Franchise Agreement

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Sample Franchise Agreement

EXHIBIT 3

FRANCHISE AGREEMENT

APARTMENT OF CORPORATIONS

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! 2006

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CRAMENTO OFFICE

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COFFEE PERKS FRANCHISE, INC. FRANCHISE AGREEMENT

FRANCHISEE

DATE

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TABLE OF CONTENTS

ARTICLE 1..................................................................................................................................................2

GRANT OF FRANCHISE........................................................................................................................2

ARTICLE II................................................................................................................................................5

TERM........................................................................................................................................................5

ARTICLE III...............................................................................................................................................6

FACILITY PREMISES............................................................................................................................6

ARTICLE IV...............................................................................................................................................9

FEES AND REPORTING........................................................................................................................9

ARTICLE V...............................................................................................................................................12

ADVERTISING AND PROMOTION....................................................................................................12

ARTICLE VI.............................................................................................................................................20

TRAINING AND TECHNICAL ASSISTANCE...................................................................................20

ARTICLE VII...........................................................................................................................................21

DUTIES OF FRANCHISOR..................................................................................................................21

ARTICLE VIII..........................................................................................................................................23

DUTIES OF THE FRANCHISEE..........................................................................................................23

ARTICLE IX.............................................................................................................................................30

PROPRIETARY MARKS......................................................................................................................30

ARTICLE X...............................................................................................................................................33

OPERATIONS MANUAL AND CONFIDENTIALITY.......................................................................33

ARTICLE XI.............................................................................................................................................36

OPERATIONAL REQUIREMENTS.....................................................................................................36

ARTICLE XII...........................................................................................................................................38

INSURANCE..........................................................................................................................................38

ARTICLE XIII..........................................................................................................................................39

TERMINATION.....................................................................................................................................39

ARTICLE XIV..........................................................................................................................................44

THE FRANCHISEE'S RIGHTS AND OBLIGATIONS UPON TERMINATION OR EXPIRATION44 ARTICLE XV............................................................................................................................................46

NON-COMPETITION............................................................................................................................46

ARTICLE XVI..........................................................................................................................................47

ASSIGNMENT, TRANSFER AND SALE............................................................................................47

ARTICLE XVII.........................................................................................................................................51

PARTNERSHIP AND CORPORATE FRANCHISEE..........................................................................51

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ARTICLE XVIII.......................................................................................................................................52

TAXES, PERMITS AND INDEBTEDNESS.........................................................................................52

ARTICLE XIX..........................................................................................................................................52

DISCOUNTS..........................................................................................................................................52

ARTICLE XX............................................................................................................................................52

CUSTOMER RELATIONS....................................................................................................................52

ARTICLE XXI..........................................................................................................................................53

RELATIONSHIP AND INDEMNIFICATION......................................................................................53

ARTICLE XXII.........................................................................................................................................55

SECURITY INTERESTS.......................................................................................................................55

ARTICLE XXIII.......................................................................................................................................55

DISPUTE RESOLUTION......................................................................................................................55

ARTICLE XXIV.......................................................................................................................................60

FRANCHISOR'S BUY-OUT OPTION.................................................................................................60

ARTICLE XXV.........................................................................................................................................60

GENERAL..............................................................................................................................................60

SCHEDULES

A - PROPRIETARY MARKS

B - LOCATION OF FACILITY

C - GUARANTY AND ASSUMPTION OF OBLIGATIONS

D - BUY-OUT FORMULA

EXHIBITS

A - LOCATION ACCEPTANCE STATEMENT

B - OPTION FOR ASSIGNMENT OF LEASE

C - ASSIGNMENT OF TELEPHONE NUMBERS

D - TRANSFER OF FRANCHISE TO A CORPORATION

E - NON-COMPETITION AND CONFIDENTIALITY AGREEMENT

F - RIDERS TO STATE SPECIFIC ADDENDUMS

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COFFEE PERKS FRANCHISE, INC.

FRANCHISE AGREEMENT

THIS FRANCHISE AGREEMENT ("Agreement") is made and entered into on this___day of

___________, 20_, between COFFEE PERKS FRANCHISE, INC., a Florida corporation, having its

principal place of business located at 2985 Mercury Road, Jacksonville, Florida 32207 (hereinafter

referred to as "Franchisor") and_________________________________________residing at_________

__________________________(hereinafter referred to as "Franchisee").

WHEREAS, the Franchisor has developed a system of uniform standards, methods, procedures, specifications, merchandising and advertising (hereinafter referred to as the "System") for the operation of a wholesale beverage distribution business under the "Coffee Perks" name, which will provide equipment, maintenance and products for Break room and Foodservice locations (hereinafter referred to as "Facility or "Franchised Business"). You will offer product and services that include such items as coffee, iced tea, bottle water, water filtration, vending, espresso/cappuccino, allied and related goods (i.e., paper, janitorial), fountain sodas, etc. ("Products and Services"), all under the trade name, trademark and service mark of "Coffee Perks" (collectively, the "Proprietary Marks"); and

WHEREAS, the Franchisor is also the licensee of other marks, from our affiliate, H & R Coffee Co., Inc. and which are specified in Schedule "A" attached hereto or as may be hereafter designated as a part of the System and not thereafter withdrawn, and

WHEREAS, the Franchisee wishes to obtain the right and sub-license from the Franchisor for the use of the Franchisor's System and Proprietary Marks, and in association therewith to own and

operate a Facility located at____________________________________________________(hereinafter

referred to as the "Premises"), and understands and accepts the terms, conditions and covenants set forth herein as those which are reasonably necessary to maintain the Franchisor's high and uniform standards of quality and service in order to protect the goodwill and enhance the public image of the System and the Proprietary Marks; and

WHEREAS, the Franchisor has the sole and exclusive right to the goodwill associated with the System and the Proprietary Marks and is willing to grant the right and license to the Franchisee on the terms and conditions herein contained to use the System and the Proprietary Marks; and

WHEREAS, Franchisee desires to obtain a franchise to use the System and the Proprietary Marks at the location described in Schedule "B", pursuant to the provisions hereof, and Franchisee has had a full and adequate opportunity to be thoroughly advised of the terms and conditions of this Franchise Agreement by counsel of his/her own choosing and represents and warrants that he/she has the business experience and financial ability to operate a Facility; and

WHEREAS, Franchisee acknowledges that Franchisee has read this Agreement and Franchisor's Uniform Franchise Offering Circular ("UFOC") and that Franchisee understands and accepts the terms, conditions and covenants contained in this Agreement as being reasonably necessary to maintain uniform high standards of quality at all Facilities and to protect the goodwill of the Proprietary Marks; and

WHEREAS, Franchisor expressly disclaims the making of any warranty or guarantee, expressed or implied, oral or written, regarding the potential revenues, profits or success of the business venture contemplated by this Agreement. Franchisee acknowledges that Franchisee has not received or relied upon any such warranty or guarantee; and

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WHEREAS, Franchisee acknowledges that Franchisee has no knowledge of any representations by Franchisor, its officers, directors, shareholders or representatives about the franchise offered hereunder, about Franchisor or its franchising programs and policies that are contrary to the statements in Franchisor's UFOC or to the terms of this Agreement; and

WHEREAS, Franchisee acknowledges that this Agreement places detailed and substantial obligations on Franchisee, including strict adherence to Franchisor's reasonable present and future requirements regarding facilities, equipment, suppliers, operating procedures, management methods, merchandising strategies, sales promotion programs and related matters. Franchisee acknowledges that future improvements, changes and developments in the System may require additional expense to be undertaken by Franchisee.

BEFORE SIGNING THIS AGREEMENT, FRANCHISEE SHOULD READ IT CAREFULLY WITH ASSISTANCE OF LEGAL COUNSEL.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto agree as follows:

ARTICLE I GRANT OF FRANCHISE

1.1         Grant. Subject to the terms, conditions and limitations elsewhere in this Agreement, the Franchisor hereby grants to the Franchisee a non-transferable right and license to use the System, the Proprietary Marks and to market, sell and provide the Products and Services in accordance with the System. The Products and Services are the only products and services authorized to be offered and sold by the Franchisee.

1.2        Location. The right and license granted in Section 1.1 hereof shall be restricted solely and exclusively to use in and from the Exclusive Territory, however, Franchisor (and any affiliates that it might have from time to time) will not establish, nor allow another franchise owner to establish, another Franchised Business, the physical premises of which are located within the area set forth on Exhibit "A" which is attached hereto ("Exclusive Territory"). During the term of this Agreement, the Premises shall be used exclusively by the Franchisee and solely for the purpose permitted by this Agreement. In the event that, prior to the termination of the franchise hereunder, the lease or sublease should expire or terminate without fault of the Franchisee, or if the Premises should be destroyed or otherwise rendered unusable for the purposes hereof, or if the Premises should be expropriated or the Franchisee otherwise loses possession thereof without fault on his/her part, or if the lease is expiring or is about to expire without the right to renew same, the Franchisee shall be entitled to relocate the Facility to another premises acceptable to the Franchisor, provided that:

(a)         the Franchisor has first given its written consent to such relocation and new site;

(b)        the new premises shall be developed by the Franchisee in the same manner as described in Article III hereof solely at the Franchisee's costs;

(c)         the Franchisee pays to the Franchisor any costs (including legal fees) incurred by Franchisor with respect to such relocation; and

(d)        the new premises shall be located within Franchisee's Exclusive Territory.

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1.3         Non-Exclusivity. Except as set forth above, the franchise and licenses granted to Franchisee by this Agreement are non-exclusive and Franchisor shall have, at all times throughout the term of this Agreement and any renewals hereof, and at all places, the unqualified right to open and operate, or to franchise and license others to open and operate, businesses utilizing the System anywhere, except within Franchisee's Exclusive Territory.

1.4        Limitations on Sale of the Products and Services. This license does not include any right to sell any product for resale or the right to sell any product or provide any service at or from any location except from within the Exclusive Territory. Use by Franchisee, directly or indirectly, of the System, the Proprietary Marks licensed hereunder, the sale of any product or the servicing of Franchisee's customers at any location other than from within the Exclusive Territory or at Franchisee's customers' premises shall be a material breach of this Agreement and shall give Franchisor, in addition to all other rights and remedies hereunder, the right to terminate this Agreement. Franchisee shall not engage in any promotional activities or sell the Products and Services or similar products, accessories or services, whether directly or indirectly, through the internet, the World Wide Web, or any other similar proprietary or common carrier electronic delivery system (collectively, the "Electronic Media"); through catalogs or other mail order devices sent or directed to customers or prospective customers located anywhere; or by telecopy or other telephonic or electronic communications, including toll-free numbers, directed to or received from customers or prospective customers located outside of the Exclusive Territory. Franchisee may place advertisements in printed media and on television and radio that are targeted to customers and prospective customers located within the Exclusive Territory, and Franchisee will not be deemed to be in violation of this Agreement if those advertisements, because of the natural circulation of the printed media or reach of television and radio, are viewed by prospective customers outside of the Exclusive Territory. Franchisee may not make any sales or perform services to customers located outside of the Exclusive Territory unless there is not another Facility, either franchised or Franchisor-owned, located in close proximity to Franchisee's Facility.

1.5        Rights Reserved to Franchisor. Franchisor reserves the right to establish or operate, or license any other Franchisee to establish or operate, a Facility under the System at any location outside of the Exclusive Territory. Franchisor (and any affiliates that Franchisor periodically might have) reserves the right:

(a)         to establish and operate, and grant rights to other franchise owners to establish and operate, Facilities or any other wholesale or distribution environment or similar businesses at any locations outside the Exclusive Territory and on any terms and conditions Franchisor deems appropriate;

(b)        to sell the Products and Services, or any products or services identical or similar to, or dissimilar from, those Franchisee sells, whether identified by the Proprietary Marks or other trademarks or service marks through any distribution channels Franchisor thinks best (including mail order and the Internet), wherever located or operating (including within the Exclusive Territory), except not through Facilities (other than Franchisee's Facility), the physical premises of which are located within the Exclusive Territory;

(c)         to sell the Products and Services through any distribution channels Franchisor thinks best (including, but not limited to, mail order and the Internet), wherever located or operating (including within the Exclusive Territory), except not through warehouse and/or industrial facilities (other than Franchisee's Facility), the physical premises of which are located within the Exclusive Territory;

(d)        to purchase or otherwise acquire the assets or controlling ownership of one (1) or more businesses identical or similar to the Facility (and/or franchise, license, and/or similar agreements for such businesses), some or all of which might be located anywhere, including within the Exclusive

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Territory. If there is such a purchase or other acquisition, Franchisor will (i) with respect to those businesses which are in the Exclusive Territory and are not franchised or licensed, (A) offer to sell these businesses to Franchisee or to any third party at their fair market value to be operated under the System, or (B) offer Franchisee the opportunity to operate those businesses in partnership with Franchisor (or its affiliate) under their original trade identities or a different trade identity that does not include the Proprietary Marks. Franchisor has the right to choose which of these alternatives Franchisor thinks best; (ii) with respect to those businesses which are franchised or licensed, act as franchisor and/or licensor of those businesses in compliance with the then-effective franchise and/or license agreements;

(e)         to be acquired (regardless of the form of transaction) by a business identical or similar to "Coffee Perks", even if the other business operates, franchises and/or licenses competitive businesses within the Exclusive Territory; and

(f)         to engage in any other business activities not expressly prohibited by this Agreement, both within and outside the Exclusive Territory.

1.6        National or Regional Account. Except as provided below, and subject to other policies and procedures set forth in Franchisor's Confidential Operations Manual, Franchisee may not solicit or service the locations of a National or Regional Account (as defined below) without Franchisor's prior written consent. Franchisor has the right to condition its consent (although it is not obligated to grant its consent) on Franchisee's agreement to comply with certain requirements and has the right to withdraw its consent for any or no reason as it deems appropriate. If Franchisor withdraws its consent to Franchisee's soliciting and/or servicing one (1) or more National or Regional Accounts, Franchisee must cease all solicitation and servicing activity with respect to that National or Regional Account(s) immediately.

1.6.1 Franchisor retains the right under all circumstances to provide any services and sell the Products and Services to any National or Regional Account location, wherever operated, provided, however, that where Franchisee has exclusive authority under this Agreement to offer and sell through his/her Facility the products and services that Franchisor would like to provide to the National or Regional Account's locations, Franchisor first will offer Franchisee the opportunity to provide those services and sell the Products and Services to the locations of the National or Regional Account on the terms and conditions that Franchisor has established with the National or Regional Account. If Franchisee fails to accept the offer in the manner Franchisor specifies, Franchisor has the right, or may authorize other Franchisees or third parties, to provide those services and to sell the Products and Services to the locations of the National or Regional Account. The term "National or Regional Account" means any customer that has two (2) or more locations. Nothing in this paragraph is intended to require Franchisee to participate in any National or Regional Account program. Franchisee is not permitted to negotiate cost of the Products and Services with a National or Regional Account without Franchisor's prior consent.

1.7        Failure to Meet Predetermined Sales of Products and Services. In the event Franchisee fails to achieve the sales of the agreed upon of Products and Services, as set forth in Section 24.1 hereof, and Franchisor elects not to exercise its repurchase option, Franchisee shall, at the Franchisor's discretion, lose his/her Exclusive Territory and Franchisor shall have the right to refranchise said Exclusive Territory or any part thereof to any person or persons, following ten (10) days' written notice from Franchisor. Any such refranchising shall not impact Franchisee's operating from the Premises.

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ARTICLE II TERM

2.1         Initial Term. This Agreement, unless terminated earlier as hereinafter provided, shall remain in force for an initial term often (10) years commencing on the date of this Agreement ("Initial Term").

2.2        Renewal. Subject to the provisions of this Section, the Franchisee shall have an option (exercisable only by written notice delivered to the Franchisor less than nine (9) months, but more than six (6) months, prior to the end of the Initial Term of this Agreement) to renew the franchise hereunder for two (2) additional options to renew for periods of five (5) years each, the second following the first renewal term, if:

(a)         the Franchisee has been, throughout the Initial Term of this Agreement, in substantial compliance, and at the expiration of such Initial Term is in full compliance, with this Agreement, the lease and all other agreements between the Franchisee and the Franchisor or companies associated or affiliated with the Franchisor;

(b)        the Franchisee enters into the Franchisor's then-current Franchise Agreement and all other ancillary agreements, instruments and documents then customarily used by the Franchisor in the granting of "Coffee Perks" franchises (all of which will contain terms substantially the same as those herein contained, except with respect to fees to be paid to Franchisor, which fees shall be the same as those Franchise Agreements being executed at the time of renewal, but which will not obligate the Franchisee to pay a further initial franchise fee), provided that if, at the sole option of the Franchisor, the requirement to enter into the Franchisor's then-current Franchise Agreement is waived by written notice from the Franchisor, the terms hereof (except the option to renew) shall remain in force for the renewal term;

(c)         the Franchisee is able to maintain possession of the Facility at the Premises (or at relocated Premises pursuant to Section 1.2 hereof) pursuant to a lease reasonably acceptable to Franchisor;

(d)         the Franchisee refurbishes, upgrades, renovates, and remodels his/her Facility to meet the then-current standards and image for all new Facilities;

(e)         the landlord of the Premises consents to a renewal or extension of the Franchisor's or Franchisee's lease (if necessary);

(f)         at the time each renewal option is exercised and at the time such renewal commences, all monetary obligations to Franchisor and any affiliate of Franchisor must be current and must have been current at all times during the preceding twelve (12) months;

(g)         the Franchisee executes a general release running in favor of Franchisor, its officers, directors and shareholders releasing all claims against Franchisor, its officers, directors and shareholders;;

(h) the Franchisee pays to the Franchisor a renewal fee equal to Five Thousand Dollars ($5,000); and

(i)        the Franchisor shall have the right, but not the duty to grant additional renewals,

at its sole discretion.

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2.3 Failure to Renew. For the purposes hereof, the Franchisee shall be deemed to have irrevocably elected not to renew the franchise hereunder (and the option to do so shall thereupon terminate) if the Franchisee fails to execute and return to the Franchisor its then-standard Franchise Agreement and other ancillary documents required by the Franchisor for each renewal term within thirty (30) days after the Franchisor has delivered same to the Franchisee. In such event, Franchisor shall have the immediate right to service Franchisee's existing accounts, or Franchisor may elect to have a designee service such accounts and shall have a sixty (60) days to accomplish same. Franchisee may be required by Franchisor to assist in this account transition.

ARTICLE III FACILITY PREMISES

3.1         Location of Facility. If a site for the Facility has not been specified at the time of the execution of this Agreement by Franchisor and Franchisee, Franchisee shall use his/her best efforts and proceed with diligence to obtain and designate a location for the Facility within a designated geographic area, which location shall be subject to Franchisor's written acceptance and approval. Franchisor will assist Franchisee in evaluating a suitable location. Upon Franchisor's acceptance and approval of a location, Franchisor and Franchisee shall execute a Location Acceptance Statement in the form of Exhibit "A" hereto, which shall be deemed to be incorporated herein and made a part of this Agreement. Franchisee acknowledges that the location of the Facility is a factor in the Franchised Business' potential for success, and accordingly Franchisor may reject any proposed location in its reasonable discretion. Franchisee also acknowledges that the acceptance and approval by Franchisor of any location shall not in any way be deemed to be a guarantee, warranty or any other assurance (express or implied) of the success of Franchisee's business at such location. In the event a mutually agreeable site for the Facility has not been located within ninety (90) days after execution of this Agreement by Franchisor, Franchisor shall have the right to terminate this Agreement and Franchisor shall refund to Franchisee all but Five Thousand Dollars ($5,000) of the initial franchise fee paid by Franchisee excluding training expenses incurred by Franchisor at the current per diem training rate, in consideration of Franchisor's time, effort and expenses in traveling to and inspecting the proposed locations.

3.2        Lease of Premises of Facility. Franchisee shall not execute any lease for the Facility without Franchisor's prior written approval. If the Facility is to be leased or subleased by Franchisee from an entity or person affiliated in any way with Franchisee, the terms of the lease, including the financial terms, shall be comparable to the fair market terms of similar leases in the appropriate geographic area. Franchisor may reject any lease which does not include terms and conditions reasonably acceptable to Franchisor (and terms and conditions not acceptable to Franchisor may include, without limitation, those which Franchisor does not believe are comparable to fair market terms of similar leases in the appropriate geographic area). In addition, concurrently with the execution of such lease, Franchisee and Lessor shall execute and deliver to Franchisor an "Option for Assignment of Lease" in form and substance as provided for in Exhibit "B" attached hereto.

3.3         Development of Facility. Franchisor shall consult with Franchisee regarding the construction of the interior and warehouse design of the Facility or interior/warehouse leasehold improvements. Franchisor will provide Franchisee with design and specifications based upon typical configurations for the layout of a Facility. Franchisee must construct (or renovate) and equip the Facility in a good and workmanlike manner and in conformity with all laws, rules, regulations and requirements of governmental authorities having jurisdiction over the Facility and in accordance with the plans and specifications of Franchisor or, subject to Franchisor's prior written approval, the plans and specifications of Franchisee. All plans and specifications or modifications to Franchisor's plans and specifications proposed by Franchisee shall be submitted to Franchisor for approval at a reasonable time prior to the

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commencement of construction and shall be modified as requested by Franchisor. Franchisee will forthwith cause any mechanics' liens, materialmen's liens or other liens which may be recorded or perfected or which may otherwise attach to all or any portion of the Facility as a result of work done by or for Franchisee to be discharged or released of record or be fully bonded.

3.4        Equipment, Furniture, Furnishings and Signs. Franchisee shall install in and about the Facility such equipment, including computer-related equipment and computer software, fixtures, furnishings, furniture, interior and exterior signs, warehouse ramps and/or loading docks, security and surveillance systems, security fencing, phone and electronic systems and other personal property as are required and which strictly conform to the appearance, uniform standards, and specifications of Franchisor existing from time to time (hereinafter sometimes referred to collectively as "Equipment and Furnishings"). Franchisor shall furnish Franchisee with lists and specifications of the approved furniture, fixtures, equipment and signs, and vehicle branding which are required to outfit and furnish the Facility in accordance with Franchisor's image and standards. Franchisor shall have the right to inspect all Equipment and Furnishings and their installation to assure Franchisee's compliance with Franchisor's standards and specifications..

3.5        Opening for Business. Franchisee shall open the Facility for business as follows:

(a)         If the location requires the installation of Improvements (as hereinafter defined), then Franchisee shall open the Facility for business upon completion thereof; provided, however, that Franchisee shall not delay the completion of the Improvements; and provided further, that (subject only to force majeure) Franchisee shall open the Facility for business not later than ninety (90) days after the date Franchisee's location is approved by Franchisor.

(b)         If the location does not require the installation of Improvements, then Franchisee shall open the Facility within sixty (60) days following training; provided, however, that Franchisee shall not delay taking delivery of possession.

(c)         In the event the Facility is not open for business on or before the time provided for above, Franchisor may terminate this Agreement upon thirty (30) days' prior written notice to Franchisee, unless the Facility shall open for business pursuant to the terms of this Agreement within such thirty (30) day period.

(d)         For purposes of this Section 3.5(d), "Improvements" shall mean and include all improvements necessary or required to operate a Facility including, but not limited to, electrical, plumbing, lighting, and carpentry work, floor treatment, structural modifications including walls, heating, ventilating, and air conditioning, ceiling, and sheet metal work. Franchisor will consult with Franchisee regarding the construction of the warehouse and office design of Franchisee's Facility or interior leasehold improvements. Franchisor will provide Franchisee with model plans and specifications based on typical configurations for the layout of Franchisee's Facility, including lists and specifications of approved furniture, fixtures, equipment and signs needed to outfit and furnish Franchisee's Facility in accordance with Franchisor's uniform image and standards

(e)         In no event shall the Facility be opened for business until: (i) all Franchisee's obligations under this Section 3.5 have been fulfilled; (ii) Franchisor determines that the Facility has been constructed, decorated, furnished, equipped and stocked with materials and supplies in accordance with plans and specifications Franchisor has approved; (iii) the initial training program has been completed to Franchisor's satisfaction by all required persons; (iv) the initial franchise fee and all other amounts due to Franchisor have been paid; (v) Franchisee has furnished Franchisor with all Certificates of Insurance required by Article XII herein; (vi) Franchisee has obtained all required governmental permits, licenses

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and authorizations necessary for the operation of the Facility; (vii) Franchisee is in full compliance with all the terms of this Agreement; and (viii) all items in Franchisor's opening checklist have been complied with to Franchisor's satisfaction.

3.6 Motor Vehicles.

3.6.1      Use of Motor Vehicles. Franchisee and his/her employees, agents and independent contractors shall travel to Franchisee's customers' and prospective customers' premises only in vehicles (hereinafter referred to as "Motor Vehicles") that have been acquired, designed, equipped, painted, decaled, decorated and/or otherwise outfitted as specified by Franchisor. It is acknowledged that such restriction is necessary to present a uniform appearance to the public.

3.6.2     Condition. Franchisee shall maintain his/her Motor Vehicles in good working order, performing scheduled maintenance as recommended by the manufacturer and repairing all malfunctions promptly.

3.6.3     Cleanliness and Appearance. Franchisee shall keep all of his/her Motor Vehicles neat and clean.

3.6.4     Disposition. Under no circumstances shall Franchisee allow a Motor Vehicle to come into the possession of anyone who is not a "Coffee Perks" Franchisee without first obliterating all the Proprietary Marks.

3.6.5      Safe Driving. Franchisee shall hire and use only safe and courteous drivers of his/her Motor Vehicles, and maintain the appropriate commercial driving licenses as required for the Motor Vehicle.

3.6.6     Compliance with Law. Franchisee shall at all times cause himself/herself and his/her employees, agents and independent contractors, along with all Motor Vehicles, to be in full compliance with all applicable laws and regulations pertaining to all Motor Vehicles and shall maintain a Drug Free Workplace, as determined by the state authorities.

