THIS MASTER FRANCHISE AGREEMENT, made as of the 30th day of
September, 1996, by and between STERLING VISION, INC., a corporation organized
under the laws of the State of New York, and having an address at 0000 Xxxxxxxxx
Xxxxxxxx, Xxxx Xxxxxx, Xxx Xxxx 00000 (hereinafter referred to as the
"Company"), and EYE-SITE INC. ("EYE-SITE") and EYE SITE (ONTARIO) LTD ("LTD"),
each being a corporation organized and existing under the laws of the Province
of Ontario, and having an address at 000 Xxxx Xxxxxx Xxxx, Xxxxxx, Xxxxxxx X0X
0X0 XXXXXX (EYE SITE and LTD are hereinafter collectively referred to as the
"Master Franchisor").
W I T N E S S E T H:
WHEREAS, the Company operates and franchises retail optical centers
specializing in the sale of prescription and non-prescription eye wear, contact
lenses and solutions, other optical and ophthalmic products and related optical
products and services. These retail optical centers (the "Centers") utilize
distinctive and common formats, layouts, signs, systems, designs and decor, and
certain methods, management techniques, standards, specifications and business
operating procedures (the "Business System"), which Business System are embodied
in the Company's Operating Manual, which may be improved, further developed
and/or otherwise modified during the term by, and at the sole discretion of, the
Company (such existing Operating Manual as hereinafter so modified, being
hereinafter referred to as the "Operating Manual"); and
WHEREAS, the Company uses, promotes and licenses certain proprietary
trademarks and service marks (the "Marks") in connection with the operation of
retail optical centers known as Sterling Optical Centers. The Marks include, but
are not limited to the Xxxx "STERLING OPTICAL"; and
WHEREAS, the Company grants to qualified persons, who meet its
standards and requirements and are willing to undertake the necessary investment
and effort, franchises to operate Sterling Optical Centers which utilize the
Business System and certain of the Marks; and
WHEREAS, the Company desires to expand and develop Sterling Optical
Centers, and seeks a Master Franchisor who will open and operate, or procure and
assist sub-franchisees ("Sub-franchisees") to open and operate Sterling Optical
Centers using the Business System and the Marks within the Territory herein
defined; and
WHEREAS, the Master Franchisor recognizes the benefits to be derived
from being identified with, and franchised by, the Company and desires to obtain
the benefits arising out of the right
to utilize the Business System and those Marks which the Company
makes available to its franchisees; and
WHEREAS, the Master Franchisor recognizes the necessity of operating
a STERLING OPTICAL CENTER in accordance with the Company's standards and
specifications in order to obtain such benefits; and
WHEREAS, the Master Franchisor desires to become the Master
Franchisor for, and to operate and/or offer franchises for the operation of
STERLING OPTICAL CENTERS within the Territory herein described, and pursuant to
the terms hereof; and
WHEREAS, simultaneously with the execution of this Agreement, LTD,
is acquiring the assets of four (4) existing IPCO/STERLING OPTICAL CENTERS at
the locations described on Schedule "A" (the "Existing Centers"), and desires to
operate each of said Centers, as a STERLING OPTICAL CENTER, in accordance with
the terms hereof; and
WHEREAS, EYE-SITE, is the owner and operator of five (5) optical
centers located within the Territory, at the locations described on Schedule "B"
(the "ESI Centers") each of which is presently operated under the name EYE SITE,
and EYE-SITE desires to convert each of said ESI Centers to a STERLING OPTICAL
CENTER, and thereafter operate said ESI Centers in accordance with the terms
hereof; and
WHEREAS, the Master Franchisor is fully aware of the terms and
conditions of this Agreement, and has had the opportunity to consult with, and
been advised by, counsel of its own choosing.
NOW, THEREFORE, in consideration of the mutual terms, conditions and
covenants herein contained, it is hereby agreed as follows:
1. GRANT OF MASTER FRANCHISE/TERM OF AGREEMENT.
A. For and in consideration of the payments herein specified, and subject
to the terms and conditions of this Agreement and the continuing good faith
performance thereof by Master Franchisor, the Company hereby grants to Master
Franchisor, the exclusive right to open and operate, and to procure, train,
assist and grant franchises to Sub-Franchisees, for the right to operate
Sterling Optical Centers to be located within the Territory, as herein defined,
and, except as may otherwise be provided herein, the exclusive license to use,
and grant franchises for the use of, within the Territory, only, the Business
System and the Xxxx, STERLING OPTICAL, together with such other insignia,
symbols, and trademarks which may be approved and authorized by the Company, for
use by the Master Franchisor from time to time in connection with the STERLING
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OPTICAL CENTERS to be operated pursuant to the terms of this Agreement, and the
goodwill to be derived therefrom.
B. This License granted hereunder is for an initial term equal to twenty
(20) years commencing on September , 1996, and terminating at midnight on
September 30, 2016, unless sooner terminated in accordance with the provisions
herein specified (the "Term"). Termination or expiration of this Agreement
shall, except as otherwise specifically provided hereunder, constitute a
termination or expiration of the License granted hereunder. Provided that Master
Franchisor is not in default hereunder, at the end of the term Master Franchisor
shall have the right to renew this agreement for one additional twenty (20) year
term in accordance with the provisions of Section 17 herein.
C. Master Franchisor accepts the grant of the License on the terms herein
granted and agrees that Master Franchisor will, at all times, faithfully,
honestly and diligently perform its obligations hereunder, will continuously
exert Master Franchisor's best efforts to promote and enhance the business of
the Company, within the Territory, and will not, and will cause its affiliates,
officers, directors and shareholders to agree not to, engage in any other
business or activity that may conflict with the terms and conditions hereof
and/or its obligations hereunder.
D. Master Franchisor shall not, without the Company's prior written
consent, use, otherwise employ or permit the use or employment of the Business
System or the Marks except in the Territory and in accordance with the
provisions of this Agreement. Master Franchisor shall not have the right to
grant sub-franchising rights to any person for Sterling Optical Centers, nor
shall the Master Franchisor have the right to grant sub-licensing rights to any
person in respect of the System or the Marks.
2. RIGHTS RESERVED BY THE COMPANY.
A. For so long as this Agreement shall be in effect, and provided that
Master Franchisor shall not have lost its exclusive rights to the Territory, as
provided herein, and provided that Master Franchisor is not in default of any of
its obligations hereunder, and except as otherwise provided herein, the Company
shall not during the Term of this Agreement, or any renewal thereof, itself own,
or operate or grant franchises to others to own or operate Sterling Optical
Centers within the Territory. Notwithstanding the foregoing, the Company (on
behalf of itself, its licensees, franchisees and affiliates) retains the right,
in its sole discretion:
(1) to own, operate and grant franchises to others to operate
businesses, outside of the Territory, offering some or all of the products
and services authorized for sale by Sterling Optical Centers, under the
Marks and/or other trade-
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marks, service marks and commercial symbols and pursuant to such terms and
conditions as the Company deems appropriate;
(2) to itself operate, and to grant to other persons and/or entities
the right to operate, Sterling Optical Centers at such locations, outside
the Territory, at such times and on such terms and conditions as the
Company deems appropriate;
(3) to own, operate or grant franchises to own or operate any of the
Existing Centers, described in Section 7 of this Agreement, in the event
of a default by the Master Franchisor of its obligations relating to any
of said Centers;
(4) to manage, own, operate, participate in joint ventures, and
grant franchises and/or Master Franchising rights, to one or more persons
to operate and/or grant to others the right to grant to others the rights
to operate franchises, licenses, departments, and/or concessions, within
department stores or other host environments located within the Territory,
as hereinafter defined, it being agreed that the term Center, as defined
above, shall exclude any such retail optical outlets being operated within
host environments; provided, however, that the Company shall not use the
name Sterling Optical for any host environment within the Territory.
(5) to manufacture, sell or otherwise distribute some or all of the
products and services authorized for sale by Sterling Optical Centers in
any channel of distribution other than through Sterling Optical Centers
including catalogue or mail order services, and/or to provide management
and/or consulting services using the Business Systems, to ophthalmologists
or other professionals, in connection with dispensaries not operated under
the name Sterling Optical Centers;
(6) to purchase, merge, acquire or affiliate with an existing chain
of retail optical store(s) having one or more optical stores within or
outside of the Territory, as hereinafter defined, and, from and after the
date of such purchase, merger, acquisition or affiliation, to continue
operating said stores, within and/or outside of the Territory under such
other name, and from said location(s) and/or any other locations
subsequently opened;
(7) to modify or revise, in whole or in part, the provisions of the
Operating Manual, to reflect changes generally being made to the Business
System or other changes generally being made for a majority of Sterling
Optical franchisees.
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3. MASTER FRANCHISE FEE/REPRESENTATION AND WARRANTIES.
A. MASTER FRANCHISE FEE
Upon execution of this Agreement, there will be due to the Company, from
the Master Franchisor, a Master Franchise Fee in the amount of US$220,000, of
which $20,000 shall be payable at Closing and the balance shall be payable,
together with interest, at the rate of twelve (12%) percent per annum, in 84
consecutive monthly installments of US$3,530.55, commencing the first day of the
first full month following the Closing, pursuant to a Promissory Note to be
executed at Closing (the "Master Fee Note").
B. REPRESENTATIONS AND WARRANTIES OF MASTER FRANCHISOR
The Master Franchisor represents and warrants to the Company (which
representations and warranties shall survive closing on the date hereof, and on
the Effective Date, the following statements and information set forth in this
Section 3B, or in any Schedule or Exhibit referred to herein are true and
complete, not misleading and do not omit any material information.
(1) Each of EYE-SITE and LTD is, and on the Effective Date will be,
a corporation duly organized, validly existing and in good standing under the
laws of the Province of Ontario.
(2) The execution and delivery of this Agreement and all other
documents executed and to be executed in connection with the consummation of
this transaction embodied herein, have been duly and validly authorized and all
requisite corporate action has been taken to make each of them valid and binding
upon the Master Franchisor in accordance with each of their terms.
(3) The Master Franchisor's execution and delivery of this Agreement
and all other documents executed or to be executed by Master Franchisor in
connection with the consummation of the transactions embodied herein do not
require the consent of any third party and will not result in the breach of any
other agreement to which Master Franchisor or any guarantor hereunder is a party
including the leases where the ESI Centers are located, nor will it result in
the breach of any terms or provisions of any Certificate of Incorporation or
By-Laws of the Master Franchisor, nor will it conflict with, result in a breach
of, or constitute a default under any applicable law, judgment, order,
injunction, decree, rule and/or regulation or ruling of any court or
governmental authority.
(4) EYE-SITE is the sole owner of each of the five ESI Centers
described on Schedule B hereunder, which Centers, simultaneously herewith are,
pursuant to the terms of this Agreement, being converted to Sterling Optical
Centers.
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(5) EYE-SITE is the lessee of each of the Premises where the
ESI Centers are located; each of said leases is in full force and effect;
EYE-SITE has not received any notice of default with respect to any of said
Premises; nor, to the best of Master Franchisor's knowledge, has there been any
event or occurrence, which with the passage of time, the giving of notice, or
both, would constitute a default under any of said leases.
(6) Simultaneously herewith, LTD is acquiring the Existing
Centers from the Company and thereafter LTD will be the sole owner of each of
said Existing Centers; said Centers will be owned free and clear of all liens
and encumbrances, except for those liens specifically set forth under the terms
of the Security Agreement between LTD and the Company, dated of even date
herewith.
(7) The sole shareholder of EYE SITE and LTD is Xxxxxxxx Xxx.
(8) At least ten (10) days prior to the date hereof, Master
Franchisor has received and reviewed a copy of the Company's Franchise Offering
Circular dated June 15, 1996.
(9) Neither the Master Franchisor, any of its shareholders nor
any of the ESI Centers referred to herein are subject to any pending or
threatened bankruptcy or insolvency or similar proceeding, and none of them has
made, or is threatening to make, any assignment for the benefit of creditors,
bulk sale of assets or is (or any of its or their property is) subject to any
receiver, assignee, custodian, liquidator, conservator, committee, trustee or
similar officer.
(10) Neither the Master Franchisor, nor any of its
shareholders nor any of the ESI Centers referred to herein have been served in
any litigation, an adverse outcome of which would impair the ability of the
Master Franchisor or any such guarantor from performing its or his obligations
under this Agreement and/or any of the other documents referred to herein.
(11) The Master Franchisor is not in default under, and no
condition exists that with notice or lapse of time would constitute a default of
Master Franchisor under (i) any mortgage, loan agreement, evidence of
indebtedness, or other instrument evidencing borrowed money to which the Master
Franchisor is a party or by which the Master Franchisor or the properties of the
Master Franchisor are bound; or (ii) any lease for any of the premises where the
ESI Centers are located (ii) any judgment, order, regulation or injunction of
any court, arbitrator, governmental agency.
(12) Master Franchisor has good and marketable title to all of
furniture, fixtures, equipment and all other assets at each of the ESI Centers,
free and clear of all security interests,
6
liens, encumbrances, or other restrictions or claims, except as otherwise set
forth on Schedule 3B.
(13) Master Franchisor does not own any Subsidiaries nor does
it hold any rights to acquire any shares of stock or any other security or
interest in any other corporation or entity.
(14) To the best of Master Franchisor's knowledge, the Master
Franchisor is, in the conduct of its business, in substantial compliance with
all laws, statutes, ordinances, regulations, orders, judgments, or decrees
applicable to it, except those, which taken as a whole, would not have a
materially adverse effect on the business of the Master Franchisor or any of the
ESI-Centers.
(15) Master Franchisor has the financial ability to perform
its obligations under the terms of this Agreement; annexed hereto as Exhibit is
a true and correct statement of the assets and liabilities of the Master
Franchisor as of the day of , 1996 and there has been no material adverse change
in such assets and/or liabilities to the date hereof.
(16) On the date hereof and on the Effective Date, the
statements and information set forth in this Section 3B or any Schedule or
Exhibit referred to herein are true and complete, are not misleading and do not
omit any material information.
4. TERRITORY/DEVELOPMENT OBLIGATIONS:
A. As used herein, the term "Territory" shall mean the Province of Ontario
within the country of Canada.
B. Master Franchisor shall be obligated, during the Term of this
Agreement, to construct, equip, open and continue in operation, or train and
assist Sub-Franchisees, to construct, equip, open and operate, and thereafter
maintain, or cause to be maintained, in operation, the number of STERLING
OPTICAL CENTERS, set forth on the Development Schedule, annexed hereto, as
Schedule "C". The number of Centers required under the Development Schedule,
shall be exclusive of the four (4) Existing Centers, described on Schedule "A",
the assets of which LTD will acquire simultaneously with the execution of this
Agreement, and shall also be exclusive of the five (5) ESI Centers, described on
Schedule "B"; provided, however, each of the Centers opened pursuant to the
Development Schedule, as well as each of the Existing Centers and the ESI
Centers, shall be operated pursuant to the provisions of this Agreement.
C. Each Center opened within the Territory, shall be opened and/or
operated by either (i) the Master Franchisor, in which event Master Franchisor
shall operate said Center pursuant to the terms of this Agreement (a "Master
Franchisor Center"), or (ii) or a Sub-
7
Franchisee (a "Sub-Franchisee Center"), in which event Master Franchisor and
Sub-Franchisee shall be obligated to enter into a Sub-Franchise Agreement which
shall be substantially in the form then being used by the Company for its
Franchisees, subject to such changes and modifications as shall (i) be necessary
to reflect that the Master Franchisor hereunder shall be the Franchisor
thereunder; (ii) as set forth in this Agreement, or (iii) have otherwise been
approved by the Company. The current form of agreement is annexed hereto as
Exhibit "A". Master Franchisor shall have the right, at any time during the Term
of this Agreement, and subject to the terms hereof, to sell the assets and
franchise at any Existing Center, ESI Center, or Master Franchisor Center, to a
Sub-Franchisee who shall execute a Sub-Franchise Agreement in accordance with
the terms herein, and whereupon said Center shall thereafter, for purposes of
this Agreement, be deemed to be a Sub-Franchisee Center. Notwithstanding the
foregoing, the conversion of an Existing Center or an ESI Center to a
Sub-Franchisee Center, shall not change Master Franchisor's obligations under
the Development Schedule, it being acknowledged that, the number of Centers
described in the Development Schedule shall be exclusive of the Existing Centers
and the ESI Centers, notwithstanding their subsequent conversion to a
Sub-Franchisee Center.
D. All locations and leases shall be subject to the approval of the
Company which approval shall not be unreasonably withheld. Master Franchisor
shall be obligated to submit to the Company, for its approval, the final form of
the negotiated lease, together with the information relating to the location, as
described in Section E below. All documents required to be submitted by the
Master Franchisor shall be forwarded via overnight courier to the attention of
the Company's corporate counsel at the address described in Section 27 of this
Agreement. The Company shall have the right to have all leases reviewed by its
counsel, who shall have the right to provide comments or suggested or required
modifications to the proposed lease. Master Franchisor shall be obligated,
during the first year of the term of this Agreement, to reimburse the Company
for its reasonable legal fees incurred in reviewing the leases, which fees, the
Company agrees, during the first year of the term of this Agreement, will not
exceed US$250 per lease. The Company reserves the right, at any time during the
term of this Agreement, to charge the Master Franchisor for all of its
reasonable fees and expenses incurred, if, at the request of the Master
Franchisor, the Company or its attorney negotiates the terms of the lease and/or
the modifications on behalf of Master Franchisor. The Company shall be obligated
within five (5) business days after receiving the required information to
approve or reject the proposed location and/or the lease. The approval of a
location may be subject to obtaining a satisfactory lease for said location. In
the event that the Company fails to object to a location or the lease therefor,
within five (5) business days after receipt of the required information such
approval shall be deemed granted.
8
E. To obtain the Company's approval for a particular location, Master
Franchisor shall submit to the Company, a lease, if applicable, together with
such ownership, demographic, commercial and other information as the Company may
reasonably require. Master Franchisor hereby acknowledges and agrees that
Company's approval of a site does not constitute an assurance, representation or
warranty of any kind, express or implied, as to the suitability of the site for
a STERLING OPTICAL CENTER or for any other purpose. The Company agrees that its
approval to any proposed location shall not be unreasonably withheld or delayed.
F. If the Company approves the proposed location and the lease therefor,
the Master Franchisor shall thereafter, if the location is a Master Franchisor
Center, proceed to acquire, construct, open and operate said Center, in
accordance with the terms hereof. If the location relates to a Sub-Franchisee
Center, then Master Franchisor shall promptly execute a Sub-Franchise Agreement
with the Sub-Franchisee, in accordance with the terms hereof.
