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10.85
CITE DESIGN
AGREEMENT
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[LETTERHEAD]
DATE: THURSDAY, 2 MAY 1996
CLIENT: THE SPORTS CLUB COMPANY
00000 XXXXX XXXXXX XXXXXXXXX
XXXXX 000
XXX XXXXXXX, XXXXXXXXXX 00000
PROJECT REFERENCE: #700.3054/CITE DESIGN MANAGEMENT AGREEMENT
THE SPORTS CLUB COMPANY PRO SHOPS
ATTENTION: XXXX XXXXXXX
PRESIDENT
REFERENCE: MANAGEMENT AGREEMENT
REVISED
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[LETTERHEAD]
MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT made by and between The Sports Club Company, Inc.
("Sports Club"), a corporation organized and existing under the laws of the
State of California, having its principal place of business at 00000 Xxxxx
Xxxxxx Xxxxxxxxx, Xxxxx 000, Xxx Xxxxxxx, Xxxxxxxxxx 00000, and C.I.T.E. Design
Corp. ("CITE"), a corporation organized and existing under the laws of the
State of New York, having its principal place of business at 000 Xxxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000,
WITNESSETH:
1. Sports Club currently is the owner and operator of workout and
gym facilities located in Los Angeles and Irvine, California, and New York, New
York, each of which contains a pro shop for the sale of related clothing
products. Sports Club and CITE have agreed that CITE shall assume the over-all
management of the existing pro shops as well as those which may be located in
other workout clubs or gym facilities which may be hereafter acquired,
established or operated by Sports Club hereafter (the existing workout clubs or
gym facilities as well as those which may hereafter be acquired, established or
operated as aforesaid being collectively called the "Clubs" and existing pro
shops and as well as those which may hereafter be acquired, established or
operated as aforesaid being collectively called the "Pro Shops"), all for the
account of Sports Club, in accordance with the terms and conditions of this
Management Agreement.
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2. CITE's duties and responsibilities under this Management Agreement
shall consist of the following:
(a) CITE shall provide at its own cost and expense
qualified personnel who, as employees of CITE, shall exercise general over-all
management for each of the Pro Shops.
(b) CITE shall formulate the working schedules for Sports
Club staff at each Pro Shop, which shall include direct sales personnel as well
as one working sales manager for each Pro Shop. The schedules shall provide
that the Pro Shops shall be open from 9:00 A.M. to 9:00 P.M. daily or such
other period of 12 continuous hours or normal business hours if less, as the
parties may agree upon, on each day when the Clubs shall be open for business.
(c) CITE shall recruit and hire the direct sales
personnel and sales manager for each of the Pro Shops, and on behalf of Sports
Club, negotiate their rates of pay and salaries, as the case may be.
(d) CITE shall be solely responsible for the
identification, sourcing, pricing and ordering of all products, for the account
of Sports Club, to be offered for sale in each of the Pro Shops from time to
time, including private label products. CITE will use best efforts to obtain
lowest price, highest quality product for the benefit of Sports Club. Sports
Club will be invoiced directly by the source of products and will be
responsible for paying for such goods in accordance with normal and customary
terms in the industry. The quantities of goods to be ordered shall be based
upon CITE's reasonable projections of the anticipated sales of each Pro Shop,
which shall be approved by Sports Club. Before issuing any purchase order for
any product for the first time, CITE shall provide to Sports Club either
samples or complete descriptions of all products to be ordered, the name and
address of each proposed vendor and the proposed purchase price. Within ten
business days thereafter Sports Club may request that goods shall be ordered
from an alternative resource, provided that the quality offered is at least
equal to
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that of CITE's resource and the prices are equal or lower. The foregoing
procedure shall not apply to reorders of goods after a resource has been
selected except that CITE and Sports Club will review pricing, selection and
quality on a semi annual basis and shall jointly decide whether or not to seek
other sources.
(e) In the event that Sports Club should from time to
time desire to open or acquire additional Clubs in which a pro shop is to be
installed and operated, or to cite establish a free standing pro shop, CITE
will examine the proposed plan of operation for each such new pro shop and
provide its opinion as to the economic viability thereof. If CITE is satisfied
with the plan for a new pro shop, upon opening of the new Club or free standing
pro shop, CITE shall assume the management of the pro shop at that location in
accordance with the terms of this Management Agreement and such pro shop shall
be considered to be one of the Pro Shops as defined herein.
