EXHIBIT 10.1
FRANCHISE AGREEMENT
THIS FRANCHISE AGREEMENT ("Agreement") is executed in Scottsdale, Arizona
as of the date stated below, between Fitness For Life Franchise Corporation, an
Arizona corporation ("FFL"), and ____________________, of ____________________
("Franchisee").
RECITALS:
A. FFL is engaged in the business of franchising a unique and
comprehensive system of providing individualized personal fitness
training (the "FFL Franchise System").
B. FFL has expended time, skill, effort and money to develop a business
plan in connection with the operation of franchises using certain
standards, specifications, methods, procedures, techniques, systems,
and information, all of which may be enhanced, improved and further
developed from time to time by FFL.
C. The distinguishing characteristics of the FFL Franchise System
include, but are not limited to the interior layout and design, color
scheme, signage and equipment, the name and xxxx "Fitness For Life 1
Client, 1 Trainer, 1 Goal" and "Fitness Together 1 Client, 1 Trainer,
1 Goal" together with such other trade names, service marks,
trademarks, copyrights, titles, symbols, emblems, slogans, insignia,
designs, diagrams, artworks, worksheets, originals, manuals,
techniques, rules, ideas, philosophies, illustrations, course
materials, advertising and promotional materials, and other audio,
video and written materials as FFL has developed and designated for
use in connection with the FFL Franchise System, and as FFL may
hereafter acquire or develop and designate for use in connection with
the FFL Franchise System ("Proprietary Assets").
D. Franchisee desires to operate a franchise using the FFL Franchise
System and the Proprietary Assets in the territory described in
Paragraph 1 on the terms and conditions set forth herein, which terms
and conditions are reasonably necessary to maintain FFL's standards of
quality and service, protect the good will and enhance the public
image of the FFL Franchise System and Proprietary Assets.
E. Franchisee has been informed and hereby acknowledges his or her
understanding of the fact that the successful operation of the
franchise will depend primarily upon the efforts, capabilities and
management skills of Franchisee, as well as efficient operation of the
franchised business, the general economic trends and local marketing
conditions. FFL makes no claims or representations whatsoever
regarding potential sales, profits or earnings achievable by
Franchisee.
40
NOW, THEREFORE, the parties agree:
1. GRANT OF FRANCHISE
1.1 FFL hereby grants to Franchisee the right to own and operate one (1) FFL
Franchise System basic franchise ("Franchise") within the territory
described on Exhibit A ("Territory").
1.2 This Agreement grants to Franchisee the individual franchised territory
within which FFL and Franchisee contractually, mutually agree to refrain
from establishing or franchising others to establish another FFL center.
Franchisee is unrestricted as to the geographic area into which it may go
to solicit business as an FFL franchise owner. Franchisee may relocate the
franchised business only with FFL's prior written approval and conditioned
on meeting and agreeing to FFL relocation criteria. FFL approval will be
based on a variety of factors, including the viability of the then-current
location and conditions of the area, potential modifications of the
Territory, new design and current upgrades.
FFL agrees that during the term of the Franchise Agreement and as long as
Franchisee is not in default under this Agreement and all other agreements,
FFL or its affiliates, if any, will not establish or operate, nor license
any other person to establish or operate a business selling or providing
individualized personal fitness training within the Territory. FFL reserves
the right to franchise and/or operate fitness centers or other franchises
at its sole discretion in any area or territory outside and/or contiguous
to the Territory.
The size of the Territory granted to Franchisee will be a function of the
market conditions of the area. Territory boundaries will be delineated by
street, highways, waterways, city or county borders or other such lines of
demarcation. Boundary lines shall be defined as extending only to the
middle of boundary line of demarcation, e.g., to the middle of a street or
highway, and another FFL center franchise may be located on the boundary
line, but outside of Franchisee's Territory. The typical territory will
include an area of five (5) miles in any direction from the Franchise
location and/or a daytime population base of 80,000 in densely populated
areas.
Continuation of the Territory shall be for the initial term of the
Franchise Agreement and shall be subject to the modification or elimination
at FFL's sole discretion at time of transfer and renewal.
The Franchise Agreement does not provide Franchisee with any options,
rights of first refusal or similar rights to acquire additional franchises
within the Territory or areas contiguous to the Territory. Franchisee's
Territory may be altered during the initial term only by mutual consent in
writing by both Franchisee and FFL, except at time of transfer or renewal.
1.3 FFL hereby licenses to Franchisee the right to use the FFL Franchise System
and the Proprietary Assets in connection with the operation of the
Franchise.
2. TERM AND RENEWAL
2.1 This Franchise shall expire ten (10) years from the effective date of this
Agreement.
2.2 Franchisee may, at its option, renew the Franchise and the right to use the
FFL Franchise System and the Proprietary Assets in connection with the
operation of the Franchise for two (2) additional terms
41
of five (5) years each, provided that prior to the expiration of the
initial term or each renewal term, as the case may be:
(a) Franchisee gives FFL written notice of its election to renew not less
than six (6) months nor more than twelve (12) months prior to the end
of the initial term or each renewal term, as the case may be;
(b) Franchisee is not, when written notice of its election to renew is
given or at any time subsequent thereto, in default of any provisions
of this Agreement or any other agreement between Franchisee and FFL,
including any other Franchise Agreement, and has substantially
complied with the terms and conditions of all such agreements during
the initial term, or during each renewal term, as the case may be;
(c) All monetary obligations owed by Franchisee to FFL have been satisfied
prior to the renewal and paid when due throughout the initial term, or
throughout any renewal term, as the case may be;
(d) Franchisee executes FFL's then-current standard form of Franchise
Agreement, which may contain terms and conditions different from those
set forth herein, but which shall not alter Franchisee's renewal
rights or monthly royalty obligation, or require Franchisee to pay an
additional Initial Franchise Fee;
(e) Franchisee executes a general release in a form satisfactory to FFL,
of any and all claims against FFL and its officers, directors,
members, shareholders and employees, in their corporate and individual
capacities, including, without limitation, claims arising under
federal, state and local laws, rules and ordinances; and
(f) Franchisee and any other person who has an interest in the Franchise
(if Franchisee is a group of individuals or a corporation, limited
liability company, partnership, unincorporated association or similar
entity) attends and satisfactorily completes such refresher training,
if any, as FFL may require, in its sole discretion, at such time and
place prior to expiration of the initial term or each renewal term as
FFL may reasonably designate, it being understood that all costs for
travel, sustenance, lodging and other expenses in any way related to
such training shall be borne by Franchisee, and that all costs
relating to verbal advice, written advice or materials unilaterally
supplied at such training shall be borne by FFL.
(g) Franchisee pays a renewal fee of twenty-five percent (25%) of the
then-current initial FFL franchise fee. Franchisee must execute and be
bound by the then-current Franchise Agreement for the sale of new FFL
centers. Franchisee will be required to upgrade, remodel and refurbish
the franchise center premises and the inside and outside must be
brought up to the then-current standards, graphics and signs will need
to be replaced if necessary and all equipment updated to the
then-current requirements.
3. FEES
3.1 Franchisee shall pay to FFL the sum of Twenty-Four Thousand and No/100
Dollars ($24,000.00) as an Initial Franchise Fee. The Initial Franchise Fee
is payable no earlier than ten (10) business days after Franchisee's
receipt of a copy of the Offering Circular, but no later than at the time
of the
42
execution of the Franchise Agreement. The Initial Franchise Fee is fully
earned by FFL when paid and is not refundable.
3.2 FFL may, from time to time, offer programs to existing qualified franchise
owners to open multiple centers. In these cases, FFL, at its option, may
elect to reduce the Initial Franchise Fee for each additional franchise,
offer financing, defer the Initial Franchise Fee and/or provide other
options at its discretion.
3.3 Franchisee shall pay to FFL a continuing monthly royalty of five percent
(5%) of its gross monthly receipts on the tenth (15th) day of the first
full calendar month after the execution of this Agreement, and on the tenth
day of each month thereafter during the initial term of the Franchise and
any renewal terms.
3.4 Gross monthly receipts shall include all receipts of Franchisee for
individualized personal training whether at the Franchisee's regular place
of business, from off-site training and the sales of merchandise and shall
include, cash, credit and electronic funds transfer sales consisting of all
amounts invoiced or received for services, goods or merchandise sold by
Franchisee, exclusive of sales, use or privilege taxes thereon.
3.5 Franchisee may, at its option, purchase from or through FFL such equipment
and materials (beyond those initially supplied pursuant to Paragraph 4.4
and those agreed to be purchased) as FFL may from time to time make
available to Franchisee at prices set forth from time to time in the
Operations Manual.