3.6.7     Taxes and License Fees. Franchisee shall promptly pay all license and use charges and taxes assessed on or pertaining to his/her Motor Vehicles, and shall hold Franchisor harmless therefrom.

3.6.8     Insurance. Franchisee shall obtain and at all times maintain in force, at his/her own expense, such insurance the Franchisor specifies from time to time, including the types and amounts of coverage required under such insurance policies. Each insurance policy must name the Franchisor and its affiliates as additional named insureds, will contain a waiver of all subrogation rights against the Franchisor, its affiliates and any successors and assigns, and will provide for thirty (30) days' prior written notice to the Franchisor of any material modifications, cancellation or expiration of such policies.

3.6.9     Inspection. The Franchisor, by its agents, employees and attorneys, shall have the right at all times during business hours, and without prior notice to Franchisee, to inspect the interior and exterior of Franchisee's Motor Vehicles to ascertain if Franchisee is in compliance with this Agreement. Such inspection may include verification of correct registration, licensing and insurance. Franchisee shall cooperate, and shall cause his/her employees to cooperate, fully with such inspection, and shall give his/her permission as may be necessary to allow Franchisor to obtain government and insurance Franchisor records pertaining to ownership and operation of the Motor Vehicles, and promptly deliver the information and documentation referred to herein to Franchisor, upon Franchisor's request.

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3.6.10 Reports. Franchisee shall, when upon adding a Motor Vehicle to the Franchised Business, report to Franchisor in writing the identity of the Motor Vehicle Franchisee is adding. Also, Franchisee shall, from time to time as requested by Franchisor or pursuant to this Agreement, report to Franchisor in writing the identity of all Motor Vehicles Franchisee is then using in connection with the Franchised Business. Franchisee shall also report to Franchisor in writing each time Franchisee disposes of any Motor Vehicle, setting forth the date of disposition, the name and address of the purchaser and a description of the measures taken to obliterate all resemblance to a "Coffee Perks" Motor Vehicle, including but not limited to removing all decals and signage at Franchisee's sole cost and expense. These reports shall also include such other information as Franchisor may reasonably require, and shall be made on such forms, and at such times, as prescribed by Franchisor.

ARTICLE IV FEES AND REPORTING

4.1         Initial Franchise Fee. In consideration of the grant of this license, the Franchisee shall pay to the Franchisor by cashier's or certified check a non-recurring and non-refundable initial franchise

fee for the franchise hereunder in the amount of____________Thousand ($_______) Dollars, payable

upon execution of this Agreement. The initial franchise fee shall be deemed to have been fully earned by the Franchisor upon execution of this Agreement.

4.2        Continuing Service Fee. In further consideration of the grant of this license, the Franchisee shall pay to the Franchisor monthly (the "Period") on the tenth (10th) day of the month following the previous month's end during the term of the Agreement a non-refundable continuing service fee ("Continuing Service Fee") equal to six percent (6%) of the Franchisee's Gross Revenue for such Period. All Continuing Service and other fees payable hereunder shall be made via electronic funds transfer or automatic debit of funds, in a method determined by the Franchisor, in its sole discretion.

4.2.1      Franchisee shall sign and deliver to Franchisor any documents required to authorize Franchisor to debit Franchisee's business checking account automatically for the Continuing Service Fee and other amounts due under this Agreement. On or before the day Franchisor specifies, Franchisee must report to Franchisor by telephone or electronic means or in written form, as Franchisor directs, the Facility's true and correct Gross Revenue for the previous month. Franchisor will debit Franchisee's account for the Continuing Service Fee on or after the tenth (10th) day of the month for the previous month. Franchisee agrees to make the funds available for withdrawal by electronic transfer before each due date.

4.2.2     If Franchisee fails to report the Facility's Gross Revenue, Franchisor may debit Franchisee's account for one hundred twenty percent (120%) of the last Continuing Service Fee that it debited. If the Continuing Service Fee debited from Franchisee's account is less than the Continuing Service Fee Franchisee actually owes to Franchisor (once Franchisor has determined the Facility's true and correct Gross Revenue), Franchisor will debit Franchisee's account for the balance of the Continuing Service Fee due on the day Franchisor specifies. If the Continuing Service Fee debited from Franchisee's account is greater than the Continuing Service Fee actually owed, Franchisor will credit the excess against the amount Franchisor otherwise would debit from Franchisee's account during the following month.

4.3         Advertising Contributions. Recognizing the value of uniform national and regional advertising and promotion of the System, the Franchisee, in further consideration of the grant of this license, agrees to pay to the Franchisor, without notice from Franchisor, on the tenth (10th) day after the end of each Period, a non-refundable advertising contribution ("Advertising Fee") to the Fund (as

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hereinafter defined) equal to two percent (2%) of the Franchisee's Gross Revenue, payable at the same time and in the same manner as the Continuing Service Fee provided for in Section 4.2 hereof.

4.4        Definition of Gross Revenue. For purposes of this Agreement, the term "Gross Revenue" includes the total during any month of all sales, monies, revenues, charges and receipts received by Franchisee or any other person which are derived from products manufactured or sold and services performed within the Exclusive Territory and from all sales and orders made, solicited or received within the Exclusive Territory, and from all other business whatsoever conducted within the Exclusive Territory or related in any way to the Franchised Business, whether such revenues are evidenced by cash, credit (and regardless of collection in the case of credit), checks, credit cards, gift certificates, scrip, electronic funds or direct deposits, coupons, services, property or other means of exchange, and whether such sales are of vending or coin operated machine items, services, merchandise or products of any nature whatsoever. However, Gross Revenue shall not include (i) sales taxes or other taxes measured on the basis of the Gross Revenue of the business imposed by governmental authorities directly on sales and collected from customers, provided the taxes are added to the selling price and are in fact paid by Franchisee to the appropriate governmental authorities; and (ii) sales for which refunds have been made to customers to the extent that such sales have been previously included in Gross Revenue for which a Continuing Service Fee was paid.

4.4.1      Gross Revenue shall be deemed received by Franchisee at the time an invoice is rendered by Franchisee, whether such payment represents an installment or partial payment or payment in full for any of the products, merchandise or services sold, contracted for or rendered. Gross Revenue consisting of property or services shall be valued at the prices applicable, at the time such Gross Revenue are received, to the products or services exchanged for such Gross Revenue.

4.4.2     Franchisee shall report the daily Gross Revenue to Franchisor at the time of payment of the Continuing Service Fee and Advertising Fee on such form and in such detail as may be prescribed from time to time by Franchisor, and at the same time Franchisee shall deliver to Franchisor copies of all customer product and service order forms in such form and such detail as Franchisor may from time to time require.

4.5        Late Payments. To encourage prompt and timely payment of the Continuing Service Fees and Advertising Fees and to cover the costs and expenses involved in handling and processing any payments not received by their due dates, Franchisee shall also pay, upon demand, a late payment charge in an amount equal to the lesser of: (i) two percent (2%) per month; or (ii) the highest rate permitted by law. Such charge shall accrue from the date payment was due until the date payment is actually received by Franchisor. Notwithstanding the foregoing, each failure to pay the Continuing Service Fees, Advertising Fees or other payments payable to Franchisor when due will be a material breach of this Agreement. The foregoing shall not apply if the lateness is the result of Franchisor's failure to debit such account in a timely manner.

4.6        Application of Payments. Franchisor shall have sole discretion to apply any payments received from Franchisee to any past due indebtedness of Franchisee for the Continuing Service Fees, Advertising Fees, purchases made from Franchisor or its affiliates, late payment charges or any other indebtedness of Franchisee to Franchisor or its affiliates.

4.7        Bookkeeping, Accounting and Records. The Franchisee shall use a bookkeeping, accounting, inventory control, point of sale and record-keeping system for the business of the Facility that is recommended and reasonably approved by Franchisor, and Franchisee shall retain all invoices, order forms, time cards, payroll records, check stubs, bank deposit receipts, bank statements, sales tax records and returns, cash disbursements journals and general ledgers. The Franchisee shall keep such original

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documents at the Facility throughout the term of this Agreement, and for at least five (5) years thereafter, at a location of which the Franchisor shall be kept advised, unless the Franchisor gives written permission to dispose of such records. All sales shall be recorded at the time of sale in the presence of the customer on Franchisee's point of sale system reasonably approved by the Franchisor and having a cumulative totaling device.

4.8        Reports and Tax Returns. The Franchisee shall furnish to the Franchisor throughout the term of this Agreement in the form from time to time prescribed by the Franchisor:

(a)         on the tenth (10th) day of each month, a facsimile or electronic report of Gross Revenue for the preceding month, together with the Continuing Service Fees due;

(b)         within five (5) days after each of the Franchisor's Periods, a report of the Franchisee's Gross Revenue and other Facility activities for such Period (including such information as may be required by Franchisor) verified by the Franchisee on forms to be supplied or approved by the Franchisor;

(c)         within thirty (30) days after the documents referred to in Section 4.9 hereof are filed, an exact copy of all returns, schedules and reports filed by the Franchisee for income, corporate or sales tax purposes;

(d)         within ten (10) days after the end of each calendar month, a statement of Gross Revenue for such month and all preceding months of such calendar year, a balance sheet, a cash flow analysis or working capital analysis, a monthly profit and loss statement for such month, and a profit and loss statement from the beginning of the Franchisee's latest financial year, on such forms as the Franchisor may specify;

(e)         within sixty (60) days after the end of each fiscal year of the Franchisee, a reviewed balance sheet, statement of profit and loss and source and application of funds from the beginning of that fiscal year, prepared by an independent certified public accountant and verified by the Franchisee's statutory declaration as to the information furnished to such accountant; and

(f)         such other reports, statements, annual budgets, sales slips, order forms, records, calculations and indices as the Franchisor may, from time to time, require.

4.9        Audited Statements. If the Franchisor, in its sole discretion, determines that any report, financial statement, tax return or schedule furnished by the Franchisee understates the Gross Revenue of the business by more than two percent (2%), distorts any other material information or is materially incomplete, unclear or misleading, it shall have the right to require the Franchisee to furnish audited annual financial statements for that year at the Franchisee's sole cost and expense, with such statements being prepared in accordance with generally accepted accounting principles consistently applied.

4.10      Audit. The Franchisor or its representatives or agents shall have the right at any time during normal business hours, and upon seventy-two (72) hour prior notice to the Franchisee, to inspect, copy, request, receive and/or audit or cause to be inspected, copied, requested, received and/or audited the business records, bookkeeping and accounting records, sales, reports, financial statements and tax returns that the Franchisee is required to submit to the Franchisor hereunder along with the Franchisee's books and records and those of any corporation or partnership to which the Franchisee has assigned this Agreement. If the Franchisor should determine that an audit is necessary during the term hereof or after the expiration or termination of the franchise, the Franchisee will, upon notice, deliver to the Franchisor all required records and documents to conduct such audit. The Franchisee shall fully cooperate with

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representatives of the Franchisor conducting any such audit. In the event that any such audit should disclose an understatement of Gross Revenue for any Period or Periods, the Franchisee shall pay, within fifteen (15) days after receipt of the audit report, the fees, contributions and any other amounts (including, without limitation, interest pursuant to Section 25.13 hereof) due upon the amount of such understatement. Further, in the event such audit is made necessary by the failure of the Franchisee to furnish reports, financial statements, tax returns or schedules as herein required, or if an understatement of Gross Revenue for any Period is determined by any such audit to be greater than two percent (2%) of the Gross Revenue for such Period disclosed by the audit, the Franchisee shall reimburse the Franchisor for the cost of such audit, including, without limitation, the charges of any independent accountants, legal fees, and travel expenses, room, board and compensation of their employees or representatives. The foregoing remedies are in addition to all other rights and remedies Franchisor may have under this Agreement or under applicable law.

4.11       Information from Others. The Franchisee hereby authorizes the Franchisor to make reasonable inquiries of the Franchisee's bank, credit reporting agencies, suppliers and trade creditors concerning the business of the Facility and hereby directs such persons and companies to provide to the Franchisor such information as it may request.

4.12      Inspection. The Franchisor or its representatives or agents shall have the right at any time during normal business hours, and without prior notice to the Franchisee, to enter and inspect and photograph the Premises and all aspects of the operation of the Facility together with all records, books of account, tax returns and other documents and materials in the possession or under the control of the Franchisee relating to the business of the Facility, the Franchisee and the subject matter and terms of this Agreement, including, without limitation, all records of the Franchisee required to be maintained pursuant to applicable law, to ascertain that the Franchisee is operating the Facility in accordance with the System, the terms of this Agreement and the Confidential Operations Manual. The Franchisor or its representatives or agents shall be allowed to make extracts from or copies of any such material and to take samples of any products sold at the Facility and immediately remove any unauthorized products from the Facility without any liability to Franchisor, including, but not limited to, payment for such unauthorized products. In the event that the Franchisor gives notice to the Franchisee of any deficiency detected during such inspection, the Franchisee shall diligently correct such deficiency as soon as possible, but in any event within five (5) days after receipt of such notice. If the Franchisee fails to correct such deficiency within such five (5) day period, the Franchisor shall have the right (but not the obligation) to correct such deficiency on behalf of and at the sole expense of the Franchisee, and in such case the Franchisee shall reimburse the Franchisor for all costs incurred by the Franchisor (including, without limitation, a reasonable charge for the time of any personnel of the Franchisor) in connection therewith.

ARTICLE V ADVERTISING AND PROMOTION

5.1 The Fund. Recognizing the value of uniform advertising and promotion to the goodwill and public image of the System, the Franchisee agrees that the Franchisor or its designee shall have the right to establish, maintain and administer a national creative advertising fund (hereinafter referred to as the "Fund") for such national and regional advertising programs as the Franchisor may deem necessary or appropriate, in its sole discretion, as follows:

(a) the Franchisor shall direct all national and regional advertising programs with sole discretion over the creative concepts, materials, endorsements and media used therein, and the placement and allocation thereof. The Franchisee understands and acknowledges that the Fund is intended to maximize general public recognition and acceptance of the System and the Proprietary Marks for the benefit of all Facilities operating under the System, and that the Franchisor undertakes no

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obligation in administering the Fund to ensure that expenditures from the Fund are proportionate or equivalent to the Franchisee's contributions made for his/her Facility, or that any particular Facility or Franchisee benefits directly or pro rata from the placement of any such advertising;

(b)         the Franchisee agrees that the Fund may be used to meet any and all costs of maintaining, administering, directing and preparing national and/or regional advertising materials, programs and public relations activities (including, without limitation, the cost of preparing and conducting television, radio, internet or other electronic media, magazine, billboard, newspaper, direct mail and other media programs and activities, for conducting marketing surveys, test marketing, employing advertising agencies to assist therewith, and providing promotional brochures, coupons and other marketing materials to all Franchisees of the System). The Fund shall be accounted for separately from the other funds of the Franchisor, and shall not be used to defray any of the Franchisor's general operating expenses, except for such reasonable administrative costs and overhead, not to exceed ten (10%) percent, as the Franchisor may incur in activities reasonably related to the administration or direction of the Fund and its advertising programs;

(c)         a statement of the operations of the Fund shall be prepared annually by the Franchisor's accountants and shall be made available to the Franchisee on written request. The cost of the statement shall be paid by the Fund. Except as expressly provided in this Section 5.1, the Franchisor assumes no direct or indirect liability or obligation to the Franchisee with respect to the maintenance, direction or administration of the Fund;

(d)         the Franchisor shall, for each Franchisor-owned Facility, make contributions to the Fund calculated at the same percentage of the Gross Revenue of such Facility as is required to be contributed by Facility Franchisees generally within the System;

(e)         the Franchisor shall have the right to create an advertising council composed of Franchisees and Franchisor representatives, including any of Franchisor's designees. Said council shall have input with respect to expenditures of Fund contributions; and

(f)         The Franchisee understands and acknowledges that the Fund is intended to maximize recognition of the Proprietary Marks and patronage of "Coffee Perks" businesses. Although the Franchisor will endeavor to utilize the Fund to develop advertising and marketing materials, and to place advertising, in a manner that will benefit all "Coffee Perks" businesses, the Franchisor undertakes no obligation to ensure that expenditures by the Fund in or affecting any geographic area are proportionate or equivalent to contributions to the Fund by "Coffee Perks" businesses operating in that geographic area or that any "Coffee Perks" business will benefit directly or in proportion to its contribution to the Fund from the development of advertising and marketing materials or the placement of advertising. Except for losses to the Fund resulting from theft, embezzlement, or similar actions by the Franchisor's representatives, the Franchisor assumes no direct or indirect liability or obligation to the Franchisee with respect to the maintenance, direction, or administration of the Fund.

5.2 Local Advertising. In addition to making the Fund contributions required in Section 4.3 hereof, the Franchisee shall make every reasonable effort to vigorously and aggressively promote and increase the demand for the services and products of the Facility by conducting, at his/her further expense, the following local advertising during the term of this Agreement:

(a) the Franchisee shall obtain and pay for listings for the Facility in the white pages and classified sections (Yellow Pages) of local telephone directories distributed in the area in which his/her Facility is located, as recommended by the Franchisor, of the kind and size as may from time to time be specified by the Franchisor. If other Facilities are served by the same white pages and classified

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section, the Franchisor shall have the right, in its sole discretion, to require group advertisements and listings therein, to make arrangements directly with the telephone Franchisor on the Franchisee's behalf for his/her participation therein, and to determine the formula for allocating part of the costs thereof to the Franchisee, and the Franchisee shall pay such on demand;

(b)        the Franchisee shall participate in such sales and promotional campaigns and activities as the Franchisor may direct from time to time; provide such approved promotional material to each customer of the Facility as the Franchisor may require; and maintain a sufficient supply thereof, stationery, business cards and other collateral material, for that purpose at all times; and

(c)         the Franchisee shall display all such signs, emblems and logos at the Premises and on the Motor Vehicles as the Franchisor may require from time to time.

5.3        Additional Local Advertising. Subject to the prior written approval of the Franchisor, the Franchisee shall, at the Franchisee's expense, conduct additional advertising in the Franchisee's local area, and the Franchisor may, from time to time, offer the Franchisee approved local marketing plans and materials including, without limitation, newspaper mats, radio commercial tapes, television commercial prints or tapes, printed collateral material, sales aids and other promotional and marketing materials, on the same terms and conditions as the Franchisor is then offering to its other "Coffee Perks" Franchisees. Prior to their use by the Franchisee, samples of all local marketing materials not prepared or previously approved by the Franchisor shall be submitted to the Franchisor for written approval, which approval shall not be unreasonably withheld. Notwithstanding the generality of the foregoing, the Franchisee shall spend a minimum amount equal to two (2%) percent of the.Gross Revenue in his/her marketing area per month. Upon request from Franchisor, Franchisee shall provide Franchisor with verification of all expenditures for local advertising within thirty (30) days of such request. The foregoing expenditures shall, at Franchisor's discretion, include advertising programs and campaigns described in Section 5.2(b) above.

5.4        Advertising Cooperatives. In addition to the Advertising Fee and in lieu of the required local advertising expenditures discussed above, if a local advertising cooperative is formed by Franchisor's Franchisees and approved by Franchisor, Franchisee shall contribute to said cooperative the amount agreed upon by a majority of the members of the cooperative, and to pay that amount to the advertising cooperative at the times agreed upon by the majority. If, however, the amount contributed to the cooperative is less than what is required to be spent locally (Section 5.3 above), then Franchisee shall nevertheless be required to spend the difference locally.

5.5         Grand Opening Advertising. The Franchisee shall not be required to spend any dollars for a grand opening advertising campaign. However, any grand opening promotions that Franchisee elects to conduct must first be approved by Franchisor.

5.6        Website.

5.6.1. Definitions: For the purpose of this Agreement, the following words and phrases shall have the meaning set forth in this Paragraph 5.6.1:

5.6.1.1   "Content" means all text, images, sounds, files, video, designs, animations, layout, color schemes, trade dress, concepts, methods, techniques, processes and data used in connection with, displayed on, or collected from or through Franchisor's Web site.

5.6.1.2  "Deep Link" means a link to content of a Web site. Typically, a deep link to an interior page of a Web site (i.e., bypassing the front page of the Web site).

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5.6.1.3   "Electronic Commerce" means offering and selling merchandise and services associated with the Proprietary Marks, and receiving and accepting orders and payment for that merchandise and services, directly or indirectly, through any means of electronic communication, including receiving and accepting orders over the Internet.

5.6.1.4  "Frame" refers to a feature which, when used in conjunction with certain browsers, allows visitors of a Web site to view content form other Web sites without actually leaving the first page.

5.6.1.5  "Franchisee's Web Page" means one or more interior pages of Franchisor's Web site dedicated in whole or on part of the Facility.

5.6.1.6  "Franchisor's Web site" means one or more Internet Web site that may, among other things, facilitate orders, provide information about the System and the products and services that are offered on the Web site and at Facilities operated under the Proprietary Marks; Franchisee's Web Page may be part of the Franchisor Web site.

5.6.1.7  "Internet" means any means of electronic communication that employs inter-connected computer networks to communicate information (of any kind) by fiber optics, wire, radio or other methods of transmission, including the myriad of computers, telecommunications facilities and similar means (both equipment and software) that comprise the interconnected worldwide network of networks that employ the TCP/IP (Transmission Control Protocol/Internet Protocol) or any predecessor or successor protocols to that protocol.

5.6.1.8  "Intranet" means a private method of communication for use only by employees and franchisees of Franchisor; the Franchisor's Intranet may be either a "True" intranet (a series of inter-connected computers that use the same type of software as the Internet, but that are not technically part of the Internet and do not use the Internet to transmit material to one another) or an extranet (which will actually transmit information over the Internet, but require a password to access data on the servers used by Franchisor).

5.6.1.9  "Link" means a cross-reference which, with the aid of an interactive browser program, allows the end-user to move or connect easily from one document (including, another Web site or page on a Web site) to another.

5.6.1.10"Software" means all computer programs and computer code (e.g., HTML, Java) used for or on the Web site, excluding any software owned by third parties.

5.6.1.11 "URL" means uniform resource locator, the unique address assigned to each page of a Web site.

5.6.1.12"Web site" means a series of inter-connected "pages" on the World Wide Web section of the Internet (the "World Wide Web" is the portion of the Internet that features graphic-rich pages using the HTTP and HTML protocols);

5.6.2. Use of Proprietary Marks and National Brand Logos on Internet:

Franchisee shall not develop, create, generate, own, license, lease or use in any manner any computer medium or electronic medium (including, any Internet home page, e-mail address, Web site, bulletin board, newsgroup or other Internet-related medium) which in any way uses or displays, in whole or part, the Proprietary Marks, or any of them, or any words, symbols or terms confusingly similar thereto

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without Franchisor's express prior written consent, and then only in such manner and in accordance with this Agreement, such procedures, policies, standards and specifications as Franchisor may establish in the Manuals from time to time and only so long as Franchisee is not in default of this Agreement or any other Agreement between Franchisor its affiliates and Franchisee. Without limiting the generality of the foregoing, Franchisee shall not cause, permit or allow the Proprietary Marks, or any of them, or any words, symbols or terms confusingly similar thereto, be used or displayed in whole or part; (a) as, or as a part of, an Internet domain name; (b) as, or as a part of, URL (at any level or address); or (c) on or in connection with any Internet home page, Web site, bulletin board, newsgroup, chat-group, buddy list, instant messenger, meta-tag or the comparable identifier in any future technology) or other internet-related activity, without Franchisor's express prior written consent, and then only in such manner and in accordance with such procedures, policies, standards and specifications as Franchisor may establish in the Manuals from time to time. Franchisee shall not link to or frame Franchisor's Web site (including Franchisee's Web Page, if any) to any other Web site or authorize any third party to Link to or frame the Web site (including Franchisee's Web Page, if any) without Franchisor's express prior written consent, and then only in such manner and in accordance with such procedures, policies, standards and specifications as Franchisor may establish in the Manuals from time to time.

5.6.2.1   Except as provided in Paragraph 5.6.4 of this Agreement Franchisee shall not use, nor authorize any third party to use, the Proprietary Marks to advertise, promote, offer or sell any goods or services through the Internet, if those goods or services are the same as or similar to those (a) which are offered at or from the Facility, (b) which bear any of the Proprietary Marks, or (c) which otherwise offered or sold under the Proprietary Marks. Franchisee may, however, use the Proprietary Marks to sell such goods or services through the Internet in compliance with Paragraph 5.6.4 of this Agreement or with Franchisor's prior written consent, but then only in such manner and in accordance with such procedures, policies, standards and specifications as Franchisor may establish in the Manuals from time to time.

5.6.2.2  Franchisor will own and will retain all right, title and interest in and to the Proprietary Marks and the use thereof in any and all manners and to all existing and future domain names, URLs, future addresses and sub addresses established by Franchisor (including Franchisee's Web Page sub addresses) which may or may not include the Proprietary Marks; all Software; all Content prepared for, or use on, Franchisor's Web site; and all intellectual proprietary rights in or to any of them.

5.6.3 Franchisor's Web Site: Franchisor may, but shall not be obligated to, establish and maintain from time to time Franchisor's Web site to provide information about the System and the goods and services the Facilities provide, even through Franchisor's Web site is accessible by person in Franchisee's trade area. Franchisor has sole discretion and control over design and content of Franchisor's Web site, except the Franchisor may configure the site to accommodate Franchisee's Web Page as described in Paragraph 5.6.3.2 of this Agreement. Franchisor may, at its sole option, from time to time, without prior notice to Franchisee: (a) change, revise, or eliminate the design, content and functionality of Franchisor's Web site; (b) make operational changes to Franchisor's Web site; (c) change or modify, or modify the URL and /or domain name of Franchisor's Web site; (d) substitute, modify, or rearrange Franchisor's Web site, at Franchisor's sole option, including in any manner that Franchisor considers necessary or desirable to, among to other things, (1) comply with applicable laws, (2) respond to changes in market conditions or technology, and (c) respond to any other circumstances; (3) limit or restrict end-user access (in whole or in part) to Franchisor's Web site; and (e) disable or terminate Franchisor's Web site without any liability to Franchisee.