(f) Within sixty days after the execution and delivery of
this Management Agreement, CITE shall present to Sports Club a business plan, in
reasonable detail, for the establishment of a mail order department which will
offer products identical or similar to those offered at the Pro Shops from time
to time. If Sports Club shall approve the plan, CITE shall supervise the
establishment of the mail order department and shall assume the supervisory
management of the mail order department and shall assume the supervisory
management of the mail order department effective thirty days after the first
substantial mail order solicitation shall gave been mailed. Sports Club shall
make available to CITE its mailing list and customer records and CITE shall be
free to utilize the same in the operation and management of the mail order
department but for no other purpose. When CITE shall assume the management of
the mail order department, the department shall be considered to be a Pro Shop
for the purposes of the other provisions of this Management Agreement.
(g) CITE shall formulate and submit to Sports Club for
review and approval at least twice in each year a proposed advertising and
publicity program and budget for
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the Pro Shops. Sports Club will not unreasonably fail to approve such program
and budget and in each case will specify its reasons for failing to approve.
Any program and budget shall be deemed to have been approved ten business days
after the same has been submitted to Sports Club, unless Sports Club shall have
given written notice of its objections to CITE during such period. CITE shall
administer the advertising and publicity program on behalf of Sports Club with
final approval of use of Sports Club names and logo by Sports Club Marketing.
3. Under no circumstances shall CITE be required to provide the
following services without separate agreement and additional compensation,
(a) Design, construction or procurement services with
respect to any the establishment or alteration of any existing, future or
proposed Pro Shops.
(b) Design services with respect to any products to be
offered for sale in the Pro Shops.
(c) Design services with respect to any catalogs, fliers,
or advertising relating to the products offered for sale at the Pro Shops.
(d) Any other services not specifically enumerated herein
as the responsibility of CITE.
4. (a) Sports Club shall have the sole and complete financial
responsibility for all costs and expenses relating directly or indirectly to the
establishment and operation of each of the Pro Shops. All bills and invoices
with respect to goods purchased for sale in the Pro Shops or relating to the
operation of the Pro Shops shall be paid on a timely basis. All payroll,
withholding taxes, and payments with respect to employees required by law from
time to time shall be paid timely.
(b) Sports Club shall prepare and file all sales tax
returns and all tax returns with respect to the employment of the employees of
the Pro Shops as the same shall become due and pay all taxes which shall be
shown as due thereon.
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(c) Sports Club shall purchase and maintain for its
employees and CITE for its employees in effect at all times all workers'
compensation, unemployment and other similar insurance required by law or
regulation to be carried from time to time.
(d) Sports Club shall indemnify CITE and hold it harmless
of and from any and all third party claims and liabilities arising from the
operation of the Clubs and the Pro Shop, other than claims and liabilities
arising out of negligence by CITE or its employees or any violation of this
agreement for which CITE shall indemnify and hold harmless Sports Club.
(e) Sports Club shall not change the location of or
impede access to any of the Pro Shops after such locations have been
established except as necessary for Sports Club to operate general business, in
such case provisions of paragraph 6 will not apply to that location.
(f) Sports Club shall establish and maintain appropriate
facilities to enable qualified customers of the Pro Shops to charge their
purchases to American Express, VISA and Master Card as well as all other credit
cards utilized in each club from time to time.
(g) Sports Club shall provide decorating, cleaning,
maintenance and garbage removal services for the Pro Shops without charge.
5. (a) In consideration of the services to be provided by
CITE hereunder, Sports Club shall pay to CITE an amount equal to 13.5% of the
first $2 million of aggregate gross sales of the Pro Shops in each year. "Gross
sales" as used in this Management Agreement shall mean the aggregate of cash
sales or credit card charges effected in the Pro Shops, less bona fide returns
and allowances and sales taxes, and the term "year" as used in this Management
Agreement shall mean each twelve month period commencing on the first day of
the calendar month next following the date of the execution of this Management
Agreement. If items shall be provided without full charge
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to employees of Sports Club or others out of the inventory of any of the Pro
Shops, the same shall be taken into account as sales at their respective normal
purchase prices. Sports Club shall furnish to CITE a financial report and
support schedules showing the gross sales of each of the Pro Shops for each
calendar month no later than the 25th of the following calendar month and the
amount due to CITE under this paragraph, if any, shall be paid to CITE
simultaneously.
(b) (i) In addition, Sports Club shall pay to CITE an amount equal
to 20% of the trading profits of the Pro Shops for each year.
(ii) Trading profits shall be calculated by deducting from
the gross sales of the Pro Shops the payroll for the Pro Shops, direct expenses
of operating the Pro Shops, employee discounts, and CITE's management fee as set
forth in subparagraph (a) above. Under no circumstances will there be any
deduction or allocation for overhead or indirect expenses, as, for example,
rent, maintenance, utilities, legal, bookkeeping and accounting expenses and the
like, or for advertising or publicity unless such advertising or publicity in
its entirety shall relate solely to the Pro Shops and/or direct mail. If
CITE and Sports Club decide to expand the concept into stand alone retail
markets, both parties will work towards a separate business agreement with
respect to stand alone shops.