G. If, at any time, LTD shall obtain an assignment of the leases for any
of the Existing Centers, in accordance with the terms set forth in the Purchase
and Sale Agreement between the parties, and provided that at such time any
amounts remain to be paid, under the Master Fee Note and/or the various other
promissory notes being executed by and delivered to the Company by LTD and/or
EYE-SITE, pursuant to the terms of a Purchase and Sale Agreement, dated of even
date herewith (the "Purchase Notes"), then in said event, LTD shall execute and
deliver to the Company, as security for its obligations hereunder, a collateral
assignment of lease, in the form annexed as Exhibit "B" herein which collateral
assignment shall be returned to Master Franchisor upon full payment of all
amounts due under the Master Fee Note and the Purchase Notes. For each
Sub-Franchisee Center, Master Franchisor will either (i) have the lease executed
by the Master Franchisor or an affiliate of the Master Franchisor, and then
deliver to the Company a collateral assignment of the lease, or (ii) shall use
its best efforts to cause its Sub-Franchisee to execute and deliver to the
Master Franchisor, a collateral assignment of said lease, and, upon expiration
or other termination of this Agreement, Master Franchisor shall deliver said
collateral assignment to the Company, in accordance with the provisions of
Section 19 of this Agreement.
5. MASTER FRANCHISOR'S RIGHT TO OFFER FRANCHISES
A. Master Franchisor shall at all times, and at Master Franchisor's cost
and expense, comply with all applicable laws and regulations, including those
applicable to the solicitation of prospective franchisees and the offering and
sale of franchises by Master Franchisor within the Territory. The Company shall,
at the Company's expense, and subject to Master Franchisor's obligations
hereunder, cause the Uniform Franchise Offering Circular ("UFOC") being utilized
by the Company on the Effective Date of this
9
Agreement to be modified to comply with the then existing statutes, rules and
regulations applicable to the sale of franchises within the Territory, provided
Master Franchisor shall be obligated to promptly furnish to the Company or its
counsel all such information and documents as the Company or its counsel shall
reasonably request in connection with such Franchise Offering Circular.
Thereafter, the Master Franchisor shall be obligated to modify the UFOC to
reflect the relationship by and among the Company, Master Franchisor and the
Sub-Franchisees, and, if required, to comply with applicable rules and
regulations and shall be obligated, at Master Franchisor's cost and expense, to
have such Offering Circular[s] reviewed by local counsel who shall, if requested
by the Company, confirm to the Company, in writing, that same is in compliance
with the applicable laws, rules and regulations within the Territory.
B. In the event that any applicable laws, rules or regulations within the
Territory, at any time, shall require registration, filing or similar action to
be taken with respect to the offer to sell franchises, or any of the
transactions contemplated hereunder, then, in said event, Master Franchisor
shall, at its cost and expense, register and maintain proper registrations as a
Master Franchisor, in all jurisdictions where such registration is or shall be
required. Subject to the provisions of Section 5A above, Master Franchisor shall
submit to the Company, for its prior written approval, any offering circular,
prospectus, statement of material fact, offering memorandum or any other similar
document proposed to be filed or registered with any security commission or
other governmental agency or authority or stock exchange or otherwise used in
connection with any solicitation or sale of franchises for the STERLING OPTICAL
CENTERS in the Territory, together with true copies of all other material
agreements, documents, and information required to be prepared, filed or
submitted in connection therewith. All copies so provided to the Company shall
be signed by the Chief Executive Officer and the Chief Financial Officer of
Master Franchisor. The Company does not undertake any obligation hereunder to
review any such material or to advise Master Franchisor in connection therewith.
If requested by the Company, Master Franchisor shall, at its sole cost and
expense, make such amendments to such material as the Company shall, in its sole
and reasonable discretion, require in order to eliminate any untrue statement of
material fact or to rectify an omission to state a material fact that is
required by applicable to be stated, or that is necessary to make a statement
not misleading in light of the circumstances in which it was made. For the
purposes hereof, the term "material fact" shall mean a fact that significantly
affect the decision of a reasonable and prudent person contemplating the
purchase of a Sterling Optical Center Franchise.
C. The Company agrees that the Company shall, from time to time, at the
Company's cost and expense, provide Master Franchisor with copies of the
standard franchise marketing presentation and agreements typically provided to
prospective franchisees of the
10
Company. Master Franchisor shall be obligated, at its cost and expense, to amend
these documents to reflect the terms of the Franchise Agreements being offered
by Master Franchisor and to ensure that such material complies with all local
laws, rules and regulations.
D. Master Franchisor agrees to indemnify the Company from and against any
and all claims, demands, suits, liability, losses, costs, and expenses incurred,
suffered or sustained by the Company as a result of any misrepresentation or
omission made by Master Franchisor to any person in connection with the
solicitation or sale of a franchise or in connection with any violation by
Master Franchisor of any applicable law, by-law, rule or regulation pertaining
to the solicitation or sale of franchises. This indemnity shall not apply with
respect to any representation or omission of a material fact contained in any
document prepared by the Company and made available to the Master Franchisor for
use in connection with the solicitation or sale of franchises, unless based upon
information provided by Master Franchisor. Master Franchisor shall not make or
permit any representation concerning the Company, the System, the trade marks or
franchises to be made, including without limitation, the profitability thereof,
other than such representations (if any) as are expressly approved by the
Company or which are not in any way contrary to or inconsistent with any
representation in any up-to-date disclosure document pertaining to the sale of
franchises for STERLING OPTICAL CENTERS which has been prepared and registered
by the Company with any security commission or other governmental agency or
authority or recognized stock exchange, or other than representations
specifically authorized in writing by the Company. Master Franchisor's failure
to comply with the provisions of this subsection shall constitute a material
default under this Agreement. The Company shall exercise its best efforts to
cooperate with Master Franchisor, at no expense to the Company, in effecting
compliance with all applicable laws and regulations, if requested to do so by
Master Franchisor.
E. All Sub-Franchisees shall be subject to the approval of the Company
which approval shall not be unreasonably withheld or delayed. Master Franchisor
shall be obligated to submit to the Company, for its approval, such information
as the Company shall reasonably request with respect to potential
Sub-Franchisees, or if Sub-Franchisee is a partnership, corporation, or other
business entity, the principals thereof, including financial background, credit
history and business experience. All documents required to be submitted by the
Master Franchisor shall be forwarded via overnight courier to the attention of
the Company's corporate counsel at the address described in Section 27 of this
Agreement. The Company shall be obligated, within five (5) business days after
receiving the required information, to approve, reject the proposed
Sub-Franchisee or request additional information. The Company shall also have
the right to require the proposed Sub-Franchisee at, Sub-Franchisee's cost and
expense, to meet with and be interviewed by
11
representatives, officers or employees of the Company at the Company's offices,
presently located in New York. In the event that the Company fails to either
request additional information including, Sub-Franchisee's meeting with
representatives of the Company at the Company's offices or object to a proposed
Sub-Franchisee, within five (5) business days after receipt of the required
information, such approval shall be deemed granted. In the event the Company
shall request additional information, and/or meeting with the proposed
Sub-Franchisee, the Company shall have five (5) days from the later of receipt
of additional information or the date of the meeting with the Sub-Franchisee to
approve or reject the proposed Franchisee, in accordance with the provisions
herein described.
6. INITIAL AND CONTINUING FEES:
A. INITIAL FRANCHISE FEE:
(1) For each Sub-Franchisee Center opened pursuant to the terms of
this Agreement, and for each ESI Center, Existing Center, or Master
Franchisor Center which is converted to a Sub-Franchisee Center, the
Master Franchisor shall pay to the Company an initial non-recurring
Initial Franchise Fee, which, for the first three (3) years during the
term of this Agreement, shall be equal to fifty (50%) percent of the
amount due from the Sub-Franchisee, and thereafter shall be equal to forty
(40%) percent of the amount due from the Sub-Franchisee. The initial
franchise fee for Sub-Franchisee Centers shall not, without the prior
written consent of the Company, be less than TWENTY THOUSAND ($20,000
Cnd.) CANADIAN DOLLARS. Said fees shall be due and payable upon the
earlier of either (i) the signing by Sub-Franchisee of a Sub-Franchise
Agreement or (ii) the opening of a Sub-Franchisee Center.
(2) There shall be no initial non recurring franchise fee due for
any of the ESI Centers or for the Existing Centers opened under the terms
of this Agreement, until said Center shall be converted to a
Sub-Franchisee Center. In addition, if Master Franchisor shall own and
operate a Center, the initial franchisee fee for such Master Franchisor
Center will be due upon the earlier of either (i) twelve (12) months
following the opening of the Center or (ii) the transfer of said Center to
a Sub-Franchisee.
B. ROYALTY PAYMENTS:
(1) For each Master Franchisor Center, each Existing Center, and
each ESI Center, the Master Franchisor shall be obligated to pay to the
Company a continuing royalty fee (the "Royalty Fee"); which, during the
first 12 months of the term of this Agreement, shall be equal to three
(3%) percent of Gross Revenues, and thereafter shall be equal to two (2%)
12
percent of the Gross Revenues of each Center; provided, however, in the
event that the Master Franchisor increases the royalty fees due from its
Sub-Franchisees to more than eight (8%) percent then with respect to any
Master Franchisor Centers opened or which commence operation as a Master
Franchisor Center after the date of said increase, the royalty fee due
pursuant to this provision shall be in an amount equal to the percentage
of the Gross Revenues of each Center which Master Franchisor is obligated
to pay to the Company for each of the Sub-Franchisee Centers, as described
in subsection (2) below. The Royalty Fee shall be payable to the Company
on a monthly basis, shall be delivered on the tenth (10th) day of each
month and shall be calculated on the basis of the Center's Gross Revenues
for the immediately preceding calendar month.
(2) Each Sub-Franchise Agreement shall provide that the
Sub-Franchisee shall be obligated to pay to the Master Franchisor, a
continuing royalty in an amount which, except for Converted Centers which
shall be subject to the provision of subsection 6B(3) below, shall not be
less than eight (8%) percent of the Gross Revenues of the Center (as
defined below) and shall be payable on a weekly basis. The Master
Franchisor shall be obligated to pay to the Company, during the first 12
months of the term of this Agreement, an amount equal to 37.5% of the
royalty due from the Sub-Franchisee, and thereafter an amount equal to 25%
of the royalty due from the Sub-Franchisee. These payments shall be
payable to the Company on the tenth (10th) day of each month and shall be
calculated on the basis of the royalties due from each Sub-Franchisee for
the immediately preceding calendar month.
(3) In the event that Master Franchisor enters into a Sub-Franchisee
Agreement with a person who has been operating a retail optical store
under another name and, in conjunction with the execution of the
Sub-Franchise Agreement, converts said store to a Sterling Optical Center
(a "Converted Center") and thereafter operates a Sub-Franchisee Center in
accordance with the terms herein, in lieu of the eight (8%) percent
royalty fee, Master Franchisor shall have the right to provide that said
Sub-Franchisee shall, for the first four (4) years, pay royalty fees which
shall be calculated on the basis of Base Revenues and Additional Revenues
as hereinafter defined.
(a) Base Revenues, for Converted Centers which have in
operation for less than one year, shall be the total Gross Revenues
of the Center prior to the effective date of the Franchise
Agreement.
(b) Base Revenues for Converted Centers which have been in
operation for more than one year shall be equal
13
to the average Annual Gross Revenues for the 24 month period
immediately prior to the Effective Date.
(c) Additional Revenues shall be all Gross Revenues in excess
of the Base Revenues.
(d) The Master Franchisor shall, for a Converted Center, have
the right to provide that during the first four (4) years of the
term of the Sub-Franchisee Agreement that the Sub-Franchisee shall
pay the Royalty Fees which shall be not less than the following:
YEAR % PAYABLE ON % PAYABLE ON
---- BASE REVENUES ADDITIONAL REVENUES
------------- -------------------
1 2% 8%
2 2% 8%
3 4% 8%
4 6% 8%
Commencing with the fifth year of the term of the Sub-Franchisee
Agreement (or if the Center shall be sold or transferred to a new
Sub-Franchisee, then upon the effective date of said transfer) the
Sub-Franchisee shall be obligated to pay a royalty fee which shall
not be less than eight (8%) percent of the Gross Revenues at the
Center
(e) Master Franchisor shall be obligated to pay to the Company
that portion of the royalty fee as specified in subsection (2) above
for each said Converted Center.
(4) As used herein, the term "Gross Revenues" shall mean and include
the aggregate amount of all fees and other charges of every type, kind or
nature for professional and other services performed and/or goods and
services sold at, from, through or in connection with the Center, by
Master Franchisor (if a Master Franchisor Center) or by Sub-Franchisee (if
a Sub-Franchisee Center), or the Centers's employees, independent
contractors, affiliated professionals or others, and inclusive of service
plans, insurance plans, and rental or other amounts received upon the
subletting or other agreement pursuant to which a licensed professional
occupies a portion of the Premises, but excluding the full amount of (i)
any cash refunds and/or reimbursements or price adjustments issued to
customers and/or patients of the Center in the ordinary course of Master
Franchisor's or Sub-Franchisee's, whichever the case may be, business, and
in accordance with the Operating Manual; (ii) sales, use, service or
excise taxes collected from customers and/or patients and paid to the
appropriate taxing authority; (iii) bad debts as determined to be
uncollectible by a bona fide collection agency, provided that the Master
14
Franchisor or Sub-Franchisee, as appropriate, has used its reasonable best
efforts to collect such bad debts and has utilized good business practices
to ensure that such bad debts do not exceed levels which are customary for
the industry, and further provided that said amount shall be net of any
insurance proceeds received by the Master Franchisor or Sub-Franchisee on
account of such bad debts; (iv) optometric fees or services of any nature
if, and only to the extent that, the payment or collection of royalties
upon said amounts would be a violation of the laws of the jurisdiction in
which the Center is located, and then only for as long as, and to the
extent prohibited by, such law; and (v) eye refraction services, collected
by independent contractors, including optometrists or ophthalmologists,
located at the Centers who are not affiliates of Franchisee, whose
arrangements with Franchisee are the result of arms length negotiations,
and which fees are paid to said independent contractor by its patients and
no portion is payable to Franchisee. For purposes of this definition, all
such fees and charges shall be included within the Center's Gross Revenues
at the time the goods are sold or the services are rendered,
notwithstanding the fact that full payment for the same has not been
received at that time.
C. RENEWAL FEES/TRANSFER FEES
Upon renewal or transfer of any Sub-Franchise Agreement, the Master
Franchisor shall be obligated to pay to the Company, an amount which, for
the first three (3) years during the term of this Agreement, shall be
equal to fifty (50%) percent of the renewal fee or transfer fee due from
the Sub-Franchisee or the transferee, and, thereafter, shall be equal to
forty (40%) percent of the renewal fee or transfer fee due from the
Sub-Franchisee or the transferee. Said amount shall be due and payable to
the Company, upon the earlier of either (i) execution by Sub-Franchisee of
any renewed Sub-Franchise Agreement or any assumption of or execution of a
new Sub-Franchise Agreement, in the event of a transfer; or (ii) payment
by the Sub-Franchisee or transferee of any renewal fee or transfer fee to
the Master Franchisor.
D. INTEREST ON LATE PAYMENTS.
If any payments due to the Company, its subsidiaries or its
affiliates, are more than ten (10) days overdue, such obligations shall
bear interest from and after their respective due dates, and Master
Franchisor shall be obligated to pay to the Company, upon demand therefor,
interest, at the rate of one and one-half (1-1/2%) percent per month, or
the highest applicable legal rate for open account business credit,
whichever is lower.
15
E. ELECTRONIC TRANSFERS.
The Company shall, during the term of this Agreement, have the right
to require that any or all payments due to the Company or its affiliates,
from Master Franchisor be made via an electronic fund transfer process,
pursuant to which Master Franchisor's bank accounts will be debited
directly by the Company, or its financial institution. Master Franchisor
is required, within ten (10) days after written request by the Company, to
submit to the Company or the Company's financial institution, such
documentation and authorization for such transfers, in such form as may,
from time to time, be required by the Company or its various financial
institutions. Master Franchisor may not change its bank accounts or
financial institutions, unless prior to such change, it so notifies the
Company of such change, and executes such authorization as may be
necessary to continue to permit such electronic transfer.
F. RETURNED PAYMENTS.
(1) If any check or electronic fund transfer which Master Franchisor
delivers or authorizes for payment to the Company or any of its
subsidiaries and affiliates is returned unpaid by the bank upon which it
is drawn for any reason other than bank error or the payee's endorsement,
then Master Franchisor shall, upon demand, pay to the Company, as a
service charge, $25 or such greater amounts as charged by the Company's
bank for each such unpaid check or transfer.
G. ACCEPTANCE AND APPLICATION OF PAYMENTS.
(1) The Company shall have the right to apply any payments received
from Master Franchisor for any purpose or reason to any past due
indebtedness of Master Franchisor for Royalty Fees, purchases from the
Company or its affiliates, interest, or any other indebtedness owed by
Master Franchisor to the Company or its affiliates, in such order of
application as the Company shall, consider appropriate; except that
payments received on account of the Master Fee Note, the Purchase Notes or
any other note shall be applied to the payments due under said note.
(2) Master Franchisor acknowledges that this Subsection G of Section
6 shall not constitute the Company's agreement to accept any such payments
after the same are due or a commitment by the Company to extend credit to
Master Franchisor.
(3) All amounts due hereunder to the Company from the Master
Franchisor, unless otherwise set forth herein, shall be payable in
Canadian Funds.
16
7. SIMULTANEOUS CONVERSION OF EXISTING CENTERS
A. EXISTING IPCO CENTERS
(1) Simultaneously with the execution of this Agreement, LTD is
acquiring from the Company the assets relating to the four (4) Existing
Centers, in accordance with the terms of the Purchase and Sale Agreements
being executed simultaneously herewith, and, in connection therewith, is
delivering to the Company the Purchase Notes, including a Note in the
principal amount of US$450,000, as well as a note for the inventory
located at each of said Existing Centers.
(2) From and after the date hereof, LTD shall be required to operate
the Existing Centers in accordance with the terms set forth herein for
"Master Franchisor Centers" except said Centers, whether operated by LTD,
EYE-SITE or by a Sub-Franchisee, shall not be included in the number of
Centers required under the Development Schedule. In the event that at any
time LTD shall sell or otherwise transfer the Franchise for any of the
Existing Centers, together with all or substantially all of the assets
pertaining thereto (in accordance with, and as permitted by, the terms of
this Agreement), then Master Franchisor shall be obligated to execute a
Sub-Franchise Agreement with the Sub-Franchisee, and thereafter the Center
shall, subject to the terms hereunder, be operated in accordance with the
terms of said Agreement.
B. SIGNAGE AND TELEPHONE LISTINGS FOR EXISTING CENTERS AND
ESI CENTERS
(1) The Company shall be obligated, within ninety (90) days
following the date of execution of this Agreement, or such reasonable
additional periods as the Company may require to obtain permits from local
authorities, and the consent of landlords for each of said Centers, at its
cost and expense, to replace all IPCO Optical signage at the Existing
Centers, to Sterling Optical signage, in accordance with the standard
requirements of the Company.