5.6.3.1 Franchisor's Web site may include a series of interior pages that may identify participating franchisees by among other things, name, geographic region, address, telephone number and/or e-mail address. Franchisor may permit Franchisee to customize or post certain

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information to Franchisee's Web Page, subject to Franchisee's compliance with the procedures, policies, standards and specifications that Franchisor may establish the Manuals from time to time which may require the Franchisee to pay a reasonable fee for the privilege of having Franchisee's Web Page, and may include, without limitation, specifications and limitations for the data or information to be posted to Franchisee's Web Page, customization specifications, the basic template for design of Franchisee's Web Page, parameters and deadlines specified by Franchisor, disclaimers, and such other standards and specifications and rights and obligations of the parties as Franchisor may establish from time to time. Any modifications (including customizations, alterations, submissions or updates) to the Content made by Franchisee for any purpose will be deemed to be a "work made for here" under the copyright laws, and therefore, Franchisor shall own the intellectual property rights in and to such modifications. To the extent any modification does not qualify as a work made for hire as outlined above. Franchisee hereby assigns those modifications to Franchisor for no additional consideration and with no further action required and shall execute such further assignments(s) as Franchisor may request. Franchisee may not modify Franchisee's Web Page except in coordination with Franchisor's webmaster and in compliance with Franchisor's policies and procedures. Franchisee shall contribute a reasonable fee toward the cost of the Web site's maintenance, which may vary from year to year during the term of this Agreement and shall pay the same to Franchisor in the manner and at the times that Franchisor may establish in the Manuals from time to time. If Franchisee fails to pay when due any fees or other amount payable to Franchisor under this Agreement, or any other agreement with Franchisor or Franchisor's affiliates, Franchisor may disable Franchisee's Web Page until such time as Franchisee pays its outstanding obligations in full. Franchisee hereby appoints Franchisor as Franchisee's attorney-in-fact with full power and authority for the sole purpose of disabling Franchisee's Web Page. This appointment shall be deemed to be coupled with an interest and shall continue in full force and effect until the termination or expiration of this Agreement.

5.6.3.2  Franchisor may Link Franchisor's Web site to the Web sites of third parties, including, electronic service providers, Franchisor's affiliates and other providers of goods and services. Franchisor may also permit third parties to Link (including Deep Links to any interior page of Franchisor's Web site, including Franchisee's Web Page) and frame Franchisor's Web site (including Franchisee's Web Page). Franchisor may place legal notices, disclaimers, Franchisor's corporate logos and slogans, advertisements, endorsements, trademarks, and other identifying information on Franchisor's Web site, all of which may be modified, expanding, or eliminated at Franchisor's option. Further, Franchisor may establish or participate in programs whereby Franchisor refers end-users to other Web site, or Franchisor receives referrals from other Web sites. All consideration (monetary and nonmonetary) received by Franchisor on account of the placement or dale of advertisements, endorsements, and sponsorships on Franchisor's Web site (including any Franchisee Page), and all consideration (monetary and non-monetary) received by Franchisor on account of affiliate programs, will belong only to Franchisor. Franchisor may also establish programs which encourage repeat and business by end-users.

5.6.3.3  Without limiting Franchisor's general unrestricted right to permit, deny and regulate Franchisee's participation on Franchisor's Web site in Franchisor's sole discretion, if Franchisee fails to pay when due any fees or other amounts payable to Franchisor under this Agreement, including the payment for Franchisee's link to Franchisor's Web site, or any other agreement with Franchisor or Franchisor's affiliates or otherwise breaches this Agreement or any other agreement with Franchisor or Franchisor's affiliates, Franchisor may disable or terminate Franchisee's Web Page and remove all references to the Facility on Franchisor's Web site until the breach is cured.

5.6.3.4  Franchisor has no control over the stability or maintenance of the Internet generally; as a result, Franchisor is not responsible or damage or loss caused by errors of the Internet. Furthermore, Franchisor is not liable for any direct or indirect, special, incidental, exemplary or

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consequential damages arising out of the use of, or the inability to use, Franchisor's Web site or the Internet, including loss of profits, goodwill, or savings; downtime; or damage to or replacement of programs and data, whether passed in contract, tort, product liability, or otherwise.

5.6.4     Electronic Commerce. Franchisee will not use the Proprietary Marks to advertise, promote or sell any services or merchandise through the Internet, nor will Franchisee offer or sell any service that is identify with the Proprietary Marks or any memorabilia or other merchandise that bears the Proprietary Marks through the Internet, except in compliance with Paragraph 5.6.2 of this Agreement and this Paragraph 5.6.4. Franchisee's breach of this restriction will constitute willful trademark infringement and a material breach of this Agreement.

5.6.4.1   Franchisor may, at its discretion, use the Web site described in Paragraph 5.6.3 of this Agreement or may establish another facility on the Internet for the purpose of engaging in Electronic Commerce with respect to products and services that are identified with the Proprietary Marks.

5.6.4.2  If Franchisor decides to engage in Electronic Commerce, it will (a) establish uniform procedures, policies and protocols to govern electronic communications between Franchisor and its customers and the use and dissemination of information that Franchisor obtains with respect to customers' identities, purchasing habits and other commercially relevant matters; (b) develop a secure site on the facility through which Franchisor can accept credit card and other confidential information from its customers; (c) establish a central administration center through which customer orders are processed, customer complains are handled, sales taxes (if any) are remitted, and records of sales transactions are created and maintained; (d) establish a central fulfillment center through which all customer orders are filled; and (e) establish the terms and conditions under which members of the System may participate in Franchisor's Electronic Commerce program.

5.6.4.3  In the event that Franchisor initiates Franchisor's Electronic Commerce program, Franchisee will have the opportunity to participate in the program provided the Franchisee is in good standing under this Agreement and any other agreement with Franchisor or Franchisor's affiliates. The Electronic Commerce program set forth in the Manuals may (a) state the terms on which Franchisor and participating franchisee of Franchisor may share program revenues and expenses, (b) obligate Franchisee to adhere to Franchisor's procedures, policies and protocols that govern electronic communications and the use and dissemination of customer information, (c) authorize Franchisor from time to time to modify the procedures, policies and protocols that govern the Electronic Commerce program; and (d) release Franchisor from liability to Franchisee and its customers for theft or disclosure of confidential customer information or breach of Franchisor's privacy standards unless the proximate cause of such theft, disclosure or breach is Franchisor's gross negligence or willful misconduct.

5.6.4.4  If Franchisee declines to participate in the Electronic Commerce program on the terms stated in the Manuals, Franchisee will have no right to share in the program revenues, nor will Franchisee have any responsibility to bear or pay any program expenses.

5.6.4.5  If Franchisee fail to pay when due any fees or other amounts payable to Franchisor under this Agreement, or any other agreement with Franchisor or Franchisor's affiliates or otherwise breaches this Agreement or any other agreement with Franchisor or Franchisor's affiliates, Franchisee hereby authorizes Franchisor to disable or terminate the end-user's ability to place pick-up and deliveries orders with Franchisee until the breach is cured.

5.6.5     Franchisor's Intranet. Franchisor may, at its option, establish and maintain, an Intranet through which Franchisor, franchisees of Franchisor and Franchisor's employees may communicate with each other, and through which Franchisor may disseminate the Manuals, updates

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thereto and other confidential information. Franchisor shall have sole discretion and control over all aspects of the Intranet, including the content and functionality thereof. Franchisor will have no obligation to maintain the Intranet indefinitely, and may dismantle it at any time without liability to Franchisee.

5.6.5.1   If Franchisor establishes an Intranet, Franchisee shall have the privilege to use the Intranet, subject to Franchisee's strict compliance with the standards and specifications, protocols and restrictions that Franchisor may establish from time to time. Such standards are specifications, protocols and restrictions may relate to, among other things,(a) the use of abusive, slanderous or otherwise offensive language in electronic communications; (b) communications between or among franchisees that endorse or encourage breach of any franchisee's Franchise Agreement; (c) confidential treatment of materials that Franchisor transmits via the Intranet; (d) password protocols and other security precautions; (e) grounds and procedures for Franchisor's suspending or revoking a franchise's access to the Intranet; and (f) a privacy policy governing Franchisor access to use of electronic communications that franchisees post to the Intranet. Franchisee further acknowledges that, as administrator of the Intranet, Franchisor can technically access and view any communication that any person posts on the Intranet. Franchisee further acknowledges that the Intranet facility and all communications that are posted to it will become Franchisor's property, free of any claims of privacy or privilege that Franchisee or any other person may assert.

5.6.5.2  Upon receipt of notice from Franchisor that Franchisor has established the Intranet, Franchisee shall establish and continually maintain (during all times that the Intranet shall be established and until the termination of this Agreement) an electronic connection (the specifications of which shall be specified in the Manuals) with the Intranet that allows Franchisor to send message to and receive messages from Franchisee, subject to the standards and specifications. Franchisee shall contribute a reasonable amount toward the cost of the Intranet's maintenance which may vary from year to year during the term of this Agreement and shall pay the same to Franchisor in the manner and at the times that Franchisor may establish in the Manuals from time to time.

5.6.5.3   If Franchisee fails to pay when due any fees or other amounts payable to Franchisor under this Agreement, or any other agreement with Franchisor or Franchisor affiliates or otherwise breaches this Agreement or any other agreement with Franchisor or Franchisor's affiliates, Franchisor may temporarily disable to terminate Franchisee's access to the Intranet until such time as Franchisee pays its outstanding obligation in full without Franchisor having any liability to Franchisee, in which case Franchisor shall only be required to provide Franchisee a paper copy of the Manuals and any updates thereto, if none have been previously provided to Franchisee, unless Franchisee is not otherwise entitled to the Manuals.

5.6.6. Assignment Upon Termination or Expiration. Franchisee shall, at the option and request of Franchisor, assign to Franchisor all rights to all e-mail addresses, URLs, domain names, Internet listings, and Internet accounts related to the Facility following demand by Franchisor upon Franchisee's misuse of the same and/or the termination or expiration of this Agreement. Furthermore, Franchisee hereby appoints Franchisor as Franchisee's attorney-in-fact with full power and authority for the sole purpose of assigning these rights to Franchisor. This appointment shall be deemed to be coupled with an interest and shall continue in full force and effective until the termination or expiration of this Agreement.

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APARTMENT Of

CORPORATIONS

ARTICLE VI TRAINING AND TECHNICAL ASSISTANCE

6.1         Managerial Responsibility. It is agreed that at all times durir Agreement, either Franchisee or a fully trained Manager, certified by the Franchisor shall:

(a)         devote full time, attention and effort to the active management and operation of the business of the Facility;

(b)         irrespective of any delegation of authority, not inconsistent with clause (a), reserve and exercise ultimate authority and responsibility with respect to the management and operation of the business of the Facility; and

(c)         represent and act on behalf of the Franchisee in all dealings with the Franchisor.

If two (2) or more individuals are named in this Section, each of them shall fulfill the requirements of clause (a) and both or all of them shall jointly fulfill the requirements of clauses (b) and (c).

6.2        Initial Training Program. At least sixty (60) days before the Facility is opened for business and following the execution of a lease for the Premises, the Franchisor shall make available to the Franchisee a two (2) weeks training program which the Franchisee and the Manager, that Franchisee designates, must successfully complete prior to the opening of the Facility. Such training program shall be held at the Franchisor's office location or at such other place as may be specified by the Franchisor. All costs and expenses incurred by the Franchisee and such Manager relating to such training program (including, without limitation, the cost of travel, food, accommodations and wages) shall be paid by the Franchisee. The Franchisor shall provide only the instruction, training facilities and materials for classroom and on-site instruction of the Franchisee and one (1) Manager, not to exceed two (2) persons total. If the Franchisor determines that the Franchisee or one (1) or more of the Managers cannot or has not completed the training program to the Franchisor's satisfaction (after giving the Franchisee the opportunity to designate a replacement Manager), the Franchisor may terminate this Agreement pursuant to Section 13.1 hereof and refund to Franchisee all but Five Thousand Dollars ($5,000) of the initial franchise fee paid by Franchisee, in consideration of Franchisor's time, effort and expense in approving and qualifying the franchisee, plus Five Hundred Dollars ($500) per day per person that attended training. Franchisor may, in its sole discretion, provide additional or refresher training programs at a time and place designated by the Franchisor. Franchisee must pay to Franchisor its then-current per diem training fee for each of Franchisor's representatives involved in said additional or refresher training, in addition to reimbursing Franchisor for all expenses of said representatives, including travel, lodging and meals.

6.3         Hiring and Training of Employees by the Franchisee. The Franchisee shall hire and train, at his/her expense, except as may be set forth in Section 6.2, all employees of the Facility, and shall be exclusively responsible for the terms of their employment and compensation. The Franchisee shall not employ anyone who refuses or fails to complete such training program or who refuses to sign Franchisor's non-competition agreement. The Franchisee shall at all times maintain a sufficient number of trained employees to service the Franchisee's customers, but at least the minimum number specified by the Franchisor in its Operations Manual.

6.3.1 Franchisor may require Franchisee (or Franchisee's Manager(s)) and/or previously trained and experienced managers to attend training courses that Franchisor periodically

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chooses to provide at the times and locations Franchisor designates. Franchisor may charge reasonable attendance fees for these courses. Franchisee is also responsible for all travel and living expenses incurred in attending Franchisor's training courses.

6.4 Operating Assistance. The Franchisor shall make available to the Franchisee such operating assistance and training on a continuing basis as the Franchisor considers appropriate and which may consist of advice and guidance with respect to:

(a)         methods and procedures for the purchase, storage, sales and distribution of the Products and Services;

(b)         such additional services and products as the Franchisor may approve, from time to time, to be used or offered for sale by Franchisees;

(c)         the purchase, operation, maintenance and use of equipment (regardless of location), maintenance and repair, products, uniforms, materials and supplies;

(d)         formulating and implementing advertising and promotional programs using such merchandising, marketing and advertising research data and advice as may, from time to time, be developed by the Franchisor and deemed by it to be helpful in the operation of the Facility;

(e)         the establishment and implementation of administrative, bookkeeping, inventory control and general operating procedures for the proper operation of the Facility; and

(f)         the operation, cleanliness and efficiency of the Facility.

ARTICLE VII DUTIES OF FRANCHISOR

7.1 Franchisor's Duties. During the term of this Agreement, the Franchisor shall, at its expense, offer to the Franchisee the following:

(a)         an initial training program in System standards, specifications, methods and techniques as provided for in Section 6.2 hereof;

(b)         upon Franchisee's request such periodic continuing individual or group advice, consultation, and assistance, by weekly correspondence (electronic or otherwise), quarterly field visits, or by periodic telephone or written communications made available from time to time to all Franchisees of the System, as the Franchisor may deem necessary or appropriate to assist the Franchisee in conforming to the requirements of the System. Such continuing advice may include, but not be limited to, such topics as products and services to be offered to customers, Motor Vehicle maintenance, improvements and developments in operating a Facility, pricing, administrative, bookkeeping, accounting and inventory control procedures, and operating problems encountered by the Franchisee;

(c)         subject to Section 10.1 hereof, to lend to the Franchisee one (1) copy of the Confidential Operations Manual and one (1) copy of any other manuals designated for use with the System, as well as such additions and modifications thereto as the Franchisor may, in its sole discretion, issue from time to time;

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(d)         new, modified or supplemented standards for the System that, in Franchisor's sole discretion, are beneficial or necessary to maintain the uniformity and goodwill of the System utilized by all Franchisees; and

(e)         arrangements for Franchisee to purchase his/her initial supply of the Products and Services, equipment, sales and marketing materials from Franchisor or from Franchisor's designated suppliers or manufacturers.

7.1.1 Franchisor or Franchisor's affiliates or other restricted sources shall sell and Franchisee shall purchase the Products and Services intended for sale exclusively through "Coffee Perks" Facilities and its entire system from the Franchisor, its designated or approved affiliates or other restricted sources.

7.2        Products and Services. Upon request and at the Franchisee's expense, the Franchisor shall offer to the Franchisee, during the term of this Agreement, any of the following services and products which it is then offering to other Franchisees and on the same terms and conditions:

(a)         supplies of signs, equipment, accessories, printed business forms and other materials and supplies used in the operation of the Facility;

(b)         on-site assistance by a person employed or retained by the Franchisor at mutually convenient times; and

(c)         periodic supplemental training, as set forth in Section 6.2 hereof.

7.3         System Maintenance. The Franchisor shall continue its efforts to maintain uniform standards of quality, cleanliness, appearance and service at all Facilities in the System, to promote, protect and enhance the public image and reputation of the System, and to increase the demand for the services and products offered by all System Franchisees, and to that end the Franchisor shall:

(a)         administer a program for national and regional advertising and promotion, subject to the provisions of Section 5.1 hereof;

(b)         review all other materials prepared by the Franchisee for use in local advertising and promotion pursuant to Section 5.3 hereof, in proof form; and

(c)         conduct periodic inspections of the services and products provided to the public by the Franchisee's Facility.

7.4        Meetings. To develop and maintain cooperation and friendship with other Franchisees, to enhance the ability to operate the Franchised Business properly, to learn the most recent developments in business methods for the Franchised Business and to take instructions from Franchisor on new or revised procedures or requirements, Franchisee shall be required to attend any regional meetings organized and conducted by Franchisor for Franchisees, to be held at locations to be determined by Franchisor.

7.4.1 Franchisor will pay all costs of organizing and conducting such meetings utilizing monies of the Fund, but Franchisee shall be responsible for his/her own travel expenses, meals and lodging, including those of his/her Manager(s), if any. However, Franchisor shall be under no obligation to organize or hold such meetings until, in Franchisor's sole and absolute discretion, it is advisable to do so.

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7.4.2     Franchisee may be excused from attending any regional meetings only for reasonable necessity, after prior notice in writing to Franchisor and following Franchisor's approval. However, regardless of any excuses, Franchisee must attend a make-up session to be arranged by Franchisor at a date and location to be selected by Franchisor. The cost of organizing and conducting each such make-up session, including the fees of any guest lecturer, rental of a meeting place and audiovisual materials and equipment, and reasonable compensation for the time of Franchisor personnel required to organize such make-up session, shall be borne in equal shares by all those who attend it, as determined by Franchisor. Failure to attend a make-up session after missing a regional meeting shall be deemed good cause for termination of this Agreement.

7.4.3     Franchisee's Manager(s), if any, must attend and complete, at Franchisee's expense, all the meetings and training sessions described in Article VII hereof, in addition to Franchisee and to the same extent as Franchisee.

7.5        Directories. To assist in the efficient operation of the "Coffee Perks" System, Franchisor shall provide and Franchisee shall assist Franchisor in the continuous development and maintenance of the following directories for their use solely by the "Coffee Perks" System:

7.5.1      Franchisee Directory. To assist Franchisee in maintaining contact with other franchisees, referring customers to them and receiving referrals from them, Franchisor shall publish, from time to time, a directory of the names, addresses and telephone numbers of every franchisee in good standing, in the System.

7.5.2     Approved Suppliers Directory. Franchisor will compile from time to time and deliver to Franchisee a directory of the names and addresses of authorized sources of materials and supplies for all goods and services which Franchisee may only purchase from Approved Suppliers (as hereinafter defined). Such directory may also include suggested sources of supply for items which must meet Franchisor's specifications. Franchisor may require a listing fee for suggested sources of supply, but will not require any such fee or other payment for listing Approved Suppliers of items which Franchisee cannot purchase except from Approved Suppliers. Such directory may be national or regional, at Franchisor's sole and absolute discretion. Franchisor may sell advertising in such directory for Franchisor's own account.

7.6        Disbursement of Internet Sales Leads. In the event Franchisor receives any sales leads via its website which are from potential customers who are physically located within Franchisee's Exclusive Territory, Franchisor shall direct such sales leads to Franchisee. Franchisee must keep Franchisor apprised of the status of each sales lead, within thirty (30) days of receiving such lead. If Franchisee is unable to complete the sale of the Products and Services to the customer, Franchisor shall have the right to fulfill such order itself or direct same to another Franchisee, without compensating Franchisee for his/her failed efforts.

ARTICLE VIII DUTIES OF THE FRANCHISEE

8.1 Obligations of Franchisee. In order to maintain the high quality and uniform standards associated with the System and the Proprietary Marks, and to promote and protect the goodwill associated therewith, the Franchisee shall:

(a) at all times comply strictly, and cause the Facility to comply strictly, with all standards, specifications, processes, procedures, requirements and reasonable instructions of Franchisor

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regarding the operation of the Facility. Franchisee shall adopt as a standard for performance and operation of his/her Facility the standards of Franchisor and conform to all specifications relating to construction, decor, design, equipment, packaging, products, services, uniforms, signs, displays or decorations, and other identifying materials, uniform record keeping practices, days and hours of operation and such other matters as may be in the Confidential Operations Manual, any administrative bulletins, and other confidential manuals or materials developed by Franchisor, or otherwise, as any of same may be modified from time to time by Franchisor. To insure the conformance and compliance by Franchisee with Franchisor's standards of performance, Franchisee will permit Franchisor, its officers, employees and designated representatives to enter his/her Facility at any time and from time to time to conduct an inspection and take photographs or videos to ascertain whether or not the uniform standards are being met;

(b)         at all times keep and maintain the Facility Premises and equipment at the customer's location, the Equipment and Furnishings in a neat, clean, orderly and sanitary condition, and the Equipment and Furnishings in good repair and maximum working condition, including Motor Vehicle maintenance, purchasing of new Motor Vehicles and uniforms, as needed and other equipment, regardless of location. In connection therewith, Franchisee shall from time to time abide by any reasonable requirement of Franchisor with regard to the remodeling and upgrading of the Facility to comply with standards then applicable to new "Coffee Perks" Franchisees. The interior of the Facility shall be renewed or repainted as necessary, but in any event not less frequently than every five (5) years, in accordance with Franchisor's then-current standard color schemes and standards, or within said five (5) year period if reasonably required by Franchisor. If at any time during the Initial Term or any renewal thereof any of the Equipment and Furnishings become obsolete or depreciated, then to the extent that they require replacement in accordance with Franchisor's standards, Franchisee will replace the same with items required by Franchisor's then-current standards and specifications. Franchisee shall not attach or exhibit any signs, displays, or posters on or in the interior of said building other than signs, displays or posters then currently supplied, required, or authorized in writing by Franchisor, nor shall Franchisee permit or suffer others to do so. If any substantial alterations are to be made upon the Facility Premises or Motor Vehicles during the Initial Term or any renewal thereof, then said alterations shall be first approved in writing by Franchisor and plans and specifications therefor agreed to in writing by Franchisor. To maintain a modern, progressive, and uniform operational image, Franchisor, at any time during the Initial Term or any renewal thereof, shall have the right to require Franchisee to perform such remodeling, repairs, and replacements in and upon the Facility Premises, improvements, and Equipment and Furnishings used by Franchisee which are reasonably necessary and practical to bring such Facility Premises, improvements, and Equipment and Furnishings up to the then-current standards of Franchisor. Franchisee will bear the entire cost of any remodeling, repairs, replacements, or other maintenance or refurbishing required hereunder. Franchisee acknowledges that possible additional investment may be required pursuant to this Section. If Franchisee fails to make any required remodeling, repairs, replacements, redecoration or other maintenance or refurbishing required hereunder within ten (10) days after receipt of notice from Franchisor of the actions required to be taken, Franchisor may, but is not required to, arrange for the completion of all required actions on Franchisee's behalf and Franchisee shall reimburse Franchisor upon demand for all costs incurred;

(c)         operate the Facility, its vehicles and equipment at the customer's location, in accordance with the standards, specifications, requirements and instructions as may be communicated to Franchisee by Franchisor. Franchisee must comply strictly with all standards, specifications, processes, procedures, requirements and instructions of Franchisor, whether they now exist or are hereafter established from time to time regarding the operation of the Facility. The Facility and everything located therein must be maintained in first-class condition and repair and must be kept clean, neat, sanitary and secure. It must be adequately lighted and must be operated in a clean, wholesome, sanitary and secure manner consistent with Franchisor's requirements. All maintenance, repairs and replacements requested

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by Franchisor or needed in connection with the Facility must be made promptly. All employees of Franchisee must be clean and neat and must wear the required uniform, if any, at all times;

(d)         offer for sale the Products and Services and only the Products and Services, as same exist from time to time. The Products and Services must be offered for sale on a continuous basis within the Exclusive Territory at the time and in the manner required by Franchisor. No sale of any product or service except the Products and Services may be solicited, accepted or made at or from within the Exclusive Territory. If requested by Franchisor, on at least thirty (30) days' notice, as part of a general program or standardization effort by Franchisor, the marketing of the Products and Services may be modified. In such an event, such modified product becomes the Products and Services.

(i)        Franchisee must at all times maintain an adequate inventory of the

Products and Services, customer equipment and repair parts sufficient in quantity and variety to realize the full potential of the Franchised Business.

(ii) Franchisor may, from time to time, conduct market research and testing to determine consumer trends and salability of new products and services. Franchisee must cooperate by participating in Franchisor's market research programs, test marketing new products and services and providing timely reports and other relevant information regarding marketing research. In connection with such test marketing, Franchisee must purchase a reasonable quantity of products to be tested and effectively promote and make a reasonable effort to sell such products and services.

(iii) Franchisee may not: (a) sell any product for resale; (b) sell any product or service at or from any place except within the Exclusive Territory; or (c) prepare or deliver any product or service at any place other than from within the Exclusive Territory.