3.6 With regard to all sums owed to FFL that are in arrears, Franchisee shall
pay FFL a late fee of five percent (5%) of the amount due or Fifty and
No/100 Dollars ($50.00) for each month or portion of months that such
amount is in arrears, whichever is greater.
3.7 If a default notice is sent to Franchisee, Franchisee shall pay FFL a fee
of Fifty and No/100 Dollars ($50.00).
3.8 When activated, Franchisee shall join and participate as a member of FFL's
Electronic Mail and Communications Network ("FFLnet") linking franchisees
with each other and the Corporate Office and complete FFL software license.
When operational, Franchisee agrees to participate in a FFL Electronic
Funds Transfer program by allowing FFL to electronically transfer directly
to and from Franchisee's bank account.
Electronic Funds Transfer from Franchisee's bank account may include, but
are not limited to, royalty, lease and note payments and supplies and
equipment. Electronic Funds Transfer will allow FFL to collect royalty,
lease and note payments and supplies and equipment payments in conjunction
with the ability of Franchisee to electronically submit royalty reports and
receive center financial account information via FFLnet.
3.9 FFL has developed and custom designed a software package for conducting
accounting and related activities ("Proprietary Software Package"). The
Proprietary Software Package is proprietary and confidential information of
FFL. Franchisee must comply with FFL's standards regarding the Proprietary
Software Package as explained in the confidential Operations Manual. FFL
will lease the
43
Proprietary Software Package to Franchisee at no charge. The cost of any
leases of or updates to the Proprietary Software Package will be included
in the continuing services and royalty fee.
Franchisee must upgrade any hardware component or software program at any
time during the term of this Agreement to be compatible with the
Proprietary Software Package required by FFL. The Proprietary Software
Package will be compatible with the hardware and software described in the
paragraph above. FFL will not require Franchisee to upgrade more than twice
during the term of this Agreement at a cost of not more than Two Thousand
Five Hundred and No/100 Dollars ($2,500.00).
3.10 Franchisee agrees that it shall not, on grounds of the alleged
nonperformance by FFL of any of its obligations under this Agreement,
withhold payment of any fee or other amount payable to FFL under this
Agreement or otherwise.
4. OBLIGATIONS OF FFL
4.1 FFL, commencing at its next regular training session, will conduct for
Franchisee and/or Franchisee's manager (and others designated by FFL), a
comprehensive training program ("Initial Training") so as to inform
Franchisee of the methods, procedures and techniques contained in the FFL
Franchise System. Initial Training will be conducted during normal business
hours at FFL's principal place of business in Castle Rock, Colorado or at
such other site in the State of Colorado as FFL shall designate. Franchisee
and/or its manager is required to attend and successfully complete such
training program. The Initial Training session will be for a duration of
four to seven (4 - 7) days. All costs for travel, sustenance, lodging and
other expenses in any way related to Initial Training shall be borne by
Franchisee.
Franchisee will not be required to attend an Initial Training course
conducted at a FFL designated location with the second or additional
Franchises purchased by Franchisee.
4.2 FFL or its designee will provide advice to Franchisee regarding the conduct
of Franchisee's business at reasonable times. Franchisee and a reasonable
number of Franchisee's staff members may attend subsequent training
sessions ("Subsequent Training") that may be provided by FFL or its
designee. All costs related to Subsequent Training shall be borne by
Franchisee. Arrangements must be made by Franchisee and its staff members
prior to their participation in any training offered by FFL or its
designee.
4.3 FFL shall make available to Franchisee, directly or through a designee:
(a) Such assistance as FFL determines is required in connection with the
opening and operation of the Franchise;
(b) Such merchandising, marketing and other data and advice as may from
time to time be developed by FFL and deemed by it to be helpful in the
operation of the Franchise;
(c) Such individual or group advice, consultation and assistance rendered
by telephone, newsletters or bulletins as FFL may deem necessary or
appropriate from time to time;
(d) Such other resources and assistance as may be developed and offered by
FFL to its franchisees.
4.4 FFL will promptly provide Franchisee with a list of equipment and supplies
as set forth in Exhibit B. FFL will also give Franchisee a list of approved
manufacturers, suppliers and distributors authorized
44
for the Franchise and a list of approved inventory, products, fixtures,
furniture, signs, stationary, supplies and other items or services
necessary to operate the Franchise. If Franchisee would like to sell or use
any product, material or supply or purchase any products from a supplier
not on either of these lists, it must notify FFL and may need to submit
samples and other information to FFL so that FFL can make an informed
decision as to whether the product or supplier meets FFL's standards.
Franchisee may be charged for the costs of FFL's testing of a product or
supplier. FFL will approve or disapprove submitted items within ten (10)
days. Any item used in the Franchisee's business which is not specifically
required to be purchased in accordance with the approved lists will conform
to FFL's established standards.
5. LIMITATIONS OF FRANCHISE
5.1 Franchisee acknowledges that FFL is the exclusive owner of the Proprietary
Assets and of the standards, specifications, operating procedures and other
elements of the FFL Franchise System and further acknowledges that any
modifications to the FFL Franchise System or any substitutions or additions
to the Proprietary Assets suggested or developed by Franchisee and approved
by FFL shall be owned exclusively by FFL and may be incorporated by FFL
into the Proprietary Assets. Franchisee shall use the FFL Franchise System
and the Proprietary Assets at one (1) physical location strictly in
accordance with the terms of this Agreement and all policies set forth from
time to time in the Operations Manual. Any unauthorized use of the FFL
Franchise System or the Proprietary Assets is and shall be deemed to be an
infringement of FFL's rights. Except as expressly provided in this
Agreement, Franchisee shall acquire no right, title or interest in or to
the FFL Franchise System or the Proprietary Assets. All good will
associated with the FFL Franchise System and the Proprietary Assets used by
Franchisee shall inure exclusively to FFL's benefit; and upon the
termination of the Franchise, no monetary amount shall be assigned as
attributable to any good will associated with Franchisee's use of the FFL
Franchise System or the Proprietary Assets. Franchisee shall at no time
take any action whatsoever to contest the validity, ownership,
distinctiveness or enforceability of the Proprietary Assets and the good
will associated therewith. Franchisee agrees that any use by Franchisee of
all or any part of the FFL Franchise System or the Proprietary Assets
contrary to any provision of this Agreement or any use by Franchisee of any
confusingly similar method, format, procedure, technique, system, name,
xxxx, symbol, emblem, slogan, insignia, term, designation, design, diagram,
promotional material or course material, during or after the term of this
Agreement, shall cause irreparable injury to FFL, shall constitute a
material breach of his Agreement and shall entitle FFL to temporary,
preliminary or permanent injunctive relief from a court of competent
jurisdiction, court costs, reasonable expenses of litigation, reasonable
attorneys' fees and any other appropriate remedies.
5.2 Franchisee shall operate and advertise under the name "Fitness Together 1
Client, 1 Trainer, 1 Goal" and use the service xxxx "Fitness Together 1
Client, 1 Trainer, 1 Goal." Franchisee shall have no right to use in its
corporate, limited liability company, partnership or similar entity name,
the name "Fitness Together" or any other trade names or marks used by FFL.
Upon termination of Franchisee for any reason whatsoever, Franchisee shall
immediately take any steps necessary to eliminate the use of the name and
service marks of FFL. Franchisee shall identify itself as a FFL franchisee
on its stationery, business cards and other similar material used and
distributed in connection with the franchised business. Franchise shall
submit its stationery, business cards and other similar material to FFL for
approval within thirty (30) days from the date hereof. Franchisee must not
use in advertising or any other form of promotion, the copyrighted
materials, trademarks, service marks or
45
commercial symbols of FFL without the appropriate notices which may be
required by law such as (C), etc.
5.3 The Franchise and the right to use the FFL Franchise System and the
Proprietary Assets granted hereunder are exclusive within the Territory,
except for the right of FFL or its other franchisees to advertise within
the Territory. FFL retains the right in its sole discretion to grant
franchise rights to other persons outside the Territory, subject to the
terms and conditions of this Agreement.
5.4 FFL retains the right in its sole discretion to develop, use and franchise
the rights to any systems, trade names, trademarks, service marks, trade
symbols, emblems, signs, slogans, insignia, or copyrights not designated by
FFL as part of the FFL Franchise System or the Proprietary Assets, at any
location, including within the Territory, on such terms and conditions as
FFL may deem advisable, and without granting Franchisee any rights therein.
5.5 Because complete and detailed uniformity under many varying conditions may
not be possible or practical, FFL specifically reserves the right and
privilege, in its sole discretion and as it may deem to be in the best
interests of all concerned and in any specific instance, to vary standards
for any franchisees based upon the peculiarities of a particular territory,
density of population, business potential, business practice or other
condition important to the successful operation of such franchise owner's
business. FFL may grant to franchisees variations from standard
specifications and practices as FFL determines in its sole discretion, and
FFL shall have no obligation to grant Franchisee like or similar
variations.
