EXHIBIT 10.2
FITNESS FOR LIFE FRANCHISE CORPORATION
MASTER FRANCHISE AGREEMENT
MASTER FRANCHISEE:
------------------------
ADDRESS:
------------------------
------------------------
------------------------
EFFECTIVE DATE: ______________________, 2001
THIS MASTER FRANCHISE AGREEMENT (the "Agreement") is between Fitness For Life
Franchise Corporation, an Arizona corporation, located at 0000 Xxxxxxx Xxxxx,
Xxxxxx Xxxx, Xxxxxxxx ("Franchisor"), and the Master Franchise Owner listed
above ("Master Franchisee"), who agree as follows:
1. BACKGROUND AND PURPOSE
1.1. Franchisor has developed methods for establishing, operating, and
promoting Fitness Together Personal Training Studios ("Fitness Together
Personal Training Studios"). These methods feature the use and license
of the service xxxx and related service marks and trademarks
(collectively, the "Marks") and Franchisor's distinctive plans for the
establishment, operation, and promotion of Fitness Together Personal
Training Studios and related licensed methods of doing business (the
"Licensed Methods").
1.2. Franchisor grants to qualified individuals, or to entities with which
such individuals are affiliated, the right and license to develop and
operate Fitness Together Personal Training Studios using the Marks and
Licensed Methods.
1.3. Master Franchisee desires to provide to Franchisor certain sales and
services activities within the Territory, enabling Master Franchisee to
sell franchises for Fitness Together Personal
69
Training Studios and to develop, support, and provide services to
Fitness Together Personal Training Studios within such geographical
area, under the terms and conditions contained in this Agreement
("Master Franchisee Business" or "Business").
1.4. Franchisor is willing to grant to Master Franchisee the right to sell
franchises for Fitness Together Personal Training Studios and to provide
site selection and support services to Fitness Together Personal
Training Studios within the Territory, under terms and conditions
herein.
2. DEFINITIONS
2.1. Assignment. "Assignment" shall mean an assignment or other transfer to a
Franchisee of all of the Master Franchisee's rights, title, and interest
in and to a Prime Lease.
2.2. Fitness Together Manual. "Fitness Together Manual" means the manuals,
technical bulletins, or other written materials covering the proper
operating and marketing techniques of a Fitness Together business and
standards and specifications for implementing the Licensed Methods.
2.3. Franchise Agreement. "Franchise Agreement" means the forms of agreements
(including, without limitation, franchise agreement and any exhibits,
riders, collateral assignments of lease or sublease, and personal
guarantees used in connection therewith) used by Franchisor from time to
time in the granting of franchises for the ownership and operation of
Fitness Together Personal Training Studios. Master Franchisee
acknowledges that Master Franchisee will use Franchisor's then current
form of franchise agreement and that Franchisor, in its sole discretion,
may from time to time modify or amend in any respect the form of
franchise agreement and related agreements, including, without
limitation, modifying fees customarily used in granting Fitness Together
Personal Training Studio franchises.
2.4. Franchisee. "Franchisee" means any person, corporation, partnership, or
other entity who has entered into a Franchise Agreement with Franchisor.
2.5. Managing Owner. "Managing Owner" means the individual or individuals
identified as Managing Owner(s) on the signature page of this Agreement
who have the responsibilities set forth in Section ___, below, and
elsewhere in this Agreement.
2.6. Prime Lease and Premises. "Prime Lease" shall mean a lease of commercial
space ("Premises") entered into by the Master Franchisee, as tenant
thereunder, for Premises located within the Territory.
2.7. Sales Quarter. "Sales Quarter" means each calendar quarter during the
term of this Agreement.
70
2.8. Sales Year. "Sales Year" means each calendar year during the term of
this Agreement.
2.9. Territory. "Territory" is the geographical area described in the
attached Exhibit 1.
3. SCOPE OF APPOINTMENT
3.1. Grant of Master Franchisee Rights; Scope of Operations. Franchisor
grants to Master Franchisee the rights set forth in this Agreement, and
Master Franchisee agrees to perform its obligations in accordance with
the terms and conditions of this Agreement, and only within the
Territory to: (1) solicit prospective Franchisees for Fitness Together
Personal Training Studios to be located in the Territory ("Sales
Services"); (2) perform certain site acquisition and development
services described in Section 9.4 ("Site Services"); and (3) to render
support and other services ("Support Services") to Fitness Together
Personal Training Studios located within the Territory, as those
services are described in Section 9.5.
3.2. Rights and Limitations to Territory. Franchisor will not establish and
license any other person as Master Franchisee to perform Sales Services,
Site Services, or Support Services to Franchisees within the Territory;
provided, however, that Franchisor shall retain such rights in the
Territory as described in Section 3.3.
3.3. Reservation of Rights to Franchisor. Master Franchisee acknowledges that
the rights granted hereunder are nonexclusive and Franchisor (on behalf
of itself, its affiliates, and designees) retains the right in its sole
discretion (and without compensation or obligation whatsoever to Master
Franchisee unless specifically set forth herein):
(a) to use, and to license others to use, the Marks and Licensed
Methods for the operation of other Master Franchise Businesses at
any location outside of the Territory; and
(b) to solicit prospective Franchisees and to grant other persons
franchises to operate Fitness Together Personal Training Studios at
such locations within and outside of the Territory and on such
terms and conditions as Franchisor deems appropriate and to itself
own and operate such Fitness Together Personal Training Studios
within the Territory (subject to its obligation to compensate
Master Franchisee, as set forth in Section 6.5).
3.4. Managing Owner. If Master Franchisee is an entity, identified on the
signature page of this Agreement are the names of the Managing Owners.
Franchisor has entered into this Agreement with Master Franchisee in
reliance on the personal involvement in the Business of Managing Owners.
At all times during the term of this Agreement, such Managing Owners
shall devote so much of their personal time and attention to the
management and operation of the Business as may be necessary.
71
4. FRANCHISE SALES PROCEDURES
4.1. Sales and Openings Goals. Master Franchisee agrees that during the term
of this Agreement, Master Franchisee will set and work toward the
franchise sales and openings goals ("Sales and Openings Goals") set
forth in Exhibit 1 to this Agreement.
4.2. Franchise Registration and Disclosure. Neither Master Franchisee nor any
employee or representative of Master Franchisee shall solicit
prospective Franchisees of Fitness Together Personal Training Studios
until Franchisor has registered its current UFOC in applicable
jurisdictions and has provided Master Franchisee with the requisite
documents, or at any time when Franchisor notifies Master Franchisee
that its registration is not then in effect or its documents are not
then in compliance with applicable law. If Master Franchisee's
activities pursuant to this Agreement require the preparation,
amendment, registration, or filing of information or any disclosure or
other documents, all requisite offering circulars, ancillary documents,
and registration applications shall be prepared and filed by Franchisor
or its designee, and registration secured before Master Franchisee may
solicit prospective Franchisees of Fitness Together Personal Training
Studios. Costs of such registration applicable to Master Franchisee
shall be borne by Master Franchisee. In particular, Master Franchisee
shall:
(a) prepare and forward to Franchisor _____________ financial
statements of Master Franchisee in such form and for such periods
as shall be designated by Franchisor certified by Master Franchisee
and any Managing Owner as being true, correct, and complete,
including audited financial statements, if necessary and
appropriate to comply with applicable legal disclosure, filing, or
other legal requirements;
(b) promptly provide all information reasonably required by Franchisor
to prepare all requisite offering circulars and ancillary documents
for the offering of franchises throughout the Territory;
(c) execute all documents required by Franchisor for the purpose of
registering Master Franchisee and Franchisor to offer franchises
throughout the Territory; and
(d) pay to Franchisor, or its designee, upon demand, the costs of
registering and preparing those portions of all such offering
circulars and ancillary documents which are applicable to Master
Franchisee.
Master Franchisee agrees to review all information pertaining to Master
Franchisee prepared to comply with legal requirements for selling
franchises in the Territory and verify its accuracy if so requested by
Franchisor. Master Franchisee acknowledges that Franchisor, its
affiliates, or its designees shall not be liable to Master Franchisee
for any errors, omissions, or delays which may occur in the preparation
of such materials.
72
4.3. Master Franchisee Advertising, Recruiting, and Screening. Master
Franchisee shall be responsible for assisting Franchisor in advertising
for, recruiting, screening, and interviewing prospects for Fitness
Together Personal Training Studio franchises within the Territory.
Franchisor shall provide prospective Franchisees with written
information regarding a Fitness Together Personal Training Studio
franchise as requested by Master Franchisee, or via the telephone,
face-to-face meetings or by visiting other Fitness Together Personal
Training Studios within the Territory. Master Franchisee shall submit
each qualified applicant ("Applicant") for a Fitness Together Personal
Training Studio franchise to Franchisor for approval. Master Franchisee
further agrees that all Applicants submitted to Franchisor by Master
Franchisee, if an individual, or the Managing Owner of the Applicant if
the Applicant is not an individual, shall be individuals who are of good
character, have adequate financial resources, and meet Franchisor's
criteria for Franchisees or Managing Owners of Franchisees. Each
application for a franchise received by Master Franchisee shall be
submitted to Franchisor with all information respecting the Applicant,
the Managing Owner of the Applicant, if applicable, the Applicant's
proposed franchise location, if known, and all other information then
customarily required by Franchisor concerning Applicants, including such
financial statements and other information as Franchisor may reasonably
require. Master Franchisee shall assist the Applicant in the preparation
of such financial reports and other information.
4.4. Franchisor's Approval of Prospective Franchisees. By delivery of written
notice to Master Franchisee, Franchisor shall approve or disapprove
Applicants to become Fitness Together Personal Training Studio
Franchisees. Franchisor agrees to exert its best efforts to deliver such
notification to Master Franchisee within 10 business days after the
later of:
(a) receipt by Franchisor of a complete application, financial
statement, and other materials regarding the Applicant requested by
Franchisor; and
(b) the personal interview of Applicant by Franchisor, if any.
Franchisor, in its sole discretion, shall determine whether the
Applicant possesses sufficient financial and managerial capability and
meets the other criteria then utilized by Franchisor in the grant of
franchises. The grant of the franchise shall be effected only upon and
after the full execution of the then current Franchise Agreement by
Franchisor and the Applicant.
