECTION 11.2 TERMINATION BY THE FRANCHISOR - WITHOUT NOTICE. 34
SECTION 11.3 TERMINATION BY THE FRANCHISOR - AFTER NOTICE. 34
SECTION 11.4 TERMINATION BY THE FRANCHISOR - AFTER NOTICE AND RIGHT TO CURE. 35
SECTION 11.5 TERMINATION NON-PARTY INITIATED. 35
ARTICLE 12 - OBLIGATIONS OF THE MASTER FRANCHISEE UPON TERMINATION OR EXPIRATION 36
SECTION 12.1 PAYMENT OF OUTSTANDING AMOUNTS. 36
SECTION 12.2 RETURN OF MATERIALS. 36
SECTION 12.3 LOSS OF EXCLUSIVITY; CESSATION OF SALES; CESSATION OF SERVICES. 36
SECTION 12.4 CHANGE OF CORPORATE NAME. 37
SECTION 12.5 COMPETITION DIFFERENTIATION. 37
3<PAGE>
ARTICLE 13 - INDEPENDENT COVENANTS OF THE MASTER FRANCHISEE 37
SECTION 13.1 DEVOTION TO THE SALE AND SERVICE OF FRANCHISES. 37
SECTION 13.2 DIVERSION OF BUSINESS; COMPETITION AND INTERFERENCE WITH THE
FRANCHISOR. 37
SECTION 13.3 MODIFICATION OF COVENANTS. 39
SECTION 13.4 INDEPENDENT COVENANTS. 39
ARTICLE 14 - INDEPENDENT CONTRACTOR AND INDEMNIFICATION 39
SECTION 14.1 INDEPENDENT STATUS. 39
SECTION 14.2 INDEMNIFICATION. 39
ARTICLE 15 - REPRESENTATIONS AND WARRANTIES 40
SECTION 15.1 NO RELIANCE. 40
SECTION 15.2 REPRESENTATIONS OF THE FRANCHISOR. 40
SECTION 15.3 REPRESENTATIONS OF THE MASTER FRANCHISEE; OPINION OF COUNSEL. 40
SECTION 15.4 ACKNOWLEDGEMENT OF RISK. 41
ARTICLE 16 - MEDIATION AND ARBITRATION; EQUITABLE RELIEF 42
SECTION 16.1 MEDIATION AND ARBITRATION. 42
SECTION 16.2 EXCEPTIONS TO MEDIATION AND ARBITRATION; EQUITABLE RELIEF. 43
ARTICLE 17 - TERM 43
SECTION 17.1 MASTER FRANCHISE TERM. 43
SECTION 17.2 OPTION TO OBTAIN SUCCESSOR ACCESS POWER INTERNATIONAL MASTER
FRANCHISE AGREEMENT. 44
SECTION 17.3 REINSTATEMENTS AND EXTENSIONS. 44
ARTICLE 18 - DEFINITIONS 44
SECTION 18.1 DEFINITIONS. 44
SECTION 18.2 OTHER DEFINITIONAL PROVISIONS. 48
ARTICLE 19 -GENERAL PROVISIONS 48
SECTION 19.1 RELEASE OF PRIOR CLAIMS. 48
SECTION 19.2 AMENDMENTS. 48
SECTION 19.3 PROMOTIONAL ALLOWANCES. 49
SECTION 19.4 MODIFICATION OF THE SYSTEM. 49
SECTION 19.5 BINDING EFFECT. 49
SECTION 19.6 NOTICES. 49
SECTION 19.7 HEADINGS. 50
SECTION 19.8 SEVERABILITY. 50
SECTION 19.9 WAIVERS. 50
SECTION 19.10 ENFORCEMENT COSTS. 51
SECTION 19.11 JURISDICTION AND VENUE. 51
SECTION 19.12 REMEDIES CUMULATIVE. 51
SECTION 19.13 EFFECTIVENESS; COUNTERPARTS. 51
SECTION 19.14 CONSENTS, APPROVALS AND SATISFACTION. 52
SECTION 19.15 GOVERNING LAW. 52
SECTION 19.16 INTERPRETATION. 52
SECTION 19.17 ENTIRE AGREEMENT. 53
SECTION 19.18 SURVIVAL. 53
4<PAGE>
SECTION 19.19 FORCE MAJEURE. 53
SECTION 19.20 THIRD PARTIES. 53
SECTION 19.21 RIGHT OF PARTIES. 53
SECTION 19.22 LANGUAGE. 53
SECTION 19.23 WAIVER OF PUNITIVE DAMAGES CLAIMS. 54
SECTION 19.24 WAIVER OF JURY TRIAL. 54
FORM OF ACCESS POWER FRANCHISE AGREEMENT 56
TRADEMARKS GRANTED AND FILED 57
VOCAL TEC GATEWAY SOFTWARE LICENSE AGREEMENT 58
DEPLOYMENT/PERFORMANCE SCHEDULE 59
COLLATERAL ASSIGNMENT OF FRANCHISE AGREEMENTS 60
RIDER TO UCC-1 FINANCING STATEMENT 64
</TABLE>
5<PAGE>
ACCESS POWER INTERNATIONAL MASTER FRANCHISE AGREEMENT
THIS INTERNATIONAL MASTER FRANCHISE AGREEMENT IS SIGNED ON APRIL 26,
1998, BETWEEN ACCESS POWER, INC., A FLORIDA CORPORATION (THE
"FRANCHISOR") AND ACCESS POWER CANADA, INC., A FEDERAL CORPORATION
(THE "MASTER FRANCHISEE").
BACKGROUND
A. The Franchisor has developed and owns a special advanced
communications system under the trade name "Access Power Advanced
Communications" that offers Internet telephony products and services
to the global consumer marketplace, with an emphasis on marketing to
businesses and individual consumers.
B. The distinguishing characteristics of the System include:
Private Label Products; Software; uniform standards and procedures for
business operations; customer billing; training in the operation,
management and promotion of the Access Power Franchise; promotional
programs; customer development and service techniques; other technical
assistance; and ongoing research and development.
C. The Franchisor desires to engage the Master Franchisee as a
subfranchisor of Access Power Franchises in the Master Franchise
Territory and the Master Franchisee desires to be so engaged.
D. The Master Franchisee recognizes the benefits to be derived
from receiving a Master Franchise from the Franchisor to operate its
own IP Telephony Units, establish, sell and service Access Power
Franchises in the Master Franchise Territory and desires to enter into
this International Master Franchise Agreement subject to the
conditions and controls prescribed in this Agreement and to receive
the benefits provided by the Franchisor in connection with this
Agreement.
E. The Franchisor has reviewed the application of the Master
Franchisee and has decided to award an International Master Franchise
to the Master Franchisee pursuant to the terms of this Agreement.
F. The Master Franchisee has had sufficient opportunity to be
advised thoroughly of the terms and conditions of this Agreement by
advisors of the Master Franchisee's own choosing, has had an
opportunity to review the Franchisor's current U.S. form of Franchise
Offering Circular and has made an independent investigation of the
Franchisor's operations, and the Master Franchisee and the Franchisor
have concluded an agreement that they reduce to this written document,
which is intended to fully set forth as between the parties all of
their understanding and agreements, representations and warranties
pertaining to their relationship and which terms are acknowledged by
the parties to be material and reasonable.
G. The Franchisor is aware of the Master Franchisee's desire to
provide long distance telephone service Offnet (without use of the
Internet). Franchisor will permit the Master Franchisee to market and
sell Offnet services under the Access Power name. Master Franchisee
can offer Offnet long distance telephone service based upon least cost
routing and quality considerations.
The parties agree as follows:
6
<PAGE>
ARTICLE 1 - APPOINTMENT
-----------------------
Section 1.1 Grant.
-----
The Franchisor grants to the Master Franchisee and the Master
Franchisee accepts from the Franchisor, subject to the terms contained
in this Agreement, the right to, within the Master Franchise
Territory, operate its own IP Telephony Units and sell Franchises to
Franchisees pursuant to the form of Franchise Agreement attached as
Exhibit A, as it may be amended from time to time only upon the mutual
written agreement of the parties. The Master Franchisee is permitted
to adapt the form of Franchise Agreement to reflect the laws,
commercial usage, customs and business realities of the federal and
provincial laws of Canada and to use a form of Franchise Agreement
that is consistent with the form of other commercial agreements in use
in Canada.
Section 1.2 Master Franchise Territory.
--------------------------
(a) DEFINITION. The Master Franchisee agrees that the Master
Franchise confers the exclusive right to operate its own IP Telephony
Units and sell Franchises to be located in Canada (the "Master
Franchise Territory").
(b) PROVINCE OF ALBERTA. The Master Franchisee shall not "trade in a
franchise" in the Province of Alberta, as such term is defined in the
Franchises Act of Alberta, as amended, nor engage in any conduct in or
related to the Province of Alberta which would be a violation of any
applicable law, rule or regulation thereof until: (seq level3
\*romani) the Franchisor has been granted an exemption in respect to
this Master Franchise; and (seq level3 \*romanii) the Master
Franchisee is properly registered as a subfranchisor or otherwise
complied with the Act. For application under the Franchises Act of
Alberta, the Franchisor shall be responsible for the development and
presentation of franchise documents, including costs associated
therewith. The Franchisor shall be responsible for obtaining the
exemption or approval and the Master Franchisee shall be responsible
for all expenses associated therewith, including, but not limited to
administrative costs, filing costs, and registration fees. Nothing
herein is intended to prevent the Master Franchisee from operating its
own IP Telephony Unit(s) in the Province of Alberta, if such operation
is not in violation of any applicable law, rule or regulation thereof,
including, but not limited to the Franchises Act of Alberta, as
amended.
Section 1.3 Exclusivity.
-----------
(a) IP TELEPHONY UNITS. During the Agreement Term and provided
that the Master Franchisee has not defaulted upon any of its
obligations under this Agreement, the Franchisor shall not itself, nor
grant the right to any third party to, sell any Franchises nor install
or operate any IP Telephony Units within the Master Franchise
Territory nor originate any traditional long distance service therein.
Upon termination or expiration of this Agreement, the Franchisor shall
not be bound by the restrictions in this Section, notwithstanding any
agreed upon continuation of this Agreement.
(b) SERVICE SALES. In addition, the Master Franchisee
understands the Franchisor network marketing program where independent
sales representatives sell Private Label Products and secure
subscriptions for Franchisor services within the Master Franchise
Territory. Master Franchisee receives no override or other commission
in connection with the sales by such independent sales
representatives. However, Master Franchisee recognizes the benefit to
be received in terms of additional usage of its own and its
Franchisee's IP Telephony Units.
7
<PAGE>
ARTICLE 2 - DUTIES OF THE FRANCHISOR
------------------------------------
The Franchisor shall provide the Master Franchisee with the
following assistance and services so long as such assistance and
services are necessary for the operation of the Master Franchisee's
business and provided the Master Franchisee is not in default under
this Agreement:
SECTION 2.1 TRAINING.
--------
(a) INITIAL TRAINING. The Franchisor shall provide 5 days of
Initial Training for up to 4 Trainees at the Master Franchisee's
location in Toronto, Canada. All Trainees must be acceptable to
the Franchisor. In addition to a written test, Initial Training
includes instruction in marketing, promotion and advertising,
sales techniques, servicing of Franchisees and computer applications
at a time scheduled by the Franchisor. The Franchisor shall provide,
at its expense, instructors, facilities, training materials and
technical training tools in connection with Initial Training. The
Master Franchisee shall be responsible for all expenses of the
Trainees in attending Initial Training including all travel, lodging
and meal expenses. All costs and expenses incurred to have additional
employees or agents of the Master Franchisee attend Initial Training,
including reasonable training fees, shall be borne by the Master
Franchisee, and are subject to the prior written approval of the
Franchisor.
(b) FAILURE TO COMPLETE INITIAL TRAINING. In the event any
Trainee fails to complete satisfactorily Initial Training, as
determined by the Franchisor, the Master Franchisee must: (iii) have
the Trainee retrained; or (2) hire another Trainee to complete Initial Training.
Any Initial Training which is required as a result of the failure of any
Trainee to satisfactorily complete the training will be conducted at the
at the expense of the Master Franchisee including all travel, lodging and
meal expenses of attendee(s) and trainers and reasonable facility and
training fees.
(c) CONTENT. The content of, operation of, and manner of conducting
Initial Training shall be in the sole control of the Franchisor.
(d) ATTEND FRANCHISEE'S CORPORATE MANAGEMENT TRAINING. The Master
Franchisee must also attend at least one session of the Franchisor's
Corporate Management Training for Franchisees to learn to operate its
own IP Telephony units and to more fully understand and coordinate its
training of Franchisees. There shall be no fees or costs charged by
the Franchisor for such Corporate Management Training program.
(e) REFRESHER OR ADDITIONAL TRAINING. The Franchisor from time to
time may provide refresher training programs, seminars or advanced management
training for the Master Franchisee at a facility designated by the Franchisor
which may be required, at the option of the Franchisor. Such training shall
not be required more often than once a year. The Master Franchisee shall
be responsible for costs and expenses associated with all travel, meals
and lodging for the Master Franchisee's attendees but there shall be
no fees or costs charged by the Franchisor for the programs, seminars
or training. Required refresher or additional training may take any
form of training as the Franchisor may choose, including, but not
limited to CD-ROM and long distance learning via videoconference.
SECTION 2.1 LOAN OF THE ACCESS POWER MANUALS.
--------------------------------
The Franchisor shall loan to the Master Franchisee one registered
copy of the Access Power Manuals (with periodic revisions as
required), it being the Franchisor's practice to deliver to the Master
Franchisee the Access Power Manuals at or shortly before the time of
Initial Training. The Master Franchisee shall be responsible for any
translation of the Access Power Manuals and all future updates and
modifications into French and for dissemination of the Access Power
Manuals to Franchisees.
8<PAGE>
SECTION 2.3 ASSISTANCE AND SUPPORT.
----------------------
(a) SALE OF PRODUCTS AND EQUIPMENT. The Franchisor will sell
to the Master Franchisee for its use and resale to Franchisees the
Access Power Telephony Gateway Server at prevailing wholesale prices.
Gateway Server purchases are non-refundable and cannot be paid in
installments. Such sales will be inclusive of the necessary Gateway
software licensing fees. The sale shall occur and title shall pass
in the United States. All shipments shall be F.O.B. point of origin
or determined by the Franchisor. The Master Franchisee shall be
responsible for their shipment and importation into Canada. The
Master Franchisee is not required to obtain equipment for itself
nor its Franchisees from Franchisor, as long as any equipment to be
used in the provision of the services hereunder meets the specific
technical requirements set forth by Franchisor and are available to
the Master Franchisee upon written request. This fee includes the
licensing of the Gateway software if purchased from Franchisor.
(b) PURCHASES FROM FRANCHISOR OR FRANCHISOR AFFILIATES. Master
Franchisee must purchase or license from Franchisor or Franchisor Affiliates
the Private Label Products and other items that Franchisor require if
implemented on a System-wide basis.
(c) AUTHORIZED SPECIFICATIONS AND SUPPLIERS. Master Franchisee must
purchase or lease equipment, supplies, inventory, advertising materials and
other products and services used for the operation of Master Franchisee Access
Power Franchise solely from authorized manufacturers, contractors and
other suppliers who demonstrate, to Franchisor continuing reasonable
satisfaction: (seq level3 \*romani) the ability to meet Franchisor
standards and specifications for these items; (seq level3 \*romanii)
possess adequate quality controls and capacity to supply Master
Franchisee needs promptly and reliably; and (seq level3 \*romaniii)
have been approved in writing by Franchisor and not later disapproved.
Franchisor will use Franchisor best reasonable efforts to negotiate
agreements with suppliers that, in Franchisor good faith belief, are
in the best interest of all Access Power franchisees. Franchisor may
approve a single supplier for any brand and may approve a supplier
only as to a certain brand or brands. In approving suppliers for the
System, Franchisor may take into consideration factors like the price
and quality of the products or services and the supplier's
reliability. Franchisor may concentrate purchases with 1 or more
suppliers to obtain the lowest prices and/or the best advertising
support and/or services for any group of Franchise Units or Company
Units. Approval of a supplier may be conditioned on requirements on
the frequency of delivery, standards of service, warranty policies
including prompt attention to complaints, and concentration of
purchases, as stated above, and may be temporary, pending Franchisor
additional evaluation of the supplier.
(d) APPROVAL OF NEW SPECIFICATIONS AND SUPPLIERS. If Master
Franchisee propose to purchase or lease any equipment, supplies,
inventory, advertising materials or other products or services for the
provision of IP Telephony services from an unapproved supplier, Master
Franchisee must submit to Franchisor a written request for approval, or
request the supplier to do so. Franchisor will have the right to require,
as a condition of Franchisor approval, that Franchisor representatives
be permitted to inspect the supplier's facilities, and that samples from
the supplier be delivered, at Franchisor option, either to Franchisor
or to an independent, certified laboratory designated by Franchisor
for testing. Franchisor is not liable for damage to any sample that
results from the testing process. Master Franchisee will pay a charge
not to exceed the reasonable cost of the inspection and the actual
cost of the testing. Franchisor reserve the right, at Franchisor
option, to reinspect the facilities and products of any approved
supplier and continue to sample the products at the supplier's expense
and to revoke approval upon the supplier's failure to continue to meet
Franchisor standards and specifications. Franchisor may also require
as a condition to Franchisor approval, that the supplier present
satisfactory evidence of insurance, for example, product liability
insurance, protecting Franchisor and Franchisor franchisees against
all claims from the use of the item within the System.
(f) FIELD CONSULTANTS. Subject to the availability of special
consultants, as determined by the Franchisor, the Franchisor will,
upon written request by the Master Franchisee, assist and provide a
special consultant to render on-site assistance to the Master
Franchisee or its Franchisees at the Master Franchisee's cost,
including the costs of meals, lodging, travel and wages as determined
by the then standard hourly consultant fees charged by the Franchisor.
9<PAGE>
(g) ADVISORY ASSISTANCE. The Franchisor shall provide
continuing advisory assistance to the Master Franchisee in the sale of
Franchises and the operation and promotion of a franchised business as
the Franchisor deems advisable, which will include telephone
assistance (provided that all telephone calls will be at the expense
of the Master Franchisee), and which may also include Software
training and assistance, communication of new developments,
improvements in equipment and supplies, and new techniques in
advertising, service and management which are relevant to the
operation of a franchised business.
(h) PROMOTIONS. The Franchisor will assist the Master
Franchisee in promotions as the Franchisor, in its discretion, deems
appropriate and will make available at no additional fee or cost to
the Master Franchisee copies or samples of all advertising and
promotional items used or developed by the Franchisor or in
association with the System, including novelty items, advertising
brochure, flyers and advertisements.
(j) RESEARCH AND DEVELOPMENT. The Franchisor shall continue to
research and develop new products and services, introductions and
techniques as deemed appropriate by the Franchisor in its sole and
absolute discretion. Franchisor must approve any additional products
that the Master Franchisee comes up with before sale thereof under the
Access Power tradename.
SECTION 2.4 PRIVATE LABEL PRODUCTS.
----------------------
Franchisor has developed certain Private Label Products for use
in the System. Due to the importance of quality control and
uniformity of these Private Label Products, it is to the mutual
benefit of the parties that Franchisor closely control the production
of the Private Label Products, Master Franchisee agree that Master
Franchisee will purchase from Franchisor or from an approved source
Franchisor designate and license, all of Master Franchisee needed
supplies of the Private Label Products. All products sold by or
through Franchisor or Franchisor Affiliates to Master Franchisee will
be sold in accordance with the terms expressly stated in writing by
Franchisor or the manufacturer of the products.
SECTION 2.5 LIQUIDATED DAMAGES FOR SALE OF PROHIBITED PRODUCTS OR
SERVICES.
------------------------------------------------------
The Franchisee agrees that the offer to sell or the sale of
unauthorized or prohibited products and services will result in
damages to the Franchisor. The Franchisee agrees these damages will
be measured as $1,500 for each day of the prohibited offer or sale,
payable to the Franchisor upon demand. These damages are in addition
to the Franchisor's other rights or remedies, including the
Franchisor's right strictly to enforce or terminate this Agreement as
provided in this Agreement and obtain injunctive relief, except to the
extent any other rights are excluded by law in light of this Section.
The parties agree that a precise calculation of the full extent of the
damages that the Franchisor will incur from the offer or sale of
unauthorized products and services is difficult to determine and the
Franchisor and the Franchisee desire certainty in this matter and
agree that the liquidated damages are reasonable and are not a
penalty.
SECTION 2.6 LICENSES.
--------
(a) PROPRIETARY MARKS. Subject to the terms of this Agreement,
the Franchisor licenses to the Master Franchisee the right to use and
to sublicense to its Franchisees the right to use the "Access Power
Advanced Communications" trade name and other Proprietary Property
as set forth currently in Exhibit B and as may be amended at the
discretion of the Franchisor.
(B) LICENSE OF THE VOCALTEC GATEWAY SOFTWARE. Subject to this
Agreement, the Master Franchisee agrees to enter into a license
agreement with VocalTec for its VocalTec Gateway Software pursuant
to the License Agreement stated in Exhibit C.
10<PAGE>
SECTION 2.7 DUTIES SOLELY TO THE MASTER FRANCHISEE.
--------------------------------------
All of the duties and obligations of the Franchisor under this
Agreement are solely to the Master Franchisee. No other party is
entitled to rely on, enforce, or obtain relief for breach of such
obligations either directly or by subrogation.
SECTION 2.8 THE FRANCHISOR'S RIGHT TO DELEGATE DUTIES.
-----------------------------------------
The Master Franchisee acknowledges the Franchisor's right to
delegate any or all of the duties of the Franchisor under this
Agreement to a Designee. The Master Franchisee shall be required to
discharge its duties in all respects with such Designee to the extent
requested by the Franchisor, from time to time, in the same manner
with which the Master Franchisee is otherwise required to do so with
the Franchisor.
ARTICLE 3 - DUTIES OF THE MASTER FRANCHISEE
-------------------------------------------
The Master Franchisee shall perform the following duties on an
exclusive, full-time, best efforts basis:
SECTION 3.1 MANAGEMENT OF MASTER FRANCHISEE OPERATIONS.
------------------------------------------
The Manager must devote his or her best full-time efforts to the
management and operation of Master Franchisee business and such
related activities, which are approved in writing by the Franchisor.
Master Franchisee agree that Master Franchisee operations require the
day-to-day supervision of a Manager at all times Master Franchisee
operations are open for business. The Manager, and all successive
Managers, if any, are required to complete Corporate Management
Training before managing Master Franchisee operations, unless
Franchisor otherwise agree in writing.
SECTION 3.2 TRAINING OF EMPLOYEES AND FRANCHISEES.
-------------------------------------
The Master Franchisee shall train its and its Franchisee's
employees in accordance with the terms of the individual Franchise
Agreement for each Access Power Advanced Communications Franchise in
the Master Franchise Territory and shall train according to the
standards, policies and procedures prescribed by the Franchisor in the
Access Power Manuals and any other written communications from the
Franchisor to the Master Franchisee from time to time.
SECTION 3.3 HIRING AND TRAINING OF EMPLOYEES.
--------------------------------
Master Franchisee is solely responsible for the terms of their
employment and compensation and, except for training required under
this Agreement, for the proper training of the employees of the Master
Franchisee's operations. Master Franchisee is solely responsible for
all employment decisions and functions, including hiring, firing,
establishing wage and hour requirements, disciplining, supervising and
record keeping. Master Franchisee will not recruit or hire any
employee of an Access Power Franchise operated by Franchisor or
another franchisee within the System without obtaining the employer's
written permission.
<PAGE>
Section 3.4 Franchise Sales.
---------------
(a) The Master Franchisee's responsibilities in this regard may
include advertising for prospective Franchises, screening of
prospective Franchises pursuant to standards prescribed by the
Franchisor and obtaining and reviewing completed franchise
applications. The Master Franchisee shall make no representations
inconsistent with any authorized materials delivered by the Master
Franchisee to prospective Franchisees.
11<PAGE>
(b) The Master Franchisee shall comply with all applicable
Canadian and provincial laws and regulations relating to the sale of
Franchises.
(c) The Master Franchisee shall maintain a detailed log as to
each prospective Franchisee including all letters, telephone contacts,
personal meetings, and other information required by the Franchisor.
The Master Franchisee shall make no oral or written statement,
promise, guarantee, representation, understanding or other agreement
which is outside of, or inconsistent with, the terms of the Franchise
Agreement. The Master Franchisee shall not use any marketing or
advertising materials that have not been previously supplied by the
Franchisor or previously approved, in writing, by the Franchisor.
(d) All advertising must receive the prior written approval of
the Franchisor before its use and Master Franchisee shall comply with
all laws regulating the content and use of such advertising.
SECTION 3.5 PRE-OPENING ASSISTANCE TO FRANCHISEES.
-------------------------------------
(a) With respect to a Franchisee's selection of a site for
the establishment and operation of a Franchised Business, the Master
Franchisee shall be required to:
(i) develop and provide standards and criteria for the
threshold consideration of possible sites;
(ii) develop meaningful information concerning possible
site selection and present such information to a Franchisee;
(iii) upon request of a Franchisee, consult with the Franchisee
regarding site selection and the negotiation of real estate leases; and
(iv) consider and evaluate applications presented by the Franchisees
for site approval.
The site for a Franchised Business must be located in the Master
Franchise Territory.
(b) The Master Franchisee shall provide the Franchisee with Corporate
Management Training, pre-opening inspections, pre-opening on-site training,
an opening supervisor, and grand opening assistance as set forth in the
Franchise Agreement. The Master Franchisee shall use its best efforts
to ensure that a Franchisee's Franchised Business opens within 120
days from the execution of the Franchise Agreement.
SECTION 3.6 CONTINUED ASSISTANCE AND SUPPORT OF FRANCHISEES.
-----------------------------------------------
(a) CUSTOMER SERVICE. The Master Franchisee will provide
customer service functions including customer activation, billing,
technical support and marketing assistance.
(b) FIELD VISITS. The Master Franchisee shall be required
to provide assistance to the Franchisees in the development and operation
of their respective Franchises by means of periodic visits by the Master
Franchisee at such time as the Master Franchisee considers reasonably
necessary. The Master Franchisee shall make itself available to the
Franchisees and sales agents for consultation on such matters as
operations, advertising and promotion, installation and business methods.
12<PAGE>
(c) ACCESS POWER MARKETING FUND. The Master Franchisee shall be
solely responsible for maintaining and administering the Access Power
(Canada) Marketing Fund (as defined in the Franchise Agreement). The
Master Franchisee shall administer the Access Power (Canada) Marketing
Fund for Canada in a similar manner as the Franchisor administers the
U.S. Access Power Marketing Fund and provide a semi-annual accounting
of the Access Power (Canada) Marketing Fund to the Franchisor and all
Franchisees. In addition, Master Franchisee will contribute to the
Access Power (Canada) Marketing Fund for all IP Telephony Units that
are operated by the Master Franchisee at the same rate as is required
of the Franchisees thereof.
(d) ADVICE ON LOCAL ADVERTISING. The Master Franchisee shall
provide suggestions and comments to Franchisees regarding regional and
local advertising, and direction regarding the proper usage of the
Franchisor's Proprietary Marks.
(e) PERIODIC FRANCHISEE MEETINGS. The Master Franchisee shall
conduct periodic meetings of all Franchisees in the Master Franchise Territory.
SECTION 3.7 OTHER OBLIGATIONS AND REQUIREMENTS.
----------------------------------
(a) LICENSES. The Master Franchisee shall be responsible for
complying with any and all licensing requirements and other applicable
laws concerning the performance of the Master Franchisee's duties, for
which the Franchisor makes no representations and warranties.
(b) TELEPHONES. The Master Franchisee shall at all times: (i)
maintain continuously a reasonable number of operating telephone lines and
telephone numbers to be used exclusively by the Master Franchisee for the
operation of its business with sufficient staff to handle telephone calls
in an efficient and courteous manner at all times during business hours;
and (ii) maintain an answering service after normal business hours.
(c) COMPLIANCE WITH LAWS. The Master Franchisee shall comply with
all Canadian, provincial and local laws, rules and regulations except where
the Master Franchisee is challenging the application of such to the operation
of the Franchised Business, and shall obtain, maintain and renew when required
any and all permits, certificates or franchises necessary for the full and
proper conduct of the its business under this Agreement, including
qualification to do business, fictitious, trade or assumed name
registration, occupational licenses and franchise salesperson
regulations. Copies of all inspection reports, warnings, certificates
and ratings, issued by any governmental entity during the Agreement
Term in connection with the conduct of its business which indicate
material non-compliance by the Master Franchisee with any applicable
law, rule or regulation, shall be forwarded to the Franchisor by the
Master Franchisee within 2 days of the Master Franchisee's receipt of
such items. The Master Franchisee shall have ten business days
following notification of or otherwise becoming aware of any material
non-compliance to cure, if possible, such non-compliance.
(d) TAX PAYMENTS; CONTESTED ASSESSMENTS. The Master Franchisee
shall promptly pay when due all taxes levied or assessed by any Canadian,
provincial or local tax authority. In the event of any bona fide dispute
as to liability for taxes assessed or other indebtedness, the Master
Franchisee may contest the validity or the amount of the tax or indebtedness
in accordance with procedures of the taxing authority or applicable law;
however, in no event shall the Master Franchisee permit a tax sale or
seizure by levy of execution or similar writ or warrant, or attachment
by a creditor, to occur against any assets used in connection with its
business.
<PAGE>
(e) INSPECTIONS. The Master Franchisee shall permit the Franchisor
and/or its representatives to enter the office of the Master Franchisee and
its training facility at any time during normal business hours, for purposes
of conducting inspections including a review of the Master Franchisee's books
and records, shall cooperate fully with the Franchisor and/or its agents in
such inspections by rendering such assistance as they may reasonably
request and by permitting them, at their option, to observe the manner
in which the Master Franchisee is selling franchises and rendering its
13<PAGE>
services on behalf of the Franchisor. The inspections may be
conducted without prior notice at any time when the Master Franchisee
or one of its managing employees is at its business. The inspections
will be performed in a manner which minimizes interference with the
operation of its business. Upon notice from Franchisor, and without
limiting Franchisor other rights under this Agreement, Master
Franchisee will take all steps necessary to correct immediately any
deficiencies detected during inspections, including immediately
stopping use of any equipment, advertising, materials, products,
supplies or other items that have not been approved by Franchisor or
otherwise do not conform to Franchisor then-current requirements.
(f) MINIMUM PERFORMANCE REQUIREMENT. The Master Franchisee
acknowledges and agrees that its performance under this Agreement will
be measured, in part, by the capacity of IP Telephony provided by the
Master Franchisee and its Franchisees during the Agreement Term as a
result of the Master Franchisee's efforts in accordance with the
Deployment/Performance Schedule set forth in Exhibit D. The Master
Franchisee shall be relieved of its responsibilities with respect to
the Deployment/Performance requirements in Exhibit D during any period
of time in which Franchisor has not met its performance requirement as
stated in Exhibit D.
(g) NOTICES TO THE FRANCHISOR. The Master Franchisee shall notify
the Franchisor in writing within 10 days of each of the following events:
(i) The actual commencement of, any material action, suit or
proceeding against the Master Franchisee or any of its managerial
employees;
(ii) The issuance of any order, writ, injunction, award or
decree of any court, agency or other governmental instrumentality,
which, in any of the above instances, may materially adversely affect
the operation, financial condition or good will of the Master Franchisee;
or
(iii) Notice to the Master Franchisee of a violation of any law,
ordinance or regulation materially relating to its business.
If any action or proceeding is brought against the Master Franchisee
materially relating to its business, the Master Franchisee shall
immediately provide the Franchisor with copies of all pleadings,
papers and material correspondence relating to the action or
proceeding. The Master Franchisee shall keep the Franchisor informed
about the progress and outcome of such action or proceeding.
SECTION 3.8 INSURANCE.
---------
(a) The Master Franchisee shall procure and maintain in full
force and effect during the Agreement Term, at its sole expense, an
insurance policy or policies, as the Franchisor may reasonably require,
protecting the Master Franchisee and the Franchisor, and their officers,
directors, partners and employees, against any loss, liability, personal
injury, death, or property damage or expense whatsoever arising in
connection with the Master Franchisee's obligations under this Agreement.
All liability policies shall name the Franchisor as an additional named
insured and shall provide that the Franchisor will receive notice of the
Master Franchisee's default in payment of any premium and 30 days' prior
written notice of termination, cancellation, expiration or alteration
to provide less coverage. The insurance afforded by any liability
policy shall not be limited in any way by reason of any insurance
maintained by the Franchisor.
(b) The policy or policies procured by the Master Franchisee shall
be written by a licensed insurance company and shall include, at a minimum,
commercial general casualty insurance and general liability insurance,
including products liability, property damage, owned and non-owned motor
vehicle coverage, and personal injury coverage with a combined single limit
of at least $1,000,000, unless otherwise agreed in writing by the Franchisor,
an "Errors and Omissions" policy with at least $1,000,000 coverage, as
well as such other insurance as may be required by Canadian or
provincial statute or rule including workers' compensation insurance,
if applicable. The Franchisor may from time to time require that
additional coverage be procured or that minimum limits be increased as
reasonably necessary for the Master Franchisee's and the Franchisor's
protection.
14<PAGE>
(c) At least 2 weeks before commencing operation of the Master
Franchisee's obligations under this Agreement, the Master Franchisee
shall submit to the Franchisor one or more certificates showing that
the Master Franchisee has procured the required insurance. The Master
Franchisee shall submit evidence annually of the renewal or extension of
such policies.
(d) If the Master Franchisee fails to procure and maintain any
required insurance coverage or furnish satisfactory evidence of such
insurance, the Franchisor, in addition to its other remedies, may, but
need not, procure such insurance coverage on behalf of the Master
Franchisee, who shall pay the Franchisor on demand the amount of any
premiums and expenses incurred by the Franchisor in obtaining such insurance.
SECTION 3.9 WAIVER OF SUBROGATION.
---------------------
Insofar as and to the extent that this Section may be effective
without invalidating it or making it impossible to secure insurance
coverage obtainable from responsible insurance companies, the parties
agree that, for any loss that is covered by insurance then being
carried by them, their respective insurance companies have no right of
subrogation against the other.