5.6 If Franchisee will occupy the premises under lease, FFL will have final
ultimate approval of the lease. The lease must include the following terms
and conditions:
(a) That the initial term of the lease, or the initial term together with
the renewal term, must be not less than five (5) years.
(b) That the lessor consents to Franchisee's use of such proprietary marks
and signage as FFL may require for the franchised business.
(c) That the use of the premises be restricted solely to the operation of
the franchised business.
(d) That Franchisee be prohibited from sub-leasing or assigning all or any
part of his or her occupancy rights or extending the terms of or
renewing the lease without FFL's prior written consent.
(e) That the lessor provide to FFL copies of any and all notices of
default given to Franchisee under the lease.
(f) That FFL have the right to enter the premises to make modifications
necessary to protect the proprietary marks for the FFL Franchise
System, or to cure any default under the Franchise Agreement or under
the lease.
(g) That FFL (or its designee), have the option, upon default, expiration
or termination of the Franchise Agreement, and upon notice to the
lessor, to assume all of the Franchisee's rights under the lease terms
(including rent payments), including the right to assign or sub-lease.
46
Further, FFL shall have the right to remove its equipment and signage
in the event of the above.
(h) That lessor agrees not to lease space, or continue to lease space if
tenant is not doing business as (dba) Fitness Together.
6. ADVERTISING; FRANCHISEE'S EMPLOYEES
AGENTS AND INDEPENDENT CONTRACTORS
6.1 Franchisee shall, prior to conducting any advertising, submit to FFL a copy
of any such advertising not prepared by FFL and a description of the manner
in which Franchisee intends to disseminate the advertising. FFL shall have
the right to disapprove or place conditions upon the text, except with
respect to the prices to be charged, artistic composition, manner of
dissemination or any other time with respect to the advertising by written
notice to Franchisee given within fifteen (15) days of FFL's receipt of the
advertisement. Notwithstanding anything to the contrary contained herein,
Franchisee may not disseminate any advertising through the United States
mail in any manner that would be in conflict with any mailing rights
granted by FFL to any other franchisee.
6.2 FFL acknowledges that Franchisee may hire one (1) or more employees, agents
or independent contractors to assist in the operation of the Franchise, to
solicit clients and provide individualized fitness training. Franchisee
agrees that any such employee, agent or independent contractor shall be
required to execute a Non-Disclosure and Non-Compete Agreement located in
the Originals Manual.
7. FRANCHISEE'S OBLIGATIONS
7.1 Franchisee has sole responsibility for the performance of all obligations
arising out of the operation of the Franchise, including, the payment when
due of any taxes levied by reason of such operation. Franchisee shall
carefully monitor the performance of any person who is actively involved in
the operation of the Franchisee.
7.2 This Agreement does not create a fiduciary relationship between FFL and
Franchisee. Franchisee shall be an independent contractor with the entire
control and discretion of its Franchise, subject only to the terms and
conditions of this Agreement. No agency, employment or partnership is
created or implied by the terms of this Agreement. In all public records,
in its relationship with other persons, and in any offering circular,
prospectus or similar document, Franchisee shall indicate clearly the
independent ownership of its business and that the operations of its
business are separate and distinct from the operations of FFL's business.
7.3 Franchisee shall operate the Franchise in accordance with both the
Originals Manual and the Operations Manuals, a copy of each Franchisee
acknowledges having received on loan from FFL for the term of the
Franchise. FFL may, from time to time, unilaterally revise the contents of
the Originals and Operations Manuals to implement new or different
operating requirements and fees applicable to the Franchise, and Franchisee
expressly agrees to comply with such changed requirements and fees within
such reasonable time as FFL may require; provided, however, that any
changed requirements or fees shall not unreasonably increase Franchisee's
obligations under this Agreement or place an excessive economic burden of
Franchisee's operations. Franchisee shall at all times keep its copy of the
Originals and Operations Manuals and any other manuals loaned to it
47
current and up-to-date and, in the event of any dispute as to the contents
thereof, the master copies maintained by FFL at its principal place of
business shall be controlling. Franchisee agrees that the provisions of the
Originals and Operations Manuals, including the mandatory specifications,
standards, procedures and rules applicable to the FFL Franchise System, and
such modifications as are made thereto from time to time by FFL, shall
constitute provisions of this Agreement as if fully set forth in this
Agreement. Franchisee further agrees that all references in this Agreement
to the provisions or specifications of the Originals or Operations Manuals
shall mean the provisions and specifications of those manuals, including
all mandatory and recommended specifications, standards, procedures, rules
and criteria, as of the time they are in effect.
7.4 Franchise must treat the Originals and Operations Manuals, any other
manuals created for or approved for the use in the operation of the
franchised business and the information contained in them as confidential
and must use all reasonable efforts to maintain this information as secret
and confidential. Franchisee must not copy, duplicate, record or otherwise
reproduce these materials, in whole or in part, or otherwise make them
available to any unauthorized person. The manuals will remain FFL's sole
property and must be kept in a secure place on the premises.
7.5 During the term of this Franchise Agreement, except as otherwise provided
in writing by FFL, Franchisee or if a corporation, partnership or limited
liability company, a principal, member or general partner of the
corporation, partnership or limited liability company, or Franchisee's
fully- trained manager, must devote full time and best efforts to the
management and operation of the franchised business. The franchised
business must at all times be under the direct on premises supervision of a
manager who has satisfactorily completed FFL's training program. Franchisee
must also maintain a competent, conscientious, trained staff, including a
fully-trained manager, which may be Franchisee. If Franchisee is an
individual, we recommend that Franchisee be the fully-trained manager
described above. FFL imposes no limitations as to who Franchisee may hire
as the manager, except that Franchisee must comply with all applicable laws
and that Franchisee must not harm the goodwill associated with the FFL
Franchise System and the proprietary marks. (This requirement may affect
who Franchisee may hire as its manager).
FFL does not have the right to approve the manager. The manager will not be
required to have an equity interest in the business. The manager and other
employees may be required to attend and complete FFL's training programs as
described in paragraph 7.6. The manager and other employees may also be
required to enter into an agreement not to complete with businesses under
the FFL Franchise System while employed by Franchisee and for two (2) years
thereafter, and an agreement not to reveal confidential information
obtained in the course of their employment with Franchisee.
This Franchise Agreement provides that Franchisee will devote sufficient
time and energy to ensure the efficient operation of the center, with
center days and hours as prescribed by FFL.
7.6 To further protect the FFL Franchise System, the Proprietary Assets and the
goodwill to be associated therewith, Franchisee shall:
(a) Take the initial training prescribed by and provided by FFL. If FFL
determines, in its sole discretion, that Franchisee is unable to
satisfactorily complete the training program, FFL shall have the right
to require Franchisee to attend such additional training as FFL may
require, or terminate this Agreement and refund the initial franchise
fee less Five Thousand and No/100 Dollars ($5,000.00).
48
(b) Provide such training for its personnel as may be necessary to meet
qualifications levels set by FFL from time to time for personnel
involved in Franchisee's business.
(c) Feature and use the Proprietary Assets solely in the manner prescribed
by FFL.
(d) Observe such reasonable requirements with respect to service xxxx,
trade name, trademark, and fictitious name registrations and copy
right notices as FFL may, from time to time, direct in writing.
(e) Not offer, sell or promote any other sales or other type of fitness
training or other program under the service xxxx Fitness Together or
any other like xxxx except such programs as it has obtained from FFL.
(f) Sell or offer for sale at the franchised business only products which
meet FFL's current standards and specifications established in FFL's
Operations Manuals or otherwise in writing.
(g) Use only materials displaying the names, marks, insignia and symbols
of the FFL Franchise System.
(h) Equip its FFL center with equipment recommended and approved by FFL
and maintain an inventory of products, equipment and supplies that
will permit operation of the Franchise at maximum capacity.
(i) Comply will all laws, ordinances and regulations affecting the
operation of the Franchise and the conduct of personal training. All
personal training shall be conducted at Franchisee's one (1) place of
business in the Territory or at homes or offices within the Territory.
(j) Notify FFL in writing within five (5) days of the commencement of any
action, suit or proceeding, or of the issuance of any writ,
injunction, award or decree of any court, agency or governmental
agency or instrumentality, which may adversely affect Franchisee's
financial condition or ability to meet its obligations hereunder.
(k) Permit authorized personnel of FFL to enter its place of business
during normal business hours to examine its operations, facilities,
books and records.
(l) Franchisee shall cooperate with FFL's representatives in such
inspections by rendering such assistance as they may reasonably
request.