(iii) Trading profits shall be calculated within thirty days
after the end of each quarter of the year, as herein before defined. In
calculating trading profits for each quarter after the first in each year, the
figures shall be cumulated forward from the first quarter of the year, so that
trading profits and losses during each quarter of each year shall offset each
other. There shall be no carryback of trading profits and losses from year to
year, however. Sports Club shall furnish to CITE a financial report reviewed by
a certified public accountant showing the calculation of trading profits and the
amount shown to be due to CITE shall be paid at the same time. If any such
calculation shall
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show that CITE has been overpaid in any earlier quarter, CITE shall refund to
Sports Club the amount of such overpayment promptly upon receipt of the report
of such calculation.
6. The aggregate of the payroll of all the Pro Shops shall not
exceed 10% of the aggregate gross sales, as defined, of the Pro Shops during
each calendar quarter of each year, as herein before defined. The payroll for
any Pro Shop not presently operated by Sports Club shall not be taken into
account for this purpose until thirty days after the same shall have been
opened for business. In calculating payroll hereunder, payroll taxes or
insurance and other employee benefits shall not be deducted. In making the
calculations under this paragraph, for each quarter after the first in each
year the figures shall be cumulated from the first of the year. There shall be
no carryover of gross sales or payroll from year to year, however. CITE shall
reimburse to Sports Club the amount for each period by which payroll shall
exceed 10% of gross sales. Sports Club shall furnish to CITE a written report
showing the calculation of gross sales and payroll within thirty days after the
end of each quarter, and deduct from the amounts payable to CITE under
paragraph 5 hereof the amount of such excess. If any subsequent calculation
shall show that an excessive amount had been deducted pursuant to this
paragraph from the amount to be paid to CITE, Sports Club shall refund to CITE
the amount deducted.
7. Sports Club shall maintain books and records of the operations
of the Pro Shops, which shall be available for copying, audit and review by
representatives or designees of CITE from time to time. Such records shall be
preserved for such purpose for a period of two years after the close of each
year. If any audit shall show that there has been a shortfall in the amounts
which have been paid Sports Club to CITE, the same shall be paid forthwith
together with interest from the due date of each payment at the rate of 10%
payable on judgments in the State of New York, and if the amount of such
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shortfall for any quarter shall exceed 5% of the total amount due, then Sports
Club shall reimburse CITE for all of the expenses of the audit.
8. CITE acknowledges that all copyrights, trade marks and trade
names, including the name "Sports Club", utilized by Sports Club in connection
with its business are, and shall all time both during and after the term of
this Management Agreement remain, the sole and exclusive property of Sports
Club. CITE shall acquire no interest in the said copyrights, trade marks and
trade names by use or prescription.
9. This Management Agreement shall take effect as of the first
day of the calendar month occurring after the date of the execution hereof and
shall remain in effect for a period of three years. If gross sales do not
exceed $2,500,000. during the first year of this contract or $ 4,000,000.
during the second year; or if trading profits are less than $250,000. for
either of such year, either party can cancel this agreement upon 90 days
written notice, after the respective year is over. Thereafter, it shall remain
in effect subject to termination at the election of either party upon 90 days
written notice to the other, such termination to take effect at the end of the
first day of the month next following the expiration of such 90 days.
10. All documents and notices required or permitted by this
Management Agreement to be given to a party shall be in writing and shall be
deemed to be duly given on the date: (i) personally delivered; (ii) mailed by
certified or registered mail, return receipt requested; (iii) delivered by
Express Mail or courier service (such as Federal Express) which requires the
addressee to acknowledge, in writing, the receipt thereof; or (iv) sent by
telefax and confirmed by hard copy mailed by certified or registered mail,
return receipt requested or acknowledged by return telefax to the party
concerned at its address set forth on Page 1 above (or at such other address
as the party may specify by notice to the other). Copies of all notices to
CITE shall be sent to Lesser & Xxxxxxxx, Two Xxxx Xxxxx Xxxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000, Attention: S. Xxxxx Xxxxxxxx.
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11. The failure of either party at any time or times to demand
strict performance by the other of any of the terms, covenants or conditions set
forth herein shall not be construed as a continuing waiver or relinquishment
thereof and each may at any time demand strict and complete performance by the
other of said terms, covenants and conditions.
12. The rights granted to a party hereunder shall be exclusive to
it and shall not, without the prior written consent of the other, be
transferred, or assigned by it to any other person, firm or corporation.