SECTION 3.10 EFFECT OF FRANCHISOR INSURANCE.
------------------------------
Master Franchisee obligation to maintain the policies in the
amounts required is not limited by reason of any insurance Franchisor
maintain, nor will Franchisor performance of Master Franchisee
obligations relieve Master Franchisee of liability under the indemnity
provisions in this Agreement.
SECTION 3.11 FAILURE TO MAINTAIN INSURANCE.
-----------------------------
If either party fails to maintain the insurance required by this
Agreement, the other party has the right and authority (without any
obligation to do so) to immediately procure the insurance and to
charge the cost of the insurance to the party obligated to maintain
the insurance, plus interest at the maximum rate permitted by law,
these charges, together with a reasonable fee for the party's expenses
in so acting, the other party agrees to pay immediately upon notice.
Section 3.12 Confidentiality.
---------------
During the Agreement Term and at all times thereafter, the Master
Franchisee shall not in any manner, either directly or indirectly,
divulge, disclose or communicate to any person or firm, except to or
for the Franchisor's benefit, any Confidential Information of any kind
concerning any matters affecting or relating to the business of the
Franchisor or its affiliates, which it may have acquired in the course
of or as incident to its engagement by the Franchisor, including the
terms of this Agreement, the terms of any other agreement between the
Franchisor and its employees or its Franchisees, or any Franchisee
lists, compilations or profiles or the name of any Franchisee, without
regard to whether such information would be deemed confidential or
material, the parties agreeing that such information affects the
successful and effective conduct of the Franchisor's business and its
good will, and that any breach of the terms of this Section shall be a
material breach of this Agreement. All of the records, files and
materials created or used by the Master Franchisee in performing its
duties under this Agreement shall be the Franchisor's sole and
exclusive property and any such items in the Master Franchisee's
possession shall be returned immediately to the Franchisor upon its
request, and in any event upon termination of this Agreement.
15<PAGE>
SECTION 3.13 COMPLIANCE WITH FRANCHISE AGREEMENTS.
------------------------------------
The Master Franchisee shall timely comply with all its
obligations under the respective Franchise Agreements executed between
the Master Franchisee and the Franchisees. The Master Franchisee is
required to use the Franchise Agreement attached as Exhibit A in
selling Franchises to Franchisees, shall not materially alter or amend
the Franchise Agreement (including any of its exhibits) at any time
without first obtaining the written consent of the Franchisor and
shall provide a copy of the Franchise Agreement executed by each
Franchisee, with all exhibits thereto, and all amendments thereto (if
any), to the Franchisor within 10 days after the execution of the
Franchise Agreement and each amendment, respectively. Any other
agreements or understandings between the Master Franchisee and the
Franchisees which materially contradict the Franchise Agreement shall
be a material breach of this Agreement unless the Master Franchisee
has first obtained written consent from the Franchisor to enter into
such agreement. The parties expressly agree that the Master
Franchisee may determine the amounts to be charged under the Franchise
Agreement to any Franchisee for the Initial Franchise Fee, Equipment
Fee, Monthly Internet Management Fee, Royalty Fee, Advertising
Contributions and other fees (and that the amounts currently specified
in the Franchise Agreement are merely recommended amounts, and the
Master Franchisee shall in no way suffer in its business relations
with the Franchisor or any other person over whom the Franchisor has
control if such recommended amounts are not followed), provided that
the portions of the payments owed to the Franchisor as specified in
Sections 4.1 and 4.5 shall not be changed, notwithstanding any
variation among the amounts charged to Franchisees.
ARTICLE 4 - FEES, COMPENSATION AND INCENTIVES
---------------------------------------------
SECTION 4.1 MASTER FRANCHISE FEE.
--------------------
The Master Franchisee shall pay to the Franchisor an initial fee
of U.S. $3,570,000 (the "Master Franchise Fee") payable: (i) U.S.
$24,000 payable at the same time this Agreement is signed (for the
first 120 Lines); and (ii) U.S. $1,000 for each additional Line but
not to exceed U.S. $3,570,000 regardless if more than 3,666 Lines are
deployed. The Master Franchise Fee or any portion thereof paid to the
Franchisor is non-refundable in consideration for administrative and
other costs incurred by the Franchisor and opportunities lost or
deferred as a result of the rights granted to the Master Franchisee in
this Agreement.
SECTION 4.2 MASTER FRANCHISE FEE RELIEF.
---------------------------
In the event of a termination of this Agreement, if Franchisor and
franchisees thereof have not deployed the number of Lines set forth in
Exhibit D, the Master Franchisee will not be required to continue
deployment nor pay any remaining Master Franchise Fee. However, all
Master Franchise Fee amounts paid up to such termination are non-
refundable and belong to Franchisor. In addition, as long as the
Master Franchisee continues deployment of Lines under this Agreement,
the Master Franchisee will pay U.S. $1,000 for each Line until the
maximum total Master Franchise Fee of $3,570,000 has been paid.
<PAGE>
SECTION 4.3 ADDITIONAL MASTER FRANCHISE FEE PAYMENT TERMS.
---------------------------------------------
(a) Master Franchisee has the option to pay to Franchisor any
outstanding portions of the Master Franchise Fee at any time.
(b) In the event the Franchisor and franchisees thereof have deployed
the number of lines required in Exhibit D and the Master Franchisee
has not deployed the number of Lines required in Exhibit D, the unpaid
portion of the Master Franchise Fee, up to U.S. $2,300,000, becomes
due and payable to the Franchisor.
16<PAGE>
SECTION 4.4 POPULATION COVERAGE INCENTIVE.
-----------------------------
Upon provision of service to 8 distinct cities within the Master
Franchise Territory, Access Power Canada Inc. will be awarded a
100,000 share option of Access Power, Inc. common stock at an exercise
price of $1.00 per share. However, the option will be made available
earlier to the Master Franchisee, if, upon exercise and sale of all
such shares, the proceeds are to be used for the sole purpose of
purchasing hardware and software for the expansion of IP Telephony
coverage within the Master Franchise territory.
SECTION 4.5 ROYALTIES AND OTHER FEES.
------------------------
(a) The Master Franchisee shall pay to the Franchisor: (i) 5%
of Gross Revenues (in U.S. Dollars) relating to revenues from IP Telephony
products and services from Calls originating from Canada whether terminating
inside or outside Canada; (ii) 15% of Gross Revenues (in U.S. Dollars) relating
to revenues from IP Telephony services from Calls terminating in Canada but
originating outside of Canada; and (iii) 2.5% of Gross Revenues (in U.S.
Dollars) relating to revenues from Offnet Long Distance telephone service.
(the "Royalty Fee"). Payment of the Royalty Fee will be made in accordance
with the billing and payments provisions in Article 5. For the purchase of
any prepaid Calls, the assumption will be that these are for IP Telephony
services originating from Canada and thus the Royalty Fee will be 5% of
Gross Revenues (in U.S. Dollars). The Royalty Fee is not applicable to
non- prepaid calls that both originate and terminate without the use of
IP Telephony and/or a Gateway Server.
(b) After the first year of this Agreement, the Master Franchisee will
pay to the Franchisor a Monthly Internet Management Fee equal to $750 (in U.S.
Dollars) for each Province and Territory in which the Master Franchisee or
Franchisees thereof have IP Telephony Units.
(c) For billing and/or accounting services, the Franchisor shall receive
3% of the Master Franchisee's gross revenues on services originating on an IP
Telephony Unit outside of the Master Franchise Territory and terminating on a
Gateway Server within the Master Franchise Territory. This 3% is in addition to
any Royalty Fee associated with such services.
(d) Unless otherwise expressly provided to the contrary in this
Agreement, all expenses incurred by the Master Franchisee in connection with
soliciting prospective Franchisees and servicing the Franchisees as required
pursuant to ARTICLE 3 shall be the sole expense and obligation of the Master
Franchisee.
17
<PAGE>
ARTICLE 5 - BILLING AND PAYMENTS
--------------------------------
SECTION 5.1 STANDARD BILLING PRACTICES.
--------------------------
The first 5 Business Days of each month will be used to conduct
the settlement process. The settlement process will generate
reporting which detail amounts owed and offsets thereto. Payments
required, whether from Master Franchisee to Franchisor or vice versa,
shall be made by electronic fund transfer by the 10th Business Day of
each month. All accounts and transactions, with the exception of
Business Accounts, will be included in the settlement process in the
month immediately following the month in which the charge was
incurred. Business Accounts will be included in the settlement
process of the second month following the month in which the charges
were incurred. For example, business usage of services in the month
of August will be included in the settlement process in the first 5
Business Days of October. Nothing herein is intended to prevent the
Franchisor or Master Franchisee from charging Consumer Accounts or
Business Accounts on a non-monthly cycle.
SECTION 5.2 SPECIAL SERVICES BILLING.
------------------------
Billing for special services will be done in the same fashion as
is described in Section 5.1. For example, the Royalty Fee due on the
sale of all prepaid Calls will be included in the settlement process
in the month immediately following the month in which the purchase of
such service was made. For services, such as Conference Calling and
Calling from Web sites, which are included in an arrears billing
process to businesses, will be billed on the same cycle as Business
Accounts.
SECTION 5.3 BILLING OF USAGE ACROSS THE NETWORK.
-----------------------------------
Non-Business Account customers will be billed by the Franchisor
or Master Franchisee based upon the origination Gateway or, if the
call is PC to Phone, the termination Gateway for such call. The fact
that the call is billed by one party or another, except with respect
to section 4.5(c), will not impact the treatment of that call during
the settlement process, as described in section 5.1. Business Account
usage information will be provided to the Franchisor, Master
Franchisee or Franchisee responsible for the billing of such Business
Account in the settlement period of the month immediately following
such usage. Both the Franchisor and the Master Franchisee will be
collecting payments for each other and other franchisees. Amounts
collected and owed to the non-collecting party will be calculated and
remitted for distribution during each monthly settlement process.
SECTION 5.4 INTEREST ON LATE PAYMENTS; LATE CHARGE.
--------------------------------------
Although each failure to pay monies when due will be a material
breach of this Agreement, to encourage prompt payment and to cover the
costs involved in processing late payments, if any payment under this
Agreement or any other agreement between the Franchisor and the Master
Franchisee is overdue for any reason, the party owing the monies must
pay to the party owed the monies, on demand, in addition to the
overdue amount, interest on such overdue amount from the date it was
due until paid equal to the lesser of: (seq level3 \*romani) 18% per
annum; or (seq level3 \*romanii) the maximum rate of interest
permitted by law. In addition to interest on overdue amounts, the
party owing the monies shall pay a late charge on demand of U.S.$500
for each payment which is more than 10 days overdue to cover the party
owed the monies costs in dealing with the late payment. Interest on
late payments and the late charge will be based upon the appropriate
"buying" foreign exchange rate on the date that is most favorable to
the party owed the monies between the date payment first became due
and the date such payment is actually made. Nothing in this Agreement
shall be construed to mean that either party is to pay, or has
contracted to pay, any sum in excess of that which may lawfully be
charged or contracted for under any applicable law. The intention of
the parties is to conform strictly to applicable usury laws and it is
agreed that if an excess is inadvertently collected it shall be
applied to reduce the amounts owed.
18<PAGE>
SECTION 5.5 PAYMENT TO THE FRANCHISOR; CURRENCY.
-----------------------------------
(a) All payments from the Master Franchisee to the Franchisor
shall be made directly from the Master Franchisee's bank to the
Franchisor's account at its designated bank. All payments from the
Franchisor to the Master Franchisee shall be made directly from the
Franchisor's bank to the Master Franchisee's account at its designated
bank. All references in this Agreement and all other agreements
between the parties to monetary amounts shall be with respect to U.S.
dollars, unless otherwise agreed in writing by both parties. Canadian
dollars shall be converted into U.S. dollars upon the prevailing
"buying" foreign exchange rates of Sun Trust on the date payment is
due. All costs associated with currency conversion shall be borne by
the Master Franchisee. In the event of the imposition of currency
controls or restrictions, the Master Franchisee is obligated to use
its best efforts to obtain any consents or authorizations that may be
necessary to effect such payment.
(a) For any and all bank accounts maintained by Master Franchisee
for Access Power operations, Master Franchisee must identify these accounts
to Franchisor and provide to Franchisor copies of the monthly statements
for all these accounts and the details of all deposits and withdrawals
to them.
(b) Master Franchisee will pay all charges imposed by Master
Franchisee financial institution. Franchisor will pay all charges
imposed by Franchisor financial institution.
SECTION 5.6 WITHHOLDING TAXES; VALUE-ADDED TAXES AND OTHER TAXES.
----------------------------------------------------
(a) If the payments by the Master Franchisee to the Franchisor
are subject to withholding taxes, the Master Franchisee shall withhold
the appropriate taxes required by the laws of Canada and pay such
taxes to the appropriate taxing authorities. The Master Franchisee
shall provide the Franchisor with evidence of payment of such taxes as
well as such other documentation as the Franchisor may require for use
in the United States in order to receive the appropriate foreign tax
credit. The Franchisor shall have the right to take whatever steps
are necessary to verify not only that taxes are withheld, but also
that payment of the amount withheld is actually made by the Master
Franchisee to the appropriate authorities.
(b) If the payments by the Franchisor to the Master Franchisee
are subject to withholding taxes, the Franchisor shall withhold the
appropriate taxes required by the laws of the United States and pay
such taxes to the appropriate taxing authorities. The Franchisor
shall provide the Master Franchisee with evidence of payment of such
taxes as well as such other documentation as the Master Franchisee may
require for use in Canada in order to receive the appropriate foreign
tax credit. The Master Franchisee shall have the right to take
whatever steps are necessary to verify not only that taxes are
withheld, but also that payment of the amount withheld is actually
made by the Franchisor to the appropriate authorities.
(c) The Master Franchisee shall be responsible for the payment
and remittance to the appropriate taxing authorities of any import
duties or tariffs, value-added taxes or other taxes that may be
imposed with respect to any payment from the Master Franchisee to the
Franchisor under this Agreement.
(d) The Franchisor shall be responsible for the payment and
remittance to the appropriate taxing authorities of any import duties
or tariffs, value-added taxes or other taxes that may be imposed with
respect to any payment from the Franchisor to the Master Franchisee
under this Agreement.
Section 5.7 Collateral Assignment of Franchise Agreements.
---------------------------------------------
19<PAGE>
The Master Franchisee shall collaterally assign to the Franchisor
its interest pursuant to the Collateral Assignment of Franchise
Agreements attached as Exhibit E. In the event of the termination of
this Agreement, exercise of the Collateral Assignment is subject to
the terms and time frame of section 12.3(a).
ARTICLE 6 - OPERATION OF MASTER FRANCHISEE IP TELEPHONY UNITS
-------------------------------------------------------------
SECTION 6.1 ADVERTISING.
-----------
Master Franchisee will not solicit business through the use of an
800 number, catalog, direct mail or other advertising method without
Franchisor consent. Additionally, all advertising involving the use
of the Access Power name and or trademark(s) must be pre-approved by
Franchisor.
SECTION 6.2 LINK AND MONITOR OF IP TELEPHONY UNITS.
--------------------------------------
All IP Telephony Units installed by the Master Franchisee or
Franchisees thereof will become part of the Access Power Gateway
Network which will be monitored and controlled from a centralized
location by the Franchisor. The Master Franchisee will have the
ability to access the machines, in a manner approved by Franchisor,
within the Master Franchise Territory for the purposes of monitoring,
billing and reporting of activity within the Master Franchise
Territory. Master Franchisee must be able to provide on-site
technical support should such a need arise. Franchisor will provide
periodic on-site assistance and inspection of the installation of the
equipment and will generally inspect the IP Telephony Unit Co-location
Facility. Franchisor reserves the right to terminate calls outside
of the Access Power Gateway Network if such termination is in the best
interest of the customer using the service as determined by the
Franchisor.
Section 6.3 Franchisor Temporary Operation of Master Franchisee IP
Telephony Unit(s).
------------------------------------------------------
At Franchisor option, if:
(a) Master Franchisee fails to be accessible to Franchisor or
Master Franchisee customers during normal business hours;
(b) Master Franchisee is unavailable to Master Franchisee
customers, prospective customers and Franchisor for more than 5 days;
(c) Service from one or more production IP Telephony Units is
unavailable for a continuous period of 2 days;
(d) Master Franchisee or the Franchise Owner dies or becomes
permanently incapacitated and the franchise or the ownership interest
in the franchise is not assigned promptly under Section 10.2;
(e) Master Franchisee materially breaches any of Franchisor
standards including customer satisfaction and specifications for the
operation of the IP Telephony Units; or
(f) Master Franchisee Agreement is terminated and Franchisor
elects to purchase Master Franchisee business assets as provided in
Section 10.3;
then, Franchisor is entitled (but has no obligation) to operate and
manage the IP Telephony Unit(s) for Master Franchisee (or Master
Franchisee estate) until this Agreement is terminated, transferred to
a party under Section 10.2, purchased by Franchisor, or until Master
Franchisee resume control over Master Franchisee operations and
operates in accordance with this Agreement. Franchisor operation and
20<PAGE>
management will not continue for more than 90 days without Master
Franchisee written consent or the consent of the representatives of
Master Franchisee estate. If Franchisor operates Master Franchisee IP
Telephony Unit(s), Franchisor will account to Master Franchisee or
Master Franchisee estate for all net income from the operation less
Franchisor reasonable expenses incurred in, and a reasonable
management fee for, Franchisor operation of Master Franchisee IP
Telephony Units.
Section 6.4 Operational Requirements.
------------------------
Master Franchisee agrees to operate Master Franchisee IP
Telephony Units in conformity with all uniform methods, standards and
specifications required in the Manuals or otherwise, to ensure that
the highest degree of quality and service is uniformly maintained.
Master Franchisee agrees to:
(a) Sell usage over the Access Power Gateway Network (System);
(b) Keep Master Franchisee IP Telephony Units continuously open
for business.
(c) Comply with the procedures and systems Franchisor reasonably
institute on a System-wide basis both now and in the future, including
those on sales, good business practices, advertising and other
obligations and restrictions;
(d) Insure highest reasonable standard with minimum blockage
base, on capacity standards described in the Manuals. Reasonable
minimum hardware and software standards for these connections will be
set by Franchisor and may be periodically revised, and Master
Franchisee will have reasonable time to upgrade when standards change.
The standards to comply satisfactorily will not exceed those
applicable to new Franchises and new Franchisor Units. Master
Franchisee will bear the entire cost of upgrades, changes or
additions, for any changes in, or additions of, equipment and other
items, or the taking of other actions Franchisor specify to satisfy
Franchisor then-current standards for IP Telephony Unit capacity
utilization, image, positioning, marketing strategy, or quality but
not to exceed total capital expenditures of $20,000 per IP Telephony
Unit for non-capacity enhancements every 18 months (the "Capital
Expenditure Limitation").
(e) Maintain in sufficient supply (as Franchisor may reasonably
prescribe in the Manuals or otherwise in writing) and use at all
times, only inventory, equipment, materials, advertising methods and
formats, and supplies that conform with Franchisor standards and
specifications, if any, at all times sufficient to meet the
anticipated volume of business, and to refrain from deviating from
these requirements without Franchisor written consent;
(f) Adhere to the highest standards of honesty, integrity, fair
dealing and ethical conduct in all dealings with customers, suppliers,
employees, independent contractors, Franchisor and the public;
(g) Sell or offer for sale only the products and services that
meet Franchisor reasonable standards of quality and quantity; have
been expressly approved for sale in the Manuals or otherwise in
writing by Franchisor and discontinue selling and offering for sale
any products and services that Franchisor reasonably disapproves in
writing at any time;
(h) Purchase and install, at Master Franchisee expense, all
equipment Franchisor reasonably specifies. The equipment must be
maintained in a condition that meets the operational standards
specified in the Manuals. As equipment becomes obsolete or
inoperable, Master Franchisee will replace the equipment with the
equipment that is then approved for use in the Access Power Franchise.
If Franchisor determine that additional or replacement equipment is
needed on a System-wide basis because of a change in technology,
customer concerns or health or safety considerations, Master
Franchisee will install the additional equipment or replacement
equipment within the time Franchisor specify, subject to the Capital
Expenditure Limitation in Section 6.4 (d).
21
<PAGE>
(i) Franchisor will provide Master Franchisee with an E-mail
account. Standards will include current uniform communications
software in use by the System; word processing and spreadsheet
software that is either the same as that in use at Franchisor office
or capable of reading and converting files created by Franchisor
office; and a computer capable of running the software and containing
reasonable minimums for memory and data storage and a modem connected
via network links to Franchisor System. Master Franchisee will be
responsible for all normal communications charges from the networks
making connection to Franchisor System, for example, phone bills or
bills from an on-line service. Information important to the
Franchisor System will be sent to Master Franchisee computer address
electronically. In order to stay informed on developments affecting
the System, Master Franchisee agrees to check and respond to Master
Franchisee electronic mailbox for System communications on a regular
basis.
(j) Terminate all IP telephony calls within the Franchisor
Network.
ARTICLE 7 - PROPRIETARY PROPERTY
---------------------------------
SECTION 7.1 THE FRANCHISOR'S REPRESENTATIONS AS TO THE PROPRIETARY MARKS.
-------------------------------------------------------------
The Franchisor represents to the Master Franchisee with respect
to the Proprietary Marks that:
(a) The Franchisor is the owner of all right, title, and interest
in and to the Proprietary Marks subject to the rights of senior users, if any;
(b) The Franchisor is in the process of applying for trademark
registration in Canada; and
(c) The Franchisor will take all steps necessary to preserve and
protect the ownership and validity of such Proprietary Marks.
SECTION 7.2 THE MASTER FRANCHISEE'S USE AND SUBLICENSE OF THE
PROPRIETARY PROPERTY.
-------------------------------------------------
The Master Franchisee may use, and sublicense to Franchisees to
use, the Proprietary Property only in accordance with standards and
specifications determined from time to time by the Franchisor. With
respect to the Master Franchisee's use of the Proprietary Property
pursuant to this Agreement, the Master Franchisee agrees that:
(a) The Master Franchisee shall use only the Proprietary Property
as designated from time to time by the Franchisor and shall use them only
in the manner required or authorized and permitted by the Franchisor;
(b) The Master Franchisee shall use the Proprietary Property only
in connection with the business of selling and servicing Franchises or
operating IP Telephony Units, unless otherwise expressly authorized in
writing by the Franchisor;
(c) The Master Franchisee's right to use the Proprietary Marks
is limited to such uses as are expressly authorized under this Agreement,
and any unauthorized use thereof shall constitute an infringement of the
Franchisor's rights; and
(d) The Master Franchisee shall not use the Proprietary Property
as security for any obligation or indebtedness.
22<PAGE>
SECTION 7.3 INFRINGEMENT BY THE MASTER FRANCHISEE.
-------------------------------------
The Master Franchisee acknowledges that the use of the
Proprietary Property outside the scope of this Agreement, without the
Franchisor's prior written consent, is an infringement of the
Franchisor's rights in the Proprietary Property, and expressly
covenants that during the Agreement Term, and after the expiration or
termination of this Agreement, the Master Franchisee shall not,
directly or indirectly, commit an act of infringement or contest or
aid in contesting the validity or right of the Franchisor to the
Proprietary Property, or take any other action in derogation of such
rights.
23
<PAGE>
SECTION 7.4 CLAIMS AGAINST THE PROPRIETARY PROPERTY.
---------------------------------------
In the event of any claim of infringement, unfair competition or
other challenge to the Master Franchisee's or any Franchisee's right
to use any Proprietary Property, or in the event the Master Franchisee
becomes aware of any use of or claims to, any Proprietary Property by
other persons, the Master Franchisee shall promptly (but in no event
more than 7 days later) notify the Franchisor in writing. The Master
Franchisee shall not communicate with anyone except the Franchisor and
its counsel in connection with any such infringement, challenge or
claim except pursuant to judicial process. The Franchisor will have
sole discretion as to whether it takes any action in connection with
any such infringement, challenge or claim, and the sole right to
control exclusively any litigation or other proceeding arising out of
any infringement, challenge or claim relating to any Proprietary
Property. The Master Franchisee must sign all instruments and
documents, render any assistance, and do any acts that the
Franchisor's attorneys deem reasonably necessary or advisable in order
to protect and maintain the Franchisor's interest in any litigation or
proceeding related to the Proprietary Property or otherwise to protect
and maintain the Franchisor's interests in the Proprietary Property.
SECTION 7.5 INDEMNIFICATION OF THE MASTER FRANCHISEE.
----------------------------------------
The Franchisor indemnifies the Master Franchisee against and will
reimburse the Master Franchisee for all damages for which it is held
liable in any proceeding arising out of its use of any Proprietary
Property in accordance with this Agreement, but only pursuant to and
in compliance with this Agreement, provided that the Master
Franchisee: (a) has timely notified the Franchisor of such claim or
proceeding in accordance with Section 7.4; (b) has otherwise complied
with this Agreement; and (c) allows the Franchisor sole control of
the defense and settlement of the action in accordance with Section
7.4.
Section 7.6 The Franchisor's Right to Modify the Proprietary Marks.
------------------------------------------------------
If it becomes advisable at any time in the sole and absolute
discretion of the Franchisor to modify or discontinue the use of any
Proprietary Mark and/or use one or more additional or substitute names
or marks, including due to the rejection of any pending registration
or revocation of any existing registration of any of the Proprietary
Marks, or the rights of senior users, the Master Franchisee is
obligated to do so at its sole cost and expense within 30 days of the
Franchisor's request. In such event the Franchisor shall be liable
solely to reimburse the Master Franchisee for its reasonable direct
printing and signage expenses in modifying or discontinuing the use of
the Proprietary Mark and substituting a different Proprietary Mark
(which expenses shall not include any expenditures made by the Master
Franchisee to promote a modified or substitute Proprietary Mark).
SECTION 7.7 OWNERSHIP; INUREMENT SOLELY TO THE FRANCHISOR.
---------------------------------------------
The Master Franchisee acknowledges that: (a) it has no ownership
or other rights in the Proprietary Property, except as expressly granted
in this Agreement; and (b) the Franchisor is the owner or authorized
licensee of the Proprietary Property. Master Franchisee agrees that
all good will associated with the Access Power Franchise inures
directly and exclusively to Franchisor benefit and is Franchisor sole
and exclusive property except through profit received from the
operation or possible permitted sale of Master Franchisee Franchises
during the Agreement Term. Master Franchisee will not in any manner
prohibit, or do anything that would restrict, Franchisor or any
existing or future franchisee from using the names or the Proprietary
Marks or from filing any trade name, assumed name or fictitious name
registration with respect to any business to be conducted outside the
Protected Territory or any business within the Protected Territory
24<PAGE>
that is permitted by this Agreement. If the Master Franchisee in the
operation of its Access Power business dealings secures in any
jurisdiction any rights whatsoever to any Proprietary Mark (or any
other Proprietary Property) not expressly granted under this
Agreement, the Master Franchisee shall immediately notify the
Franchisor and shall immediately assign all of the Master Franchisee's
right, title and interest to such Proprietary Marks to the Franchisor.
Franchisor, in writing and at its sole discretion can allow Master
Franchisee to maintain rights to specific Proprietary Marks or
Property.
Section 7.8 Franchisor Reservation of Rights.
--------------------------------
(a) Master Franchisee agrees that the license of the Proprietary
Marks granted to Master Franchisee has limited exclusivity and that,
in addition to Franchisor right to use and grant others the right to
use the Proprietary Marks outside the Protected Territory, all rights
not expressly granted in this Agreement to Master Franchisee
concerning the Proprietary Marks or other matters are expressly
reserved for Franchisor, including the right to sell services to
National and International Accounts located both outside or within the
Protected Territory without offering or providing the Master
Franchisee the right to participate.
(b) If Franchisor acquires a Competitive Business and units of
the Competitive Business encroach upon Master Franchise Territory,
Franchisor will have 1 year from the date of acquisition of the
Competitive Business to sell the encroaching units without being in
default under this Agreement. In the event that the Franchisor
receives an arm's-length written offer from an independent unrelated
third party, Master Franchisee has the right of first refusal for any
such sale.
ARTICLE 8 - ACCESS POWER MANUALS AND OTHER CONFIDENTIAL INFORMATION
SECTION 8.1 IN GENERAL.
----------
To protect the reputation and good will of the Franchisor, and to
maintain uniform standards of operation under the Proprietary Marks,
the Master Franchisee shall conduct its IP Telephony business and
cause the Franchisees to conduct his or her business in accordance
with the Access Power Manuals. The Access Power Manuals shall be
deemed to be an integral part of this Agreement with the same force
and effect as if fully set forth in this Agreement.
Section 8.2 Confidential Use.
----------------
The Master Franchisee shall at all times treat and maintain the
Confidential Information as confidential and trade secrets of the
Franchisor. The Access Power Manuals and Software shall, at all
times, be kept in a secure area within the offices of the Master
Franchisee. The Master Franchisee shall strictly limit access to the
Confidential Information to the employees of the Master Franchisee, to
the extent they have a "need to know" in order to perform their jobs.
The Master Franchisee shall report the theft, loss or destruction of
the Access Power Manuals or Software, or any portion thereof,
immediately to the Franchisor. Upon the theft, loss or destruction of
any of the Access Power Manuals or Software, a replacement copy will
be loaned to the Master Franchisee by the Franchisor at a fee of
$200.00 for each Access Power Manual or Software diskette. A partial
loss or failure to update any Access Power Manual or Software diskette
shall be considered a complete loss. The Master Franchisee shall not
at any time, without the Franchisor's prior written consent, copy,
record or otherwise reproduce any of the Confidential Information, in
whole or in part. All persons whom the Master Franchisee permits to
have access to the Access Power Manuals or any other Confidential
Information, shall first be required by the Master Franchisee to sign
the Franchisor's form of confidentiality agreement.
25<PAGE>
SECTION 8.3 PERIODIC REVISIONS.
------------------
The Franchisor may revise and change the contents of the Access
Power Manuals. The Master Franchisee agrees to comply and cause its
Franchisees to comply with each new or changed provision beginning on
the 30th day (or such longer time as specified by the Franchisor)
after written notice from the Franchisor. Revisions to the Access
Power Manuals shall be based on what the Franchisor, in its sole
discretion, deems is in the best interests of the System, including to
promote quality, enhance good will, increase efficiency, decrease
administrative burdens, or improve profitability of the Franchisor,
the Master Franchisee and its franchisees. The Master Franchisee at
its sole discretion and as it may deem in the best interests of all
concerned in any specific instance, to vary standards and the contents
of the Access Power Manuals for its Franchisees in the Master
Franchise Territory to reflect the laws, commercial usage, customs and
business realities of Canada and its provinces based upon the
peculiarities of the particular site or circumstances, density of
population, business potential, population of trade area, existing
business practices or any condition which the Master Franchisee deems
to be of importance to the successful operation of such Franchised
Businesses. The Master Franchisee shall at all times ensure that its
copy of the Access Power Manuals contains all updates received by the
Master Franchisee from the Franchisor and will be responsible for
translation thereof. In the event of any dispute as to the contents
of the Access Power Manuals, the terms contained in the Master Copy of
each of the Access Power Manuals maintained by the Franchisor at the
Franchisor's home office shall be controlling.
SECTION 8.4 PRIOR INFORMATION.
-----------------
The Master Franchisee further acknowledges that all Confidential
Information received prior to the Agreement Date was unknown to it
except through disclosure by the Franchisor in connection with the
grant of a Master Franchise and that the marketing practices and
operating procedures developed by the Franchisor for the operation of
the Franchised Business are important for the success of the System.
To the extent the Master Franchisee receives any Confidential
Information after the execution of this Agreement, and the Master
Franchisee does not object in writing to the Franchisor within 30 days
thereafter that any or all of the information comprising the
Confidential Information should not be considered Confidential
Information, then the Master Franchisee shall be deemed to have
irrevocably waived its right to make any such objection. The Master
Franchisee acknowledges that such representation and warranty is a
material inducement for the Franchisor to enter into this Agreement,
and any breach shall be a material breach of this Agreement.
ARTICLE 9 - ACCOUNTING AND RECORDS
SECTION 9.1 BOOKS AND RECORDS.
-----------------
The Master Franchisee shall maintain complete and accurate books
and records of its operations. Such books and records shall be
segregated from all other information not concerning the Master
Franchise and shall be preserved for at least 6 years from the dates
of their preparation (including the period after termination or
expiration of this Agreement).
26<PAGE>
SECTION 9.2 REPORTS AND STATEMENTS.
----------------------
The Master Franchisee shall submit to the Franchisor by the 4th
Business Day of each month during the Agreement Term, in the form
prescribed by the Franchisor, accurate records reflecting all revenues
of the preceding month and such other information as the Franchisor
may require from time to time. The Master Franchisee shall also
submit, an annual balance sheet and income statement, within 90 days
of end of the fiscal year of the Master Franchisee prepared in
accordance with generally accepted accounting principles consistently
applied. Each annual statement shall be audited by an independent
certified chartered accountant acceptable to the Franchisor, and shall
be signed by the Master Franchisee or by the Master Franchisee's
treasurer or chief financial officer attesting that the financial
statements are true and correct and fairly present the financial
position of the Master Franchisee as at and for the times indicated.
The Master Franchisee shall also supply to the Franchisor copies of
its income tax returns at the time such returns are filed with the
appropriate tax authorities. The financial statements and/or other
periodic reports described above must be prepared to segregate the
income and related expenses of the Master Franchise from those of any
other business which may be conducted by the Master Franchisee.
SECTION 9.3 REVIEW AND AUDIT BY THE FRANCHISOR.
----------------------------------
The Franchisor and its representatives shall have the right at
all reasonable times to examine and copy, at the Franchisor's expense,
the books and records of the Master Franchisee. The Franchisor shall
also have the right, at any time, to have an independent audit made of
the books and records of the Master Franchisee. If an inspection
should reveal that any financial information reported to the
Franchisor (such as revenues or payments owed to the Franchisor) has
been understated in any report to the Franchisor, the Master
Franchisee shall immediately pay to the Franchisor, upon demand, the
amount understated in addition to interest at the maximum rate
permitted by law commencing from the time the required payment was
due. If any inspection discloses an understatement of 2% or more of
revenues the Master Franchisee shall, in addition, reimburse the
Franchisor for the costs and expenses connected with the inspection
(including reasonable accounting and attorneys' fees and costs). The
foregoing remedies shall be in addition to any other remedies that the
Franchisor may have under this Agreement or under applicable law. If
the audit discloses an overpayment any amount paid by the Master
Franchisee to the Franchisor, the Franchisor will promptly pay to the
Master Franchisee the amount of such overpayment or offset such
overpayment against any amounts owed to the Franchisor.