(m) Pay on a timely basis all fees and costs incurred in the operation of
the Franchise, whether owing to FFL or to third parties. Franchisee is
aware that failure to make prompt payment causes irreparable harm to
the reputation and credit of FFL and other FFL franchisees.
(n) Submit reports of its operations on such forms as are prescribed from
time to time in the Operations Manuals at such times as FFL may
reasonably request.
(o) Take reasonable steps to protect FFL, the FFL Franchise System and the
Proprietary Assets against any misappropriation of same and/or other
action taken by any third party which is or might damage FFL, the FFL
Franchise System and/or the Proprietary Assets, and
49
immediately notify FFL of such misappropriation and/or action;
provided, however, that Franchisee shall not be required to incur any
significant costs to protect FFL, the FFL Franchise System or the
Proprietary Assets.
(p) Devote such reasonable time to the business of the Franchise as shall
be necessary to cause the Franchise to be effectively and efficiently
operated.
(q) Comply with all requirements set forth in this Agreement and in the
Originals and Operations Manuals as the same may be modified from time
to time.
(r) Accept the transfer from another franchisee of any member who desires
to receive training from Franchisee provided that such other
franchisee has paid Franchisee all unused payments made by such
person.
(s) At no time solicit any prospective franchisee of FFL to purchase any
product or services or to become associated with Franchisee as an
employee, independent contractor or co-owner of the franchised
business, unless otherwise authorized in writing by FFL.
(t) At no time solicit any employee of another FFL franchisee to become
associated with Franchisee as an employee, independent contractor or
co-owner of the franchised business, unless otherwise authorized in
writing by FFL and such other franchisee.
(u) At no time solicit any existing client of another FFL franchisee
unless otherwise authorized in writing by such other franchisee and
FFL.
(v) Franchisee must use the fitness center premises solely for the
operation of the franchised business; must keep the franchised
business open and in a normal operation for such minimal hours and
days as specified by FFL; must refrain from using or permitting the
use of the premises for any other purpose or activity at any time
without first obtaining FFL's written consent.
(w) Franchisee must maintain the condition and appearance of the of the
premises of the franchised business consistent with FFL's quality
controls and standards. Franchisee must reasonably maintain the
franchised business as is periodically required to maintain or improve
the appearance and efficient operation of the franchised business.
(x) Franchisee may not make any material alterations to the premises of
the franchised business or make material replacements of or
alterations to the equipment, fixtures or signs of the franchised
business without FFL's written approval.
(y) Franchisee must record all sales and related activities on a computer
which are fully compatible with any program or system which FFL
employs. All gross sales and sales information will be recorded on
this equipment. FFL will have full access to all of Franchisee's data
system and related information by means of direct access whether in
person or by telephone/modem.
50
7.7 Franchisee shall have the right to offer services and sell products at any
price it may determine. If FFL recommends a retail price, such
recommendation is suggested only and is in no way binding upon Franchisee.
7.8 Franchisee shall maintain (i) an automobile insurance policy, and (ii) a
comprehensive business liability insurance policy, each with limits of not
less than One Million and No/100 Dollars ($1,000,000.00) for bodily and
property injury. If circumstances so require for the protection of
Franchisee and FFL, the foregoing limits of insurance may be increased by
FFL. Each insurance policy maintained by Franchisee for the Franchise shall
name FFL as an additional insured party. Each insurance policy shall be
issued by an insurance company with a performance rating of at least A+ as
rated in the most recent edition of Best's Insurance Reports or comparable
publication. Within thirty (30) days after establishing the Franchise, and
annually thereafter, Franchisee shall provide FFL with a copy of each
insurance policy, together with evidence of payment of premiums, evidencing
the limits noted above or then required and providing that such insurance
shall not be canceled, amended or modified without thirty (30) days' prior
written notice to FFL. If Franchisee fails to procure or to continue to
maintain any required insurance, FFL is hereby authorized, but not
obligated, to procure such insurance and to charge the cost of such
insurance to Franchisee.
7.9 Franchisee shall secure workmen's compensation or similar insurance as
required by law.
7.10 Franchisee shall provide FFL with financial information on such forms as
are prescribed from time to time in the Originals and Operations Manuals.
All such financial information shall be prepared in accordance with
generally accepted accounting principles, consistently applied and shall be
accurate and complete in all material respects. FFL shall have the right
from time to time to request additional financial information from
Franchisee as FFL may reasonably deem to be required or desirable. If an
inspection or audit of Franchisee's books and records reveals that any
payments due to FFL have been understated in any report, then Franchisee
will immediately pay FFL, upon its demand, the understated amount plus
interest from the date the amount was due until paid. If an inspection or
audit discloses an understatement of two percent (2%) or more, then
Franchisee will also reimburse FFL for any costs and expenses, including
accounting and attorneys' fees connection with the inspection or audit.
Franchisee must retain all books and records regarding its Franchise for
three (3) years.
At the end of each calendar quarter, Franchisee will supply to FFL in a
form approved by FFL, a profit and loss statement and a balance sheet for
the three (3) month period just ended. Within ninety (90) days of
Franchisee's fiscal year end, Franchisee must submit to FFL a profit and
loss statement for that fiscal year and a balance sheet as of the last day
of the fiscal year prepared on an accrual basis including all adjustments
necessary for fair presentation on the financial statements.
7.11 Franchisee shall promptly after obtaining possession of the site for the
Franchise: (i) cause to be prepared and submit for approval by Franchisor a
site survey and any modifications to Franchisor's conceptual designs and
specifications (not for construction) for the development of the Fitness
Together business (including requirements for dimensions, exterior design,
materials, interior design and layout, equipment, fixtures, furniture,
signs and decorating) at the site leased or purchased therefor, provided
that Franchisee may modify FFL's basic plans and specifications only to the
extent required to comply with all applicable ordinances, building codes
and permit requirements and with prior notification to and approval by
Franchisor; (ii) obtain all required zoning changes, building, utility,
health, sanitation and sign permits and licenses and any other required
permits and licenses;
51
(iii) purchase or lease equipment, fixtures, furniture and signs as
provided herein; (iv) complete the construction and/or remodeling,
equipment, fixtures, furniture and sign installation and decorating of the
Franchise in full and strict compliance with plans and specifications
therefor approved by FFL and applicable ordinances, building codes and
permit requirements; (v) obtain all customary contractors' sworn statements
and partial and final waivers of lien for construction, remodeling,
decorating and installation services; and (vi) otherwise complete the
development of and have the Franchise ready to open and commence the
conduct of its business.
7.12 Franchisee shall not install or maintain on the premises of the franchised
business, any newspaper racks, video games, jute boxes, gaming machines,
gum machines, games, rides, vending machines or other similar devices
without FFL's written approval.
8. INDEMNIFICATION
8.1 Franchisee shall hold harmless and indemnify FFL and its officers,
directors, agents and employees, from and against any and all losses,
expenses, judgments, claims, reasonable attorneys' fees and damages arising
out of any claims directly or indirectly related to the operation of the
Franchise or arising out of a breach of this Agreement; provided, however,
that Franchisee shall not be required to hold harmless or indemnify FFL for
any claim arising out of a breach of this Agreement by FFL or any other
civil wrong of FFL. Franchisee shall promptly notify FFL of any suit filed
by or against Franchisee in connection with the operation of the Franchise
and, upon request, shall furnish FFL with copies of such documents from the
suit as FFL may request.
8.2 FFL shall hold harmless and indemnify Franchisee against any claim for
copyright, service xxxx or trademark infringement arising out of
Franchisee's authorized use of FFL materials or the Proprietary Assets in
accordance with this Agreement and the Operations Manuals, provided
Franchisee notifies FFL in writing within thirty (30) days, or within such
shorter period as is necessary to avoid prejudice, after learning of any
claim, and also provided FFL has the right to control any litigation or
proceeding resulting from any such claim. FFL may require Franchisee to
modify or discontinue using any xxxx and in that event FFL will reimburse
Franchisee for its tangible costs of compliance.
8.3 The obligations of Franchisee and FFL to hold harmless and indemnify as
specified in Paragraphs 8.1 and 8.2 shall survive the repurchase or
termination of the Franchise for so long as any potential for liability
under any applicable law, rule, ordinance, statute or judicial decision
remains. In this regard, to the maximum extent permitted by law, Franchisee
and FFL hereby each waive the effect of any statute of limitation which
would, by lapse of time, limit such obligations.
9. DEFAULT; TERMINATION
9.1 The occurrence of any of the following events shall constitute a default
under this Agreement:
(a) If Franchisee, or any person controlling, controlled by or under
common control with Franchisee, shall misuse the FFL Franchise System
or the Proprietary Assets, or any other names, marks, systems,
insignia, symbols or rights provided by FFL to Franchisee, or
otherwise materially impair the goodwill associated therewith or FFL's
rights therein, or if Franchisee shall use any names, marks, systems,
insignia or symbols not authorized by FFL.