5. PAYMENTS TO FRANCHISOR
5.1. Initial Master Franchise Fee. The initial Master Franchise fee ("Initial
Fee") payable to Franchisor by Master Franchisee in consideration for
Master Franchisee's appointment as exclusive Master Franchisee within
the Territory shall be calculated and set forth in the attached Exhibit
1. Unless otherwise agreed, the Initial Fee is payable in full upon
execution of this Agreement. The Initial Fee is fully earned by
Franchisor upon receipt and is nonrefundable once paid; provided,
however, that if this Agreement is terminated under
73
Section 17.2(a), Master Franchisee shall be entitled to a refund of the
Initial Fee, less reasonable expenses incurred by Franchisor in
connection with Master Franchisee's training. Master Franchisee
acknowledges that the Initial Fee does not include payment of any
initial franchise fees for individual Fitness Together Personal Training
Studios.
6. PAYMENTS TO MASTER FRANCHISEE
6.1. Sales Services Commissions and Conditions of Payment. During the term of
this Agreement, Master Franchisee shall be paid a commission, as set
forth in this Section, based on a percentage of initial franchise fees
paid by Franchisees for the purchase of a franchise for a Fitness
Together Personal Training Studio to be located within the Territory
("Sales Services Commission"), subject to fulfillment of the following
conditions ("Franchise Sales Conditions"):
(a) Franchisee executes a Franchise Agreement with Franchisor and an
initial franchise fee has been paid and actually received by
Franchisor (Franchisor shall not be deemed to have received any
fees paid into escrow, if applicable, until such fees have actually
been remitted to Franchisor);
(b) The sale for which the initial franchise fee has been paid is not a
resale of any existing Fitness Together Personal Training Studio,
or any interest therein; and
(c) Master Franchisee has complied with all other of its obligations
under this Agreement with respect to such sale and has verified the
same to Franchisor in writing in a form prescribed by Franchisor.
6.2. Sales Services Commission Payments. Sales Services Commissions shall be
an amount equal to 100% of the total initial franchise fees paid to
Franchisor as contemplated by Section 6.1, above, until the Master
Franchisee has received payments under this Section 6.2 equal to the
Initial Fee paid by Master Franchisee to Franchisor, and thereafter
shall be 50% of the total initial franchise fees paid to Franchisor.
These monies will be payable to Master Franchisee within 20 days after
the Franchise Sale Conditions have been fulfilled. Master Franchisee
shall not receive any Sales Services Commission for Fitness Together
Personal Training Studios owned and operated by Franchisor, its
affiliates, or designees ("Company Owned Fitness Together Personal
Training Studios") in the Territory, if any.
6.3. Commissions on Transfers of Franchises. If, during the term of this
Agreement, a Fitness Together Personal Training Studio located within
the Territory or an interest therein is resold to a different Franchisee
and the sale results in the execution of a Franchise Agreement and the
payment of a transfer fee, then Master Franchisee will be paid a
commission in the amount of 50% of the transfer fee paid and actually
received by Franchisor, payable within 20 days of the completion of the
transfer, provided that
74
Franchisor shall not be deemed to have received any fees paid into
escrow, if applicable, until such fees have actually been remitted to
Franchisor.
6.4. Commissions on Royalty Fees. Franchisor shall pay to Master Franchisee,
within 25 days of the end of each monthly period, 50 % of the royalty
fees (which excludes Master Franchisee advertising fees and royalty fees
based on those items listed in Section 3.3) actually received by
Franchisor from each Franchisee located in the Territory during the
applicable period pursuant to their Franchise Agreement ("Royalty
Fees"). Notwithstanding the foregoing:
(a) If Master Franchisee has failed to conduct the periodic inspections
described in Section 9.5 and file a written report or failed to
perform in any material respect the other services described in
Section 9 to be provided to Franchisees located in the Territory
during any applicable month with respect to one or more Franchisees
located in the Territory, Master Franchisee shall not be entitled
to receive commissions on Royalty Fees with respect to such
Franchisees for the period during which reports or services were
not provided.
(b) Master Franchisee shall not be entitled to share in and receive any
commissions on Royalty Fees from any fees paid to Franchisor by
Franchisees in the Territory prior to the time Master Franchisee
completes the initial Master Franchisee training program and
commences full performance of the services set forth in Section 9.
(c) Master Franchisee shall not be entitled to share in or receive any
commissions on Royalty Fees from any fees paid to Franchisor by
Franchisees (or that would otherwise be payable by any Company
Owned Fitness Together Personal Training Studio) from any Fitness
Together Personal Training Studio in the Territory that was (i)
opened, or operated under a Franchise Agreement entered into prior
to the Effective Date of this Agreement; (ii) constructed by
Franchisor and then transferred to a Franchisee under Franchisor's
"Turnkey" program; or (iii) a non-operation acquired by Franchisor
or its subsidiaries and thereafter converted to a Fitness Together
Personal Training Studio (collectively, "Exempt Fitness Together
Personal Training Studios"); provided that Master Franchisee will
be paid $300 per month for any Exempt Fitness Together Personal
Training Studio within the Territory in exchange for performance of
the services set forth in Section 9 with respect to such Exempt
Fitness Together Personal Training Studio.
6.5. Commissions After Termination. If Franchisor terminates this Agreement
due to Master Franchisee's failure to meet Sales and Openings Goals as
set forth in Section 17(c), then Master Franchisee will receive a 1%
commission (from amounts actually received by Franchisor from such
Fitness Together Personal Training Studios) on the gross sales of all
Fitness Together Personal Training Studios open and operating in the
Territory as of the date this Agreement is terminated through either the
initial term of the Franchise Agreement,
75
which governs each Fitness Together Personal Training Studio, or five
years following termination of this Agreement, whichever is sooner.
Notwithstanding the foregoing, if (i) Master Franchisee terminates this
Agreement: or (ii) Master Franchisee elects not to renew this Agreement
pursuant to Section 16; or (iii) if Franchisor terminates this Agreement
for any other reason; or (iv) if Master Franchisee violates the terms of
Sections 17.4 or 17.5 at any time during the term or after the
expiration or termination of this Agreement, then all payments under
this Section 6.5 shall immediately and permanently cease.
6.6. Application of Payments. Franchisor's payments to Master Franchisee
shall be based on amounts actually collected from Franchisees, not on
payments accrued, due, or owing. In the event of termination of a
Franchise Agreement for a Fitness Together Personal Training Studio
within the Territory under circumstances entitling Franchisee to the
return of all or part of the initial franchise fee or Royalty Fees (or
in the event that Franchisor becomes legally obligated or decides, in
its sole discretion, to return part or all of the initial franchise fee
or Royalty Fees), Franchisor may deduct the portion of the amount to be
returned to Franchisee in the same proportion as Master Franchisee
shared in the initial franchise fee or Royalty Fees from any future
amounts owed Master Franchisee. Franchisor shall apply any payments
received from a Franchisee to any past due indebtedness of that
Franchisee for Royalty Fees, Master Franchisee advertising
contributions, purchases from Franchisor or its affiliates, interest, or
any other indebtedness of that Franchisee to Franchisor or its
affiliates. To the extent that such payments are applied to a
Franchisee's overdue Royalty Fee payments, Master Franchisee shall be
entitled to its pro rata share of such payments, less its pro rata share
of the costs of collection paid to third parties.
6.7. Set-offs. Master Franchisee shall not be allowed to set-off amounts owed
to Franchisor for fees or other amounts due hereunder against any monies
owed to Master Franchisee by Franchisor, which right of set-off is
hereby expressly waived by Master Franchisee. Franchisor shall be
allowed to set-off amounts owed to Master Franchisee for commissions,
Royalty Fees, or other amounts due hereunder, against any monies owed to
Franchisor by Master Franchisee, including setting-off amounts owed to
Master Franchisee for commissions or Royalty Fees against monies owed to
Franchisor for commissions on Sales Services which were paid to Master
Franchisee before Franchisee failed to successfully complete
Franchisor's initial training program.
7. TRAINING ASSISTANCE
7.1. Master Franchisee Training. Within 60 days after the date of execution
of this Agreement, Franchisor shall furnish, and Master Franchisee (or
if Master Franchisee is an entity, a Managing Owner) shall attend, at
Master Franchisee's sole cost and expense, an initial training program,
to consist of the training program applicable to Franchisor's
Franchisees and such further training which may include topics such as
marketing, franchise sales, franchise law compliance, site selection,
and Fitness Together Personal Training Studio
76
operations, as Franchisor, in its sole discretion, deems advisable,
furnished at such place and time as Franchisor may designate.
7.2. Length of Training. Franchisor shall determine the appropriate length of
the portion of the initial Master Franchisee training program applicable
only to Master Franchisees, which will be in addition to the second part
of the initial Master Franchisee training program applicable to both
Master Franchise Owners and Franchisees. Other than the Initial Fee, no
tuition or fee shall be charged for the initial training. However,
Master Franchisee shall be responsible for all travel and living
expenses which are incurred in connection with attendance at both parts
of the initial training program.
7.3. Additional Training. The initial training program will be made available
to replacement or additional Managing Owners and other management
personnel during the term of this Agreement. Franchisor reserves the
right to charge a tuition or fee in an amount payable in advance for
such training. Master Franchisee will be responsible for all travel and
living expenses incurred by its personnel in connection with attendance
at the training program. Further, the availability of the training
programs will be subject to space considerations and prior commitments
to new Fitness Together Personal Training Studio Franchisees and Master
Franchisees.
7.4. Seminars and Ongoing Training. From time to time, Franchisor may present
seminars, conventions, or continuing development programs for the
benefit of Master Franchisee. Master Franchisee or its Managing Owner
shall be required to attend any ongoing mandatory seminars, industry
conventions, or programs as may be offered by Franchisor. If Master
Franchisee fails to attend a mandatory seminar, convention, or program
without obtaining Franchisor's prior written approval of the absence and
fails to arrange for attendance at an alternate time, Master Franchisee
shall be required to make up the missed program at a time and place
designated by Franchisor and will be charged $1,500 for each program
missed. Franchisor shall give Master Franchisee at least 30 days' prior
written notice of any seminar, convention, or program that is deemed
mandatory. Franchisor will not require that Master Franchisee attend any
ongoing training more often than one time per calendar year. Master
Franchisee will be responsible for all travel and living expenses which
are associated with attendance at any ongoing training program.