SECTION 9.4 CONFIDENTIALITY.
---------------
Franchisor agrees to maintain the confidentiality of all
financial information Franchisor obtains about Master Franchisee
operations, and will not disclose this financial information to any
third party who is not bound to maintain the confidentiality of the
information; provided however, that: (i) Franchisor may use the
information in preparing any earnings claims or other information
required by federal or state franchise law; and (ii) Franchisor
may prepare a composite list of financial performances by Franchisor
franchisees for dissemination among the franchisees, identifying
Gross Revenues and advertising expenditures.
<PAGE>
Section 9.5 Master Franchisee Name, Home Address and Telephone
Number.
--------------------------------------------------
Master Franchisee agrees that, under federal and state franchise
laws and other applicable laws, Franchisor may be required to disclose
Master Franchisee name, home address and telephone number and Master
Franchisee agrees to the disclosure of Master Franchisee name, home
address and telephone number. Master Franchisee must notify
Franchisor of any change in Master Franchisee name, home address and
telephone number within 10 days of the change. Master Franchisee
releases Franchisor and Franchisor officers, directors, stockholders,
agents and legal successors and assigns from all causes of action,
suits, debts, covenants, agreements, damages, judgments, claims and
demands, in law or in equity, that Master Franchisee ever had, now
have, or that Master Franchisee later may have, from Franchisor
disclosure of Master Franchisee name, home address and telephone
number.
27<PAGE>
ARTICLE 10 - TRANSFER OF INTEREST
---------------------------------
Section 10.1 Transfer by the Franchisor.
--------------------------
The Franchisor shall have the absolute right to transfer, assign
or delegate all or any part of its rights or obligations under this
Agreement to any person without the consent or approval of the Master
Franchisee. If the Franchisor's transferee assumes the Franchisor's
obligations under this Agreement and sends to the Master Franchisee
written notice of the assignment and assumption, the Master Franchisee
agrees within 7 days of such request to execute a release of the
Franchisor except for any liabilities from which the Franchisor may
not be released under any applicable law. Any such required release
will not diminish or eliminate any right that the Master Franchisee
may have against the Franchisor or Franchisor's successors or assigns
for any breach of obligation(s) under this Agreement. The Franchisor
can also transfer its stock, engage in public and private securities
offerings, merge, consolidate, acquire other businesses including
Competitive Businesses sell all or substantially all of its assets,
borrow money (secured or unsecured), deal in its assets or otherwise
operate its business without the consent or approval of the Master
Franchisee.
Section 10.2 Transfer by Master Franchisee.
-----------------------------
(a) PERSONAL RIGHTS. Master Franchisee agrees that, unless
otherwise expressly permitted by this Agreement, Master Franchisee
will not sell, assign, transfer, convey or give voluntarily, involuntarily,
directly or indirectly, by operation of law or otherwise (collectively
"transfer") any direct or indirect interest in this Agreement, in the
Franchise or in Master Franchisee without Franchisor written consent.
However, Franchisor written consent is not required for: (i) a single
transfer of less than a 5% interest in a publicly-held corporation; (ii) a
single transfer of all or any part of any interest in Master Franchisee
to one of Master Franchisee other original shareholders or partners; or
(iii) a single transfer to another existing franchisee of the System.
A transfer of 50% or more of the voting or ownership interests in
Master Franchisee corporation, partnership or limited liability
company, individually or in the aggregate, directly or indirectly, is,
for all purposes of this Agreement, considered a transfer of an
interest in this Agreement by Master Franchisee. Any purported
transfer by Master Franchisee, by operation of law or otherwise in
violation of this Agreement, is void and is an Event of Default on
Master Franchisee part.
(b) NO ENCUMBRANCE. The Master Franchisee understands that
neither the rights of the Master Franchisee under this Agreement nor
any voting or ownership interest of more than 25% in the Master Franchisee
(or in any owner of the Master Franchisee) may be pledged, mortgaged,
hypothecated, given as security for an obligation or in any manner
encumbered.
(c) PERMITTED TRANSFER. The Franchisor shall not unreasonably
withhold or delay its consent to a transfer of any interest in this
Agreement if the following requirements are satisfied, any of which
may be waived by the Franchisor in its sole discretion:
(i) The Franchisor shall not have exercised its right
of first refusal;
(ii) All of the Master Franchisee's accrued monetary
obligations and all other outstanding obligations to the
Franchisor shall have been satisfied;
28<PAGE>
(iii) The Master Franchisee shall not be in default of
any provision of this Agreement, any Franchise Agreement in
which the Master Franchisee is a party, or any other
agreement between the Master Franchisee and the Franchisor or its
affiliates;
(iv) The Master Franchisee shall have executed a general
release of any and all claims against the Franchisor, its affiliates,
and their respective officers, directors, shareholders, representatives,
agents and employees, in their corporate and individual capacities,
except for liabilities from which the Franchisor may not be released
under any applicable law;
(v) The transferee shall execute the standard form of Access
Power International Master Franchise Agreement then being offered to
new master franchisees and such other ancillary agreements as the
Franchisor may require which may differ from the terms of this Agreement
and the Master Franchisee shall pay a Transfer Fee equal to the
Franchisor's actual direct expenses in lieu of the initial master
franchise fee. If the transfer is a wholly owned corporation, spouse,
son or daughter of the transferor, no Transfer Fee will be charged;
(vi) The transferee shall be interviewed at the Franchisor's
principal office without expense to the Franchisor and shall demonstrate
to the Franchisor's satisfaction that the transferee has the business and
personal skills, reputation and financial capacity required by the
Franchisor for a master franchisee;
(vii) The transferee shall satisfactorily complete the Franchisor's
application procedures for new master franchisees;
(viii) The transferee shall demonstrate to the Franchisor's sole
satisfaction that it has properly assumed and will be able to comply
with all of its obligations in connection with the Master Franchise.
The Master Franchisee shall remain liable for all obligations to the
Franchisor in connection with the Master Franchise prior to the effective
date of the transfer and shall execute any and all instruments
reasonably requested by the Franchisor to evidence such
liabilities; and
(ix) The Franchisor must be reasonably satisfied that the proposed
terms of sale or other factors involved in the transfer do not materially
reduce the potential ability of the transferee effectively to assume and
carry out its obligations. The Franchisor has no duty to consider such
factors and approval of a proposed transfer shall not be considered an
expression of opinion of the appropriateness or fairness of the
terms of the transfer or the likelihood of success of the
transferee. No disapproval of the transferee for failure to
satisfy the transfer conditions described in this Subsection, or
of any other condition to transfer set forth in this Agreement
shall cause any liability of the Franchisor to such transferee.
The Franchisor's consent to a transfer shall not constitute a waiver
of any claims it may have against the Master Franchisee, nor shall it
be deemed a wavier of the Franchisor's right to demand exact
compliance with any of the terms of this Agreement by the transferee.
29<PAGE>
Section 10.3 The Franchisor's Right of First Refusal.
---------------------------------------
(a) If at any time during the Agreement Term: (i) any
person who owns at least a 25% ownership or voting interest in the
Master Franchisee (or in any entity with an ownership interest in the
Master Franchisee) receivesan arm's-length written offer from an independent
unrelated third party to purchase any portion or all of such person's interest
(the portion or all of such person's interest hereinafter referred to as
the "Interest," and such type of offer later referred to as the
"Interest Offer"); or (ii) the Master Franchisee shall receive an arm's-length
written offer from an independent unrelated third party to purchase any
portion or all of the Master Franchisee's interests under this Agreement or,
outside the ordinary course of business, a material part or all of the assets
used in the Master Franchisee's business (such assets subject to the offer
later referred to as the "Assets", and such type of offer later referred to
as the "Asset Offer"), then the Master Franchisee shall ensure that
such person receiving the Interest Offer, or the Master Franchisee
receiving the Asset Offer (as the case may be, and in either case the
person receiving such third party's offer is hereinafter referred to
as the "Offeror") shall, if it desires to accept such offer, first
offer to sell to the Franchisor the Interest or the Assets for the
consideration and on the terms and conditions set forth in such third
party's written offer. The Offeror's offer (the "Offer") shall be
made by written notice to the Franchisor setting forth the name and
address of the prospective purchaser, the price and terms of the Offer
together with a franchise application completed by the prospective
purchaser, and any other information that the Franchisor may
reasonably request in order to evaluate the Offer including any
purchase and sale and related agreements proposed to be executed or
executed by the Master Franchisee or the third party. The Franchisor
shall have the first option to purchase the Interest or the Assets by
accepting the Offer, within 30 days after its receipt of the Offer and
required information.
(b) If the Franchisor gives notice of acceptance of the Offer,
then the Offeror shall sell the Interest or the Assets to the Franchisor
and the Franchisor shall purchase the Interest or the Assets from the Offeror,
for the consideration and upon the terms and conditions set forth in the
Offer, less any broker's commission not due if the Franchisor
exercises its right of first refusal but due and payable by the
Offeror upon the sale to the prospective purchaser. The Franchisor's
creditworthiness shall be deemed at least equal to the
creditworthiness of any proposed purchaser. If the Franchisor is a
public company at such time having shares traded on a U.S. national
securities exchange, the Offeror must accept the then-current value of
the Franchisor's registered shares in lieu of cash or Unique
Consideration.
(c) If an independent third party's written offer (and the Offeror's
corresponding offer to the Franchisor) provides for the purchaser's payment of
a Unique Consideration which is of such a nature that it cannot reasonably
be duplicated by the Franchisor, then the Franchisor may, in its notice
of exercise, in lieu of such Unique Consideration, substitute a cash
or stock (if a public company with registered shares) consideration in
an amount determined by mutual agreement of the Offeror and the
Franchisor within 45 days after the Offer is made or, failing such
agreement, by an independent appraiser selected by the Franchisor.
(d) If the proposed sale includes assets of the Offeror not
related to the operation of the Master Franchisee's business, the
Franchisor may, at its option, elect to purchase only the assets related
to the operation of Master Franchisee's business and an equitable purchase
price shall be determined in the reasonable discretion of the Franchisor
and allocated to each asset included in the proposed sale.
(e) Unless otherwise agreed by the Offeror and the Franchisor, the
closing of the purchase of the Interest or the Assets shall be held at the
Franchisor's then principal office or other location designated by the
Franchisor, on no later than the 60th day after the Offer is delivered to the
Franchisor, provided that the closing of any such purchase for which a
cash or stock consideration is determined in accordance with
Subsection 10.3(c) shall be held on the 15th day after such cash or
stock consideration is finally determined. At any such closing, the
Offeror shall deliver to the Franchisor an assignment and other
documents reasonably requested by the Franchisor representing a
transfer of ownership of the Interest or the Assets free and clear of
all liens, claims, pledges, options, restrictions, charges and
encumbrances, in proper form for transfer and with evidence of payment
of all applicable transfer taxes by the Offeror. The Franchisor shall
simultaneously therewith make payment of any cash consideration for
the Interest or Assets by a cashier's check drawn on a bank or thrift
doing business in the county of the Franchisor's principal place of
business or payment by the issuance of the Franchisor's registered
shares, after set off against the amount due to the Offeror for all
amounts the Master Franchisee owes the Franchisor, if any. The
remaining terms and conditions of such purchase and sale shall be set
forth in the Offer.
30<PAGE>
(f) If the Franchisor does not accept the Offer as provided above,
the Offeror shall be free, for a period of 60 days after the Franchisor
has elected not to exercise its option, to sell the Interest or the
Assets to the independent third party for the consideration and upon
the terms and conditions specified in such third party's written offer,
subject to full compliance with all terms and conditions of transfer
required under this Agreement, including those set forth in Section 10.2.
It shall be a condition precedent to any sale of the Interest to an
independent third party that there is delivered to such third party an
acknowledgment that the Interest purchased by such third party is and
shall be subject to the terms and conditions of this Agreement and
that such third party agrees to be bound to the terms of this Section
with respect to transferring the Interest, in the same manner as the
Offeror. If the Offeror does not sell the Interest or the Assets as
provided above within the aforesaid 60-day period, then any transfer
by him or her of the Interest or the Assets shall again be subject to
the restrictions set forth in this Agreement.
(g) In the event a proposed transferee is the spouse, son, or
daughter of the Offeror, the Franchisor shall not have any right of first
refusal; provided, however, that all such transferees shall be subject to
all of the restrictions on transfer of ownership imposed on the Offeror under
this Agreement.
(h) The Franchisor may assign its right of first refusal to another
entity, if foreign investment restrictions would not allow the Franchisor to
purchase directly.
(i) The Franchisor's rights contained in this Section shall not be
deemed to have been exercised for purposes of the Investment Canada Act until
the time of actual exercise by the Franchisor of its rights.
SECTION 10.4 SECURITIES OFFERINGS BY THE MASTER FRANCHISEE.
---------------------------------------------
(a) Corporate securities or partnership interests in the Master
Franchisee may be offered to the public, by private offering or otherwise.
The Master Franchisee shall comply with all applicable laws, orders,
rules and regulations of the United States, Canada and all other applicable
jurisdictions and governmental agencies governing the offer and sale of
securities.
(b) All materials to be used for a public or private offering or
to be submitted to a governmental agency under United States and Canadian
law shall first be submitted to the Franchisor for review for their
content, veracity and impact upon the public image and name of the Franchisor.
No offering or press release by or for the benefit of the Master Franchisee
shall imply (by use of the Proprietary Marks or otherwise) that the Franchisor
is participating in an underwriting, issuance, or offering of the Master
Franchisee's or the Franchisor's securities. The Franchisor shall
thereafter promptly advise the Master Franchisee in writing as to its
approval or disapproval of the information to be contained in the
offering materials and instruct the Master Franchisee as to any
information which it believes may have a detrimental effect, and
therefore shall not be included in the offering materials. Upon
completion of the final draft, the Master Franchisee shall submit 2
copies of the final draft to the Franchisor for approval. The
Franchisor shall review the final draft for any detrimental or
misstated data, material or information and either approve or
31<PAGE>
disapprove the final draft. Only after written approval has been
given by the Franchisor may the Master Franchisee proceed to file,
publish, issue, release and make public the offering materials. Any
information found to be detrimental or misstated must be stricken from
the final draft before release or publication. It is specifically
understood, however, that any such review by the Franchisor is solely
for its own information. The Franchisor's approval shall not
constitute any kind of authorization, endorsement, approval or
ratification as to the legal or factual sufficiency on which the
Master Franchisee or any other person may rely, either expressly or
impliedly. The Master Franchisee shall make no oral or written
representations of any kind indicating or implying that the Franchisor
has any interest or relationship whatsoever with the proposed offering
other than acting as the Franchisor pursuant to the terms of this
Agreement. The Master Franchisee's offering materials and sales
literature shall include the following statement, in the appropriate
language:
ACCESS POWER, INC. HAS NOT BEEN ASKED TO AND HAS
NOT PASSED UPON THE ACCURACY OR ADEQUACY OF THE
STATEMENTS MADE HEREIN NOR IS IT NOR WILL IT BE
RESPONSIBLE FOR THE INACCURACY OR INADEQUACY OF
THE SAME. FURTHER, ACCESS POWER, INC. WILL NOT
AND HAS MADE NO RECOMMENDATION RESPECTING THE
QUALITY, SUITABILITY, ADVISABILITY, OR NATURE OF
THE INVESTMENT CONTEMPLATED BY THIS OFFERING.
(c) The Master Franchisee in the offering must fully indemnify
the Franchisor in connection with the offering other than for any liability
arising from material errors or omissions in information provided by the
Franchisor to the Master Franchisee and incorporated into the offering
materials and relied upon by the investors.
(d) For each proposed offering reviewed by Franchisor, the Master
Franchisee shall pay to the Franchisor such amount as is necessary to
reimburse the Franchisor for its reasonable costs and expenses associated
with reviewing the proposed offering materials, including legal and
accounting fees.
(e) The Master Franchisee shall give the Franchisor at least 30
days' written notice prior to the effective date of any offering or
other transaction covered by this Section.
ARTICLE 11 - DEFAULT AND TERMINATION
------------------------------------
Section 11.1 Termination by the Master Franchisee.
------------------------------------
If the Master Franchisee has substantially complied with this
Agreement and the Franchisor materially breaches this Agreement, the
Master Franchisee will have the right to terminate this Agreement
effective 10 days after delivery of written notice of termination, if
the Franchisor does not cure such breach within 30 days after the
Franchisor receives a written notice of default from the Master
Franchisee, unless the breach cannot reasonably be cured within 30
days, in which case the Master Franchisee will have the right to
terminate this Agreement if, after the Franchisor's receipt of a
written notice of default from the Master Franchisee, the Franchisor
does not within 10 days undertake and continue efforts to cure such
breach and continue until completion. Any termination of this
Agreement by the Master Franchisee other than as provided above, will
be deemed a wrongful termination by the Master Franchisee.
32<PAGE>
SECTION 11.2 TERMINATION BY THE FRANCHISOR - WITHOUT NOTICE.
----------------------------------------------
Subject to applicable law, this Agreement shall automatically
terminate without notice or opportunity to cure on the date of the
occurrence of any of the following events, which shall be considered
defaults under this Agreement by the Master Franchisee. In addition,
the Master Franchisee shall notify the Franchisor in writing within 3
days of each of the following events: the Master Franchisee becomes
insolvent or makes a general assignment for the benefit of creditors;
a petition in bankruptcy is filed by the Master Franchisee or such a
petition is filed against or consented to by the Master Franchisee and
such petition is not dismissed within 45 days; the Master Franchisee
is adjudicated as bankrupt; a bill in equity or other proceeding for
the appointment of a receiver of the Master Franchisee or other
custodian for the Master Franchisee's business or assets is filed and
consented to by the Master Franchisee; a receiver or other custodian
(permanent or temporary) of the Master Franchisee's business or assets
is appointed by any court of competent jurisdiction; proceedings for a
composition with creditors under United States law is instituted by or
against the Master Franchisee; a final judgment in excess of
U.S.$5,000 remains unsatisfied or of record for 30 days or longer
(unless a supersedeas bond is filed); execution is levied against the
Master Franchisee's operation or property, or suit to foreclose any
lien against the assets of the Master Franchisee is instituted against
the Master Franchisee and not dismissed within 45 days; or a
substantial portion of real or personal property of the Master
Franchisee used in the Master Franchisee's business is sold after levy
thereupon by any sheriff, marshal or constable.
SECTION 11.3 TERMINATION BY THE FRANCHISOR - AFTER NOTICE.
--------------------------------------------
The Master Franchisee shall be deemed to be in default and the
Franchisor may, at its option, terminate all rights granted to the
Master Franchisee under this Agreement, without affording the Master
Franchisee any opportunity to cure the default, effective immediately
upon notice to the Master Franchisee, upon the occurrence of any of
the following events:
(a) If the Master Franchisee ceases to operate its business for
more than 14 days in any calendar year or for more than 7 consecutive
days or otherwise forfeits the right to do or transact business in Canada;
(b) If a serious or imminent threat or danger to public health or
safety results from the operation of the Master Franchisee's business and
such threat or danger remains uncorrected for 5 days after receipt by the
Master Franchisee of written notice from the Franchisor or a governmental
authority, unless a cure cannot be reasonably completed in such time, in
which event all reasonable steps to cure must be commenced within such time,
but a cure must be completed promptly thereafter, in no event later than 30
days after receipt of such written notice;
(c) If the Master Franchisee fails to maintain the Minimum Performance
Requirement;
(d) If the Master Franchisee, or any officer, director, owner or
managerial employee of the Master Franchisee, is convicted of a felony, a
crime of moral turpitude or any other crime or offense that the Franchisor
reasonably believes is likely to have a material adverse effect on the
System, the Proprietary Property, the good will associated with the Proprietary
Marks, or the Franchisor's interest in any of the Proprietary Property
unless the Master Franchisee immediately and legally terminates such
individual as an officer, director, owner and employee of the Master
Franchisee;
(e) The Master Franchisee denies the Franchisor the right to inspect
the Master Franchisee's business or to audit the sales and accounting records
of the Franchised Business;
(f) Conduct by the Master Franchisee which is deleterious to or
reflects unfavorably on the Master Franchisee or the System by exhibiting a
reckless disregard for the physical and mental well being of employees,
customers, the Franchisor's representatives or the public at large, including
battery, assault, sexual harassment or discrimination, racial
harassment or discrimination, alcohol or drug abuse or other forms of
threatening, outrageous or unacceptable behavior as determined in the
Franchisor's sole discretion;
33<PAGE>
(g) If the Master Franchisee, contrary to the terms of this Agreement,
purports to transfer any rights or obligations under this Agreement, without
the Franchisor's prior written consent as required under this Agreement;
(h) If any breach occurs under Sections 8.2 or 13.2;
(i) If the Master Franchisee knowingly maintains false books or
records, or knowingly submits any false reports to the Franchisor;
(j) If the Master Franchisee misuses or makes any unauthorized
use of the Proprietary Property or otherwise materially impairs the good
will associated with the Proprietary Property or the Franchisor's rights
in the Proprietary Property; or
(k) If the Master Franchisee has received from the Franchisor 3
or more prior Notices of Default for the same or similar defaults during
any 6 consecutive-month period, notwithstanding the fact that such
defaults were cured.
Section 11.4 Termination by the Franchisor - After Notice and Right to
Cure.
---------------------------------------------------------
Except as otherwise provided above, the Master Franchisee shall
have 30 days after delivery from the Franchisor of a written Notice of
Default specifying the nature of the default within which to remedy
any default other than as set forth above, and provide evidence of
cure satisfactory to the Franchisor. If any such default is not cured
within that time, or such longer period as applicable law may require,
all the rights of the Master Franchisee under this Agreement shall
terminate without further notice to the Master Franchisee effective
immediately upon the expiration of the 30-day period or such longer
period as applicable law may require. In addition to the events
specified in Sections 11.2 and 11.3, the Master Franchisee shall be in
default under this Section for any failure to comply with any of the
requirements imposed by this Agreement, as it may from time to time
reasonably be revised or supplemented by the Access Power Manuals, or
to carry out the terms of this Agreement in good faith. The Master
Franchisee shall have the burden of proving it properly and timely
cured any default, to the extent such cure is permitted under this
Agreement.
SECTION 11.5 TERMINATION - NON-PARTY INITIATED.
----------------------------------
Neither the Franchisor nor Master Franchisee shall be considered
in breach of this Agreement for termination of this Agreement as a
result of actions taken outside of the reasonable control of the
parties hereto. Both parties acknowledge that in the future, as a
result of changes in the Internet's technical capacity or the
Regulatory environment surrounding the provision of IP Telephony
services this Agreement may be terminated with neither party
considered in breach. In the event of a termination of this
Agreement pursuant to this section, the limitations upon the Master
Franchisee under section 13.2(b) shall not apply.
ARTICLE 12 - OBLIGATIONS OF THE MASTER FRANCHISEE UPON
TERMINATION OR EXPIRATION
Upon termination by the Franchisor or expiration of this
Agreement, all rights granted under this Agreement to the Master
Franchisee shall terminate immediately, and the Sections of this
ARTICLE shall apply to the rights and obligations of the parties.
34<PAGE>
Section 12.1 Payment of Outstanding Amounts.
------------------------------
The Franchisor may retain all fees paid pursuant to this
Agreement except for refunds expressly required in this Agreement. In
addition, within 10 days after the effective date of the termination
or expiration, or such later dates as it is determined that amounts
are due to the Franchisor, the Master Franchisee shall pay to the
Franchisor all Master Franchise Fee Payments (up to the US $2,300,000
minimum), Royalty Fees, amounts owed for products or services
purchased by the Master Franchisee from the Franchisor or its
affiliates, and all other amounts owed to the Franchisor or its
affiliates which are then unpaid.
Section 12.2 Return of Materials.
-------------------
Except for those materials necessary to continue to service
Franchisees if the Master Franchisee is allowed or retains such
rights, the Master Franchisee shall immediately turn over to the
Franchisor in an organized manner all materials, including the Access
Power Manuals, records, files, instructions, correspondence, all
materials related to operating Access Power, including all Authorized
Materials and other materials relating to solicitation of prospective
Franchisees, and any and all other materials relating to the operation
of a Master Franchisee's business in the Master Franchisee's
possession or control, and all copies and any other forms of
reproductions thereof (all of which are acknowledged to be the sole
and exclusive property of the Franchisor), and shall retain no copy or
record of any of the foregoing, excepting only the Master Franchisee's
copy of this Agreement and related agreements and of correspondence
between the parties, copies of all Franchise Agreements with the
Franchisees in the Master Franchise Territory entered into during the
Agreement Term, and copies of any other documents which the Master
Franchisee reasonably needs for compliance with any law. The
Franchisor shall reimburse the Master Franchisee for the reasonable
cost of shipping the foregoing materials to the Franchisor promptly
after receipt of invoices or other reasonable evidence of such costs.
Section 12.3 Loss of Exclusivity; Cessation of Sales; Cessation of
Services.
-----------------------------------------------------
(a) Upon the expiration of this Agreement, the Master Franchisee
shall: (i) cease selling Franchises; (ii) cease using all advertising
materials, forms and other materials bearing the Franchisor's Proprietary
Marks; (iii) cease holding itself out as a sales representative of the
Franchisor; and (iv) take all steps necessary to disassociate itself from
the Franchisor. As to all existing Access Power operations under this
Agreement, the Master Franchisee shall continue to operate as required in
this Agreement until such operations are sold to an independent third party,
approved by the Franchisor, or to the Franchisor. Should the Franchisor
not approve a sale to an independent third party, the Franchisor must
purchase the Master Franchisee's interests in the organization on the
terms and conditions set forth in the independent third party's
written offer. Any such written independent third party offer must be
received by the Master Franchisee within 4 months of the termination
of the Agreement.
(b) Upon the early termination of this Agreement due to the Master
Franchisee's default, the Master Franchisee shall: (i) cease selling Franchises
on behalf of the Franchisor; (ii) cease using all advertising materials,
forms and other materials bearing the Franchisor's Proprietary Marks; (iii)
cease holding itself out as a representative of the Franchisor; and
(iv) take all steps necessary to disassociate itself from the
Franchisor. At the option of the Franchisor, the Master Franchisee
shall cease providing services to existing Franchisees. In such event
the Master Franchisee shall not be entitled to any further fees from
existing Franchisees. The Franchisor shall also be free to sell new
Franchises, renew existing Franchises, and enter into master franchise
agreements or other arrangements within the Master Franchise Territory
without further obligation to the Master Franchisee.
(c) The Franchisor shall be free to sell new Franchises, enter
into new master franchise agreements or other arrangements within the
Master Franchise Territory without further obligation to the Master
Franchisee.
35<PAGE>
SECTION 12.4 CHANGE OF CORPORATE NAME.
------------------------
The Master Franchise agrees to file all necessary amendments and
other documents to change its corporate name to exclude the "Access
Power" trade name to a name not confusingly similar to the "Access
Power" trade name.
Section 12.5 Competition Differentiation.
---------------------------
Master Franchisee agrees, if Master Franchisee continues to
operate or later begins to operate any other business, not to use any
reproduction or colorable imitation of the Proprietary Marks, methods
of operation or undertake any other conduct either in any other
business or the promotion of any other business, that is likely to
cause confusion, mistake or deception, or that is likely to dilute
Franchisor rights in and to the Proprietary Marks. In addition,
Master Franchisee agrees not to utilize any designation of origin or
description or representation that falsely suggests or represents an
association or connection with Franchisor, or any of Franchisor
Affiliates.
ARTICLE 13 - INDEPENDENT COVENANTS OF THE MASTER FRANCHISEE
SECTION 13.1 DEVOTION TO THE SALE AND SERVICE OF FRANCHISES.
----------------------------------------------
The Master Franchisee covenants that during the Agreement Term,
except as otherwise approved in writing by the Franchisor, the Master
Franchisee shall faithfully, honestly and diligently devote full time,
energy and best efforts in carrying out the Master Franchisee's
obligations under this Agreement in support of the business of the
Franchisor and refrain from engaging in any business or other activity
that will conflict with its obligations under this Agreement, whether
or not such activity is pursued for gain, profit, or other pecuniary
advantage; provided, however, that this shall not be construed as
preventing the Master Franchisee from investing its assets in
businesses which do not compete with the Franchisor where the form or
manner of such investment will not require services on the part of the
Master Franchisee in the operation of the business in which such
investments are made and in which his or her participation is solely
that of a passive investor.
Section 13.2 Diversion of Business; Competition and Interference
With the Franchisor.
---------------------------------------------------
The Master Franchisee agrees that the Franchisor would be unable
to protect the Confidential Information against unauthorized use or
disclosure and would be unable to encourage a free exchange of ideas
and information among the franchisees within the System if master
franchisees were permitted to hold interests in any Competitive
Business.
(a) IN-TERM. The Master Franchisee covenants that during the
Agreement Term except as otherwise approved in writing by the Franchisor,
that the Master Franchisee will not:
(i) directly or indirectly, solicit or otherwise attempt to
induce, by combining or conspiring with, or attempting to do so, or
in any other manner influence any Business Affiliate of the Franchisor
to terminate or modify his, her or its business relationship with the
Franchisor or to compete against the Franchisor;
(ii) directly or indirectly, as owner, officer, director,
employee, agent, lender, broker, consultant, franchisee or in any
other similar capacity whatsoever be connected in any manner with
the ownership, management, operation or control of or conduct a
Competitive Business (provided that this restriction shall not
apply to a 5% or less beneficial interest in a publicly-held
corporation); and
36<PAGE>
(iii) in any manner knowingly interfere with, disturb,
disrupt, decrease or otherwise jeopardize the business of the
Franchisor or any of its other franchisees.
(b) POST-TERM. The Master Franchisee also covenants that for
a 24-month period after the expiration or termination of this
Agreement, except as otherwise approved in writing by the Franchisor,
that the Master Franchisee will not:
(i) directly or indirectly, solicit or otherwise attempt to
induce, by combining or conspiring with, or attempting to do so,
or in any other manner influence any Business Affiliate of the
Franchisor to terminate or modify his, her or its business
relationship with the Franchisor or to compete against the
Franchisor;
(ii) directly or indirectly, as owner, officer, director,
employee, agent, lender, broker, consultant, franchisee or in
any other similar capacity whatsoever be connected in any manner
with the ownership, management, operation or control of or
conduct a Competitive Business in Canada (provided that this
restriction shall not apply to a 5% or less beneficial interest
in a publicly-held corporation); and
(iii) in any manner interfere knowingly with, disturb, disrupt,
decrease or otherwise jeopardize the business of the Franchisor or
any of its other franchisees.
(c) The Master Franchisee acknowledges and confirms that the length of
the term and geographical restrictions contained in this Section are fair
and reasonable and not the result of overreaching, duress or coercion
of any kind. The Master Franchisee further acknowledges and confirms
that its full, uninhibited and faithful observance of each of the
covenants contained in this Section will not cause any undue hardship,
financial or otherwise. The Master Franchisee acknowledges and
confirms that its special knowledge of the business of a business that
is engaged, wholly or partially, directly or indirectly, in the sale
or resale of long distance or internet telephony service (and anyone
acquiring such knowledge through the Master Franchisee) is such as
would cause the Franchisor and its franchisees serious injury and loss
if it (or anyone acquiring such knowledge through the Master
Franchisee) were to use such ability and knowledge to the benefit of a
competitor or were to compete with the Franchisor or any of its
franchisees.
(d) In the event that any court of competent jurisdiction shall
finally hold that the time or territory or any other provision stated in this
Section constitutes an unreasonable restriction upon the Master Franchisee,
the Master Franchisee agrees that the provisions of this Agreement shall
not be rendered void, but shall apply as to time and territory or to
such other extent as such court may judicially determine or indicate
constitutes a reasonable restriction under the circumstances involved.
(e) In the event of a termination of this Agreement pursuant to
section 11.1, the period in subsection (b) above shall be reduced from
24 months to 6 months.
SECTION 13.3 MODIFICATION OF COVENANTS.
-------------------------
The Master Franchisee acknowledges that the Franchisor shall have
the right, in its sole discretion, to reduce the scope of any
covenants set forth in this ARTICLE without the Master Franchisee's
consent, effective immediately upon receipt by the Master Franchisee
of written notice. The Master Franchisee agrees that it shall comply
immediately with any covenant as so modified, which shall be fully
enforceable to the extent permitted by applicable law.
37<PAGE>
Section 13.4 Independent Covenants.
---------------------
The parties agree that the foregoing covenants in this ARTICLE
shall be construed as independent of any other covenant or provision
of this Agreement. The Master Franchisee further agrees that the
existence of any claim it may have against the Franchisor or any of
its affiliates, regardless of whether arising from this Agreement,
shall not constitute a defense to the enforcement of the foregoing
covenants by the Master Franchisee.
ARTICLE 14 - INDEPENDENT CONTRACTOR AND INDEMNIFICATION
Section 14.1 Independent Status.
------------------
It is understood and agreed by the parties that this Agreement
does not create a fiduciary relationship between them. The Master
Franchisee shall be an independent contractor, and, unless expressly
provided to the contrary, nothing in this Agreement is intended to
constitute either party an agent, legal representative, subsidiary,
joint venturer, partner, employee, affiliate or servant of the other
party for any purpose whatsoever. It is understood and agreed that
nothing in this Agreement authorizes the Master Franchisee to make any
contract, agreement, warranty or representation on the Franchisor's
behalf, nor to incur any debt or other obligation in the Franchisor's
name. The Master Franchisee agrees to take such affirmative action as
may be requested by the Franchisor to indicate that the Master
Franchisee is an independent contractor, including a notice on all
stationery, business cards, sales literature, contracts and similar
documents which states that the Master Franchisee's business is
independently owned and operated by the Master Franchisee. The
content of the notice is subject to the prior written approval of the
Franchisor.