(b) If Franchisee shall fail to remit any payments immediately when due to
FFL.
52
(c) If Franchisee shall fail to submit to FFL any financial or other
information required under this Agreement.
(d) If Franchisee shall violate any service xxxx, trademark, or copyright
of FFL.
(e) If Franchisee shall fail to operate the Franchise in accordance with
the Operations Manuals and/or other manuals, or shall fail to conform
to the specifications and standards of FFL, or shall fail in any other
way to maintain FFL's standards of quality in the operation of the
Franchise.
(f) If Franchisee shall purport to effect any transfer other than in
accordance with the terms and conditions hereof.
(g) If Franchisee submits any false or substantially inaccurate report to
FFL.
(h) If an imminent threat or danger to public health or safety results
from the maintenance or operation of the Franchise.
(i) If Franchisee makes, or has made, any misrepresentation to FFL in
connection with obtaining the Franchise, or in connection with
operating the Franchise or using the Proprietary Assets hereunder.
(j) If Franchisee fails to obtain FFL's prior written approval or consent
as expressly required by this Agreement.
(k) If Franchisee defaults in the performance of any obligation under this
Agreement not covered by Subparagraphs 9.1(a) through 9.1(j) or
Subparagraphs 9.1(l) through 9.1(n), or any amendment or modification
to this Agreement, or any other agreement between Franchisee and FFL.
(l) If Franchisee ceases operations, or does not commence operations on or
before one hundred eighty (180) days from the date hereof, without the
written consent of FFL, for any reason.
(m) If Franchisee, or any person controlling, controlled by or under
common control with Franchisee, shall be adjudicated bankrupt; or if
Franchisee or any such person shall file or have filed against it a
petition in bankruptcy, reorganization or similar proceeding under the
bankruptcy laws of the United States; or if a receiver, permanent or
temporary, of the business, assets or property of Franchisee or any
such person, or any part thereof, is appointed by a court of competent
authority; or if Franchisee or any such person requests the
appointment of a receiver or makes a general assignment for the
benefit of creditors; or if a final judgment against Franchisee or any
such person in the amount of Five Thousand and No/100 Dollars
($5,000.00) or more remains unsatisfied of record for thirty (30) days
or longer; or if the bank accounts, property or receivables of
Franchisee or any such person are attached and such attachment is not
dismissed within thirty (30) days; or if execution is levied against
the business or property of Franchisee or any such person; or if suit
to foreclose any lien or mortgage against the Franchise, the premises
thereof or equipment thereon is instituted and not dismissed within
thirty (30) days.
53
(n) If Franchisee, or any person controlling, controlled by or under
common control with Franchisee, shall be convicted of violating any
law providing for criminal penalties and related to or adversely
affecting the operation of the Franchise, including crimes of moral
turpitude.
(o) Any unauthorized use of the Proprietary Software Package.
(p) Abandons or fails or refuses to actively operate the Franchise for two
(2) business days in any twelve (12) month period, unless the
Franchise has been closed for a purpose approved by FFL or due to
force majeure, or fails to relocate to approved premises within an
approved period of time following expiration or termination of the
lease for the premises of the franchise business.
(q) Continues to violate any health, safety or sanitation law, ordinance
or regulation or operates the Franchise in a manner that presents a
health or safety hazard to its customers or the public.
(r) Fails to satisfactorily complete FFL's training program.
9.2 If the cause for termination is correctable, Franchisee shall have the
right to correct such cause in a manner acceptable to FFL. All cause for
termination must be corrected prior to thirty (30) days following the date
of notice and if all such cause is timely corrected, then FFL shall
withdraw or suspend such termination.
9.3 Beginning with the second notice of termination for correctable cause, FFL
may notify Franchisee because of repeated cause for termination that a
subsequent repeat of a given cause in the succeeding twelve (12) month
period shall be a good cause for a final termination which is not
correctable.
9.4 Upon occurrence of any of the defaults set forth in Paragraph 9.1, FFL may,
without prejudice to any other rights or remedies contained in this
Agreement or provided by law or equity, terminate the Franchise.
Termination shall be effective thirty (30) days after written notice is
given by FFL to Franchisee of any of the defaults set forth in
9.1(a)(b)(c)(d)(e) and (k), if such defaults are not cured within the
thirty (30) day period. Termination shall be effective immediately when
written notice is given by FFL to Franchisee upon occurrence of any of the
defaults specified in Subparagraphs 9.1(f)- (j) and (l)-(r). Termination
shall be effective immediately and without notice upon occurrence of any of
the defaults specified in Subparagraphs 9.1(m) and (n). Franchisee
acknowledges and agrees that the provisions of paragraphs 8, 11, 12 and 14
through 17 shall survive the termination of this Agreement and that such
provisions shall remain in full force and effect for the time periods set
forth therein.
9.5 Upon termination of the Franchise for any reason, or upon expiration of the
term of the Franchise, Franchisee agrees as follows:
(a) To pay immediately to FFL the full amount of all sums due.
(b) To cease immediately to use the FFL Franchise System and the
Proprietary Assets, or any confusingly similar names, marks, systems,
insignia, symbols or other rights, procedures or methods.
54
(c) To return to the Originals and Operations Manuals and all manuals,
plans, specifications, designs, records, data samples, models,
programs, materials, handbooks, drawings and other materials provided
to Franchisee by FFL.
(d) To cease immediately to hold itself out in any way as a franchisee of
FFL or to do anything which would indicate any relationship between it
and FFL.
(e) Immediately assign the business telephone number for the FFL center to
FFL. Franchisee hereby irrevocably appoints and designates FFL a
franchisee's attorney-in-fact to change any listed telephone numbers
related to the franchised business and to discontinue White Pages and
Yellow Pages listings in the event of the termination of this
Agreement. Franchisee is liable for all telephone charges incurred
prior to any such termination and FFL shall pay all charges and
listing costs subsequent to the termination.
9.6 Allow FFL or its designee, at its option, to sell as an agent all or any
part of Franchisee's center, including his/her tangible assets, at a price
to be determined by three (3) independent appraisers, one obtained by FFL,
one obtained by the franchisee, and the third chosen by the other two
appraisers. The average of the three appraisals will be the selling price.
Goodwill and other intangible assets are to be excluded from the
determination of selling price. On sale of the business, creditors of the
ex- franchisee shall be satisfied and the balance, if any, shall be paid to
the ex-franchisee. FFL shall have the discretionary right for a period of
six (6) months following termination to operate the center as an agent and
to be Franchisee's agent for sale of the business. If no bona fide offer is
received within such six (6) month period, then FFL may liquidate the
center and satisfy the creditors of the Franchisee and pay over any balance
remaining to Franchisee.
10. TRANSFER
10.1 The Franchise is personal to Franchisee. Franchisee shall not sell, assign,
transfer or encumber ("transfer") this Agreement or the Franchise, or any
interest in either, and shall not suffer or permit any such sale,
assignment, transfer or encumbrance to occur by operation of law or
otherwise, without the prior written consent of FFL.
Notwithstanding the foregoing, Franchisee may, solely for the convenience
of ownership, within ninety (90) days from the date hereof and without the
payment of any additional fees, transfer the Franchise to a corporation,
limited liability company, partnership, unincorporated association or
similar entity, the voting stock of or other ownership interest of which
shall be wholly owned by Franchisee. Prior to such transfer, Franchisee
shall supply to FFL a copy of the organizational documents of such entity,
execute a guaranty of the obligations of such entity in substantially the
form set forth on the signature page(s) hereof, and execute any other
transfer documents deemed reasonably necessary by FFL.
Franchisee may, with the prior written consent of FFL, and subject to the
requirements of this Section, transfer the Franchise to a corporation,
limited liability company, partnership, unincorporated association or
similar entity, the voting stock of or other ownership interest of which
need not be wholly owned by Franchisee but which shall be under the
"control" of the Franchisee within the Securities and Exchange Act of 1934
and the regulations thereunder. Prior to such transfer, Franchisee shall
supply to FFL a copy of the organizational documents of such entity, cause
all owners of such entity to execute a guaranty of the obligations of such
entity in substantially the form
55
set forth on the signature page(s) hereof, and cause all necessary parties
to execute any other transfer documents deemed reasonably necessary by FFL.
Franchisee agrees that (s)he shall not solicit prospective or existing
franchisees or employees of franchisees of FFL to become a business partner
of Franchisee without FFL's prior written consent. Franchisee and all
owners will guaranty and comply with all terms of this Agreement, both
monetary and non-monetary and be jointly and severally liable for any
breach of this Agreement. The performance of the terms of this Franchise
Agreement and the payment of any sums due shall be personally guaranteed by
Franchisee, its spouse and all owners and their spouses.