(2) EYE-SITE shall be obligated, within ninety (90) days after the
execution of this Agreement, or such reasonable additional periods as
EYE-SITE may require to obtain permits from local authorities and consent
of the landlords of each Centers, at its cost and expense, to replace all
Eye Site signage at the ESI Centers with Sterling Optical signage, in
accordance with the standard requirements of the Company; provided,
however, that the Company shall give to Master Franchisor a credit of
$4,000 toward the signage of each Center, which amount shall be paid by
the Company at Closing.
17
(3) As soon as practicable following the Effective Date of this
Agreement, Master Franchisor shall, at its cost and expense, cause all
telephone and yellow page listings for the Existing Centers and the ESI
Centers to be amended to use only the Sterling Optical name. All listings
shall be in accordance with the standard requirements of the Company. The
Company shall promptly furnish to Master Franchisor specifications and
samples for such listings.
8. RECORDS, REPORTS, INSPECTIONS AND AUDITS.
A. ACCOUNTING AND RECORDS.
(1) Master Franchisor will itself, and will cause its
Sub-Franchisees, to establish and maintain, a complete and accurate
bookkeeping, accounting, ordering and record keeping system conforming to
generally-accepted accounting principles and the requirements and formats
prescribed by the Company from time to time in its Operating Manual, or
otherwise prescribed by the Company in writing. Such accounting and
bookkeeping system shall include: (i) sequentially numbered sales tickets,
on such forms as the Company may from time to time prescribe; (ii) daily
closeouts and deposits; and (iii) cash registers equipped with duplicate
tapes and utilizing a locked-in grand total mechanism or such other point
of sale equipment as the Company may, from time to time, require in
accordance with the terms hereof.
(2) Master Franchisor shall furnish the following reports to the
Company all of which shall be on forms approved or required by the Company
and all of which shall be certified by the Master Franchisor as true and
correct:
(a) for each Existing Center, ESI Center, Master Franchisor
Center and Sub-Franchisee Center, by the close of business on Monday
of each week, a written or electronic statement of the Gross
Revenues of the Center for the immediately preceding week ending at
the close of business on the preceding Sunday, and, upon request by
the Company, Master Franchisor shall also, provide to the Company
copies of the sales register tapes, the order forms or such other
forms as the Company may prescribe;
(b) for each Existing Center, ESI Center, Master Franchisor
Center and Sub-Franchisee Center, on or before the tenth (10th) day
of each month, a written statement of the Gross Revenues of the
Center and related information for the immediately preceding
calendar month; and
(c) within thirty (30) days following request by the Company,
a quarterly and/or year-to-date profit and loss statement and a
current balance sheet for the Master
18
Franchisor, each Sub-Franchisee and for each Master Franchisor
Center, Sub-Franchisee Center, Existing Center and ESI Center; and
(d) within ninety (90) days after the end of each calendar
year, an annual profit and loss statement of the Center for the year
then ended and a balance sheet for the Master Franchisor,
Sub-Franchisee and for each Existing Center, ESI Center, Master
Franchisor Center and Sub-Franchisee Center as of the end of the
year, which have been reviewed by an independent certified
accountant or public accountant, or if requested by the Company, are
accompanied by an opinion of either a certified accountant or public
accountant or a firm of accountants selected by Master Franchisor
and approved by the Company, which opinion may be qualified only to
the extent reasonably acceptable to the Company; provided, however,
it is agreed that a review engagement shall be deemed acceptable,
unless the Master Franchisor is required to provide additional
reports to its lending or banking institutions, in which event,
Master Franchisor shall also provide such other reports to the
Company.
(4) Master Franchisor shall require each Sub-Franchisee to maintain
and submit to Master Franchisor all other reports and information required
hereunder and under the terms of the Sub-Franchise Agreement, and Master
Franchisor shall, within five (5) days after receipt of same from
Sub-Franchisee, forward duplicate copies thereof to the Company.
(5) Master Franchisor shall maintain readily available for
inspection by the Company, and shall furnish to the Company upon its
request, exact copies of all province sales, service, and GST
(value-added) tax returns. In addition, Master Franchisor, at its expense,
shall furnish to the Company and its agents such additional forms,
reports, records, financial statements and other information as the
Company may require.
(6) Master Franchisor shall preserve and make available for
inspection by the Company all books, records, accounts and tapes for a
period of seven (7) years or for such other period as may be prescribed in
the Operating Manual.
(7) Acceptance by the Company of any payment shall not be conclusive
or binding on the Company with respect to the accuracy of such payment to
the Company.
B. THE COMPANY'S RIGHT TO EXAMINE BOOKS AND RECORDS.
(1) The Company shall have the right, at the Company's expense,
except as provided in subsection (3) below, at any
19
time during or after normal business hours, and upon not less than
seventy-two (72) hours prior notice to Master Franchisor, to examine or
audit, or cause to be examined or audited, the business records, cash
control devices, bookkeeping and accounting records, bank statements,
sales, service, payroll records, and other books and records of the
business conducted by the Master Franchisor hereunder, including all
books, records and accounts relating to the Advertising Fund, or any of
its Centers or the business conducted by any of its Sub-Franchisees to
verify the accuracy of the statements rendered and remittance made by
Master Franchisor and its compliance with the requirements set forth
herein.
(2) Master Franchisor shall maintain all of its books, records and
supporting documents at all times at its designated office within the
Territory or at such other or additional locations as the Company shall
have consented to in writing, and shall cause its Sub-Franchisees to
maintain their books, records and supporting documents at their respective
offices within the Territory. Master Franchisor shall fully cooperate with
representatives of the Company and any independent accountants or other
persons hired by the Company to conduct any such examination or audit. The
Company and its agents shall have the right to make extracts from, and
copies of, all such documents and information.
(3) In the event that any such examination or audit shall disclose
an understatement of Gross Revenues, Master Franchisor shall pay to the
Company, within five (5) days after receipt of the examination or audit
report, the Royalty Fees due and payable with respect to the amount of
such understatement, plus interest (at the rate and on the terms provided
herein) from the date originally due until the date of payment. If such
examination or audit is made necessary by the failure of Master Franchisor
to furnish reports, supporting records, financial statements (in the form
required pursuant to Section 8A2(d) above) or other documents or
information as herein required, or the failure by Master Franchisor to
furnish such reports, records, financial statements, documents or
information on a timely basis, or if the audit discloses an understatement
of Gross Revenues by two (2%) percent or more, Master Franchisor shall
also be obligated to reimburse the Company for any and all expenses
incurred in connection with said audit, including, but not limited to,
accounting and legal fees, travel and lodging expenses and compensation of
the Company's agents and employees. In the event that the audit indicates
a willful and deliberate understatement of Gross Revenues, and/or in the
event that the understatement is ten (10%) percent or more for any three
month period, said misstatement shall automatically be deemed to be a
breach of this Agreement, and the Company may terminate this Agreement as
described in Section 19 of this Agree-
20
ment. The foregoing remedies shall be in addition to all other remedies
and rights of the Company hereunder or under applicable law, including,
but not limited to, the right to demand strict compliance with the terms
of this Agreement and the right to terminate this Agreement in accordance
with its terms.
(4) In the event that any such examination or audit discloses an
overstatement of Gross Revenues, the Company shall, within ten (10) days
of its receipt of the examination or audit report, apply the Royalty Fees
contributions which were paid with respect to such overstatement of Gross
Revenues to any indebtedness which is then due and owing or will become
due and owing to the Company in the future, which amounts shall be applied
in accordance with Section 6 of this Agreement.
(5) In the event that any such examination or audit discloses that
the Master Franchisor has failed to maintain the Advertising Fund in
accordance with the terms required hereunder, and in the event that said
failure is not cured within the period required under Section 19 of this
Agreement, then, in addition to all other remedies provided hereunder, the
Company shall have the right to terminate this Agreement pursuant to
Section 19 herein and shall have the right to charge the Master Franchisor
for all accounting fees relating to such audit.
9. POINT OF SALE AND OTHER COMPUTER SYSTEMS
A. The Company and the Master Franchisor shall cooperate to cause no later
than ninety (90) days from the date of this Agreement each of their existing
Point of Sale Systems to be modified to be compatible and to enable the Company,
to access, on a daily basis, the Master Franchisor's system, to obtain sales and
other data relevant to this Agreement, relating to the Master Franchisor and its
Sub-Franchisees. The Master Franchisor shall cause to be installed in each new
Master Franchisor and each Sub-Franchisee Center, a point of sale system
approved by the Company, (subject to continuing modifications and upgrades).
Thereafter, Master Franchisor and each Sub-Franchisee shall be obligated, at
their cost and expense, to install, maintain in operation and, from time to
time, modify and/or upgrade said point of sale or other computer system, as may,
from time to time, be designated by the Company; provided, however, that with
respect to Centers existing on the date that a modification or upgrade is
requested by the Company, such Centers shall have 90 days to install such new or
modified systems or upgrade. Each system shall provide direct daily reporting of
daily sales of all Master Franchisor Centers, Sub-Franchisee Centers, Existing
Centers and ESI Centers to the office of Master Franchisor, and shall provide
the Company with the ability to maintain direct access to Master Franchisor's
system to
21
enable the Company to obtain daily reporting from Master Franchisor for all
Centers within the Territory. Master Franchisor shall not modify its programs or
otherwise change its system without the prior written approval of the Company.
10. OBLIGATIONS OF THE COMPANY
A. The Company shall, at the Company's cost and expense, provide to all
Sub-Franchisees, such initial training as is generally provided by the Company
to its Franchisees who have previous retail optical experience. Such training
shall be held at the Company's headquarters in New York or such other places as
the Company shall designate in accordance with its standard practices. The cost
of the training (including instructors and materials) shall be borne by the
Company. All other expenses during such training, including, without limitation,
costs of travel, accommodations, wages, meals and other expenses of Master
Franchisor or Sub-Franchisee and their respective employees, shall be the
responsibility of the Master Franchisor or Sub-Franchisees.
B. During the term of this Agreement, the Company shall provide, once
during each calendar quarter, a training meeting for all Sub-Franchisees, which
meeting shall be held, at the Company's election, in Buffalo or Toronto, and may
be held together with any other regional training meeting held for Franchisees
of the Company. Said costs shall not include travel, food, lodging, or wages
which shall be the responsibility of the Master Franchisor or the
Sub-Franchisee. The Company shall also provide training of Master Franchisor's
field consultants, which training, at the Company's election, may be held either
in the United States or Canada, and which shall be consistent with the training
generally provided to the Company's field consultants. At the Company's option,
in lieu of conducting separate training for Master Franchisor's field
consultants within the Territory, Master Franchisor's field consultants shall be
included in the training programs conducted by the Company within the United
States. The Company shall also have the right to require managers and/or other
employees of Centers owned and operated by Master Franchisor to attend and/or
participate in training meetings, or other training generally required by the
Company for its Franchisees, which training may be at the offices of the Company
or such other locations as may be designated by the Company. Except for the
costs and expenses of the personnel of the Company which shall be borne by the
Company, Master Franchisor shall be responsible for all costs and expenses
relating to all such training programs, including without limitation, costs of
travel, accommodations, wages, meals and other expenses of Master Franchisor and
its employees, Sub-Franchisees and their field consultants.
C. The Company shall, during the first year of the term of this Agreement,
provide Master Franchisor with such reasonable initial training and assistance
in the sale of franchises, the
22
marketing of franchises, and the closing of franchise sales, as the Company
shall determine to be reasonably necessary or appropriate. Such assistance shall
include assisting in procuring of potential franchisees, initial and subsequent
interviews and meetings with potential franchisees, training of franchisees and
attendance at closing for execution of Sub-Franchisee Agreements.
D. The Company shall use its best, reasonable good faith efforts, to
assist Master Franchisor to obtain from vendors of optical products and services
such payment and/or discount terms as may, from time to time, be obtained by the
Company from such vendors for its Company-operated Centers; provided, however,
Master Franchisor acknowledges that notwithstanding the Company's reasonable
good faith efforts, the terms and discounts available to the Company may not
necessarily be provided to the Master Franchisor.
E. The Company shall provide the Master Franchisor with reasonable
assistance in establishing programs to obtain funding from vendors for
Franchisee education and training as well as other meetings for its
Sub-Franchisees. Master Franchisor acknowledges that there is no guarantee that
such funds will be available, or that the Company will be successful in
assisting Master Franchisor to obtain such funds.
F. Master Franchisor shall also have the right, at Master Franchisor's
cost and expense, and at Master Franchisor's or Sub-Franchisee's expense, to
have Sub-Franchisees attend, any national meetings or conventions which are held
by the Company for its Franchisees.
G. In the event that the Company shall offer to its franchisees training
programs utilizing the services of outside consultants, or, in the event that
the Company participates with vendors in training or sales programs, the Company
shall seek to arrange for similar programs to be held within the Territory at
Master Franchisor's expense or, in the event said programs are not held within
the Territory, the Master Franchisor and the Sub-Franchisees shall have the
right, at their cost and expense, to attend said meetings or programs at such
location within the United States as the programs may be held.
H. The Company shall provide Master Franchisor with all such research,
proprietary information, technological information, vendor information, an other
information and programs which it generally makes available to its franchisees,
in the New York Region.
I. The Company shall provide the Master Franchisor with all such
specifications as shall generally be provided to its Franchisees,to design,
construct, furnish and fixture Sterling Optical Centers;
23
J. The Company shall provide the Master Franchisor with such special
techniques, preparation instructions, new services and other operational
developments as may, from time to time, be developed by the Company and deemed
by it to be helpful to the Master Franchisor. Any trade secrets made available
to Franchise pursuant to this subsection shall be deemed part of the "Business
System".
11. OPERATING MANUAL AND CONFIDENTIAL INFORMATION
A. OPERATING MANUAL
(1) The Company will loan to each Master Franchisor, for its use
during the term of this Agreement, one (1) copy of the Company's Operating
Manual (the "Operating Manual"), which Operating Manual contains mandatory
and suggested specifications, standards, policies and operating procedures
which are prescribed or suggested by the Company for Sterling Optical
Centers and information relative to the other duties and obligations of
franchisees of Sterling Optical Center; provided, however, Master
Franchisor shall be obligated at Master Franchisor's cost and expense to
modify the Company's Operating Manual to incorporate such laws, rules and
regulations as may be applicable for operation of retail optical centers
within the Territory and to reflect the relationship between the Master
Franchisor, the Company and the Sub-Franchisee. Master Franchisor shall be
obligated, at Master Franchisor's expense, to arrange for local counsel to
review same to ensure it accurately reflects the applicable laws, rules
and regulations. All such modifications shall be subject to the approval
of the Company. Subject to the modifications herein contained, Master
Franchisor shall be obligated to operate all Master Franchisor Centers,
inclusive of the Existing Centers and the ESI Centers, and shall cause all
Sub-Franchisee Centers, to be operated in accordance with the terms of the
Operating Manual. Notwithstanding anything to the contrary contained
herein or elsewhere expressed or implied, the Operating Manual shall not
be used in any fashion to direct, limit or otherwise control the
independent professional judgment of any ophthalmologist, optometrist or
optician who provides professional eye care services at, from or through
the Centers.
(2) The Company shall have the right, from time to time, to add to,
delete from and to otherwise modify the Operating Manual, upon written
notice thereof to Master Franchisor, to reflect changes in authorized
services, approved types and brands of equipment, new or modified marks,
materials and supplies, specifications, standards, policies, techniques,
and operating procedures. Each and every addition to, deletion from, or
other modification to the Operating Manual shall become effective within
thirty (30) days after Master Franchi-
24
sor's receipt of the aforesaid notice from the Company or such greater
time period as the Company shall specify in said modification. Master
Franchisor shall be obligated to advise each of its Sub-Franchisees of any
changes in the Operating Manual. The Master Franchisor shall retain the
Operating Manual at its offices within the Territory; provided, however,
that the master copies maintained by the Company at its office shall be
controlling in the event of a dispute relative to the contents of the
Operating Manual.
(3) The Company shall deliver to Master Franchisor such computer
tape or diskette as shall be necessary to assist Master Franchisor to
duplicate the Operating Manual, provided same shall at all times remain
the property of the Master Franchisor, and be subject to the provisions
herein contained. Master Franchisor shall, subject to the terms of this
Agreement and the Sub-Franchise Agreements, make a copy of the Operating
Manual available to each of its Sub-Franchisees, together with such
changes as shall be required to reflect the relationship between the
Sub-Franchisee and the Master Franchisor; provided that all copies of the
Operating Manual, either provided by the Company, or provided by the
Master Franchisor to its Sub-Franchisees, shall be the property of the
Company. Master Franchisor shall be obligated to maintain a record of the
copies of the Operating Manual which it has supplied to its
Sub-Franchisees. The Master Franchisor shall not provide more than one
copy of the Operating Manual to any Center.
(4) Master Franchisor shall at all times treat, and shall cause its
Sub-Franchisees to treat, the Operating Manual, and the information
contained therein, as confidential, and shall use, and cause its
Sub-Franchisees to use, all reasonable efforts to maintain such
information as secret and confidential.
(5) Upon termination or expiration of this Agreement, Master
Franchisor shall return the Operating Manual all computer tapes and
diskettes, and all copies of any of the foregoing to the Company and shall
cease use of all proprietary information. In the event that Master
Franchisor shall, during the term of this Agreement, lose the Operating
Manual or shall fail to return it upon termination or expiration, Master
Franchisor shall be obligated to pay to the Company the sum of Five
Thousand (US$5,000) Dollars for each copy thereof and shall provide in
each Sub-Franchisee Agreement that each Sub-Franchisee will be obligated
to pay to the Company the sum of FIVE THOUSAND (US$5,000) DOLLARS for each
copy of the Operating Manual which such Sub-Franchisee fails to return. In
addition, Master Franchisor shall use its best good faith efforts to cause
each of its Sub-Franchisees to return the
25
Operating Manual to the Company, upon expiration or termination of their
Sub-Franchise Agreements.
(6) Master Franchisor acknowledges that the Operating Manual, as it
exists on the date of execution of this Agreement and as it may
subsequently be amended by the Company, is proprietary to the Company, and
belongs exclusively to the Company. Upon expiration or termination of this
Agreement, Master Franchisor shall cease use of all such proprietary
information.
B. CONFIDENTIAL INFORMATION.
(1) The Company now possesses, and may hereafter acquire or develop,
certain confidential information and know-how, consisting of the methods,
techniques, computer software, formats, specifications, procedures,
information and systems for, and knowledge of and experience in, the
development, operation and franchising of Sterling Optical Centers
("Confidential Information"). Confidential Information has been or may be
furnished to Master Franchisor, or the appropriate officers, shareholders
or partners of Master Franchisor and/or the manager of any of its Centers.