Section 14.2 Indemnification.
---------------
The Master Franchisee indemnifies and holds harmless the
Franchisor from any and all costs, losses and damages (including
reasonable attorneys' fees and costs, even if incident to appellate,
post-judgment or bankruptcy proceedings), from claims brought by third
parties arising out of or in any way incidental to or in connection
with the ownership or operation by the Master Franchisee of the Master
Franchisee's business unless caused by the Franchisor's gross
negligence or intentional misconduct. This indemnity obligation
continues in full force and effect and notwithstanding the expiration
or termination of this Agreement.
ARTICLE 15 - REPRESENTATIONS AND WARRANTIES
Section 15.1 No Reliance.
-----------
Except as expressly provided to the contrary in this Agreement,
the Franchisor makes no representations, warranties or guarantees upon
which the Master Franchisee may rely, and assumes no liability or
obligation to the Master Franchisee, by providing any waiver,
approval, consent or suggestion to the Master Franchisee in connection
with this Agreement, or by reason of any neglect, delay or denial of
any request therefor unless such conduct would otherwise constitute a
breach of an express obligation of the Franchisor under this
Agreement.
Section 15.2 Representations of the Franchisor.
---------------------------------
The Franchisor makes the following representations and warrants
to the Master Franchisee, which shall be true and correct upon the
execution of this Agreement and throughout the Agreement Term:
38<PAGE>
(a) ORGANIZATION. The Franchisor is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida.
(b) AUTHORIZATION. The Franchisor has the corporate power to
execute, deliver, and carry out the terms and conditions of the
Agreement. The Franchisor has taken all necessary action with respect
thereto. This Agreement has been duly authorized, executed and delivered
by the Franchisor and constitutes its valid, legal and binding agreement
and obligation in accordance with the terms of this Agreement, except as
may be limited by applicable bankruptcy, insolvency, reorganization and
other laws and equitable principles affecting creditors' rights generally
from time to time in effect.
(c) NO VIOLATION. Performance by the Franchisor of its obligations
under the Agreement will not result in: (i) the breach of any term or condition
of, or constitute a default under, any term or condition of any contract or
agreement to which the Franchisor is a party or by which it is bound,
or constitute an event which, with notice, lapse of time or both,
would result in such a breach or event of default; nor (ii) result in the
violation by the Franchisor of any statute, rule, regulation, ordinance,
code, judgment, order, injunction or decree.
Section 15.3 Representations of the Master Franchisee; Opinion of Counsel.
------------------------------------------------------------
The Master Franchisee makes the following representations and
warranties to the Franchisor, which shall be true and correct upon the
execution of this Agreement and throughout the Agreement Term:
(a) ORGANIZATION. The Master Franchisee is a corporation
duly organized, validly existing and in good standing under the laws
of Canada.
(b) AUTHORIZATION. The Master Franchisee has the power to
execute, deliver, and carry out the terms and conditions of the Agreement.
The Master Franchisee has taken all necessary action with respect thereto.
This Agreement has been duly authorized, executed and delivered by the
Master Franchisee and constitutes its valid, legal and binding agreement
and obligation in accordance with the terms of this Agreement, except as may
be limited by applicable bankruptcy, insolvency, reorganization and other
laws and equitable principles affecting creditors' rights generally from
time to time in effect.
(c) NO VIOLATION. Performance by the Master Franchisee of its
obligations under this Agreement will not result in: (i) the breach of any
term or condition of, or constitute a default under, any term or condition
of any contract, agreement or other commitment to which the Master Franchisee
is a party or by which it is bound, or constitute an event which, with notice,
lapse of time or both, would result in such a breach or event of default;
nor (ii) result in the violation by the Master Franchisee of any statute, rule,
regulation, ordinance, code, judgment, order, injunction or decree.
(d) LITIGATION. There is not now pending against the Master Franchisee,
nor to the knowledge of the officers of the Master Franchisee, is
there threatened, any litigation, investigation or proceeding the
outcome of which would in any cause, or in the aggregate, adversely
affect the assets or financial condition of the Master Franchisee or
seriously affects its continued operations.
(e) CONSENT OR FILING. All consents, approvals or authorization
of, or registrations, declarations or filings with any court, any governmental
body or authority or other person or entity that is required in connection
with the valid execution, delivery or performance of this Agreement or any
document required by this Agreement or in connection with any of the
transactions contemplated thereby have been completed.
(f) DISCLOSURE. No representation or warranty made by the Master
Franchisee in this Agreement or in any other document furnished or to be
furnished from time to time in connection herewith or therewith contains
or will contain any misrepresentation of a material fact or omits or will
omit to state any material fact necessary to make the statements herein or
39<PAGE>
therein not misleading. There is no fact known to the Master Franchisee
which materially adversely affects, or which would in the future materially
adversely affect, the business, assets, property, prospects or financial
condition of the Master Franchisee.
(g) BROKERAGE. The Master Franchisee has dealt with no broker or
finder in connection with the master franchise rights and the Master
Franchisee indemnifies the Franchisor against and to hold the Franchisor
harmless from any claims for finders' or brokerage fees or commission
in connection with the master franchise rights and agrees to pay all
expenses (including attorneys' fees and expenses) incurred by the
Franchisor in connection with the defense of any action or proceeding
brought to collect any such fees or commissions or otherwise relating
to any such brokerage claims resulting from or arising out of any claim
that the Master Franchisee consulted, dealt or negotiated with the person
or entity making such brokerage claim.
SECTION 15.4 ACKNOWLEDGEMENT OF RISK.
-----------------------
The Master Franchisee acknowledges and agrees to the following:
(a) THE SUCCESS OF THE MASTER FRANCHISEE IN OWNING AND OPERATING
THE MASTER FRANCHISEE'S BUSINESS IS SPECULATIVE AND WILL DEPEND ON MANY
FACTORS INCLUDING, TO A LARGE EXTENT, THE MASTER FRANCHISEE'S INDEPENDENT
BUSINESS ABILITY. NO REPRESENTATIONS OR PROMISES, EXPRESS OR IMPLIED, HAVE
BEEN MADE BY THE FRANCHISOR OR ANY EMPLOYEE, BROKER OR REPRESENTATIVE OF
THE FRANCHISOR, TO INDUCE THE MASTER FRANCHISEE TO ENTER INTO THIS
AGREEMENT EXCEPT AS SPECIFICALLY INCLUDED IN THIS AGREEMENT. NO
EMPLOYEE, OFFICER, DIRECTOR, BROKER OR REPRESENTATIVE IS AUTHORIZED TO
DO OTHERWISE.
(b) THE MASTER FRANCHISEE ACKNOWLEDGES THAT IN ALL OF ITS DEALINGS
WITH THE FRANCHISOR, ITS EMPLOYEES, BROKERS (IF ANY), AND OTHER
REPRESENTATIVES ACT ONLY IN A REPRESENTATIVE CAPACITY AND NOT IN AN
INDIVIDUAL CAPACITY. THE MASTER FRANCHISEE FURTHER ACKNOWLEDGES THAT THIS
AGREEMENT, AND ALL BUSINESS DEALINGS BETWEEN THE MASTER FRANCHISEE AND SUCH
INDIVIDUALS AS A RESULT OF THIS AGREEMENT, ARE SOLELY BETWEEN THE MASTER
FRANCHISEE AND THE FRANCHISOR.
(c) IN ADDITION, THE FRANCHISOR MAKES NO WARRANTY AS TO THE MASTER
FRANCHISEE'S ABILITY TO SELL AND SERVICE THE FRANCHISED BUSINESS IN THE
JURISDICTION IN WHICH THE FRANCHISED BUSINESSES ARE TO BE OPERATED. IT IS
INCUMBENT UPON THE MASTER FRANCHISEE TO SEEK OR OBTAIN ADVICE OF COUNSEL
SPECIFICALLY WITH RESPECT TO THIS ISSUE. IN THE EVENT THAT LEGISLATION
ENACTED BY, OR REGULATION OF, ANY GOVERNMENTAL BODY PREVENTS THE MASTER
FRANCHISEE OR A FRANCHISEE FROM OPERATING THE FRANCHISED BUSINESS, THE
FRANCHISOR SHALL NOT BE LIABLE FOR DAMAGES NOR BE REQUIRED TO INDEMNIFY
THE MASTER FRANCHISEE IN ANY MANNER WHATSOEVER OR TO RETURN ANY MONIES
RECEIVED FROM THE MASTER FRANCHISEE.
40<PAGE>
ARTICLE 16 - MEDIATION AND ARBITRATION; EQUITABLE RELIEF
SECTION 16.1 MEDIATION AND ARBITRATION.
-------------------------
(a) In connection with any dispute arising under this
Agreement, prior to any arbitration proceeding taking place,
either party may, at its option, submit the controversy or claim to
non-binding mediation before FAM or other mutually agreeable mediator,
in which event both parties shall execute a confidentiality agreement
reasonably satisfactory to the Franchisor. Upon submission, the
obligation to attend mediation shall be binding on both parties.
(b) Except as specifically modified by this Section and
excepting matters involving remedies as set forth in Section 16.2,
any controversy or claim arising out of or relating to this Agreement,
including any claim that this Agreement, or any part thereof, is
invalid, illegal or otherwise voidable or void, shall be submitted
to arbitration before and in accordance with the arbitration
rules of FAM, or if FAM is unable to conduct the arbitration for any
reason or if both parties agree, before the American Arbitration
Association in accordance with its commercial arbitration rules, or
any other mutually agreeable arbitration association.
(c) The provisions of this Section shall be construed as
independent of any other covenant or provision of this Agreement;
provided that if a court of competent jurisdiction determines that
any such provisions are unlawful in any way, such court shall modify
or interpret such provisions to the minimum extent necessary to have
them comply with the law. Notwithstanding any provision of this
Agreement relating to under which state laws this Agreement shall
be governed by and construed under, all issues relating to
arbitrability or the enforcement of the agreement to arbitrate
contained in this Agreement shall be governed by the United States
Arbitration Act (9 U.S.C. Section 1 et seq.) and the Federal common
law of arbitration.
(d) Judgment upon an arbitration award may be
entered in any court having competent jurisdiction and shall be
binding, final and non-appealable. The Franchisor and the Master
Franchisee (and their respective owners) waive to the fullest extent
permitted by law, any right to or claim for any punitive or exemplary
damages against the other and agree that in the event of a dispute
between them each shall be limited to the recovery of any actual
damages sustained by it.
(e) Prior to any arbitration proceeding taking place, the
Franchisor or the Master Franchisee may, at its respective option,
elect to have the arbitrator conduct, in a separate proceeding
prior to the actual arbitration, a preliminary hearing, at which
hearing testimony and other evidence may be presented and briefs may
be submitted, including a brief setting forth the then applicable
statutory or common law methods of measuring damages in respect of the
controversy or claim being arbitrated.
(f) This arbitration provision shall be deemed to be
self-executing and shall remain in full force and effect after
the expiration or termination of this Agreement. In the event either
party fails to appear at any properly noticed arbitration proceeding,
an award may be entered against such party by default or otherwise
notwithstanding such failure to appear.
(g) Mediation and/or arbitration shall take place in Duval County,
Florida.
(h) The Master Franchisee acknowledges and agrees that it is the
intent of the parties that mediation or arbitration between the Franchisor
and the Master Franchisee shall be of the Franchisor's and the Master
Franchisee's individual claims, and that none of the Master Franchisee's
claims shall be mediated or arbitrated on a class-wide basis.
41<PAGE>
SECTION 16.2 EXCEPTIONS TO MEDIATION AND ARBITRATION; EQUITABLE
RELIEF.
--------------------------------------------------
(a) The obligation to mediate or arbitrate shall not be binding
upon either party with respect to claims relating to the Proprietary
Property; the obligations of the Master Franchisee upon termination
or expiration of this Agreement; any transfers restricted under this
Agreement concerning interests in the Master Franchisee and this
Agreement; matters relating to actions which may impair the good
will associated with the Proprietary Marks; matters involving claims
of danger, health or safety involving the Master Franchisee, the
employees, customers or the public; or requests for restraining
orders, injunctions or other procedures in a court of competent
jurisdiction to obtain specific performance when deemed
necessary by such court to preserve the status quo or prevent
irreparable injury pending resolution by mediation or arbitration of
the actual dispute between the parties.
ARTICLE 17 - TERM
SECTION 17.1 MASTER FRANCHISE TERM.
---------------------
The Term of this Agreement shall run for 30 years from the
Agreement Date, unless otherwise sooner terminated pursuant to ARTICLE
9. This Agreement shall remain in full force and effect so long as
the Master Franchisee has any obligations to the Franchisor under this
Agreement or to any Franchisee under a Franchise Agreement, unless
sooner terminated in accordance with the terms of this Agreement (the
"Agreement Term"). The Agreement Term refers to the term during which
this Agreement is in full force and effect and the Master Franchisee
is either obligated to the Franchisor or to a Franchisee.
SECTION 17.2 OPTION TO OBTAIN SUCCESSOR ACCESS POWER
INTERNATIONAL MASTER FRANCHISE AGREEMENT.
----------------------------------------
(a) The Master Franchisee is granted an option to obtain
a Successor Access Power Franchise Agreement for a period of 5
years. The Master Franchisee may exercise its option to obtain
a Successor Access Power International Master Franchise
Agreement only if it complies with the following conditions at the
time the option is exercised and immediately before the commencement
of the Succeeding Term, unless another time is specified below:
(i) One year before the end of the Term, the Franchisor
will give the Master Franchisee written notice that its Franchise
Agreement will expire in one year.
(ii) The Master Franchisee shall give the Franchisor written
notice of its intention to exercise the option to obtain a Successor
Access Power Franchise Agreement by submitting its application for a
Successor Access Power Franchise Agreement not less than 9 months
nor more than 12 months prior to the end of the Agreement Term;
(iii) The Master Franchisee shall have satisfied all monetary
obligations owed by the Master Franchisee to the Franchisor and its
affiliates and shall not be in default of any provision of this
Agreement including the Minimum Performance Requirement or any other
agreement between the Master Franchisee and the Franchisor or its
affiliates;
(iv) The Master Franchisee, within 90 days prior to the expiration
of the Agreement Term, shall execute and deliver to the Franchisor a
Successor Access Power Master Franchise Agreement which agreement may
differ from the terms of this Agreement; and
42<PAGE>
(v) The Master Franchisee shall execute a general release of any
and all claims against the Franchisor and its affiliates, and their
respective officers, directors, shareholders, agents and employees
except for liabilities from which the Franchisor may not require a
release under any applicable law.
SECTION 17.3 REINSTATEMENTS AND EXTENSIONS.
-----------------------------
If any termination or expiration of the Term would violate any
applicable law, Franchisor may reinstate or extend the Term for the
purpose of complying with the law, for the duration provided by
Franchisor in a written notice to Master Franchisee, without waiving
any of Franchisor rights under this Agreement or otherwise modifying
this Agreement.
ARTICLE 18 - DEFINITIONS
SECTION 18.1 DEFINITIONS.
-----------
As used in this Agreement, the Exhibits attached to this
Agreement and any other document executed incidental to this Agreement
and any exhibits to such documents, the following terms shall have the
following meanings:
"ACCESS POWER GATEWAY NETWORK" means the IP Telephony Units
connected together by the Franchisor for the origination and/or
termination of IP traffic, whether such unit was established by
Franchisor or franchisee thereof, Master Franchisee or franchisee
thereof, or any other entity which the Franchisor may have an
agreement with for the origination and/or termination of IP traffic.
"ACCESS POWER MANUALS" means all manuals produced by, or for the
benefit of, the Franchisor and loaned to the Master Franchisee, now
existing or later produced, and any revisions prepared for the
internal use of the Franchised Business.
"ACCESS POWER MARKETING FUND" means the fund described in
Subsection 3.6(c) into which Advertising Contributions from
Franchisees will be deposited for use in regional and national
marketing activities in Canada to promote the System.
"AFFILIATE" means a company related to Franchisor as a parent
corporation, brother/sister corporation or subsidiary corporation.
"AGREEMENT" means this Access Power International Master
Franchise Agreement, as it may be amended, supplemented or otherwise
modified by an agreement in writing signed by the Master Franchisee
and the Franchisor.
"AGREEMENT DATE" means the execution date of this Agreement.
"AGREEMENT TERM" means the term of the Agreement described in
Section 17.1.
"AUTHORIZED MATERIALS" means: (i) those written or recorded
materials provided by the Franchisor to the Master Franchisee
for purposes of soliciting prospective Franchisees, including
the Franchise Agreement and exhibits, brochures and applications;
(ii) written or recorded materials prepared by the Master Franchisee
upon the specific written request of, or which have previously been
43<PAGE>
approved in writing by Franchisor; and (iii) general written
correspondence prepared by the Master Franchisee which is based
upon, and not inconsistent with (i) or (ii) above, nor inconsistent
with policies and procedures of the Franchisor specified in this
Agreement and otherwise set forth in writing by the Franchisor
from time to time. No materials shall be considered Authorized
Materials if the Franchisor has notified the Master Franchisee
(or the Master Franchisee is otherwise aware) that such materials
are no longer Authorized Materials; such materials are not current
or are misleading and the Franchisor has notified the Master
Franchisee (or the Master Franchisee is otherwise aware) that
such materials are no longer correct or are misleading; or such
materials subsequently become inconsistent with facts, policies or
procedures the Franchisor specifies in writing to the Representative.
The Master Franchisee shall make no representations which would not,
if written, constitute Authorized Materials. The Representative shall
be responsible for the translation of the Authorized Materials into
the appropriate language.
"BUSINESS AFFILIATE" means any employee, officer, director,
agent, consultant, representative, contractor, supplier, distributor,
franchisee or other business contact of the Franchisor.
"BUSINESS DAY " means any day other than Saturday, Sunday or a
day upon which open trading does not take place on the New York Stock
Exchange
"CALLS" mean any usage of the System IP Telephony Units for any
services thereunder.
"COMPANY-OWNED FRANCHISE" means a Franchise owned by the Master
Franchisee or an affiliate. "Access Power Franchise" means the
distributorship Master Franchisee is authorized to establish and
operate under this Agreement.
"COMPANY UNIT" means an Access Power Advanced Communications
Business operated under the System and owned by Franchisor.
"COMPETITIVE BUSINESS" means a business that is engaged, wholly
or partially, directly or indirectly, in the sale or resale of long
distance or Internet Telephony services.
"CONFIDENTIAL INFORMATION" means any oral or written information
and data of a confidential nature, including but not limited to
proprietary, technical, development, marketing, sales, operating,
performance, cost, know-how, business and process information,
computer programming techniques, and all record bearing media
containing or disclosing such information and techniques, which is
disclosed by one party to the other party pursuant to this Agreement.
Confidential Information shall not include any information which (a)
is already in the public domain through no breach of confidentiality;
(b) was lawfully in a party's possession prior to receipt from the
other party; (c) was received by a party independently from a third
party free to lawfully disclose such information to such party; or (d)
had been independently developed by a party as of the time of
disclosure.
"DESIGNEE" means one or more representatives of the Franchisor
who are independent contractors and are appointed by the Franchisor to
perform certain of the Franchisor's duties under this Agreement as
described in ARTICLE 2.
"EVENT OF DEFAULT" means a breach of this Agreement including
those situations requiring the giving of notice, the lapse of time, or
both, or any other condition is satisfied.
"FAM" means Franchise Arbitration and Mediation, Inc.
"FRANCHISE AGREEMENT" means agreements entered into for the
operation of an Access Power franchise substantially in the form
attached as Exhibit A.
"FRANCHISE OWNERS" If a corporation, partnership or other entity
is to own Master Franchisee operations, Master Franchisee will notice
certain provisions that are applicable to Master Franchisee
shareholders, partners or members, upon whose business skill,
44<PAGE>
financial capability and personal character Franchisor are relying in
entering into this Agreement. Those individuals will be referred to
in this Agreement as "Franchise Owners."
"FRANCHISE UNIT" means an Access Power Advanced Communications
Business operated under the System and owned by other than the
Franchisor.
"FRANCHISOR NETWORK" means the services coverage area of the
entire network, as established and maintained by the Franchisor, for
the termination of traffic originating through local Gateway servers
or via the Internet.
"GATEWAY CO-LOCATION FACILITY" means the actual facility housing
an Access Power IP Telephony Gateway Server and VocalTec Gateway
Software, and connection to the public switched telephone networks.
"GATEWAY SERVER" means a combination of hardware and software
which permits the changing of communications from analog to digital
and/or digital to analog for delivery over a network.
"GROSS REVENUE(S)" means the entire amount of all of Master
Franchisee revenues from the ownership or operation of the Access
Power Master Franchise or any business at or about the Gateway Co-
location Facility including the proceeds of any business interruption
insurance and any revenues received from the lease or sublease of a
portion of the Gateway Co-location Facility, whether the revenues are
evidenced by cash or credit, services, property or other means of
exchange, excepting only the amount of any sales taxes that are
collected and paid to the taxing authority (based on the cash method
of accounting). Cash refunded and credit given to customers and
receivables uncollectible from customers will be deducted in computing
Gross Revenues to the extent that the cash, credit or receivables
represent amounts previously included in Gross Revenues where Royalty
Fees were paid. Gross Revenues are deemed received by Master
Franchisee at the time the goods, products, merchandise or services
from which they derive are delivered or rendered or at the time the
relevant sale takes place, whichever occurs first, unless otherwise
specified herein. Gross Revenues consisting of property or services
(for example, "bartering" or "trade outs") are valued at the prices
applicable, at the time the Gross Revenues are received, to the
products or services exchanged for the Gross Revenues.
"INITIAL FRANCHISE FEE" means the fee paid by a franchisee to a
franchisor for the right to operate an Access Power Franchise.
"INITIAL TRAINING" means the training described in Subsection
2.1(a).
"IP TELEPHONY UNIT" means a Gateway Server or set of Gateway
Servers providing service to a specific market.
"MASTER FRANCHISE" means the rights granted to the Master
Franchisee under this Agreement.
"MASTER FRANCHISE FEE" means the fee described in Section 4.1.
"MASTER FRANCHISE OWNER" means: (i) if the Master Franchisee is
an individual, such individual; (ii) if the Master Franchisee is a
corporation, the individual who owns a majority of the voting and
ownership interests in such corporation; and (iii) if the Master
Franchisee is a partnership, each individual who is, or owns a
majority of the voting and ownership interest in an entity which is, a
general partner of such partnership.
"MASTER FRANCHISE TERRITORY" means all of Canada.
"MASTER FRANCHISEE" means all persons signing the signature page
of this Agreement as Master Franchisee, jointly and individually.
45<PAGE>
"NOTICE OF DEFAULT" means the notices described in Article 11.
"OFFNET" means traditional long distance telephone services that
do not use IP protocol or the Internet.
"PROPRIETARY MARKS" means the service mark and logo "Access
Power" and all other trademarks, service marks, trade names, logos and
commercial symbols authorized by the Franchisor as part of the System.
"PROPRIETARY PROPERTY" means the Proprietary Marks, Confidential
Information and copyrighted information of the Franchisor or its
affiliates which the Master Franchisee is entitled to use under this
Agreement.
"ROYALTY FEE" means the fee described in Subsection 4.5(a).
"SOFTWARE" means the computer software licensed to the Master
Franchisee by VocalTec Gateway.
"SUCCEEDING TERM" means the period described in Subsection
17.2(a).
"SUCCESSOR ACCESS POWER INTERNATIONAL MASTER FRANCHISE AGREEMENT"
means the current form of international master franchise agreement for
new Access Power master franchisees at the time the Master Franchisee
elects to enter into such agreement in accordance with Section 17.2.
"SYSTEM" means the Franchisor's system for operating an Access
Power Franchise, which System includes, specific standards and
procedures and Proprietary Property all of which may be improved,
further developed or otherwise modified.
"TRAINEES" means the persons approved by the Franchisor who
attend Initial Training.
"TRANSFER FEE" means the fee described in Subsection 10.2(c)(v).
"UNIQUE CONSIDERATION" means the consideration described in
Subsection 10.3(c).
"UNIT" means either a Company Unit or a Franchise Unit.
SECTION 18.2 OTHER DEFINITIONAL PROVISIONS.
-----------------------------
(a) All of the terms defined in this Agreement shall have
such defined meanings when used in other documents issued under,
or delivered pursuant to, this Agreement unless the context shall
otherwise require or unless specifically otherwise defined in
such other document; and
(b) The term "person" includes any corporation, partnership,
estate, trust, association, branch, bureau, subdivision, venture,
associated group, individual, government, institution, instrumentality
and other entity, enterprise, association or endeavor of every nature
and kind.
46<PAGE>
ARTICLE 19 - GENERAL PROVISIONS
SECTION 19.1 RELEASE OF PRIOR CLAIMS.
-----------------------
By executing this Agreement, the Master Franchisee, and each
successor of the Master Franchisee under this Agreement forever releases
and discharges the Franchisor and its affiliates, its Designees, franchise
sales brokers, if any, or other agents, and their respective officers,
directors, representatives, employees and agents, from any and all
claims of any kind, in law or in equity, which may exist as of the
Agreement Date relating to, in connection with, or arising under this
Agreement or any other agreement between the parties, or relating in
any other way to the conduct of the Franchisor, its affiliates, its
Designees, franchise sales brokers, if any, or other agents, and their
respective officers, directors, representatives, employees and agents
prior to the Agreement Date, including any and all claims, whether
presently known or unknown, suspected or unsuspected, arising under
the franchise, business opportunity, securities, antitrust or other
laws of the United States or Canada.
SECTION 19.2 AMENDMENTS.
----------
Except as specifically provided in this Agreement, the provisions
of this Agreement may not be amended, supplemented, waived or changed
orally, but only by a written document signed by the party as to whom
enforcement of any such amendment, supplement, waiver or modification
is sought and making specific reference to this Agreement. With
respect to the Franchisor, only the President of the Franchisor shall
have the authority to execute any amendment on behalf of the
Franchisor. No other officer, employee or agent of the Franchisor
shall have authority to execute any amendment. This Section is
expressly subject by the terms of Sections 19.4 and 19.8.
SECTION 19.3 PROMOTIONAL ALLOWANCES.
----------------------
Master Franchisee grants Franchisor the right to freely use, with
prior approval, any pictures, information, or biographical material
relating to Master Franchisee or Master Franchisee Access Power
Franchise for use in promotional literature or in any other way
beneficial to the Access Power organization as a whole. Master
Franchisee will cooperate in securing photographs, including obtaining
consents from any persons appearing in photographs. If Franchisor
publishes anything Master Franchisee feels reflects unfairly or
inaccurately on Master Franchisee, Access Power Franchise or an
individual, Franchisor will take all reasonable steps in Franchisor
power to retract the material.
Section 19.4 MODIFICATION OF THE SYSTEM.
--------------------------
THE MASTER FRANCHISEE RECOGNIZES AND AGREES THAT FROM TIME TO
TIME AFTER THE AGREEMENT DATE THE FRANCHISOR MAY REASONABLY CHANGE OR
MODIFY THE SYSTEM. THE MASTER FRANCHISEE AGREES TO ACCEPT AND BE
BOUND BY, ANY SUCH CHANGES IN THE SYSTEM AS IF THEY WERE PART OF THIS
AGREEMENT AT THE TIME OF EXECUTION OF THIS AGREEMENT. THE MASTER
FRANCHISEE WILL MAKE SUCH EXPENDITURES AS SUCH CHANGES OR
MODIFICATIONS OF THE SYSTEM AS THE FRANCHISOR MAY REASONABLY REQUIRE.
47<PAGE>
SECTION 19.5 BINDING EFFECT.
--------------
All of the terms and provisions of this Agreement, whether so
expressed or not, shall be binding upon, inure to the benefit of, and
be enforceable by the parties and their respective personal
representatives, legal representatives, heirs, successors and
permitted assigns.
SECTION 19.6 NOTICES.
-------
All notices, requests, consents and other communications required
or permitted under this Agreement shall be in writing (including
telex, telecopied and telegraphic communication) and shall be (as
elected by the person giving such notice) hand delivered by messenger
or courier service, telecopied, telecommunicated, or mailed (airmail
if international) by registered or certified mail (postage prepaid),
return receipt requested, addressed to:
If to the Franchisor: With a copy to:
Access Power, Inc. Keith J. Kanouse, Esq.
10033 Sawgrass Drive West Keith J. Kanouse, P.A.
Suite 100 2424 North Federal Highway, Suite 353
Ponte Vedra Beach, FL 32082 Boca Raton, FL 33431
Attn: Glenn Smith, President
If to the Master Franchisee:
__________________________ _________________________
__________________________ _________________________
__________________________ _________________________
Attn: ___________________ Attn: ___________________
or to such other address as any party may designate by notice
complying with the terms of this Section. Each such notice shall be
deemed delivered: (a) on the date delivered if by personal delivery;
(b) on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method; and (c) on the date upon
which the return receipt is signed or delivery is refused or the
notice is designated by the postal authorities as not deliverable, as
the case may be, if mailed.
SECTION 19.7 HEADINGS.
--------
The headings and subheadings contained in this Agreement are for
convenience of reference only, are not to be considered a part of this
Agreement and shall not limit or otherwise affect in any way the
meaning or interpretation of this Agreement.
SECTION 19.8 SEVERABILITY.
------------
48<PAGE>
(a) If any provision of this Agreement or any other agreement
entered into pursuant to this Agreement is contrary to, prohibited by
or deemed invalid under applicable law or regulation, such provision
shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder of this Agreement shall not
be invalidated thereby and shall be given full force and effect so
far as possible. If any provision of this Agreement may be construed
in two or more ways, one of which would render the provision invalid
or otherwise voidable or unenforceable and another of which would
render the provision valid and enforceable, such provision shall
have the meaning that renders it valid and enforceable.
(b) If any applicable law of any jurisdiction requires a
greater prior notice of the termination of or non-renewal of this
Agreement (if permitted) than is required under this Agreement, or
the taking of some other action not required under this Agreement,
or if under any applicable law of any jurisdiction, any provision
of this Agreement or any requirement prescribed by the Franchisor
is invalid or unenforceable, the prior notice and/or other action
required by such law shall be substituted for the comparable
provisions of this Agreement. The Franchisor shall have the right,
in its sole discretion, to modify such invalid or unenforceable
requirement to the extent required to be valid and enforceable.
Such modifications to this Agreement shall be effective only in such
jurisdiction, unless the Franchisor elects to give them greater
applicability, and this Agreement shall be enforced as originally
made and entered into in all other jurisdictions.
SECTION 19.9 WAIVERS.
-------
The failure or delay of any party at any time to require
performance by another party of any provision of this Agreement, even
if known, shall not affect the right of such party to require
performance of that provision or to exercise any right, power or
remedy under this Agreement. Any waiver by any party of any breach of
any provision of this Agreement should not be construed as a waiver of
any continuing or succeeding breach of such provision, a waiver of the
provision itself, or a waiver of any right, power or remedy under this
Agreement. No notice to or demand on any party in any case shall, of
itself, entitle such party to any other or further notice or demand in
similar or other circumstances.
SECTION 19.10 ENFORCEMENT COSTS.
-----------------
If any arbitration, legal action or other proceeding is brought
for the enforcement of this Agreement, or because of an alleged
dispute, breach, default or misrepresentation in connection with any
provision of this Agreement, the successful or prevailing party or
parties shall be entitled to recover reasonable attorneys' fees,
arbitration costs, court costs and all expenses even if not taxable as
arbitration or court costs (including all such fees, costs and
expenses incident to arbitration, appellate, bankruptcy and
post-judgment proceedings), incurred in that action or proceeding, in
addition to any other relief to which such party or parties may be
entitled. Attorneys' fees include paralegal fees, administrative
costs, investigative costs, costs of expert witnesses, court reporter
fees, sales and use taxes, if any, and all other charges billed by the
attorneys to the prevailing party. If the Franchisor is required to
engage legal counsel in connection with any failure by the Master
Franchisee to pay when due any monies owed under this Agreement or
submit when due any reports, information or supporting records, or in
connection with any failure otherwise to comply with this Agreement,
the Master Franchisee must reimburse the Franchisor on demand for all
of the above-listed costs and expenses incurred by it. If the Master
Franchisee is required to engage legal counsel in connection with any
failure by the Franchisor to pay when due any monies owed under this
Agreement or submit when due any reports, information or supporting
records, or in connection with any failure otherwise to comply with
this Agreement, the Franchisor must reimburse the Master Franchisee on
demand for all of the above-listed costs and expenses incurred by it.
SECTION 19.11 JURISDICTION AND VENUE.
----------------------
49<PAGE>
The parties acknowledge that a substantial portion of the
negotiations, anticipated performance and execution of this Agreement
occurred or shall occur in Duval County, Florida, and that, therefore,
without limiting the jurisdiction or venue of any other Federal or
state court, each of the parties irrevocably and unconditionally: (a)
agrees that any suit, action or legal proceeding arising out of or
relating to this Agreement shall be brought in the District Court of
the United States, Northern District of Florida or, if such court
lacks jurisdiction, the courts of record of the State of Florida in
Duval County, Florida; (b) consents to the jurisdiction of each such
court in any suit, action or proceeding; (c) waives any objection
which it may have to the laying of venue of any such suit, action or
proceeding in any of such courts; and (d) agrees that service of any
court paper may be effected on such party by mail at the last known
address, as provided in this Agreement, or in such other manner as may
be provided under applicable laws or court rules in the State of
Florida.
SECTION 19.12 REMEDIES CUMULATIVE.
-------------------
Except as otherwise expressly provided in this Agreement, no
remedy in this Agreement conferred upon any party is intended to be
exclusive of any other remedy. Each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under
this Agreement or now or later existing at law or in equity or by
statute or otherwise. No single or partial exercise by any party of
any right, power or remedy under this Agreement shall preclude any
other or further exercise of such right, power or remedy.
SECTION 19.13 EFFECTIVENESS; COUNTERPARTS.
---------------------------
This Agreement shall not be effective or be binding and
enforceable against the Franchisor until it is accepted by the
Franchisor at its home office in Ponte Vedra Beach, Florida and
executed by the President of the Franchisor. No other officer,
employee or agent of the Franchisor shall have authority to accept
and/or execute this Agreement on behalf of the Franchisor and the
Master Franchisee is advised not to incur any expenses with respect to
opening the Master Franchisee's business until the Master Franchisee
has received a final executed copy of this Agreement from the
Franchisor's home office executed by its President. This Agreement
may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and
the same instrument. Confirmation of execution by telex or by
telecopy or telefax of a facsimile signature page shall be binding
upon any party to such confirmation.