10.2 If Franchisee is a corporation, limited liability company, partnership,
unincorporated association or similar entity, the terms of this Paragraph
10 shall be deemed to apply to any sale, resale, pledge, assignment,
transfer or encumbrance ("transfer") of the voting stock of, or other
ownership interest in Franchisee, which would alone or together with other
related, previous, simultaneous or proposed transfers, result in a change
of "control" of Franchisee within the meaning of the Securities Exchange
Act of 1934 and the regulations thereunder.
10.3 Upon the death, disability or permanent incapacity of Franchisee, FFL shall
not unreasonably withhold its consent to the transfer of all of the
interest of Franchisee to a spouse, heirs or relatives, by blood or
marriage, whether such transfer is made by will or by operation of law,
provided that the requirements of this Paragraph 10 have been met. In such
event, no transfer fee shall be required to be paid. If Franchisee's heirs
do not obtain FFL's consent as prescribed herein, the personal
representative of Franchisee shall have one hundred eighty (180) days to
dispose of Franchisee's interest hereunder, which disposition shall be
subject to all the terms and conditions or transfers under this Agreement.
10.4 Franchisee agrees that the restrictions on transfer imposed herein are
reasonable and necessary to protect the Franchise, the FFL Franchise System
and the Proprietary Assets, as well as FFL's reputation and image, and are
for the protection of FFL, Franchisee and other franchisees.
10.5 Any transfer permitted by this Paragraph 10 shall not be effective until
FFL has received a completely executed copy of all transfer documents and
has consented in writing to the transfer and transferee has executed the
then-current form of FFL Franchise Agreement except that the term shall be
the time remaining on transferor's ten (10) year term.
10.6 FFL agrees not to unreasonably withhold its consent to a transfer by
Franchisee hereunder. Consent to a transfer otherwise permissible may be
refused unless:
(a) All obligations of Franchisee created by this Agreement, all ancillary
documents and any other Franchise Agreements are assumed by the
transferee;
(b) All monies owed to FFL by Franchisee have been paid (including, but
not limited to, the monthly royalty and any other royalties) and
Franchisee agrees to pay to FFL any amount less than the then-current
monthly royalty being paid by Franchisee which may be paid by the
transferee under the terms of its Franchise Agreement;
(c) Franchisee is not in default under this Agreement;
56
(d) The transferee satisfactorily completes the training required of new
franchisees on FFL's then- current terms prior to the date of
transfer;
(e) Franchisee satisfies FFL that the transferee meets all the
requirements of FFL for new franchisees, including, but not limited
to, requirements relating to good reputation and character, the
ability to operate a personal fitness center, business acumen,
financial strength and other business considerations;
(f) The transferee executes or, in appropriate circumstances, causes all
necessary parties to execute, FFL's then-current standard form of
Franchise Agreement for the Franchise and such other then-current
ancillary documents being required by FFL of new franchisees on the
date of transfer;
(g) Franchisee executes a general release in a form satisfactory to FFL,
of any and all claims against FFL and its officers, directors,
members, shareholders and employees, in their corporate and individual
capacities, including, without limitation, claims arising under
federal, state and local laws, rules and ordinances; and
(h) Franchisee or the transferee pays FFL a transfer fee in the amount of
Ten Thousand and No/100 Dollars ($10,000.00) plus all on-site travel
expenses reasonably required by FFL to cover FFL's reasonable costs in
effecting the transfer and in providing training and other initial
assistance to the transferee.
10.7 Franchisee may request assistance from FFL in locating a transferee for the
Franchise upon the following terms and conditions:
(a) At the time Franchisee requests FFL's assistance, Franchisee shall pay
to FFL the amount of Two Thousand Five Hundred and No/100 Dollars
($2,500.00) to cover the cost of advertising in addition to the
customary advertising then conducted by FFL;
(b) Franchisee shall pay to FFL a fee of Five Thousand and No/100 Dollars
($5,000.00) upon the completion of the transfer to cover salesperson
commissions;
(c) Franchisee's transferee shall be the next prospective franchisee from
Franchisee's Territory that makes an initial inquiry and purchases a
Franchise after the date on which Franchisee notifies FFL that it
desires FFL's assistance in locating a transferee;
(d) Franchisee shall remain current in all of its obligations under this
Agreement, including, but not limited to, the payment of the monthly
royalty.
(e) All the conditions of Section 10.6 shall be satisfied, including, but
not limited to, the payment by Franchisee or transferee of a transfer
fee in the amount of Ten Thousand and No/100 Dollars ($10,000.00); and
(f) Franchisee shall be available to meet with prospective franchisees at
mutually convenient times.
57
10.8 At least sixty (60) days prior to a proposed sale or transfer by Franchise
of fifty percent (50%) or more of the Franchise or its assets, (the
"Offered Property"), whether voluntarily or involuntarily undertaken,
Franchisee shall give written notice of such proposed sale to FFL. Said
notice shall set forth the name of the proposed purchaser, a description of
the offered property, all terms and conditions of the proposed sale, and
must be accompanied by a fully completed current FFL Transfer Packet,
including a fully executed Purchase and Sale Agreement. (The effectiveness
of the Purchase and Sale Agreement must be contingent upon FFL's waiver of
its right of first refusal as described in this section). Upon receipt of
the notice and other documents, the sixty (60) day notice period shall
commence. Within the sixty (60) day notice period, FFL may elect to
purchase the offered property on the same terms and conditions set forth
within the notice. In addition, within the sixty (60) day notice period,
FFL may notify Franchisee that FFL has elected to withhold approval of the
proposed transfer by providing the specific reasons for such action. FFL
may not unreasonably withhold approval. FFL shall not grant approval in the
event the proposed transferee does not agree to be bound by the terms and
conditions of the then-current Agreement for the balance of transferor's
terms or if the proposed transferee is otherwise unacceptable as a
franchisee. If FFL shall fail to respond to Franchisee's notice of intent
to transfer within the sixty (60) day period by approving or disapproving
the proposed transfer or by electing to purchase according to the terms and
conditions offered to the proposed transferee, Franchisee may then transfer
this franchise business in accordance with the terms of said notice.
10.9 This Agreement inures to the benefit of FFL, it successors and assigns, and
FFL shall have the right to transfer or assign all or any part of its
interest herein to any person or legal entity.
11. NON-COMPETITION; CONFIDENTIALITY
11.1 Franchisee, any persons controlling, controlled by or under common control
with Franchisee, shall not, without FFL's prior written consent:
(a) During the term of the Franchise, offer personal fitness training,
workshops or other programs, or sell educational materials involving
subject matters that are the same as, similar to or competitive with
FFL programs and materials, anywhere in Canada or the United States,
other than FFL programs and materials in the Territory.
(b) For a period of two (2) years following termination or expiration of
the Franchise, establish, assist, consult with, participate in or be
employed by any enterprise that is or plans to be engaged in the
Territory or within a twenty-five (25) mile radius of the boundaries
of the Territory in offering personal fitness training sessions,
meetings, workshops or other programs, or selling educational
materials, involving marketing and selling fitness training that is
the same as, similar to or competitive with the subject matters of FFL
programs or materials which Franchisee is entitled to sell pursuant to
this Agreement.
(c) During the term of the Franchise and at any time thereafter, use any
of the Proprietary Assets for any unauthorized purpose; use any
confusingly similar method, format, procedure, technique, slogan,
insignia, term, designation, design, diagram, promotional material or
course material; or cause or permit any facility or program to look
like, copy or imitate any facility or program operated or licensed by
FFL.
58
11.2 Franchisee, and persons controlling, controlled by or under common control
with Franchisee, shall at all times treat as confidential all manuals and
materials designated for use with the FFL Franchise System, and such other
information as FFL may designate from time to time for confidential use
with the FFL Franchise System (as well as all trade secrets, if any, and
confidential information, knowledge and know-how concerning the operation
of the Franchise that may be imparted to, or acquired by, Franchisee from
time to time in connection with this Agreement), and shall use all
reasonable efforts to keep such information confidential. Franchisee
acknowledges that the unauthorized use or disclosure of such confidential
information (and trade secrets, if any) will cause incalculable and
irreparable injury to FFL. Franchisee shall not, at any time, without the
FFL's prior written consent, disclose, use or permit the use (except as may
be required by applicable law or authorized by this Agreement) of such
information, in whole or part, or otherwise make the same available to any
unauthorized person or source. All information, knowledge and know how not
generally known about the FFL Franchise System, methods, standards,
specification, procedures and techniques, and such other information or
material as FFL may designate as confidential, shall be deemed confidential
for purposes of this Agreement, except information which Franchisee can
demonstrate came to its attention prior to disclosure thereof by the FFL,
or which is or has become a part of the public domain through publication
and communication by others. All manuals or materials designated for use
with the FFL Franchise System, and all confidential information (and trade
secrets, if any) shall at all times be deemed to be, and shall remain, the
sole property of FFL, and Franchisee shall acquire no rights, title or
interest therein by virtue of its authorization pursuant to this Agreement
to possess and use the same.