8. FRANCHISOR'S OPERATING ASSISTANCE
8.1. Master Franchisee Manual. Franchisor shall, in addition to the Master
Franchisee training program, loan to Master Franchisee during the term
hereof one copy of its Master Franchisee Manual to assist Master
Franchisee and its employees in the conduct of the business contemplated
by this Agreement. Franchisor may prescribe mandatory and suggested
standards and operating procedures for Master Franchisee in the Master
Franchisee Manual, which may be modified from time to time by
Franchisor. Master Franchisee shall keep its copy of the Master
Franchisee Manual current. In the event of a dispute relating to the
77
Master Franchisee Manual, the master copy that Franchisor maintains at
its principal office shall be controlling. Master Franchisee may not at
any time copy any part of the Master Franchisee Manual, unless approved
in writing by Franchisor. In the event Master Franchisee's copy of the
Master Franchisee Manual is lost, destroyed, or damaged, Master
Franchisee shall be obligated to obtain from Franchisor, at
Franchisor's then applicable charge, a replacement copy of the Master
Franchisee Manual. The Master Franchisee Manual and other writings
communicated to Master Franchisee shall constitute material provisions
of this Agreement as if fully set forth herein.
8.2. Operating Assistance. Franchisor will make available the following
services during the term of this Agreement:
(a) Upon the reasonable request of Master Franchisee, consultation by
telephone regarding franchise sales and Franchisee support and
assistance; and
(b) Access to franchise sales advertising and promotional materials as
may be developed by Franchisor, the reasonable cost of which may be
passed on to Master Franchisee at Franchisor's option.
9. MASTER FRANCHISEE'S OBLIGATIONS
9.1. Hiring and Training of Employees of Master Franchisee. Master Franchisee
shall hire all of Master Franchisee's employees, shall be exclusively
responsible for the terms of their employment and compensation, and
shall implement a training program for employees to enable their
compliance with Franchisor's requirements. Such employees shall meet all
requirements set forth in the Master Franchise Manual. Master Franchisee
shall not employ any person whom Franchisor, in its sole discretion, has
determined to be unfit to represent Franchisor in the marketing of
Fitness Together Personal Training Studio franchises or in furnishing
services to Franchisees.
9.2. Commencement of Business. Unless otherwise agreed to in writing by
Franchisor and Master Franchisee, Master Franchisee has 60 days from the
date of this Agreement within which to complete the first part of its
initial training and commence operation of its Fitness Together Personal
Training Studio Master Franchisee Business. Such 60-day time period may
be extended by Franchisor, in its reasonable discretion, upon
satisfaction of each of the following conditions: (a) Master Franchisee
demonstrates that it has been delayed in opening such Business by events
outside of Master Franchisee's reasonable control; (b) Master Franchisee
has made and is continuing to make reasonable and continuing efforts to
commence operations; and (c) Master Franchisee makes such a request for
extension to Franchisor in writing prior to the end of such 60-day
period. The obligations of Master Franchisee, including Sales Services,
shall commence at the earlier of the date Master Franchisee or its
Managing Owner has satisfactorily completed the first part of
Franchisor's initial training program or 60 days from the date of this
Agreement. Master Franchisee will
78
also, at Master Franchisee's expense, purchase or otherwise obtain for
use in connection with the Business:
(a) computer hardware and software that complies with the standards and
specifications of Franchisor;
(b) an office which must be serviced by a minimum of one dedicated
telephone line with 24-hour professional answering service or voice
mail;
(c) a facsimile machine with its own dedicated telephone line;
(d) business cards and stationary; and
(e) any other items required by the Master Franchisee Manual.
The telephone number of the Business office must be advertised in the
white and yellow pages of the telephone directories in the Territory.
9.3. Sales Services. Master Franchisee shall solicit and identify prospective
franchisees for Fitness Together Personal Training Studios to be located
within the Territory.
9.4. Site Services. Master Franchisee shall perform the following Site
Services on behalf of Franchisor with respect to Franchisees of Fitness
Together Personal Training Studios located in the Territory:
(a) Assist with Fitness Together Personal Training Studio location
selection for each Franchisee, which shall consist of providing
each Franchisee with criteria for a satisfactory site and assisting
each Franchisee in completing a site submittal package (containing
such demographic, commercial, and other information as Franchisor
may reasonably require) for each location at which Franchisee
proposes to establish and operate a Fitness Together Personal
Training Studio, and assist in negotiating lease terms and
coordinating the work of contractors and architects with respect to
the development of each Fitness Together Personal Training Studio;
(b) Provide standards and specifications for the build-out, interior
design, layout, floor plan, signs, designs, color, and decor of the
Fitness Together Personal Training Studio as prescribed from time
to time by Franchisor; and
(c) Submit completed forms and reports to Franchisor as prescribed by
Franchisor from time to time, including site selection and
pre-opening assistance forms and reports related to leases and
construction.
9.5. Pre-Opening and Opening Support Services.
79
(a) Provide Master Franchisee advice to Franchisee regarding the
standards and specifications for the equipment, supplies, and
materials used in, and the menu items offered for sale by, the
Fitness Together Personal Training Studio, and advice regarding the
selection of suppliers for the purchasing of such items used in
connection with the Fitness Together Personal Training Studio;
(b) Provide initial training and on-site assistance for not less than
50 hours in the opening of Fitness Together Personal Training
Studios located in the Territory, and the first two new franchisees
in the Master Franchisee territory will be trained by the
Franchisor; and
(c) Provide guidance in implementing advertising and marketing
programs, operating and sales procedures, and bookkeeping
(excluding accounting programs).
9.6. Continuing Support Services. With respect to Franchisees of Fitness
Together Personal Training Studios located in the Territory, Master
Franchisee shall perform the following Support Services on behalf of
Franchisor:
(a) Upon the reasonable request of Franchisee, provide consultation by
telephone regarding the continuing operation and management of the
Fitness Together Personal Training Studio and advice regarding
Fitness Together Personal Training Studio services, product quality
control, employee items, and customer relations issues;
(b) Provide on-going updates of information and programs regarding the
Fitness Together Personal Training Studio Business and related
Licensed Methods, including, without limitation, information about
special or new services of Franchisor;
(c) Provide advice and assistance to Franchisee in connection with the
development of and improvements to Franchisees of Fitness Together
Personal Training Studio;
(d) Conduct at least one quality assurance inspection (or reinspection
in the case of a failed first inspection) of each Fitness Together
Personal Training Studio in the Territory every month in the manner
as required by Franchisor from time to time, said inspections to be
verified by written reports in a form acceptable to Franchisor,
such inspections to be conducted by the Managing Owner.
(e) Provide access to advertising and promotional materials as may be
developed by Franchisor from time to time;
(f) At Franchisor's written request, establish an advertising
cooperative for all Fitness Together Personal Training Studios
located in the Territory using forms and procedures supplied by
Franchisor; and
80
(g) Submit periodic reports to Franchisor on activities in the
Territory, using procedures and forms prescribed by Franchisor.
9.7. Compliance with Franchise Agreement. Master Franchisee acknowledges that
it is being delegated certain responsibilities of Franchisor under the
Franchise Agreement to Franchisees in the Territory. The
responsibilities to Franchisees are to be performed by Master Franchisee
as described herein or as may in the future be set forth in the Master
Franchisee Manual or other reasonable standards and specifications as
may be provided by Franchisor from time to time, and the
responsibilities to Franchisees will not materially change during the
term of this Agreement. In the performance of services to Franchisees of
all Fitness Together Personal Training Studios located in the Territory,
Master Franchisee shall in all respects comply with the terms and
conditions of any Franchise Agreement or other agreement in effect
between Franchisee and Franchisor. Master Franchisee understands,
however, that its rights as a Master Franchisee are only by virtue of
this Agreement and that it is not in any manner a party, third party,
beneficiary, or holder of any other right, title, or interest in or to
any Franchise Agreement.
9.8. Master Franchisee's Inspections. Master Franchisee shall ascertain
through field audits, reviews, and inspections that each Franchisee in
the Territory has complied satisfactorily with all of the terms and
conditions of the Franchise Agreement, specifications, standards,
operating procedures, and the Franchisee's Operations Manual, and shall
promptly notify Franchisee in writing, with a copy and evaluation report
to Franchisor, of any deficiencies. Master Franchisee understands and
acknowledges that Franchisor shall have:
(a) all of the rights to inspect and ascertain compliance of all
Franchisees as if this Agreement were not in effect;
(b) the sole right to send notices of default to Franchisee;
(c) the sole right to terminate a Franchise Agreement; and
(d) the sole right to take any legal action with respect to any default
or any violation of a Franchise Agreement.
If Master Franchisee believes that any Franchisee in the Territory has
breached a Franchise Agreement with Franchisor, Master Franchisee shall
document in writing all facts related to the alleged breach and shall
request in writing that Franchisor investigate such alleged breach. If,
as a result of Franchisor's investigation, Franchisor determines that
there is a breach by Franchisee of its Franchise Agreement with
Franchisor, Franchisor shall, in its sole discretion, take such action
as it deems appropriate.
9.9. Discoveries. Should Master Franchisee, a Managing Owner, or anyone
affiliated with Master Franchisee develop any discoveries or ideas
related to the operation of Fitness
81
Together Personal Training Studios, Master Franchisee shall immediately
advise Franchisor of such discovery or idea in writing. Franchisor may
authorize the use and/or dissemination of such discovery or idea in its
discretion, and Master Franchisee agrees not to implement the discovery
or idea until authorized to do so by Franchisor. All such discoveries
and ideas developed or used in connection with the Business and Fitness
Together Personal Training Studios are the property of Franchisor,
regardless of whether developed by Franchisor, Master Franchisee, a
Managing Owner, or otherwise. No compensation is due to Master
Franchisee on account of any such idea or discovery.
10. MARKS
10.1. Ownership and Goodwill of Marks. Master Franchisee acknowledges that its
right to use the Marks is derived solely from this Agreement, unless
such rights are granted under a separate written agreement with
Franchisor, and is limited to operating as an Master Franchisee pursuant
to and in compliance with this Agreement. Any unauthorized use of the
Marks by Master Franchisee shall constitute a breach hereof and an
infringement of Franchisor's rights in and to the Marks. Master
Franchisee acknowledges and agrees that its usage of the Marks and any
goodwill established thereby shall inure to Franchisor's exclusive
benefit and that this Agreement does not confer any goodwill or other
interests in the Marks upon Master Franchisee.
10.2. Limitation on Use. Master Franchisee shall not use any Xxxx as part of
any corporate or trade name or with any prefix, suffix, or other
modifying words, terms, designs, or symbols (other than logos licensed
to Master Franchisee hereunder), or in any modified form, nor may Master
Franchisee use any Xxxx in connection with unauthorized services or
products or in any other manner not expressly authorized in writing by
Franchisor. Master Franchisee agrees to give such notices of trademark
and service xxxx registration as Franchisor specifies and to use and
obtain such fictitious or assumed name registrations as may be required
by Franchisor or under applicable law. Master Franchisee further agrees
that no service xxxx other than "Fitness Together, One Client, One
Trainer, One Goal" or such other Marks as may be specified by Franchisor
shall be used in the marketing, promotion, or operation of Master
Franchisee's Business.