(iv) Franchisee shall purchase his/her entire supply of the Products and Services from Franchisor, its designated affiliates or other restricted sources, in which case Franchisee will be obligated to acquire the Products and Services only from such restricted sources at prices Franchisor deems appropriate;

(e)         at his/her own expense, promotionally display in and upon the Premises and Motor Vehicles, "Coffee Perks" advertising signs of such nature, form, color, number, location, size and containing such material as Franchisor shall direct or approve in writing. Franchisor or its suppliers shall furnish to Franchisee, without cost or expense to Franchisee, design plans for outside advertising signs. Only signs or advertising media approved by Franchisor shall be displayed by Franchisee in or upon the Facility Premises or elsewhere. All signs must be purchased from suppliers approved by Franchisor. Franchisee shall install and maintain such signs at his/her own expense for the period that such signs remain in Franchisee's possession. Upon termination of this Agreement for whatever reason, the signs shall become the property of Franchisor, and Franchisee shall promptly remove and procure any such signs and deliver them to Franchisor according to its direction;

(f)         adhere to Franchisor's minimum quality standards and specifications for all facets of the "Coffee Perks" Franchised Business, including equipment, signage, layout design, decor, furniture, fixtures, furnishings, inventory supplies, Motor Vehicles, advertising and sales promotion materials and other products or materials used in the operation of a Facility. Such standards and specifications have been established by Franchisor for uniformity, quality control and to protect, maintain and foster its reputation, goodwill and public acceptance. All such information regarding standards and specifications shall be provided to Franchisee in writing or otherwise through the Confidential Operations Manual. The Confidential Operations Manual is incorporated in this Agreement by reference and

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Franchisee will comply with all provisions therein. All such standards and specifications may be modified at any time by Franchisor. Franchisor will provide Franchisee with a list of and specifications for the equipment, fixtures, furniture and furnishings which are consistent with the standard Facility. Franchisor will provide Franchisee with a list of recommended fixtures, furniture, Equipment and Furnishings and the Approved Suppliers thereof, which list may be modified by Franchisor from time to time. Franchisor shall also provide Franchisee with lists and specifications of approved promotional materials, supplies, and other inventory items needed in the daily operation of the Franchised Business. Franchisor will provide Franchisee the opportunity to purchase in sufficient quantity, and in a timely manner to meet Franchisee's reasonable needs, such products and supplies as Franchisor or its affiliated Franchisor is in the business of selling. Franchisee will also have the opportunity to purchase from Franchisor advertising, promotional and training materials developed by Franchisor.

(i)        Franchisor has and will continue to periodically approve suppliers and

distributors of the products, customer equipment, materials and supplies used in the operation of a Facility that meet Franchisor's standards and requirements, including, without limitation, standards and requirements relating to product quality, customer equipment, Motor Vehicles, prices, cost of goods, consistency, reliability, financial capability, labor relations, customer relations, sales and marketing support. Franchisee must purchase all products, materials and supplies only from distributors and other suppliers approved by Franchisor from time to time.

(ii) Franchisor may approve a single distributor or other supplier (collectively "Approved Supplier") for any product and may approve a supplier only as to certain products, except for the Products and Services which shall be purchased exclusively from Franchisor or its designee. Franchisor may concentrate purchases with one (1) or more suppliers to obtain lower prices or the best advertising support or services for any group of Facilities. Franchisor may, if it chooses, take advantage of discounts offered by a supplier in connection with the acquisition of large quantities of products and resell said products to Franchisee at a profit. Approval of a supplier may be conditioned on requirements relating to the frequency of delivery, concentration of purchases, quality of products, product exclusivity, standards of service, including prompt attention to complaints, or other criteria and may be temporary, pending Franchisor's continued evaluation of the supplier from time to time.

(iii) If Franchisee desires to purchase any items from any unapproved supplier, Franchisee must submit to Franchisor a written request for approval of the proposed supplier and obtain Franchisor's written approval of the supplier prior to purchasing any such items from said supplier. Franchisor may charge Franchisee a reasonable, non-refundable fee, not to exceed One Thousand Dollars ($1,000), to cover the cost Franchisor incurs in determining its approval. Franchisor may inspect the proposed supplier's facilities and require product samples from the proposed supplier to be delivered at Franchisor's option either directly to Franchisor or . to any independent entity which Franchisor designates for testing. Franchisor's evaluation and ultimate approval or rejection shall be completed within thirty (30) days of submission. Franchisor reserves the right to periodically re-inspect the facilities and products of any Approved Supplier and to revoke its approval if the supplier does not continue to meet any of Franchisor's criteria. Franchisor shall in no event be obligated to approve any proposed supplier;

(g) comply with all mandatory specifications, standards and operating procedures relating to the appearance, function, cleanliness, sanitation and operation of a Facility, customer Break Room service standards, food service standards and its Motor Vehicles. Mandatory specifications, standards, and operating procedures prescribed from time to time by Franchisor, or otherwise communicated to Franchisee in writing, will constitute provisions of this Agreement as if fully set forth in

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this Agreement. All references to "this Agreement" include all such mandatory specifications, standards and operating procedures;

(h) secure and maintain in force in his/her name all required licenses, permits and certificates relating to the operation of the Facility. Franchisee must operate the Facility in full compliance with all applicable laws, ordinances and regulations, including, without limitation, all government regulations relating to workers' compensation insurance, unemployment insurance, and withholding and payment of federal and state income taxes, social security taxes and sales taxes. All necessary and appropriate measures must be taken to avoid unsatisfactory safety, sanitation or health ratings at all times from government authorities. Conditions or practices disapproved by any such authorities must be corrected promptly except that, after consultation between Franchisee and Franchisor, Franchisee may contest in good faith the action by such authority as being arbitrary, capricious, unfair or unlawful. All advertising employed by Franchisee must be completely factual, in good taste (in Franchisor's judgment), and must conform to the highest standards of ethical advertising. Franchisee must in all dealings with Franchisor, customers, suppliers, and public officials adhere to the highest standards of honesty, integrity, fair dealing and ethical conduct. Franchisee must refrain from any business or advertising practice which may be harmful to the business of Franchisor, the goodwill associated with the Proprietary Marks or other Facilities. Franchisee must notify Franchisor in writing within five (5) days of the commencement of any action, suit or proceeding, and of the issuance of any order, writ, injunction, award or decree of any court, agency or other governmental unit, which may adversely affect the operation or financial condition of Franchisee or the Facility, or of any notice of violation of any law, ordinance or regulation relating to health or safety;

(i)         assure that at all times the Franchised Business must be under the direct, on-

premises supervision of a manager who has satisfactorily completed Franchisor's training program. Franchisee shall staff the Franchised Business with the number of managers, assistant managers or other key personnel as Franchisor specifies from time to time. Franchisee shall hire all employees of the Franchised Business and be exclusively responsible for the terms of their employment, their compensation, and for the proper training of the employees in the operation of the Franchised Business and shall require all such personnel, including Franchisee, to execute Franchisor's Non-Competition and Confidentiality Agreement in the form annexed hereto as Exhibit "E". Franchisee may not recruit or hire, either directly or indirectly, any employee (or former employee for twelve (12) months after his or her employment has ended) of a Franchised Business without Franchisor's or that Franchisee's advance written permission or that of the employer-Franchisee. (If Franchisee violates this provision, Franchisee shall pay the hired employee's former employer twice the hired employee's annual salary, plus all costs and attorneys' fees incurred as a result of the violation);

(j)        provide that payment for all Products and Services purchased from the

Franchisor by the Franchisee shall be due and payable within fifteen (15) days after receipt of an invoice therefor, unless otherwise specified by the Franchisor. All other supplies, forms, documents and equipment required for the operation of the Facility and not required to be purchased from the Franchisor or its designees may be purchased from the Franchisor or from any source or supplier approved or designated in writing by the Franchisor or from any other source or supplier, provided that the Franchisor shall have first approved in writing such other source or supplier, which approval shall not be unreasonably withheld so long as the standards of the System are met;

(k) maintain at all times such arrangements with (and only with) such credit card issuers or sponsors, and shall implement and at all times operate such point-of-sale systems and credit verification systems as the Franchisor may designate from time to time;

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(1)        assure that his/her Manager(s) and other personnel of the Franchised Business as

the Franchisor may direct shall attend and participate at such additional or supplemental training courses, seminars and Franchisee meetings as may be specified by the Franchisor from time to time. The Franchisor shall have the right to charge the Franchisee a reasonable fee for such additional or supplemental training courses, seminars or Franchisee meetings and the Franchisee shall also be responsible to pay all travel, accommodation, meal and other expenses of the Franchisee and its Manager(s) and other personnel in respect of attending and completing such courses, seminars or meetings;

(m) issue and honor any type of gift certificate or other types of promotions or marketing campaigns, provided such promotion does not violate any federal antitrust laws.

8.2        Inventory. Franchisee shall, at all times, maintain on the Premises and/or in Motor Vehicles, under proper conditions, an adequate inventory of the Products and Services, all required components, materials, equipment and supplies therefor, including, without limitation, the marketing, manufacturing, installation and administrative aspects of the Franchised Business.

8.3         Computer Hardware and Software Systems. Since the effective and efficient operation of a "Coffee Perks" Franchised Business is intimately connected with the use and maintenance of appropriate computer hardware, including hand-held computers and printers and software systems as specified by Franchisor, with direct interconnection to and access by Franchisor's computer hardware and software systems, Franchisee must purchase, use, maintain and update computer and other systems, including software programs which meet Franchisor's specifications, as they evolve over time and which, in some cases, may only be available through Franchisor and/or its affiliates. Franchisee must maintain his/her systems on-line to provide full access for computer systems used by Franchisor and Franchisee must promptly update and otherwise change his/her computer hardware and software systems and Franchisor requires from time to time, at Franchisee's expense. Franchisee will pay all amounts charged by any supplier or licensor, which may be Franchisor or an affiliate, of the systems and programs used by Franchisee, including charges for use, maintenance, support and/or update of these systems or programs.

8.4        Mutual Dependence. Franchisee acknowledges that he/she is one of a number of "Coffee Perks" Franchisees, each of whose success depends in substantial part on the integrity, reputation and marketing efforts of each other Franchisee. Franchisee further acknowledges that the value of the Proprietary Marks and of membership in the "Coffee Perks" System to Franchisee, to Franchisor and to each other Franchisee depends on the maintenance of uniform standards of quality, integrity and appearance. Franchisee further acknowledges that any action which impairs the reputation and goodwill of the Proprietary Marks, impairs or adversely affects the objectives of the Franchisor or brings the Franchisor into disrepute, or departs from the uniform practices specified by Franchisor, will be likely to injure all members of the "Coffee Perks" System.

8.5        Uniformity. Franchisee agrees that he/she will at all times adopt and follow all the Franchisor's directives concerning the appearance of Franchisee's Premises and Motor Vehicles, the quality and appearance of goods and services offered, the appearance of Franchisee and his/her staff, other business practices and other matters likely to affect the public perception of the "Coffee Perks" System as a unified and reliable network of companies. Franchisee will offer all of, and only, the goods and services which Franchisor authorizes.

8.6        Variances. Complete and detailed uniformity under many varying conditions may not be possible or practicable, and Franchisor therefore reserves the right and privilege, at the sole and absolute discretion of Franchisor and as Franchisor may deem in the best interest of all concerned in any specific instance, to vary standards to accommodate special needs of Franchisee, or those of any other Franchisee,

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based upon the peculiarities of a particular site or location, density of population, business potential, population of trade area, existing business practices, requirements of local law or local custom, or any other condition which Franchisor deems to be of importance to the successful operation of such Franchisee's business. Further, Franchisor may from time to time allow certain Franchisees to depart from normal System standards and routines in certain respects in order to experiment with or test new products or services, equipment, Motor Vehicles, designs, procedures and the like. In no event shall such variance, or such testing, be deemed a waiver of any of Franchisor's rights, or an excuse from performance of any of Franchisee's duties hereunder. Franchisor may at any time require Franchisee to commence full compliance with all of Franchisor's standards and procedures. Franchisor shall not under any circumstances be required to grant any variance to Franchisee. Nothing contained in this Article is intended to confer on Franchisee any right to compel Franchisor to grant a variance to Franchisee or to grant, withdraw or modify any variance given to any other Franchisee. Such matters shall at all times remain within the sole and absolute discretion of Franchisor.

8.7        Referrals. Franchisee acknowledges that it is in his/her best interest to refer prospective customers to other Franchisees of the "Coffee Perks" System when, because of territorial restrictions, distance or excessive work, or for other reasons, Franchisee cannot promptly, properly and profitably serve such customers himself/herself. Franchisee agrees that he/she will not undertake any work that he/she is not capable of performing promptly and properly. If Franchisee is prevented by the terms of this Section from accepting one or more new customers, Franchisee will refer each such prospective customer another franchisee who would serve the area where such prospective customer lives or works. Franchisee shall be permitted to service customers outside their Exclusive Territory provided there is not another franchisee operating therein. However, once a franchisee is granted a Franchised Business for that open territory, Franchisee must deliver those accounts and all account records to the new franchisee.

8.8        Relationship with Former Franchisees. Franchisee acknowledges that former franchisees (those whose franchise agreements have expired or have been terminated) are in a position to compete unfairly with the Franchisee and/or other members of the "Coffee Perks" System, and to cause great injury to the reputation of the "Coffee Perks" System and/or the Proprietary Marks. Franchisee therefore agrees as follows:

8.8.1      Franchisee will not sell, loan, give or otherwise transfer or deliver to any former franchisee, any vendor, any former employees or their immediate family member, or anyone not operating within Franchisee's Franchised Business or allow any former franchisee or their immediate family member, to copy or otherwise obtain, any confidential business information about the "Coffee Perks" System; any advertising or promotional materials produced by the Fund or by Franchisor or which bear any of the Proprietary Marks; any other materials or publications of Franchisor, including, without limitation, the Confidential Operations Manual; any directory or roster of franchisees or Approved Suppliers, any other customer lists or mailing lists pertaining in any way to the "Coffee Perks" System; or any other information about the "Coffee Perks" business or the System which is not available to the public.

8.8.2     Franchisee will not refer prospective customers to any former franchisee.

8.8.3     Franchisee will not notify or advise any former franchisee of, or in any other way assist any former franchisee in learning about, the date, time and place of any meetings of franchisees.

8.8.4     If Franchisee observes any former franchisee using any of the Proprietary Marks in any way, or utilizing business premises or motor vehicles from which the Proprietary Marks and/or distinctive color scheme have not been completely obliterated, Franchisee shall immediately report such observation to Franchisor, along with all details available to Franchisee.

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8.8.5     Franchisee shall in general have no dealings with a former franchisee which Franchisee, under this Agreement, could not have with a person who has never been a "Coffee Perks" Franchisee.

8.8.6     The provisions of Section 8.9 of this Agreement shall apply to Franchisee as soon as Franchisee is on notice of the expiration or termination of another franchise agreement. Franchisee shall be deemed to be on such notice when:

(i)        Franchisee receives a new Franchisee Directory in which such franchise

does not appear; or

(ii) Franchisee receives written notice from Franchisor that one or more particular franchise agreements have expired or have been terminated.

8.9        Parties to Litigation. Franchisee will not in any way contribute to the legal costs and fees of any actual or contemplated legal proceeding against Franchisor, the Fund or any other Franchisee or any individual member or owner thereof, nor in any other way encourage, support or assist such litigation, except:

(i)        to give evidence to the extent required by law, pursuant to a subpoena or court

order; or

(ii) to carry on litigation to which Franchisee is a proper party.

8.10      Membership in Trade Associations. Franchisee shall be required to join any appropriate or Franchisor recommend trade association during the initial term and any renewals of this Agreement. Franchisee shall provide evidence of membership to Franchisor immediately upon request.

ARTICLE IX PROPRIETARY MARKS

9.1         Proprietary Marks. When used in this Agreement, "Proprietary Marks" mean the "Coffee Perks" trademark and service marks which are used now or in the future to identify Facilities or the Products and Services and to distinguish it from that of any other business, and the trademarks, service marks, trade names, logos and commercial symbols as may be designated by the Franchisor from time to time for use in connection with the System.

9.2        License of Proprietary Marks. Franchisee is licensed to use the Proprietary Marks, goodwill and trade secrets in the operation of the Facility only within the Exclusive Territory. Nothing in this Agreement shall be construed as authorizing or permitting their use anywhere else or for any other purpose, except as may be authorized in writing by Franchisor. During the term of this Agreement and any renewal or extension hereof, Franchisee shall identify himself/herself as the owner of the Facility in conjunction with any use of the Proprietary Marks, including, but not limited to, on invoices, order forms, receipts, business stationery, contracts with all third parties or entities, as well as the display of such notices in such content and form and at such conspicuous locations as Franchisor may designate in writing.

9.3         Franchisor Retains Ownership. Franchisee acknowledges that the ownership of all of the Proprietary Marks, goodwill and trade secrets remains solely with Franchisor and that Franchisee shall not register or attempt to register the Proprietary Marks or to assert any rights in them other than as

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specifically granted in this Agreement, nor shall Franchisee use the Proprietary Marks as part of any domain name, electronic address, or search engine that Franchisee may maintain on the Internet, Worldwide Web, or any other similar proprietary or common carrier electronic delivery system, or otherwise in connection with a Website, unless the Franchisor has approved such use. A Website is defined as an interactive electronic document contained in a network of computers linked by communications software, including the Internet and Worldwide Web Home Pages.

9.4        Use of Proprietary Marks. Franchisee shall only use the Proprietary Marks, logos, trade styles, color combinations, designs, signs, symbols and slogans of Franchisor or of the national brands with whom Franchisor has agreements with, and only in the manner and to the extent specifically permitted by this Agreement, the Confidential Operations Manual or in any manuals, directives or memos prepared by Franchisor, an in the manner Franchisor specifies in any Website Franchisor has established for the System.

9.5        Approval of Items Using Proprietary Marks. Franchisor reserves the right to approve all signs, memos, stationery, business cards, advertising material, forms and all other objects and supplies using the Proprietary Marks. All advertising, publicity, point of sale materials, signs, decorations, furnishings, equipment, or other materials employing the words "Coffee Perks" shall be in accordance with this Agreement and the Confidential Operations Manual, and Franchisee shall obtain Franchisor's approval prior to such use.

9.6        Cessation of Use after Expiration, Termination or Non-Renewal. Upon the expiration, termination or non-renewal of this Agreement, Franchisee shall immediately cease using the Proprietary Marks, color combinations, designs, symbols or slogans; and Franchisor may cause Franchisee to execute such documents and take such action as may be necessary to evidence this fact. After the effective date of expiration, termination or non-renewal, Franchisee shall not represent or imply that he/she is associated with Franchisor. To this end, Franchisee irrevocably appoints Franchisor or its nominee to be Franchisee's attorney-in-fact to execute on Franchisee's behalf any document or perform any legal act necessary to protect the Proprietary Marks from unauthorized use. Franchisee acknowledges and agrees that the unauthorized use of the Proprietary Marks will result in irreparable harm to Franchisor for which Franchisor shall be entitled to obtain injunctive relief, monetary damages, reasonable attorneys' fees and costs.

9.7        Notification of Infringement. Franchisee shall immediately notify Franchisor of any apparent infringement of or challenge to Franchisee's use of the Proprietary Marks, or any claim, demand, or suit based upon or arising from the unauthorized use of, or any attempt by any other person, firm, or corporation to use, without authorization, or any infringement of or challenge to, any of the Proprietary Marks. Franchisee also agrees to immediately notify Franchisor of any other litigation instituted by any person, firm, corporation or governmental entity against Franchisor or Franchisee.

9.8        Franchisor to Defend. Franchisor shall undertake the defense or prosecution of any litigation concerning Franchisee that relates to any of the Proprietary Marks or that, in Franchisor's judgment, may affect the goodwill of the System; and Franchisor may, in such circumstances, undertake any other action which it deems appropriate. Franchisor shall have sole and complete discretion in the conduct of any defense, prosecution or other action it chooses to undertake. In that event, Franchisee shall cooperate and execute those documents and perform those acts which in the opinion of Franchisor are necessary for the defense or prosecution of the litigation or for such other action as may be undertaken by Franchisor.

9.9        Franchisee to Use Only Designated Proprietary Marks. In order to develop and maintain high uniform standards of quality and service and to protect the reputation and goodwill of

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Franchisor, Franchisee shall do business and advertising using only the Proprietary Marks designated by the Franchisor or by any national brands whose marks and/or logos are licensed to the System. Franchisee shall not do business or advertise using any other name. Franchisee is not authorized to and shall not use the words "Coffee Perks" by itself, as a part of the legal name of any corporation, partnership, proprietorship or other business entity to which Franchisee is associated, or with a bank account, trade account or in any legal or financial connection.

9.10      Inspection. In order to preserve the validity and integrity of the Proprietary Marks, and to assure that Franchisee is properly employing them in the operation of Franchisee's business, Franchisor and its agents shall have the right at all reasonable times to inspect and photograph Franchisee's business, financial books and records, and operations. Franchisee shall cooperate with and assist Franchisor's representative in such inspection.

9.11       Copyright Symbols. Franchisee shall be required to affix the ®, or SM symbol upon all advertising, publicity, signs, decorations, furnishings, equipment or other printed or graphic material employing the words "Coffee Perks" or any other of the Proprietary Marks, whether presently existing or developed in the future.

9.12      No Right to Deny Use of Proprietary Marks. Franchisee acknowledges that he/she does not have any right to deny the use of the Proprietary Marks to any other "Coffee Perks" Franchisees. In consideration therefor, Franchisee shall execute all documents and take such action as may be requested to allow Franchisor or other "Coffee Perks" Franchisees to have full use of the Proprietary Marks, except that other "Coffee Perks" Franchisees shall not be permitted to have use of the Proprietary Marks within the Exclusive Territory.

9.13      Avoidance of Conflict. If during the term of this Agreement there is a claim of prior use of the "Coffee Perks" name or any other of the Proprietary Marks in the area in which Franchisee is doing business or in another area or areas, Franchisee shall so use Franchisor's other Proprietary Marks in such a way and at Franchisor's discretion in order to avoid a continuing conflict.

9.14      Indemnification. The Franchisor agrees to indemnify Franchisee against, and to reimburse Franchisee for, all damages, costs, reasonable attorneys' fees and expenses for which he/she is held liable in any proceeding in which Franchisee's use of any Proprietary Mark pursuant to and in compliance with this Agreement is held to constitute trademark infringement, unfair competition or dilution, and for all costs reasonably incurred by Franchisee in the defense of any such claim brought against him/her or in any such proceedings in which he/she is named as a party, provided that Franchisee has timely notified the Franchisor of such claim or proceedings, has otherwise complied with this Agreement and has tendered complete control of the defense of such to the Franchisor. If the Franchisor defends such claim, the Franchisor shall have no obligation to indemnify or reimburse Franchisee with respect to any fees or disbursements of any attorney retained by Franchisee.

9.15      Limited License. Franchisee understands and agrees that the limited license to use the Proprietary Marks granted hereby applies only to such Proprietary Marks and/or national brand marks or logos, as are designed by Franchisor, and which are not subsequently designated by Franchisor as being withdrawn from use, together with those which may hereafter be designated by Franchisor in writing. Franchisee expressly understands and agrees that he/she is bound not to represent in any manner that he/she has acquired any ownership or equitable rights in any of the Proprietary Marks by virtue of the limited license granted hereunder, or by virtue of Franchisee's use of any of the Proprietary Marks.

If it becomes advisable at any time, in the discretion of Franchisor, to modify or discontinue use of any Proprietary Mark or national brand logos and/or to adopt or use one or more additional or

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substitute Proprietary Marks, then Franchisee shall be obligated to comply with any such instruction by Franchisor. Franchisee waives any other claim arising from or relating to any Proprietary Mark change, modification or substitution. Franchisor will not be liable to Franchisee for any expenses, losses or damages sustained by Franchisee as a result of any Proprietary Mark addition, modification, substitution or discontinuation, except as provided herein. Franchisee covenants not to commence or join in any litigation or other proceeding against Franchisor for any of these expenses, losses or damages.

9.16 Name Registrations. Before commencing business at the Facility, Franchisee must supply evidence satisfactory to Franchisor that Franchisee has complied with all applicable laws regarding the use of fictitious or assumed names. Franchisee must take such steps as Franchisor approves in writing to register the name "Coffee Perks" to be able to operate the Facility under such name within Franchisee's Exclusive Territory. Except for registration of a "d/b/a" or assumed name or other fictitious name certificate in connection with the operation of the Facility, Franchisee must not register or attempt to register Franchisor's names or the Proprietary Marks in Franchisee's own name or that of any other entity, nor shall Franchisee make any attempt to register a domain name which includes the Proprietary Marks.

ARTICLE X OPERATIONS MANUAL AND CONFIDENTIALITY

10.1 Confidential Operations Manual. The Franchisor has developed and will lend to the Franchisee during the term of this Agreement an operating manual for the Facility and Franchised Business (herein referred to as the "Confidential Operations Manual") containing mandatory specifications, standards, methods, techniques and procedures for the operation of the Facility and the Franchised Business, prescribed from time to time by the Franchisor for its Franchisees, and containing information relative to other obligations of the Franchisee hereunder. All such specifications, standards and operating procedures shall be consistent with this Agreement and all applicable laws. Specifications, standards and operating procedures prescribed from time to time by the Franchisor in the Confidential Operations Manual or otherwise communicated to the Franchisee in writing shall constitute provisions of this Agreement as if fully set forth herein and shall be kept confidential by the Franchisee at all times during the term of this Agreement and after the termination or expiration thereof for any reason. The Franchisee shall operate his/her Facility strictly in accordance with the Confidential Operations Manual. The Franchisor shall have the right to add to, and otherwise modify, the Confidential Operations Manual from time to time to reflect changes in the Products and Services, the System, standards, operating procedures, or the operation of the Facility; provided, however, no such addition or modification shall alter the Franchisee's fundamental status and rights under this Agreement. The Franchisee covenants to accept, implement and adopt any such modifications at his/her own cost, except as provided in Section 9.15 hereof covering a change in the Proprietary Marks. The Franchisee shall keep the Confidential Operations Manual up to date with replacement pages and insertions as instructed by the Franchisor. Operating procedures and standards that the Franchisor prescribes from time to time in the Confidential Operations Manual will constitute provisions of this Agreement as if fully set forth herein. All references to this Agreement shall include all such standards and operating procedures. The Franchisee acknowledges that the Confidential Operations Manual contains proprietary information of the Franchisor and the Franchisee agrees to keep the Confidential Operations Manual and its contents confidential at all times and not to make any copies thereof. The Confidential Operations Manual shall at all times remain the property of the Franchisor, and the Franchisee shall promptly return the Confidential Operations Manual to the Franchisor upon the Franchisor's request, and in any event upon the termination or expiration of this Agreement for any reason. In the event a dispute arises as to the contents of the Confidential Operations Manual, the master copy maintained by Franchisor shall be controlling.