SECTION 19.14 CONSENTS, APPROVALS AND SATISFACTION.
------------------------------------
Whenever the consent or approval of the Franchisor is required
under this Agreement, such consent or approval shall not be
unreasonably withheld or delayed unless specifically stated in this
Agreement to the contrary. All consents or approvals required of the
Franchisor shall not be binding upon the Franchisor unless the consent
or approval is in writing and signed by the President of the
Franchisor. No other officer, employee or agent of the Franchisor
shall have authority to execute any consent or approval on behalf of
the Franchisor. The Franchisor's consent or approval, whenever
required, may be withheld if any default by the Master Franchisee
exists under this Agreement. Anytime the satisfaction of the
Franchisor is required under this Agreement, unless the Agreement
expressly states otherwise such satisfaction shall be determined in
the sole discretion of the Franchisor.
SECTION 19.15 GOVERNING LAW.
-------------
Except to the extent governed by the United States Trademark Act
of 1946 (Lanham Act, 15 U.S.C. Sections 1051 et seq. or the United States
Arbitration Act, 9 U.S.C. Sections 1 et seq.), this Agreement and any other
agreement relating to this Agreement and all transactions contemplated
by this Agreement and any other agreement relating to this Agreement
shall be governed by, and construed and enforced in accordance with,
the internal laws of the State of Florida without regard to principles
of conflicts of laws.
50<PAGE>
SECTION 19.16 INTERPRETATION.
--------------
Each of the parties acknowledge that they have been or have had
the opportunity to have been represented by their own counsel
throughout the negotiations and at the execution of this Agreement and
all of the other documents executed incidental to this Agreement and,
therefore, none of the parties shall, while this Agreement is
effective or after its termination, claim or assert that any
provisions of this Agreement or any of the other documents should be
construed against the drafter of this Agreement or any of the other
documents.
51
<PAGE>
SECTION 19.17 ENTIRE AGREEMENT.
----------------
This Agreement, its Exhibits and all other written agreements
related to this Agreement and expressly referenced in this Agreement,
represent the entire understanding and agreement between the parties
with respect to the subject matter of this Agreement, and supersedes
all other negotiations, understandings and representations, if any,
made by and between the parties. No representations, inducements,
promise or agreements, oral or otherwise, if any, not embodied in this
Agreement shall be of any force and effect.
SECTION 19.18 SURVIVAL.
--------
All obligations of the Franchisor and the Master Franchisee which
expressly or by their nature survive the expiration or termination of
this Agreement shall continue in full force and effect subsequent to
and notwithstanding its expiration or termination and until they are
satisfied or by their nature expire.
SECTION 19.19 FORCE MAJEURE.
-------------
Neither the Franchisor nor the Master Franchisee shall be liable
for loss or damage or deemed to be in breach of this Agreement if its
failure to perform its obligations results solely from the following
causes beyond its reasonable control, specifically: (a) transportation
shortages or inadequate supply of equipment, merchandise, supplies,
labor, material, or energy; (b) the imposition of quotas or other import
restrictions; (c) compliance with any applicable law; or (d) war, strikes,
natural disaster or acts of God. Any delay resulting from any of said
causes shall extend performance accordingly or excuse performance, in
whole or in part, as may be reasonable, except that said causes shall
not excuse payments of amounts owed to the Franchisor for any reason.
However, if any such force majeure shall continue for a period in
excess of 6 months, the Franchisor may terminate this Agreement upon
written notice to the Master Franchisee.
SECTION 19.20 THIRD PARTIES.
-------------
Except as provided in this Agreement to the contrary with respect
to any affiliates of the Franchisor, nothing in this Agreement,
whether express or implied, is intended to confer any rights or
remedies under or by reason of this Agreement on any persons
(including other Access Power franchisees) other than the parties and
their respective personal representatives, other legal representatives,
heirs, successors and permitted assigns. Further, except as provided
in this Agreement to the contrary with respect to any Designee of
the Franchisor, nothing in this Agreement is intended to relieve
or discharge the obligation or liability of any third persons to
any party to this Agreement, nor shall any provision give any third
persons any right of subrogation or action over or against any
party to this Agreement.
SECTION 19.21 RIGHT OF PARTIES.
----------------
In the event that the Master Franchisee defaults in performing
any of its obligations under this Agreement, the Franchisor shall have
the right (but not the obligation) to perform the Master Franchisee's
obligations and shall be reimbursed by the Master Franchisee for the
actual costs of so performing, together with accrued interest
permitted under this Agreement on overdue amounts. Interest shall
accrue commencing on the 10th day after demand by the Franchisor for
reimbursement.
Section 19.22 Language.
--------
52<PAGE>
The parties acknowledge having required that this Agreement as
well as all notices, documents, comments and other agreements related
hereto be drafted in the English language: les parties aux presentes
reconnaissent avoir exige que cette convention ainsi que tous avis,
documents, engagements, ou autres ententes s'y rapportant soient
rediges en anglais.
Section 19.23 WAIVER OF PUNITIVE DAMAGES CLAIMS.
---------------------------------
THE PARTIES MUTUALLY AND WILLINGLY WAIVE TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY RIGHT TO OR CLAIM FOR ANY PUNITIVE OR EXEMPLARY
DAMAGES AGAINST THE OTHER AND AGREE THAT IN THE EVENT OF A DISPUTE
BETWEEN THEM, EACH SHALL BE LIMITED TO THE RECOVERY OF ACTUAL DAMAGES
SUSTAINED BY IT.
Section 19.24 WAIVER OF JURY TRIAL.
--------------------
THE PARTIES MUTUALLY AND WILLINGLY WAIVE THE RIGHT TO A TRIAL BY
JURY OF ANY AND ALL CLAIMS MADE BETWEEN THEM WHETHER NOW EXISTING OR
ARISING IN THE FUTURE, INCLUDING ANY AND ALL CLAIMS, DEFENSES,
COUNTERCLAIMS, CROSS CLAIMS, THIRD PARTY CLAIMS AND INTERVENOR'S
CLAIMS WHETHER ARISING FROM OR RELATED TO THE SALE, NEGOTIATION,
EXECUTION, OR PERFORMANCE OF THE TRANSACTIONS TO WHICH THIS AGREEMENT
RELATES.
IN WITNESS WHEREOF, the parties have duly executed and delivered
this Agreement.
Witnesses:
MASTER FRANCHISEE:
____________________________________ ACCESS POWER CANADA ____________
____________________________________ By:__________________________________
Ron Crowe, President
FRANCHISOR:
____________________________________ ACCESS POWER, INC.
____________________________________ By:__________________________________
Glenn Smith, President
STATE OF FLORIDA
COUNTY OF ST. JOHNS
STATE OF FLORIDA
The foregoing instrument was acknowledged before me on April 22,
1998, by Glenn Smith, as President of Access Power, Inc., a Florida
corporation, on behalf of the corporation. He personally appeared
before me at the time of notarization.
NOTARY PUBLIC - STATE OF FLORIDA:
sign ____________________________________
53<PAGE>
print ____________________________________
Personally Known _____ OR Produced Identification _____
Type of Identification Produced:
________________________________
The foregoing instrument was acknowledged before me this _____
day of April, 1998, by ____________________, as ___________ of Access
Power Canada, a ____________ corporation, on behalf of the
corporation. He or she personally appeared before me at the time of
notarization.
NOTARY PUBLIC - ___________________________:
sign ____________________________________
print ____________________________________
Personally Known _____ OR Produced Identification _____
Type of Identification Produced:
________________________________
54
<PAGE>
Exhibit A to Access Power
International Master Franchise Agreement
FORM OF ACCESS POWER FRANCHISE AGREEMENT
<PAGE>
Exhibit B to Access Power
International Master Franchise Agreement
TRADEMARKS GRANTED AND FILED
<PAGE>
Exhibit C to Access Power
International Master Franchise Agreement
VOCAL TEC GATEWAY SOFTWARE LICENSE AGREEMENT
<PAGE>
Exhibit D to Access Power
International Master License Agreement
DEPLOYMENT/PERFORMANCE SCHEDULE
Period Minimum Minimum Number Network
Cumulative Lines Deployed by other than
Operational Master Franchisee and
Lines Franchisees thereof
- --------------------------------------------------------------------------
By September 30, 1999 240 1920
By September 30, 2000 480 3840
By September 30, 2001 720 5760
By September 30, 2002 960 7680
By September 30, 2003 1200 9600
By September 30, 2004 1440 11,520
By September 30, 2005 1680 13,440
By September 30, 2006 1920 15,360
By September 30, 2007 2160 17,280
By September 30, 2008 2400 19,200
Lines refers to number of Internet Telephony lines available for
production service.
The deployment requirement of the Master Franchisee is in effect as
long as: a) Franchisor and its franchisees, excluding Lines deployed
by the Master Franchisee and the franchisees thereof, have deployed
eight times the number of Lines that have been deployed by the Master
Franchisee and the franchisees thereof; and b) The number of Lines
deployed by the Master Franchisee and the franchisees thereof are
below 2400.
Any Lines deployed, by the Master Franchisee, outside of the Master
Franchise Territory, pursuant to subsequent Agreements with the
Franchisor, excluding Lines in the United States or South America, are
to be counted towards the Minimum Cumulative Operational Lines
required of the Master Franchisee.
* Minimum Performance Requirement. THIS MINIMUM PERFORMANCE STANDARD
IS IN NO WAY INTENDED TO INFER THAT THE FRANCHISEE WILL EXPERIENCE
GROSS REVENUES OF ANY PARTICULAR LEVEL.
58
<PAGE>
Exhibit E to Access Power
International Master Franchise Agreement
COLLATERAL ASSIGNMENT OF FRANCHISE AGREEMENTS
THIS COLLATERAL ASSIGNMENT OF FRANCHISE AGREEMENTS is signed on
__________________, 199__ by Access Power Canada __________ (the
"Master Franchisee") to Access Power, Inc., a Florida corporation (the
"Franchisor").
BACKGROUND
A. The Franchisor and the Master Franchisee are in the process of
entering into an International Master Franchise Agreement (the
"International Master Franchise Agreement").
B. Section 5.7 of the International Master Franchise Agreement
requires, as security for the obligation of the Master Franchisee to
the Franchisor, that the Master Franchisee collateral assign to the
Franchisor the Master Franchisee's interest, as franchisor, in all
franchise agreements entered into by the Master Franchisee.
The parties agree as follows:
Section 1. Grant of Security Interest.
--------------------------
As security for Master Franchisee monetary and other
obligations to Franchisor or Franchisor Affiliates, Master Franchisee
grants to Franchisor a first priority security interest in all Master
Franchisee business assets, including all telephony hardware and
software, furniture, fixtures, machinery, equipment, inventory and all
other property, (tangible or intangible), Master Franchisee now owns
or later acquires used in Master Franchisee Access Power Franchise and
wherever located, and all Master Franchisee contractual and related
rights under this Agreement and all other agreements between the
parties. Master Franchisee will sign all financing statements,
continuation statements, notices of lien, assignments, or other
documents as required to perfect and maintain Franchisor security
interest. Franchisor agrees to subordinate Franchisor security
interest to: (i) the landlord's lien; (ii) the security interest
of a reputable institutional lender for a loan to Master Franchisee
for working capital purposes; or (iii) the purchase money security
interest of an approved equipment vendor for any equipment Master
Franchisee purchase or lease and use in the operation of Master Franchisee
Access Power Franchise.
Section 2. Master Franchisee's Affirmative Covenants.
-----------------------------------------
(iv) The Master Franchisee covenants and
agrees that it shall faithfully observe and perform all of the
obligations and agreements imposed upon the Master Franchisee under
the franchise agreements.
(v) The Master Franchisee will provide the Franchisor with
copies of all franchise agreements and all notices received in
connection with the franchise agreements.
(vi) From and after the date of this Agreement, the Master
Franchisee's Interest in Franchise Agreements may not be materially
altered, amended or canceled without the prior written consent of
the Franchisor.
59<PAGE>
(vii) The Master Franchisee shall not sell, assign, encumber,
grant or permit any other security interest in or lien or encumbrance
upon the Interest in Franchise Agreements without the written
consent of the Franchisor which shall be at the Franchisor's
sole discretion to grant.
Section 3. Master Franchisee's Representations and Warranties.
--------------------------------------------------
The Master Franchisee represents and warrants:
(i) The Master Franchisee is the sole franchisor under each
franchise agreement free and clear of all liens, security interests
or other encumbrances and has the power and authority to assign and
grant the security interest in the Interest in Franchise Agreements
to the Franchisor; and
(ii) The Master Franchisee has made no prior assignments of
the Interest in Franchise Agreements.
Section 4. Remedies for Default.
--------------------
(i) Upon the occurrence of an Event of Default under the
International Master Franchise Agreement, the Franchisor shall have
any and all rights and remedies available to the Franchisor under
applicable law and pursuant to the International Master Franchise
Agreement, in such order of application as the Franchisor may
determine, all without further notice to the Master Franchisee,
and may execute any documents necessary to effect the foregoing.
(ii) Upon the occurrence of an Event of Default under the
International Master Franchise Agreement, the Franchisor may enforce
this Collateral Assignment by notifying a franchisee under a franchise
agreement in accordance with the notice provision in the Franchise
Agreement. The affidavit or written statement of an officer, agent
or attorney of the Franchisor stating that there has been an Event
of Default by the Master Franchisee shall constitute conclusive
evidence thereof, and a franchisee or any other person is
authorized and directed to rely thereon.
(iii) Upon the occurrence of an Event of Default under the
International Master Franchise Agreement, the Franchisor may elect
to exercise any and all of the Master Franchisee's rights and remedies
under the franchise agreements, without any interference or objection
from the Master Franchisee including receiving any receipt of royalties
and other payments from franchisees.
(iv) The Franchisor may, at its option, take over and enjoy the
benefits of the franchise agreements, exercise the Master Franchisee's
rights under the franchise agreements as franchisor, and perform all
acts in the same manner and to the same extent as the Master Franchisee
might do. The Master Franchisee releases any and all claims which
it has or might have against the Franchisor arising out of such
performance by the Franchisor.
Section 5. Miscellaneous.
-------------
(i) The Franchisor will not be deemed in any manner to have
assumed the Interest in Franchise Agreements, nor shall the Franchisor
be liable to the Master Franchisee by reason of any default by any
party. The Master Franchisee indemnifies and holds the Franchisor
harmless of and from any and all liability, loss or damage that
it may or might incur by reason of any claims or demands against
it based on its alleged assumption of the Master Franchisee's duty and
obligation to perform and discharge the terms, covenants and
agreements of the Franchise Agreements arising prior to actual
assumption of the Interest in Franchise Agreements by the Franchisor.
(ii) All of the foregoing powers granted in this Agreement
to the Franchisor shall be liberally construed. The Franchisor need
not expend its own funds in the exercise of such powers, but if it
does, such amount shall be considered as advances for and on behalf
of the Master Franchisee secured by this Collateral Assignment.
60<PAGE>
(iii) The Franchisor is not the agent, partner, or joint
venturer of the Master Franchisee.
(iv) This Collateral Assignment may be enforced from time to time
by the Franchisor at its discretion, with or without order of any court.
The Franchisor may also at any time cease to enforce this Collateral
Assignment. Any failure on the part of the Franchisor promptly to exercise
any option given or reserved by this Agreement shall not prevent the
exercise of any such option at any time thereafter. The Franchisor
may pursue and enforce any remedy or remedies accorded it in this
Agreement independently of, in conjunction or concurrently with, or
subsequent to its pursuit of enforcement of any remedy or remedies that
it may have under the International Master Franchise Agreement.
IN WITNESS WHEREOF, the Master Franchisee has caused this
Collateral Assignment to be duly executed on the day first above
written.
MASTER FRANCHISEE:
ACCESS POWER CANADA
By:_________________________________
FRANCHISOR:
ACCESS POWER, INC.
By:__________________________________
Glenn Smith, President
STATE OF ______________
COUNTY OF _____________
The foregoing instrument was acknowledged before me this _____
day of March, 1998, by __________________, as ______________ of Access
Power Canada _______________, a __________________ corporation, on
behalf of the corporation. He or she personally appeared before me at
the time of notarization.
NOTARY PUBLIC - STATE OF _______________:
sign ____________________________________
print ____________________________________
Personally Known _____ or Produced Identification _____
Type of Identification Produced:
________________________________
STATE OF FLORIDA
61<PAGE>
The foregoing instrument was acknowledged before me this 22nd day
of April, 1998, by Glenn Smith, as President of Access Power, Inc., a
Florida corporation, on behalf of the corporation. He personally
appeared before me at the time of notarization.
NOTARY PUBLIC - STATE OF FLORIDA:
sign ____________________________________
print ____________________________________
Personally Known _____ or Produced Identification _____
Type of Identification Produced:
62
<PAGE>
Exhibit F to Access Power
International Master Franchise Agreement
RIDER TO UCC-1 FINANCING STATEMENT
The Debtor (Franchisee) grants to the Secured Party (Franchisor)
a security interest in the following described property:
A. All of the Debtor's right, title and interest as Franchisee under
the Access Power Franchise Agreement with the Secured Party of even date
herewith and all related documents;
B. All of the Debtor's Inventory, of whatever type or description,
wherever located now owned or later acquired;
C. All of the Debtor's Accounts, including all notes receivable,
accounts receivable, contract rights and all other forms of customer
obligations now existing and that may at any time come into existence;
D. All of the Debtor's equipment, machinery, furniture, fixtures and
other items of personal property, whether now or later acquired;
E. All of the Debtor's permits, licenses and other governmental
approvals;
F. The Debtor's business on an ongoing basis, together with all good
will of the business, and all of the Debtor's contract rights, customer
lists, price lists, patents, trademarks, service marks, trade names, trade
secrets and other proprietary information;
G. All of the Debtor's cash, certificates of deposit, securities,
instruments and general intangibles, including all cash in the Debtor's
operating accounts;
H. The right to all insurance proceeds of all insurance covering the
Collateral;
I. All proceeds, products, replacements, additions, substitutions
and accessions of and to all the foregoing; and
J. All personal property of the Debtor, whether now or later existing
or now owned or later acquired,of every kind and description, tangible or
intangible, now or later in the possession, custody or control of the Secured
Party, now or later existing.
The Debtor's personal assets including consumer goods are not subject
to this security interest
63
NETSPEAK PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (this "Agreement") is made as of
June 17, 1998 (the "Agreement Date") by and between NetSpeak
Corporation, a Florida corporation, having a place of business at 902
Clint Moore Road, Suite 104, Boca Raton, FL 33487 ("NetSpeak") and
Access Power, Inc. having a place of business at 10033 Sawgrass Drive
West Suite 100 Ponte Vedra Beach, Florida, USA 32082 ("Customer").
NOW THEREFORE, in consideration of the mutual covenants and
promises herein, the parties agree as follows:
"NetSpeak Product(s)" shall mean the hardware, software,
firmware, combination thereof or services listed on the attached
Schedule A. NetSpeak may at any time update, revise or discontinue
any Product(s).
"Port" means a connection from the Gateway Software that can be
accepted by any NetSpeak Product. The maximum number of ports of a
NetSpeak Product is the maximum number of connections from the
Software that the NetSpeak Product can utilize simultaneously. For
example, ten (10) T1 gateways have 240 PSTN ports. The GRS, EMS and
other future NetSpeak Corporation products based on port licensing
would use 240 ports as the standard for calculating the licensing fee
for that product.
1. PURCHASE TERMS AND CONDITIONS
(a) ORDERING. Customer will purchase units of the NetSpeak
Products by issuing a written purchase order indicating
model number and quantity of each NetSpeak Product desired,
the price, and requested delivery date. All purchase orders
shall be dated, uniquely numbered for identification,
reference this Agreement, incorporate the terms and
conditions of this Agreement and be signed by a duly
authorized representative of Customer. The terms and
conditions of this Agreement prevail regardless of any
conflicting terms or conditions on Customer's purchase
order. Purchase orders must be received by NetSpeak at
least 14 business days prior to the requested delivery date
specified on the order, and during the term of this
Agreement. All such purchase orders and delivery dates are
subject to written acceptance by NetSpeak and shall be
deemed accepted if in accordance with the terms of this
Agreement and are not rejected in writing by the NetSpeak
within seven (7) business days of receipt thereof.
(b) PRICES. The list price for the NetSpeak Products shall be
as determined by NetSpeak in its discretion and may be
changed by NetSpeak at its sole discretion at any time. All
prices are exclusive of any sales, usage, import, excise,
and other taxes (except those specified based upon
NetSpeak's net income), shipping, maintenance & support,
dongles and insurance. Such items, including any withholding
taxes on royalty fees and other costs, when applicable,
shall appear as separate items on NetSpeak's invoices, and
shall be paid by Customer.
(c) PAYMENT. All payment shall be made in U.S. currency in the
United States and shall be due within thirty (30) days after
delivery or date of invoice, whichever is later. For the
initial purchase of products that are identified herein as
-1-
<PAGE>
Exhibit A the special payment terms noted therein will apply
for this initial purchase and all subsequent orders will
assume the standard payment terms described within this
section. If at any time Customer is delinquent in the
payment of any invoice or is otherwise in breach of this
Agreement, NetSpeak may, in its discretion, withhold
shipment (including partial shipment) of any order or may,
at its option, require Customer to pay C.O.D. for further
shipments. A service charge of one and one-half percent
(1.5%) per month (or the maximum rate permitted by law) may
be assessed by NetSpeak on payments more than ten (10) days
past due.
(d) SOFTWARE. The terms and conditions by which Customer may
copy, use or transfer any program code, including object
code, source code or firmware, hereafter referred to as
"Software", contained within the NetSpeak Products are set
forth in the Program License Agreement accompanying the
NetSpeak Product(s) and similar to that set forth in
Schedule B. In the event of a conflict between the terms
and conditions contained herein and such Program License
Agreement, the terms and conditions of the Program License
Agreement are controlling as to any Software contained
within the NetSpeak Product(s). Where license fees are
based on the total maximum number of Ports available with a
NetSpeak Product, Customer may utilize the Software on
different computer simultaneously, up to the maximum number
of Ports purchased. The Software is protected by the
copyright and patent laws of the United States and
international copyright treaties and is licensed not sold.
Customer may transfer its rights in the software to a third
party provided the third party agrees to the same terms and
conditions as contained herein and Customer does not use or
retain any copy of the NetSpeak Product so transferred.
(e) TRANSFER/RESALE OF NETSPEAK PRODUCTS. Customer may
transfer its rights in the NetSpeak Product(s) to a third
party provided: i) the third party agrees to the same terms
and conditions as contained herein ii) Customer does not use
or retain any copy of the NetSpeak Product transferred, and
iii) all software is transferred in original, unmodified
form and accompanied by the appropriate Program License
Agreement. No further compensation is due to NetSpeak for
such subsequent transfers. Any subsequent. purchaser for
value does not receive any title or ownership in the
NetSpeak software only a license to use as set forth herein.
2. RESCHEDULING, SHIPMENT AND DELIVERY
(a) RESCHEDULING. During the first thirty (30) days following
the receipt of Customer's purchase order by NetSpeak, Customer may
reschedule the delivery date for such purchase order without penalty
to a date not later than sixty (60) days following the original
scheduled delivery date. Purchase orders may not be rescheduled more
than once. The rescheduling does not apply for products that are
specified to be ordered and shipped by June 30, 1998 according to
schedule A attached hereto
(b) SHIPPING DATES. NetSpeak will provide to Customer an
anticipated scheduled delivery date for each purchase order within
three (3) business days after acceptance of the purchase order.
NetSpeak will attempt to deliver the NetSpeak Products by the
-2-
<PAGE>
requested delivery date, subject to restrictions in manufacturing,
scheduling, material and production availability. NetSpeak will
notify Customer of any significant delays in delivery as soon as
NetSpeak becomes aware of such delay. If deliveries are made in
installments, each shipment shall be paid for when due without regard
to the other scheduled deliveries. In the event NetSpeak notifies
Customer of a delay of five (5) or more days in the scheduled delivery
date, Customer shall have the right to reschedule the delivery date
within sixty (60) days of the originally requested delivery date.
(c) FREIGHT CHARGES. Delivery shall be made F.O.B at NetSpeak's
plant of manufacture. Customer shall be responsible for all freight,
handling and insurance charges. Unless given written instruction to
the contrary, NetSpeak shall be responsible for and shall select the
carrier for all shipments. In no event shall NetSpeak have any
liability in connection with shipment, nor shall the carrier be deemed
to be an agent of NetSpeak.
(d) SECURITY INTEREST. Title to and risk of loss or damage
shall pass from NetSpeak to Customer upon delivery to common carrier
or Customer's representative at the F.O.B. point. Delivery shall be
deemed made upon transfer of possession to the carrier. Customer
grants to NetSpeak a security interest in the NetSpeak Products
purchased under this Agreement to secure payment for those NetSpeak
Products purchased. If requested by NetSpeak, Customer agrees to
execute financing statements, or other necessary documentation from
time to time, to perfect this security interest.
3. CUSTOMER COVENANTS AND REPRESENTATIONS
Customer covenants to NetSpeak to:
(a) keep NetSpeak informed as to any problems encountered with
the NetSpeak Products and any resolutions arrived at for those
problems.
(b) comply with all export control laws and regulations of the
United States Government, including, but not limited to 15 CFR Parts
370-799 Export Administration Regulations of the Department of
Commerce, 22 CFR Parts 120-130 International Traffic in Arms
Regulations of the Department of State, 31 CFR 500 Foreign Assets
Control Regulations of the Department of the Treasury, and regulations
issued under the authority of the Atomic Energy Act of 1954 by the
Nuclear Regulatory Commission or the Department of Energy, or
successor supplement or regulation. Customer shall not export, or
allow to be exported or re-exported, any Proprietary Information, or
NetSpeak Product in violation of any such restriction, law or
regulation. Customer shall maintain applicable records about all
exports, including showing compliance with the regulations pertaining
to export to military entities or for military end-users, and shall
obtain and bear all expenses relating to any necessary licenses and/or
exemptions with respect to the export from the United States of all
materials or items deliverable by NetSpeak to any location and shall
demonstrate to NetSpeak compliance with all applicable export control
laws and regulations prior to delivery thereof by NetSpeak.
-3-
<PAGE>
4. LIMITED WARRANTY AND LIABILITY
(a) NetSpeak warrants to Customer, and only to Customer, that
all NetSpeak Products shall be free from material defects in materials
and workmanship under normal and proper use, and shall substantially
conform to the specification to be published by NetSpeak. The fact
that the warranty runs only to Customer does not obviate NetSpeak's
obligation to fulfill warranty claims by Customer which arise from
claims by Customer's customers, although all warranty claims of such
customers shall be asserted by Customer. Customer agrees not to make
any other warranty commitment on NetSpeak's behalf beyond those in the
foregoing limited warranty. Such warranty does not apply to units of
the NetSpeak Products that have been mishandled, mistreated, used,
maintained or stored in any manner other than in the conformity with
NetSpeak's instructions. The warranty on all NetSpeak Products which
can be identified by shipment will terminate ninety (90) days after
the date of receipt of such NetSpeak Products by the Customer. With
respect to all NetSpeak Products for which receipt documentation is
not available, the warranty shall terminate ninety (90) days from the
date of the manufacturing date code stamped on the NetSpeak Product.
(b) Any claim under the warranty must be submitted before the
end of the warranty period to NetSpeak at such address as NetSpeak
provides Customer upon request. The units of the NetSpeak Products
subject to a warranty claim must be securely packaged, insured, and
shipped freight prepaid. Customer must obtain a return authorization
number from NetSpeak before shipping any NetSpeak Product, and include
a written description of the defect.
CUSTOMER'S SOLE AND EXCLUSIVE REMEDY FOR ANY BREACH OF THE
FOREGOING WARRANTY SHALL BE REPLACEMENT OF OR (AT NETSPEAK'S OPTION )
REFUND FOR RETURNED NON-CONFORMING UNITS OF THE NETSPEAK PRODUCTS FOR
WHICH FULL DOCUMENTATION AND PROOF OF NON-CONFORMITY IS PROVIDED TO
NETSPEAK WITHIN NINETY (90) DAYS AFTER THE ORIGINAL NON-CONFORMING
UNITS ARE RECEIVED BY PURCHASER. EXCEPT FOR THE FOREGOING, NO OTHER
REPRESENTATIONS OR WARRANTIES, INCLUDING, BUT NOT LIMITED TO, THE
WARRANTIES OF WORKMANSHIP, MERCHANTABLITY, FITNESS FOR PARTICULAR
PURPOSE, DURABLITY OR NON-INFRINGEMENT ARE MADE BY NETSPEAK WITH
REGARD TO THE NETSPEAK PRODUCTS. ALL TERMS AND CONDITIONS OF THE
UNIFORM COMMERCIAL CODE REGARDING EXPRESS OR IMPLIED REPRESENTATIONS
OR WARRANTIES WHICH MAY APPLY TO THE NETSPEAK PRODUCT(S) ARE HEREBY
SPECIFICALLY DISCLAIMED. NETSPEAK HAS NOT AUTHORIZED ANYONE TO MAKE
ANY REPRESENTATION OR WARRANTY OTHER THAN AS PROVIDED ABOVE. IN NO
EVENT WILL NETSPEAK BE LIABLE FOR ANY DAMAGES CAUSED BY EITHER PARTY'S
FAILURE TO PERFORM ITS OBLIGATIONS HEREUNDER, OR FOR ANY LOST PROFITS
OR ANY INDIRECT, SPECIAL, PUNITIVE, INCIDENTAL, EXEMPLARY OR
CONSEQUENTIAL DAMAGES, REGARDLESS OF THE FORM OF ACTION, WHETHER IN
CONTRACT OR IN TORT, INCLUDING NEGLIGENCE, EVEN IF NETSPEAK HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
(c) In the event that any NetSpeak Product is returned to
NetSpeak under the provisions of this Section, NetSpeak will use
commercially reasonable efforts to repair or replace such NetSpeak
Product, at NetSpeak's sole expense, within ten (10) business days of
the receipt of such NetSpeak Product by NetSpeak. Transportation
costs incurred with respect to the return of such NetSpeak Product
shall be borne by Customer when returned to NetSpeak, and by NetSpeak
when returned to Customer. NetSpeak Products repaired by the NetSpeak
under the warranty provisions hereof shall be warranted for a period
of ninety (90) days or the remainder of the original warranty period,
whichever is greater.
-4-
<PAGE>
(d) If Customer wishes to have any NetSpeak Product repaired
other than under the warranty provisions herein, NetSpeak agrees to
repair such NetSpeak Product at NetSpeak's then-current standard
published repair rates (without discounts), and Customer shall
reimburse NetSpeak for all travel, room, board or other expenses
incurred by NetSpeak in connection therewith.
5. GENERAL
5.1 ASSIGNMENT. This Agreement shall not be assigned by either
party without the advance written consent of the other,
which consent both parties agree will not be unreasonably
withheld; provided, however, that either party may assign
this Agreement in its entirety to a successor to all or a
substantial portion of its business or, to a purchaser of
all of NetSpeak's rights in any NetSpeak Product. This
Agreement shall be binding upon and inure to the benefit of
the parties, their successors and permitted assigns.
5.2 ENTIRE AGREEMENT. This Agreement, and the exhibits hereto,
constitute the entire Agreement between the parties with
respect to its subject matter; except as provided herein,
all prior agreements, representations, statements,
negotiations and undertakings, with respect to such subject
matter are terminated and superseded hereby.
5.3 AMENDMENTS. No amendment to this Agreement shall be
effective unless it is in writing and signed by a duly
authorized representative of each party.
5.4 CONSENT TO BREACH NOT WAIVER. No term or provision hereof
shall be deemed waived and no breach excused, unless such
waiver or consent shall be in writing and signed by the
party claimed to have waived or consented. Any consent by
any party to, or waiver of, a breach by the other, whether
express or implied, shall not constitute a consent to,
waiver of, or excuse for any other different or subsequent
breach.
5.5 SEVERABILITY. In the event any provision of this Agreement
is held illegal, void or unenforceable, to any extent, in
whole or in part, as to any situation or person, the balance
shall remain in effect and the provision in question shall
remain in effect as to all other persons or situations, as
the case may be.
5.6 RESTRICTIVE RIGHTS LEGENDS. If Purchaser is acquiring any
NetSpeak Product in the form of object, source or other
computer programming code on behalf of any unit or agency of
the U.S. Government, the following shall apply:
(i) For units of the Department of Defense, use,
duplication or disclosure by the Government is subject
to restrictions as set forth in subparagraph (c)(1)(ii)
of the Rights in Technical Data and Computer Software
Clause at DFAR 252.227-7013;
(ii) For any other unit or agency use, reproduction or
disclosure is subject to the restrictions set forth in
subparagraphs (a) through (d) of the Commercial
Computer Software - Restricted Rights clause at FAR
52.227-19, and the limitations set forth in NetSpeak's
-5-
<PAGE>
standard commercial agreement for this software.
Contractor/manufacturer is NetSpeak Corp., 902 Clint
Moore Road, Suite 104, Boca Raton, FL 33487
5.7 GOVERNING LAW. This Agreement shall be deemed to have been
made in the State of Florida, and shall be governed by and
construed in accordance with the laws of the State of
Florida, exclusive of its rules governing choice of law and
conflict of laws.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized representatives as of the
Agreement Date.