10.3. Discontinuance of Use of Marks. If it becomes advisable at any time in
Franchisor's sole discretion for Franchisor or Master Franchisee to
modify or discontinue use of any Xxxx or to use an additional Xxxx,
Master Franchisee agrees to comply with Franchisor's directions to do so
within a reasonable time after notice thereof.
10.4. Notification of lnfringements and Claims. Master Franchisee shall
immediately notify Franchisor of any apparent infringement of or
challenge to Master Franchisee's use of any Xxxx, or claim by any person
of any rights in any Xxxx, and Master Franchisee shall not communicate
with any person other than Franchisor or its counsel in connection with
any such matter. Master Franchisee may not settle any claim without
Franchisor's written
82
consent. Franchisor shall have sole discretion to take such action as it
deems appropriate and the right to control exclusively any litigation,
U.S. Patent and Trademark Office proceeding, or any other administrative
proceeding arising out of any such infringement, challenge, or claim or
otherwise relating to any Xxxx. Master Franchisee agrees to execute any
and all instruments and documents, render such assistance and perform
such acts as, in the opinion of Franchisor's counsel, may be necessary
or advisable to protect and maintain Franchisor's interests in the
Marks.
10.5. Indemnification. Franchisor agrees to indemnify Master Franchisee
against and to reimburse Master Franchisee for all damages for which
Master Franchisee is held liable in any proceeding arising out of its
authorized use of any Xxxx pursuant to and in compliance with this
Agreement and for all costs reasonably incurred by Master Franchisee in
defending any such claim or any proceeding in which Master Franchisee is
named as a party, provided that Master Franchisee has timely notified
Franchisor of such claim or proceeding and has otherwise complied with
this Agreement. Franchisor, at its option, shall be entitled to defend
and control the defense of any proceeding arising out of Master
Franchisee's use of any Xxxx pursuant to and in compliance with this
Agreement.
11. CONFIDENTIAL INFORMATION
11.1. Confidential Information. Franchisor possesses certain proprietary
confidential information consisting of the methods, techniques, formats,
specifications, procedures, information, systems, methods of business
management, sales, and promotion techniques and knowledge of and
experience in the operation and franchising of Fitness Together Personal
Training Studios (the "Confidential Information"). Franchisor shall
disclose the Confidential Information to Master Franchisee in the
training program, the Master Franchisee Manual, and in guidance
furnished to Master Franchisee during the term hereof. Master Franchisee
has not acquired any interest in the Confidential Information, other
than the right to utilize it in the Territory in the execution of Master
Franchisee's duties hereunder during the term of this Agreement, and
Master Franchisee acknowledges that the use or duplication of the
Confidential Information in any other business venture would constitute
an unfair method of competition. Master Franchisee acknowledges and
agrees that the Confidential Information is proprietary, includes trade
secrets of Franchisor, and is disclosed to Master Franchisee solely on
the condition that Master Franchisee agrees, and Master Franchisee (and
its shareholders, partners, members, and managers if Master Franchisee
is a corporation, partnership, or limited liability company) does hereby
agree that Master Franchisee:
(a) shall not use the Confidential Information in any other business or
capacity;
(b) shall maintain the absolute confidentiality of the Confidential
Information during and after the term of this Agreement;
83
(c) shall not make unauthorized copies of any portion of the
Confidential Information disclosed in written or other tangible
form; and
(d) shall adopt and implement all reasonable procedures prescribed from
time to time by Franchisor to prevent unauthorized use or
disclosure of the Confidential Information.
Master Franchisee agrees that Franchisor shall have the perpetual right
to use and authorize other Fitness Together Personal Training Studio
Franchisees and area directors to use, and Master Franchisee shall fully
and promptly disclose to Franchisor, all ideas, concepts, methods, and
techniques relating to the development and operation of a Fitness
Together Personal Training Studio or Master Franchisee's activities
howsoever conceived or developed by Master Franchisee or its employees
or the franchisees serviced by Master Franchisee during the term of this
Agreement. Master Franchisee acknowledges that any such ideas, concepts,
methods, and techniques shall be the property of Franchisor, and
Franchisor may utilize or disclose such information to franchisees or
other agents as it determines to be appropriate.
11.2. Nondisclosure and Noncompetition Agreement. Master Franchisee, each
Managing Owner, and each shareholder, officer, director, partner,
employee, member, and manager of Master Franchisee, and, if Master
Franchisee is an individual, Master Franchisee's spouse, and each
Managing Owner's spouse shall execute a Nondisclosure and Noncompetition
Agreement in a form approved by Franchisor.
12. EXCLUSIVE RELATIONSHIP
12.1. Exclusive Relationship. Franchisor has entered into this Agreement with
Master Franchisee on the condition that Master Franchisee will deal
exclusively with Franchisor. Master Franchisee acknowledges and agrees
that Franchisor would be unable to protect its Confidential Information
and would be unable to encourage a free exchange of ideas and
information among Master Franchisees and Franchisor if Master
Franchisees were permitted to hold interests in any Competitive
Business, as defined below. Master Franchisee, therefore, agrees that,
during the term hereof, neither Master Franchisee nor any person
identified in Section 11.2, above, shall
(a) have any direct or indirect interest as a disclosed or beneficial
owner in a "Competitive Business," which shall be defined as a
business operating or granting franchises or licenses to others to
operate a Personal Training Studio or other fitness service
business deriving more than 10% of its gross receipts from personal
training (excluding Fitness Together Personal Training Studios
operated under franchise agreements with Franchisor);
84
(b) perform services as a director, officer, manager, employee,
consultant, representative, agent, or otherwise for a Competitive
Business; or
(c) divert or attempt to divert any business related to, or any
customer or account of, the Master Franchisee Business,
Franchisor's business, or any other area director's or franchisee's
business, by direct inducement or otherwise, or divert or attempt
to divert the employment of any employee of Franchisor or another
area director or franchisee licensed by Franchisor to any
Competitive Business by any direct inducement or otherwise.
Notwithstanding the foregoing, (i) Master Franchisee shall not be
prohibited from owning securities in a Competitive Business if such
securities are listed on a stock exchange or traded on the
over-the-counter market and represent 5% or less of that class of
securities issued and outstanding; and (ii) Master Franchisee will not
be deemed to be operating a Competitive Business, as that term is
defined above, if Master Franchisee temporarily operates a Fitness
Together Personal Training Studio which had either been sublet to a
Franchisee under an approved Sublease or had been assigned to a
Franchisee under an approved Assignment, for a period of not more than
90 consecutive days following the Franchisee's failure to operate such
Fitness Together Personal Training Studio for a period of five
consecutive days or a default by the Franchisee under the terms of its
Sublease or Assignment. If Master Franchisee operates any Fitness
Together Personal Training Studio for a period longer than 90
consecutive days, then Franchisor will have the right to require Master
Franchisee to sign the Franchisor's then-current form of Franchise
Agreement to govern Master Franchisee's operation of such Fitness
Together Personal Training Studio.
13. OPERATING STANDARDS
13.1. Standards of Service. Master Franchisee shall at all times give prompt,
courteous, and efficient service to Fitness Together Personal Training
Studio Franchisees in the Territory. Master Franchisee shall, in all
dealings with such Franchisees, prospective Franchisees, and the public,
adhere to the highest standards of honesty, integrity, fair dealing, and
ethical conduct.
13.2. Compliance with Laws and Good Business Practices. Master Franchisee
shall secure and maintain in force all required licenses, permits, and
certificates relating to Master Franchisee's activities hereunder and
shall operate in full compliance with all applicable laws, ordinances,
and regulations. Master Franchisee acknowledges being advised that many
jurisdictions have enacted laws concerning advertising, sale, renewal,
termination, and continuing relationship between parties in a franchise
agreement, including, without limitation, laws concerning disclosure
requirements. Master Franchisee agrees promptly to become aware of, and
to comply with, all such laws and legal requirements in force in the
Territory and to utilize only offering circulars that Franchisor has
approved for use in the applicable jurisdiction.
85
13.3. Accuracy of Information. Before it offers or sells any franchise, Master
Franchisee shall each time take reasonable steps to confirm that the
information contained in any written materials, agreements, and other
documents related to the offer or sale of franchises is true, correct,
and not misleading at the time of such offer or sale, and the offer or
sale of such franchise will not at that time be contrary to or in
violation of any applicable state law related to the registration of the
franchise offering. Franchisor shall provide Master Franchisee with any
changes to its disclosure documents and other agreements on a timely
basis, and shall, upon request, provide Master Franchisee with
confirmation that the information contained in any written materials,
agreements, or documents being used by Master Franchisee is true,
correct, and not misleading, except for information specifically
relating to disclosures regarding Master Franchisee. If Master
Franchisee notifies Franchisor of an error in any information in
Franchisor's documents, Franchisor shall have a reasonable period of
time to attempt to correct any deficiencies, misrepresentations, or
omissions in such information.
13.4. Notification of Litigation. Master Franchisee shall notify Franchisor in
writing within five days of the commencement of any action, suit,
arbitration, proceeding, or investigation, and of the issuance of any
order, writ, injunction, award, or decree, by any court, agency, or
other governmental instrumentality, which concerns the operation or
financial condition of Master Franchisee. Master Franchisee's Business
or any Franchisee in the Territory.
13.5. Ownership and Management of Business. Master Franchisee's Business shall
at all times be under the direct, day-to-day, full-time supervision of
Master Franchisee or the Managing Owner. Master Franchisee shall at all
times during the term of this Agreement own and control the Business.
Upon the request of Franchisor, Master Franchisee shall promptly provide
satisfactory proof of such ownership. Master Franchisee represents that
the Statement of Ownership, attached to this Agreement as Exhibit 2 is
true, complete, and accurate and not misleading. Master Franchisee shall
promptly provide Franchisor with written notification if the information
contained in the Statement of Ownership changes at any time during the
term of this Agreement and shall comply with the applicable transfer
provision contained in Section 15. If Master Franchisee is not an
individual, the Managing Owner(s) shall execute the Guaranty attached
hereto as Exhibit 3 and incorporated herein by this reference.