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10.2 Confidentiality. The Franchisor and its affiliates possess certain confidential information (the "Confidential Information") relating to the operation of "Coffee Perks" Businesses, which includes:

(a)         methods, techniques, formats, specifications, systems, procedures, sales and marketing techniques, route distribution and maintenance, delivery and warehouse logistics, knowledge, and experience in developing and operating "Coffee Perks" Businesses;

(b)         knowledge of specifications for and suppliers of certain Products and Services, materials, coffee blend recipes, and flavor profiles, supplies, equipment, furnishings, and fixtures;

(c)         knowledge of operating results and financial performance of "Coffee Perks" Businesses;

(d)         technological and design specifications for equipment and products, and

(e)         proprietary computer software.

Confidential Information will exclude information received by the Franchisee from a third party (provided such third party has not by the disclosure breached any obligations to the Franchisor), information available in the public domain, and the information the Franchisee can demonstrate it already knew before it became a "Coffee Perks" Business Franchisee.

The Franchisor may disclose certain Confidential Information to the Franchisee in the initial training program and subsequent training, the Confidential Operations Manual and guidance furnished to the Franchisee during the term of this Agreement. The Franchisor will conspicuously mark all information deemed to be confidential.

The Franchisee acknowledges and agrees that it will not acquire any interest in Confidential Information, other than the right to utilize Confidential Information in operating the Business during the term of this Agreement, and that using or duplicating any Confidential Information in any other business would constitute an unfair method of competition. The Franchisee acknowledges and agrees that Confidential Information is proprietary, includes trade secrets of the Franchisor and its affiliates, and is disclosed to the Franchisee solely on the condition that the Franchisee agrees, and the Franchisee does hereby agree, that it

(a)         will not use Confidential Information in any other business or capacity;

(b)         will maintain the absolute confidentiality of Confidential Information during and after the term of this Agreement;

(c)         will not make unauthorized copies of any portion of Confidential Information disclosed in written or other tangible form; and

(d)         will adopt and implement all reasonable procedures that the Franchisor prescribes from time to time to prevent unauthorized use or disclosure of Confidential Information, including, without limitation, restrictions on its disclosure to its employees and the use of, as appropriate, nondisclosure and non-competition agreements with employees who have access to Confidential Information. If the Franchisee is legally compelled to disclose Confidential Information in a judicial or administrative proceeding, the Franchisee agrees to notify the Franchisor prior to disclosure and to use all reasonable efforts to obtain, and to afford the Franchisor and its affiliates the opportunity to obtain, an appropriate protective order or other assurance satisfactory to the Franchisor and its affiliates of confidential treatment for the information required to be disclosed.

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Franchisee further acknowledges and agrees that Confidential Information is beyond the skills, knowledge, and experience it now has and will be valuable to it in developing the Business.

All materials, discoveries, inventions, ideas, and/or improvements (whether or not patentable or copyrightable) relating to the Franchised Business whether created by or on behalf of the Franchisee or its owners (if the Franchisee is a corporation, limited liability Franchisor, or partnership), will be promptly disclosed to the Franchisor, deemed to be the Franchisor's sole and exclusive property, and deemed to be works made-for-hire for the Franchisor and may be shared among all franchisees without consideration paid to Franchisee. The Franchisee and its owners agree to execute whatever assignment or other documents the Franchisor requests to evidence the Franchisor's ownership or to assist the Franchisor in obtaining copyright registrations or patent rights. Franchisee and its owners agree to use such items solely in connection with activities permitted in this Agreement and not to use any substantially similar materials, discoveries, inventions, ideas, and/or improvements for any purpose during or after the term of this Agreement

Except as otherwise provided in the immediately preceding paragraph, and whether or not patentable or copyrightable, all materials, discoveries, inventions, ideas, and/or., improvements (the "Work") will be deemed to be the Franchisee's sole and exclusive property if, and only if, each of the following conditions is satisfied: (i) the equipment and facilities used in creating or developing the Work belong to or were hired by the Franchisee; (i i) the Work does not result directly from the use of the Franchisor's or its affiliates' Confidential Information; and (iii) the Franchisor does not pay the Franchisee to create or develop the Work. If any of these conditions is not satisfied, then any Work created or developed by the Franchisee will be deemed to be the Franchisor's sole and exclusive property and deemed to be works made-for-hire for the Franchisor. Under such circumstances, the Franchisee and its owners agree to execute whatever assignment or other documents the Franchisor requests to evidence the Franchisor's ownership of the Work or to assist the Franchisor in obtaining copyright registrations or patent rights in the Work. The Franchisee and its owners agree in such instances to use the Work solely in connection with activities permitted in this Agreement and not to use any substantially similar items for any purpose during or after the term of this Agreement

10.3 Exclusive Relationship. Franchisee acknowledges and agrees that the Franchisor would be unable to protect Confidential Information against unauthorized use or disclosure and unable to encourage a free exchange of ideas and information among "Coffee Perks" Businesses if franchised owners of "Coffee Perks" Businesses were permitted to hold interests in or perform services for a Competitive Business. The Franchisee also acknowledges that the Franchisor has granted the franchise to the Franchisee in consideration of and reliance upon the Franchisee's agreement to deal exclusively with the Franchisor. The Franchisee therefore agrees that during the term of this Agreement, except for the Franchised Business and other "Coffee Perks" Businesses operated under franchise agreements with the Franchisor, neither the Franchisee nor, any of its owners (or the immediate families of the Franchisee or its owners) shall have any direct or indirect interest as a disclosed or beneficial owner, investor, partner, director, officer, employee, consultant, representative, or agent, or in any other capacity, in any Competitive Business or in any entity which is granting franchises or licenses or establishing joint ventures for the operation of Competitive Businesses. The restrictions of this Section shall not be applicable to the ownership of shares of a class of securities listed on a stock exchange or traded on the over-the-counter market that represent three percent (3%) or less of the number of shares of that class of securities issued and outstanding. The term "Competitive Business" shall mean any business (i) specializing, in whole or in part, in the operation of a coffee service, bottled water, vending or food service distribution business, or (ii) manufacturing or distributing coffee brewing or dispensing machines, for the coffee service, bottled water, vending or food service distribution market, or (iii) producing or roasting coffee, manufacturing bottled water for any purpose. The Franchisee (and its owners) agree that it may and will be conclusively presumed that any violation of this Section was accomplished by and through the Franchisee's (or its owners') unlawful use of Confidential Information.

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10.4      Database. Franchisee acknowledges that the database of customers is proprietary to Franchisor and that Franchisor shall have access to same electronically following notice to Franchisee on an annual basis.

10.4.1 Customer List. Franchisee agrees that the list of the names, addresses and other information (including, without limitation, telephone numbers) regarding Franchisee's current customers, former customers, and those who have inquired about the services and products ("Customer List"), shall be included in the Confidential Information, shall at all times remain the property of the Franchisor, upon termination, expiration or non-renewal, and shall constitute a trade secret of the Franchisor. Franchisee agrees that the Franchisee may shall not disclose the Customer List, or any portion thereof, to any person other than the Franchisor, either during the term of this Agreement or thereafter. Franchisee further agrees that a breach of this Section shall be grounds for immediate termination of this Agreement pursuant to Section 13.1 (7).

10.5      Return of Confidential Operations Manual. Franchisee shall keep the Confidential Operations Manual in his/her Facility at all times and promptly return all copies to Franchisor upon the expiration or termination of this Agreement, and shall refrain from making any copies thereof or otherwise reproducing it either in whole or in part at any time.

ARTICLE XI OPERATIONAL REQUIREMENTS

11.1       Sole Business at Premises. Franchisee shall not carry on all or part of any business except the Franchised Business at the Premises or from the Motor Vehicles. Without limiting the generality of the foregoing, Franchisee shall not receive mail or telephone calls or visitors at the Premises for or in connection with any other line of business, without Franchisor's prior approval. However, in the event Franchisee has added the "Coffee Perks" Franchised Business to his/her existing business premises, Franchisee shall nevertheless be required to maintain "Coffee Perks" dedicated Motor Vehicles and telephone lines for this Franchised Business.

11.2      Hours of Operation. Franchisee shall be open for business to the public beginning no later than 8:00 a.m. and remaining open until no earlier than 5:00 p.m., Monday through Friday of each week, except legal holidays. Natural disasters, war, strikes or riots preventing Franchisee temporarily from complying with the foregoing shall to that extent suspend Franchisee's obligation to comply therewith.

11.3      Payment Methods. Franchisee shall accept in payment for services rendered and goods sold in connection with the Franchised Business only the following forms of payment:

(a)         United States currency; and/or

(b)         Cashier's check in U.S. funds drawn on a bank or savings and loan association or credit union chartered by the United States or by a state of the United States; and/or

(c)         Preprinted local check of the customer, in U.S. funds, not to exceed the amount of Franchisee's invoice to customer, drawn on a bank or savings and loan association or credit union chartered by the United States or by a state of the United States, only if satisfactory identification is noted on the check; and/or

(d)        Visa, MasterCard or other major credit cards, with approval as required by the issuing bank; and/or

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(e)         Credit card issued or sponsored by Franchisor, under the Coffee Perks name or other name which Franchisee is then authorized by Franchisor to use; and/or

(f)         A pre-arranged financing program(s), if implemented by Franchisor, under the Coffee Perks name or other name which Franchisee is then authorized by Franchisor to use; and/or

(g)         American Express, Citibank, Bank of America, or other Traveler's Checks which Franchisor may approve; and/or

(h) Other forms of payment, in money, electronic transfers, barter credits or other property or things of value, but only with the prior written consent of Franchisor, which may be granted or withheld at Franchisor's sole.and absolute discretion. It is understood and agreed that the purposes of the restrictions of this Section 11.3 are to protect Franchisee and the System from improvident business practices and credit risks, to provide for adequate and reliable record-keeping, and to protect both parties from errors or distortions in computing of Franchisee's Gross Revenue.

11.4      Business Forms. Franchisee shall use only those forms, contracts, invoices and statements which have been approved as to form by Franchisor. If Franchisor has made available a form of customer contract, credit disclosure, customer invoice, and/or statement of account for use by Franchisee, Franchisee shall reimburse Franchisor's legal fees and other expenses incurred in connection with reviewing any other form of the same type which Franchisee submits for approval.

11.5      Prior Review of Collection Practices. Franchisee acknowledges that abusive or excessive collection techniques and unnecessary or unfounded litigation against his/her customers is likely to injure the goodwill of the Proprietary Marks and the reputation of the System. Franchisee therefore agrees that he/she will neither (a) assign any account for collection, nor employ any collection agency, without obtaining Franchisor's prior approval of the collection agency; nor (b) commence any legal action or proceeding against any customer or former customer, or allow a collection agency to do so, without first submitting such matter for Franchisor's review for a period often (10) days from the time Franchisor receives all documentation pertaining to the account, customer or former customer in question.

11.5.1 If Franchisor believes that such legal action is not well founded in law, or brings disrepute on the Franchisor, or is likely to result in disclosure of trade secrets or other confidential business information about the Franchisor, and so advises Franchisee in writing prior to the expiration of such ten (10) days referred to herein, Franchisee shall make such modifications to his/her complaint as may be necessary to avoid risks of the kind set forth in Section 11.5 hereof, and shall obtain Franchisor's approval before filing or serving the complaint. Such approval shall not be unreasonably withheld.

11.6      Compliance with Laws and Ethical Business Practices. Franchisee shall secure and maintain in force, in his/her name, all required licenses, permits and certificates relating to the operation of the Franchised Business. Franchisee shall operate his/her Franchised Business in full compliance with all applicable laws, ordinances and regulations, including, without limitation, laws relating to health regulations, workers' compensation insurance, unemployment insurance, and withholding and payment of income taxes, payroll taxes, social security taxes and sales taxes. All advertising by Franchisee will be completely factual, in good taste in Franchisor's sole and absolute discretion, and will conform to high standards of ethical advertising. Franchisee will, in all dealings with his/her customers, suppliers and public officials, adhere to high standards of honesty, integrity, fair dealing and ethical conduct, in each case above and beyond merely legal requirements. Franchisee will refrain from any business or advertising practice which may be injurious to Franchisor's business and the goodwill associated with the Proprietary Marks and other Coffee Perks businesses. Franchisee will notify Franchisor in writing within

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five (5) days of the commencement of any action, suit or proceeding, and of the issuance of any order, writ, injunction, award or decree of any court, agency, or other governmental instrumentality, which relates to or which may affect the operation or financial condition of Franchisee and/or his/her Franchised Business.

11.6.1 In no event shall Franchisee's failure or inability to comply with applicable laws or regulations excuse Franchisee from timely performance of each and every one of his/her obligations under this Agreement.

11.7      Disclosure. In order to facilitate compliance with current and future legal obligations and requirements, Franchisor shall maintain the right, in its sole and absolute discretion, to disclose, whether in its offering circulars or otherwise, any information relating to Franchisee's ownership and operation of his/her "Coffee Perks" Facility, including, but not limited to, Franchisee's name, address and/or telephone number, e-mail address, revenues, expenses, results of operation or other information.

11.8      Inspection by Franchisor. Franchisor and its employees and representatives shall have the right to observe and monitor the activities of Franchisee and Franchisee's employees, agents and independent contractors, including the right to enter Franchisee's Premises and at all reasonable times during the business day, and without prior notice to Franchisee, for the purpose of ascertaining if all the provisions of this Agreement and if the operating standards and procedures and other Franchisor directives are being observed by Franchisee. On any such inspection, Franchisor and/or such representatives shall have the right to observe Franchisee's marketing and sales techniques; to monitor Franchisee's use of required design principles and techniques; to inspect and photograph Franchisee's Premises and Motor Vehicles, fixtures and equipment; to inspect products and the storage, manufacturing, installation and overall condition thereof; to observe the customer relations services rendered by Franchisee and to inquire of Franchisee's customers about their satisfaction; to observe the conditions of maintenance and repair; to observe and question Franchisee's employees; and otherwise to investigate all aspects of Franchisee's operations.

11.8.1    Franchisee and all those under Franchisee's control shall cooperate fully in such inspection by admitting Franchisor's representatives to Franchisee's Premises, Motor Vehicles, by allowing Franchisor's representatives to accompany Franchisee's representatives to customer meetings, by answering questions, by providing and explaining business records, by providing samples, and work space as reasonably requested, and by otherwise facilitating in good faith the proper completion of such inspection.

11.8.2   Franchisee shall include in any and all agreements with independent contractors terms and conditions sufficient to ensure cooperation by their respective employees, agents and independent contractors with such inspections by Franchisor.

11.9      Other Forms of Agreement. Franchisee understands, acknowledges and agrees that Franchisor may have offered franchises in the past, may currently be offering franchises and/or may offer franchises in the future on economic and/or other terms, conditions and provisions which may significantly differ from those offered by this Agreement and any related documents.

ARTICLE XII INSURANCE

12.1 Insurance. Prior to opening the Facility for business, Franchisee must obtain the following insurance coverage under policies of insurance issued by carriers approved by Franchisor: (1) comprehensive public liability insurance and comprehensive product liability insurance against claims

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for bodily and personal injury, death, director and officer liability, and property damage caused by or occurring in conjunction with the operation of the Facility or Franchisee's conduct of business pursuant to this Agreement under one (1) or more policies of insurance containing minimum liability coverage prescribed by Franchisor from time to time; (2) general casualty insurance including fire and extended coverage, vandalism, theft, burglary and malicious mischief insurance for the replacement value of the Facility and its contents; (3) Workers' Compensation or other employer's liability insurance as well as such other insurance as may be required by statute or rule in the state in which the Facility is located; (4) business interruption and rent insurance for a period adequate to reestablish normal business operations with coverage adequate to coincide with the value of the Facility Premises and its contents; (5) automobile liability coverage, including coverage of owned, non-owned and hired vehicles; and (6) comprehensive plate glass insurance, if applicable. Franchisee must maintain all required policies in force during the entire term of this Agreement and any renewals thereof. Franchisor may periodically increase or decrease the amounts of coverage required under these insurance policies and require different or additional kinds of insurance at any time, including excess liability insurance, to reflect inflation, identification of new risks, changes in law or standards of liability, higher damage awards, or other relevant changes in circumstances. Each insurance policy must name Franchisor (and, if Franchisor so requests, the directors, employees or shareholders of Franchisor) as additional insureds and must provide Franchisor with thirty (30) days' advance written notice of any material modification, cancellation, or expiration of the policy.

Before the expiration of the term of each insurance policy, Franchisee must furnish Franchisor with a Certificate of Insurance for each policy to be maintained for the upcoming term, along with evidence of the payment of the premium for each. If Franchisee does not maintain the required insurance coverage, or does not furnish Franchisor with satisfactory evidence of the required insurance coverage and the payment of the premiums for same, Franchisor may obtain, at its option and in addition to its other rights and remedies under this Agreement, any required insurance coverage on Franchisee's behalf. If Franchisor does that, Franchisee agrees to fully cooperate with Franchisor in its effort to obtain the insurance policies, promptly execute all forms or instruments required to obtain or maintain the insurance, allow any inspections of the Facility which are required to obtain or maintain the insurance and pay to Franchisor, on demand, any costs and premiums Franchisor incurs.

Franchisee's obligation to maintain insurance coverage, as described in this Agreement, will not be reduced in any manner by reason of any separate insurance Franchisor maintains on its own behalf, nor will Franchisor's maintenance of that insurance relieve Franchisee of any obligations under this Article XII.

ARTICLE XIII TERMINATION

13.1 Defaults with No Right to Cure. Franchisee's rights and Franchisor's obligations under this Agreement will automatically terminate on delivery or, in any event, on three (3) calendar days after mailing of notice of termination to Franchisee, without further action by Franchisor and without opportunity to cure, if:

(1)         Franchisee or any of its owners fails, in the time provided in, or otherwise in accordance with this Agreement to: (a) locate a site accepted by Franchisor; (b) obtain lawful possession of the Premises; (c) develop and open the Franchised Business; or (d) Franchisee or any of his/her Managers fails to successfully complete the initial training program;

(2)         Franchisee or any of its owners abandons or fails to operate the Franchised Business for three (3) consecutive days during which Franchisee is required to operate the

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business under the terms of this Agreement, or any shorter period after which it is not unreasonable under the facts and circumstances for Franchisor to conclude that Franchisee does not intend to continue to operate the business, unless such failure to operate is due to fire, flood, earthquake or similar causes beyond Franchisee's control, or surrenders or transfers control without Franchisor's prior written approval;

(3)         Franchisee or any of its owners has made any material misrepresentation or omission in its application for the Franchised Business, including, but not limited to, failure to disclose any prior litigation or criminal convictions (other than minor traffic offenses);

(4)         Franchisee or any of its owners is judged bankrupt, becomes insolvent, makes an assignment for the benefit of creditors, is unable to pay its debts as they become due, or a petition under any bankruptcy law is filed against Franchisee or any of its owners or a receiver or other custodian is appointed for a substantial part of the assets of the Franchised Business;

(5)        Franchisee or any of its owners is convicted by a trial court of or pleads no contest to a felony, or to any crime or offense that may adversely affect the reputation of the Franchisee or any owner or the Franchised Business or the goodwill associated with the Proprietary Marks or engages in any misconduct which unfavorably affects the reputation of the Franchisee or any owner of the Franchised Business, Franchisor or the goodwill associated with the Proprietary Marks (including, but not limited to, child abuse or other mistreatment, health or safety hazards, drug or alcohol problems, or allowing unlawful activities or unauthorized or illegal items to be used or distributed at the Premises or in connection with the Franchised Business);

(6)         Franchisee or any of the Franchisee's owners makes an unauthorized transfer as defined in this Agreement;

(7)         Franchisee or any of the Franchisee's owners makes any unauthorized use or disclosure of or duplicates any copy of any Confidential Information (including but not limited to Customer List), makes any unauthorized use of the Proprietary Marks, or uses, duplicates, or discloses any portion of the Confidential Operations Manual or Franchisee and/or any other person/entity violates any restriction on ownership, operation etc. of a Similar Business (as hereinafter defined);

(8)         Franchisee or any of the Franchisee's owners loses the right to possession of the Premises and does not relocate the Franchised Business to other premises in accordance with this Agreement;

(9)         Franchisee and/or any of Franchisee's owners (and/or any affiliate of Franchisee and/or any affiliate's owner) makes any knowing misrepresentation to Franchisor or any affiliate, including, but not limited to, any misrepresentation of Gross Revenue and/or any amounts due Franchisor and/or any affiliate and/or commits any other act or omission constituting fraud, misrepresentation or similar act or omission, whether with respect to Franchisor, any of the Franchisor-related entities and/or any third party (Franchisee agrees that any fraud, misrepresentation or similar act or omission by Franchisee, etc. is by its nature incurable, since it would adversely affect the goodwill associated with the Proprietary Marks and/or irrevocably damage the relationship between Franchisee and Franchisor);

(10)       Franchisee (and/or any of the Franchisee's owners and/or affiliate of Franchisee) engages in any legal action (including arbitration, but not including mediation) against Franchisor

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and/or any of the Franchisor-related persons/entities and does not receive a final judgment or award substantially in his/her favor on the merits;

(11)      Franchisee fails, for a period of ten (10) days after notification of noncompliance, to comply with any federal, state or local law or regulation applicable to the operation of the Franchised Business;

(12)       Franchisee violates any material law pertaining to the operation of the Franchised Business, whether or not Franchisee receives notice of non-compliance;

(13)       there are five (5) or more customer complaints with respect to Franchisee's Franchised Business in any twelve (12) month period, whether or not resolved; and/or

(14)       Franchisee has failed to retain (or otherwise fails to produce on request) any records required to be maintained by Franchisor's record retention policy or otherwise are required for Franchisor to confirm Franchisee's compliance with the provisions of this or any other agreement; and/or

(15)       Franchisee breaches the non-disclosure provision pertaining to this Agreement set forth in Section 10.2 and 10.3 hereof.

13.2 Defaults with Right to Cure. Franchisee's rights and Franchisor's obligations under this Agreement will automatically terminate on Franchisor's mailing of notice of termination to Franchisee, without further action by Franchisor and without further opportunity to cure beyond that set forth in this Section, if Franchisee, any of the Franchisee's owners or any affiliate of any of the foregoing:

13.2.1    Five (5) Day Cure. Fail to report accurately the Gross Revenue of the Franchised Business; or fail to submit, in fully accurate and complete form and when required, any other report due under this Agreement, any lease/sublease or otherwise; or fail to make payments of any amounts due Franchisor, any affiliate and/or any supplier/creditor of Franchisee; or use the System and the Proprietary Marks at or from a location other than from within the Exclusive Territory; or sell any product, including the Products and Services, and service customers from a location outside of the Exclusive Territory and do not correct such failure within five (5) calendar days after written notice is mailed to Franchisee;

13.2.2   Thirty (30) Day Cure. Cause or permit to exist any default under the lease or sublease for the Premises and fail to cure such default within the applicable cure period set forth in the lease or sublease; fail to attend any make-up session of a regional meeting; fail to remain current in Franchisee's obligations to taxing authorities, landlords, equipment lessors, suppliers or others; or fail to comply with any other provision of this Agreement, or any other agreement with Franchisor and/or any affiliate of Franchisor, or any specification, standard or operating procedure or rule prescribed by Franchisor (including reporting requirements); Franchisee( or its owners) fails to pay any federal or state income tax, sales or other taxes due on the operations of the Franchised Business, unless Franchisee is in good faith contesting its liability for such taxes or has made arrangements with the respective agency for settlement of claim and remains in compliance with same: Franchisee violates any health, safety, or sanitation law, ordinance, or regulation and does not initiate corrective measures after written notice is delivered to the Franchisee and complete such corrective measures within the time period specified by the agency involved; and, in any such case, do not: (a) correct such failure within thirty (30) calendar days after written notice of such failure to comply is mailed to Franchisee; or (b) if such failure cannot reasonably be corrected within such thirty (30) day period, undertake within thirty (30) calendar days after such written notice is mailed to Franchisee, and diligently continue until completion, efforts to bring the Franchised Business into full compliance and furnish, at Franchisor's request, proof acceptable to

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Franchisor of such efforts and the date full compliance will be achieved; provided that, in any event, such defaults must be fully cured within ninety (90) calendar days after such written notice is mailed to Franchisee.

13.3      Repeated Defaults. Franchisee's rights and Franchisor's obligations under this Agreement will terminate without further action by Franchisor, or notice to Franchisee, if Franchisee or any affiliate fails on two (2) or more separate occasions within any period of twelve (12) consecutive months, or on three (3) or more separate occasions within any period of twenty-four (24) consecutive months, to comply with any material provisions (whether the same or different) of this Agreement and/or the Confidential Operations Manual, whether or not such failures to comply are timely corrected.