12. ACTUAL, AVERAGE, PROJECTED OR
FORECASTED FRANCHISE SALES, PROFITS OR EARNINGS
12.1 Due to the competitive nature of the business involved, successful
operations of the Franchise will primarily depend upon the best efforts,
capabilities and management abilities of the Franchisee and on efficient
operation of the franchised business as well as local marketing conditions.
Franchisee acknowledges, warrants and represents to FFL that no
representation has been made by FFL (or any employees, agents or
salesperson thereof) and relied upon by Franchisee as to the future or past
income, expenses, sales volume or potential profitability, earnings or
income of a FFL Franchise.
12.2 Any sales, profits or earnings disclosed are not furnished nor authorized
by FFL and should not be considered as the actual or potential sales,
profits or earnings that will be realized by any other franchise. FFL does
not represent that any franchise can expect to attain these sales, profits
or earnings.
12.3 FFL does not offer or utilize any projections of earnings or profits as an
inducement for the sale of Franchises. It is understood that Franchisee is
starting a new business and is assuming the financial risks attendant
hereto. Where FFL provides information requested by Franchisee relating to
typical costs of operation a FFL facility such as typical rents, typical
labor costs, typical equipment lease costs, etc., such information shall
not be construed as a representation or warranty relative to any future
sales, profits or earnings achievable by the Franchisee.
12.4 FRANCHISEE HEREBY ACKNOWLEDGES THAT FFL HAS MADE NO CLAIMS OR
REPRESENTATIONS WHATSOEVER REGARDING POTENTIAL EARNINGS FRANCHISEE MAY
ACHIEVE AS A FFL FRANCHISEE AND THAT WHILE FFL HAS OFFERED ASSISTANCE,
FRANCHISE HAS HAD FINAL, ULTIMATE APPROVAL OF THE SITE
59
SELECTED, LEASE EXECUTED AND OTHER DECISIONS CONCERNING THE FRANCHISE
PURCHASE, LOCATION AND OPERATION.
13. NOTICES
13.1 All notices hereunder shall be in writing and shall be duly given if hand
delivered or sent by registered or certified mail, postage prepaid, return
receipt requested, addressed:
(a) If to FFL, to:
Fitness For Life Franchise Corporation
0000 Xxxxxxx Xxxxx
Xxxxxx Xxxx, XX 00000
With a copy to:
Xxxx Xxxxx
0000 X. Xxxxxxx Xxxx
Xxxxxxx, XX. 00000
(b) If to Franchisee, to the address indicated on Page 1 of this
Agreement; or
(c) To such other address as FFL or Franchisee shall have specified in a
written notice given to the other party.
14. GOVERNING LAW; JURISDICTION
AND VENUE; ARBITRATION
14.1 Franchisee acknowledges and agrees that this agreement shall be deemed to
have been made and entered into in the State of Arizona, and shall be
governed by and construed in accordance with the laws of the State of
Arizona, except to the extent governed by the United States Trademark Act
of 1946 (Xxxxxx Xxx, 00 U.S.C., Sections 1051 et seq.).
14.2 Franchisee acknowledges that it has and will continue to develop a
substantial and continuing relationship with FFL at its principal offices
in the State of Colorado. Therefore, any action arising out of or relating
to this Agreement shall be commenced in any state or federal court of
general jurisdiction in the State of Arizona. Franchisee irrevocably
submits to the jurisdiction of such court and waives any objection it may
have to the jurisdiction or venue of such court.
14.3 Except where FFL seeks injunctive relief or any other provisional remedy
(e.g., replevin/repossession), every controversy, claim or dispute arising
out of or in connection with the negotiation, performance or
non-performance of this Agreement, including, without limitation, any
alleged torts and/or claims regarding the validity, scope and
enforceability of this Section, shall be solely and finally settled by
binding arbitration conducted in the locality in which the Franchise is
located and in accordance with the Arbitration Rules then in effect of the
American Arbitration Association ("AAA") or any successor organization, or
as otherwise agreed by the parties.
60
In the event of any controversy or claim, the parties shall first attempt
to resolve the matter through good faith, informal negotiations, including,
upon mutual agreement, non-binding mediation. If the parties are unable to
resolve the dispute, either party hereto may demand arbitration by written
notice to the other party ("Demand for Arbitration") [and to their local
AAA office]. Any Demand for Arbitration pursuant to this Section shall be
made within one (1) year from the date that the dispute arose or should
have been known to arise.
The parties shall mutually agree on one (1) arbitrator. If the parties
cannot so agree, any dispute shall be submitted to a single arbitrator
selected by the Arbitration Administrator from the panel of arbitrators. If
the Arbitration Administrator must chose an arbitrator, each party is
entitled to one (1) peremptory challenge of the arbitrator chosen, whether
it be with or without cause. The costs of arbitration; i.e., fees payable
to AAA and the arbitrator, are to be shared equally by the parties. Each
party shall be responsible for its own costs and attorneys' fees.
The arbitrator shall have full power to make such orders, rules and
regulations as he or she shall deem just and expedient in respect to any
procedure or matter involved in this arbitration, including, without
limitation, discovery procedures, ex parte relief, interim awards,
provisional remedies, temporary injunctive relief, injunctive relief or
orders for specific performance.
IT IS THE INTENT, AGREEMENT AND UNDERSTANDING OF THE PARTIES THAT NEITHER
PARTY SHALL RECEIVE, AND THE ARBITRATOR SHALL HAVE NO POWER TO AWARD, ANY
SUMS BY WAY OF PUNITIVE OR EXEMPLARY DAMAGES, LOST WAGES AND/OR PROFITS,
ATTORNEYS' FEES AND/OR COSTS, AND IN NO EVENT SHALL ANY MONETARY DAMAGES BE
RECOVERED BY A FRANCHISEE IN EXCESS OF THE AMOUNT OF THE FRANCHISE FEE AND
THE COSTS OF BUILDING OUT THE FFL CENTER.
The arbitrator shall follow the rules of evidence of the State of Arizona
relating to the trial of civil actions. The parties are free to mutually
waive or modify any evidentiary rule or procedure with the consent from the
arbitrator.
All parties shall mutually agree upon the scope and duration of discovery.
Should the parties be unable to agree, they shall submit a proposed
discovery plan or schedule to the arbitrator, who shall resolve such
dispute in his or her sole discretion.
The arbitrator shall, within thirty (30) days after the matter has finally
been submitted to him or her, render a written decision making specific
findings of fact and setting forth the reasons for the decision which shall
comply with the express terms of this Franchise Agreement.
Judgment on any award of the arbitrator shall be binding and may be entered
in any court having jurisdiction thereof. The parties intend that this
Agreement to arbitrate be valid, binding, enforceable and irrevocable. The
terms of this section shall survive the termination or expiration of this
Franchise Agreement. It is the intent of the parties that any arbitration
between FFL and Franchisee shall be limited to the individual claims of
either party and that no claim of any other party shall be subject to
arbitration in such proceeding on any basis whatsoever, whether by
consolidation, by class or representative principles, or otherwise.
61
The parties acknowledge that this provision fully expresses their agreement
and is for the purpose of avoiding lengthy, protracted and expensive
litigation. If any provision of this section is held to be unenforceable by
a court of competent jurisdiction, it is the intent of the parties,
consisting with public policy of the laws of the jurisdiction in which the
arbitration takes place, that those provisions be construed as written to
the fullest extent possible. Each covenant will be construed as independent
of any other covenant or provision of this Agreement. If all or any portion
of a covenant is held unreasonable or unenforceable by a court or agency
having valid jurisdiction in an unappealed final decision to which FFL is a
party, Franchisee will be bound by any lessor covenant subsumed within the
terms of this covenant that imposes the maximum duty permitted by law, as
if the resulting covenant was originally stated in this Agreement.
Franchisee's Initials: ____ ____
15. REMEDIES; WAIVERS AND CONSENTS
15.1 All rights and remedies of FFL and Franchisee enumerated in this Agreement
shall be cumulative and, except as specifically contemplated otherwise by
this Agreement, shall not exclude any other rights or remedies allowed at
law or in equity, and said rights and remedies may be exercised and
enforced concurrently.