13.6. Conflicting Interests. Master Franchisee shall at all times faithfully,
honestly, and diligently perform its obligations hereunder and
continuously exert its best efforts to promote, enhance, and service
Fitness Together Personal Training Studios in the Territory. Master
Franchisee shall not engage in any other business or other activity,
directly or indirectly, with the exception of operating Fitness Together
Personal Training Studios, that requires any significant management
responsibility, time commitments, or otherwise may conflict with Master
Franchisee's obligations hereunder, without the prior written approval
of Franchisor.
86
13.7. Insurance. Master Franchisee shall at all times during the term of this
Agreement maintain in force, at Master Franchisee's sole expense,
insurance for Master Franchisee Business of the types, in the amounts,
and with such terms and conditions as Franchisor may from time to time
reasonably prescribe in the Master Franchisee Manual or otherwise. All
of the required insurance policies shall name Franchisor as an
additional insured, contain a waiver of the insurance company's right of
subrogation against Franchisor and provide that Franchisor will receive
30 days' prior written notice of termination, expiration, or
cancellation of any such policy.
13.8. Proof of Insurance Coverage. Master Franchisee will provide proof of
insurance to Franchisor prior to commencement of operations of its
Master Franchisee Business. This proof will show that the insurer has
been required to inform Franchisor in the event any policies are
amended, lapse, or are cancelled. Franchisor has the right to change the
minimum amount of insurance Master Franchisee is required to maintain by
giving Master Franchisee prior reasonable notice, giving due
consideration to what is reasonable and customary in the similar
business. Noncompliance with the insurance provisions set forth herein
shall be deemed a material breach of this Agreement; and in the event of
any lapse in insurance coverage, in addition to all other remedies,
Franchisor shall have the right to demand that Master Franchisee cease
operations of Master Franchisee Business until coverage is reinstated,
or, in the alternative, pay any delinquencies in premium payments and
charge the same back to Master Franchisee.
13.9. Advertising in Territory. Master Franchisee may be asked to assist in
advertising and marketing costs. Participation is not required.
13.10. Approval of Advertising. Prior to their use by Master Franchisee,
samples of all advertising and promotional materials not prepared or
previously approved by Franchisor shall be submitted to Franchisor for
approval, which approval shall not be unreasonably withheld. Master
Franchisee shall not use any advertising or promotional materials that
Franchisor has disapproved. Master Franchisee acknowledges and
understands that certain states require the filing of franchise sales
advertising materials with the appropriate state agency prior to
dissemination. Master Franchisee agrees to fully and timely comply with
such filing requirements at Master Franchisee's own expense unless such
advertising has been previously filed with the state by Franchisor.
Franchisor may charge Master Franchisee, in Franchisor's sole
discretion, for the costs incurred by Franchisor in printing large
quantities of advertising and marketing materials supplied by Franchisor
to Master Franchisee at Master Franchisee's request.
13.11. Accounting, Bookkeeping, and Records. Master Franchisee shall maintain
at its Business premises in the Territory all original invoices,
receipts, checks, contracts, licenses, acknowledgment of receipt forms,
and bookkeeping and business records as Franchisor may require from time
to time. Master Franchisee shall use an accounting software program as
required by Franchisor from time to time. Master Franchisee shall
furnish to Franchisor,
87
within 120 days after the end of Master Franchisee's fiscal year, a
balance sheet and profit and loss statement for Master Franchisee's
business for such year (or monthly or quarterly statement if required by
Franchisor, in which case such statements shall also reflect year-to-
date information) as prepared on such required accounting program. In
addition, upon request of Franchisor, within 10 days after such returns
are filed, exact copies of federal and state income, sales, and any
other tax returns and such other forms, records, books, and other
information as Franchisor may periodically require regarding Master
Franchisee's business shall be furnished to Franchisor. Master
Franchisee shall maintain all records and reports of the business
conducted pursuant to this Agreement for at least two years after the
date of termination or expiration of this Agreement.
13.12. Reports. Master Franchisee shall, as often as required by Franchisor,
deliver to Franchisor a written report of its Business activities during
such period as required in Sections 9.4 and 9.5, in such form and in
such detail as Franchisor may from time to time specify, including
information about efforts to solicit prospective Franchisees, the status
of pending real estate transactions and the status of the Fitness
Together Personal Training Studios in the Territory. Master Franchisee
shall, as often as required by Franchisor, during the term of this
Agreement, deliver to Franchisor the quality assurance inspection
reports required in Section 9.5 for each Franchisee in the Territory, in
such form and in such detail as Franchisor may from time to time
specify. Master Franchisee authorizes Franchisor to use information from
Master Franchisee's Business on a nondisclosed basis in Franchisor's
disclosure statements required by any federal or state law.
14. INSPECTIONS AND AUDITS
14.1. Inspections and Audits. To determine whether Master Franchisee is
complying with this Agreement, Franchisor or its designee shall have the
right at any time during normal business hours, and without prior notice
to Master Franchisee, to enter onto the premises in which Master
Franchisee is then keeping its business records and inspect, and conduct
an audit of, the business records, bookkeeping and accounting records,
invoices, payroll records, time cards, check stubs, bank deposits,
receipts, sales tax records and returns, and other business records and
documents of Master Franchisee's Business. Master Franchisee and its
employees shall fully cooperate with representatives of Franchisor
making, conducting, supervising, or observing any such inspection or
audit, including, without limitation, providing to Franchisor all
passwords necessary to access any computer-based records, information
concerning all software applications and programs, the location of all
computer files, and an explanation of the functionality of all
computer-based accounting and record keeping systems.
15. TRANSFERS
15.1. Transfers by Franchisor. This Agreement is fully transferable by
Franchisor and shall inure to the benefit of any transferee or other
legal successor to Franchisor's interests herein.
88
15.2. Transfers by Master Franchisee. Master Franchisee agrees that the rights
and duties created by this Agreement are personal to Master Franchisee
(or its shareholders or partners if Master Franchisee is a corporation
or partnership), and that Franchisor has entered into this Agreement in
reliance upon Franchisor's perceptions of the individual or collective
character, skill, aptitude, attitude, business ability, and financial
capacity of Master Franchisee (or its shareholders, members, managers,
or partners). Accordingly, without the prior written consent of
Franchisor, which consent will not be unreasonably withheld, neither
this Agreement (or any interest therein) nor any part or all of the
ownership of Master Franchisee may be transferred. Any unauthorized
transfer shall constitute a breach hereof and be void and of no effect.
As used in this Agreement, the term "transfer" shall mean and include
the voluntary, involuntary, direct, or indirect assignment, sale,
subfranchise, gift, or other disposition by Master Franchisee (or any of
its owners) of any interest in: (1) this Agreement; (2) 30% or more of
the ownership of Master Franchisee; or (3) the assets of the Business.
15.3. Condition for Approval of Transfer. Franchisor shall not be obligated to
approve a proposed transfer unless Master Franchisee (and its owners)
are in full compliance with this Agreement. Franchisor shall not
unreasonably withhold its approval or a transfer that meets all the
applicable requirements of this Section. The proposed transferee and its
owners must be individuals of good moral character and otherwise meet
Franchisor's then applicable standards for area directors. If the
transfer is of this Agreement, a 30% or more ("Controlling Interest")
interest in Master Franchisee, or all or a substantial portion of the
assets of the Business, or is one of a series of transfers which in the
aggregate constitute the transfer of this Agreement, a Controlling
Interest in Master Franchisee or all or a substantial portion of the
assets of the Business, all of the following conditions must be met
prior to or concurrently with the effective date of the transfer:
(a) The transferee has sufficient business experience, aptitude, and
financial resources to act as an Master Franchisee, agrees to be
bound by all of the terms and conditions of this Agreement, and the
transferee and its Managing Owner must have completed Franchisor's
training program to Franchisor's satisfaction;
(b) Master Franchisee has paid all fees due hereunder and all other
amounts owed to Franchisor or its affiliates and third party
creditors and submit to Franchisor all required reports and
statements;
(c) Master Franchisee or the transferee has paid Franchisor a transfer
fee in the amount of $10,000 to defray expenses Franchisor incurs
in connection with the transfer;
(d) Master Franchisee (and its transferring owners) executes a general
release, in form satisfactory to Franchisor, of any and all claims
against Franchisor and its affiliates and their respective
officers, directors, employees, and agents;
89
(e) The transferee signs an express written assumption of Master
Franchisee's obligations pursuant to this Agreement, or at the
option of Franchisor, executes a Master Franchisee Agreement in the
form then currently offered by Franchisor, the term of which will
end on the expiration date of this Agreement, and which shall
supersede this Agreement in all respects. If a new Master
Franchisee Agreement is signed, the terms may differ from the terms
of this Agreement; provided, however, the transferee will not be
required to pay any additional Initial Fee;
(f) Franchisor approves the material terms and conditions of such
transfer, including, without limitation, that the price and terms
of payment are not so burdensome as to affect adversely the
transferee's business as a Master Franchisee of Franchisor;
(g) If Master Franchisee (and the transferring owners) finances any
part of the sale price of the transferred interest, Master
Franchisee and its owners agree that all obligations of the
transferee under any promissory notes, agreements, or security
interests shall be subordinate to the transferee's obligations to
pay fees, and other amounts due to Franchisor and its affiliates
and otherwise to comply with this Agreement; and
(h) Master Franchisee (and its transferring owners) executes a
noncompetition covenant in favor of Franchisor and the transferee
with terms the same as those set forth in Section 17.5.
15.4. Transfer to an Entity. If Master Franchisee is in full compliance with
this Agreement, Master Franchisee may transfer this Agreement to a
corporation or other entity of which Master Franchisee owns not less
than two-thirds of the ownership interest with Franchisor's prior
written approval, which approval shall not be unreasonably withheld. The
transfer fee described in Section 15.3(c) will be waived by Franchisor,
and all owners of such entity shall sign a Guaranty and Assumption of
Master Franchisee's Obligations attached hereto as Exhibit 3.
15.5. Franchisor's Approval of Transfer. Franchisor has 30 days from the date
of the written notice to approve or disapprove in writing Master
Franchisee's proposed transfer. Written notice shall mean and include
all documentation necessary to evaluate the transferee. Master
Franchisee acknowledges that the proposed transferee shall be evaluated
for approval by Franchisor based on the same criteria as is currently
being used to assess new Master Franchisees of Franchisor and that such
proposed transferee shall be provided, if appropriate, with such
disclosures as may be required by state or federal law.