NetSpeak Corporation Purchaser
_____________________________ _______________________________
By By
_____________________________ _______________________________
Name Name: Glenn Smith
_____________________________ _______________________________
Title Title
_____________________________ _______________________________
Date Date
-6-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
GATEWAYS Quantity Delivery Date Price Extended
-------- -------- ------------- ----- --------
<S> <C> <C> <C> <C>
T1 WGX (Bundled Price) 17 6/30/98 $ 30,584.00 $ 519,928.00
Dual T1 (Bundled Price) 4 6/30/98 $ 60,341.60 $ 241,366.40
Triple T1 (Bundled Price) 2 6/30/98 $ 79,917.50 $ 159,835.00
Quad T1 (Bundled Price) 1 6/30/98 $ 97,223.24 $ 97,223.24
E1 WGX (Bundled Price) 2 6/30/98 $ 30,584.00 $ 61,168.00
$ 1,079,520.64
</TABLE>
<TABLE>
<CAPTION>
Number of Ports Price per port
<S> <C> <C> <C> <S>
GRS ports 90065 6/30/98 $ 240 per port included above
EMS ports 90065 6/30/98 $ 240 per port included above
ITEL Call Center (software) - Supplied free of charge for internal $ -
---------------
evaluation purposes $ 1,079,520.64
---------------
Maint. & Support 12 Month (Refer to Schedule C) 8.0% $ 86,361.65
---------------
Includes Hardware & Software Upgrades 12 months $ 1,165,882.29
Sales Tax 6.0% $ 69,952.94
Delivery (included for initial shipment to Jacksonville, FL) $ -
- -------------------------------------------------------------------------------------------
Total $ 1,235,835.23
===========================================================================================
Terms of Payment
150,000.00 upon execution of contract
50,000.00 60 Days from Shipment
100,000.00 120 Days from Shipment
100,000.00 150 Days from Shipment
Final Payment 835,835.23 180 Days from Shipment
________________________________________
1,235,835.23
==============================
Upon Access Power
receiving additional capital
funding then all payments
will become due
immediately
</TABLE>
Attached is the agreed upon pricing for future related products
-1-
<PAGE>
<TABLE>
<CAPTION>
FUTURE PRICING PRODUCT NUMBER WGX Only Price Per Port Includes
WGX, GRS, EMS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
T1 Gateway WGX/241PTT $ 26,229.00 1,573
Dual T1 Gateway WGX/481PTT $ 51,438.00 1,470
Triple T1 Gateway WGX/721PTT $ 64,080.00 1,370
Quad T1 Gateway WGX/961PTT $ 73,920.00 1,250
24 Port T1 analog Gateway WGX/241PTTA $ 26,229.00 1,573
48 Port T1 analog Gateway WGX/481PTTA $ 51,438.00 1,470
72 Port T1 analog Gateway WGX/721PTTA $ 64,080.00 1,370
96 Port T1 analog Gateway WGX/961PTTA $ 73,920.00 1,250
E1 Gateway WGX/301PTE $ 32,790.00 1,573
Dual E1 Gateway WGX/601PTE $ 59,400.00 1,470
Triple E1 Gateway WGX/901PTE $ 80,100.00 1,370
Quad E1 Gateway WGX/1201PTE $ 92,400.00 1,250
30 Port E1 analog Gateway WGX/301PTEA $ 32,970.00 1,573
60 Port E1 analog Gateway WGX/601PTEA $ 59,400.00 1,470
90 Port E1 analog Gateway WGX/901PTEA $ 80,100.00 1,370
120 Port E1 analog Gateway WGX/1201PTEA $ 92,400.00 1,250
GRS (Required for Gateways) $240 per port
EMS (Required for Gateways) $240 per port
</TABLE>
UPGRADES
--------------------------------------------------------------------------
| All upgrades within a specific platform will be upgraded at a |
| price to equal the per port price as if the upgraded unit was |
| purchased from NetSpeak at the initial per port price plus shipping |
| and dongle charges of $150 per unit. For example a T1 to |
| Dual T1 upgrade will include necessary components from NetSpeak |
| to be shipped for a price of $25,209 plus $240 for each additional |
| GRS and EMS port. |
--------------------------------------------------------------------------
<TABLE>
<CAPTION>
Other Server Products (Software Only)
- -------------------------------------
<S> <C> <C> <S>
Subscribed Account Mgmt. SAM1 $10,000 for 20,000 Client
Records for each computer that
software is installed except
redundant backup
-2-<PAGE>
For credit/debit/call duration SAM3 $25,000 for unlimited license
over first 20,000 records for
each computer
Information Services IS1 $2500 for up to 1000 records
IS3 $.50 for each client record
(min. order 500
records)
Credit Processing Services CPS1 $6,000 per POS
Upgrade to write to EMS CPS2 $6000 per POS
Install/Deliver/Maint.
- ----------------------
Installation $5000 plus Expenses
Delivery $150 per WGX
Maintenance & Support 10% of Purchase
Standard Delivery 2 Weeks
- -----------------
Additional Services
- -------------------
Custom WebPhone (Logo interface) $10,000 per Phone
Client WebPhone SWP3.1 $10 per phone All foreign languages
that NetSpeak makes
generally available
Min. WebPhone MWP Unlimited No
Charge
</TABLE>
Agreement Value
- ---------------
The minimum committed value of services and products under this
agreement is $4,000,000 to be ordered and delivered no later than 24
months from the execution of this agreement. The initial order in
regard to this agreement is specified above. The commitment of
$4,000,000 becomes null and void in the event prices for products
listed above shall increase. Access Power may purchase gateways from
other suppliers that use NetSpeak technology during the term of this
agreement. However, all server technology must be purchased
exclusively from NetSpeak including the GRS, EMS, and other such
products listed above or that become generally available from
NetSpeak.
-3-
<PAGE>
Schedule B
NetSpeak Corporation License Agreement
(Product Name) (Release Version Number)
BY INSTALLING AND RUNNING THIS SOFTWARE PROGRAM YOU AGREE TO BE BOUND
BY THE TERMS AND CONDITIONS OF THIS AGREEMENT. IF YOU DO NOT AGREE TO
THE TERMS OF THIS AGREEMENT, DO NOT CONTINUE THIS INSTALLATION AND
DELETE ANY PORTIONS OF THIS SOFTWARE ALREADY INSTALLED ON YOUR SYSTEM.
ALL TERMS AND PROVISIONS HEREIN ARE RELATED TO THE INSTALLATION AND
USE OF THE SOFTWARE IDENTIFIED IN SCHEDULE A
LICENSE GRANT
NetSpeak Corporation ("NetSpeak") grants to You a non-exclusive
license under Copyrights to use its (Product Name/Release) software
("Software Product") on a single computer at any one time. The
Software Product is "in use" on a computer when it is resident in
memory (i.e., RAM) or when executable or other files are installed on
the hard drive or other storage device of the computer. Where license
fees are based on the total maximum number of ports available with a
Software Product, You may utilize the Software Product on different
computers simultaneously, up to the maximum number of ports licensed.
You may not, or may not permit other individuals to, copy, modify,
translate, reverse engineer, decompile, disassemble, or create
derivative works from the Software Product, or remove any proprietary
notices or labels on the Software product, including copyright,
trademark or patent pending notices.
SOFTWARE PRODUCT
NetSpeak reserves the right to at any time alter prices, features,
capabilities, functions, licensing terms, release dates, general
availability or any other characteristics of the Software Product as
NetSpeak sees fit.
TITLE
Title, ownership rights, and intellectual property rights in and to
the Software Product remain with NetSpeak. The Software Product is
protected by the copyright and patent laws of the United States and
international copyright treaties.
You acknowledge and agree that the Software Product contains
proprietary and confidential information of NetSpeak. You agrees to
protect the confidential and proprietary nature of the Software
Product in the same manner that You protect Your own confidential
information of like value, provided that You will in all cases use
reasonable care to protect the Software Product.
-1-<PAGE>
LIMITED WARRANTY
NetSpeak warrants that the Software Product will perform substantially
in accordance with the accompanying documentation for a period of
ninety (90) days from date of first use. Some states and
jurisdictions do not allow limitation on the duration of implied
warranties, so the above limitation may not apply to you. Except as
expressly provided herein there are no warranties, conditions or
representations express or implied by statute, usage, custom of the
trade or otherwise with respect to the Software Product licensed by
Netspeak hereunder, including but not limited to, warranties or
representations of workmanship, merchantability, suitability or
fitness for a particular purpose, durability or noninfringernent.
Without limiting the generality of the foregoing, Netspeak does not
warrant that the Software Product will meet all of your needs or that
operation of the Software Product will be error free. This limited
warranty constitutes an essential part of this Agreement.
CUSTOMER REMEDY
NetSpeak and its suppliers' entire liability and your exclusive remedy
shall be, at NetSpeak's option to either (a) refund the license fee,
or (b) repair or replace the Software Product that does not meet
NetSpeak's limited warranty. This limited warranty is void if failure
of the Software Product has resulted from accident, abuse, or
misapplication. Any replacement Software Product under the limited
remedy will be warranted for the reminder of the original warranty
period or thirty (30) days, which ever is longer.
LIMITATION OF LIABILITY
Under no circumstances and under no legal theory, whether in tort,
contract, or otherwise, shall NetSpeak or any other person be liable
for any direct, indirect, special, incidental, exemplary, punitive or
consequential damages of any character including, without limitation,
damages for loss of goodwill, work stoppage, computer failure or
malfunction, or any and all other commercial damages or losses, even
if NetSpeak has been advised of the possibility of such damages. In
no event will NetSpeak be liable for any damages whatsoever in excess
of the amount paid for the Software Product that is the subject matter
of the claim or that is directly related to the cause of action.
TERM
This Agreement shall become effective upon your installation of the
Software Product and shall terminate automatically upon breach of this
Agreement by you, if any. NetSpeak may terminate this Agreement at
any time, for any reason, however, NetSpeak may refund a prorated
portion of the license fee upon any such termination, at NetSpeak's
discretion.
MISCELLANEOUS
If any provision of this Agreement is held to be unenforceable for any
reason, such provision shall be reformed only to the extent necessary
to make it enforceable. This Agreement shall be governed by and
construed under Florida law, except as pre-empted by United States
Federal law. The application the United Nations Convention of
Contracts for the International Sale of Goods is expressly excluded.
-2-<PAGE>
You shall comply with all export regulations pertaining to the
Software Product in effect from time to time. In particular, without
limiting the generality of the foregoing, You hereby warrant that you
will not directly or indirectly export, re-export or transship the
Software Product or such other information, media or products in
violation of or otherwise in contravention of the export laws, rules
and regulations.
U.S. GOVERNMENT RESTRICTED RIGHTS
Use, duplication or disclosure by the Government is subject to
restrictions set forth in subparagraphs (a) through (d) of the
Commercial Computer-Restricted Rights clause at FAR 52,227-19 when
applicable, or in subparagraph (c)(1)(ii) of the Rights in Technical
Data and Computer Software clause at DFARS 252,227-7013, and in
similar clauses in the NASA FAR Supplement.
CUSTOMER SUPPORT
Unless you have entered into a separate support and maintenance
agreement with NetSpeak, you shall receive technical support during
he term of the warranty period set forth above in accordance with the
NetSpeak software support policy in effect for the Software Product.
For technical support related to the Software Product call NetSpeak
Corp. at (561) 998-8700.
-3-
<PAGE>
Schedule C
NETSPEAK MAINTENANCE AND SUPPORT AGREEMENT
This Maintenance and Support Agreement (this "Agreement") is made
as of June 17, 1998 (the "Agreement Date") by and between NetSpeak
Corporation, a Florida corporation, having a place of business at 902
Clint Moore Road, Suite 104, Boca Raton, FL 33487 ("NetSpeak") and
_Access Power, Inc. having a place of business at 10033 Sawgrass
Drive West Suite 100 Ponte Vedra Beach, Florida, USA 32082
("Customer").
NOW THEREFORE, in consideration of the mutual covenants and
promises herein, the parties agree as follows:
"NetSpeak Product(s)" shall mean the hardware, software,
firmware, combination thereof or services listed on the attached
Schedule A. NetSpeak may at any time update, revise or discontinue
any Product(s).
1. MAINTENANCE OBLIGATIONS AND FEES
1.1 NetSpeak shall provide to Customer the maintenance and
support services set forth in Section 1.2 herein, subject to
Customer's payment of the sum of eight percent (8%) of the total
purchase price of NetSpeak Products to be serviced for the initial
twelve month period following delivery of the NetSpeak Products. In
return, as part of the maintenance and support services, NetSpeak
shall provide to Customer all enhancements, upgrades, and subsequent
releases to both the hardware and software comprising the NetSpeak
Products for which support fees have been paid. Thereafter, for each
subsequent twelve month period following the one year anniversary of
delivery of the NetSpeak Products and subject to Customer's payment of
the sum of ten percent (10%) of the total purchase price of NetSpeak
Products to be serviced, NetSpeak shall provide to Customer the
maintenance and support services set forth below. NetSpeak shall
invoice Customer for the maintenance and support fee forty-five (45)
days prior to the expiration of the then current warranty period.
Such invoice shall be due and payable by Customer within the 30-days
from the date of such invoice in order to maintain continuous warranty
and support services. Customer may terminate the maintenance and
support subscription set forth herein upon ninety (90) days written
notice to NetSpeak, provided however, that if Customer subsequently
requests to NetSpeak to provide maintenance and support services,
Customer will be obligated to purchase retroactively all previously
unpurchased support periods, in addition to then current maintenance
and support period. If for any reason Customer has not fulfilled its
payment obligation set forth in Section 1.1 of this Agreement for more
than thirty (30) days, NetSpeak shall have authority to terminate any
maintenance or service obligations hereunder.
1.2 NetSpeak shall provide support and maintenance to Customer
with respect to each NetSpeak Product for the periods of time which
Customer has satisfied the payment obligation set forth in Section
1.1. Support and maintenance shall include (i) all error correction,
maintenance modifications and minor releases necessary for the
NetSpeak Products to perform to their original specifications; (ii)
telephone help service staffed by qualified representatives of
NetSpeak available to Customer five (5) days per week and eight (8)
hours per day including direct call service or through electronic
paging; (iii) the repair of any error or defect in the NetSpeak
Product and/or replacement of nonrepairable Licensed Products, but
-1-
<PAGE>
specifically excluding any third party hardware other than in the
initial purchase for delivery by June 30,1998 whether purchased
separately by Customer or through NetSpeak. These support and
maintenance services include all enhancements, upgrades, new versions
or subsequent releases of the NetSpeak Products that add new features
or functionality.
1.3 NetSpeak shall provide to Customer telephone help line
service and an electronic mail address by which Customer may ask
questions and/or notify NetSpeak of any technical problems, program
errors, or defects which cause the NetSpeak Products not to perform up
to their technical specifications. Customer shall provide sufficient
information to enable NetSpeak to evaluate and verify the existence of
an error in one of the NetSpeak Products, hereafter an "Incident."
Following notice by Customer of an Incident and verification of the
same by NetSpeak, NetSpeak will assign a Severity Level to the
Incident, in accordance with the categories defined below. NetSpeak
shall respond to the Incident within the time limit set forth below
and address the nature of the Incident so that the NetSpeak Products
perform in accordance with their written user instructions and
technical specifications.
1.4 If, upon investigation, it is determined that the Incident
is not caused by a nonconformance of any of the Licensed Products,
Customer agrees to pay all cost incurred by NetSpeak related to the
Incident, including all reasonable travel and living expenses, an
administrative charge equal to twenty percent (20%) of the total
travel and living expenses incurred by NetSpeak due to the Incident,
and an hourly rate for technical assistance rendered in relation to
the Incident, according to the following rates:
Technician $90/hour
Engineer $120/hour
Principal Engineer $150/hour
1.5 For so long as Customer performs the payment obligations set
forth in Section 1.1 to obtain Maintenance and Support for a NetSpeak
Product, NetSpeak agrees to deliver all Maintenance and Support to
Customer, within the following timeframes based upon the Severity
Level of the Incident:
-2-
<PAGE>
<TABLE>
<S> <S> <S>
Severity 1: Unable to use NetSpeak Product; Errors Within four (4)business days, maximum
unavoidable; Major effort given until an
feature/function not usable emergency
fix or bypass is developed and
available to be shipped to Customer;
Critical situations may require
Customer and NetSpeak to be at their
respective work locations, or
available, on an around the clock
basis.
Severity 2: Severely restricted product use; Within seven (7) business days
Considerable work around effort
Severity 3: Use of product with some restrictions Within sixty (60) calendar days
Easily avoidable; Not detrimental to
user's data/media/output
Severity 4: Little or no impact; can be circumvented At next release of NetSpeak Product
</TABLE>
The number of days indicated represents the time from
verification of the Incident by NetSpeak until the correction or other
resolution is received by Customer from NetSpeak.
1.6 NetSpeak is not obligated to perform investigation and/or
corrections of Errors to the extent reasonably found by NetSpeak to be
either: (i) in other than a current release of a NetSpeak Product,
provided that the newer release still complies with the applicable
product specifications; (ii) caused by Customers negligence; (iii)
caused by a modification to the NetSpeak Product by Customer, or their
respective employees and contractors; or (iv) due to external causes
such as, but not limited to, power failure or electric surges, harmful
code including computer viruses and worms not present in the NetSpeak
Product as delivered to Customer, or combination of the NetSpeak
Product(s) with hardware or software with which the NetSpeak
Product(s) were not intended to work. In addition, if, upon
investigation, it is determined by the Parties that the Error reported
by the Customer is not caused by non-conformance of a NetSpeak
Product, Customer shall pay all costs reasonably incurred by NetSpeak
in investigating, addressing and resolving the error, as applicable,
including the hourly rates set forth above, as well as all reasonable
travel expenses, and an administrative charge equal to five percent
(5%) of such total travel expenses.
-3-<PAGE>
2. LIMITED WARRANTY AND LIABILITY
(a) NetSpeak warrants to Customer, and only to Customer, that
all maintenance and support services shall be free from material
defects in materials and workmanship under normal and proper use, and
shall substantially conform to the specification to be published by
NetSpeak. The fact that the warranty runs only to Customer does not
obviate NetSpeak's obligation to fulfill warranty claims by Customer
which arise from claims by Customer's customers, although all warranty
claims of such customers shall be asserted by Customer. Customer
agrees not to make any other warranty commitment on NetSpeak's behalf
beyond those in the foregoing limited warranty.
(b) CUSTOMER'S SOLE AND EXCLUSIVE REMEDY FOR ANY BREACH OF THE
FOREGOING WARRANTY SHALL BE COMPLETION OF THE REQUIRED MAINTENANCE AND
SUPPORT SERVICES. EXCEPT FOR THE FOREGOING, NO OTHER REPRESENTATIONS
OR WARRANTIES, INCLUDING, BUT NOT LIMITED TO, THE WARRANTIES OF
WORKMANSHIP, MERCHANTABILITY, FITNESS FOR PARTICULAR PURPOSE,
DURABILITY OR NON-INFRINGEMENT ARE MADE BY NETSPEAK WITH REGARD TO THE
NETSPEAK PRODUCTS. ALL TERMS AND CONDITIONS OF THE UNIFORM COMMERCIAL
CODE REGARDING EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES WHICH
MAY APPLY TO THE NETSPEAK PRODUCT(S) OR SERVICES PERFORMED HEREUNDER
ARE HEREBY SPECIFICALLY DISCLAIMED. NETSPEAK HAS NOT AUTHORIZED
ANYONE TO MAKE ANY REPRESENTATION OR WARRANTY OTHER THAN AS PROVIDED
ABOVE. IN NO EVENT WILL NETSPEAK BE LIABLE FOR ANY DAMAGES CAUSED BY
EITHER PARTY'S FAILURE TO PERFORM ITS OBLIGATIONS HEREUNDER, OR FOR
ANY LOST PROFITS OR ANY INDIRECT, SPECIAL, PUNITIVE, INCIDENTAL,
EXEMPLARY OR CONSEQUENTIAL DAMAGES, REGARDLESS OF THE FORM OF ACTION,
WHETHER IN CONTRACT OR IN TORT, INCLUDING NEGLIGENCE, EVEN IF NETSPEAK
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
3. GENERAL
3.1 Assignment. This Agreement shall not be assigned by either
party without the advance written consent of the other,
which consent both parties agree will not be unreasonably
withheld; provided, however, that NetSpeak may assign this
Agreement in its entirety to a successor to all or a
substantial portion of its business or, to a purchaser of
all of NetSpeak's rights in any NetSpeak Product. This
Agreement shall be binding upon and inure to the benefit of
the parties, their successors and permitted assigns.
3.2 Entire Agreement. This Agreement, and the exhibits hereto,
constitute the entire Agreement between the parties with
respect to its subject matter; except as provided herein,
all prior agreements, representations, statements,
negotiations and undertakings, with respect to such subject
matter are terminated and superseded hereby.
-4-<PAGE>
3.3 Amendments. No amendment to this Agreement shall be
effective unless it is in writing and signed by a duly
authorized representative of each party.
3.4 Consent to Breach Not Waiver. No term or provision hereof
shall be deemed waived and no breach excused, unless such
waiver or consent shall be in writing and signed by the
party claimed to have waived or consented. Any consent by
any party to, or waiver of, a breach by the other, whether
express or implied, shall not constitute a consent to,
waiver of, or excuse for any other different or subsequent
breach.
3.5 Severability. In the event any provision of this Agreement
is held illegal, void or unenforceable, to any extent, in
whole or in part, as to any situation or person, the balance
shall remain in effect and the provision in question shall
remain in effect as to all other persons or situations, as
the case may be.
3.6 Governing Law. This Agreement shall be deemed to have been
made in the State of Florida, and shall be governed by and
construed in accordance with the laws of the State of
Florida, exclusive of its rules governing choice of law and
conflict of laws.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized representatives as of the
Agreement Date.
NetSpeak Corporation Customer
___________________________ ___________________________________
By By
___________________________ ___________________________________
Name Name: Glenn Smith
___________________________ ____________________________________
Title Title
___________________________ ____________________________________
Date Date
-5-
Employment Agreement
A. This agreement (hereinafter referred to as "Agreement") is between Access
Power (hereinafter referred to as the "Company") and Howard Kaskel (the
"Employee").
B. A base salary of $6,000 per month will be paid to Employee to provide
CFO services to the Company on a part-time (three days per week) basis.
Additional days will be paid at the rate of $500 per day.
C. The title of the Employee will be Chief Financial Officer.
D. Employee will be reimbursed for mileage at $.32 a mile from Lake Mary,
Florida to Ponte Vedra Beach and return.
E. The Company will provide hotel accommodations (or other suitable
temporary living quarters) and meals when Employee is in Ponte Vedra
Beach providing services to the Company.
F. The Company will pay the Employee consistent with the timing and method
of paying other members of management. Appropriate federal taxes will
be withheld from payments made to the Employee.
G. Employee's salary in the first and last month of employment will be
prorated if the employee works less than four weeks in such months.
H. Employee elects not to participate in any employee benefit programs
unless specifically set forth in this Agreement or approved by both
parties in writing.
I. Employee will earn vacation and observe holidays in accordance with the
Company's policy.
J. The Company acknowledges that the Employee works under the exclusive
legal authority and management of the Company and not Tatum CFO
Partners, LLP.
K. The Company agrees to indemnify Employee in his duties as an Employee
and as Chief Financial Officer to the extent permitted by governing
law. The Company shall pay for or reimburse the reasonable expenses
incurred by Employee if he is a party to any proceeding arising out of
his being an Employee or the Chief Financial Officer of the Company, as
long as the Employee has acted in good faith and with reasonable care
in carrying out his duties as an Employee and as Chief Financial
Officer.
L. The Employee agrees that any proprietary information gained while
engaged/employed will only be used to further the mission of the
Company. Hence, such information will otherwise be kept in strict
confidence both during and after employment by the Company.
M. The Company may terminate this Agreement with thirty (30) days written
notice with all payments required pursuant to this agreement to be paid
on or before the termination date.
<PAGE>
I have read and understand the scope of services and fees described in this
Agreement and the enclosed Proposal. I hereby agree to the terms of this
Agreement with respect to Howard Kaskel.
Access Power Employee
/s/ Glenn Smith July 1, 1998 /s/ Howard Kaskel July 1, 1998
Glenn Smith, CEO Date Howard Kaskel Date
MUTUAL DISSOLUTION
of
INTERNATIONAL MASTER FRANCHISE AGREEMENT
Between
ACCESS POWER, INC.,
a Florida corporation
and
APC TELECOM INC., (aka APC Telecom)
a Canadian Federal corporation
Dated: December 11, 1998
1 of 5 <PAGE>
MUTUAL DISSOLUTION
of
INTERNATIONAL MASTER FRANCHISE AGREEMENT
This Mutual Dissolution of International Master Franchise Agreement is
signed on December 11, 1998, between ACCESS POWER, INC., a Florida
corporation and ACCESS POWER CANADA, INC., Canadian Federal
corporation;
Whereas ACCESS POWER CANADA INC. (herein "APCI") was incorporated
pursuant to a Certificate of Incorporation under the Canada Business
Corporations Act dated April 24 ,1998;
Whereas APCI amended its legal corporate name to APC TELECOM INC.
pursuant to a Certificate of Amendment under the Canada Business
Corporations Act dated June 19,1998;
Whereas both parties hereto have discussed and agreed that the
Franchisor and Master Franchisee relationship (Franchise Relationship)
established by the International Master Franchise Agreement (and all
exhibits thereto) dated April 26, 1998 (IMFA) is no longer in the best
interest of either party, both parties agree that:
1. Dissolution
As of December 3, 1998 (Effective Date) all future rights and
obligations resulting from the IMFA, except as otherwise
specifically provided herein, are no longer applicable to either
party to this Agreement. In addition, subsequent to the
Effective Date, no business or contracts shall be engaged in by
either party which may require continuation of the IMFA. All
undertakings and existing agreements contrary to this Agreement
between the parties are repealed and this Agreement shall take
their place.
2. Amounts Owed
As of the Effective Date and by agreement of the parties hereto,
neither party owes the other party any sums of money related to
activities associated with the establishment of, operation of,
or this dissolution of the IMFA.
Any amounts which may be in any Marketing Fund referred to under
the IMFA shall be reimbursed on a percentage contributed basis
among the parties. (A party contributing 25% of the Funds total
contributions over the life of the Fund shall be entitled to 25%
of the remaining amounts in the Fund as of the Effective Date of
this Agreement.)
3. Waiver of Claims
Except with respect to amounts owed and any other matters
provided for in this agreement as set forth in this Agreement,
neither party shall be liable to the other party under any and
all causes of action with regard to activities undertaken or not
undertaken prior to the Effective Date of this Agreement,
regardless of whether any obligation was undertaken by either
party in reliance upon the Franchise Arrangement established in
the IMFA.
By executing this Agreement, both parties forever release and
discharge the other party and its affiliates, its Designees,
franchise sales brokers, if any, or other agents, and their
respective officers, directors, representatives, employees and
agents, from any and all claims of any kind, whether presently
known or unknown, in law or in equity, which may exist as of the
Agreement Date relating to, in connection with, or arising under
this Agreement or any prior agreement between the parties.
4. Confidentiality
Neither party shall, for a period of 2 (two) years from the
Effective Date, either directly or indirectly, divulge, disclose,
or communicate to any person or firm, any confidential
2 of 5<PAGE>
information of any kind concerning any matters affecting or
relating to the business of the other party or its affiliates,
which such party may have acquired in the course of or as
incident to its involvement with the other party as a result of
the IMFA.
For the purposes of this section, confidential information shall
mean any oral or written information and data of a confidential
nature, including but not limited to proprietary, technical,
development, marketing, sales, operating, performance, cost,
know-how, business and process information, agreements, lists,
reports, computer programming techniques, and all record bearing
media containing or disclosing such information and techniques,
which has been or will be disclosed by one party to the other
party under this or any prior agreement between the parties
hereto.
5. Proprietary Marks and Property
All proprietary marks revert back to the party which initially
had any claim, regardless of country, to such proprietary mark
and each party agrees not to infringe upon or attempt to take in
any territory a proprietary mark belonging to the other. Neither
party shall, directly or indirectly, commit an act of
infringement or contest or aid in contesting the validity or
right of the Proprietary Property of the other, or take any other
action in derogation of such rights.
APC TELECOM INC .,may continue, indefinitely, to use and
advertise under the specific name "APC Telecom" if it so chooses.
Access Power, Inc. will not challenge the use of that name.
However, that allowance does not include the use of the service
mark and logo of Access Power or Access Power Advanced
Communications.
6. Exclusivity and Competition
The parties hereto shall not be limited, based upon any time
frame of non-competition nor any territory/location, from
competing with one another. However, nothing herein shall
preclude the parties from reaching any future agreement which may
incorporate market exclusivity and/or non-competition provisions.
7. Termination Activities
The following activities shall be carried out, as applicable:
Both parties shall execute any documents reasonably required
by to wind up the Franchisor-Master Franchisee affairs.
At the earliest practical opportunity both parties shall
notify any third party or parties of the winding up of the
Franchisor - Master Franchisee relationship.
Both parties agree to return any loaned materials to the other
party at the request and expense of such other party.
The servers belonging to APC TELECOM INC. shall be removed
from the Access Power, Inc. Gateway Server Network., forthwith
after execution of this agreement.
Access Power Canada, Inc. shall: (i) cease selling Franchises
pursuant to the IMFA; (ii) cease using all advertising materials,
forms and other materials bearing Access Power, Inc. Proprietary
Marks; and (iii) cease holding itself out as a sales representative
of Access Power Inc.
Both parties agree to maintain complete and accurate books and
records of its IMFA operations with respect to the period of
time in which the IMFA was in effect, for at least 6 (six)
years from their preparation.
3 of 5<PAGE>
Access Power Inc .agrees to provide to APC TELECOM INC. ,
three (3) ADTRAN T1 C. S. U. ACE units within ten (10) days
of execution of this agreement .
8. Indemnification ---Intentionally deleted
9. Third Party Beneficiaries
Nothing in this Agreement, whether express or implied, is
intended to confer any rights or remedies under or by reason of
this Agreement on any persons other than the parties and their
respective personal representatives, other legal representatives,
heirs, successors and permitted assigns. Further, nothing in
this Agreement is intended to relieve or discharge the obligation
or liability of any third party to any party to this Agreement.
10. Arbitration
Any disputes related to this agreement shall be arbitrated under
the commercial arbitration rules of the American Arbitration
Association, with a single arbiter.
Any arbitration proceedings shall take place in a reasonable
location (including the home area of the selecting party)
selected by the party that is not initiating the arbitration
proceeding.
Any judgment upon an arbitration award may be entered in any
court having competent jurisdiction and shall be binding, final
and non-appealable. Both parties waive to the fullest extent
permitted by law, any right to or claim for any punitive or
exemplary damages against the other and agree that in the event
of a dispute between them each shall be limited to the recovery
of any actual damages sustained by it.
In the event either party fails to appear at any properly noticed
arbitration proceeding, an award may be entered against such
party by default or otherwise notwithstanding such failure to
appear.
Each party shall be responsible for its own costs in pursuing or
defending an arbitration proceeding under this Agreement.
The only exception to the obligation to arbitrate herein shall be
with respect to claims relating to the Proprietary Property of
either party or requests for restraining orders, injunctions or
other procedures in a court of competent jurisdiction to obtain
specific performance when deemed necessary by such court to
preserve the status quo or prevent irreparable injury pending
resolution by arbitration of the actual dispute between the
parties.
11. Entirety
This Agreement represents the entire understanding and agreement
between the parties with respect to the subject matter of this
Agreement, and supersedes all other negotiations, understandings
and representations, if any, made by and between the parties. No
representations, inducements, promise or agreements, oral or
otherwise, if any, not embodied in this Agreement shall be of any
force and effect.
This Agreement shall remain valid and in effect to the fullest
extent possible between the two parties with respect to the
subject matter hereof and to the extent the provisions hereof are
not superseded by subsequent agreements between the two parties.
12. Non-Enforcement
A party's failure at any time to enforce any of the provisions
of this Agreement or any right with respect thereto, will not be
construed to be a waiver of such provision or right, nor to
affect the validity of this Agreement. The exercise or non-
exercise by a party of any right under the terms or covenants
herein shall not preclude or prejudice the exercising thereafter
of the same or other rights under this Agreement.
4 of 5<PAGE>
13. Severability
If any provision of this Agreement is contrary to, prohibited by,
or deemed invalid under applicable law or regulation, such
provision shall be inapplicable and deemed omitted to the extent
so contrary, prohibited or invalid, but the remainder of this
Agreement shall not be invalidated thereby and shall be given
full force and effect so far as possible.
14. Governing Law and Jurisdiction
Unless otherwise required under specific laws of the United
States, this Agreement shall be governed by, construed, and
enforced in accordance with the laws of the State of Florida ,and
the country of Canada.
15. Modifications
This agreement may only be modified in writing, signed by duly
authorized representatives of the each party hereto.
16. Notices
All notices, requests, consents and other communications required
or permitted under this Agreement shall be in writing and shall
be hand delivered by messenger or courier service, or mailed
(airmail if international) by registered or certified mail
(postage prepaid), return receipt requested, addressed to:
If to Access Power, Inc.: If to APC TELECOM INC.:
Access Power, Inc. APC Telecom, Inc.
Suite 100 Suite 4
10033 Sawgrass Drive West 241 Applewood Cresent
Ponte Vedra Beach, FL 32082 Vaughan, Ontario L4K4E6
Attn: Glenn Smith, President Attn: Larry Hunt, President
17. Execution - Counterparts
This Agreement may be executed by the parties in separate
counterparts each of which when so executed and delivered
shall be an original and all such counterparts shall together
constitute one and the same instrument. The parties hereto
agree that this agreement may be executed and delivered and
transmitted by means of facsimile or other electronic means
and the parties hereto agree to accept and rely upon such
documents as if the same bore original signatures.
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement.
Witnesses:
APC TELECOM INC.
By:__________________________________
Larry Hunt, President A.S.O.
ACCESS POWER, INC.
By:__________________________________
Glenn Smith, President
STATE OF FLORIDA
COUNTY OF ST. JOHNS
5 of 5
[*] Certain information omitted and filed separately with the
Commission pursuant to a confidential treatment request under Rule
24b-2 of the Commission.
IP Telephony Services Agreement
between
Access Power, Inc.
10033 Sawgrass Drive West, Suite 100
Ponte Vedra Beach, Florida 32082
and
Access Universal, Inc.
13426 Verbena Lane
Houston, TX 77083
1 of 15
<PAGE>
IP TELEPHONY
SERVICES AGREEMENT
Between
Access Power, Inc.
and
Access Universal, Inc.
RECITALS
This Services Agreement is made as of the ___ day of December,
1998, by and between Access Power, Inc., a Florida corporation
("the Service Provider") and Access Universal, Inc., a Texas
corporation ("the Customer").