(2) Master Franchisor acknowledges and agrees that neither Master
Franchisor, nor any of its Sub-Franchisees, will acquire any interest in
the Confidential Information other than the right to utilize the same in
connection with the operation of their respective Sterling Optical Centers
in accordance with and during the term of this Agreement, or the
Sub-Franchise Agreement, and that the use or duplication of the
Confidential Information for any other purpose would constitute an unfair
method of competition. Master Franchisor acknowledges and agrees that the
Confidential Information is proprietary and contains trade secrets of the
Company and has been disclosed to Master Franchisor by the Company solely
for use in connection with this Agreement and the operation of Master
Franchisor and Sub-Franchisee Centers, on the following conditions, all of
which are specifically acknowledged, accepted and agreed to by Master
Franchisor as being reasonable and necessary to protect the Company's
proprietary interest in the Confidential Information:
(a) Master Franchisor will not use the Confidential
Information in any other business or capacity;
(b) Master Franchisor will maintain the absolute
confidentiality of the Confidential Information during and after the
term of this Agreement and will not communicate, divulge, nor
disclose it to any unauthorized person;
26
(c) Master Franchisor will not make unauthorized copies of any
portion of the Confidential Information which is disclosed in
written form;
(d) Master Franchisor will adopt and implement all reasonable
procedures prescribed from time to time by the Company to prevent
the unauthorized use or disclosure of the Confidential Information
including, without limitation, restrictions on disclosure thereof to
Master Franchisor's employees, owners, contractors, and affiliated
professionals, and the incorporation of nondisclosure and
noncompetition clauses in employment and other agreements with such
persons; and
(e) Master Franchisor will take, at Master Franchisor's sole
cost and expense, but at the Company's option, and in any event
under the Company's control, any legal action which the Company
deems necessary to prevent use of the Confidential Information by
any third party or entity which has gained access to the
Confidential Information due, in material part, to the fault of
Master Franchisor.
(f) Master Franchisor will disclose such information to
Sub-Franchisees only upon their consent to the foregoing conditions,
and Master Franchisor shall be obligated to take all such action as
may be necessary to enforce the obligations of its Sub-Franchisee's
to keep such information confidential.
(3) Notwithstanding the restrictions contained in this Section 11B,
the restrictions on Master Franchisor's and Sub-Franchisees disclosure and
use of the Confidential Information shall not apply to the following:
(a) information, processes or techniques which are or become
generally known in the eye care profession or eyewear industry,
other than through deliberate or inadvertent disclosure by or
through Master Franchisor or Sub-Franchisees or their agents,
contractors, owners, affiliated professionals, employees or
associates; and
(b) disclosure of the Confidential Information in judicial or
administrative proceedings, but only to the extent that Master
Franchisor or Sub-Franchisee is legally compelled to disclose the
same by any competent legal authority; provided, however, that
Master Franchisor shall have used its best efforts to prevent any
such disclosure and shall have afforded the Company the opportunity
to obtain an appropriate protective order or such other assurances
as the Company may choose to seek in order to assure confidential
treatment of any Confi-
27
dential Information which Master Franchisor or Sub-Franchisee is
required to disclose.
(4) Master Franchisor's obligations hereunder shall survive the
expiration or sooner termination of this Agreement.
12. ADVERTISING AND PROMOTION:
A. Master Franchisor shall be obligated to establish and maintain an
advertising fund (the "Advertising Fund") to advertise and promote Sterling
Optical Centers throughout the Territory, and shall thereafter use the
Advertising Fund to diligently promote the Sterling Optical name. Each
Sub-Franchisee Agreement shall require that the Sub-Franchisees makes a
continuing contribution to the Advertising Fund in an amount which shall not be
less than six (6%) percent of the Gross Revenues for said Center, which amount
shall be paid on a weekly basis. For each Master Franchisor Center, as well as
for the Existing Centers and ESI Centers, Master Franchisor shall be obligated
to contribute to the Advertising Fund, on a weekly basis, an amount equal to six
(6%) percent of the Gross Revenues for each of said Centers; provided, however,
in the event that Master Franchisor increases the amount of the Advertising Fund
Contribution due for new Sub-Franchisees, then, for such Master Franchisor
Centers opened or which otherwise commence to operate as a Master Franchisor
Center from and after the date of such increase, the Master Franchisor shall be
obligated for each such Center to make contributions in such greater amount as
then is being required to be contributed by new Sub-Franchisees.
B. The Advertising Fund shall be maintained by the Master Franchisor as a
separate fund, and shall not be commingled with the Master Franchisor's funds.
The Advertising Fund shall be utilized for the purposes described herein and in
the Sub-Franchise Agreements. In administering the Advertising Fund, and
conducting the advertising programs, Master Franchisor shall be obligated to
retain or employ such advertising agencies as shall be designated or approved by
the Company, and shall be obligated, from the Advertising Fund, to pay all fees
due to such advertising agencies. The Advertising Fund shall also be used to pay
all media costs, commissions, creative and production costs and other costs
relating to the regional advertising and promotional programs undertaken in the
Territory by Master Franchisor pursuant to this Section. The Master Franchisor
will be obligated to spend at least one half of that portion of each
Sub-Franchisee's advertising contribution which is allocable to media (after
deduction of appropriate agency fees, production costs, administrative costs and
overhead) to media which is available within the Sub-Franchisee's Area of
Dominant Influence ("ADI");
C. Master Franchisor shall diligently advertise and promote the Marks and
the chain of Sterling Optical Centers located within
28
the Territory, in a manner that will reflect favorably on the Company, its
proprietary marks, its franchises and sub-franchisees, and the good name, good
will and reputation thereof. Master Franchisor shall not conduct any advertising
or promotion which is or may be deceptive or misleading. All advertising and
promotions shall conform to the highest standards of ethical advertising and
shall be consistent with the advertising practices and policies established by
the Company from time to time.
D. Master Franchisor recognizing the importance of the standardization of
such activities as aforesaid, agrees not to use any such material or engage in
any such promotion without the prior approval of the Company, which approval
shall not be unreasonably withheld. Master Franchisor agrees to submit to the
Company, for its prior approval, all advertising and sales promotion materials
which Master Franchisor desires to use. If within seven (7) days from the date
of receipt of any advertising or sales promotion materials submitted by Master
Franchisor the Company does not give Master Franchisor written or oral notice of
any disapproval of said proposed advertising or sales promotion material, such
materials shall be deemed approved. It is hereby agreed that notwithstanding the
foregoing, once the Company has approved a specific advertising format, and
until otherwise notified by the Company that said format is not acceptable, the
Master Franchisor shall have the right to continue to utilize said format
without obtaining the Company's consent to each such advertisement. The Company
reserves the right to subsequently withdraw its consent if such advertisement no
longer conforms to its then current standards.
E. Master Franchisor shall be obligated, at its cost and expense, to
furnish to the Company, on an annual basis, not later than 90 days after the end
of each calendar year, a written report and accounting of the Advertising Fund,
audited by a firm of independent certified public accountants acceptable to the
Company. Master Franchisor shall also be obligated to make such reports
available to each of its Sub-Franchisees. Master Franchisor shall also have the
right, upon prior notice, to audit the accounts of the Advertising Fund. Master
Franchisor also shall be responsible to submit to the Company such other
reasonable reports, at such reasonable times, as the Company shall require
including, but not limited to:
(1) annual advertising budgets, which shall be updated quarterly.
(2) quarterly advertising plans.
(3) periodic written evaluations of the effectiveness of
advertising activities.
29
13. DUTIES AND OBLIGATIONS OF MASTER FRANCHISOR:
A. Master Franchisor hereby covenants and agrees as follows:
(1) to diligently recruit potential Sub-Franchisees and in
connection therewith, to use the criteria and standards that may be
designated by the Company, from time to time, for evaluating prospective
franchisees and agrees to grant sub-franchises for the operation of
Sub-Franchisee Centers only to those persons who demonstrate substantial
compliance with such criteria and standards; shall be subject to the prior
approval of the Company in accordance with the provisions of Section 5E
above.
(2) to assist each Sub-Franchisee in selecting a suitable location
for the operation of its Sub-Franchisee Center and to supervise the
construction, fixturing, furnishing and equipping of each Master
Franchisor Center and Sub-Franchisee Center, to ensure that each Center
complies with the requirements of the Business System, the Operating
Manual and such plans and specifications as the Company may, from time to
time provide to the Master Franchisor.
(3) to fully and faithfully fulfill its responsibilities and perform
its obligations as franchisor under each Sub-Franchise Agreement. Without
limiting the generality of the foregoing, Master Franchisor shall observe
and perform its obligations under each Sub-Franchise Agreement relating to
site selection, development of the Center, training of Sub-Franchisees,
pre-opening and opening assistance, advertising, and providing continuing
supervision, advice and guidance in the operation of a Sub-Franchisee
Center.
(4) to operate each Existing Center, Master Franchisor Center and
ESI Center, and to cause each Sub-Franchisee Center to be operated, in
accordance with this Agreement, the Business System, the Operating Manual,
and such other standards as the Company shall, from time to time, require
for its franchisees.
(5) to protect the integrity of the Business System in the
Territory, including, without limitation, by taking all such steps
(including commencement and diligent prosecution of legal proceedings), at
its sole cost and expense, as may be necessary to cause each of its
Sub-Franchisees to observe and perform, in a timely fashion, all of the
Sub-Franchisee's obligations under its Sub-Franchise Agreement, and any
other agreement entered into with the Master Franchisor in connection
therewith.
(6) to maintain a sufficient number of qualified personnel, to train
and supervise Sub-Franchisees in the operation
30
of a Sterling Optical Center, as well as to provide the office facilities,
accounting services, advertising services, and such other services as may
be required under this Agreement and/or each Sub-Franchise Agreement.
(7) to actively promote the Sterling Optical name and to apply all
amounts collected in the Advertising Fund to such promotion, or such other
related expenses as may be authorized hereunder.
B. With respect to each Sub-Franchise Agreement, Master Franchisor shall
(1) prior to the opening of any Sub-Franchisee Center obtain the
Company's approval to the selection of the Sub-Franchisee in accordance
with the terms of this Agreement, and require the Sub-Franchisee to
execute the Sub-Franchise Agreement, in the form required hereunder, as
the same may, from time to time be amended;
(2) promptly following the execution thereof, but in no event more
than ten (10) days after the Sub-Franchisee commences operation of the
Sub-Franchisee Center, provide to the Company true and correct copies of
the Sub-Franchise Agreement, the Guaranty and all other documents executed
by the Sub-Franchisee in connection with the Sub-Franchisee Center,
together with a collateral assignment of the Franchise Agreement, and, if
obtained pursuant to Subsection 4G above, a collateral assignment of the
lease or sublease pursuant to which the Sub-Franchisee occupies the
Premises where its Sub-Franchisee Center is located, and an assignment of
the telephone number(s) utilized by the Sub-Franchisee at the
Sub-Franchise Center; each Sub-Franchise Agreement shall provide
Sub-Franchisee's consent to such collateral assignments and an
acknowledgment and consent that in the event that this Agreement between
Master Franchisor and the Company is terminated, for any reason
whatsoever, the Company shall have the right, but not the obligation to
require the agreements be assigned to the Company and thereupon the
Sub-Franchisee shall become a franchisee of the Company;
(3) obtain Sub-Franchisee's agreement to Sub-Franchisee's obligation
to make all payments required under the Sub-Franchise Agreement to the
Company or its designee, upon written notice from either the Company or
Master Franchisor; and
(4) obtain all such personal guaranties, guaranty and assumption
agreements, security agreements, electronic fund transfer authorization
and such other documents and agreements as may, from time to time,
generally be required of the Company for its new Franchisees.
31
14. OPERATION OF THE CENTERS.
A. CONDITION AND APPEARANCE OF THE CENTERS.
(1) Master Franchisor agrees that:
(a) each Center opened and operated pursuant to the terms of
this Agreement will be used only for the operation of a Sterling
Optical Center in compliance with this Agreement or the
Sub-Franchise Agreement, and for no other purpose;
(b) Master Franchisor will, with respect to all Master
Franchisor Centers, Existing Centers and ESI Centers maintain, at
Master Franchisor's cost and expense, and with respect to all
Sub-Franchisee Centers, cause the Sub-Franchisee to maintain at
their cost and expense, the condition and appearance of the Centers
in accordance with the standards of the Company and consistent with
the image of a Sterling Optical Center as a clean, attractive,
professional and efficiently operated retail optical center offering
quality products and services, including, without limitation: (i)
the continuous and thorough cleaning and sanitation of the interior
and exterior of the Centers to keep the Centers in the highest
degree of sanitation and repair; (ii) repair and alteration of the
Centers, as may be reasonably required including repair of public
areas, recovering, refinishing, or replacement of display cases,
furniture, fixtures, or equipment, the renovation or replacement of
flooring, and the repainting of the Centers; and (iii) the upgrading
and/or remodeling of the Premises and the Centers, at such times as
may be reasonably necessary to conform the Centers to the Company's
then current standards and specifications for decor, layout,
furnishings and/or equipment, for Sterling Optical Centers as the
same may be modified upon consent of the Company which shall not be
unreasonably withheld, to create a uniform appearance within the
Territory or to reflect local styles or designs; and
(2) In the event Master Franchisor does not maintain the condition
and appearance of the Premises or the Centers in accordance with this
Agreement, the Company may, in addition to its other rights and remedies
hereunder, and upon not less than thirty (30) days prior written notice to
Master Franchisor: (i) arrange for any necessary cleaning or sanitation,
repair, remodeling, upgrading, painting or decorating; and/or (ii) replace
the necessary fixtures, equipment or signs; unless within said thirty (30)
day period the Master Franchisor has commenced to correct the condition,
and thereafter diligently continues and completes said repairs and/or
32
renovations. In the event the Company incurs any cost pursuant to this
provision, Master Franchisor shall pay the entire cost thereof to the
Company on the due date for the next subsequent Royalty Fee payment.
B. APPROVED PRODUCTS AND SUPPLIES.
(1) In order to maintain set standards for the products and services
provided by Sterling Optical Centers, Master Franchisor agrees that Master
Franchisor shall, and shall require all Sub-Franchisees to, purchase or
lease all equipment, fixtures, furnishings, products or other items
required for use in connection with the operation of their Centers solely
from suppliers approved by the Company. Such suppliers will be ones who
demonstrate, to the continuing satisfaction of the Company, their ability
to meet the Company's reasonable standards and specifications for such
items; who possess adequate quality controls and capacity to supply and
service Master Franchisor's needs promptly and reliably; and who have been
approved in writing by the Company and not thereafter disapproved.
(2) For purposes of this Agreement, and unless Master Franchisor is
otherwise notified to the contrary, any vendor or supplier (i) listed now
or at any time hereafter in "FRAME FACTS"; (ii) from whom Master
Franchisor is currently purchasing goods or services; or (iii) and any
vendor or supplier from whom the Company is purchasing goods or services
for its Company-operated Centers shall be deemed to be an approved vendor
or supplier and Master Franchisor may and may permit its Sub-Franchisee's
to purchase or lease equipment, fixtures, furnishings, products or other
items from any such vendor or supplier without first obtaining approval
from the Company.
(3) In the event that Master Franchisor or any Sub-Franchisee
desires to purchase or otherwise obtain any equipment, fixtures,
furnishings, products, or other items required for use in connection with
the operation of their Centers from a supplier not previously approved by
the Company, the Company shall have the right to require as one of the
conditions to its approval that financial information as to such supplier
be furnished to the Company, and that, at Master Franchisor's or
Sub-Franchisee's expense, samples and/or specifications of such product be
delivered to the Company or to an independent testing lab selected by the
Company in the reasonable exercise of its discretion for tests designed to
determine such item's compliance with the specifications set forth in the
Operating Manual.
(4) The Company shall, in the reasonable exercise of its discretion,
be entitled to withdraw its approval of any item or supplier on the ground
that such item or supplier does not
33
then meet the standards set forth in the Operating Manual or other written
stated specifications.
(5) Master Franchisor agrees that all products, supplies or
materials used or dispensed at, from or through any of the Centers to be
opened and operated hereunder, shall comply with all applicable laws and
shall be fit for their intended uses.
C. STANDARDS OF SERVICE.
Each Center opened and operated under the terms of this Agreement,
shall at all times give courteous, efficient and professional service to
its customers and patients. Master Franchisor shall, and shall require
that each of its Sub-Franchisees, adhere to the highest standards of
honesty, integrity, professionalism, fair dealing and ethical conduct in
all dealings with its suppliers, the public, the Company, and customers
and patients served by or through their Centers.
D. COMPLIANCE WITH LAWS AND GOOD BUSINESS PRACTICES.
(1) Master Franchisor shall, and shall require that its
Sub-Franchisees, secure and maintain in force all required licenses,
permits and certificates relating to the operation of each Center and
shall, and cause its Sub-Franchisees to, operate each Center in full
compliance with all applicable laws, ordinances and regulations including
those regulations which govern the practice of medicine, optometry or
opticianry.
(2) In the event of the commencement of any action, suit,
investigation or other proceeding against Master Franchisor, any
Sub-Franchisee, any Center or the Company by any patient, customer,
employee, former employee, affiliated professional, formerly affiliated
professional, public agency, private group, professional organization or
any other person or entity which may adversely affect the operation or
financial condition of Master Franchisor, the Sub-Franchisee, the Company,
or the goodwill associated with the Business System and the Marks, Master
Franchisor shall promptly notify the Company in writing of such action or
proceeding. The Company shall thereafter have the right to require that
Master Franchisor or Sub-Franchisee not settle, compromise or otherwise
resolve any such action, suit, investigation or proceeding without
granting the Company an opportunity to become a party to the same and/or
obtain such releases and other similar protection as its counsel shall
consider appropriate. Master Franchisor shall promptly notify the Company
of the resolution of any such action, suit, proceeding or investigation or
the issuance of any order, writ, injunction, award or decree, by any court
or agency, against Master Franchisor or any Sub-Franchisee.
34
E. MANAGEMENT OF THE CENTERS.
Each Master Franchisor Center, Existing Center and ESI Center shall
at all times have either one or more of Master Franchisor's principal
shareholders or a manager who may, from time to time, be designated by
Master Franchisor and who has successfully completed the Company's
training program, devoting his or her full time and attention to the
operation of the Centers, and the business described hereunder; provided
that if at any time such person is not operating the Centers or the
business in compliance with this Agreement or the Operating Manual, the
Company shall have the right to so notify the Master Franchisor, and
Master Franchisor shall thereafter be obligated to use its best efforts to
either replace said manager, or cause such manager to remedy his/her non
compliance; provided, however, if the condition has not been remedied to
the Company's reasonable satisfaction within one hundred fifty (150) days
after the initial notice, the Company reserves the right to revoke its
approval of said manager and require that the Master Franchisor replace
said manager within thirty (30) days after notice of such revocation of
approval. The Company also maintains the right to require such manager(s),
at Master Franchisor's cost and expense, to complete the Company's
training program as more fully described in Section 10 above.