If Franchisee (and/or any affiliate) have (a) defaulted, on two (2) or more separate occasions within any period of twelve (12) consecutive months, or on three (3) or more separate occasions within any period of twenty-four (24) consecutive months, in any obligation(s) (whether the same or different), whether or not such defaults are timely corrected, or (b) have committed any default, or have violated any material obligation to Franchisor and/or any of the Franchisor-related persons/entities, which is incurable, or (c) have committed any material default, or have violated any material obligation to Franchisor and/or any of the Franchisor-related persons/entities, which remains uncured after any applicable cure period, whether under this Agreement, any other agreement with Franchisor and/or any of its affiliates, the Confidential Operations Manual or otherwise, then Franchisor may cancel any and/or all of Franchisee's rights of first refusal, and/or any other territorial or similar rights, whether arising under this Agreement, any other agreement and/or otherwise.

13.4      No Equity on Termination, etc. Franchisee's ownership of the Franchised Business is controlled by the provisions of this Agreement and Franchisee will have no equity or other continuing interest in the Franchised Business, any goodwill associated with it or otherwise, or any right to compensation, return of amounts paid or otherwise, at the expiration and/or termination of the term of the Franchised Business.

13.5       Content and Delivery of Notice of Termination. Termination for any cause shall be accomplished by mailing or delivering written notice of termination to the Franchisee, which notice shall state the grounds thereof. Any such notice shall be delivered by registered or certified mail, sent by telegram or personally delivered to the Franchisee or left with a responsible person at Franchisee's place of business or at the home(s) of its owner(s). Termination shall be effective upon the Franchisee's receipt of such written notice, unless a later date is specified therein, in which event termination shall be effective on such later date. Any termination becomes effective at the close of business on the day on which it takes effect.

13.6      Judicial Termination. Anything in this Agreement to the contrary notwithstanding, if a court, arbitrator or court-appointed magistrate or referee having jurisdiction of the matter has entered its judgment or award that a party has good cause to cancel or terminate this Agreement, or may be relieved from its obligations hereunder, this Agreement shall be deemed terminated as of the date such judgment or award becomes final. Unless Franchisor has terminated this Agreement pursuant to one of the other provisions of this Article XIII, this Agreement shall remain in force during the pendency of any such proceeding and any appeals therefrom until such judgment has become final, and shall thereupon be terminated.

13.7      Injunctive Relief. Franchisee agrees that the Franchised Business is, or is likely to be, one of a large number of businesses similarly situated and selling to the public similar products and services, and that the failure on the part of Franchisee to comply with the terms of his/her Franchise Agreement could cause irreparable damage to Franchisor and/or to some or all other Franchisees.

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Therefore, it is agreed that in the event of a breach or threatened breach of any of the terms of this Agreement by Franchisee, Franchisor shall forthwith be entitled to an injunction restraining such breach, and/or to a decree of specific performance, as applicable, without having to show or prove any actual damage. This remedy shall be in addition to, and not in lieu of, all other remedies or rights which Franchisor might have by virtue of any breach of this Agreement by Franchisee.

13.8      Cross-Defaults, Non-Exclusive Remedies, etc. Cross-Defaults, Non-Exclusive Remedies, etc. Any default by Franchisee (or any person/Company affiliated with Franchisee) under this Agreement may be regarded as a default under any other agreement between Franchisor (or any affiliate of Franchisor) and Franchisee (or any affiliate of Franchisee). Any default by Franchisee (or any person/Company affiliated with Franchisee) under any other agreement, including, but not limited to, any lease and/or sublease, between Franchisor (or any affiliate of Franchisor) and Franchisee (or any person/Company affiliated with Franchisee), and any default by Franchisee (or any person/Company affiliated with Franchisee) under any obligation to Franchisor (or any affiliate of Franchisor) may be regarded as a default under this Agreement. Any default by Franchisee (or any person/Company affiliated with Franchisee) under any lease, sublease, loan agreement, security interest or otherwise, whether with Franchisor, any affiliate of Franchisor and/or any third party may be regarded as a default under this Agreement and/or any other agreement between Franchisor (or any affiliate of Franchisor) and Franchisee (or any affiliate of Franchisee).

In each of the foregoing cases, Franchisor (and any affiliate of Franchisor) will have all remedies allowed at law, including termination of Franchisee's rights (and/or those of any person/Company affiliated with Franchisee) and Franchisor's (and/or Franchisor's affiliates') obligations. No right or remedy which Franchisor may have (including termination) is exclusive of any other right or remedy provided under law or equity and Franchisor may pursue any rights and/or remedies available.

13.9      Setoffs, etc. Franchisee waives any and all existing and future claims and setoffs against any amounts due hereunder, which amounts shall be paid when due regardless of any other claims which Franchisee may have against Franchisor. However, Franchisor shall be entitled to apply or cause to be applied against amounts due to it or its affiliates any amounts which may from time to time be held by Franchisor or its affiliates on Franchisee's behalf or be owed to Franchisee by Franchisor or its affiliates. Notwithstanding any designation by Franchisee, Franchisor (and/or any affiliate) will have sole and absolute discretion to apply any payments received from Franchisee, whether designated as payable to Franchisor, the Fund or otherwise, to any past due or other indebtedness of Franchisee (or any affiliate of Franchisee) for Continuing Service Fees, advertising contributions, purchases, interest or otherwise. Franchisor (and/or any affiliate) may set off from any amounts that may be owed to Franchisee (or any affiliate of Franchisee) any amount that Franchisee owes to Franchisor (and/or any affiliate) or with respect to any advertising contribution. In particular, Franchisor may retain any amounts it has received for Franchisee's account (whether rebates or other funds and whether paid by or due from suppliers or otherwise) as a credit and payment against any amounts that Franchisee (or any affiliate of Franchisee) owes or will owe to Franchisor (or any affiliate) or with respect to any advertising contribution. Franchisor may do so without notice at any time. However, Franchisee does not have the right to offset or withhold payments owed to Franchisor (and/or any affiliate) for amounts purportedly due Franchisee (or any affiliate of Franchisee) from Franchisor and/or any affiliate. Franchisor may condition Franchisee's participation in any program (including, but not limited to, any program involving payments from third party suppliers or otherwise) as Franchisor determines in its sole and absolute discretion, including, but not limited to, Franchisee being a Coffee Perks Franchisee in good standing and not in default under this or any other agreement with Franchisor or any affiliated entity.

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ARTICLE XIV THE FRANCHISEE'S RIGHTS AND OBLIGATIONS UPON TERMINATION OR

EXPIRATION

14.1       Payment of Amounts Owed to the Franchisor and Other Creditors. The Franchisee agrees to pay, within seven (7) days of the effective date of termination or expiration of this Agreement, all amounts owed to the Franchisor and any Franchisor affiliated with the Franchisor and the Franchisee's trade and other creditors which are then unpaid. All periodic payments shall be deemed to accrue daily and shall be adjusted accordingly.

14.2      Return of Manuals and Retention of Records. The Franchisee agrees that, within five (5) days of the effective date of termination, non-renewal or expiration of this Agreement for any reason, he/she will immediately return to the Franchisor all copies of the Confidential Operations Manual and all lists of customers, prospect and leads of the Facility, vendor information and materials and all promotional or other materials of a proprietary nature or which bear any of the Proprietary Marks. The Franchisee shall retain all business records for at least three (3) years following the expiration of termination of this Agreement, and shall keep the Franchisor advised of the location of such records.

14.3       Cancellation of Assumed Names/Transfer of Phone Numbers. The Franchisee agrees, upon termination, non-renewal or expiration of this Agreement for any reason, to take such action as may be required to cancel all registrations relating to the use of any of the Proprietary Marks, including, but not limited to, any electronic address, domain name, search engine or Website that associates Franchisee with Franchisor, cancel or assign memberships in any designated trade associations, the Facility or the Proprietary Marks (if Franchisor allowed Franchisee to establish same), and will not directly or indirectly at any time or in any manner identify any premises or any business as a franchise, or himself or herself as a Franchisee, of the Franchisor; and the Franchisee shall not, in any manner or for any purpose, use any of the Proprietary Marks or any colorable imitation thereof. The Franchisee shall notify the telephone company and all listing agencies of the termination or expiration of the Franchisee's right to use any telephone number and any classified or other telephone directory listings associated with such names and to authorize the transfer of same to the Franchisor or its new Franchisee. The Franchisee acknowledges that, as between the Franchisor and Franchisee, the Franchisor has the sole rights to and interest in all telephone numbers and directory listings associated with the Proprietary Marks. The Franchisee will provide the Franchisor, on execution, with an undated assignment of the telephone number to the Franchisor, in the form annexed hereto as Exhibit "C".

14.4      Signs and Appearance of the Franchisee's Facility. In the event that the Franchisee maintains possession of the Premises subsequent to the termination or expiration of this Agreement, the Franchisee agrees to immediately, upon request from the Franchisor, make such alterations and removals or changes in signs and colors as the Franchisor may reasonably request so as to distinguish effectively the Premises from its former appearance and from the then-prevailing Facility image.

14.5       Continuing Obligations. All obligations of the parties hereto which expressly or by their nature survive the expiration or termination of this Agreement shall continue in full force and effect, notwithstanding such expiration or termination. In particular, but without limiting the generality of the foregoing, the provisions of Articles IX, X, XIII and XV hereof shall survive termination or expiration of this Agreement.

14.6      Termination of Lease. Breach of this Agreement by the Franchisee shall constitute a breach of Franchisee's Facility's lease; a breach of the lease shall constitute a breach of this Agreement. All payments required to be made by the Franchisee hereunder to the Franchisor shall be deemed to be additional rent pursuant to the lease. In the event that this Agreement expires or is terminated for any

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reason whatsoever by either party, the Franchisee shall immediately upon such expiration or termination, if requested by the Franchisor, vacate the Premises and deliver up possession to the landlord, subject to the terms of the Option for Assignment of Lease attached hereto as Exhibit "B". Termination of this Agreement shall, at the Franchisor's option, be deemed to be termination of the lease. The Franchisee shall leave the Premises in a clean, tidy condition, free of debris, and shall remove therefrom only his/her own personal property. The Franchisee acknowledges that upon such termination, all leasehold improvements and fixtures on the Premises shall become the Franchisor's property, without compensation to the Franchisee.

14.7      Franchisor's Right to Repurchase. Upon expiration, non-renewal or termination of this Agreement, Franchisor shall have the option, exercisable by written notice to Franchisee within thirty (30) days after expiration, non-renewal or termination of this Agreement, to purchase from Franchisee for cash all tangible assets of the Facility, including real property. Franchisor will also be entitled to an assignment of Franchisee's lease for the Premises of the Facility or, if an assignment is prohibited, a sublease for the full remaining term of the lease and on the same terms and conditions as Franchisee's lease. The purchase price for said assets shall be an amount agreed upon by Franchisee and Franchisor. In the event Franchisee and Franchisor cannot agree on a purchase price within a reasonable time, the purchase price shall be determined by an independent appraiser selected as follows: Franchisor and Franchisee shall each select one (1) appraiser and those two (2) appraisers shall select a third appraiser who shall determine the purchase price. The decision of the third appraiser shall be binding on all parties. Franchisor and Franchisee shall each pay the cost of their respective appraisers, and the cost of the third appraiser shall be divided equally between Franchisor and Franchisee. In determining the purchase price, no value shall be included for intangibles, goodwill or going concern value.

The closing of Franchisor's purchase of the assets (the "Closing") shall occur at a time and place designated by Franchisor, but in no event later than sixty (60) days after determination of the purchase price. The purchase price shall be paid in a manner and in terms determined by the Franchisor. Franchisor shall have the right to offset against and reduce the amount of the first installment of the purchase price, and defer said installment, if necessary, by any and all amounts owed by Franchisee to Franchisor or any of its affiliates. If Franchisee is unable to deliver clear title to all the purchased assets or if there are other unresolved issues, the Closing will be accomplished through an escrow.

If Franchisor exercises the repurchase option set forth herein, Franchisor shall have the right, to immediately appoint a manger to maintain the operation of the Facility in order to maintain continuity. Alternatively, Franchisor may require Franchisee to close the Facility during such time period without removing any assets other than perishable products. Franchisor has an unrestricted right to assign the option to repurchase set forth herein.

14.8      Liquidated Damages. Upon termination of this Agreement according to its terms and conditions, as a result of a material breach of this Agreement by Franchisee, Franchisee agrees to pay to Franchisor within fifteen (15) days after the effective date of this Agreement's termination, in addition to the amounts owed hereunder, liquidated damages equal to the present value (using the then-current 30-Year Treasury Bond rate) of the Continuing Service Fees Franchisee would have paid on the product of (a) the Facility's average monthly Gross Revenue during the twelve (12) months of operation preceding the effective date of termination multiplied by (b) the number of months remaining in the Agreement had it not been terminated.

The parties hereto acknowledge and agree that it would be impracticable to determine precisely the damages Franchisor would incur from this Agreement's termination and the loss of cash flow from Continuing Service Fees due to, among other things, the complications of determining what costs, if any, Franchisor might have saved and how much the Continuing Service Fees would have grown over what

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would have been this Agreement's remaining term. The parties hereto consider this liquidated damages provision to be a reasonable, good faith pre-estimate of those damages.

The liquidated damages provision only covers Franchisor's damages from the loss of cash flow from the Continuing Service Fees. It does not cover any other damages, including damages to its reputation with the public and landlords and damages arising from a violation of any provision of this Agreement other than the Continuing Service Fee section. Franchisee and each of its owners agree that the liquidated damages provision does not give Franchisor an adequate remedy at law for any default under, or for the enforcement of, any provision of this Agreement other than the Continuing Service Fee section.

ARTICLE XV NON-COMPETITION

15.1       Non-Competition During Agreement. During the term of this Agreement, the Franchisee shall not individually or in conjunction with any person, firm, partnership, corporation or other third party as principal, agent, shareholder, director, officer, employee, consultant or guarantor or in any other manner whatsoever, directly or indirectly, carry on or be engaged in or concerned with or interested in, financially or otherwise, or advise in the establishment or operation of, any Competitive Business.

15.2      Non-Competition Following Termination, Expiration or Transfer. In the event of the expiration, non-renewal or termination of this Agreement for any reason whatsoever, or in the event this Agreement is transferred pursuant to Section 16.2, 16.5 or 16.8 hereof, the Franchisee (or, in the case of a Transfer among the individuals comprising the Franchisee pursuant to Section 16.5, the Transferor individual(s)) shall not, without the prior written consent of the Franchisor, at any time during the period of two (2) years from the date of such expiration or termination or transfer, either individually or in conjunction with any person, firm, partnership or corporation or other third party as principal, agent, shareholder, director, officer, employee, consultant, guarantor or in any other manner whatsoever, directly or indirectly, carry on, be engaged in or be concerned with or interested in, financially or otherwise, or advise in the operation of, within a radius in any direction of fifty (50) miles of the state in which the Franchised Business is located or within a radius in any direction of fifty (50) miles of any other Facility as of the date of this Agreement, any Competitive Business.

15.3       Interference with Employment Relations. During the term of this Agreement and for a period of two (2) years after the termination or expiration of this Agreement for any reason whatsoever, or the transfer of this Agreement pursuant to Section 16.2, 16.5 or 16.8 hereof, the Franchisee (or, in the case of a Transfer among the individuals comprising the Franchisee pursuant to Section 16.5, the Transferor individual(s)) shall not solicit for employment any person who is, at the time of such solicitation, employed by the Franchisor or by any other Franchisee of the Franchisor, nor shall the Franchisee directly or indirectly induce any such person to leave his or her employment.

15.4      Amendment of Restrictive Covenants. The Franchisee acknowledges that the provisions of this Article XV have been inserted for the sole benefit of the Franchisor and that the Franchisor shall have the right, from time to time during the term of this Agreement in its sole discretion, to waive in whole or in part or otherwise reduce the scope of any covenant set forth in this Article XV or any portion thereof without the Franchisee's consent, effective upon the Franchisor giving notice thereof to the Franchisee.

15.5       Other Covenants. The Franchisee covenants that after termination, non-renewal or expiration of this Agreement, regardless of the cause of termination or expiration, the Franchisee shall not, without the Franchisor's prior written consent, directly or indirectly:

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(a)         adopt, use, employ or trade under any of the Proprietary Marks, nor adopt, use, employ or trade under any other name, mark or symbol that constitutes a reproduction, counterfeit, copy, imitation or variation thereof, or which is confusingly similar thereto;

(b)         adopt, use, employ or trade under any description or representation that falsely suggests or indicates a connection or association with the Franchisor;

(c)         copy, communicate or otherwise use for the benefit of the Franchisee or of any other person any information deemed confidential pursuant to Article X hereof; or

(d)         contest or aid others in contesting the validity or enforceability of the Proprietary Marks or the System, contrary to Article IX hereof.

15.6 Power of Attorney. The Franchisee hereby irrevocably appoints the Secretary of the Franchisor as the Franchisee's true and lawful attorney to take any action, execute any document, or do any other act or things required by Articles IX and XIY hereof at the Franchisee's sole risk and expense upon the Franchisee's failure or refusal to comply fully therewith within ten (10) days after termination, non-renewal or expiration of this Agreement; and the Franchisee further consents and agrees that the Franchisor or its designated agents shall have the right to enter the Facility at any time, at the Franchisee's sole risk and expense and without liability for trespass, tort or other act, to make any alterations thereto required by Section 14.4 hereof upon the Franchisee's failure or refusal to do so within ten (10) days after the termination, non-renewal or expiration of this Agreement, and the Franchisee hereby covenants and agrees for its successors and assigns to allow, ratify and confirm whatever the Secretary of the Franchisor shall do by virtue of the foregoing power of attorney. The Franchisee hereby declares that the powers of attorney herein granted may be exercised during any subsequent legal incapacity on his/her part.

ARTICLE XVI ASSIGNMENT, TRANSFER AND SALE

16.1 By Franchisor. Franchisor shall have the right, without the need for Franchisee's consent, to assign, transfer or sell its rights under this Agreement to any person, partnership, corporation or other legal entity provided that the transferee agrees in writing to assume all obligations undertaken by Franchisor herein and Franchisee receives a statement from both Franchisor and its transferee to that effect. Upon such assignment and assumption, Franchisor shall be under no further obligation hereunder, except for accrued liabilities, if any. Franchisee further agrees and affirms that Franchisor may go public; may engage in a private placement of some or all of its securities; may merge, acquire other corporations, or be acquired by another corporation; and/or may undertake a refinancing, recapitalization, leveraged buyout or other economic or financial restructuring. With regard to any of the above sales, assignments and dispositions, Franchisee expressly and specifically waives any claims, demands or damages arising from or related to the loss of Franchisor's name, Proprietary Marks (or any variation thereof) and System and/or the loss of association with or identification of Coffee Perks Franchise, Inc. as Franchisor under this Agreement. Franchisee specifically waives any and all other claims, demands or damages arising from or related to the foregoing merger, acquisition and other business combination activities including, without limitation, any claim of divided loyalty, breach of fiduciary duty, fraud, breach of contract or breach of the implied covenant of good faith and fair dealing.

Franchisee agrees that Franchisor has the right, now or in the future, to sell to, to purchase, merge, acquire or affiliate with an existing competitive or non-competitive franchise network, chain or any other business, regardless of the location of that chain's or business' facilities, and to operate, franchise or license those businesses and/or facilities as "Coffee Perks" Facilities operating under the

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Proprietary Marks or any other marks following Franchisor's purchase, merger, acquisition or affiliation, regardless of the location of these facilities, which Franchisee acknowledges may be within his/her Exclusive Territory, proximate thereto or proximate to any of Franchisee's locations.

If Franchisor assigns its rights in this Agreement, nothing herein shall be deemed to require Franchisor to remain in the coffee servicing equipment and maintenance business or to offer or sell any products or services to Franchisee.

16.2 By Franchisee. The Franchisee shall not, in whole or in part, voluntarily or involuntarily, directly or indirectly, pledge, encumber, mortgage, assign, subdivide, subfranchise or otherwise transfer any interest in this Agreement, or any interest in the Facility or the franchise granted hereunder (including, without limitation, by the personal representatives of the Franchisee in the event of the death of the non-corporate Franchisee, by will, declaration of, or transfer in, trust or the laws of intestate succession), or any interest in the Franchisee or in any proprietorship, partnership or corporation which owns any interest in this Agreement or in the Facility or the franchise granted hereunder or in the Franchisee, nor offer, permit or suffer the same without the prior written approval of the Franchisor. Approval shall be subject to compliance with each of the following conditions either before or concurrently with the effective date of the transfer:

(a)         the Franchisee being then in full compliance herewith and settling and paying to the Franchisor or its affiliates and all trade creditors of the Facility all outstanding debts;

(b)         the transferee executing the Franchisor's then-current "Coffee Perks" franchise agreement and lease of the Facility (which shall have a term equal to the remainder of the term hereof) and such other ancillary agreements, instruments and documents then customarily used by the Franchisor to grant Facility franchises;

(c)         the Franchisee and its officers, directors and shareholders, if a corporation, executing a general release of the Franchisor, its officers, directors and employees releasing all claims against Franchisor, its officers, directors and employees ;

(d)         the transferee purchasing all of the Franchisee's assets used in the business of the Facility in accordance with all applicable bulk sales legislation and assuming all of the Franchisee's business liabilities;

(e)         the transferee being an individual having adequate financial resources and otherwise meeting all the criteria for "Coffee Perks" Franchisees,;

(f)         the transferee remitting to the Franchisor a transfer fee equal to Five Thousand Dollars ($5,000) for the administration of such transfer and the preparation, execution and filing of all documentation required by the Franchisor in connection with such transfer;

(g)         the Franchisee and transferee entering into a written agreement of purchase and sale, the form and material terms and conditions which shall be subject to the Franchisor's reasonable approval;

(h) neither the transferee nor its owners or affiliates operate or have any ownership interest in a business that sells the Products and Services or which in any way competes with a "Coffee Perks" Facility;

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(l)        Franchisor determines that the purchase price and payment terms will not

adversely affect the transferee's operation of the Facility;

(j)         if Franchisee finances any portion of the purchase price, Franchisee and/or its

owners agree that all of the transferee's obligations under promissory notes, agreements or security interests reserved in the Facility are subordinate to the transferee's obligation to pay Continuing Service Fees, Advertising Fees and Cooperative contributions, and other amounts due to Franchisor, its affiliates and third party vendors and otherwise to comply with this Agreement;

(k) Franchisee or its transferring owners (and their spouses) will not, for two (2) years beginning on the transfer's effective date, engage in any of the activities prescribed in Article XV hereof; and

(1)        Franchisee and its transferring owners will not directly or indirectly at any time

or in any manner (except with respect to other Facilities they own and operate) identify themselves or any business as a current or former "Coffee Perks" Facility or as one of Franchisor's Franchisees; use any Proprietary Mark, any colorable imitation of a Proprietary Mark, or other indicia of a "Coffee Perks" Facility in any manner or for any purpose; or utilize for any purpose any trade name, trade or service mark, or other commercial symbol that suggests or indicates a connection or association with Franchisor.

16.3      Effect of Consent to Transfer. Franchisor's consent to a transfer of this Agreement and the Facility or any interest in Franchisee is not a representation of the fairness of the terms of any contract between Franchisee and the transferee, a guarantee of the Facility's or transferee's prospects of success, or a waiver of any claims Franchisor has against Franchisee (or its owners) or of Franchisor's right to demand the transferee's full compliance with this Agreement's terms and conditions.

16.4      Assignment to Corporation. Notwithstanding Section 16.2, after obtaining the written consent of the Franchisor, the franchise granted hereunder may, subject to Section 17.1, be assigned by the Franchisee without charge, once only, to a newly formed corporation which shall conduct no business other than the Franchised Business granted hereunder, which is actively managed by the Franchisee and in which the Franchisee at all times owns and controls one hundred (100%) of the equity and voting rights and interests therein. The Franchisee and such corporation shall execute both Schedule "C" and Exhibit "D" attached hereto.

In the event of such an assignment by the Franchisee of the Franchise Business granted hereunder to a corporation which the Franchisee controls, the Franchisee agrees, as a condition of being permitted to make such assignment, to cause the corporation and its directors and shareholders to acknowledge this Agreement and to agree in writing to be bound by the provisions hereof, cause the corporation in its Articles of Incorporation to provide in effect that its object or business is confined exclusively to the operation of a "Coffee Perks" Facility as provided in this Agreement, and cause the corporation to restrict the issue of, and its directors and shareholders to restrict the transfer of, shares of the corporation so that the Franchisee shall continuously own greater than fifty percent (50%) of the equity and voting rights and interests in such corporation.

16.5      Transfer Among Franchisees. In the event that the Franchisee comprises two (2) or more individuals, the Franchisor shall not unreasonably withhold its consent to a sale, assignment or transfer of any kind (a "Transfer") of the interest of one (1) such individual (the "Transferor") in the franchise hereunder to the other individual or individuals comprising the Franchisee, if but only if:

(a) the Transferor transfers the whole of such interest in this Agreement and the lease and all other agreements relating to the franchise hereunder;

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(b)         the Transfer shall not relieve the Transferor of the Transferor's obligations hereunder to the Franchisor;

(c)         the Transfer shall be completed in accordance with all applicable bulk sales legislation;

(d)         the Transferor shall have given the Franchisor at least thirty (30) days' prior written notice of the proposed Transfer, together with all reasonable details thereof which the Franchisor may demand;

(e)         the Transferor and the remaining individual(s) with an interest in the Franchisee execute such documents as may be required by the Franchisor in connection with such Transfer; and

(f)         the remaining individual(s) with an interest in the Franchisee is (are), in the opinion of the Franchisor, capable of operating the business associated with the Facility without the Transferor.