Whereas the Service Provider provides certain Internet Telephony
Services, ("Services"); and
Whereas the Customer desires to use said Services in the delivery
of telecommunications traffic; and
Whereas the Customer will be assuming the existing customer base
and existing voice telecommunications traffic of Trademaster
International, a Texas company, and Universal Services
Enterprise, Inc., a Florida corporation for the purposes of this
contract;
It is hereby mutually agreed as follows:
Section 1. DEFINITIONS
AGREEMENT - refers to this IP Telephony Services Agreement and
all attachments, exhibits, and addenda hereto.
CONFIDENTIAL INFORMATION - refers to, but is not limited to, the
following types of information and other information of a similar
nature: pricing, software (in various stages of development),
designs, drawings, specifications, models, technical information,
source code, object code, documentation, diagrams, flow charts,
marketing and development plans, co-developer and sub-contractor
identities, business plans or records, financial information,
market reports, customer lists, employee lists, supplier and/or
2 of 15<PAGE>
subcontractor information, business manuals, policies and
procedures, the terms and conditions of this Agreement and all
information clearly marked as confidential.
DEFAULT - means any material breach or nonperformance of a
material obligation of a party with respect to this Agreement,
which is not cured or excused in accordance with the provisions
of this Agreement.
GATEWAY - means the equipment and software necessary, in any
given location, to perform the IP processing and transmission of
telephony communications.
IP - Internet Protocol.
IP TELEPHONY NETWORK - refers to the transmission path from one
Gateway to another Gateway and may include routers, hubs and
digital switching units over which IP telephony traffic will be
processed. This network will handle traffic from a point within
the US to a point in Manila, Philippines. It includes necessary
hardware and software to perform the transmissions, however, it
explicitly does not include the PTT or PSTN transmissions on
either side of the IP Telephony Network.
REGULATIONS - mean any statute, law, ordinance, regulation, order
or rule of any governmental agency or body or of any other type
of regulatory body in any state or country, including, without
limitation, those covering environmental, energy, safety,
bribery, record keeping, zoning, anti-discrimination, antitrust,
wage and hour, export control, privacy, data transfer,
telecommunications and price and wage control matters.
SERVICE(S) - refers to the obligations undertaken by the Service
Provider under the terms of this Agreement.
TELEPHONY TRANSMISSIONS - refers to the complete process of
making a call from the point of origination through the
completion and subsequent disconnection of the call.
Section 2. IP TELEPHONY SERVICES
2.1 The Service Provider will provide the Customer with voice
telephony transmission (including the transfer of standard
telephony signaling to IP and vice versa) and routing services
through the IP Telephony Network between the United States and
Manila in the Philippines.
2.2 The Service Provider will install, test and remotely monitor the
operation and performance of the IP Telephony Network.
2.3 The Service Provider shall provide reports to the Customer
containing telephony transmission activity over the IP Telephony
Network. Such reports will include traffic information from the
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IP Telephony Network activity log files. The reports will be
provided in the form of data files on a frequency and
transmission method to be established by the parties hereto.
2.4 The IP Telephony Network will initially be constructed to
accommodate a volume of call traffic of 1,000,000 minutes per
month. The Customer must provide periodic volume projections to
enable the Service Provider enough lead time to increase the IP
Telephony Network systems capacity to handle traffic growth over
such network. The volume will increase by an additional
2,000,000 minutes a month within the first six months of
operation. Volume increases may be implemented on an accelerated
basis upon agreement by both parties. For each increase of
250,000 minutes or more beyond the projected 3,000,000 minutes,
the Customer must provide at least ninety (90) days advance
notification to the Service Provider. For any volume increases
in excess of 1,000,000 minutes, the Service Provider reserves the
right to require more than (90) days for capacity implementation
and reserves the right to set periodic maximums, based upon
capacity availability issues.
2.5 The Service Provider may enter into one or more subcontracts in
connection with the performance of this Agreement. Subject to
the provisions herein, the Service Provider shall remain
responsible to the Customer for ensuring that the Service is
performed in accordance with the applicable provisions of this
Agreement, including those portions of the Service performed by
subcontractors of the Service Provider.
2.6 The Customer will be required to arrange and provide for the co-
location of the Service Provider equipment within the United
States, access to the PSTN within the United States, and local
and long distance access associated with completing the Telephony
Transmissions in the Philippines.
2.7 The Service Provider will not be verifying the validity of the
calling card, nor calculating remaining time on such calling
cards. These functions are the responsibility of the Customer and
a function of the telephony switches outside of the IP Telephony
Network.
2.8 If an incoming call cannot be terminated within the coverage area
of the IP Telephony Network, then the telephony traffic will not
be completed.
2.9 The Customer will provide for appropriate co-location facilities
for the Service Provider's equipment within the United States.
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SECTION 3. CHARGES, COMPENSATION AND FEES
3.1 The Customer shall prepay the Service Provider on a monthly basis
an amount, for anticipated use of the IP Telephony Network which
shall be no less than the minimums set forth in Exhibit A, equal
to payment for the number of anticipated minutes in Exhibit A.
3.2 If usage for a particular month goes above the number of prepaid
minutes, the Customer shall pay the per minute rate, as specified
in Exhibit A, within 10 days of receipt of the billing invoice
from the Service Provider. If the bill is not paid within the 10
day period, it will be deemed past due. Any past due monetary
amounts will bear interest calculated at 18% (eighteen percent)
APR from the billing date until paid in full. In the event of a
disagreement concerning amounts owed with respect to an invoice,
the Customer shall pay any amount not in dispute within the
timeframe above.
3.3 If any payment is greater than seven (7) days past due, the
Service Provider reserves the right to suspend Services to the
Customer until such time as the Customer has no outstanding
overdue amounts owed to the Company.
3.4 If, due to specific or unique needs of the Customer, the Service
Provider incurs hourly programming costs, such programming costs
will be billed at an hourly rate as specified in Exhibit A. The
Customer will be notified in advance of any such work to be done,
the reason therefor and an estimate of the number of hours that
will be necessary to complete the work.
3.5 All references herein to dollars, cents, costs, or monetary
amounts shall be in US Currency. All fees, charges or
assessments associated with the conversion of monetary amounts
shall be borne by the Customer.
3.6 The fees listed in Exhibit A of the Agreement do not include
additional taxes or fees which may be applicable. If the Service
Provider is required to pay taxes or fees by any regulatory
authority based on the Services provided under this Agreement,
then such additional costs shall be billed to and paid by the
Customer. The additional costs will be billed to the Customer in
the exact amount of such additional costs without any mark-up by
the Service Provider. Any such additional costs must be
directly measured and based upon the Customer driven usage or
ability to use (e.g.: capacity) the IP Telephony Network.
3.7 The Service Provider reserves the right to increase the rates for
the Services due to currency fluctuations which result in an
increase in the cost to provide the Services in the Philippines.
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<PAGE>
3.8 Bills/invoices shall be directed to the Customer as provided for
in the Notices section of this Agreement or to a subsequently
identified person and/or location identified in communication(s)
provided in accordance with said Notices section.
3.9 In addition to the charges contained herein, the Customer is
responsible for all costs, including but not limited to,
installation, usage, billing, and taxes associated with all costs
of completing the Telephony Transmissions outside of the IP
Telephony Network.
Section 4. TERM
4.1 The term of this Agreement shall commence upon the date of mutual
execution and continue through the 36th month of Service provided
hereunder unless earlier terminated in accordance with this
Agreement.
4.2 Upon the expiration of the initial or any renewal term, this
Agreement shall renew automatically for successive three-year
terms unless either party gives written notice of non-renewal at
least three (3) months prior to the scheduled expiration date.
However, if three (3) months is insufficient time for the party
receiving the notice of non-renewal to reasonably continue
uninterrupted services to that party's customers, the terms of
this agreement shall continue for up to, but not exceed, an
additional three (3) months.
Section 5. TERMINATION
5.1 The Customer may terminate this Agreement at any time and without
cause by giving the Service Provider at least six (6) months
prior written Notice of Termination. The Service Provider may
terminate this Agreement at any time and without cause by giving
the Customer six (6) months prior written Notice of Termination.
5.2 A party may terminate this Agreement immediately if a Default
occurs and is not corrected during the Cure Period(s) provided
for within this section.
5.3 A Default shall not be deemed to have occurred unless the
nondefaulting party has given written notice (a "Default Notice")
to the defaulting party in accordance with the requirements of
this section. A Default Notice shall specify in reasonable
detail the events which the nondefaulting party believes have
occurred and which constitute or evidence a Default, the
provisions of this Agreement which have not been performed or
complied with, and the actions which, in the opinion of the
nondefaulting party, would be required to fulfill the
requirements of this Agreement and cure the Default. An
immaterial failure to comply precisely with the foregoing notice
requirements shall not affect the validity of a Default Notice if
the defaulting party was not prejudiced by such failure.
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5.4 Following the giving of a Default Notice, the defaulting party
shall have thirty (30) days (the "Cure Period") in which to take
the necessary actions to cure its breach or nonperformance. All
Cure Periods shall commence on the date a Default Notice is
given.
5.5 Except in the case of a Default for non-payment of amounts owed,
any Cure Period provided for in the preceding paragraph shall be
extended for up to ninety (90) days (or for such longer period as
the parties may agree in writing) if (i) the nonperforming party
is making its best efforts to promptly cure the nonperformance,
and/or (ii) a cure cannot practically be achieved within the
applicable Cure Period. As used in the preceding sentence, the
term, "best efforts" shall mean the application of diligence and
resources reasonably necessary to cure the nonperformance in a
business like fashion with due regard for the seriousness of the
nonperformance and its impact upon the other party and those to
whom the other party may have legal or contractual obligations.
5.6 A party's Default or failure to perform any of its obligations
under this Agreement shall be excused if and to the extent such
Default or failure arises out of causes beyond the reasonable
control of the nonperforming party or are related to acts
undertaken at the request of or performed by the other party.
5.7 If any Default is caused as a result of actions by a
subcontractor or supplier over whom the defaulting party does not
have direct influence or control, then the nonperforming party
shall be excused hereunder unless the goods or services to be
furnished to it by the subcontractor or supplier were reasonably
obtainable from other sources in sufficient time to permit the
nonperforming party to meet its obligations hereunder.
5.8 The waiver by either party of any breach or default hereunder
shall not constitute the waiver of any other or subsequent breach
or default.
5.9 Notwithstanding anything herein to the contrary, either party may
terminate this Agreement immediately in the event the other party
files a petition in bankruptcy or proceedings in bankruptcy are
instituted against it and not dismissed within ninety (90) days,
or any court shall assume jurisdiction of such party and its
assets pursuant to proceedings under any bankruptcy or
reorganization act, or a receiver is appointed to such party's
assets and is not dismissed within ninety (90) days, or if such
party shall make an assignment for the benefit of creditors.
5.10 Upon termination of this Agreement, the Customer's rights under
this Agreement to pass data through the IP Telephony Network
shall cease.
5.11 If this Agreement is terminated for any reason, neither party
will be liable to the other because of such termination for
damages for the loss of prospective profits, anticipated sales,
goodwill or for expenditures, investments or commitments made in
connection with this Agreement.
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5.12 The termination of this Agreement shall not relieve the Customer
of its liability to pay any compensation described in the
Charges, Compensation and Fees section of this Agreement, which
have accrued to the Service Provider as of the date of
termination or any liability to pay that may accrue after the
date of termination.
Section 6. WARRANTIES
6.1 The Service Provider does not represent or warrant that the
operation of the system or the performance of the services will
be uninterrupted or error-free. However, the Service Provider
will use all reasonable efforts to maintain the overall IP
Telephony Network quality.
6.2 Unless the Service Provider specifies otherwise, the Service
Provider warrants that all Equipment and software and other
materials provided by the Service Provider under this agreement
are all appropriately licensed and have undergone testing before
being used in the provision of the Services.
6.3 The Service Provider warrants that upon notification of a problem
with the provision of the Services, the Service Provider will
immediately take all reasonable steps to correct such problem.
6.4 The Customer represents that it is aware that the sound quality
of the Service may not be comparable to that of standard
telephony transmissions and that the Service is subject to
certain technical interference and issues related to transmission
of IP packets which are beyond the control of the Service
Provider.
6.5 The Customer represents that it is aware that the Service may be
suspended in the future as a result of changes in the technical
capacity and/or protocols of data networks or the regulatory
environment surrounding the provision of IP based telephony
service, in which case the Service Provider will not be
considered to be in breach of this Agreement.
6.6 The Customer agrees to comply fully with all relevant Regulations
to assure that neither the Service nor any direct product thereof
are (i) provided or used, directly or indirectly, in violation of
Regulations; or (ii) are intended to be used for any purposes
prohibited by Regulations.
6.7 Except as expressly stated in this Section, there are no
warranties, express or implied, with respect to the Services to
be provided under this Agreement.
Section 7. HARDWARE, SOFTWARE AND DATA RIGHTS
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7.1 All hardware and software used to provide the Services herein are
deemed to belong to or be licensed by the Service Provider or a
contractually involved third party thereof. Nothing contained in
this Agreement shall confer to the Customer any property rights,
proprietary interest or license in the software, hardware,
written materials, techniques or know how used to provide the
Services.
7.2 Voice traffic, in any form, transferred through the IP Telephony
Network pursuant to the Services being provided herein, belongs
to the Customer. Nothing contained in this Agreement shall
confer to the Service Provider any property rights or proprietary
interest in such traffic.
SECTION 8. REGULATORY COMPLIANCE
8.1 The Service Provider shall comply with all Regulations (including
identification and procurement of required permits, certificates,
approvals and inspections) which are applicable to the provision
of the Services by the Service Provider.
8.2 The Customer shall comply with all Regulations (including
identification and procurement of required permits, certificates,
approvals and inspections) which are applicable to interfaces,
including but not limited to the Customer's resale processes of
the Services herein.
8.3 The Service Provider may immediately terminate this Agreement
without liability or penalty at any time the Service Provider
reasonably and in good faith believes that the Services being
provided do not comply with Regulations related to the provision
of the Services. In such an instance, the Service Provider shall
notify the Customer that the Services are being terminated as a
result of non-compliance with applicable Regulations.
SECTION 9. MAINTENANCE AND UPGRADES
9.1 The Service Provider reserves the right to temporarily suspend
Services for the purposes of maintaining or upgrading hardware
and/or software in whole or in part on the IP Telephony Network.
The Service Provider shall notify the Customer no less than
twenty (20) days prior to any such planned suspension of Services
provided that the Service Provider knows of such maintenance or
upgrade requirements that far in advance. In all instances where
20 days notice can not be provided, the Service Provider will
provide notice within two (2) business days of receiving notice
of any anticipated suspension of Service.
9.2 The Service Provider will work with the Customer to schedule
maintenance and servicing on the IP Network to minimize any
service interruption to the Customer's customers.
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9.3 The Service Provider reserves the right to make such changes in
the design, production, or content of the Services as the Service
Provider decides, so long as the Services herein continue to be
performed.
Section 10. ASSIGNMENT
Neither party may assign any of its rights or obligations under
this Agreement without the prior written consent of the other
party, which consent shall not be unreasonably withheld or
delayed. Subject to the foregoing, all of the terms and
provisions of this Agreement shall be binding upon and inure to
the benefit of and be enforceable by the successors and permitted
assigns of the Customer and the Service Provider.
Section 11. SEVERABILITY
11.1 Any provision, covenant, or condition of this Agreement which is
held by a court of competent jurisdiction to be invalid or
unenforceable in any jurisdiction, shall be ineffective without
invalidating or rendering unenforceable the remaining provisions
hereof and any such invalidity or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
11.2 Notwithstanding paragraph 11.1, any provision, covenant, or
condition of this Agreement held to be illegal or unenforceable
shall be deemed, if it can be done without materially altering
the intention of the parties, amended to conform to applicable
laws or regulations.
SECTION 12. CONFIDENTIALITY
12.1 Both parties agree that the terms of this Agreement and any
Confidential Information provided by one party to the other, with
the exception of information previously disclosed to the public,
shall be considered confidential and shall not be disclosed to
third parties by the recipient, except to the extent that: (a)
such information is required to be disclosed in carrying out this
Agreement; or (b) is required to be disclosed to appropriate
governmental or regulatory authorities or in a judicial
proceeding; or (c) is provided pursuant to specific written
consent received from the disclosing party.
12.2 The parties shall conspicuously label their tangible information
as "Confidential" or "Proprietary" where appropriate, prior to
delivery to the other party. Non-tangible information shall be
designated as "Proprietary" or "Confidential" at the time of
disclosure.
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<PAGE>
12.3 The parties' obligations under this paragraph will survive the
expiration or termination of this letter of intent and remain in
effect for two years thereafter.
SECTION 13. INDEMNIFICATION
13.1 The Customer shall defend and indemnify the Service Provider from
and against any and all actions, suits, proceedings, claims,
expenses, costs or liabilities (including attorneys fees) arising
out of or caused by the negligence, willful misconduct,
unauthorized acts, failures to act or misrepresentations of the
Customer.
13.2 The Service Provider shall defend and indemnify the Customer from
and against any and all actions, suits, proceedings, claims,
expenses, costs or liabilities (including attorneys fees)
arising out of or caused by the negligence, willful
misconduct, unauthorized acts, failures to act or
misrepresentations of the Service Provider.
Section 14. LIABILITY
14.1 Neither party shall be liable to the other for any lost profits
(except as may relate to nonpayment for Services rendered),
unrealized savings or consequential damages that might arise from
any performance or nonperformance of this Agreement.
14.2 Neither party shall be liable to the other party or any the
Customer thereof for any indirect, special, incidental,
consequential or punitive damages, regardless of the form of
action for any reason whatsoever.
14.3 Neither party will be in Default of this Agreement if failure or
delay in performance is caused by an "act of God", fire,
flood, severe weather conditions, material shortage or
unavailability of transportation, government ordinance,
laws, regulations or restrictions, war or civil disorder, or
any other cause beyond the reasonable control of such party.
SECTION 15. DISPUTE RESOLUTION
15.1 In the event of any disagreement of any nature whatsoever between
the parties to this Agreement in any way relating to this
Agreement, the parties shall meet to attempt to resolve such
disagreement. In the event of their failure to do so within
thirty (30) days or such longer period of time as shall be
mutually agreed upon by the parties, either party may serve
notice in writing upon the other party demanding binding
arbitration, which notice shall specify in reasonable detail the
nature of the dispute. Notwithstanding the foregoing, either
party may seek a temporary restraining order or other similar
temporary injunctive relief to enforce the obligations of the
other party hereunder.
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15.2 Any arbitration under this section shall be held in Jacksonville,
Florida and conducted in accordance with the procedures set forth
hereafter and, to the extent not inconsistent with this section,
in accordance with the Commercial Arbitration Rules of the
American Arbitration Association in effect on the date of this
Agreement.
15.3 Any arbitration under this section shall be before a panel of
three (3) arbitrators who shall be attorneys-at-law admitted to
practice in the United States. The arbitrators shall be selected
by the parties from lists provided by the American Arbitration
Association. The parties agree to exchange all relevant
documents prior to any hearing and further agree that any dispute
over such exchange may be submitted to the arbitrators for
decision, which decision shall be binding on the parties. The
parties further agree to exchange hearing exhibits and
designations of witnesses to be called at the hearing at least
two (2) weeks before any hearing. A party may not offer at the
hearing as part of its direct case any witness or exhibit not so
disclosed.
15.4 Any arbitration award must (i) be rendered in accordance with
applicable law governing this Agreement and (ii) be set forth in
a written decision which sets forth the reasons (including,
without limitation, the conclusions of fact and law) upon which
such award is rendered. No punitive damages shall be awarded in
connection with any arbitration proceedings. Judgment upon an
arbitration award may be rendered in any court of competent
jurisdiction or application may be made to any such court for
judicial acceptance of an order to enforcement of an arbitration
award, as the case may be. Any arbitration award shall be final
and binding on the parties. Once an issue has been arbitrated
pursuant hereto, the decision of the arbitrator shall be res
judicata with respect to such issue.
15.5 Arbitrators shall have the power to issue subpoenas
compelling testimony and/or the production of documents from any
person whether or not a party hereto, which subpoenas shall be
enforceable in all courts of competent jurisdiction. In
addition, the arbitrators and attorneys-of-record for the parties
shall have the power to order through courts of competent
jurisdiction the taking of depositions from any person, not a
party or a director, officer, employee or agent of a party, who
cannot be subpoenaed or is unable to attend the arbitration,
whose testimony the arbitrators deems both important and relevant
to the resolution of the issues presented for arbitration.
15.6 The cost of the arbitration and all attorney fees shall be borne
by the parties in such proportion as the arbitrators shall
direct, with such arbitrators to give due consideration to the
fault of the parties.
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SECTION 16. NOTICES
All notices, requests, demands, and other communications required
or permitted hereunder shall be in writing and will be deemed to
have been duly given when delivered by hand or telephonic
facsimile (and duly receipted), or by certified or registered
mail, return receipt requested, with postage prepaid, to the
addresses set forth below (or to such other addressee or address
as shall be set forth in a notice given in accordance herewith).
All such notices shall be deemed to have been given on the date
delivered, sent by facsimile or seven (7) days after the date
mailed in the manner provided above.
Notices to the Service Provider Notices to the Customer
-------------------------------- -----------------------
Access Power, Inc. Access Universal, Inc.
10033 Sawgrass Dr. W., Suite 100 13426 Verbena Lane
Ponte Vedra Beach, FL 32082 Houston, TX 77083
Attn: Glenn Smith Attn: Rick Ilanga
fax: 904.273.6390 fax: 281.530.4581
e-mail: [email protected] e-mail: [email protected]
17. ENTIRETY OF AGREEMENT
This Agreement constitutes the complete understanding of the
parties hereto and supersedes all prior or contemporaneous
agreements or representations, written or oral, concerning the
subject matter of this Agreement. This Agreement may not be
modified or amended except in writing and signed by a duly
authorized representative of each party or their respective
successor or assigns.
18. GENERAL PROVISIONS
18.1 Nothing herein contained shall be construed to place the Parties
in any partnership, agency, or joint venture relationship.
Neither party will represent that it has any right to assume or
create any obligation, expressed or implied, on behalf of the
other party, nor to represent the other party as an agent,
employee, or in any other capacity.
18.2 The Customer shall not use the name of the Service Provider
or any of the Service Provider's trademarks, trade names, logos,
designations or copyrights in any advertising, public relations
or media release without the prior written consent of the Service
Provider.
18.3 This Agreement and all matters arising out of or relating to this
Agreement shall be governed by, interpreted and enforced in
accordance with the laws of the State of Florida, USA without
regard to the conflict of laws provisions thereof, except that
when U.S. Federal law exists on substantive matters requiring
construction under this Agreement, such Federal law shall apply
in lieu of State law, but only to the extent required by
applicable federal laws. The parties hereby agree to the
exclusive jurisdiction of the courts of the State of Florida,
USA.
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18.4 The parties may change any aspect of this Agreement by mutual
agreement. Any such change shall be agreed upon in writing and
signed by the duly authorized representatives of the parties.
18.5 A party's failure at any time to enforce any of the provisions of
this Agreement or any right with respect thereto, will not be
construed to be a waiver of such provision or right, nor to
affect the validity of this Agreement. The exercise or non-
exercise by a party of any right under the terms or covenants
herein shall not preclude or prejudice the exercising thereafter
of the same or other rights under this Agreement.
18.6 The parties' respective obligations under this Agreement which by
their nature would continue beyond the termination or expiration
of this Agreement, including, without limitation those contained
in the sections entitled Confidentiality, Liability and
Indemnification shall survive the termination or expiration of
this Agreement.
18.7 Words used herein, regardless of the number and gender
specifically used, shall be deemed and construed to include any
other number, singular or plural, and any other gender,
masculine, feminine, or neuter, as the context requires.
Access Power, Inc. Access Universal, Inc.
By: ___________________ By____________________
Name: Glenn Smith Name: Felix F. Medina
Title: President and CEO Title:
Access Power, Inc. Access Universal, Inc.
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<PAGE>
EXHIBIT A
FEE SCHEDULE
[*] Information omitted and filed separately with the Commission
pursuant to a confidential treatment request under Rule 24b-2 of
the Commission.
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AN AGREEMENT
BETWEEN
ACCESS POWER, INC.
AND
Ldt Net Com, Inc.
<PAGE>
IP TELEPHONY SERVICES AGREEMENT
THIS AGREEMENT is made as of this the 2nd day of October, 1998 (the
"Effective Date"), by and between
ACCESS POWER, INC. a Florida corporation located at 10033 Sawgrass Drive
West, Suite 100, Ponte Vedra Beach, Florida 32082 ("Company"); and
LDT NET COM, INC., a Florida corporation located at 679 Third Street
South, Jacksonville Beach, Florida 32250, ("Agent").
RECITALS
A. The Company provides certain Internet Telephony services and
Services, including those listed in Exhibit A. ("Services"). This
Agreement pertains only to Services as listed in Exhibit A and Exhibit B
and not to any other Services and/or services provided by the Company.
B. The Company and Agent desire that Agent be authorized to act as a
non-exclusive independent distributor of the Services under the terms and
conditions set forth below.
NOW, THEREFORE, the parties hereto agree as follows:
1. APPOINTMENT AND TERM
1.1 TERM: The Company hereby appoints Agent as a distributor for
Access Power Internet Telephony Origination and Termination
Services as described in Exhibit B for a period of five (5) years
from the Effective Date (the "Initial Term"). This Agreement
shall automatically renew for successive one (1) year terms
unless terminated pursuant to Section [4].
1.2 GRANT OF RIGHTS: The Company grants Agent a nonexclusive,
nontransferable right to distribute the Services. Distribution
of the Services shall begin when the Company has the equipment,
software and recordkeeping systems ready to support Agent and
Agent's customers.
1.3 MODIFICATIONS TO SERVICES AND AVAILABILITY: The Company may make
such changes in the design, production, or content of the
Services as the Company decides. The Company will provide notice
to Agent of any change under this section.
2. AGENT OBLIGATIONS
2.1 APPROVALS; PERMITS: Agent shall be responsible for obtaining any
and all required regulatory approvals for importation, marketing
and distribution of the Services. Without limitation, Agent
shall indemnify the Company against all claims made by any
regulatory authority for sales of Services under this Agreement.
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<PAGE>
2.2 MARKETING ACTIVITIES: Agent shall use all reasonable efforts to
advertise and promote the sale of the Services. The Company
shall use all reasonable efforts to assist Agent in such
activities.
2.3 REPRESENTATION: Agent agrees to conduct business in a manner
that reflects favorably at all times on Services and the good
name, good will and reputation of the Company and avoid
activities or practices which are or might be detrimental to the
Company.
2.4 LEGAL COMPLIANCE: Agent will comply with all applicable
international, national, regional and local laws and regulations
in performing its duties hereunder and in any of its dealings
with respect to the Company. If any approval with respect to
this Agreement, or the notification or registration thereof, will
be required at any time during the term of this Agreement with
respect to giving legal effect to this Agreement in Indonesia, or
with respect to compliance with exchange regulations or other
requirements so as to assure the right of remittance abroad of
U.S. Dollars pursuant to Section [3] hereof or otherwise, Agent
will take whatever steps may be necessary in this respect, and
any charges incurred in connection therewith will be borne by
Agent.
3. ORDERS; FEES; PAYMENT TERMS
3.1 PURCHASE ORDERS: Agent shall submit purchase orders for
prepaid accounts directly to LDT either via electronic mail, fax
or postal service. Purchase order must specify number of
accounts by face value and retail price. For example, Agent may
order 25,000 US $20 accounts @ US$0.50 Per Minute, 50,000 US$10
accounts @ US$0.50 Per Minute, and so on. Retail amount must be
supplied in order to perform accounting and recordkeeping
functions for each individual accountholder. Agent may order
prepaid accounts at any time, but must order according to Minimum
and Maximum Monthly Call Volumes as described in Exhibit B
3.2 FEES/TERMS: Agent will be charged on a prepaid basis for
usage of the Company Internet Telephony Origination and
Termination Services as described in Exhibit A.
3.3 PIN/ACCOUNT DELIVERY: PIN Numbers and accounts will be delivered
to Agent in a mechanized format to be defined at a later date
prior to availability of services. The Company will furnish
Agent such mechanized file via e-mail no later than ten working
days after receipt of valid Purchase Order. Accounts and
associated PINS become activated within two business days upon
receipt of payment.
3.4 HOURLY PROGRAMMING CHARGE: If, due to specific or unique needs
of Agent, the Company incurs hourly programming costs, such
programming costs will be billed at an hourly rate as set forth
in Exhibit A. Agent will be notified in advance of any such work
to be done, the reason therefore, and an estimate of the number
of hours that will be necessary to complete the work.
-3-
<PAGE>
3.5 INTEREST ON OVERDUE PAYMENTS: Any payment or part of a payment
that is not paid when due, as set forth in Exhibit A, shall bear
interest at the rate of 1.5% per month from its due date until
it is paid in full.
3.6 SUSPENSION OF SERVICE: The Company reserves the right to
suspend Services to Agent and Agent's customers, if any payment
is greater than 7 days past due, until such time as Agent has no
outstanding overdue amounts owed to the Company.
3.7 U.S. CURRENCY: All references herein to dollars, cents,
costs, or monetary amounts shall be in U.S. Currency. Agent
shall bear the cost of any conversion to U.S. currency.
3.8 TAXES: The fees listed in this Agreement do not include
additional taxes that may be applicable to the sale, distribution
or licensing of the Services. If the Company is required to pay
taxes (whether federal, state or local) based on the Services
provided under this Agreement, then such tax shall be billed to
and paid by Agent. The additional tax charges will be billed to
Agent in the exact amount of the additional taxes required
without any mark-up by the Company. Any such additional tax
charges must be directly measured and based upon Agent purchases
or usage of Services and not upon infrastructure costs of the
Company. This provision explicitly does not include income taxes
based upon revenues generated by the Company.
3.9 CUSTOMS AND DUTY CHARGES: Agent shall also be responsible to
make payment of any customs, duties, withholding taxes, and other
fees which may be levied by reason of importation to or use of
Services in Indonesia.
3.10 CHANGE OF PRICES: The Company reserves the right to increase
from time to time the rates for the Services provided under this
contract relating to charges imposed on the Company stemming from
an order, rule or regulation of the Federal Communications
Commission or a court of competent jurisdiction, concerning: (i)
payphone use charges, (ii) "Universal Service Fund (USF), and
(iii) presubscribed interexchange carrier charges ("PICCs").
Additionally, currency fluctuation can result in an increase in
the cost to provide Services in Indonesia, and the Company
reserves the right to increase the rates for the Services
provided under this contract to reflect such increases. The
Company will make rate adjustments under this provision as
necessary.
3.11 PRICE GUARANTEE. The Company guarantees the given price to
Agent for a purchase order as described in section 3.1 for a
period of 90 days from date of activation.
4. TERMINATION
4.1 TERMINATION FOR CAUSE: Notwithstanding anything provided for
elsewhere in this Agreement, this Agreement may be terminated by
either party upon provision to the other party of thirty (30)
-4-<PAGE>
days prior written notice upon the occurrence of one of the
following events:
(a) either party commits a fundamental breach of the
Agreement and fails to cure such breach within thirty (30) days
after receipt of written notice; or
(b) either party commits an act of bankruptcy, becomes
insolvent, enters into any arrangement for the benefit of its
creditors, goes into liquidation or winding-up receivership
proceedings against it have been initiated and any of these have
not been dismissed or canceled within sixty (60) days.
4.2 RESPONSIBILITIES UPON TERMINATION: Upon termination of this
Agreement, Agent shall immediately cease all of its distribution
and marketing activities for the Services and use of Intellectual
Property relating to the Services, and promptly pay in full all
outstanding amounts due to the Company.
5. CONFIDENTIALITY
Agent acknowledges that in the course of performing its obligations
hereunder it may receive information which is confidential and
proprietary to the Company. Agent agrees not to use such information
except in performance of this Agreement and not to disclose such
information to third parties. Agent agrees to sign a commercially
reasonable non-disclosure agreement at the request of the Company prior
to receipt of information that the Company deems confidential.
6. NON-COMPETITION
6.1 COMPETITOR REPRESENTATION: Agent shall not distribute Services
of nor represent any direct competitor of the Company during the
term of this Agreement nor for a period of 60 days following
termination of this Agreement. For the purposes of this clause,
a direct competitor is defined as an Internet Telephony Service
Provider providing like services to and from Indonesia.
6.2 INTELLECTUAL PROPERTY: Agent shall not utilize any Intellectual
Property of the Company or any Confidential Information of the
Company for the purpose of competing, directly or indirectly,
with the Company.
7. PROMOTIONS AND TRADEMARKS
7.1 ADVERTISING AND MEDIA: Agent shall not use the name of the
Company or any of the Company's trademarks, trade names, logos,
designations or copyrights in any advertising, public relations
or media release without the prior written consent of the
Company.
-5-<PAGE>
8. INDEMNIFICATION AND WARRANTY
8.1 RECIPROCAL INDEMNIFICATION: Agent agrees to indemnify the Company
(including paying all reasonable attorneys fees and costs of
litigation) against and hold the Company harmless from any and all
claims by an other party resulting from Agent's acts, omissions or
misrepresentations, regardless of the form of action. The Company
agrees to indemnify Agent (including paying all reasonable attorneys
fees and costs of litigation) against and hold Agent harmless from
any and all claims by an other party resulting from Agent's acts,
omissions or misrepresentations, regardless of the form of action.
8.2 CUSTOMER INDEMNIFICATION: Notwithstanding paragraph 9.1, Agent
agrees to indemnify the Company against any and all claims by
Agent and Agent's customers for incidental, consequential, indirect,
or special damages of any nature, including, without limitation, lost
business profits or opportunities.
8.3 AGENT REPRESENTATION: Agent represents and warrants that it has
tested the Services prior to entering into this Agreement and
is aware that the sound quality is not currently comparable to that
of standard telephony services and that the Services and use thereof
is subject to potential technical interference related to the
Internet which is beyond the control of the Company. Agent further
warrants that it is aware that the Services and/or use thereof may be
suspended in the future as a result of changes in the Internet's
technical capacity or the regulatory environment surrounding the
provision of Internet based telephony services, in which case, the
Company will not be considered to be in breach of this Agreement.