F. INSURANCE.
(1) Master Franchisor shall, with respect to each Master Franchisor
Center, Existing Center and ESI Center and, with respect to each
Sub-Franchisee Center, shall cause its Sub-Franchisees to, maintain, at
their sole expense (i) workers' compensation board premiums, to the extent
applicable, and which policies shall have such face amounts, coverage
provisions and exclusions as required by applicable law and as the Company
shall approve; (ii) comprehensive public and product liability insurance
and professional liability or malpractice insurance against claims for
bodily and personal injury, death and property damage and a broad form
comprehensive general liability endorsement against claims arising from or
occurring in conjunction with the conduct of business by Master Franchisor
or its Sub-Franchisees all services performed at or through the Centers,
which general liability insurance policies shall have policy limits of not
less than $1,000,000/$2,000,000 for property damage and personal injury
and malpractice, with umbrella coverage up to $5,000,000 for any one
incident, or such greater amounts as may, from time to time, be required
by the Operating Manual, which insurance shall contain such coverage
provisions and exclusions as the Company shall approve for franchised
Sterling Optical Centers which are located in the locality which the
Center is located; (iii) property and casualty insurance covering the
assets,
35
inventory, equipment, leasehold improvements and fixtures on an "all-risk"
basis and in an amount not less than their aggregate replacement cost, but
in any event, no less than the principal amount remaining on any
Promissory Note(s) which may have been executed by Master Franchisor in
connection with any financing provided by or through the Company to Master
Franchisor; (iv) business interruption insurance; and (v) any additional
insurance which may be required under the terms of the lease or Sublease
for the Centers. The Company may, in the exercise of its reasonable
discretion, periodically increase the amounts of coverage required under
insurance policies and require different or additional kinds of insurance
at any time, including without limitation, excess liability insurance, to
reflect newly identified risks, changes in law or standards of liability,
higher damage awards or other relevant changes in circumstances.
(2) All such insurance policies shall name the Company, its
designated affiliates and, where required, the landlord and sublessor of
the Premises, as an additional insured and/or loss payee as its interest
may appear, except with respect to the aforesaid professional liability or
malpractice insurance policies; shall contain a waiver by the insurance
company of all rights of subrogation against the Company and its
affiliates; and shall provide that the Company shall receive thirty (30)
days prior written notice of any termination, expiration, modification or
cancellation of any such policy. In addition to any notice requirements
contained in any insurance policy required by this Agreement, Master
Franchisor shall notify the Company of all claims made under any insurance
policy required by this Agreement within ten (10) days of Master
Franchisor's receipt of the same. Master Franchisor shall submit to the
Company a copy of the certificate or other evidence of such insurance
simultaneously upon its execution hereof and annually thereafter upon the
renewal or extension of each such insurance policy. If requested by the
Company, Master Franchisor shall also submit an exact copy of any
insurance policy required hereby.
(3) If Master Franchisor at any time fails or refuses to maintain in
effect any such insurance coverage required by the Company, or fails to
furnish satisfactory evidence thereof to the Company, the Company may, at
its option and in addition to its other rights and remedies hereunder,
obtain such insurance coverage on behalf of Master Franchisor, and Master
Franchisor shall promptly execute any applications or other forms or
instruments which may be required in order to obtain any such insurance
and pay to the Company, on demand, any costs and premiums which the
Company may pay or incur in order to obtain such insurance policies for
Master Franchisor, together with such service charges as the Company may
from time to time impose for such procurement.
36
(4) Master Franchisor's obligation to obtain and maintain the
insurance coverage described herein shall not be limited in any way by
reason of any insurance policies maintained by the Company, nor shall the
Company's performance of such obligations relieve Master Franchisor of any
obligations and/or liabilities under this Agreement.
G. TELEPHONE NUMBER.
Master Franchisor acknowledges that all rights to the telephone
number(s) of the Sub-Franchisee Centers, upon expiration or sooner
termination of this Agreement, belong to the Company, and, upon the
opening of each Sub-Franchisee Center, Master Franchisor shall cause each
Sub-Franchisee to execute and deliver to the Master Franchisor and/or
Company an assignment of the telephone number(s) substantially in the form
annexed hereto as Exhibit "C". Master Franchisor further acknowledges that
all rights to the telephone numbers of the Existing Centers, upon any
expiration or sooner termination of this Agreement, prior to full payment
of all amounts due under the Master Fee Note or any of the Purchase Notes,
also belong to the Company and upon execution of this Agreement, Master
Franchisor shall execute and deliver an assignment of telephone number
substantially in the form annexed as Exhibit C, with respect to each of
the Existing Centers; provided, however, upon full payment of all amounts
due under the Master Fee Note and the Purchase Notes, the assignments
shall be returned to the Master Franchisor.
15. MARKS.
A. OWNERSHIP AND GOODWILL OF MARKS.
(1) Master Franchisor acknowledges that the Company is the owner of
the Marks and Master Franchisor's license to use the Marks is derived
solely from this Agreement and is limited to the conduct of its business
pursuant to and in compliance with this Agreement, the Operating Manual
and all applicable specifications, standards, policies and operating
procedures prescribed by the Company and does not give Master Franchisor
any ownership interest in the Marks. Any unauthorized use of the Marks by
Master Franchisor shall constitute an infringement of the rights of the
Company in and to the Marks.
(2) Master Franchisor agrees that all usage of the Marks by Master
Franchisor, and by any Sub-Franchisee, and any goodwill established
thereby shall inure to the exclusive benefit of the Company. Master
Franchisor acknowledges that this Agreement does not confer any goodwill
or other interest in the Marks upon Master Franchisor, except for the
right to use, and sub-license same in accordance with the terms hereof.
Master Franchisor shall not, and shall not permit any Sub-
37
Franchisee, at any time during the term of this Agreement or after its
termination or expiration: (i) register or attempt to register the Marks,
or assert any right in them other than as specifically granted in this
Agreement; (ii) contest the Company's rights and interest in and to the
Marks or the Company's ownership of any of the Marks; or (iii) assist any
other person in contesting the Company's rights and interest in and to the
Marks or the Company's ownership of any of the Marks.
(3) All provisions of this Agreement applicable to the Marks shall
apply to any additional trademarks, service marks, logo forms and
commercial symbols hereafter authorized for use by and licensed to Master
Franchisor pursuant to this Agreement.
B. LIMITATIONS ON MASTER FRANCHISOR'S USE OF MARKS.
Master Franchisor shall use the Marks as the sole identification of
each Center opened or operated pursuant to the terms hereof, except to the
extent that Master Franchisor or any Sub-Franchisee may be required to
identify itself as the independent franchisee of the Center and/or by any
statute or regulation, but only in the manner prescribed by the Company.
Master Franchisor shall not use, nor permit any Sub-Franchisee to use, any
Xxxx as part of its corporate, partnership or other entity name or with
any prefix, suffix or other modifying words, terms, designs or symbols, or
in any modified form and, if so used, Master Franchisor shall, upon demand
of the Company, immediately cease, or cause the Sub-Franchisee to cease
use of such name, assign all rights to said name to the Company and take
all legal action to change the name to a name acceptable to the Company.
Master Franchisor shall not use, nor permit any Sub-Franchisee to use, any
Xxxx in connection with the offer or sale of any unauthorized service or
product or in any other manner not expressly authorized in writing by the
Company. Master Franchisor agrees to display, and cause its
Sub-Franchisees to display, the Marks prominently and in the manner
prescribed by the Company on signs, stationery, packaging materials,
forms, labels and other materials used by the Master Franchisor or
Sub-Franchisees in connection with the operation of their Sterling Optical
Centers. All Marks shall be displayed in the manner prescribed by the
Company. Master Franchisor shall give such notices of trademark and
service xxxx registrations as the Company may specify from time to time
and shall obtain such fictitious or assumed name registrations as may be
required under applicable law.
C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS.
Master Franchisor shall notify the Company immediately and in
writing of any apparent infringement of, or challenge
38
to, Master Franchisor's use of any Xxxx, or any claim by any person of any
rights in any Xxxx or any similar trademark or service xxxx of which
Master Franchisor becomes aware. Master Franchisor shall not communicate
with any person other than its counsel, the Company and the Company's
counsel in connection with any such apparent infringement, challenge or
claim. The Company shall have sole discretion to take such actions as it
deems appropriate and the right to exclusively control any litigation,
Canadian or U.S. Patent and Trademark Office proceeding, or other
administrative proceeding arising out of any such apparent infringement,
challenge or claim or otherwise relating to any Xxxx. Master Franchisor
shall execute, and shall cause its Sub-Franchisees to execute, any and all
instruments and documents, render such assistance and do such acts and
things as may, in the opinion of the Company's counsel, be necessary or
advisable to protect and maintain the interests of the Company in any such
litigation, Canadian or U.S. Patent and Trademark Office proceeding or
other administrative proceeding and to otherwise protect and maintain the
interests of the Company in the Marks.
D. REPLACEMENT OR DISCONTINUANCE OF USE OF MARKS.
The Company reserves the right to adopt new or modified proprietary
marks. If it becomes advisable at any time, in the Company's sole
discretion, for the Company and/or Master Franchisor to modify or
discontinue its use of any Xxxx, and/or use one or more additional or
substitute trademarks or service marks, Master Franchisor shall, at its
expense, and shall cause its Sub-Franchisees at their expense, to comply
therewith within a reasonable time after receiving written notice thereof
from the Company.
E. INDEMNIFICATION OF MASTER FRANCHISOR.
The Company shall indemnify and hold Master Franchisor harmless from
and against, and shall reimburse Master Franchisor for, all damages for
which it is held liable in any proceeding in which Master Franchisor's use
of any Xxxx pursuant to and in compliance with this Agreement is held to
constitute trademark infringement or dilution, and for all costs
reasonably incurred by Master Franchisor in the defense of any such claim
brought against it or in any such proceeding in which it is named as a
party; provided, however, that the Company's duty to indemnify and hold
Master Franchisor harmless shall arise only if Master Franchisor has
timely notified the Company of such claim or proceeding and has otherwise
complied with this Agreement, the Operating Manual and any instructions
issued by the Company following its receipt of any such notice from Master
Franchisor. The Company shall, at all times, have the sole and exclusive
right
39
(but not the obligation) to defend, compromise, settle or otherwise
dispose of any such claim.
16. TRANSFER.
A. BY THE COMPANY.
This Agreement and all or any part of the Company's interest
hereunder and/or under any Promissory Note delivered by the Master
Franchisor to the Company and/or any and all documents executed by Master
Franchisor in connection herewith are each fully assignable by the Company
and shall inure to the benefit of any assignee or other legal successor to
the interest of the Company therein; provided such assignee shall agree to
be bound by all of the terms and conditions provided herein.
B. MASTER FRANCHISOR MAY NOT TRANSFER
WITHOUT APPROVAL OF THE COMPANY.
Master Franchisor understands and acknowledges that the rights and
duties created by this Agreement are personal to Master Franchisor, and
its shareholders, and that the Company has granted Master Franchisor the
right described hereunder in reliance upon the collective character,
skill, aptitude, attitude, business ability and financial capacity of the
Master Franchisor and its shareholders. Therefore, except as hereinafter
expressly provided, neither this Agreement, nor the assets, ownership,
equity or control of either Master Franchisor may, in whole or in part, be
voluntarily or involuntarily, directly or indirectly, transferred,
conveyed, assigned, sold, subdivided, subfranchised, pledged, mortgaged,
hypothecated, given as security for an obligation, or otherwise
transferred or encumbered by Master Franchisor or its shareholders,
including, without limitation, transactions which result from: (i) a
merger or consolidation; (ii) the issuance of additional securities
representing an ownership interest in Master Franchisor; (iii) the sale of
the voting stock of Master Franchisor or any security convertible or
exercisable with respect to the voting stock of Master Franchisor; (iv)
the death of Master Franchisor or a shareholder or other owner of Master
Franchisor, and the enforcement of any will, declaration of, or transfer
in trust, or the laws of intestate succession; (v) the occurrence of a
bankruptcy, insolvency, and/or corporate dissolution proceeding which
results in the issuance of an appropriate decree or court order; or (vi)
otherwise by operation of law, without the prior written approval of the
Company. Any such assignment, transfer or encumbrance without the
Company's prior written approval shall constitute a material breach hereof
and shall convey no right, title or interest to the purported transferee.
Master Franchisor represents that Schedule "D"
40
annexed hereto is a true and correct statement of the names, addresses and
ownership interests of each of its shareholders as of the date hereof, and
each of its shareholders by their signatures on said Schedule "D" have
confirmed the same, as well as their agreement to comply, and cause the
Master Franchisor to comply, with all of the terms and provisions of this
Agreement and all such other agreements and/or instruments.
Notwithstanding anything herein to the contrary, Master Franchisor shall
have the right to transfer the assets or business of a Master Franchisor
Center, to a Sub-Franchisee, provided same is in accordance with the terms
of this Agreement and further provided said Sub-Franchisee executes a
Sub-Franchise Agreement with respect to said Center, and thereafter,
Master Franchisor and Sub-Franchisee comply with the terms and conditions
herein described for operation of a Sub-Franchisee Center.
C. CONDITIONS FOR APPROVAL OF TRANSFER.
If Master Franchisor and its shareholders, if Master Franchisor is a
corporation, or its partners, if Master Franchisor is a partnership, are
in compliance with this Agreement in all material respects, the Company
shall not unreasonably withhold its approval of any transfer requested by
Master Franchisor or its shareholders or partners, as appropriate. A
transfer of any ownership interest in this Agreement may be made only in
conjunction with a simultaneous transfer of a like interest in the Master
Franchisor. Each transfer of all or any portion of, or interest in, this
Agreement, the Franchise or the Master Franchisor, as appropriate, shall
be subject to the satisfaction or waiver by the Company of all of the
following conditions prior to, or concurrently with, the effective date of
the transfer:
(1) the transferee and each of its shareholders and partners shall
demonstrate, to the reasonable satisfaction of the Company, good
character, business experience, credit rating, and financial
responsibilities to be able to satisfy the obligations of the Master
Franchisor under this Agreement, and will have sufficient equity capital
in the Transferee to result in a debt-to-equity ratio as may be approved
by the Company in the reasonable exercise of its discretion;
(2) all accrued monetary obligations of Master Franchisor and its
shareholders, if Master Franchisor is a corporation, or partners, if
Master Franchisor is a partnership, to the Company and its affiliates or
subsidiaries, incurred in connection with this Agreement, the Master Fee,
the Purchase Notes, or otherwise in connection with this Agreement or any
Master Franchisor Center, and all other financial obligations to any
financial institution, lender or other entity to whom the Company deems
itself liable, in whole or in part, as a
41
guarantor, surety or otherwise for Master Franchisor have, at the
Company's election, been either assumed by the transferee or satisfied by
Master Franchisor;
(3) if required, the lessor of the premises for any Master
Franchisor Center shall consent to Master Franchisor's assignment of its
lease for, or Sublease of, the Premises, in connection with the proposed
transfer on terms and conditions
which are acceptable to the Company;
(4) the transferee and its shareholders or partners, as appropriate,
shall have executed and agreed to be bound by this Agreement and such
ancillary agreements as are then customarily used by the Company to grant
franchises and/or Master Franchises for Sterling Optical Centers;
(5) the transferee shall pay to the Company, a transfer fee equal to
Seven Hundred Fifty (US$750) Dollars multiplied by the number of Centers
then in operation in the Territory;
(6) the transferee shall complete, to the reasonable satisfaction of
the Company, the training then required by the Company for new franchisees
and pay all costs and expenses relating thereto;
(7) the transferee or the transferor shall have paid to the Company
all of its reasonable costs and expenses, including attorneys' and
accountants' fees and expenses, as were incurred in connection with said
transfer;
(8) Master Franchisor, and each of its shareholders, if Master
Franchisor is a corporation, or its partners, if Master Franchisor is a
partnership, shall execute a general release, in form and substance
satisfactory to the Company, of any and all claims which any of them may
have against the Company, its subsidiaries or affiliates, and each of
their respective officers, directors, shareholders, employees and agents;
(9) the Company shall have approved the material terms and
conditions of the transfer and shall have reasonably determined that the
price and terms of payment are not so burdensome as to adversely affect
the future operations of the Master Franchisee or the transferee's ability
to perform all duties and obligations hereunder;
(10) the Company shall not have exercised its right of first refusal
as set forth in Paragraph F of this Section 16;
(11) each transferor shall have entered into an agreement with the
Company, in form and substance reasonably satisfactory to the Company,
agreeing to subordinate to the payments to become due hereunder (and under
all other documents exe-
42
cuted in connection herewith), including, without limitation, the payment
of Royalty Fees and Note payments, any obligations which any transferee
may have to make any payments to the transferor; and
(12) if Master Franchisor requests the Company to assist Master
Franchisor in finding a purchaser of the Master Franchisee or this
Agreement and the Company does find such a purchaser, then upon
consummation of such purchase, Master Franchisor shall pay to the Company
a fee in an amount equal to six (6%) percent of the total purchase price,
as compensation for services rendered by the Company.
Consent by the Company to a transfer of any interest shall not constitute
a waiver of any claims which the Company may have against the transferor,
nor shall it be deemed a waiver by the Company of the right to demand
exact compliance with any of the terms or conditions of this Agreement by
the transferee.
D. DEATH OR DISABILITY OF MASTER FRANCHISOR.
(1) In the event of the mental or physical disability of any
shareholder of either Master Franchisor, which prevents the person from
performing his or her obligations hereunder, Master Franchisor shall
provide and maintain (or if applicable, cause the corporation or
partnership to provide and maintain) a replacement to perform such
obligations who shall be satisfactory to the Company in the reasonable
exercise of its discretion. In the event that Master Franchisor fails to
provide or maintain such replacement, the Company, in addition to all
other remedies which it may have under this Agreement, including
termination of this Agreement as specified in Section 19 of this
Agreement, shall be entitled to hire and maintain such a replacement on
behalf of and for the account of Master Franchisor in accordance with the
provisions of Section 23 herein. For purposes of this Agreement, the term
"permanent disability" shall mean a disability which is likely to last or
has lasted for more than one hundred twenty (120) days in any twelve (12)
month period and which prevents the affected individual from substantially
performing his or her customary duties in connection with the operation of
its obligations hereunder or any of its Master Franchisor Centers.