15.2 If Franchisee withholds any monies owed to FFL in the absence of a court
order permitting the withholding of such monies, FFL shall be reimbursed by
Franchisee for all reasonable costs incurred in pursuing the collection of
the withheld monies. These costs shall include, but not be limited to,
court costs, reasonable attorneys' fees, reasonable value for FFL
employees' time, witness fees and travel expenses incurred by FFL.
15.3 No waiver by FFL or Franchisee of any term, covenant or condition, or the
breach of any term, covenant or condition of this Agreement to be kept or
performed by the other party shall constitute a waiver by the waiving party
of any subsequent breach of such term, covenant or condition or authorize
the breach of non-observance on any other occasion of the same or any other
term, covenant or condition of this Agreement. Subsequent acceptance by FFL
of any payments due to it hereunder shall not be deemed to be a waiver by
FFL of any preceding breach by Franchisee of any terms, covenants or
conditions of this Agreement. Whenever this Agreement requires FFL's prior
approval or consent, such approval or consent shall be obtained in writing.
FFL will also consider granting, in its sole discretion, other reasonable
requests individually submitted by Franchisee in writing for FFL's prior
waiver of any obligation imposed by this Agreement. FFL makes no warranties
or guarantees upon which Franchisee may rely, and assumes no liability or
obligation to Franchisee, by providing any waiver, approval, consent or
suggestion to Franchisee in connection with this Agreement, or by reason of
any neglect, delay or denial of any request therefore. Any waiver granted
by FFL shall be subject to FFL's continuing review, may subsequently be
revoked for any reason effective upon ten (10) days prior written notice,
and shall be without prejudice to any other rights FFL may have.
16. SEVERABILITY
16.1 If any provision of this Agreement or the application of any provision to
any provision or circumstance shall be determined to be invalid or
unenforceable, then such determination shall not
62
affect any other provisions of this Agreement or the application of such
provisions to any other person or circumstances, all of which other
provisions shall remain in full force an effect. It is the intention of FFL
and Franchisee that if any provision of this Agreement is susceptible of
two (2) or more constructions, one (1) of which would render the provision
unenforceable, then the provision shall have the meaning which render it
enforceable.
17. ENTIRE AGREEMENT
17.1 This Agreement constitutes the entire agreement between FFL and Franchisee
regarding the subject matter hereof, and supersedes all prior and
contemporaneous agreements between FFL and Franchisee regarding such
subject matter. No officer, employee, servant or agent of FFL or Franchisee
has been authorized to make any representation, warranty or other promise
not contained in this Agreement or the accompanying Offering Circular. No
amendment, change or variance from this Agreement shall be binding on
either party unless executed in writing by both parties.
17.2 Notwithstanding any law of the State of Arizona to the contrary, no
revision, termination or attempted waiver of any provision of this
Agreement shall be binding upon FFL or Franchisee unless in writing and
signed by FFL and Franchisee. Franchisee acknowledges, however, that FFL
may unilaterally revise the contents of the Originals and Operations
Manuals in accordance with Paragraph 7.3, and that any such revision shall
be binding on Franchisee.
18. JOINT AND SEVERAL OBLIGATIONS
18.1 If Franchisee consists of more than one (1) person, their liability under
this Agreement shall be deemed to be joint and several.
19. COUNTERPARTS; PARAGRAPH HEADINGS; PRONOUNS
19.1 This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original but all of which together shall constitute one
and the same instrument. The paragraph headings in the Agreement are for
convenience of reference only and shall not be deemed to alter or affect
any provision hereof. Each pronoun used herein shall be deemed to include
the other number and genders.
20. ACKNOWLEDGMENTS
20.1 Franchisee acknowledges that:
(a) It has conducted an independent investigation of the business
contemplated by this Agreement and recognizes that it involves
business risks making the success of the venture largely dependent
upon the abilities of Franchisee. FFL expressly disclaims the making
of, and Franchisee acknowledges that it has not received or relied
upon, any warranty or guarantee, expressed or implied, as to the
potential volume, profits or success of the business contemplated by
this Agreement.
(b) It is not relying upon any representations by FFL or its officers,
directors, shareholders, members, employees, agents or servants, about
the business contemplated by this Agreement,
63
that are contrary to the provisions of this Agreement, any related
agreements or the accompanying Offering Circular.
(c) It has received, read and understood this Agreement, any related
agreements and the accompanying Offering Circular; FFL has fully and
adequately explained the provisions of each to its satisfaction; and
FFL has accorded ample time and opportunity to consult with advisors
of its own choosing about the potential benefits and risks of entering
into this Agreement.
(d) It is aware of the fact that other franchisees of FFL may operate
under different forms of agreements and, consequently that FFL's
obligations and rights with respect to its various franchisees may
differ materially in certain circumstances.
(e) No representation or statement has been made by FFL (or any employee,
agent or salesperson thereof) and relied upon by Franchisee regarding
the anticipated income, earnings and growth of FFL or the FFL
Franchise System, or the viability of the business opportunity being
offered hereunder.
(f) The covenants not to compete set forth in this Agreement are fair and
reasonable, and will not impose any undue hardship on Franchisee,
since Franchise has other considerable skills, experience and
education which afford Franchise the opportunity to derive income from
other endeavors.
(g) Notwithstanding anything to the contrary in this Agreement, in the
event any valid, applicable law or regulation of a competent
governmental authority having jurisdiction over this Agreement or the
parties hereto shall limit FFL's rights as to the termination or
renewal hereunder or shall require longer notice periods than those
set forth herein, this Agreement shall be deemed amended to conform to
the requirements of such laws and regulations, but in such event the
provisions of this Agreement thus affected shall be amended only to
the extent necessary to bring it within the requirements of the law or
regulation. FFL may reduce the scope of any covenant in this Agreement
without Franchisee's consent, effective immediately upon its receipt
of written notice, and Franchisee must comply with any modified
covenant.
(h) The individuals executing this Franchise Agreement on behalf of
Franchisee represent and warrant that the signatures listed below
constitute all of the individuals, partners, limited partners,
members, directors, officers and/or shareholders of Franchisee
necessary to bind Franchisee and that they have read, understand and
consent to be bound by all of its terms.
64
21. EFFECTIVE DATE
21.1 This Agreement shall be effective as of the date it is signed by FFL.
DATED: ________________ 2002
FITNESS FOR LIFE FRANCHISE CORPORATION
INC., an Arizona corporation
By:______________________________
Its: President
Franchisee:
---------------------------------
---------------------------------
65
EXHIBIT A
To be determined.
66
EXHIBIT B
1. One (1) Originals Manual
2. One (1) Operations Manual
3. List of Required Equipment which is not supplied by Franchisor
Life Fitness Cross Trainer 9500 HR
Life Fitness Recumbent Stationary Bike 9500 RHR
Life Fitness Treadmill 9100 Vectra 1850 w/210# Vectra
Horizontal Rack DB Vectra Extra Bar Kit Parabody DB Rack
(vertical) Parabody DB Rack (horizontal) Parabody weight tree
(ST) Parabody Hip Sleds Parabody 4x6 Mats (3) Chrome DB's
(3,5,8,10,12,15,20) Pro-style DB's (25,30,35,40,45,50,60)
Olympic E-Z Curl Olympic 310 set Olympic 45# Plates Pro-style
Barbells (20,25,30,35) ProMaxima Power Rack (Optional)
Software Needed:
BSDI Publisher PT Edition
Ohio Distinctive Software
Day-Timer Organizer
Microsoft Office
67
APPENDIX A
THIS APPENDIX WILL SERVE AS AN ADDENDUM TO THE FRANCHISE AGREEMENT FOR USE IN
THE STATE OF MINNESOTA.
DISCLOSURES REQUIRED UNDER MINNESOTA LAW
"Minn. Stat. 80C.21 and Minn. Rule 2860.4400J prohibits us from requiring
litigation to be conducted outside Minnesota. In addition, nothing in the
offering circular agreement can abrogate or reduce any of your rights as
provided for in Minnesota Statutes, Chapter 80C, or your rights to any
procedure, forum, or remedies provided for by the laws or the
jurisdiction."
"Withrespect to franchises governed by Minnesota law, the franchisor will
comply with Minn. Stat. Sec. 80C. 14, Subds. 3, 4 and 5 which require,
except in certain specified cases, that a franchisee be given 90 days
notice of termination (with 60 days to cure) and 180 days notice for non-
renewal of the franchise agreement."
Minn.Rule Part 2860.4400J. prohibits a franchisee from waiving his rights to a
jury trial or waiving his rights to any procedure, forum, or remedies
provided for by the laws of the jurisdiction, or consenting to liquidated
damages, termination penalties or judgement notes.
Minn.Rule 2860.4400D. prohibits requiring a franchisee to assent to a general
release.
-----------------------------------------
Franchisee Signature
----------------
Date
68