8.4 WARRANTY. The Company will use all reasonable efforts to maintain
overall network quality. The quality of the services provided
hereunder shall be consistent with other IP telephony industry
standards, government regulations and sound business practices.
9. MISCELLANEOUS
9.1 RELATIONSHIP: It is acknowledged and agreed that the relationship of
Agent to the Company created under this Agreement is that of an
independent contractor and not an employee. Neither party is
authorized or empowered to create any contract or obligation on
behalf of, binding upon, or in the name of the other party.
9.2 ASSIGNMENT: Agent shall not transfer or assign this Agreement or
any part hereof without the Company's prior written consent.
9.3 GOVERNING LAW: This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Florida and be subject
to jurisdiction of the courts thereof.
9.4 ENTIRETY: This Agreement, inclusive of the Exhibit(s) hereto,
constitutes the entire Agreement between the parties as to the
subject matter hereof. No amendment or modification of this
Agreement will be valid unless set forth in writing referencing
this Agreement and executed by an authorized representative of
each party.
-6-<PAGE>
9.5 WAIVER: The failure by either party on any occasion to enforce
any provision of this Agreement will in no way prevent the
enforcement of that provision or any provision on any future
occasion.
9.6 SEVERABILITY: In the event that any provision of this Agreement
is held unenforceable by a court or tribunal of competent
jurisdiction, such provision will be enforced to the maximum
extent permissible and the remaining portions of this Agreement
shall remain in full force and effect.
9.7 FORCE MAJEURE: Neither party shall be liable to the other for
damages caused which result from events beyond its control,
including, but not limited to, governmental order or regulation
(unless such event occurs as a result of an action of such party,
its affiliates, or subsidiaries), war, terrorism, difficulty in
acquisition of components, fire, flood, earthquake, typhoon,
hurricane, tsunami or tornado.
9.8 CHOICE OF LANGUAGE: The original of this Agreement has been
written in English. Agent waives any right it may have under the
laws or regulations of or within Indonesia to have the Agreement
reproduced in any other language.
9.9 HEADINGS: The paragraph headings contained herein are for
reference only and shall not be considered as substantive parts
of this Agreement.
9.10 NOTICES: Except as otherwise provided in this Agreement, all
notices required under this Agreement shall be sent by certified
or registered mail, overnight courier, or hand delivery, and
shall be addressed as specified below:
If to ACCESS POWER: If to AGENT:
Attn: Glenn Smith Attn: Paul Rosenbloom
Access Power, Inc. Ldt Net Com, Inc.
10033 Sawgrass Dr. W. Ste 100 679 Third Street South
Ponte Vedra Beach, FL 32082 Jacksonville Beach, Florida 32250
Tele: 904-273-2980 Tele: 904-247-1099
Fax: 904-273-6390 Fax: 904-247-3963
e-mail: [email protected] e-mail:
Changes in these addresses shall be valid if notice of such
change is given in writing to the other parties pursuant to this
paragraph.
-7-<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year below written.
ACCESS POWER, INC. LDT NET COM, INC.
BY: _______________________ BY: __________________________
NAME _______________________ NAME: __________________________
TITLE: _______________________ TITLE: __________________________
DATE: _______________________ DATE: __________________________
-8-<PAGE>
EXHIBIT A
SERVICES LIST AND FEES
[*] Certain information omitted and filed seperately with the Commission
pursuant to a confidential treatment request under Rule 24b-2 of the
Commission.
-9-
<PAGE>
EXHIBIT B
DEFINITION OF SERVICES; MONTHLY CALL VOLUMES AND ADDITIONAL AGENT
RESPONSIBILITIES; REIMBURSEMENT OF ONGOING TELECOMMUNICATION
CHARGES; REIMBURSEMENT OF INSTALLATION CHARGES
ACCESS POWER INTERNET TELEPHONY ORIGINATION AND TERMINATION SERVICES
The Company will provide origination of calls from the continental
United States and termination of calls to Jakarta, Indonesia using a
combination of Internet telephony and traditional telephony. Agent
customers will have access to Company Services from anywhere in the
continental United States via 800 number. Agent customer accounts
must identify themselves to the system via account number and PIN.
Account Number and PIN mechanized data files will be provided to
Agent upon valid receipt of Purchase Order as described in section
3.1. The Company will provide recordkeeping for each Agent customer
account and will accordingly decrement account balances based on
pricing described above. Valid Agent customer accounts (good Acct
Number, PIN and with available minutes on the account) will be routed
from the U.S. to Jakarta, Indonesia where the call is converted from
Internet protocol to traditional telephony via Internet telephony
equipment resident in Jakarta. The resultant call is completed to a
regular phone in the local Jakarta calling area.
Calls may be placed using the Service to destinations within
Indonesia and outside of Jakarta's local calling area. Such calls
will incur additional long distance charges from the local Jakarta
PTT. Agent is fully responsible for the establishment of such long
distance service within Jakarta and is fully responsible for payment
to the local PTT for such charges.
MINIMUM MONTHLY CALL VOLUMES
Beginning with the fourth month of availability of the Services,
Agent will be required to use a minimum 1,000,000 minutes of Services
at the price specified in Exhibit A.
MAXIMUM MONTHLY CALL VOLUMES
The Company requires sufficient lead-time to increase network
capacity to handle call volumes in excess of 120% of the Minimum Monthly
Call Volume. This time frame varies, but is generally between one to
three months and will be dependent largely upon the availability of local
Jakarta Internet access, Co-location facility and local loop access.
The Company monitors network usage and reserves the right to postpone the
fulfillment of or cancel a Purchase Order if network capacity will not
carry the load. If Agent wishes to increase Monthly Call Volumes in
excess of 120% of Minimum Monthly Call Volumes, Agent must do so in
increments of 250,000 minutes above the Minimum Monthly amount. Agent
must supply on a monthly basis a six month forecasting report estimating
the projected minutes carried by the Service over that period of time.
This report assists the Company in provisioning for capacity and
equipment needs.
-10-<PAGE>
ADDITIONAL AGENT RESPONSIBILITIES
In addition to all other terms mentioned in this Agreement, within
Indonesia, Agent will:
Acquire, contract and be financially responsible for procuring and
maintaining adequate bandwidth ("Internet Access") to service all of
Agents customers. Such bandwidth will initially be 1.5 megabits in
capacity in order to service the Minimum Monthly Call Volume, and
will be required to increase as call volumes increase.
Secure and maintain an Access Power approved co-location facility
including electricity, security and backup power.
Acquire, contract and be financially responsible for procuring and
maintaining connectivity to the local Jakarta PTT ("Local Loop").
Such connectivity will initially require four E-1s of capacity in
order to service the Minimum Monthly Call Volume, and will be
required to increase as call volumes increase.
REIMBURSEMENT OF ONGOING TELECOMMUNICATION CHARGES
Agent may submit approved expenses (local Internet access, Co-
location and Local Loop charges associated with the Services) for
reimbursement by the Company providing Agent orders and uses at least
1,000,000 minutes in a given month. Prior to the fourth month of
availability of the Services, Agent may submit approved expenses for
reimbursement on a pro-rated basis if minutes used in a given month
fail to meet the Minimum Monthly commitment of 1,000,000 minutes.
REIMBURSEMENT OF INSTALLATION CHARGES
Non-recurring charges that Agent incurs for the installation of
Internet Access, Co-location and Local Loop access will be fully
reimbursed by the Company after one complete month of operations.
-11-
LEASE AGREEMENT
SAWGRASS ADMINISTRATION BUILDING
PONTE VEDRA BEACH, FLORIDA
THIS LEASE is made and entered into the 1st day of August, 1997, by
and between DOUGLAS PARTNERSHIPS II, LTD., a Florida Limited Partnership
("Lessor"), whose address is P.O. Box 6746, Jacksonville, Florida 32236-
6746, and ACCESS POWER, INC. ("Lessee"), whose address is 108 Nautilus Lane,
Ponte Vedra Beach, Florida 32082.
NOW THEREFORE, for and in consideration of the mutual promises,
covenants and conditions herein contained, and the rent reserved by Lessor
to be paid by Lessee to Lessor, Lessor hereby leases to Lessee and Lessee
hereby rents from Lessor a portion of the Building located in St. Johns
County, Florida, as more particularly described on Exhibit A attached hereto
(the "Premises"), for the term, at the rentals, and upon the terms and
conditions hereinafter set forth.
1. PREMISES.
--------
The Premises hereby leased, let and demised by Lessor unto Lessee,
contain approximately 1,830 square feet of finished office space, together
with the right to use, on a non-exclusive basis with other occupants of the
Building, the common areas of the Building consisting of approximately 2,725
square feet of space. Lessee hereby acknowledges that it leases the
Premises in their current "as is" condition unless otherwise provided by a
separate agreement signed by the Lessor and Lessee. See Exhibit E
"Additional Space".
2. TERM.
----
2.1 The term of this Lease and the accrual of rents hereunder
shall commence on 30 days following the date hereof (mutual acceptance) (the
"Commencement Date") and shall expire at 12:00 P.M. midnight of the last day
of the 37th month thereafter, including any partial month in accordance with
paragraph 3.2 hereof if this Lease commences on any date other than the
first (1st) day of a month (the "Term"), or the expiration of any option
period exercised in accordance with Paragraph 2.4 below, but in no event
shall the term of this Lease extend beyond / / 2000 (the "Expiration
Date").
2.2 At the Expiration Date, or upon the earlier termination of
this Lease, Lessee shall peaceably vacate and surrender the Premises to the
Lessor in accordance with this Lease and, except for conditions caused by a
casualty giving rise to termination under paragraph 11 hereof, the Premises
shall then be in a broom clean condition, reasonable wear and tear excepted.
2.3 If the Lessee retains, without Lessor's consent, possession
of the Premises or any part thereof after the Expiration Date, Lessee shall
pay Lessor per diem rent at double the rate payable in the month immediately
preceding said holdover, for the time Lessee thus remains in possession, but
acceptance of said payments by Lessor shall not operate to extend the term
of this Lease.
2.4 Provided Lessee is not in default hereunder, Lessee is
granted the option to extend the Lease term for 2 - 36 successive month
periods following the expiration of the initial term (the "Extended Term")
upon the same terms and conditions set forth herein except, rent payable
during the Extended Term shall be in the following amounts.<PAGE>
2.4.1 During the first Extended Term, which shall be
months 38 through 73, the total amount of one hundred seventeen thousand,
four hundred thirty-six and No/100 Dollars ($117,436.00), payable $ SEE
EXHIBIT D monthly;
2.4.2 During the second Extended Term, which shall be
months 74 through 109, the total amount of one hundred twenty-eight
thousand, three hundred twenty-five and No/100 Dollars ($128,325.00),
payable $ SEE EXHIBIT D monthly.
In addition, in the event this Lease provides for improvements to be made to
the Premises on or before Lessee's taking possession of the Premises, said
provisions shall not be applicable. This option to extend the term of this
Lease may only be exercised by Lessee's giving written notice of its
exercise thereof to Lessor not later than sixty (60) days prior to the
expiration of the current term of the Lease.
3. RENT.
----
3.1 During the Term hereof, Lessee covenants and agrees to pay to
Lessor a fixed rent (subject to adjustment as set forth hereafter) ("Rent"),
in advance, in the total amount of one hundred seven thousand, four hundred
seventy & 59/100 Dollars ($107,470.59), payable as follows: (a) months 2
through 13, $2,897.50 monthly; (b) months 14 through 25, $2,984.43 monthly;
(c) months 26 through 37, $3,073.96 monthly. The Rent shall be due and
payable in monthly installments from the Commencement Date forward. (First
month rent - $0).
3.2 Each monthly installment of Rent shall be payable to Lessor
in advance on the first (1st) day of each calendar month of the term at
Lessor's address set forth above, or at such other place as Lessor may from
time to time designate in writing, without notice, demand or offset. If the
Commencement Date is not on the first (1st) day of a calendar month, the
Rent for the period between the Commencement Date and the first (1st) day of
the following month shall be apportioned on a per diem basis, at the monthly
rental rate provided and shall be payable on the Commencement Date. IN
ADDITION TO THE RENT PAYABLE DURING THE TERM OF THIS LEASE, LESSEE SHALL
ALSO PAY THE AMOUNT OF ANY USE OR SALES TAX ON SAID RENT IMPOSED BY THE
STATE OF FLORIDA.
3.3 Upon execution of this Lease, Lessee shall deposit with
Lessor a sum equal to $2,897.50 (1) month's rent (the "Deposit"). The
Deposit shall be held by Lessor without liability for interest thereon as
security for the faithful performance of all the terms and conditions of
this Lease by Lessee. If the rent herein reserved or any other sum payable
by Lessee to Lessor shall be overdue or unpaid, or should Lessor make
payments, or repairs to the Premises, on behalf of Lessee which Lessee is
required to make, or should Lessee fail to perform any of the terms of this
Lease, then Lessor may, at its option and without prejudice to any other
remedy to which Lessor may have on account thereof, appropriate and apply
the Deposit, or so much thereof as may be necessary to compensate Lessor
toward the payment of rent or loss or damage sustained by Lessor due to such
breach on the part of Lessee, and Lessee shall forthwith, upon demand by
Lessor, restore the Deposit to the original sum deposited. Should Lessee
comply with all of the terms of this Lease and promptly pay all of the rent
as it falls due, and all other sums payable by Lessee to Lessor, the Deposit
-2-
<PAGE>
shall be returned in full to Lessee within thirty (30) days following the
Expiration Date.
3.4 Tenant hereby acknowledges that late payment by Tenant of
Rent and other sums due hereunder will cause Landlord to incur costs, the
exact amount of which will be extremely difficult to ascertain. Such costs
include, but are not limited to processing and accounting charges and late
charges which may be imposed on Landlord by the terms of any mortgage or
trust deed covering the Demised Premises. Accordingly, if any Installment
of Rent or any other sum due from Tenant shall not be received by Landlord
within ten (10) days after such amount shall be due, Tenant shall pay to
Landlord a late charge equal to five percent (5%) of such overdue amount.
It is agreed that such late charge represents a fair and reasonable estimate
of the costs Landlord will incur by reason of late payment by Tenant.
Acceptance of such late charge by Landlord shall in no event constitute a
waiver of Tenant's default with respect to such overdue amount, nor prevent
Landlord from exercising any of the other rights and remedies granted
hereunder, including but not limited to the collection of interest on such
late payment.
4. USE.
---
Lessee shall use the premises solely for the purpose of office space in
connection with Lessee's software development, sales, and support business
and for no other purpose whatsoever. Lessee shall not make, suffer, or
permit any unlawful, improper, or offensive use of the Premises, or any part
thereof, or permit any nuisance thereon. Lessee acknowledges that its
business is not a general retail or public "walk-in" operation.
5. REPAIRS, MAINTENANCE, SURRENDER, AND OPERATIONAL COSTS.
------------------------------------------------------
5.1 Subject to the obligation of Lessee to pay to Lessor a "pro
rata share" (as defined below) of the costs thereof, Lessor shall:
(a) make provisions for the maintenance of the exterior
walls, roof, building exterior, and structure of the Building in good
repair, and the roof of the Building water tight;
(b) make provisions for the maintenance of the exterior
glass, grounds, parking areas, and walks of the Building, and common areas
in good condition;
(c) make provisions for the maintenance of the interior of
the Premises (excluding floor, wall, and ceiling coverings, light bulbs and
fixtures, personal property owned or leased by Lessee or those claiming by,
through or under Lessee, telephone equipment and telephone lines, trade
fixtures, interior glass, and interior partitions), including plumbing,
wiring, piping, heating and cooling equipment, fixtures and equipment, in
good and substantial repair;
(d) make provisions for landscaping maintenance;
(e) make provisions for pest control service to the
Premises;
-3-<PAGE>
(f) make provisions for electric, water and sewer services
and trash collection;
(g) make provisions for janitorial services to the common
areas of the Building;
(h) make provisions for the payment of all assessments,
taxes, and levies imposed on the Building, land or the associated common
areas including, without limitation, ad valorem taxes and association dues.
5.2 Lessee shall be liable for and required to make any repairs,
perform any maintenance, or satisfy any claims to or upon the Premises or
the Building, that are required by, related to, or which arise from or grow
out of negligence, fault, misfeasance, or malfeasance of or by Lessee, its
employees, agents, invitees, licensees, or customers.
5.3 Except for Lessor's maintenance obligations provided above,
Lessee shall service, keep, repair, replace, and maintain the interior of
the Premises and the property owned or leased by Lessee clean and in good
condition and repair during the term of this Lease including, without
limitation, floor, wall and ceiling coverings; light bulbs and fixtures;
property owned or leased by Lessee or those claiming by, through or under
Lessee; telephone equipment and telephone lines; trade fixtures; interior
glass and interior partitions. Lessee agrees to make repairs promptly as
they may be needed at is own expense, and at the end of the term or upon
termination of this Lease, Lessee shall deliver up the Premises in good
condition and repair, reasonable wear and tear excepted, and in a broom
clean condition with all glass and all windows and doors intact except for
damage to such glass by fire or other casualty beyond the control of Lessee.
5.4 Lessee shall be responsible for placing its trash in the
trash receptacles provided by Lessor on the exterior of the Building.
Lessee shall be responsible for arranging and paying for all other utility
services, cleaning services, and maintenance services other than those which
Lessor is specifically required to furnish to Lessee under this Lease
including, without limitation, phone service, additional cooling and heating
systems, if necessary, daily cleaning services, and security services.
5.5 Lessor and Lessee acknowledge that a portion of the Rent is
allocated to Lessee's estimated "pro rata share" of all assessments and
taxes assessed against the Building, the common areas, and the real property
upon which the Building and common areas are located and all charges paid or
incurred by Lessor in maintaining, repairing, replacing, servicing and
insuring the Building, the Premises, and associated common areas and
providing electrical, water and sewer, and trash collection services to the
Building, the Premises and associated common areas (the "Operating Costs"),
as set forth on Exhibit B attached hereto. Lessee acknowledges that its
percentage of charges is based on the ratio of Lessee's total square footage
of the Premises plus the pro rata share of the common areas of the Building
(which pro rata share is equal to 17.21 percent (17.21%) of the total, or
2,145 square feet) to the total square footage of the Building. Within one
hundred twenty (120) days after the end of each annual accounting period
chosen by Lessor, Lessor shall furnish to Lessee a statement setting forth,
in reasonable detail, all charges incurred or paid by Lessor as Operating
Costs. In the event that portion of the Rent allocated to Operating Costs
and paid by Lessee to Lessor is less than Lessee's pro rata share of
-4-<PAGE>
Operating Costs, Lessee agrees to pay to Lessor, within ten (10) days after
receipt of Lessor's statement, the amount of the underpayment, and the
monthly installments of Rent for the remainder of the term may be increased
accordingly, at Lessor's option. In the event Lessee has paid to Lessor
more than its pro rata share of the actual Operating Costs, no refund shall
be due Lessee.
5.6 Lessee acknowledges that the Premises are encumbered by and
subject time to the Restated Sawgrass Declaration of Covenants Re:
Assessments and the Articles of Incorporation and the Bylaws of the Sawgrass
Association, Inc. Lessee shall abide by all the rules, regulations, and
covenants that relate to Lessee and the Premises as of the date of this
Lease.
6. QUIET ENJOYMENT.
---------------
Subject to the terms and provisions of this Lease, Lessor covenants
that it shall do nothing to disturb Lessee's quite enjoyment of the Premises
during the term of this Lease if Lessee shall observe and perform the
covenants and provisions of this Lease.
7. TAXES AND GOVERNMENTAL ASSESSMENTS.
----------------------------------
Lessee shall pay before delinquency all governmental assessments,
license and permit fees and other governmental levies and charges, general
and special, ordinary and extraordinary, unforeseen as well as foreseen, of
any kind and nature whatsoever which are assessed, levied, confirmed,
imposed or become a lien upon Lessee's property in the Premises and taxes
imposed by the terms of this Lease. The terms of this paragraph shall
include, without limitation, sales and use taxes imposed on the rents, fees,
and charges paid to Lessor under this Lease.
8. RIGHT OF ACCESS.
---------------
Subject to Lessor's right to promulgate uniform rules for the use
thereof, Lessee shall have a non-exclusive license and right to the non-
exclusive use, in common with employees, and invitees, of automobile and
equipment parking and storage areas, driveways, and footways, the common
areas of the Building, and other facilities as may be designated from time
to time by Lessor, subject to the terms and conditions of this Lease.
9. ALTERATION TO THE PREMISES AND REMOVAL OF EQUIPMENT.
---------------------------------------------------
Except for the installation of unattached trade fixtures, furnishings
and equipment, Lessee shall not make any alteration or addition to the
Premises without first obtaining the express prior written consent of
Lessor. Upon expiration and termination of this Lease, all attached
installations, fixtures, improvements, and alterations made or installed by
Lessee, including electric lighting fixtures, made by Lessee, and all
repairs, improvements, replacements, and alterations to the Premises made by
Lessee, shall remain a part of the Premises unless required to be removed by
-5-
<PAGE>
Lessor, in which event Lessee shall repair any damage caused by removal of
said improvements.
10. NO LIENS.
--------
Lessee agrees that it will make full and prompt payment of all sums
necessary to pay for the cost of repairs, alterations, improvements,
changes, or other work done by Lessee to the Premises. Lessor and Lessee
agree to indemnify and hold harmless one another from and against any and
all such costs and liabilities incurred by either party arising from or
growing out of such actions by the other, and against any and all
mechanics', materialmen's, or laborer's liens arising from or growing out of
such work or the cost thereof which may be asserted, claimed, or charged
against the Premises or the Building or site on which it is located.
Notwithstanding anything to the contrary in this Lease, the interest of
Lessor in the Premises shall not be subject to liens for improvements made
by or for Lessee, whether or not the same shall be made or done in
accordance with an agreement between Lessor, and it is specifically
understood and agreed that in no event shall Lessor, or the interest of
lessor in the Premises, be liable for or subjected to any mechanics',
materialmen's or laborer's liens for improvements or work made by or for
Lessee; and this Lease specifically prohibits the subjecting of Lessor's
interest in the Premises to any mechanics', materialmen's or laborer's liens
for improvements made by Lessee or for which Lessee is responsible for
payment under the terms of this Lease. All persons dealing with Lessee are
hereby placed on notice of this provision. If any notice or claim of lien
shall be asserted of record against the interest of Lessor in the Premises,
the Building in which the Premises are located, or any improvement or work
done by or for Lessee, or any person claiming by, through or under Lessee,
or for improvements or work the cost of which is the responsibility of
Lessee, Lessee agrees to have such notice of claim of lien cancelled and
discharged of record as a claim against the interest of Lessor in the
Premises, the Building in which the Premises are located, or the site on
which the Premises are located (either by payment or bond as permitted by
law) within ten (10) days after notice to Lessee by Lessor, and if Lessee
shall fail to do so, Lessee shall be considered in default under this Lease.
11. CASUALTY.
--------
In the event the Premises are rendered untenantable by fire or other
casualty which in the reasonable opinion of Lessee shall render the Premises
unfit for the continued operation of Lessee's business, Lessee shall have
the right to terminate this Lease. If Lessee elects to terminate this
Lease, the Rent shall be paid to and adjusted as of the date of such
termination by Lessee, and the term of this lease shall then expire, this
Lease shall be of no further force or effect, Lessor shall be entitled to
sole possession of the Premises, and Lessee shall assign to Lessor the right
to receive payment of any insurance proceeds payable with respect to said
casualty. Lessor shall have no obligation to Lessee to rebuild or repair
the Premises unless required pursuant to the terms of the Lease.
12. INSURANCE AND INDEMNITY.
-----------------------
Lessee shall, at its expense, provide and maintain in force during the
entire term of this Lease, and any extension or renewal hereof, for its
-6-<PAGE>
operations in the Premises, the Building and the common areas, public
liability insurance with limits of coverage of not less than Five Hundred
Thousand and No/100 Dollars ($500,000.00) per person, and not less than One
Million Dollars ($1,000,000.00) for each occurrence, and property damage
insurance with limits of coverage of not less than Five Hundred Thousand and
No/100 Dollars ($500,000.00) per occurrence, which may be incorporated into
blanket or umbrella coverage of Lessee. Lessee's coverage must name Lessor
as an additional insured.
12.1 Lessee acknowledges that Lessor is required under the terms
of the Lease to maintain throughout the term of the Lease, casualty
insurance and general comprehensive and extended coverage insurance for the
Premises equal to the full insurable replacement value of the Building and
all improvements thereon. Lessee acknowledges that no policy of insurance
maintained by Lessor provides coverage for the property of Lessee and is
advised to obtain insurance coverage for said property.
12.2 Lessor shall provide evidence of Lessor's insurance coverage,
and Lessee shall provide evidence of its insurance coverage, as required
herein, upon execution of this Lease and thereafter within thirty (30) days
of the anniversary date of such policies of insurance. Lessee's and
Lessor's policies of insurance shall name each other as additional insureds.
If at any time Lessor or Lessee shall receive a distribution of insurance
proceeds which is properly allocable to the interest of the other party,
then the party receiving such distribution shall immediately distribute such
proceeds to the party entitled to same.
12.3 Lessee will indemnify Lessor and save Lessor harmless from
and against any and all claims, actions, damages, liability and expense
(including, without limitation, reasonable fees of attorneys, investigators
and experts) in connection with loss of life, personal injury or damage or
damage to property arising out of the occupancy or use by Lessee of the
Premises or any part thereof or occasioned wholly or in part by any act or
omission of Lessor, its agents, contractors, employees, licensees or
invitees, or by breach of Lessor's obligations under the terms of this
Lease.
13. INSPECTION AND REPAIR.
---------------------
Lessor or its respective representatives shall have the right at all
reasonable times and without advance notice, to enter upon the Premises for
the purpose of inspection or for the purpose of making or causing to be made
any repairs or otherwise to protect its interests.
14. DEFAULT.
-------
14.1 If Lessee shall (a) fail to make any rental or other payment
due hereunder within five (5) days after the same shall become due, or (b)
file a voluntary petition in bankruptcy or shall be adjudicated bankrupt or
insolvent or shall file any petition or answer seeking any reorganization,
arrangement or composition, readjustment, liquidation, dissolution or
similar relief for itself under the present or any future federal bankruptcy
act, or (c) make an assignment for the benefit of its creditors, or (d) have
its leasehold estate taken upon execution against Lessee, or (e) abandon the
-7-<PAGE>
Premises during the terms thereof, or (f) breach or fail to perform any of
the agreements made in this Lease other than the agreement to pay rent, and
shall fail to cure or to commence and diligently pursue such cure of any
non-monetary default within fifteen (15) days after written notice from
Lessor, then Lessor, in any such event(s), shall have the option to:
(a) Sue for rents as they may become due; or
(b) Accelerate all rents due hereunder and sue Lessee for
same; or
(c) Terminate this Lease, resume possession of the Premises
for the account of Lessee, and recover immediately from Lessee the
difference between the total rent for which provision is made in this Lease
and the fair rental value of the Premises for the remainder of the Lease
term, together with any other damage arising from or growing out of
abandonment or a breach or default under this Lease.
14.2 The remedies for which provision is made in this paragraph
14. shall not be exclusive, and in addition Lessor may pursue such other
remedies as are provided by law in the event of any breach or default of
Lessee. Lessee agrees to pay all costs and expenses incurred by Lessor,
including reasonable attorney's fees arising from, or growing out of, the
collection of rent or damages or enforcing other rights of Lessor in the
event of a breach or default by Lessee, irrespective of whether Lessor
elects to terminate this Lease by reason of such a breach or default.
15. SUBORDINATION.
-------------
All rights and interests of Lessee hereunder are and shall be and
remain subject, subordinate, and inferior to any and all mortgages, leases
and ground leases heretofore or hereafter given and encumbering the
Premises, or any part thereof, and shall likewise be subordinate and
inferior to all renewals, modifications, consolidations, replacements, and
extensions of any such instruments.
16. ASSIGNMENT AND SUBLETTING.
-------------------------
Lessee shall not, without the prior written consent of Lessor, assign
the Lease, sublet the Premises in whole or in part or permit its interest in
this Lease to be vested in any third party by operation of law or otherwise.
Any consent to subletting or assignment or a transfer of Lessee's interest
in this Lease shall be conditioned upon compliance with the terms of this
Lease with respect to assignment and subletting. Lessor shall have the
right to freely assign this Lease to any party.
17. CONDEMNATION.
------------
Lessor reserves unto itself, and Lessee assigns to Lessor, all right to
damages accruing on account of any taking or condemnation of any part of the
Premises, or by reason of any act of any public or quasi-public authority
-8-<PAGE>
for which damages are payable. Lessee agrees to execute such instruments of
assignment as may be required by Lessor, to join with Lessor in any petition
for the recovery of damages, if requested by Lessor, and to turn over to
Lessor any such damages that may be recovered in any such proceedings.
Lessor does not reserve to itself, and Lessee does not assign to Lessor, any
damages payable for trade fixtures installed by Lessee at its cost and
expense and which are not part of the realty nor any damages payable to
Lessee for loss of business opportunity related to the Premises or Lessee's
leasehold estate therein.
18. DEPOSITS AND ADVANCES.
---------------------
Any funds paid by Lessee to Lessor as a deposit or advance pursuant to
the terms of this Lease, or any exhibit, addendum, or modification thereto,
may be commingled with other funds of Lessor and need not be placed in
trust, deposited in escrow, or otherwise held in a segregated account. In
addition, if any sum or sums of money shall become payable by Lessee to
Lessor pursuant to the terms of this Lease, or any exhibit, addendum, or
modification hereto, or by any law, ordinance, or regulation affecting this
Lease, Lessor shall have the right to apply such deposits or advances
theretofore made by Lessee against such sums due by Lessee to Lessor.
19. NOTICES.
-------
Unless otherwise specifically provided herein, all notices required or
contemplated by this Lease shall be in writing and shall be delivered in
person or by United States Certified Mail, Return Receipt Requested,
addressed to the party to whom such notice is directed at the address set
forth in the first paragraph of this Lease. By giving at least two (2) days
prior written notice to the other party, either party may change its address
for notices hereunder.
20. BROKERAGE.
---------
Lessee and Lessor acknowledge that it has not dealt, consulted, or
negotiated with any real estate broker, agent, or salesperson. Each party
hereby agrees to indemnify and hold harmless the other from and against any
and all loss and liability resulting from or arising out of any claim that
the other party has dealt or negotiated with any real estate broker,
salesperson, or agent, in connection with the transaction which is the
subject of this Lease other than Nicholson Properties (Landlord's Agent) &
Gittings, Schueth & Gruenthal (Tenant's Agent). All commissions to be split
50%/50%.
21. ENTIRE AGREEMENT.
----------------
This Lease sets forth the entire understanding between Lessor and
Lessee, and shall not be changed, modified, or amended except by an
instrument in writing signed by the party against whom the enforcement of
any such change, modification, or amendment is sought. The covenants and
agreements herein contained shall bind, and the benefit and advantages
hereof shall inure to, the respective heirs, legal representatives,
-9-<PAGE>
successors, and assigns of Lessor and Lessee. Whenever used, the singular
number shall include the plural and the plural the singular, and the use of
any gender shall include all genders. The headings set forth in this Lease
are for ease of reference only, and shall not be interpreted to modify or
limit the provisions hereof. This Lease shall be governed by and construed
in accordance with the laws of the State of Florida.
IN WITNESS WHEREOF, Lessor and Lessee have caused this lease to be
executed the day and year first above written.
LESSOR:
Signed, sealed, and delivered DOUGLAS PARTNERSHIP II, LTD.
in the presence of: A Florida Limited partnership
By: INVICTUS INCORPORATED
- ----------------------------- A Florida Corporation, the General Partner
/s/ Carol I. Duke By: /s/ Ben T. Franklin, Jr.
- ----------------------------- --------------------------------------
(As to Lessor) Ben T. Franklin, Jr., President
LESSEE:
ACCESS POWER, INC.
A Florida corporation
- ------------------------------
By: /s/ Glenn A. Smith
---------------------------------------
Its President
July 17, 1997
/s/ Ray Douglas
- ------------------------------
(As to Lessee)
EXHIBITS
- --------
Exhibit A - Plan of Building with Premises
Exhibit B - Base Operating Costs
Exhibit C - Landlord and Tenant Improvements
Exhibit D - Annual/Monthly Rent Schedule
Exhibit E - Additional Space
PARKS, TSCHOPP,
WHITCOMB & ORR, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Access Power, Inc.:
We consent to the use of our report dated April 1, 1998 in the
Registration Statement on Form SB-2 and related Prospectus of
Access Power, Inc. for the registration of 8,500,000 shares of
its common stock and to the reference of our firm under the heading
"Experts" therein.
PARKS, TSCHOPP, WHITCOMB & ORR, P.A.
/s/ PARKS, TSCHOPP, WHITCOMB & ORR, P.A.
Maitland, Florida
December 18, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACED FROM FINANCIAL
STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE NINE MONTH PERIOD ENDED
JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0001041588
<NAME> ACCESS POWER, INC.
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 SEP-30-1998
<CASH> 54,086 28,904
<SECURITIES> 0 0
<RECEIVABLES> 33,692 54,838
<ALLOWANCES> 0 0
<INVENTORY> 0 30,000
<CURRENT-ASSETS> 87,778 113,742
<PP&E> 416,439 1,520,330
<DEPRECIATION> 23,847 227,623
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<CURRENT-LIABILITIES> 10,486 1,334,802
<BONDS> 0 0
0 1
0 0
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<OTHER-SE> 475,234 70,185
<TOTAL-LIABILITY-AND-EQUITY> 497,204 1,416,772
<SALES> 0 212,092
<TOTAL-REVENUES> 0 254,181
<CGS> 0 152,920
<TOTAL-COSTS> 0 152,920
<OTHER-EXPENSES> 426,156 1,496,948
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<INTEREST-EXPENSE> 282 2,927
<INCOME-PRETAX> (426,438) (1,398,614)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (426,438) (1,398,614)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (426,438) (1,398,614)
<EPS-PRIMARY> (0.04) (0.12)
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