15.6. Death or Disability of Master Franchisee. Upon the death or permanent
disability of Master Franchisee or a Managing Owner, the personal
representative of such person shall transfer his or her interest in this
Agreement or such interest in Master Franchisee to an approved third
party. Such disposition of this Agreement or such interest (including,
without limitation, transfer by bequest or inheritance) shall be
completed within a reasonable time,
90
not to exceed six months from the date of death or permanent disability
(unless extended by probate proceeding), and shall be subject to all the
terms and conditions applicable to transfers contained in this Section.
Failure to transfer the interest in this Agreement or such interest in
Master Franchisee within said period of time shall constitute a breach
of this Agreement. For purposes hereof, the term "permanent disability"
shall mean a mental or physical disability, impairment, or condition
that prevents Master Franchisee or an owner of a Controlling Interest in
Master Franchisee from performing the essential functions of Master
Franchisee. The $10,000.00 transfer fee is waived in the event of a
death.
15.7. Right of First Refusal. In the event Master Franchisee wishes to sell,
transfer, gift, assign, or otherwise dispose of any interest in this
Agreement, a Controlling Interest in any entity that owns it, or all or
a substantial portion of the assets of the Business, Master Franchisee
agrees to grant to Franchisor a 30-day right of first refusal to
purchase such rights, interest, or assets on the same terms and
conditions as are contained in the written offer to purchase submitted
to Master Franchisee by a bona fide proposed purchaser; provided,
however, the following Master Franchisee additional terms and conditions
shall apply:
(a) Master Franchisee shall notify Franchisor of such offer by sending
a written notice to Franchisor, enclosing a copy of the written
offer signed by the bona fide proposed purchaser;
(b) The 30-day right of first refusal period will run concurrently with
the period in which Franchisor has to approve or disapprove the
proposed transferee;
(c) Such right of first refusal arises for each proposed transfer and
any material change in the terms or conditions of the proposed
transfer, even if to the same bona fide proposed purchaser, shall
be deemed a separate offer for which a new 30-day right of first
refusal shall be given to Franchisor;
(d) If the consideration or manner of payment offered by a third party
is such that Franchisor may not reasonably be required to furnish
the same, then Franchisor may purchase the interest which is
proposed to be sold for the reasonable cash equivalent. If the
parties cannot agree within a reasonable time on the cash
consideration, an independent appraiser shall be designated by
Franchisor, whose determination will be binding upon the parties.
All expenses of the appraiser shall be paid for equally between
Franchisor and Master Franchisee; and
(e) If Franchisor chooses not to exercise its right of first refusal,
Franchisee shall be free to complete the sale, transfer, or
assignment, subject to compliance with Sections 15.3 and 15.5.
Absence of a reply to Master Franchisee's notice of a proposed sale
within the 30-day period is deemed a waiver of such right of first
refusal.
91
Notwithstanding the preceding, this Section 15.7 shall not apply to
any proposed transfer of any minority interest (in a single
transaction or on a cumulative basis) in Master Franchisee to
employees of Master Franchisee or family members of any Managing
Owner so long as Master Franchisee, if an individual, and all
Managing Owners maintain an ownership interest in the Business and
continue maintaining an active role in such Business. Section 15.5
will apply to such transfers. In addition to the preceding, this
Section 15.7 will not apply to any transfer made pursuant to
Section 15.4, above.
16. TERM AND EXPIRATION
16.1. Term. The primary term of this Agreement is for a period of 10 years
from the Effective Date, unless sooner terminated as provided herein.
16.2. Renewal. At the end of the primary term, Master Franchisee shall have
the option to renew its area director rights for an additional 10-year
term, so long as Master Franchisee:
(a) At least 60 days prior to expiration of the term, executes the form
of Master Franchisee then in use by Franchisor, which agreement may
contain terms materially different than those in this Agreement;
provided that Master Franchisee shall not be required to pay a new
Initial Fee, and commission percentages and definition of the
Territory will not be altered. For purposes of this Section, the
renewed Master Franchisee rights shall constitute successor
franchise rights.
(b) Has complied with all provisions of this Agreement during the
primary term, including the payment on a timely basis of all fees
due hereunder. "Compliance" shall mean, at a minimum, that Master
Franchisee has not received any written notification from
Franchisor of breach hereunder more than three times during the
primary term;
(c) Is not in default or under notification of breach of this Agreement
at the time it gives notice under Section 16.4; and
(d) Executes a general release, in a form satisfactory to Franchisor,
of any and all claims against Franchisor and its affiliates, and
their respective officers, directors, employees, and agents arising
out of or relating to this Agreement; and
(e) Has agreed on new Sales and Openings Goals for the additional term
in accordance with Section 16.3.
16.3. New Sales and Opening Goals.
(a) In addition to those items listed in Section 16.2, this Agreement
may only be renewed if Master Franchisee and Franchisor have agreed
on new Sales and
92
Openings Goals for the additional term at least 90 days prior to
expiration of the primary term.
(b) If Franchisor proposes new Sales and Openings Goals for the
additional term that result in excess of one Fitness Together
Personal Training Studio per 25,000 population in the Territory,
Master Franchisee may submit the matter to arbitration before and
in accordance with the rules of the American Arbitration
Association in order to determine whether the proposed new Sales
and Openings Goals are reasonable. Master Franchisee shall not have
the right, however, to submit this matter to arbitration if
Franchisor proposes new Sales and Openings Goals for the additional
term that are less than or equal to one Fitness Together Personal
Training Studio per 25,000 population in the Territory. All
Territories shall have an average household income of $80,000 or
more. The decision of the arbitrator shall be non- appealable,
conclusive, and binding on all parties. The arbitration fee shall
be borne equally by Franchisor and Master Franchisee. Each party
shall be responsible for any other expenses incurred by that party
in association with such arbitration, including attorneys' and
expert witness fees, notwithstanding provisions of Section 19 to
the contrary. The arbitration shall be held in Denver, Colorado.
(c) In the event that Master Franchisee is not satisfied with the
decision of the arbitration, Master Franchisee shall have 15 days
from the date that the arbitration decision is rendered to waive
its option to renew its Master Franchisee rights.
(d) If Master Franchisee has notified Franchisor of its intent to renew
as provided in Section 16.4, and so long as a demand for
arbitration has been filed prior to the expiration of the primary
term and the parties are diligently pursuing such arbitration, this
Agreement shall automatically be extended until 15 days following
the date that the arbitration award is rendered.
16.4. Exercise of Renewal Option. Master Franchisee may exercise its option to
renew by giving written notice of such exercise to Franchisor not more
than 180 days nor less than 120 days prior to the expiration of the
primary term.
16.5. Conditions of Refusal. Franchisor shall not be obligated to offer Master
Franchisee renewal upon the expiration of this Agreement if Master
Franchisee fails to comply with any of the above conditions of renewal.
In such event, except for failure to execute the then current Master
Franchise Agreement, Franchisor shall give Master Franchisee notice of
expiration at least 60 days prior to the expiration of the term, and
such notice shall set forth the reasons for such refusal to offer
renewal. Upon the expiration of this Agreement, Master Franchisee shall
comply with the provisions of Section 17.3.
93
17. TERMINATION
17.1. By Master Franchisee. Master Franchisee may terminate this Agreement at
any time during the term hereof with 180 days advance written notice to
Franchisor.
17.2. By Franchisor. Franchisor shall have the right to terminate this
Agreement, effective upon delivery of written notice of termination to
Master Franchisee, that any one or more of the following Events of
Default shall have occurred:
(a) At any time, for more than a 30-day period, no Managing Owner nor
any individual Master Franchisee shall have successfully completed
the training program as provided in Section 7.1;
(b) The Master Franchisee or any Managing Owner has made any material
misrepresentation or omission in its application to be a Master
Franchisee;
(c) Master Franchisee shall have failed to meet the Sales and Opening
Goals set forth in Exhibit 1 and does not correct such failure
within 90 days after written notice of such failure to comply is
delivered to Master Franchisee;
(d) Master Franchisee shall have failed to comply with any other
provision of this Agreement or any mandatory specification,
standard, or operating procedure prescribed by Franchisor and does
not correct such failure within 30 days after written notice of
such failure to comply is delivered to Master Franchisee;
(e) Master Franchisee surrenders, transfers control of, or makes an
unauthorized transfer of this Agreement or any person makes any
unauthorized transfer of an ownership interest in Master
Franchisee;
(f) Master Franchisee or any Managing Owner is convicted by a trial
court of or pleads no contest to a felony, or to any other crime or
offense that is, in the opinion of Franchisor, likely to adversely
affect the goodwill associated with the Marks, or engages in any
conduct which may adversely affect the reputation of the Fitness
Together Personal Training Studios or the goodwill associated with
the Marks;
(g) Master Franchisee or any Managing Owner is declared bankrupt or
insolvent or voluntarily institutes a bankruptcy proceeding under
the Bankruptcy Code or is adjudicated bankrupt as a result of an
involuntary petition in bankruptcy being filed against it. (This
provision may not be enforceable under federal bankruptcy law, 11
U.S.C. xx.xx. 101, et seq.);
(h) Master Franchisee abandons or ceases to operate the Master
Franchisee Business for a period of 30 consecutive days or any
shorter period that indicates an intent by
94
Master Franchisee to discontinue operation of the Master Franchisee
Business unless precluded from doing so by an event beyond Master
Franchisee's reasonable control, other than for financial reasons,
or abandons any Franchised Location owned by Master Franchisee;
(i) Master Franchisee has been sent three notices of default by
Franchisor within a 12-month period, regardless of whether the
defaults were cured by Master Franchisee; or
(j) Fails to pay any amounts due Franchisor or its affiliates within 10
days after receiving notice that such fees or amounts are overdue.