Notwithstanding any such transfer or assignment, each shall remain fully liable
hereunder. In addition, the provisions hereof shall be deemed to preclude
assignment by operation of law and shall be deemed to restrict the
hypothecation, pledge, granting of a security interest or in any manner steps
or permitting the integrity of this Management Agreement between the parties to
be affected in any manner or form. Any assignment or transfer of any of the
rights granted hereunder which does not conform to the requirements hereof
shall be null and void.
13. (a) Except as specifically set forth herein, any and all
disputes, controversies and claims arising out of or relating to this Agreement
or concerning the respective rights or obligations hereunder of the parties
hereto, shall be settled and determined by arbitration before the American
Arbitration Association in Los Angeles County in accordance with and pursuant
to its then obtaining Rules for Commercial Arbitration. The arbitrators shall
have the power to award specific performance or injunctive relief and
reasonable attorneys' fees and expenses (including reimbursement of filing
fees) to any party in such arbitration. The arbitrators shall not have the
power to change, modify or alter any express condition, term or provision of
this Management Agreement, and to that extent the scope of their authority is
limited. The arbitration award shall be final and binding upon the parties.
(b) The parties shall have such right to interim relief
in any Court as may be provided by law.
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(c) An action to enforce an arbitration award or
for interim relief hereunder may be brought in any court having jurisdiction.
(d) The service of any notice, process, motion or other
document in connection with any arbitration or for interim relief or the
enforcement of any arbitration award hereunder may be effectuated in the manner
in which notices are to be given to a party pursuant to Paragraph 10 above.
14. This writing constitutes the entire agreement between the
parties hereto and may not be changed or modified except by a writing signed by
the party or parties to be charged thereby.
15. This Management Agreement shall be governed and construed
according to the laws of the State of California.
16. This Management Agreement does not constitute and shall not be
construed as constituting a partnership, or joint venture between the parties.
Neither party shall have any right to obligate or bind the other party in any
manner whatsoever except as expressly provided herein and nothing herein
contained shall give, or is intended to give, any rights of any kind to any
third party.
17. This instrument shall not be considered to be an agreement or
contract nor shall it create any obligation whatsoever on the part of the
parties, unless and until it has been signed on behalf of both and delivery has
been made of a fully signed original each to the other.
18. Neither party shall be in default hereunder by reason of its
delay in the performance of or failure to perform any of its obligations under
this Agreement if such delay or failure is caused by strikes, act of God or the
public enemy, riots, incendiaries, interference by civil or military
authorities, compliance with governmental law, rules and regulations, delays in
transit or delivery or any default beyond its control or without its fault or
negligence.
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19. Each party warrants, represents and acknowledges to the other
that neither has made any warranties or representations of any nature
whatsoever to induce the other to enter into this Management Agreement, except
as expressly set forth herein. All prior discussions, understandings and
agreements between the parties have been merged herein, it being intended that
this shall constitute the complete agreement between the parties. This
Management Agreement may be modified or amended only by writing duly executed
by both parties hereto.
20. Nothing in this Management Agreement shall be construed to
transfer or confer to CITE any interest, right or title in any proprietary
asset of The Sports Club Company, Inc. or any of its subsidiaries. Such
proprietary assets include, but are not limited to, any patent, patent
application, trademark, trademark application, tradename, fictitious business
name, service xxxx, service xxxx application, copyright, copyright application,
trade secret, know-how, invention, design, proprietary product, proprietary
right; or other intellectual property right or intangible asset. (the
"Proprietary Assets") Any use by CITE of the Proprietary Assets except as
provided for in this Management Agreement will constitute a default hereunder
and will result in Sports Club's immediate termination of the Management
Agreement.
21. CITE and Sports Club agree to maintain the confidentiality of
all oral or written information of either party provided to each pursuant to
the terms of this Management Agreement and that each party shall not use such
information except for the purpose of providing the services contemplated by
this Management Agreement, provided that these restrictions shall not apply to
any information which (1) is already known to both through a source other than
Sports Club or CITE; (2) is or becomes publicly known (through no breach of
this Management Agreement); (3) is developed by either independently of any
information received from Sports Club or CITE; (4) is rightfully received from
a third party who is not obligated to keep such information
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confidential; or (5) is required to be disclosed by law or court order
(provided that each party shall notify the other of any such required
disclosure and cooperate with each other to resist or limit such disclosure.)
IN WITNESS WHEREOF, the parties hereto have signed this Management
Agreement as of the day and year first above written.
THE SPORTS CLUB COMPANY CITE DESIGN CORPORATION
By: /s/ XXXX XXXXXXX By: /s/ X.X. XXXXX
-------------------------- -------------------------
Xxxx Xxxxxxx, President X. X. Xxxxx, President
DATED: 5/6/96 DATED: 8 May 96