16.6      Franchisor's Right of First Refusal. If the Franchisee shall at any time decide to sell the Franchised Business or the ownership interest therein, the Franchisee shall obtain a bona fide, executed written offer to purchase the Facility, together with all real or personal property, leasehold improvements and other assets used by the Franchisee in connection with the Facility, from a responsible and fully disclosed purchaser and shall submit an exact copy of such offer to the Franchisor. The Franchisor shall, for a period of thirty (30) days from the date of delivery of such offer, have the right, but not the obligation, exercisable by written notice to the Franchisee, to purchase all of the Facility and the said assets of the Franchisee for the price and on the terms and conditions contained in such offer, provided that the Franchisor may substitute cash for any form of payment proposed in such offer and there shall be deducted from the purchase price the amount of any commission or fee that would otherwise have been payable to any broker, agent or other intermediary in connection with such sale. During said thirty (30) day period, Franchisor shall have the right to inspect all of Franchisee's books and records relating to the Facility's operation, specifically including all financial records and statements for the three (3) full fiscal years preceding the date on which the thirty (30) day right of first refusal commences, and if Franchisee is a corporation, all corporate minute books and transfer records. If the Franchisor does not exercise its right of first refusal, the Franchisee may complete the sale of the Facility to such purchaser on the same terms offered to the Franchisor subject to the provisions of Section 16.2 hereof. If the sale to such purchaser is not completed within sixty (60) days after delivery of such offer to the Franchisor, the Franchisor shall again have the right of first refusal herein provided.

16.7      Temporary Operation of Business by Franchisor. For the purposes of this Section 16.7, "Franchisee" shall include the controlling shareholder of a corporate Franchisee. In the event that the Franchisee:

(a)         fails to keep the Franchised Business operating during the hours required by the Franchisor (whether pursuant to the Confidential Operations Manual or otherwise);

(b)         is absent from the Facility for more than three (3) consecutive days or for more than thirty (30) days in any consecutive ninety (90) day period, or abandons the Premises; or

(c)         dies or becomes incapacitated and the Franchisee's heirs or personal representatives have not yet, or do not, assume control of the business of the Facility by means of an assignment (with the Franchisor's approval) pursuant to Sections 16.2 and 16.8 hereof, then, unless and

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until the Franchisor terminates this Agreement pursuant to Article XIII or Section 16.8 hereof, the Franchisor shall be entitled to enter onto the Premises and to operate and manage the business associated with the Facility for the Franchisee's (or the Franchisee's estate) account until the franchise hereunder is terminated, assigned to a party acceptable to the Franchisor or until the Franchisee resumes control over the business associated with the Facility and operates it in accordance herewith; provided, however, that no such operation and management by the Franchisor shall continue for more than ninety (90) days without the written consent of the Franchisee or the Franchisee's personal representatives or the representatives of the Franchisee's estate. In the event that the Franchisor so operates the business associated with the Facility, it shall account to the Franchisee (or the Franchisee's estate) for all net income from such operation, less its reasonable expenses incurred in, and a reasonable management fee not to exceed five (5%) percent for, its operation of the Facility.

16.8 Death or Incapacity. For the purposes of this Section 16.8, "Franchisee" shall include the controlling shareholder of a corporate Franchisee. If the Franchisee dies or becomes incapacitated (which shall be deemed to include, in the reasonable opinion of the Franchisor, the inability of the Franchisee, by reason of physical or mental illness or disability, to operate the business of the Facility in the ordinary course for a period of thirty (30) days or more in any consecutive ninety (90) day period) so that he/she (or, in the case of his/her incapacity only, the Manager(s)) is not able to devote full time and attention to the operation of the business of the Facility, then the rights granted hereunder may be transferred to the heirs or personal representatives of the Franchisee, if the Franchisor's prior written consent is obtained, within twelve (12) months from the beginning of the disability or from the date of death. In no event will the Franchisor be willing to provide its consent to such transfer unless the conditions set forth in Section 16.2 hereof (save and except the requirement to pay the Franchisor's then-current transfer fee) are satisfied. In the event that such conditions (save and except the requirement to pay the Franchisor's then-current transfer fee) are not satisfied, the Franchisor shall have the right in its sole discretion to terminate this Agreement by notice, in the case of death, to the estate of the Franchisee and, in the case of incapacity of the Franchisee, to the Franchisee.

ARTICLE XVII PARTNERSHIP AND CORPORATE FRANCHISEE

17.1 Partnership and Corporate Franchisee. If the Franchisee or any successor thereof is a partnership or corporation, or if the franchise granted hereunder is assigned to a partnership or corporation pursuant to Article XVI hereof:

(a)         upon the execution of this Agreement (or, in the case of an assignment, upon such assignment) and subject to the provisions of Article XVI hereof, upon each transfer of an interest in this Agreement or in the Franchisee, all holders of an interest in the Franchisee shall execute a written agreement with the Franchisor in the form required by the Franchisor individually undertaking to be bound, jointly and severally, by all of the terms of this Agreement;

(b)        the articles of partnership, partnership agreement, articles of incorporation, bylaws and other organization documents shall recite that the issuance and transfer of any interest therein is restricted by the terms of Article XVI of this Agreement and copies thereof shall be furnished to the Franchisor at Franchisor's request. The Franchisee shall also submit to the Franchisor, at any time upon request, a list of all directors, officers and partners or beneficial shareholders reflecting their respective interests in the Franchisee and other information regarding the Franchisee, in such form as the Franchisor may require; and

(c)         the Franchisee, if it is a corporation, shall maintain stop transfer instructions against the transfer on its records of any securities with voting rights subject to the restrictions of Article

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XVI hereof and shall issue no such securities, nor permit any issued securities to remain outstanding, upon the face of which the following printed legend does not legibly and conspicuously appear: "The transfer of the shares represented by this certificate is subject to the terms and conditions of a Franchise Agreement with Coffee Perks Franchise, Inc., dated________________."

ARTICLE XVIII TAXES, PERMITS AND INDEBTEDNESS

18.1       Responsibility for Taxes. The Franchisee shall be solely responsible for all expenses of the business franchised by this Agreement and shall promptly pay when due all taxes levied or assessed and all indebtedness to the Franchisor or to others incurred by the Franchisee in connection with the conduct of such business. The Franchisor and it affiliates shall have no liability for any sales, use, service occupation, excise, gross receipts, income, property, payroll or other taxes, whether levied upon the Franchisee, the Franchised Business, the Franchisee's property, or the Franchisor and it affiliates, in connection with the sales made or business conducted during the operation by the Franchisee (except any taxes the Franchisor and its affiliates are required by law to collect from the Franchisee with respect to purchases made from the Franchisor or such affiliates). Payment of all such taxes shall be the Franchisee's sole responsibility.

18.2      Compliance with Laws. The Franchisee shall comply with all federal, provincial and local by-laws, rules and regulations, and shall timely obtain any and all permits, certificates or licenses necessary for the full and proper conduct of the business licensed by this Agreement, including, without limitation, licenses to do business, name registrations and sales tax permits.

18.3       Notice of Litigation. The Franchisee shall notify the Franchisor in writing within five (5) days of the commencement of any action, suit or proceeding and of the issuance of any order, writ, injunction, award or decree of any court, agency or other government instrumentality which may adversely affect the operation or financial condition of the business associated with the Facility.

ARTICLE XIX DISCOUNTS

19.1 Discounts to Franchisor. In the event that any volume discounts, rebates, allowances, or other similar discounts are received by the Franchisor from any manufacturer or other supplier designated by the Franchisor on account of purchases made by the Franchisor or its affiliates for its account or for the account of the Franchisee, or by the Franchisee directly for his/her own account, the Franchisor shall have the option of remitting same to the Fund or retain the full amount of the said volume discounts, rebates, allowances, or other similar discounts.

ARTICLE XX CUSTOMER RELATIONS

20.1       Limitation on Services Offered. Franchisee shall not offer any services of any kind at the Premises, from the Motor Vehicles or in any other way associated or connected with the Proprietary Marks, except those services authorized by this Agreement, the Confidential Operations Manual and any other written consent which Franchisor may from time to time authorize.

20.2      Quality of Service. In order to protect the reputation of the Franchisor and the Franchised Business and increase consumer confidence in the Proprietary Marks and the System, Franchisee agrees to service all of its customers in a timely and workmanlike manner, for the agreed

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charges and in compliance with all applicable laws and regulations. Franchisee shall also observe all required safety standards in the course of performing services.

20.3       Customer's Premises. To maintain and enhance the reputation of Franchisee's own business and that of the Coffee Perks business, Franchisee shall leave each customer's premises in a condition equal to or better than that in which he/she finds them.

20.4      Employment and Retainer Agreements. Franchisee shall cause each agreement for employing or retaining either employees or independent contractors to contain provisions which require all employees and/or independent contractors to comply with all the foregoing provisions of Article XX hereof. Franchisee shall in any event be responsible for full compliance by his/her employees and independent contractors and their own employees and independent contractors with the provisions of Article XX hereof.

20.5      Complaints. Franchisee shall respond promptly and in good faith to any complaints raised by his/her customers. Franchisee shall perform corrective work promptly, courteously and in a workmanlike manner. No later than twenty-four (24) hours following Franchisee's receipt of any customer complaint, Franchisee shall provide to Franchisor a complaints report listing the name, addresses, and telephone numbers of any customers who have made a complaint, a brief description of the complaint, and corrective work which has been or will be completed.

20.5.1    Franchisor may make such investigation of the matter as it deems appropriate, including inspection of the job site and conferences with the complaining customer. If Franchisor determines Franchisee has failed to comply with the terms and conditions of this Agreement in performing work for such customer, Franchisor may, in its sole and absolute discretion, so notify both Franchisee and Franchisee's customer. If Franchisee does not promptly complete all work necessary to comply with this Agreement, Franchisor may, but shall not be required to, complete such work itself, utilizing monies from the Fund.

20.5.2   Franchisee hereby agrees to indemnify Franchisor and/or its affiliates and/or the Fund from any and all costs, damages, losses, legal fees, and any other expenses which Franchisor and/or its affiliates and/or the Fund may incur in completing such work, and further agrees to reimburse Franchisor and/or its affiliates and/or the Fund for all funds advanced for such purpose, with interest at the rate provided by Section 25.13 hereof. Franchisee's obligations under this subsection 20.6.2 shall survive expiration or termination of this Agreement.

20.5.3   Franchisor's performance of such corrective work shall under no circumstances be deemed a waiver of its right to declare a default under this Agreement, and to terminate this Agreement for Franchisee's default if not timely cured.

20.7 Legal Actions. Franchisee shall notify Franchisor promptly, in writing, of any civil action or any administrative proceeding or criminal prosecution commenced against Franchisee and/or its owners in any way arising out of or in connection with the operation of the Franchised Business.

ARTICLE XXI RELATIONSHIP AND INDEMNIFICATION

21.1 Independent Parties. The Franchisee is and will at all times remain an independent contractor and is not and shall not represent himself/herself to be the agent, joint venturer, partner or employee of the Franchisor, or to be related to the Franchisor other than as its independent Franchisee. No representations will be made or acts taken by the Franchisee which could establish any apparent

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relationship of agency, joint venture, partnership or employment, and the Franchisor shall not be bound in any manner whatsoever by any agreements, warranties or representations made by the Franchisee to any other person, nor with respect to any other action of the Franchisee. The Franchisee shall not establish any bank account, make any purchase, apply for a loan or credit, or incur or permit any obligation to be incurred in the name or on the credit of the Franchisor.

21.2      Non-Liability. The Franchisor shall not be obligated or liable for any injury or death to any person, or damage to or loss of any property caused by the Franchisee's action, failure to act, negligence, breach of this Agreement or willful misconduct, nor for any liability of the Franchisee.

21.3      Indemnification by the Franchisor. The Franchisor shall, during the term of this Agreement only, indemnify the Franchisee and hold him or her harmless from and against all damages, losses, claims, expenses and costs (including his/her attorney and customer costs, travel, investigation and living expenses and witness fees) for which he/she is held liable or which he/she incurs in the defense of any litigation commenced against him/her as a direct result of his/her proper use of the Proprietary Marks in accordance herewith, provided that he/she has timely notified the Franchisor of such litigation or threatened litigation. The Franchisor shall have the right to participate in and to control such litigation or proceeding (including the right to compromise or settle such litigation or proceeding) to the extent that the Franchisor deems necessary or advisable, and the Franchisee shall fully cooperate with the Franchisor and execute such documents and do such acts and things as, in the opinion of the Franchisor, may be necessary.

21.4      Indemnification by the Franchisee. The Franchisee shall, during the term of this Agreement and after the termination or expiration of this Agreement and in addition to his/her obligations contained in Article XIV hereof, indemnify the Franchisor and its officers, directors and employees, and hold them harmless from and against all damages, losses, claims, actions, liability, expenses and costs for which they are held liable or which they incur (including solicitor and customer costs, travel, investigation and living expenses of employees and witness fees) in any litigation or proceeding as a result of or arising out of:

(a)         a breach of this Agreement, or any other lease, agreement or contract to which the Franchisor and Franchisee are parties, by the Franchisee;

(b)         any injury to, or loss of property of, any person in or on the Premises or on any job site;

(c)         the Franchisee's taxes, liabilities, costs or expenses of his/her business;

(d)         losses, claims or damages incurred by persons, other than the Franchisee, due to errors or omissions contained in financial statements prepared by the Franchisee pursuant to Section 4.8 hereof, even if caused by the negligence of the Franchisee, its employees, agents, contractors, or others for whom it is, in law, responsible;

(e)         any negligent or willful act or omission of the Franchisee, improper product and food handling, any equipment failure, vehicular accidents, labor or employment issues or claims, age or sex discrimination, his/her employees, agents, servants, contractors or others for whom he/she is, in law, responsible; and

(f)         any advertising or promotional material distributed, broadcast or in any way disseminated by the Franchisee or on his/her behalf, unless such material has been produced or approved in writing by the Franchisor.

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ARTICLE XXII SECURITY INTERESTS

DEPARTMENT OF CORPORATIONS

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22.1 Security Interests. The Franchisee covenants and agrees-tcpgfert tMhe^ranchisoflpm time to time, upon the Franchisor's request and pursuant to the Franchisor's thejAciB/efl^artaard fonrr of agreement(s) or document(s), such security interests in such of the assets used in connection with the Facility or situated on the Premises as the Franchisor may in its sole discretion require to secure payment and performance of any and all obligations from time to time owing by the Franchisee to the Franchisor (whether pursuant to this Agreement or otherwise) or to any of the Franchisor's affiliates.

ARTICLE XXIII DISPUTE RESOLUTION

23.1 Mandatory Binding Arbitration. In order to reduce instances of possible dispute and to make the resolution of any disputes which do arise less expensive, quicker, less subject to public notoriety and to resolve disputes in a less formal and antagonistic means than litigation, as well as to increase the opportunities for Franchisee and Franchisor to maintain a mutually beneficial business relationship, Franchisee and Franchisor agree as follows:

23.1.1    ANY LITIGATION, CLAIM, DISPUTE, SUIT, ACTION, CONTROVERSY, PROCEEDING OR OTHERWISE ("CLAIM") BETWEEN OR INVOLVING FRANCHISEE (AND/OR ANY PRINCIPAL OF FRANCHISEE OR WHICH COULD BE BROUGHT BY FRANCHISEE OR ON HIS/HER BEHALF) AND FRANCHISOR (AND/OR ANY CLAIM AGAINST OR INVOLVING ANY OF THE FRANCHISOR-RELATED ENTITIES OR OTHERWISE), EXCEPT AS EXPRESSLY PROVIDED BELOW, WHETHER ARISING OUT OF OR RELATING IN ANY WAY TO THIS AND/OR ANY OTHER AGREEMENT AND/OR ANY OTHER DOCUMENT, ANY ALLEGED BREACH OF ANY DUTY OR OTHERWISE (INCLUDING, BUT NOT LIMITED TO, THE UNDERLYING LEGALITY OF THE OFFER AND/OR SALE OF THE FRANCHISE, ANY ACTION FOR RESCISSION OR OTHER SETTING ASIDE OF SUCH SALE OR ANY TRANSACTION, AGREEMENT OR DOCUMENT AND ANY CLAIM THAT THIS AGREEMENT OR ANY PORTION THEREOF IS INVALID, ILLEGAL, VOID, VOIDABLE OR OTHERWISE AND ANY CLAIM OF FRAUD) AND ON WHATEVER THEORY AND/OR FACTS BASED, WILL BE:

(a) SUBMITTED TO BINDING ARBITRATION BEFORE AND IN ACCORDANCE WITH THE ARBITRATION RULES OF FAM (OR ANY SUCCESSOR ORGANIZATION); PROVIDED THAT IF SUCH ARBITRATION IS UNABLE TO BE HEARD BY FAM FOR ANY REASON, THE ARBITRATION WILL BE CONDUCTED BY THE AMERICAN ARBITRATION ASSOCIATION PURSUANT TO ITS COMMERCIAL ARBITRATION RULES. THE FEES AND EXPENSES OF THE ARBITRATOR(S) AND THE PARTIES WILL EXECUTE SUCH CONFIDENTIALITY AGREEMENTS, EXCEPTING ONLY SUCH PUBLIC DISCLOSURES AND FILINGS AS ARE REQUIRED BY LAW.

23.1.2   ANY ARBITRATION (AND ANY APPEAL OF ARBITRATION) WILL BE CONDUCTED AT THE OFFICE OF THE ARBITRATING ORGANIZATION (OR ITS REPRESENTATIVES) WHICH IS LOCATED CLOSEST TO FRANCHISOR'S HEADQUARTERS. EXCEPT AS EXPRESSLY PROVIDED BELOW, THE PARTIES TO ANY ARBITRATION WILL BEAR THEIR OWN COSTS, INCLUDING ATTORNEYS' FEES. ANY CLAIM, AND ANY SUCH MEDIATION/ARBITRATION, WILL BE CONDUCTED AND RESOLVED ON AN INDIVIDUAL BASIS ONLY AND NOT ON A CLASS-WIDE, MULTIPLE PLAINTIFF OR SIMILAR BASIS. UPON REQUEST OF ANY PARTY TO A CLAIM, THE ARBITRATOR MAY BE REQUIRED TO

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ISSUE A WRITTEN AWARD, SPECIFYING THE FACTS FOUND AND THE LAW APPLIED, BUT THE PARTY SO REQUESTING WILL BEAR THE FEES AND CHARGES INCURRED IN CONNECTION THEREWITH. THE ARBITRATOR MAY ISSUE TEMPORARY RESTRAINING ORDERS, PRELIMINARY INJUNCTIONS, INJUNCTIONS AND OTHER EQUITABLE AND/OR INTERIM RELIEF TO THE EXTENT REASONABLY NECESSARY TO PRESERVE THE STATUS QUO (OR PREVENT IRREPARABLE INJURY) PENDING FINAL RESOLUTION BY BINDING ARBITRATION OF A CLAIM, AS WELL AS IN CONNECTION WITH ANY SUCH FINAL RESOLUTION, AND MAY ISSUE SUMMARY ORDERS DISPOSING OF ALL OR PART OF A CLAIM AT ANY POINT. EACH PARTY CONSENTS TO THE ENFORCEMENT OF SUCH ORDERS, INJUNCTIONS, ETC. BY ANY COURT HAVING JURISDICTION. THE PARTIES AGREE THAT THE ARBITRATOR (RATHER THAN A COURT) SHALL DECIDE ANY QUESTIONS RELATING IN ANY WAY TO THE PARTIES' AGREEMENT (OR CLAIMED AGREEMENT) TO ARBITRATE, INCLUDING, BUT NOT LIMITED TO, APPLICABILITY, SUBJECT MATTER, TIMELINESS, SCOPE, REMEDIES AND ALLEGED FRAUD IN THE INDUCEMENT, OR OTHERWISE. EACH PARTICIPANT MUST SUBMIT OR FILE ANY CLAIM WHICH WOULD CONSTITUTE A COMPULSORY COUNTERCLAIM (AS DEFINED BY RULE 13 OF THE FEDERAL RULES OF CIVIL PROCEDURE) WITHIN THE SAME PROCEEDING AS THE CLAIM TO WHICH IT RELATES. ANY SUCH CLAIM WHICH IS NOT SUBMITTED OR FILED IN SUCH PROCEEDING WILL BE FOREVER BARRED.

23.1.3   IN THE EVENT THAT ANY PARTY TO AN ARBITRATION WISHES TO APPEAL ANY FINAL AWARD BY AN ARBITRATOR (THERE WILL BE NO APPEAL OF INTERIM AWARDS OR OTHER INTERIM RELIEF), SUCH PARTY MAY APPEAL, WITHIN THIRTY (30) DAYS OF SUCH FINAL AWARD, TO A THREE (3) ARBITRATOR PANEL TO BE APPOINTED BY THE SAME ORGANIZATION AS CONDUCTED THE ARBITRATION. THE ISSUES ON SUCH APPEAL WILL BE LIMITED TO THE PROPER APPLICATION OF THE LAW TO THE FACTS FOUND AT THE ARBITRATION AND WILL NOT INCLUDE ANY TRIAL DE NOVO OR OTHER FACT-FINDING FUNCTION. THE PARTY REQUESTING SUCH APPEAL MUST PAY ALL COSTS AND FEES CHARGED BY SUCH ARBITRATION APPEAL PANEL AND/OR ARBITRATION ORGANIZATION IN CONNECTION WITH SUCH APPEAL, AS WELL AS POSTING ANY BOND DEEMED APPROPRIATE BY SUCH ARBITRATION ORGANIZATION OR ARBITRATION APPEAL PANEL. IN ADDITION, A PARTY REQUESTING APPEAL AND WHO DOES NOT PREVAIL ON SUCH APPEAL WILL PAY THE OTHER PARTY'S (OR PARTIES') ATTORNEYS' FEES AND OTHER COSTS OF RESPONDING TO SUCH APPEAL.

23.1.4   JUDGMENT UPON ANY PRELIMINARY OR FINAL ARBITRATION AWARD SUBJECT TO THE OPPORTUNITY FOR APPEAL AS CONTEMPLATED IN (c) ABOVE MAY BE ENTERED IN ANY COURT HAVING JURISDICTION AND WILL BE BINDING, FINAL AND NON-APPEALABLE.

23.1.5   THE OBLIGATION HEREIN TO ARBITRATE WILL NOT BE BINDING UPON FRANCHISOR WITH RESPECT TO CLAIMS OR ISSUES RELATING PRIMARILY TO (i) THE VALIDITY OF ANY TRADEMARKS OR SERVICE MARKS OWNED BY FRANCHISOR, (ii) FRANCHISOR'S RIGHTS TO OBTAIN POSSESSION OF ANY REAL AND/OR PERSONAL PROPERTY (INCLUDING ANY ACTION IN UNLAWFUL DETAINER, EJECTMENT OR OTHERWISE) AND/OR (iii) FRANCHISOR'S RIGHTS TO RECEIVE AND ENFORCE A TEMPORARY RESTRAINING ORDER, PRELIMINARY INJUNCTION, PERMANENT INJUNCTION OR OTHER EQUITABLE RELIEF.

23.1.6   THE PROVISIONS OF THIS ARTICLE XXIII WILL BE DEEMED TO BE SELF-EXECUTING AND WILL SURVIVE THE TERM OF THIS AGREEMENT AND REMAIN IN

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FULL FORCE AND EFFECT NOTWITHSTANDING ITS EXPIRATION, RESCISSION, TERMINATION OR OTHERWISE FOR ANY REASON. THE PROVISIONS OF THIS AGREEMENT (INCLUDING, BUT NOT LIMITED TO, THOSE RELATING TO MANDATORY ARBITRATION, WAIVER OF JURY TRIAL, LIMITATION OF DAMAGES, PRIOR NOTICE OF CLAIMS, SHORTENED PERIODS IN WHICH TO BRING CLAIMS, COSTS AND ATTORNEYS' FEES, OR OTHERWISE) WILL BE CONSTRUED AS INDEPENDENT OF EACH OTHER PROVISION OF THIS AGREEMENT AND IF ANY PROVISIONS ARE DEEMED TO BE UNENFORCEABLE IN ANY WAY, SUCH PROVISIONS WILL BE MODIFIED OR INTERPRETED TO THE MINIMUM EXTENT NECESSARY TO HAVE THEM COMPLY WITH THE LAW AND THE REMAINING PROVISIONS OF THIS AGREEMENT, INCLUDING THE PARTIES TO THIS AGREEMENT TO SUBMIT CLAIMS TO BINDING ARBITRATION, WILL REMAIN IN FULL FORCE AND EFFECT, THE PARTIES AGREEING, IN CONSIDERATION OF THEIR MUTUAL JUDGMENT THAT ARBITRATION IS GENERALLY THE SUPERIOR METHOD OF RESOLVING DISPUTES, THAT THE UNENFORCEABILITY OF ANY PROVISIONS OF THIS ARTICLE XXIII OR OTHERWISE SHALL NOT AFFECT THE REMAINDER OF THIS ARTICLE XXIII OR OTHERWISE, NOTWITHSTANDING ANY STATUTORY OR DECISIONAL LAW TO THE CONTRARY. NOTWITHSTANDING ANY PROVISIONS OF THIS AGREEMENT OR OTHERWISE RELATING TO WHICH STATE OR PROVINCIAL LAWS THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED UNDER, ALL ISSUES RELATING TO ARBITRABILITY AND/OR THE ENFORCEMENT OF THE AGREEMENT TO ARBITRATE CONTAINED HEREIN WILL BE GOVERNED BY THE FEDERAL ARBITRATION ACT (9 U.S.C. §1, ET SEP.) AND THE FEDERAL COMMON LAW OF ARBITRATION. NOTWITHSTANDING ANY PROVISIONS OF STATE LAW TO THE CONTRARY, FRANCHISOR INTENDS TO FULLY ENFORCE THE PROVISIONS OF THIS FRANCHISE AGREEMENT AND OTHER DOCUMENTS, INCLUDING ALL VENUE, CHOICE-OF-LAWS AND MEDIATION/ARBITRATION PROVISIONS, AND TO RELY ON FEDERAL PREEMPTION UNDER THE FEDERAL ARBITRATION ACT (9 U.S.C. §1, ET SEOJ.