17.3. Rights and Obligations of Master Franchisee Upon Termination or
Expiration. Upon termination of this Agreement, whether pursuant to
Sections 17.1, 17.2, or upon expiration of this Agreement pursuant to
Section 16, Master Franchisee agrees:
(a) To pay Franchisor within 15 days after the effective date of
termination or expiration of this Agreement, or such later date
that the amounts due to Franchisor are determined, such fees,
amounts owed for purchases by Master Franchisee from Franchisor or
its affiliates, interest due on any of the foregoing, and all other
amounts owed to Franchisor or its affiliates which are then unpaid;
(b) To not, directly or indirectly, at any time or in any manner
(except with respect to Fitness Together Personal Training Studio
franchises owned and operated by Master Franchisee) identify itself
or any business as a current Master Franchisee or authorized agent
of Franchisor or its affiliates, use any Xxxx, any colorable
imitation thereof, or other indicia of Fitness Together Personal
Training Studio in any manner or for any purpose or utilize for
purpose any trade name, trademark, or service xxxx or other
commercial symbol that suggests or indicates a connection or
association with Franchisor or its affiliates;
(c) To immediately deliver to Franchisor all past and present franchise
sales leads and records and all contracts, acknowledgments of
receipt, and other information and records related to Franchisees
of Franchisor in the Territory;
(d) To immediately deliver to Franchisor all advertising materials, the
Master Franchisee Manual, all other manuals, forms, offering
circulars, franchise sales brochures, and other materials
containing any Xxxx or otherwise identifying or relating to the
sale or service of Fitness Together Personal Training Studio
Franchises;
(e) To refrain from communicating, in any manner, with Franchisees
concerning Franchisor or obligations arising from this Agreement or
the Franchise Agreement, except as expressly authorized by
Franchisor;
95
(f) To take such action as may be required to cancel all fictitious or
assumed names or equivalent registrations relating to Master
Franchisee's use of any Xxxx;
(g) To notify the telephone company and all telephone directory
publishers of the termination or expiration of Master Franchisee's
right to use any telephone number and any regular, classified, or
other telephone directory listings associated with any Xxxx and to
authorize transfer thereof to Franchisor or its designee. Master
Franchisee acknowledges that, as between it and Franchisor,
Franchisor has the sole rights to and interest in all telephone,
telecopy or facsimile machine numbers, and directory listings
associated with any Xxxx. Master Franchisee authorizes Franchisor,
and hereby appoints Franchisor and any of its officers as Master
Franchisee's attorney-in-fact, to direct the telephone company and
all telephone directory publishers to transfer any telephone,
telecopy or facsimile machine numbers, and directory listings
relating to Master Franchisee's Business to Franchisor at its
direction, should Master Franchisee fail or refuse to do so, and
the telephone company and all telephone directory publishers may
accept such direction or this Agreement as conclusive evidence of
Franchisor's exclusive rights in such telephone numbers and
directory listings and Franchisor's authority to direct their
transfer; and
(h) Furnish Franchisor, within 30 days after the effective date of
termination or expiration, with evidence satisfactory to Franchisor
of Master Franchisee's compliance with the foregoing obligations.
17.4. Confidential Information. Master Franchisee agrees that, upon
termination or expiration of this Agreement, Master Franchisee shall
immediately cease to use any Confidential Information of Franchisor
pursuant to this Agreement in any business or otherwise (except in
connection with the operation of a Fitness Together Personal Training
Studio as may be expressly permitted by a Franchise Agreement with
Franchisor) and return to Franchisor all copies of the Master Franchisee
Manual and any other confidential materials which have been loaned to
Master Franchisee by Franchisor.
17.5. Covenant Not to Compete. Upon termination or expiration of this
Agreement, Master Franchisee (and its shareholders, officers, directors,
members, managers, or partners if Master Franchisee is a corporation,
partnership, or limited liability company [collectively "Bound
Parties"]) and all Managing Owners agree that, for the greater of (i) a
period of two years commencing on the effective date of termination or
expiration of this Agreement; or (ii) the period of time after the
termination or expiration of this Agreement during which Master
Franchisee is receiving any commissions pursuant to Section 6.6, neither
Master Franchisee nor any Bound Party shall have any direct or indirect
interest (through a member of any immediate family of Master Franchisee
or any Bound Party or otherwise) as a disclosed or beneficial owner,
investor, partner, director, officer, employee, consultant,
representative, or agent or in any other capacity in any Competitive
Business located in any territory in which Franchisor or its affiliates
or area directors conduct business at the time
96
of termination. The restrictions of this Section shall not be applicable
to the ownership of shares of a class of securities listed on a stock
exchange or traded on the over-the-counter market that represent five
percent or less of the number of shares of that class of securities
issued and outstanding. Master Franchisee and each Bound Party expressly
acknowledge that they possess skills and abilities of a general nature
and have other opportunities for exploiting such skills. Consequently,
enforcement of the covenants made in this Section will not deprive them
of their personal goodwill or ability to earn a living.
17.6. No Further Right to Payment. Upon termination of this Agreement, Master
Franchisee forfeits all fees paid to Franchisor and remains liable to
Franchisor for all amounts due to Franchisor on the date of termination.
Master Franchisee shall have no further right to receive payment of
commissions or Royalty Fees from Franchisor, except for those
commissions or Royalty Fees which have been fully earned by Master
Franchisee up through the date of such termination and except for those
commissions described in Section 6.6, if applicable. For purposes of
this Agreement, "fully earned" commissions shall mean commissions due on
franchise sales for which all conditions described in Section 6.1 have
been met or fulfilled for the purchase of a franchise for a Fitness
Together Personal Training Studio to be located within the Territory by
Master Franchisee. "Fully earned" Royalty Fees shall mean those Royalty
Fees which accrue up through the date of termination which are otherwise
owed to Master Franchisee. Franchisor shall have the right to
immediately assume control of and manage all franchise sales in the
Region and to receive all Royalty Fees from Franchisees in the
Territory. Any fully earned commissions or Royalty Fees which are due to
Master Franchisee will be paid by Franchisor in accordance with the
provisions of Section 6.
17.7. Continuing Obligations. All obligations of Franchisor and Master
Franchisee and the Bound Parties that expressly or by their nature
survive the expiration or termination of this Agreement shall continue
in full force and effect subsequent to and notwithstanding its
expiration or termination and until they are satisfied or by their
nature expire.
17.8. State and Federal Law. The parties acknowledge that in the event that
the terms of this Agreement regarding termination or expiration are
inconsistent with applicable state or federal law, such law shall govern
Master Franchisee's rights regarding termination or expiration of this
Agreement.
18. RELATIONSHIP OF THE PARTIES
18.1. Relationship of the Parties. It is understood and agreed by the parties
that this Agreement does not create a fiduciary relationship between
them, that the parties are independent contractors, and that nothing in
this Agreement is intended to make either party a general agent,
subsidiary, joint venturer, partner, employee, or servant of the other
for any purpose. Master Franchisee shall conspicuously identify itself
in all dealings with Franchisees, prospective Franchisees, lessors,
contractors, suppliers, public officials, and others as the
97
owner of its own business under a Master Franchise Agreement with
Franchisor, and shall place such other notices of independent ownership
on signs, forms, stationary, advertising, and other materials as
Franchisor may require from time to time.
18.2. Payment of Third Party Obligations. Neither Franchisor nor Master
Franchisee shall make any express or implied agreements, guaranties, or
representations, or incur any debt, in the name of or on behalf of the
other or represent that their relationship is other than independent
contractors, and neither Franchisor nor Master Franchisee shall be
obligated by or have any liability under any agreements or
representations made by the other that are not expressly authorized
hereunder, nor shall Franchisor be obligated for any damages to any
person or property directly or indirectly arising out of the operation
of Master Franchisee's business, whether or not caused by Master
Franchisee's negligent or willful action or failure to act.
18.3. Indemnification. Master Franchisee agrees to indemnify and hold
Franchisor and its subsidiaries, affiliates, stockholders, directors,
officers, employees, agents, and assignees harmless against, and to
reimburse them for, any loss, liability, taxes, or damages (actual or
consequential) and all reasonable costs and expenses of defending any
claim brought against any of them or any action in which any of them is
named as a party (including, without limitation, reasonable
accountants', attorneys', and expert witness fees, costs of
investigation and proof of facts, court costs, other litigation
expenses, and travel and living expenses) which any of them may suffer,
sustain, or incur by reason of, arising from or in connection with any
acts, omissions, or activities of Master Franchisee or any employee of
or independent contractor hired by Master Franchisee. Franchisor shall
have the right to defend any such claim against it. This indemnity shall
continue in full force and effect, subsequent to and notwithstanding the
expiration or termination of this Agreement.
19. DISPUTES
19.1. Governing Law; Consent to Venue and Jurisdiction. Except to the extent
governed by the United States Trademark Act of 1946 (Xxxxxx Act, 15
U.S.C.ss.ss.1051, et seq.) or other federal law, this Agreement shall be
interpreted under the laws of the State of Colorado and any dispute
between the parties shall be governed by and determined in accordance
with the substantive laws of the State of Colorado, which laws shall
prevail in the event of any conflict of law. Master Franchisee and
Franchisor have negotiated regarding a forum in which to resolve any
disputes which may arise between them and have agreed to select a forum
in order to promote stability in their relationship. Therefore, if a
claim is asserted in any legal proceeding involving the Master
Franchisee or any Bound Party and Franchisor, the parties agree that the
exclusive venue for disputes between them shall be in the District Court
for the City & County of Denver, Colorado, or the United States District
Court for the District of Colorado, and the parties each waive any
objection they may have to the personal jurisdiction of or venue in such
courts.
98
19.2. Waiver of Jury Trial. Franchisor, Master Franchisee and the Bound
Parties each waive their right to a trial by jury. Master Franchisee,
the Bound Parties, and Franchisor acknowledge that the parties' waiver
of jury trial rights provides the parties with the mutual benefit of
uniform interpretation of this Agreement and any dispute arising out of
this Agreement or out of the parties' relationship created by this
Agreement. Master Franchisee, the Bound Parties, and Franchisor further
acknowledge the receipt and sufficiency of mutual consideration for such
benefit.
19.3. Limitation of Claims. Master Franchisee and the Bound Parties agree not
to bring any claim asserting that any of the Marks are generic or
otherwise invalid. Any claims between the parties must be commenced
within one year from the occurrence of the facts giving rise to such
claim, or such claim shall be barred. The parties understand that such
time limit may be shorter than otherwise allowed by law. Master
Franchisee and the Bound Parties agree that their sole recourse for
claims arising between the parties shall be against Franchisor or its
successors and assigns. Master Franchisee and the Bound Parties agree
that the shareholders, directors, officers, employees, and agents of the
Franchisor and its affiliates (other than Master Franchisee) shall not
be personally liable nor named as a party in any action between the
Franchisor and Master Franchisee or any Bound Parties. The parties
further agree that, in connection with any such proceeding, each must
submit or file any claim which would constitute a compulsory
counterclaim (as defined by Rule 13 of the Federal Rules of Civil
Procedure) within the same proceeding as the claim to which it relates.
Any such claim which is not submitted or filed as described above will
be forever barred. The parties agree that any proceeding will be
conducted on an individual, not a class- wide, basis, and that a
proceeding between Franchisor and Master Franchisee or the Bound Parties
may not be consolidated with any other proceeding between Franchisor and
any other person or entity. No party will be entitled to an award of
punitive or exemplary damages (provided that this limitation shall not
apply to statutory penalties such as those set forth in 15 U.S.C.