(2) Upon the death of any shareholder of Master Franchisor, the
executor, administrator, conservator or other personal representative of
such person shall transfer such deceased person's interest within a
reasonable time, not to exceed nine (9) months from the date of death, to
a transferee approved by the Company. If the decedent was actively
participating in the operation of the business of the Master Franchisor,
the Master Franchisor or the appropriate personal
43
representative shall, during the period prior to said transfer, be
obligated to continue the operation of the business of the Master
Franchisor and of each Master Franchisor Center, Existing Center and ESI
Center by providing and maintaining a replacement or replacements to
perform his or her obligations, which replacement(s) shall be satisfactory
to the Company in the reasonable exercise of its discretion. In the event
that Master Franchisor or the appropriate personal representative fails to
provide or maintain such replacement, the Company, in addition to all
other remedies which it may have under this Agreement, including
termination as specified in Section 19 of this Agreement, shall be
entitled to hire and maintain such a replacement(s) on behalf of and for
the account of Master Franchisor, or the estate of the decedent, in
accordance with the provisions of Section 23 of this Agreement. All
transfers made pursuant to this provision, including, without limitation,
transfers by devise or inheritance, shall be subject to all of the terms
and conditions for transfers contained in this Section 16; provided,
however, it is agreed that in the event that the transfer being made is
otherwise in compliance with the provisions of Section 16, if the transfer
is to either the spouse, the children or other members of the immediate
family of the decedent, and provided such persons meet the qualifications
required by the Company, and execute the appropriate documents, the
transfer may be effected for the balance of the term of this Agreement, no
transfer fee shall be due upon said transfer.
(3) Upon the death of any guarantor of the obligations of the Master
Franchisor, Master Franchisor shall be obligated, within six (6) months
following the death of such guarantor, to provide a guarantor, reasonably
satisfactory to the Company, who, within said six (6) month period,
executes a guarantee of all of the obligations of the Master Franchisor,
in substantially the form executed by the deceased Guarantor.
E. OFFERING BY MASTER FRANCHISOR.
Securities or partnership interests in Master Franchisor may be
offered to the public, by private offering or otherwise, but only with the
prior written consent of the Company. All materials required for such
offering by federal or state law as well as any materials to be used in
any exempt offering shall be submitted to the Company for review at least
sixty (60) days prior to such documents being filed with any government
agency. No Master Franchisor offering shall imply (by use of the Marks or
otherwise) that the Company is participating in an underwriting, issuance
or offering of Master Franchisor's securities, and the Company's review of
any offering shall be limited solely to the subject of the relationship
between Master Franchisor and the Company. Master Franchisor and any other
participants in connection
44
with the offering must fully indemnify the Company with the offering,
pursuant to an indemnity agreement in form and substance satisfactory to
the Company and its counsel. For each proposed offering, Master
Franchisor, in addition to any other fees described in this Section 16,
shall pay to the Company, a non-refundable fee of Ten Thousand Dollars
(US$10,000) which shall be delivered to the Company, together with the
materials described above. Upon consummation of the offering the Master
Franchisor shall be obligated to pay to the Company an additional
non-refundable fee of Fifteen Thousand (US$15,000) Dollars. In addition to
the foregoing fees, and irrespective of whether or not the offering is
consummated, the Master Franchisor shall be obligated to reimburse the
Company for its reasonable costs and expenses associated with reviewing
the proposed offering, including, without limitation, legal and accounting
fees. Subsequent to approval of such offering documents, Master Franchisor
shall give the Company at least sixty (60) days written notice prior to
the proposed effective date of any offering or other transaction covered
by this Section.
F. THE COMPANY'S RIGHT OF FIRST REFUSAL.
If any Master Franchisor, or its shareholders, shall at any time
determine to sell or transfer this Agreement, any rights thereunder, the
business of the Master Franchisor or an ownership interest in Master
Franchisor to any third party, including without limitation, transfers
contemplated by this Section 16 (but exclusive of the transfer of an
Existing Center, ESI Optical Center, or Master Franchisor Center to a
Sub-Franchisee in accordance with the terms hereof), Master Franchisor or
its shareholders shall obtain a bona fide, executed written offer from a
responsible and fully disclosed purchaser and shall submit an exact copy
of such offer to the Company which must include the proposed date of
disposition, and all the terms and conditions thereof, including the price
(which must be reducible to monetary consideration), if any, which Master
Franchisor is to receive in connection therewith. In addition, there shall
be submitted to the Company a current income statement and balance sheet
of the proposed assignee and the Master Franchisor, and all relevant
information concerning the proposed assignee and any principals thereof,
as requested by the Company. The Company shall thereupon have the right
and option, to be exercised within thirty (30) days after receipt of said
information, to either (i) consent in writing to the proposed assignment;
(ii) disapprove the assignment; (iii) accept the assignment itself at the
monetary price and upon the same terms and conditions specified in the
notice, except as set forth herein; or (iv) request additional information
regarding the proposed assignment. In the event additional information is
timely requested by the Company, the thirty (30) day time period may be
extended to ten (10) days
45
after the Company's receipt of a full and complete response thereto. In
the event that the Company elects to purchase said interest, it will be
entitled to purchase such interest and/or additional property subject to
all customary representations and warranties given by the seller of the
assets of a business and the Company shall have not less than sixty (60)
days to prepare for closing. In the event that the Company does not
exercise its right of first refusal, Master Franchisor or its
shareholders, may complete the sale to such purchaser pursuant to and on
the terms of such offer; subject, however, to it obtaining the consent of
the Company and otherwise complying with the applicable provisions of
Section 16 of this Agreement. If the sale to such purchaser is not
completed within one hundred twenty (120) days after delivery of the
aforesaid notice to the Company, or if there is a material change in the
terms of the sale or the identity of the purchaser, Master Franchisor or
its shareholders may not consummate the proposed transfer without again
complying with the provisions of this Subsection E.
G. RESTRICTIVE LEGEND.
If Master Franchisor is a corporation or a partnership, or if this
Agreement is subsequently assigned to a corporation or partnership in
accordance with the provisions of this Agreement, then the by-laws of the
corporation or the partnership agreement, whichever is applicable, shall
state that such corporation or partnership is subject to the terms of this
Agreement and the issuance and transfer of stock of the corporation or of
any interest in the partnership are restricted by the terms and conditions
hereof, and each stock certificate or certificate evidencing a partnership
interest shall bear the following legend, printed conspicuously and
legibly on the front thereof:
"The transfer of the interest represented by this certificate
is subject to and limited by the terms and conditions of that
certain Master Franchise Agreement, dated the ___ day of September,
1996, by and between STERLING VISION, INC., a New York corporation
and EYE-SITE INC and EYE SITE (ONTARIO), LTD."
17. RENEWAL OF AGREEMENT.
A. MASTER FRANCHISOR'S RIGHT TO RENEW.
(1) Master Franchisor shall have the option to renew the term of
this Agreement and the license granted hereunder for one additional term
of twenty (20) years, provided, that:
(a) Master Franchisor shall give the Company written notice of
its election to renew at least six (6)
46
months, but not more than twelve (12) months, prior to the end of
the then current term of this Agreement;
(b) Neither Master Franchisor, its subsidiaries, its
affiliates, nor their respective shareholders, are then in default,
in any material respect, in its or their performance of any of the
terms and provisions of this Agreement, or any other agreements with
the Company or its affiliates, and each has, during the term of this
Agreement, complied in all material respects, with all of the
provisions of this Agreement, and all of such other agreements, and
there shall then be existing and in operation in the Territory, not
less than forty-five (45) Sterling Optical Centers as set forth on
the Development Schedule; and
(c) The Company and the Master Franchisor shall have mutually
agreed upon the terms for a new Development Schedule which shall set
forth the number of additional Sterling Optical Centers to be opened
during the renewal term and the terms for the development thereof;
in the event the parties shall fail to agree upon the terms of the
Development Schedule for the renewal term, the Master Agreement
shall not be renewed; the parties agree that provided Master
Franchisor is otherwise in compliance with the terms here in
contained, they shall be obligated to negotiate in good faith to
attempt to agree upon a mutually acceptable Development Schedule.
B. RENEWAL AGREEMENTS/RELEASES.
(1) If the Master Franchisor has satisfied the obligations of
Subsection A of this Section 17 above, then Master Franchisor, as a
condition to renewing the term of this Agreement, together with its
shareholders, shall:
(a) execute the form of Master Franchise Agreement, and such
ancillary agreements as are then customarily used by the Company to
grant master franchises for the operation of Sterling Optical
Centers, provided the terms and conditions shall not differ
materially from the terms and conditions herein and shall contain an
obligation for Master Franchisor, during the renewal term, to
maintain in operation, or cause to be maintained in operation, at
least 45 Sterling Optical Centers and to open or caused to be opened
that number of additional Sterling Optical Centers as shall be
mutually agreed upon by the parties pursuant to Section 17 (i) (e)
above.
(b) execute general releases, in form and substance
satisfactory to the Company, of any and all claims against the
Company, its subsidiaries and affiliates, and
47
each of their respective officers, directors, shareholders,
employees and agents; provided, however, the Company shall have the
right in the event of any dispute between the parties, which shall
then be the subject of arbitration, to either waive the provision of
the general release solely as to the issues being arbitrated, or
extend the period for renewal of this Agreement until conclusion of
the arbitration; provided, however, if the arbitrators shall
determine that Master Franchisor failed to comply with any material
terms of this Agreement, the Company shall not be obligated to renew
this Agreement.
(c) pay the renewal fee described in Sub-Paragraph 4 below.
(2) Failure by Master Franchisor and/or its shareholders, partners
or guarantors, as applicable, to sign such agreements and releases, to
deliver the same to the Company and/or to pay the above described renewal
fee within thirty (30) days after receiving the necessary documents from
the Company, shall be deemed an election by Master Franchisor not to renew
this Agreement.
(3) Provided that Master Franchisor has otherwise complied with the
provisions of this Section 17 and has executed all of the documents
referred to herein, the new agreement shall become effective on the day
immediately following the expiration of this Agreement, whereupon the
Company will execute and return a fully executed set of the documents to
Master Franchisor. If, however, on the last day of the term, Master
Franchisor, any of its subsidiaries, affiliates, or its shareholders shall
be in default in the observance or performance of any provisions of this
Agreement, or have not otherwise complied with the provisions of any other
agreement with the Company, its affiliates or subsidiaries, or shall have
not fully satisfied all of their monetary obligations thereunder, then, at
the election of the Company, the new agreements may rejected by the
Company, whereupon the election by the Master Franchisor to renew shall be
deemed to be null and void.
(4) It is agreed that a renewal fee shall be due and payable upon
renewal of this Agreement which renewal fee shall be equal to CAN$2,000
multiplied by (i) the number of Centers, ESI Centers, Master Franchisor
and Sub-Franchisee Centers then in operation in the Territory, plus (ii)
the number of new Centers contemplated to be opened during the renewal
term, as described in the Development Schedule to the renewal agreement.
48
C. EFFECT OF NON RENEWAL:
In the event that the Master Franchisor shall elect not to renew this
Agreement, or shall otherwise fail to satisfy the requirements specified in this
Section 17, or upon expiration of the renewal term, then, in any of said events,
this Agreement, and the license granted hereunder shall terminate on the date
specified in Section 1B above, and this Agreement shall be terminated in
accordance with the provisions of Section 19 herein.
18. MASTER FRANCHISOR'S RIGHT OF FIRST REFUSAL
A. During the term of this Agreement, and provided neither Master
Franchisor nor any of its subsidiaries, affiliates, principals or guarantors
shall be in default under any of the provisions of the Notes, the Subleases,
this Agreement, or any other agreement executed with the Company or any of its
subsidiaries or affiliates, after any applicable grace periods or periods of
time to cure have elapsed, and provided that neither Master Franchisor, any
affiliate, subsidiary, principal of Master Franchisor nor any guarantor, is in
default under any provision of any agreement to which it, they, or any entity in
which they are principals or shareholders, and the Company or any of its
subsidiaries or affiliates, are parties, after any applicable grace periods or
periods of time to cure have elapsed, and provided that Master Franchisor can
comply with the provisions of paragraph B below, Master Franchisor shall have a
Right of First Refusal to become the Master Franchisee for Sterling Optical
Centers, in any other province of Canada, upon the same terms and conditions
then being offered to a bona fide third party.
B. In the event that the Company shall receive an offer for another party
to become the Master Franchisee within any province of Canada outside of the
Territory, which offer the Company desires to accept, the Company shall, by
written notice, which notice (the "Written Offer") shall set forth the material
terms and conditions of such offer, give Master Franchisor notice of its
intention to enter into such Master Franchise Agreement. Master Franchisor shall
be obligated,by written notice to the Company, which notice must be received by
the Company, within thirty (30) days after Master Franchisor's receipt of the
Written Offer, to either accept or reject such offer, and, if accepting such
offer, must provide to the Company, either (i) consent by Master Franchisor's
bank to the transaction, and an agreement to provide the financing required
necessary for said transaction or (ii) a business plan satisfactory to the
Company and otherwise demonstrate management and financial capability,
independent of the assets owned pursuant to or in connection with this
Agreement, reasonably satisfactory to the Company, and not less than maintained
by the proposed offeree, to acquire and operate in accordance with the proposed
terms for the Master Franchise Agreement. Failure to timely respond, or to
49
provide satisfactory information, shall be deemed to be a rejection.
C. In the event Master Franchisor rejects the offer, fails to timely
respond to the Written Offer, or otherwise fails to qualify to be eligible for
the right of first refusal, including by reason of default under other
agreement, and/or the failure to demonstrate to the Company's reasonable
satisfaction, satisfactory business and management capability, the Company shall
be free to enter into the proposed Master Franchise Agreement with a third party
without further notice to Master Franchisor, and, upon execution of said Master
Franchise Agreement, this right of first refusal shall terminate and the Master
Franchisor shall no longer have any first refusal rights to any territory either
within or outside of the country of Canada.
D. In the event Master Franchisor timely notifies the Company that it
accepts such proposal and provides either (i) consent by Master Franchisor's
bank to the transaction, and an agreement to provide the financing required
necessary for said transaction or (ii) proof of satisfactory management and
financial capability, Master Franchisor and any guarantors, shall, within thirty
(30) days thereafter, execute the Master Franchise Agreement and all other
documents required thereunder, and pay any amounts due under the terms of the
Written Offer. In the event Master Franchisor or any guarantor, shall fail to
execute the aforesaid documents and/or pay such fees and charges within said
thirty (30) day period, and except if said failure shall be due to the fault of
the Company, the Right of First Refusal described hereunder shall terminate, and
be of no further force and effect, and the Company shall thereafter have the
right to enter into any other Master Franchise Agreement with any other third
party without further notice to Master Franchisor.
E. The Right of First Refusal described hereunder is personal and may not
be assigned by Master Franchisor by operation of law or otherwise, without the
Company's prior written consent. The Right of First Refusal, is limited to the
right to become the Master Franchisee for Sterling Optical Centers, in Canadian
provinces outside of the Territory, and shall not confer any other right of
first refusal or otherwise with respect to any other rights reserved by the
Company pursuant to Section 2 of this Agreement.
19. TERMINATION OF THE AGREEMENT.
A. EVENTS OF DEFAULT WITHOUT OPPORTUNITY TO CURE.
The Company may automatically terminate this Agreement and the
license granted hereunder by delivering written Notice of Termination to Master
Franchisor stating that the Company has terminated this Agreement and the
Franchise as the result of the occurrence of any one or more of the Events of
Default set forth
50
below, without providing Master Franchisor with an opportunity to cure, if any
Master Franchisor, any shareholder or partner of any Master Franchisor, or any
guarantor of any of the obligations of the Master Franchisor:
(1) is insolvent and/or fails to generally pay its or their debts as
they become due which is not cured within thirty (30) days; or makes an
assignment for the benefit of creditors; or files a petition under any
bankruptcy, reorganization, insolvency, or moratorium law, or any law for
the relief of, or relating to, debtors which is not discharged or
dismissed within thirty (30) days;
(2) fails, within (60) sixty days after the filing or appointment
thereof, to have set aside, withdrawn or otherwise canceled, any petition
filed against it and/or any of them under any bankruptcy, reorganization,
insolvency or moratorium law, or to have any appointment of any receiver
or trustee to take possession of its or their property canceled;
(3) is convicted of, or pleads no contest to, an indictable offense,
or is convicted of, or pleads no contest to, any other crime or offense
which, in the reasonable opinion of the Company, may adversely affect the
reputation of the Company or the goodwill associated with the Marks, or
becomes addicted to or dependent on alcohol or drugs;
(4) makes an unauthorized assignment or transfer of this Agreement,
the assets of the Master Franchisor or an ownership interest in Master
Franchisor in violation of the provisions of Section 16 hereof;
(5) is dissolved or liquidated;
(6) submits Gross Revenue reports covering any period of three (3)
consecutive months or more where an audit reveals that the correct Gross
Revenues for such period either exceeds the reported Gross Revenues by ten
percent (10%) or more, except if such Gross Revenues were reasonably based
upon the Gross Revenues of Sub-Franchisees, and Master Franchisor did not
know said reports to be inaccurate; or if the Gross Revenues were
willfully and deliberately understated;
(7) misstates any material fact, or fails to disclose any material
fact, in any report furnished to the Company pursuant to this Agreement,
the Company's Operating Manual, or the application to the Company;
provided; however, no default shall be deemed to have occurred if such
misstatement or failure to disclose was not intentional and there has been
on detrimental reliance or adverse effect to the Company or any third
party, and same is cured within ten (10) days after discovery of such
misstatement;
(8) commits a default under this Agreement which, by its very
nature, is incapable of being cured;
51
(9) knowingly maintains and/or causes to be maintained false and/or
misleading books or records, or knowingly submits or causes to be
submitted any false and/or misleading reports to the Company, including
such books, records and reports which the Master Franchisor, or its
officers, shareholders or partners, in the exercise of reasonable
judgment, should have known were false and/or misleading;
(10) makes any false or misleading statements in any offering
circular or other documentation provided to prospective Sub-Franchisees;
provided; however, no default shall be deemed to have occurred if such
misstatement or failure to disclose was not intentional and there has been
on detrimental reliance or adverse effect to the Company or any third
party, and same is cured within ten (10) days after discovery of such
misstatement;
B. EVENTS OF DEFAULT WITH OPPORTUNITY TO CURE.
The Company may terminate this Agreement and the License granted
hereunder by delivering a written Notice of Termination to the Master Franchisor
stating that the Company has terminated this Agreement and the license granted
hereunder, as a result of the occurrence of any one or more of the following
Events of Default and Master Franchisor's failure to cure the same, to the
satisfaction of the Company, within any applicable cure period set forth herein,
which cure period shall commence upon the date such Notice of Default from the
Company is deemed to have been delivered as set forth in Section 27 hereof. Such
Events of Default shall occur if, and except as otherwise provided below in this
Section 19B, any Master Franchisor, any shareholder of Master Franchisor, or any
Master Franchisor Center, Existing Center or ESI Center:
(1) fails to make complete and timely payment of any amounts which
are due to the Company, its affiliates or subsidiaries, including any
amounts due under this Agreement and/or under any agreement relating to
the acquisition of the assets of the Existing Centers and such failure
continues for thirty (30) days after written notice thereof;
(2) fails to comply with the Development Schedule, and/or fails to
maintain, or cause to be maintained in operation the number of Centers set
forth on the Development Schedule and fails to cure same within one
hundred twenty (120) days after written notice thereof.