23.2 Litigation, Waiver of Jury Trial; Limitation of Damages, etc. Without in any way limiting or otherwise affecting the parties' obligations regarding mediation/binding arbitration, the parties agree that any litigation between Franchisee and Franchisor (and/or involving any principal of Franchisee or which could be brought by Franchisee or on his/her behalf and including matters involving any of the Franchisor-related entities or otherwise), whether to enforce an arbitration award or involving any litigation, dispute, controversy, claim, proceeding or otherwise between or involving Franchisee and Franchisor which is not subject to the foregoing agreement regarding mediation/arbitration (or in the event that a court having jurisdiction should hold that the foregoing agreement regarding mediation and/or arbitration is not enforceable) or otherwise, will be held exclusively before a court in the most immediate state judicial district and court encompassing Franchisor's headquarters and having subject matter jurisdiction or (if a basis for Federal jurisdiction is present) the United States District Court for Duval County, Florida, the parties consenting to the exclusive jurisdiction of such court(s) and WAIVING ALL RIGHTS TO TRIAL BY JURY.

23.2.1 So as to achieve many of the advantages which would normally be associated with arbitration (such as lower expense, more rapid resolution of controversies, fewer protracted and complex proceedings, reduced instances of costly and time-consuming appeal, use of a more sophisticated and experienced trier of fact and law, etc.) and for the parties' mutual benefit, THE PARTIES AGREE THAT IN ANY LITIGATION BETWEEN FRANCHISOR AND FRANCHISEE (AND/OR ANY PRINCIPAL OF FRANCHISEE OR WHICH COULD BE BROUGHT BY FRANCHISEE OR ON FRANCHISEE'S BEHALF) THE PARTIES KNOWINGLY WAIVE ALL RIGHTS TO TRIAL BY JURY. IN ANY ARBITRATION, LITIGATION OR OTHERWISE, THE PARTIES WAIVE ALL RIGHTS TO PUNITIVE, EXEMPLARY, MULTIPLE, PAIN-AND-SUFFERTNG, MENTAL

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DISTRESS OR SIMILAR DAMAGES AND AGREE THAT THE PARTIES MAY ONLY RECOVER ACTUAL FINANCIAL LOSSES.

23.3      Prior Notice of Claims by Franchisee. Prior to Franchisee taking any legal or other action against Franchisor, whether for arbitration, damages, injunctive, equitable or other relief (including but not limited to rescission) and whether by way of claim, counterclaim, cross-complaint, raised as an affirmative defense or otherwise, based on any alleged act or omission of Franchisor, Franchisee will first give Franchisor sixty (60) days' prior written notice and opportunity to cure such alleged act or omission.

23.4      Periods In Which to Make Claims.

23.4.1    The parties agree that, except as provided below, no arbitration proceeding, action or suit (whether by way of claim, counterclaim, cross-complaint, raised as an affirmative defense or otherwise) by either party will lie against the other (nor will any action or suit by Franchisee against any person and/or entity affiliated with Franchisor), whether for damages, rescission, injunctive or any other legal and/or equitable relief, in respect of any alleged breach of this Agreement, or any other claim of any type, unless such party will have commenced such arbitration proceeding, action or suit before the expiration of the earlier of:

(a)         One hundred eighty (180) days after the date upon which the state of facts giving rise to the cause of action comes to the attention of, or should reasonably have come to the attention of, such party; or

(b)         Six (6) months after the initial occurrence of any act or omission giving rise to the cause of action, whenever discovered.

23.4.2   Notwithstanding the foregoing limitations, where any federal, state or provincial law provides for a shorter limitation period than above described, whether upon notice or otherwise, such shorter period will govern.

23.4.3   The foregoing limitations may, where brought into effect by Franchisor's failure to commence an action within the time periods specified, operate to exclude Franchisor's right to sue for damages but will in no case, even upon expiration or lapse of the periods specified or referenced above, operate to prevent Franchisor from terminating Franchisee's rights and Franchisor's obligations under this Agreement as provided herein and under applicable law nor prevent Franchisor from obtaining any appropriate court judgment, order or otherwise which enforces and/or is otherwise consistent with such termination.

23.4.4   The foregoing limitations shall not apply to Franchisor's claims arising from or related to: (1) Franchisee's under-reporting of Gross Revenue; (2) Franchisee's under-payment or nonpayment of any amounts owed to Franchisor or any affiliated or otherwise related entity; (3) indemnification by Franchisee; (4) Franchisee's confidentiality, non-competition or other exclusive relationship obligations; and/or (5) Franchisee's unauthorized use of the Proprietary Marks.

23.5      Withholding Consent. In no event will Franchisee make any claim, whether directly, by way of setoff, counter-claim, defense or otherwise, for money damages or otherwise, by reason of any withholding or delaying of any consent or approval by Franchisor. Franchisee's sole remedy for any such claim is to submit it to an executive meeting, mediation and arbitration as described in this Agreement and, if executive meeting and mediation fails to resolve such matter, for the arbitrator to order Franchisor to grant such consent.

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23.6      Survival and Construction. Each provision of this Article XXIII, together with the provisions of Article XXV, will be deemed to be self-executing and continue in full force and effect subsequent to and notwithstanding the expiration, termination, setting aside, cancellation, rescission, unenforceability or otherwise of this Agreement (or any part of it) for any reason, will survive and will govern any claim for rescission or otherwise. Each provision of this Agreement will be construed as independent of, and severable from, every other provision; provided that if any part of this Agreement is deemed unlawful in any way, the parties agree that such provision will be deemed interpreted and/or modified to the minimum extent necessary to make such provision lawful or, if such construction is not permitted or available, the remainder of this Agreement will continue in full force and effect. Each party reserves the right to challenge any law, rule or judicial or other construction which would have the effect of varying or rendering ineffective any provision of this Agreement.

23.7      Costs and Attorneys' Fees. Except as expressly provided otherwise in this Agreement with respect to appeal of an arbitration award, the prevailing party will bear the costs of enforcement and/or defense (including but not limited to attorneys' fees) in any claim or dispute between the parties (including Franchisee's and/or Franchisor's affiliates, related persons/entities, etc.).

23.8      Validity and Execution. This Agreement will become valid when executed and accepted by Franchisor at its headquarters.

23.9      Binding Effect. This Agreement is binding upon the parties hereto and their respective executors, administrators, heirs, assigns, and successors in interest, and will not be modified except by written agreement signed by both parties.

23.10    Construction. Nothing in this Agreement is intended, nor will be deemed, to confer any rights or remedies upon any person or legal entity not a party hereto. Except where this Agreement expressly provides otherwise, Franchisor has the right to condition, withhold and/or refuse, in its sole and absolute discretion, any request by Franchisee and Franchisor's approval of, or consent to, any action or omission by Franchisee. The headings of the several articles and sections hereof are for convenience only and do not define, limit, or construe the contents of such articles or sections. The term "attorneys' fees" will include, without limitation, legal fees, whether incurred prior to, in preparation for or in contemplation of the filing of any written demand or claim, action, hearing or proceeding to enforce the obligations of this Agreement. References to a "controlling interest" in the Franchisee will mean more than fifty percent (50%) of the voting control of the Franchisee, if the Franchisee is a corporation, and any general partnership interest, if the Franchisee is a partnership. The term "Franchisee" as used herein is applicable to one (1) or more persons, a corporation or a partnership, as the case may be. The singular usage includes the plural and the masculine and neuter usages include the other and the feminine. If two (2) or more persons are at any time the Franchisee hereunder, whether or not as partners or joint venturers, their obligations and liabilities to Franchisor will be joint and several. This Agreement will be executed in multiple copies, each of which will be deemed an original. Each of the provisions of this Article XXIII shall apply to any claim brought (or which could be brought) by any principal of Franchisee or by or on Franchisee's behalf.

23.11     Choice of Laws. Except as provided elsewhere in this Agreement (for example, with regard to the applicability of the Federal Arbitration Act, 9 U.S.C. §1 et seq. and the effect of federal preemption of state law by such Act) and except to the extent governed by the United States Trademark Act and other federal laws, the parties agree that this Agreement (including any claims, counter-claims or otherwise by Franchisee) and all other matters concerning the parties will be governed by, and construed and enforced in accordance with, the laws of the State of Florida.

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ARTICLE XXIV FRANCHISOR'S BUY-OUT OPTION

24.1       Franchisor's Rights. In the event Franchisee, after the first year of operation of the Facility, fails to generate Gross Revenues equal to Five Hundred Thousand Dollars ($500,000) during the prior twelve (12) month period and no less than Two Million Seven Hundred Thousand Dollars ($2,700,000) after sixty (60) months, the Franchisor will have the option to "buy-out" Franchisee's rights under this Agreement by paying Franchisee a sum calculated by the formula set forth on Schedule D attached hereto. Consequently, this Article shall not be applicable during the first year of this Agreement. The Franchisor may exercise the option to buy-out Franchisee's rights under this Agreement by providing written notice to Franchisee by personal service or prepaid registered or certified mail sixty (60) days prior to the date of the buy-out of this Agreement of its intent to exercise its option under this Article. During the sixty (60) day notice period, the Franchisee will continue to operate the Facility pursuant to this Agreement.

24.2      Applicability of Other Provisions. If the Franchisor elects to exercise this buy-out of Franchisee's rights pursuant to this Article, all post-term covenants not to compete contained in Section 15.2 shall be applicable.

ARTICLE XXV GENERAL

25.1       Joint and Several. If two (2) or more parties shall sign or be subject to the terms and conditions of this Agreement as Franchisee, the liability of each such party to make the payments to be made and to perform all other obligations to be performed under or pursuant to this Agreement shall be deemed to be joint and several. A breach hereof of one (1) such party or Franchisee shall be deemed to be a breach of both or all.

25.2      Rights Cumulative. No right or remedy conferred upon or reserved to the Franchisor or the Franchisee by this Agreement is intended to be, nor shall such right or remedy be deemed to be, exclusive of any other right or remedy herein or by law or equity provided or permitted and each shall be cumulative of every other right or remedy.

25.3       Entire Agreement and Amendments. This Agreement, the Schedules and Exhibits hereto and any documents incorporated by reference herein, contain the entire understanding and agreement of the parties hereto concerning the subject matter hereof and supersede all prior agreements, understandings, negotiations and discussions with respect to the subject matter hereof, whether oral or written. Except as provided herein, the Franchisee acknowledges and agrees that there are no warranties, representations, statements, promises or inducements, express or implied, or collateral, whether oral or written, about this Agreement by the Franchisor or its officers, directors, shareholders, employees or agents that are contrary to the terms of this Agreement or the documents referred to herein. No amendment or other modification to this Agreement shall be valid or binding upon the parties unless the same is in writing.

25.4      Non-Waiver. No waiver by the Franchisor of any breach, failure or default in performance by the Franchisee and no failure, refusal or neglect of the Franchisor to exercise any right hereunder or to insist upon strict compliance with or performance by the Franchisee's obligations hereunder shall constitute a waiver of the provisions of this Agreement with respect to any subsequent breach, failure or default and shall not constitute a waiver by the Franchisor of its rights at any time or thereafter to require strict compliance with the provisions hereof.

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25.5      Invalid Provisions; Substitution of Valid Provisions. As stated earlier in this Agreement in Article XV, if any provision of this Agreement relating to the payment of fees to Franchisor, to non-competition during the term of this Agreement, or to the preservation of any of the Proprietary Marks or confidential information disclosed pursuant to this Agreement is declared invalid or unenforceable, and if, as a result, Franchisor believes in its sole opinion that the continuation of this Agreement would not be in the best interests of the System, Franchisor has the right to terminate this Agreement on written notice to Franchisee. If any state or federal law requires renewal of this Agreement, Franchisee agrees to enter into Franchisor's then-current form of Franchise Agreement. To the extent that any restrictive covenant contained in this Agreement is deemed unenforceable because of its scope in terms of area, business activity prohibited, or length of time, Franchisee agrees that the invalid provision will be deemed modified or limited to the extent or manner necessary to make that particular provision valid and enforceable to the greatest extent possible in light of the intent of the parties expressed in that provision under the laws applied in the forum in which Franchisor is seeking to enforce it.

If any lawful requirement or court order of any jurisdiction (1) requires a greater advance notice of the termination or non-renewal of this Agreement than is required under this Agreement, or the taking of some other action which is not required by this Agreement, or (2) makes any provision of this Agreement or any specification, standard or operating procedures prescribed by Franchisor invalid or unenforceable, the advance notice and/or other action required or revision of the specification, standard or operating procedure will be substituted for the comparable provisions of this Agreement in order to make the modified provision enforceable to the greatest extent possible. Franchisee agrees to be bound by the modification to the greatest extent lawfully permitted.

25.6      Time of Essence. Time shall be of the essence in this Agreement.

25.7      Gender. Whenever a personal pronoun is used herein, it is understood that such usage shall include both singular and plural, masculine, feminine and neuter, and refer in appropriate cases to corporations or other legal entities as well as to individuals.

25.8      Notice. All notices, consents, approvals, statements, authorizations, documents, or other communications required or permitted to be given hereunder shall be in writing, and shall be delivered personally or mailed by registered mail, postage prepaid, or other form of electronic communication tested prior to transmission to the said parties at their respective addresses set forth hereunder, namely:

To the Franchisor at:                 2985 Mercury Road

Jacksonville, Florida 32207

or at Franchisor's corporate headquarters

With a copy to:                         Harold L. Kestenbaum, Esq.

1320 Reckson Plaza, 14th Floor, West Tower Uniondale, New York 11556-1320

To the Franchisee at:                 __________________________

or at any such other address or addresses as the party to whom such notice, consent, approval, statement, authorization, documentation or other communication is to be given may designate by notice in writing so given to the other parties hereto as provided hereinbefore. Any notices, consents, approvals, statements, authorizations, documents or other communications, if mailed, shall be deemed to have been given on the

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fifth (5th) business day (except Saturdays and Sundays) following such mailing, or, if delivered personally or transmitted by telex or other form of electronic communication, shall be deemed to have been given on the day of delivery or transmission (as the case may be), if a business day, or if not a business day, on the business day next following the day of delivery or transmission (as the case may be).

25.9      Impossibility of Performance. Notwithstanding anything to the contrary contained in this Agreement, if either party hereto is bona fide delayed or hindered in or prevented from the performance of any term, covenant or act required hereunder by reason of strikes, labor troubles, inability to procure materials or services, power failure, restrictive governmental laws or regulations, riots, insurrection, sabotage, acts of God or other reasons beyond the control of such party, whether all of a like nature or not, which is not the fault of the party delayed in performing work or doing acts required under the terms of this Agreement, then the performance of such term, covenant or act is excused for the period of the delay and the party so delayed shall be entitled to perform such term, covenant or act within the appropriate time period after the expiration of the period of such delay. However, the provisions of this Section shall not in any way operate to excuse the Franchisee from the prompt payment of any fees, continuing service fees or other sums required to be paid to the Franchisor or its affiliates by the terms of this Agreement, or from the prompt performance of any of his/her other obligations hereunder where such prompt performance is delayed, hindered or prevented by reason of lack of funds.

25.10    Further Assurances. Each of the parties covenants and agrees to execute and deliver such further and other agreements, assurances, undertakings, acknowledgments or documents, cause such meetings to be held, resolutions passed and by-laws enacted, exercise their vote and influence and do and perform and cause to be done and performed any further and other acts and things as may be necessary or desirable in order to give full effect to this Agreement and every part hereof. The Franchisee shall, within the time and from time to time forthwith upon the Franchisor's request, provide the Franchisor with a statutory declaration confirming any matter provided for in this Agreement. The Franchisee shall, at any time and from time to time forthwith upon the Franchisor's request, provide the Franchisor with access to the corporate records of the Franchisee to confirm the Franchisee's compliance with the terms of this Agreement.

25.11     Enforcement. The Franchisee acknowledges that his/her failure to comply herewith could cause the Franchisor irreparable harm which may not be compensable by way of damages, and, therefore, the Franchisor shall be entitled to apply to a court of competent jurisdiction to have itself appointed as the receiver of the Franchisee's business and to obtain (without bond) declarations, temporary and permanent injunctions and orders of specific performance enforcing the provisions of this Agreement relating to the Franchisee's use of the Proprietary Marks, relating to the obligations of the Franchisee upon termination or expiration of this Agreement, and relating to assignment of the franchise hereunder and ownership interests in the Franchisee, and to prohibit any act or omission by the Franchisee or employees of the Franchisee that constitutes a violation of any applicable law, by-law or regulation, is dishonest or misleading to the Franchisee's customers or prospective customers, or constitutes a danger to employees, customers, or to the public, or which may impair the goodwill associated with the Proprietary Marks. If the Franchisor secures any such injunction, declaration or order of specific performance, the Franchisee agrees to pay to the Franchisor any damages incurred by it as a result of the Franchisee's breach of any provision, the Franchisor's full solicitor and customer costs and all expenses the Franchisor may have incurred to enforce this Agreement (including a reasonable allowance for its employees' time spent).

25.12    The Franchisee May Not Withhold Payments. The Franchisee agrees that he/she will not, on grounds of an alleged nonperformance by the Franchisor of any of its obligations or for any other reason, withhold payment of any amount due whatsoever to the Franchisor or its affiliates. No endorsement or statement on any check or payment of any sum less than the full sum due to the

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Franchisor shall be construed as an acknowledgment of payment in full or an accord and satisfaction, and the Franchisor may accept and cash such check or payment without prejudice to its right to recover the balance due or pursue any other remedy provided herein or by law. The Franchisor may apply any payments made by the Franchisee as the Franchisor may see fit. The Franchisor may set off against any payment due by the Franchisee to the Franchisor, and may, at the Franchisor's option, pay the Franchisee's trade creditors.

25.13     Interest on Late Payments. All amounts payable pursuant to this Agreement or any other agreement between the Franchisor and Franchisee shall bear interest after the date upon which the said payment becomes due until paid in full at two percent (2%) per month at the time the said payment becomes due or the maximum legal rate of interest, whichever is less. The acceptance of any interest payment shall not be construed as a waiver by the Franchisor of its rights in respect of the default giving rise to such payment and shall be without prejudice to the Franchisor's right to terminate this Agreement in respect of such default in accordance with the provisions of this Agreement.

25.14    Changes and Modifications. Franchisee understands and agrees that the System must not remain static if it is to meet (without limitation) presently unforeseen changes in technology, competitive circumstances, demographics, populations, consumer trends, societal trends and other marketplace variables, and if it is to best serve the interests of Franchisor, Franchisee and all other Franchisees. Accordingly, Franchisee expressly understands and agrees that Franchisor may from time to time change the components of the System including, but not limited to, altering the products, programs, services, methods, standards, forms, policies and procedures of that System; abandoning the System altogether in favor of another system in connection with a merger, acquisition, other business combination or for other reasons; adding to, deleting from or modifying those products, programs and services which Franchisee's franchised business is authorized and required to offer; modifying or substituting entirely the building, premises, equipment, signage, trade dress, decor, color schemes and uniform specifications and all other unit construction, design, appearance and operation attributes which Franchisee is required to observe hereunder; and changing, improving, modifying or substituting the Proprietary Marks. Franchisee expressly agrees to comply with any such modifications, changes, additions, deletions, substitutions or alterations.

Franchisee shall accept, use and effectuate any such changes or modifications to, or substitution of, the System as if they were part of the System at the time that this Agreement was executed.

Except as provided herein, Franchisor shall not be liable to Franchisee for any expenses, losses or damages sustained by Franchisee as a result of any of the modifications contemplated hereby. Franchisee hereby covenants not to commence or join in any litigation or other proceeding against Franchisor or any third party complaining of any such modifications or seeking expenses, losses or damages caused thereby. Finally, Franchisee expressly waives any claims, demands or damages arising from or related to the foregoing activities including, without limitation, any claim of breach of contract, breach of fiduciary duty, fraud, and/or breach of the implied covenant of good faith and fair dealing.

25.15    Acknowledgments.

FRANCHISEE ACKNOWLEDGES THAT HE/SHE HAS CONDUCTED AN INDEPENDENT INVESTIGATION OF THE BUSINESS FRANCHISED HEREUNDER, AND RECOGNIZES THAT THE BUSINESS VENTURE CONTEMPLATED BY THIS AGREEMENT INVOLVES BUSINESS RISKS AND THAT ITS SUCCESS WILL BE LARGELY DEPENDENT UPON THE ABILITY OF FRANCHISEE AS AN INDEPENDENT BUSINESS PERSON. THE FRANCHISOR EXPRESSLY DISCLAIMS THE MAKING OF, AND FRANCHISEE ACKNOWLEDGES THAT HE/SHE HAS NOT RECEIVED, ANY WARRANTY OR GUARANTEE, EXPRESS OR IMPLIED, AS TO THE

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POTENTIAL VOLUME, PROFITS, OR SUCCESS OF THE BUSINESS VENTURE CONTEMPLATED BY THIS AGREEMENT.

FRANCHISEE ACKNOWLEDGES THAT HE/SHE HAS RECEIVED, READ, AND UNDERSTOOD THIS AGREEMENT, INCLUDING THE EXHIBITS HERETO; THAT THE FRANCHISOR HAS FULLY AND ADEQUATELY EXPLAINED THE PROVISIONS OF EACH TO FRANCHISEE'S SATISFACTION; AND THAT THE FRANCHISOR HAS ACCORDED FRANCHISEE AMPLE TIME AND OPPORTUNITY TO CONSULT WITH ADVISORS OF HIS/HER OWN CHOOSING ABOUT THE POTENTIAL BENEFITS AND RISKS OF ENTERING INTO THIS AGREEMENT.

FRANCHISEE ACKNOWLEDGES THAT HE/SHE HAS RECEIVED A COMPLETE COPY OF THIS AGREEMENT, THE EXHIBITS REFERRED TO HEREIN AND AGREEMENTS RELATING HERETO, IF ANY, AT LEAST FIVE (5) BUSINESS DAYS PRIOR TO THE DATE ON WHICH THIS AGREEMENT WAS EXECUTED. FRANCHISEE FURTHER ACKNOWLEDGES THAT HE/SHE HAS RECEIVED THE DISCLOSURE DOCUMENT REQUIRED BY THE TRADE REGULATION RULE OF THE FEDERAL TRADE COMMISSION ENTITLED "DISCLOSURE REQUIREMENT AND PROHIBITIONS CONCERNING FRANCHISING AND BUSINESS OPPORTUNITY VENTURES" AT LEAST TEN (10) BUSINESS DAYS PRIOR TO THE DATE ON WHICH THIS AGREEMENT WAS EXECUTED.

FRANCHISEE IS AWARE OF THE FACT THAT SOME FRANCHISEES OF FRANCHISOR MAY OPERATE UNDER DIFFERENT FORMS OF AGREEMENTS AND, CONSEQUENTLY, THAT FRANCHISOR'S OBLIGATIONS AND RIGHTS IN RESPECT TO ITS VARIOUS FRANCHISEES MAY DIFFER MATERIALLY IN CERTAIN CIRCUMSTANCES.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement under seal as of the day and year first above written.

SIGNED, SEALED AND DELIVERED in the presence of:

COFFEE PERKS FRANCHISE, INC.

WITNESS

By:_ Name: Title:

FRANCHISEE

WITNESS

By:_ Name: Title:

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SCHEDULE"A"

PROPRIETARY MARKS

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SCHEDULE"B"

LOCATION OF FACILITY

The following is the location of Franchisee's Facility:

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SCHEDULE"C

GUARANTY AND ASSUMPTION OF OBLIGATIONS

THIS GUARANTY AND ASSUMPTION OF OBLIGATIONS is given this ______ day of

__________, 20_, by___________________________________________________________.

In consideration of, and as an inducement to, the execution of that certain Franchise Agreement (the "Agreement") on this date by COFFEE PERKS FRANCHISE, INC. ("us", "we", or "our"), each of the undersigned personally and unconditionally (a) guarantees to us and our successors and assigns, for the term of the Agreement and afterward as provided in the Agreement, that ("Franchisee") will punctually pay and perform each and every undertaking, agreement and covenant set forth in the Agreement and (b) agrees to be personally bound by, and personally liable for the breach of, each and every provision in the Agreement, both monetary obligations and obligations to take or refrain from taking specific actions or to engage or refrain from engaging in specific activities, including the noncompetition, confidentiality and arbitration requirements.

Each of the undersigned consents and agrees that: (1) his or her direct and immediate liability under this Guaranty will be joint and several; (2) he or she will render any payment or performance required under the Agreement upon demand if Franchisee fails or refuses punctually to do so; (3) this liability will not be contingent or conditioned upon our pursuit of any remedies against Franchisee or any other person; and (4) this liability will not be diminished, relieved or otherwise affected by any extension of time, credit or other indulgence which we may from time to time grant to Franchisee or to any other person, including, without limitation, the acceptance of any partial payment of performance of the compromise or release of any claims, none of which will in any way modify or amend this Guaranty, which will be continuing and irrevocable during the term of the Agreement.

Each of the undersigned waives all rights to payments and claims for reimbursement or subrogation which any of the undersigned may have against Franchisee arising as a result of the undersigned's execution of and performance under this Guaranty.

IN WITNESS WHEREOF, each of the undersigned has affixed his or her signature on the same day and year as the Agreement was executed.

GUARANTORS

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SCHEDULE"D

BUY-OUT FORMULA

The Buy-Out Formula set forth in Article 24.1 of the Franchise Agreement shall be calculated as follows:

Franchisor shall maintain the option to buy out Franchisee by offering to pay Franchisee the sum equal to 50% of gross sales for the prior twelve (12) month period preceding the buyout.

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The original documents were scanned as an image. The original file can be downloaded at the link above.