1117(a)). No previous course of dealing shall be admissible to explain,
modify, or contradict the terms of this Agreement. No implied covenant
of good faith and fair dealing shall be used to alter the express terms
of this Agreement.
20. MISCELLANEOUS PROVISIONS
20.1. Invalidity. If any provision of this Agreement is held invalid by any
tribunal in a final decision from which no appeal is or can be taken,
such provision shall be deemed modified to eliminate the invalid element
and, as so modified, such provision shall be deemed a part of this
Agreement as though originally included. The remaining provisions of
this Agreement shall not be affected by such modification.
20.2. Modification. No amendment, waiver, or modification of this Agreement
shall be effective unless it is in writing and signed by the party or
parties against whom such amendment or waiver is to be enforced. Master
Franchisee acknowledges that Franchisor may modify its standards and
specifications and operating and marketing techniques set forth in the
Master Franchisee Manual unilaterally under any conditions and to the
extent in which Franchisor,
99
in its sole discretion, deems necessary to protect, promote, or improve
the Marks and the quality of the Licensed Methods, but under no
circumstances will such modifications be made arbitrarily without such
determination.
20.3. Attorneys' Fees. In the event of any default on the part of either party
to this Agreement, in addition to all other remedies, the party in
default will pay the aggrieved party all amounts due and all damages,
costs, and expenses, including reasonable attorneys' fees, incurred by
the aggrieved party in any legal action or other proceeding as a result
of such default, plus interest at the lesser of 2% per month or the
highest rate allowable by law, accruing from the date of such default.
20.4. No Jury. To save expenses and to avoid the prospect of fact finding by
persons with non- legal and non-business backgrounds, to the extent
permitted by law, Franchisor and Master Franchisee agree that any
dispute under this Agreement shall be heard before and resolved by a
judge, and, to the extent permitted by law, Franchisor and Master
Franchisee waive the right to a jury trial.
20.5. Injunctive Relief. Nothing herein shall prevent Franchisor or Master
Franchisee from seeking injunctive relief to prevent irreparable harm,
in addition to all other remedies.
20.6. No Waiver. No waiver of any condition or covenant contained in this
Agreement or failure to exercise a right or remedy by Master Franchisee
or Franchisor shall be considered to imply or constitute a further
waiver by Franchisor or Master Franchisee of the same or any other
condition, covenant, right, or remedy.
20.7. No Right to Set-Off. Master Franchisee shall not be allowed to set-off
amounts owed to Franchisor for fees or other amounts due hereunder,
against any monies owed to Master Franchisee, which right of set-off is
hereby expressly waived by Master Franchisee.
20.8. Effective Date. Regardless of the date first written above, this
Agreement shall not be effective until executed by Franchisor as
evidenced by dating and signing by an officer of Franchisor.
20.9. Review of Agreement. Master Franchisee acknowledges that it had a copy
of Franchisor's Uniform Franchise Offering Circular in its possession
for a period of time not less than 10 full business days, and this
Agreement in its possession for a period of time not less than five full
business days, during which time Master Franchisee has had Franchisee
the opportunity to submit the same for review and advice by a
professional of Master Franchisee's choosing prior to freely executing
this Agreement.
20.10. Entire Agreement. This Agreement (which includes the attachments and
Exhibits expressly incorporated herein) contains the entire agreement
between the parties and supersedes any and all prior agreements
concerning the subject matter hereof. Master Franchisee agrees and
100
understands that Franchisor shall not be liable or obligated for any
oral representations or commitments made prior to the execution hereof
or for claims of negligent or fraudulent misrepresentation and that no
modifications of this Agreement shall be effective except those in
writing and signed by both parties. Franchisor does not authorize and
will not be bound by any representation of any nature other than those
expressed in this Agreement. Master Franchisee further acknowledges and
agrees that no representations have been made to it by Franchisor
regarding projected sales volumes, market potential, revenues, profits
of Master Franchisee's Business, or operational assistance other than as
stated in this Agreement or in any disclosure document provided in
connection herewith. Master Franchisee acknowledges and agrees that any
delegation of Franchisor's duties and obligations to Master Franchisee
does not assign or confer any rights under any Franchise Agreement
(unless entered into between Master Franchisee and Franchisor) upon
Master Franchisee or and that Master Franchisee is not a third party
beneficiary of any Franchise Agreement between Franchisor and a
Franchisee who is not also the Master Franchisee.
20.11. Notices. All notices required to be given under this Agreement shall be
given in writing, by certified mail, return receipt requested, or by an
overnight delivery service providing documentation of receipt, to
addresses set forth in the first paragraph of this Agreement, or, with
respect to notices to Master Franchisee, to the address of Master
Franchisee's Business, or at such other addresses as Franchisor or
Master Franchisee may designate from time to time, and shall be
effectively given when deposited in the United States Mail, postage
prepaid, or when delivered via overnight delivery, as may be applicable.
20.12. Acknowledgment. BEFORE SIGNING THIS AGREEMENT, MASTER FRANCHISEE SHOULD
READ IT CAREFULLY WITH THE ASSISTANCE OF LEGAL COUNSEL. MASTER
FRANCHISEE ACKNOWLEDGES THAT:
(a) THE SUCCESS OF THE BUSINESS VENTURE CONTEMPLATED HEREIN INVOLVES
SUBSTANTIAL RISKS AND DEPENDS UPON MASTER FRANCHISEE'S ABILITY AS
AN INDEPENDENT BUSINESS PERSON AND ITS ACTIVE PARTICIPATION IN THE
DAILY AFFAIRS OF THE BUSINESS; AND
(b) NO ASSURANCE OR WARRANTY, EXPRESS OR IMPLIED, HAS BEEN GIVEN AS TO
THE POTENTIAL SUCCESS OF SUCH BUSINESS VENTURE OR THE EARNINGS
LIKELY TO BE ACHIEVED; AND
(c) NO STATEMENT, REPRESENTATION, OR OTHER ACT, EVENT, OR
COMMUNICATION, EXCEPT AS SET FORTH IN THIS DOCUMENT AND IN ANY
OFFERING CIRCULAR SUPPLIED TO MASTER FRANCHISEE, IS BINDING ON
FRANCHISOR IN CONNECTION WITH THE SUBJECT MATTER OF THIS AGREEMENT.
101
IN WITNESS WHEREOF, the parties hereto have executed, sealed, and delivered this
Agreement in counterparts on the date first mentioned above.
FRANCHISOR:
FITNESS FOR LIFE FRANCHISE CORPORATION,
An Arizona Corporation
By:
--------------------------------------------------
Its:
-------------------------------------------------
Date:
------------------------------------------------
MASTER FRANCHISEE:
By:
--------------------------------------------------
Printed Name:
----------------------------------------
Its:
-------------------------------------------------
Date:
------------------------------------------------
MANAGING OWNER(S):
Printed Name:
----------------------------------------
Date:
------------------------------------------------
Printed Name:
----------------------------------------
Date:
------------------------------------------------
Printed Name:
----------------------------------------
Date:
------------------------------------------------
102
EXHIBIT 1
---------
103
EXHIBIT 2
---------
104
EXHIBIT 3
---------
AGREEMENT OF MANAGING OWNERS
AND GUARANTY
Each of the undersigned officer, director, shareholder, partner, member,
owner, manager, or Managing Owner of Master Franchisee agrees to be personally
bound by Article 11 (Proprietary Information), Section 9.9 (Discoveries),
Article 12 (Covenants Not to Compete), Article 15 (Transfers), and Sections 20.3
(Cost of Enforcement) and 20.4 (No Jury) in each case as such Sections 20.3 and
20.4 relate to breaches by the undersigned of Section 9.9, Articles 11, 12, or
15, of the preceding Master Franchise Agreement (the "Franchise Agreement").
Listed below after the printed name of each Managing Owner is the ownership
percentage of the Managing Owner in the Master Franchisee which is represented
by the undersigned Managing Owners, jointly and severally, to be correct. Upon
the request of Franchisor from time to time, each Managing Owner shall deliver
to Franchisor in writing a complete statement listing the individuals who
ultimately own any interest in Master Franchisee or any affiliated company, the
form of such interests, and their percentage ownership.
Each of the undersigned ("Guarantor") guarantees to Franchisor the timely,
full, and complete performance of all of Master Franchisee's obligations under
the preceding Agreement, including, without limitation, payment to Franchisor of
all amounts due. This guaranty is a guaranty of payment and performance and not
a guaranty of collection. In the event of a default under the Franchise
Agreement by Master Franchisee, Franchisor may proceed against Master Franchisee
or any Guarantor in any order or simultaneously. Each Guarantor represents that
he or she has full and complete access to all information and records regarding
Master Franchisee and Master Franchisee's operations, and that it is the
responsibility of each Guarantor to keep itself informed about Master
Franchisee, Master Franchisee's operations, and this Franchise Agreement. From
time to time, without notice to or consent of any Guarantor, the Franchise
Agreement may be modified or amended, and the preceding guaranty shall not be
affected by any amendment or modification to the Franchise Agreement agreed to
by Master Franchisee or by any delay, waiver, forbearance, or other similar act
or omission of Franchisor in the enforcement of Franchisor's rights and remedies
under the Franchise Agreement, or by any compromise or settlement of any claim
or obligation or any amount due or owing, or claimed to be due or owing, under
the Franchise Agreement. The provisions of this guaranty will extend and be
applicable to all renewals, amendments, extensions, and modifications of the
Franchise Agreement. Each Guarantor waives notice of acceptance of this
guaranty, demand, notice of dishonor, notice of any and all proceedings to
collect amounts due, and diligence in collecting any amounts due under the
Franchise Agreement. Each Guarantor waives any defense arising by reason of any
disability of Master Franchisee by reason of the cessation from any cause
whatsoever of the liability of Master Franchisee or by reason of Franchisor's
election of any remedy against Mater Franchisee or any Guarantor. The insolvency
or bankruptcy filing of Master Franchisee shall not in any manner affect the
continuing obligations of each Guarantor hereunder. The obligations of
Guarantors hereunder are joint and several.
Name: Name:
---------------------------------- -------------------------------
Ownership Percentage: Ownership Percentage:
------------------ ---------------
Name: Name:
---------------------------------- -------------------------------
Ownership Percentage: Ownership Percentage:
------------------ ---------------
105