(3) fails to maintain the Advertising Fund in accordance with the
provisions of this Agreement or fails to provide for the advertising
required hereunder, and, in either event, fails to cure same within thirty
(30) days after written notice thereof;
(4) fails to provide an accounting of the Advertising Fund, as
required hereunder, and fails to cure same within thirty (30) days after
written notice thereof;
52
(5) fails to comply with any other provision of this Agreement or
any mandatory specification, standard or operating procedure prescribed by
the Company in the Operating Manual or otherwise and such is not cured
within thirty (30) days after notice thereof;
(6) fails to submit, when due, financial statements, reports or
other data, information or supporting records and such is not cured within
thirty (30) days after notice thereof;
(7) makes or permits any unauthorized use of the Marks unless within
ten (10) days after notice thereof Master Franchisor commences to correct
such unauthorized use and thereafter promptly, but in no event more than
thirty (30) days completes said correction;
(8) creates a threat or danger to public health or safety resulting
from the maintenance or operation of any Master Franchisor Center,
Existing Center or ESI Center unless within ten (10) days after notice
thereof Master Franchisor commences to correct such problem and thereafter
promptly completes said correction;
(9) engages in any conduct or practice that, in the reasonable
opinion of the Company, is detrimental or harmful to the good name,
goodwill or reputation of the Company, its services, other Sterling
Optical franchisees or the public, and such conduct or practice continues
for a period in excess of thirty (30) days after notice to Master
Franchisor;
(10) engages in any conduct or practice that is a fraud upon
consumers, or that is an unfair, unethical or deceptive trade act or
practice, and such conduct or practice continues for a period in excess of
thirty (30) days after notice to Master Franchisor; or
(11) by act or omission, suffers a continued violation, in
connection with the operation of the Master Franchisor, the business
described hereunder, the offering of franchises to Sub-Franchisees, or any
Master Franchisor Center, Existing Center or ESI Center of any law,
ordinance, rule or regulation of a government agency, in the absence of a
good faith dispute over its application or legality and without promptly
resorting to an appropriate administrative or judicial forum for
resolution thereof, which continues for a period in excess of thirty (30)
days after notice to Master Franchisor.
(12) fails to execute and deliver the appropriate banking
documentation and/or authorization to permit the Company to collect
payments via electronic fund transfer systems, and such failure continues
for a period of ten (10) days after notice, or, if the Master Franchisor
changes its banking arrangements and fails to notify the Company and/or
execute and deliver the proper documentation and authorization for
53
electronic funds transfer from the new accounts and such failure continues
for a period of ten (10) days after notice to Master Franchisor.
(13) fails to provide the information, services or guidance required
to be provided to its Sub-Franchisees, under this Agreement, or under any
Sub-Franchise Agreement, or fails to cause its Sub-Franchisees to operate
their Sub-Franchisee Centers in accordance with the terms of this
Agreement and the Sub-Franchise Agreement, and such failure continues for
a period of (10) days after notice to Master Franchisor.
Notwithstanding the provisions of subsections (1), (3), (4),(5),
(6), (9), (10), (11), in the event that within 12 months prior to the date
a written notice of default is forwarded to Master Franchisor, a notice
had previously been forwarded to Master Franchisor for a default under the
same subsection, and irrespective of whether said default was previously
cured, the cure period shall be reduced from thirty (30) days to ten (10)
days.
C. NOTICE OF TERMINATION.
Upon the occurrence of any one or more of the foregoing Events of
Default and, if applicable, the failure to cure within the appropriate period,
the Company may terminate this Agreement, the license and the Franchise and
Sub-Franchising relationship by giving written Notice of Termination to the
Master Franchisor stating the specific reason for the termination and the
effective date of the termination. This Agreement and the license granted
hereunder shall terminate on the date specified in the notice.
D. EFFECT OF TERMINATION.
(1) Immediately upon expiration or termination of this Agreement,
Master Franchisor automatically relinquishes all rights of exclusivity
within the Territory.
(2) Master Franchisor shall be obligated, within thirty (30) days
following the date of termination or expiration of this Agreement, to pay
to the Company all amounts due under any agreements with the Company or
any of its affiliates.
(3) Master Franchisor, with respect to each Existing Center, ESI
Center or Master Franchisor Center, which is continued to be owned and
operated by Master Franchisor and not by a Sub-Franchisee, and except as
otherwise provided in subsection (5) below, shall be obligated, within
ninety (90) days of the date of termination or expiration of this
Agreement, to cease use of the Marks, the Operating Manuals, Business
Systems, computer systems, Confidential Information, and all other
proprietary information provided by the Company, and shall return to the
Company such Operating Manuals, Confidential Information and Proprietary
Information, includ-
54
ing, without limitation, plans, specifications, designs, records, data,
samples, models, programs, training tapes, handbooks, drawings, records,
files, instructions, correspondence, and all copies thereof, all of which
are acknowledged to be the Company's property, and retain no copy or
record of any of the foregoing except Master Franchisor's copy of this
Agreement and such documents as Master Franchisor reasonably needs for
compliance with any provision of law. Master Franchisor shall further be
obligated, within said ninety (90) day period, at its cost and expense, to
change all signage and identifying insignia of such Master Franchisor
Centers, and all telephone listing for said Centers, so that they shall
not be confused with, or continue to be identified as Sterling Optical
Centers.
(4) Until such time as Master Franchisor has ceased use of the Marks
and otherwise complied with the provisions of subsection (3) above for
each Existing Center, ESI Center and Master Franchisor Center, Master
Franchisor shall be obligated to continue to pay all royalty payments due
to the Company for each non complying Centers.
(5) Notwithstanding the provisions of subsection (3) above, in the
event that prior to full payment of the amounts due under the Master Fee
Note and Purchase Notes, this Agreement shall be terminated either by
reason of a default under any of said Notes, or for any other reason
whatsoever, then, in said event, the Company with respect to the Existing
Centers which have not become Sub-Franchisee Centers, shall have the
right, to exercise its rights under the Security Agreement, and shall be
obligated to sell the assets at said Center within a commercially
reasonable period of time which, for purposes of this Agreement, shall be
deemed to be six (6) months, and apply the amounts received to the amounts
due from Master Franchisor, or obtain an appraisal of the collateral as of
the date of surrender to the Company, by an appraiser reasonably
satisfactory to each of the parties which value shall, upon surrender of
the Centers, together with all assets therein to the Company, be applied
in reduction of the amounts due to the Company. In the event that the
appraised value or the net proceeds from the sale, whichever the case
shall be, shall exceed the amount due to the Company, the Company shall
pay said excess amount to the Master Franchisor. The Company shall notify
the Master Franchisor of its election pursuant to this subsection (5)
within ninety (90) days after termination of this Agreement.
(6) With respect to the Sub-Franchisee Centers, the Company shall
have the right, upon any default by Master Franchisor, and for as long as
said default shall be continuing, or upon termination or expiration of
this Agreement, to require that all payments due under any Sub-Franchise
Agreement, be made directly to the Company. All Sub-Franchise Agreements
shall be required to provide that the Sub-Franchisee, upon notice from
either Master Franchisor or the Company,
55
shall make payments directly to the Company. In addition, upon
termination, expiration or non renewal of this Agreement, for any reason,
the Company, shall assume the obligations accruing in favor of the
Sub-Franchisees, and the Sub-Franchise Agreements, collateral assignments
of the leases, and all other agreements relating to such Sub-Franchisees,
shall, at the Company's option, be assigned to the Company or its
designee, and each Sub-Franchise Agreement shall provide that the
Sub-Franchisee consents to such assignment.
(7) Master Franchisor acknowledges that its compliance with the
provisions of this Section is essential to the Company's ability to
continue to protect the Marks and the Centers operating under the Marks
and accordingly, Master Franchisor irrevocably appoints the Company or its
nominee to be Master-Franchisor's attorney-in-fact to execute, on Master
Franchisor's behalf, any document or perform any legal act necessary to
comply with the foregoing provisions. Such power of attorney is a Special
Power of Attorney coupled with an interest, is irrevocable.
20. COVENANT NOT TO COMPETE.
A. DURING TERM OF AGREEMENT.
Master Franchisor, and each of them, agrees, and shall cause each of
its shareholders, officers, directors and guarantors to agree that, during the
term of this Agreement, neither Master Franchisor, nor any shareholder, partner,
owner or guarantor of Master Franchisor, if Master Franchisor is a corporation,
partnership or other business entity, nor any member of the immediate family of
Master Franchisor or of any shareholder, partner, owner or guarantor of Master
Franchisor, shall have any direct or indirect interest as an owner, investor,
partner, lender, director, officer, employee, consultant, representative or
agent, or in any other capacity, in any entity which owns, develops, operates or
franchises or licenses others to operate, retail optical stores, centers or
businesses which are engaged in the sale of contact lenses, prescription and/or
non-prescription eyewear and/or related eye care products, other than the
Centers described in this Agreement.
B. UPON TERMINATION.
Master Franchisor, and each of them, agrees, and shall cause each of
its shareholders, officers, directors and guarantors to agree, that for a period
of eighteen (18) months, commencing on the date of the assignment, termination
or expiration of this Agreement, for any reason whatsoever, neither Master
Franchisor, nor any shareholder, partner, owner or guarantor of Master
Franchisor, if Master Franchisor is a corporation, partnership or other business
entity, nor any member of the immediate family of Master Franchisor or of any
shareholder, partner, owner or guarantor of Master Franchisor, shall have any
direct or indirect interest as an owner, investor, partner, lender, director,
officer,
56
consultant, representative or agent, or in any other capacity, in any entity
which owns, develops, operates or franchises or licenses others to operate one
or more retail optical stores, centers or businesses which are engaged in the
sale of contact lenses, and/or prescription and non-prescription eyewear and/or
related eye care products within a six (6) block radius from any Sterling
Optical Center located in an urban area or within a one kilometer radius of or
any other Sterling Optical Center, within the Territory. This provision shall
not apply to any Master Franchisor Center or ESI Center, which, following the
termination of this Agreement, the Master Franchisor continues to operate in
accordance with the terms of this Agreement; provided, however, for a period of
eighteen (18) months following the termination, expiration or non renewal of
this Agreement, neither Master Franchisor, nor any shareholder, partner, owner
or guarantor of Master Franchisor, nor any member of the immediate family of
Master Franchisor or of any shareholder, partner, owner or guarantor of Master
Franchisor, shall, directly or indirectly, engage in franchising of any optical
centers within the Territory.
C. APPLICABILITY.
(1) It is expressly agreed that the provisions of Subsections A and
B of this Section 20 shall not apply to (i) any other Sterling Optical
Center which is operated by the Master Franchisor pursuant to this
agreement or any other franchise agreement executed by the Company; or
(ii) the ownership of securities listed on a stock exchange or traded on
the over-the-counter market which represent five percent (5%) or less of
the shares of that class of securities which are issued and outstanding.
For purposes of this section, the interests of an individual and such
individual's spouse and minor children shall be aggregated.
(2) In the event that during the term of this Agreement, any
shareholder or partner of Master Franchisor shall assign or transfer all
of his or her interest in the Master Franchisor pursuant to the provisions
of Section 16 hereof, the provisions of this Section 20 shall be
applicable to the transferor for a period of two (2) years after the
effective date of said transfer.
(3) In the event that the obligations under this Section 20 are
found to be invalid or unenforceable (as a result of a judicial decree,
for a period of time or in the area or a portion of the area specified in
Subsections A or B of this Section 20, such obligations shall be deemed
and construed to apply only to the remainder of such period and/or area
and shall be valid and enforceable therein according to their terms.
(4) Master Franchisor expressly agrees that the existence of any
claims it may have against the Company, whether or not arising from this
Agreement, shall not constitute a defense to the enforcement by the
Company of the
57
covenants set forth in this Section 20. Master Franchisor agrees to pay
all costs and expenses (including reasonable attorneys' fees and expenses)
incurred by the Company in connection with the enforcement of its rights
pursuant to this Section 20.
(5) Master Franchisor acknowledges that Master Franchisor's
violation of the terms of this Section 20 would result in irreparable
injury to the Company for which no adequate remedy at law exists.
Accordingly, Master Franchisor understands and acknowledges, that and as
to its shareholders and/or partners, including, but not limited to Mo Ali,
by their execution of the Guaranty and Assumption Agreement, annexed
hereto, understand and acknowledge, that the Company shall be entitled to
seek an injunction prohibiting any conduct by Master Franchisor, and any
such shareholder or partner, in violation of the terms of this Section 20.
21. RELATIONSHIP OF PARTIES.
A The relationship between the Company and Master Franchisor created by
this Agreement does not create a fiduciary relationship between them. The Master
Franchisor agrees that Master Franchisor is an independent contractor, is not,
and shall not represent or hold itself out either expressly or impliedly as, an
agent, legal representative, partner, subsidiary, affiliate, joint venturer or
employee of the Company, and neither the Company nor Master Franchisor is or
shall be responsible for the debts or obligations of the other except as
specifically described herein. Master Franchisor shall have no right or power
and shall make no attempt to bind or obligate the Company in any manner
whatsoever.
22. TAXES; OPERATING EXPENSES:
A. Master Franchisor shall be responsible for and shall pay when due any
and all federal, state and local income, payroll, sales, use, excise, GST (value
added) or other taxes arising out of or assessed in connection with the
development of the Territory or operation of the franchises contemplated
hereunder, the transactions contemplated herein, the sale of any assets referred
to hereunder, the assignment of any franchise, withholding or GST taxes which
are due on account of the payments to the Company, or the sale or supply of any
goods or services by the Company to the Master Franchisor (except income taxes
assessed against the Company). Nothing herein shall require Master Franchisor to
pay for any taxes required to be paid by any Sub-Franchisee which arise out of
or in connection with the operation of their Sub-Franchisee Centers nor shall
Master Franchisor be required to pay any income taxes which are owed by the
Company. Master Franchisor may contest the validity or amount of any such tax in
good faith and in accordance with the procedures specified by the relevant
taxing authority; provided, however, that in no event shall Master Franchisor
permit a tax sale or seizure by levy or execution or similar writ or warrant to
occur with respect to any franchised
58
location or any equipment, furniture, fixtures or improvements contained
therein.
B. Master Franchisor shall notify the Company in writing within five (5)
business 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 may affect the operation or financial
condition of Master Franchisor.
23. TEMPORARY MANAGEMENT OF THE CENTER BY THE COMPANY.
In the event that Master Franchisor does not have a person devoting his or
her full time and attention to any of the Master Franchisor Centers, Existing
Centers or ESI Centers or the obligations described hereunder with respect to
the Sub-Franchisees, in accordance with the terms of this Agreement, or in the
event a temporary Manager is not appointed as required pursuant to Sub-section C
of Section 16, or in the event there exists a controversy, dispute or other
disagreement between Master Franchisor and the Company in which Master
Franchisor ceases to operate the business described hereunder, or the Company
has exercised its option to purchase the assets of the Master Franchisor in
accordance with Subsection E of Section 16, the Company shall have the right,
but not the obligation, to appoint a temporary Manager to maintain the operation
of any of the Master Franchisor Centers, Existing Center or ESI Centers or the
sub-franchising operation of the Master Franchisor until the closing of any such
purchase of the assets, or the situation is satisfactorily resolved. All funds
arising out of the operation of the Centers or from the Sub-Franchisees during
the period of management by the temporary Manager appointed by the Company shall
be kept in a separate fund and all associated expenses of the Company, including
compensation, other costs and travel and living expenses of the temporary
Manager, and all amounts due to the Company under the terms of this Agreement,
shall be charged to such fund. During any such period, the Company shall operate
the Master Franchisor Centers, Existing Centers and ESI Centers for and on
behalf of Master Franchisor, provided that the Company shall only have a duty to
utilize its reasonable efforts and shall not be liable to Master Franchisor or
its owners for any debts, losses or obligations incurred, or to any creditor of
Master Franchisor for any merchandise, materials, supplies or services purchased
during any period in which any Center, or the business of the Master Franchisor
is managed by the temporary Manager selected and appointed by the Company. The
Company shall have the right to charge the Master Franchisor, or the
Sub-Franchisee, as the case may be, a reasonable management fee for its services
during any period when the Company shall be managing a Center, as provided
herein.
The Company's election to appoint a temporary Manager in accordance with
this Section 23 shall not constitute a waiver of any claims it may have against
Master Franchisor, nor shall it be deemed a waiver of the Company's right to
demand exact compliance with any of the terms or conditions of this Agreement.
59
24. COMPANY'S RIGHT TO ACQUIRE ABANDONED AND/OR TERMINATED
CENTERS.
A. In the event that at any time, during the term of this Agreement, a
Sub-Franchisee, either abandons a Sub-Franchisee Center, or otherwise elects not
to continue to operate said Center, then, the Master Franchisor shall have the
right to elect to acquire said Center, continue to operate said Center, and/or
convey said Center to another Sub-Franchisee who shall operate said Center, in
accordance with the terms of the Sub-Franchise Agreement, and the terms of this
Agreement. In the event that the Master Franchisor elects not to operate said
Center, or to convey, or otherwise enter into a Sub-Franchise Agreement with
another Sub-Franchisee, the Company shall have the right to elect to acquire
said Center, to operate said Center, and/or to convey said Center to a
Franchisee, to operate said Center in accordance with the terms of this
Agreement, provided, however, that in no event shall the Center shall be
included in the Development Schedule. The Master Franchisor shall be obligated
to notify the Company within ten (10) days of the abandonment or other
termination of any Center, or Sub-Franchisee Agreement, and shall, within ten
(10) days from the date of abandonment or other termination, to make the
election described in this Section.
B. In the event that at any time during the term of this Agreement, the
Master Franchisor abandons, or otherwise elects to cease operation of any
Existing Center, any ESI Center, and/or any Master Franchisor Center, and except
if the assets relating to said Center, are being conveyed to a Sub-Franchisee,
who shall be entering into a Sub-Franchise Agreement in accordance with the
provisions of this Agreement, the Master Franchisor shall be obligated to advise
the Company within ten (10) days of the abandonment or other termination of said
Center, whereupon the Company shall have the right to elect to acquire said
Center, to operate said Center, and/or to convey said Center to a Franchisee, to
operate said Center in accordance with the terms of this Agreement, provided
however, that in no event shall the Center shall be included in the Development
Schedule.
25. ENFORCEMENT.
A. SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS.
Except as expressly provided to the contrary herein, each section,
paragraph, term and provision of this Agreement, and any portion thereof, shall
be considered severable and if, for any reason, any such portion of this
Agreement is held to be invalid, contrary to, or in conflict with any applicable
present or future law or regulation in a final, unappealable ruling issued by
any court, agency or tribunal having competent jurisdiction in a proceeding to
which the Company is a party, no such ruling shall impair the operation of, or
have any other effect upon, such other portions of this Agreement, each of which
shall continue to be given full force and effect and bind the parties hereto,
although any portion held to be invalid shall be deemed not to be a part of
60
this Agreement from the date the time for appeal expires, if Master Franchisor
is a party thereto, or otherwise upon Master Franchisor's receipt of a notice of
non-enforcement thereof from the Company.
If any applicable and binding law or rule of any jurisdiction
requires a greater prior notice of the termination of this Agreement than is
required hereunder, or the taking of some other action not required hereunder,
or if under any applicable and binding law or rule of any jurisdiction, any
provision of this Agreement or any specification, standard or operating
procedure prescribed by the Company is invalid or unenforceable, the prior
notice and/or other action required by such law or rule shall be substituted for
the comparable provisions hereof, and the Company shall have the right, in its
sole discretion, to modify such invalid or unenforceable provision,
specification, standard or operating procedure to the extent required to make
the same valid and enforceable. Master Franchisor agrees to be bound by any
promise or covenant imposing the maximum duty permitted by law which is subsumed
within the terms of any provision hereof, as though it were separately
articulated in and made a part of this Agreement, that may result from striking
any of the provisions hereof, or any specification, standard or operating
procedure prescribed by the Company, any portion or portions which a court may
hold to be unenforceable in a final decision to which the Company is a party, or
from reducing the scope of any promise or covenant to the extent required to
comply with such a court order. Such modifications to this Agreement shall be
effective only in such jurisdiction, unless the Company elects to give them
greater applicability, and this Agreement shall be enforced as originally made
and entered into in all other jurisdictions.
B. WAIVER OF OBLIGATIONS.
The Company and Master Franchisor may, by written instrument,
unilaterally waive or reduce any obligation of, or restriction upon, the other
as evidenced by this Agreement, effective upon delivery of written notice
thereof to the other or such other effective date stated in the notice of
waiver. Any waiver granted by the Company shall be without prejudice to any
other rights which the Company may have, will be subject to continuing review by
the Company, and may be revoked, in the Company's sole discretion, at any time
and for any reason, effective upon delivery of ten (10) days' prior written
notice to Master Franchisor. The Company and Master Franchisor shall not be
deemed to have waived or impaired any right, power or option reserved by this
Agreement, including, without limitation, the right to demand exact compliance
with every term, condition and covenant herein contained, or to declare any
breach thereof to be a default and to terminate this Agreement and the license
granted hereunder prior to the expiration of its term, by virtue of: (i) any
custom or practice of the parties at variance with the terms hereof; (ii) any
failure, refusal or neglect of the Company or Master Franchisor to exercise any
right under this Agreement or to insist upon exact compliance by the other with
its obligations
61
hereunder, including, without limitation, any mandatory specification, standard
or operating procedure; (iii) any waiver, forbearance, delay, failure or
omission by the Company to exercise any right, power or option, whether of the
same, similar or different nature, with respect to any other Sterling Optical
Center; or (iv) the acceptance by the Company of any payments from Master
Franchisor after any breach by Master Franchisor of this Agreement. Neither the
Company nor Master Franchisor shall be liable for any loss or damage or deemed
to be in breach of this Agreement if its failure to perform its obligations
results from: (i) transportation shortages, inadequate supply of equipment,
merchandise, supplies, labor, material or energy, or the voluntary forgoing of
the right to acquire or use any of the foregoing in order to accommodate or
comply with the orders, requests, regulations, recommendations or instructions
of any federal, state or municipal government or any department or agency
thereof; (ii) compliance with any law, ruling, order, regulation, requirement or
instruction of any federal, state or municipal government or any department or
agency thereof; (iii) acts of God; (iv) fires, strikes, embargoes, war or riot;
or (v) any other similar event or cause. Any delay resulting from any of said
causes shall extend performance accordingly or excuse performance, in whole or
in part, as may be reasonable, except that said causes shall not excuse payment
of amounts owed at the time of such occurrence or payment of Royalty Fees or
Advertising Contributions due on any sales thereafter.
C. RIGHTS OF PARTIES ARE CUMULATIVE.
The rights of the Company and Master Franchisor hereunder are
cumulative and no exercise or enforcement by the Company or Master Franchisor of
any right or remedy hereunder shall preclude the exercise or enforcement by the
Company or Master Franchisor of any other right or remedy hereunder to which
they may be entitled by law to enforce.
D. COSTS AND ATTORNEYS' FEES.
The Master Franchisor shall promptly reimburse the Company for all
costs and expenses, including reasonable attorneys' fees and expenses, incurred
in enforcing any provision of this Agreement or any of the Master Franchisor's
and/or its shareholders' or partners' obligations hereunder.
E. GOVERNING LAW/CONSENT TO ARBITRATION.
(1) This Agreement shall be construed and enforced in accordance
with the laws of the Province of Ontario. The parties hereto consent and
agree that all controversies, disputes or claims arising between the
Company and the Master Franchisor in connection with, arising from, or
with respect to: (i) this Agreement; (ii) the relationship of the parties
created hereunder; or (iii) the validity of this Agreement, or any other
agreement between the parties, or any provision thereof (except as
otherwise set forth below) which shall not be resolved within fifteen (15)
days after either party shall
62
notify the other in writing of such controversy, dispute or claim, shall
be submitted for arbitration in Ontario, Canada pursuant to the
Arbitrations Act S.O. 1991, ch.17 on demand of either party. Such
arbitration proceedings shall be conducted by a panel of three (3)
arbitrators located in Ontario, Canada. Each of the parties shall have
thirty (30) days from receipt of the election to proceed to arbitration to
designate one arbitrator; the two arbitrators shall thereafter have
fifteen (15) days to designate a third arbitrator. In the event that any
of the arbitrators shall fail to be appointed in accordance with the
foregoing provisions, either party may apply to the Ontario Court (General
Division) to appoint the remaining arbitrator or arbitrators, as the case
may be. The arbitration shall commence thirty (30) days after appointment
of all of the arbitrators. The arbitrators shall have the right to award
or include in their award any relief which they deem proper under the
circumstances, including without limitation, money damages (with interest
on unpaid amounts from date due), specific performance and injunctive
relief. The award and decision of the arbitrators shall be conclusive and
binding upon all parties hereto, with no appeal, and judgment upon the
award may be entered in any court of competent jurisdiction. The parties
acknowledge and agree that any arbitration award may be enforced against
either or both of them in any such court of competent jurisdiction and
each waives any right to contest the validity or enforceability of such
award. The parties further agree to be bound by the provisions of any
statute of limitations which would otherwise be applicable to the
controversy, dispute or claim which is the subject of any arbitration
proceeding initiated hereunder.
(2) Nothing herein contained shall bar the Company's or Master
Franchisor's right to obtain preliminary injunctive relief against conduct
or threatened conduct, that will cause it loss or damages, under customary
equity rules, including applicable rules for obtaining restraining orders
and preliminary injunctions. Master Franchisor agrees that the Company may
have such injunctive relief, without bond, but upon due notice, in
addition to such further and other relief as may be available at equity or
law, and the sole remedy of Master Franchisor, in the event of the entry
of such injunction, shall be the dissolution of such injunction, if
warranted, upon hearing duly had, all claims for damages by reason of the
wrongful issuance of any such injunction being expressly waived hereby.
F. BINDING EFFECT.
This Agreement is binding upon and shall inure to the benefit of the
parties hereto and their respective executors, administrators, heirs, permitted
assigns and successors in interest, and shall not be modified except by a
written agreement executed by the Company and Master Franchisor which, by its
express terms, modifies this Agreement.
63
G. CONSTRUCTION.
The preambles to this Agreement are a part of this Agreement. This
Agreement, the Exhibits attached hereto, the documents contemplated hereby, and
any riders executed by the Company and Master Franchisor and attached hereto
constitute the entire agreement of the parties with respect to the terms and
conditions under which the Company has granted Master Franchisor the right to
own, operate, and grant sub-franchises for Sterling Optical Centers within the
Territory. There are no other oral or written understandings or agreements
between the Company and Master Franchisor or any of them relating to the subject
matter of this Agreement.
Except as otherwise expressly provided herein, nothing in this
Agreement is intended, nor shall be deemed, to confer any rights or remedies
upon any person or legal entity not a party hereto. The headings of the several
Sections and Paragraphs hereof are for convenience only and do not define, limit
or construe the contents of such Sections or Paragraphs. Words of any gender or
number herein shall include any other gender or number where the context so
requires. The term "Master Franchisor" as used herein may be applicable to one
or more persons, a corporation, a partnership or other business entity, as the
case may be. The obligations of the Master Franchisor hereunder shall apply with
the same force and effect to each shareholder or partner of the Master
Franchisor and each shareholder and partner shall be obligated to personally
comply with all provisions herein including, but not limited to, Sections 5, 11,
12, 13, 14, 15 16, 18, 19, 20 and 21. If two or more persons are at any time the
Master Franchisor hereunder, their obligations and liabilities to the Company
hereunder shall be joint and several. Similarly, the obligations of each
shareholder and partner of Master Franchisor, as guarantor, shall be joint and
several with the Master Franchisor and all other partners or shareholders.
References to "Master Franchisor" and "transferee" or "assignee" which are
applicable to an individual or individuals shall mean the owner or owners of the
equity or operating control of Master Franchisor, the transferee or assignee, if
Master Franchisor, the transferee or assignee, is a corporation, partnership or
other business entity.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one
and the same agreement.
H. MASTER FRANCHISOR'S OBLIGATIONS TO ENFORCE AGAINST SUB-
FRANCHISEES.
Notwithstanding anything in this Agreement to the contrary, it is
agreed that wherever in this Agreement the Master Franchisor is required to
cause a Sub-Franchisee to take or refrain from taking any action, Master
Franchisor shall be obligated to use its best efforts to cause such
Sub-Franchisee to comply with such requirements, including, commencing legal
proceedings and diligently prosecuting such proceedings to a conclusion, and/or
seeking to terminate the Sub-Franchise Agreement; provided,
64
however, Master Franchisor shall not be in default if notwithstanding its
diligent best efforts, the Sub-Franchisor is not in compliance with its
obligations.
26. CHANGE OF LAW OR REGULATION.
The parties acknowledge and agree that a significant object of this
Agreement is the furnishing by the Company to Master Franchisor of the Business
System, and the license of the Marks to be used for promotion of retail optical
centers to be located in the Territory, and the compensation of the Company
therefor at the level and in the manner herein provided. Recognizing that
changes in applicable law or regulation may render the manner of performance
herein provided illegal or otherwise impossible, in whole or in part, the
parties agree that, upon any such determination, if there is an alternative
manner of performance in which the object of this Agreement may be lawfully
achieved, they will substitute such alternative manner of performance for the
manner herein provided, and memorialize the same in one or more written
instruments executed by the parties hereto. If the Company is then offering
franchises or master franchises for Sterling Optical Centers in a manner which
conforms to the applicable laws and regulations of that state, then the parties
will adopt such an alternative manner of performance and execute a conforming
substitute franchise agreement and such related documents as are then being used
for such purpose. Otherwise, the parties shall adopt the manner of performance
and execute such conforming agreements as are reasonably selected by the Company
and which provide a lawful manner of performance in the Territory.
Any alternative manner of performance, and any conforming agreement and
related documents shall be modified as necessary to avoid an increase in the
level of compensation paid to the Company by Master Franchisor or a material
increase in the duties and obligations incurred by Master Franchisor.
27. NOTICES AND PAYMENTS.
All written notices and reports which are permitted or required to be
delivered by the provisions of this Agreement or of the Operating Manual shall
be deemed so delivered: (i) upon delivery, if delivered by hand, including by
any courier service such as Federal Express, which obtains a signed receipt for
same; (ii) one (1) business day after transmission, if the same are sent by
telegraph or comparable electronic system; or (iii) three (3) business days
after the date of deposit, if the same are deposited with the U.S. or Canadian
Postal Service, Registered or Certified Mail, Return Receipt Requested,
first-class postage prepaid and addressed to the party to be notified at the
address set forth below, or such other address as the Company or Master
Franchisor shall designate by like notice to the other party.
All Notices to the Company shall be sent to:
Sterling Vision, Inc.
65
0000 Xxxxxxxxx Xxxxxxxx
Xxxx Xxxxxx, Xxx Xxxx 00000
Attn: President
Fax No.: 000-000-0000
with copies to be sent to:
Sterling Vision, Inc.
0000 Xxxxxxxxx Xxxxxxxx
Xxxx Xxxxxx, Xxx Xxxx 00000
Attn: General Counsel
Fax No.: 000-000-0000
Xxxxxxx Xxxxxxxx & Flohr
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxx, Esq.
Fax No.: 000-000-0000
All Notices to the Master Franchisor shall be sent to:
EYE-SITE INC.
000 Xxxx Xxxxxx Xxxx
Xxxxxxx X0X 0X0
XXXXXX, XXXXXX
EYE SITE (Ontario) LTD.
000 Xxxx Xxxxxx Xxxx
Xxxxxxx X0X 0X0
XXXXXX, XXXXXX
with a copy to be sent to:
Xxxxxx Van Winssen, Esq.
Xxxxxxxxx, Menningra, Kort, Xxxxxxxx &
Xxxxxxxxxxx
000 Xxxxxx Xxxxxx Xxxx - Xxxxx 000
Xxxxxxxxxx, Xxxxxxx
Xxxxxx K8N 582
Fax No.: 000-000-0000
All payments and reports required by this Agreement shall be directed to the
Company at the address set forth on the first page of this Agreement for its
retail optical division or to such other persons and places as the Company may
from time to time designate by like notice. Any required payment or report which
is not delivered to the Company as aforesaid shall be deemed delinquent.
28. GUARANTEES.
66
Simultaneously upon the execution of this Agreement, Master Franchisor
shall provide to the Company the guarantee of Xxxxxxxx Xxx (the "Guarantor") for
all amounts due under this Agreement and under any Subleases with the Company or
its affiliates, provided that with respect to obligations under any Sublease,
Guarantor shall not be obligated for amounts due under any Sublease which
amounts are attributable to rent, additional rent or other charges for any
period after the date that possession of the premises, to which said sublease
relates, has been delivered to the Company or its designee. In addition,
Guarantor shall execute and deliver to the Company, a Guarantee and Assumption
Agreement, in form satisfactory to the Company. In the event that at any time
during the term of this Agreement, any rights under this Agreement shall be
assigned or otherwise transferred, directly or indirectly to, or in the event
that any ESI Center, Master Franchisor Center, or Sub-Franchisee Center, shall
be owned or controlled, in whole or in part, directly or indirectly, by, any
subsidiary, affiliate, or shareholder of the Master Franchisor or the Guarantor,
or other person or entity affiliated with or owned or controlled by the Master
Franchisor or the Guarantor, then such subsidiary, affiliate, shareholder or
other entity shall be deemed to be a guarantor hereunder, and shall be obligated
to execute and deliver to the Company, such guaranties, an guaranty and
assumption agreements as shall be required by the Company, provided same shall
be in substantially the form delivered by Guarantor.
29. ACKNOWLEDGMENTS.
Master Franchisor acknowledges that it, he or she has received and has
read, the Company's Franchise Offering Circular at least ten (10) business days
prior to the execution of this Agreement, and that it, he or she understands and
accepts the terms, conditions and covenants contained in this Agreement as being
reasonably necessary to maintain the Company's high standards of quality and
service and the uniformity of those standards at all Sterling Optical Centers
and protect and preserve the goodwill of the Marks, the Business System and all
other Sterling Optical Centers. Master Franchisor acknowledges that it, he or
she has conducted an independent investigation of the business venture
contemplated by this Agreement and recognizes that it involves business risks
and that the success of the venture is largely dependent upon the business
ability of Master Franchisor. The Company expressly disclaims the making of, and
Master Franchisor acknowledges that it, he or she has not received or relied
upon, any warranty or guaranty, express or implied, as to the revenues, profits
or success of the business venture contemplated by this Agreement, and that it,
he or she has based the decision to enter into this Agreement only upon the
representations and warranties contained in this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed, sealed and delivered
this Agreement in four (4) counterparts, each of
67
which shall be deemed an original instrument for all purposes, all as of the day
and year first above written.
Company: Master Franchisor:
STERLING VISION INC. EYE-SITE INC.
By:______________________________ By:_____________________________
Title ___________________________ Title: _________________________
EYE SITE (ONTARIO) LTD.
By:_____________________________
Title:__________________________
SCHEDULE A.
(a) Atrium Bay, 000 Xxx Xxxxxx, Xxxxxxx, Xxxxxxx
(the "Atrium Bay Center");
(b) Lime Ridge Mall, 000 Xxxxx Xxxxx, Xxxx Xxxxx,
Xxxxxxx (the "Lime Ridge Center");
(c) Xxxxxx Xxxx, 00-00 Xxxxxx Xxxxxx, Xxxxxxxx,
Xxxxxxx (xxx "Hamilton Center"); or
(d) Bramalea City Center, 00 Xxxx Xxxxxx,
Xxxxxxxx, Xxxxxxx (the "Bramalea Center");
SCHEDULE B.
EYE SITE
5 Points Mall
000 Xxxxxxx Xxxx, Xxxx
Xxxxxx, Xxxxxxx X0X 0X0
EYE SITE
Hopedale Mall
0000 Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxx X0X 0X0
EYE SITE
000 Xxxxxx Xxxxxx, Xxxxx
Xxxxxxxxxxxx, Xxxxxxx X0X 0X0
EYE SITE
Oshawa Centre
000 Xxxx Xxxxxx, Xxxx
Xxxxxx, Xxxxxxx X0X 0X0
EYE SITE
Xxxxxx Xxxx Xxxx
00 Xxxxxx Xxxx
Xxxxxxxxx, Xxxxxxx X0X 0X0
SCHEDULE "C"
DEVELOPMENT SCHEDULE
NUMBER OF YEARS NUMBER OF CENTERS TO BE
FOLLOWING THE CLOSING DATE OPEN AND IN OPERATION*
-------------------------- ----------------------
1 2
-- ----
2 4
-- ----
3 6
-- ----
4 8
-- ----
5 10
-- ----
6 13
-- ----
7 16
-- ----
8 19
-- ----
9 22
-- ----
10 25
-- ----
11 28
-- ----
12 31
-- ----
13 34**
-- ----
* In addition to the Existing Centers and the ESI Centers
** At such time as there shall be 35 Centers in operation, Master
Franchisor shall be obligated during the balance of the terms of the Master
Agreement, to continue to open 2 Centers per year.
