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EXHIBIT 10.28
MASTER LICENSE AGREEMENT
THIS MASTER LICENSE AGREEMENT ("Agreement") is entered into as of
____________________________________, 1996, by and between Bally Total Fitness
Corporation, a Delaware corporation ("Licensor"), and Complete Wellness
Centers, Inc., a Delaware corporation ("Licensee").
RECITALS:
A. WHEREAS, Licensor owns and operates a number of health club
facilities throughout the United States of America (collectively, the "Clubs");
B. WHEREAS, Licensor and Licensee desire to have Licensee develop and
manage complete wellness centers offering physical and occupational therapy,
chiropractic and outpatient medical treatment within certain mutually agreed
upon Clubs for the purposes set forth in Section 10 below (collectively, the
"Centers"); and
C. WHEREAS, Licensor and Licensee desire to enter into this Agreement
to document the relationship between the parties with respect to the licensing,
from time to time, of a specified area within certain Clubs to Licensee for use
as a Center and to consolidate future licensing arrangements between the
parties all upon the terms and conditions set out below.
WITNESSETH:
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements of Licensor and Licensee hereinafter set forth and other good and
valuable consideration and intending to be legally bound hereby, Licensor and
Licensee hereby agree as follows:
1. RIGHT TO DEVELOP THE CENTERS. Subject to the terms and conditions
herein set forth, Licensor hereby agrees to grant to Licensee during the term
of this Agreement a license revocable in accordance with the terms of this
Agreement (collectively and individually, "License") to develop, occupy and
manage Centers in those certain areas (collectively and individually, the
"License Area") located in available sites which are offered by Licensor and
accepted by Licensee located within such Clubs as Licensor and Licensee shall,
from time to time, agree upon at which time a description of such License Area
(which shall consist of an area containing between 1,500 and 2,000 square feet)
and its location within the Club for each License granted hereunder shall be
placed on Exhibit "A" attached hereto and made a part hereof. Exhibit A shall
be amended from time to time as set forth in this Agreement. The description
set out on Exhibit A is for the convenience of the parties only. Licensor
shall have the right, at its cost and expense, to relocate from time to time
any License Area to another reasonably comparable area within the applicable
Club provided that such relocation shall be made in consultation with Licensee.
This License does not grant Licensee any possessory right to the License Area
or the Clubs. Prior to the granting of
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any individual License, Licensee shall be given the opportunity to inspect the
proposed License Area and agrees to accept the same "AS IS" with no
modifications by Licensor required.
2. TERM. Unless earlier terminated as set out herein, the initial
term of this Agreement shall commence on the date this Agreement shall have
been executed by the last of the parties hereto and shall expire on the fifth
(5th) anniversary thereof. At the expiration of the initial term, the term
shall automatically be extended for additional one (l)-year periods (not to
exceed five (5) such one (l)-year extensions) unless either party gives the
other written notice of its election to terminate this Agreement, which notice
must be given at least four (4) months prior to the date of the next automatic
extension and which termination will be effective as of the expiration of the
initial term or the then current automatic extension, period, as the case may
be; provided, however, if as of such expiration date the term bf any License
has not yet expired, then the terms of this Agreement shall continue in full
force and effect with respect to such Licenses until all such Licenses have
expired. For purposes hereof, "Term" shall mean the initial term as same may
be extended pursuant to the terms hereof. As used herein, the term 'License
Year" shall mean and refer to each consecutive full twelve (1 2) calendar month
period during the Term of, the Agreement, commencing on the first day of the
Term of the Agreement. Unless earlier terminated as set out herein, each
License hereunder shall be for a period (a) commencing upon the earlier to
occur of (i) the date which is sixty (60) days after the Permits pertaining to
construction are issued and (ii) commencement of business in the License Area
(the "Rent Commencement Date") and (b) ending five (5) years thereafter;
provided, however, that Licensee shall be subject to and bound by all of the
terms of this Agreement commencing as of the earliest of the date Licensee
takes possession of, applies for building permits for, or begins any
construction on the applicable License Area or on the date of grant as
evidenced by the amendment of Exhibit A to include the applicable License Area.
An individual License will automatically and immediately terminate upon
Licensor's (or any of its subsidiaries', affiliates' or franchisees') ceasing
to operate the applicable Club or when the lease or other possessory agreement
therefor terminates and Licensor shall give notice to Licensee of the happening
of any such event.
3. LICENSEFEE. Licensee shall owe Licensor a monthly license
fee("License Fee") in an amount equal to $10 per square foot per year during
the first l2 months from and after the Rent Commencing Date. Thereafter, the
License Fee will be the greater of $ 1 5 per square foot per year or 1 2.5 % of
the Cash Receipts (as defined below) of the Licensee's fees which are derived
from the Center which shall be payable as follows:
(a) Licensee agrees that it will furnish to Licensor, not
later than the 1 5th day following the end of each calendar month during the
Term of this Agreement a true, accurate and correct statement of Cash Receipts
and xxxxxxxx for products, services and transactions made at, upon or from the
Center by Licensee during such calendar month, which has been certified as true
and correct by an officer of Licensee (the "Statement").
(b) Concurrently with each Statement, Licensee shall pay to
Licensor an amount equal to 12.5% of all Cash Receipts for transactions made
in, upon, or from the License Area by Licensee which are for the period covered
by the Statement. Notwithstanding anything herein to
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the contrary, in no event shall any License Fee for any month be in an amount
less than $.84 per square foot during the initial 12-month term or $1.25 per
square foot thereafter.
(c) Notwithstanding anything herein to the contrary, there
shall be no abatement, apportionment or suspension of the License Fee except as
set forth in Section 7 below.
(d) Commencing at least one (1) month prior to each
anniversary of this Agreement, the parties shall renegotiate in good faith and
mutually determine the percentage used to calculate the License Fee payable
hereunder for the immediately following year. If the parties are unable to
agree upon a new License Fee percentage, then the License Fee percentage in
effect at any time renegotiation commenced shall remain; provided, however, the
parties shall continue to be obligated to meet every year to attempt in good
faith to renegotiate such percentage.
Licensee agrees to provide Licensor with quarterly and annual
financial statements covering the operations hereunder. Such statement is due
by the 30th day after the end of each calendar quarter or fiscal year, as the
case may be. For the purpose of ascertaining the amounts payable as the
License Fee, Licensee agrees to prepare and keep at its main office for a
period of not less than three (3) years following the end of each License Year,
adequate and accurate records of all xxxxxxxx for products or services, Cash
Receipts and other transactions on or from the Center by Licensee. Licensee
further agrees to keep at its main office for at least three (3) years
following the end of each License Year, the gross income, sales, or any other
Municipal, State or Federal tax returns with respect to said License Years and
all pertinent original records. Pertinent original records shall include, but
not be limited to: (i) sales journals, (ii) bank statements, (iii) monthly
ledgers, and (iv) all other records normally examined by an independent
certified accountant pursuant to generally accepted accounting principles in
connection with auditing Licensee's xxxxxxxx, revenues and receipts. Licensor
at all reasonable times during business hours, upon reasonable prior notice,
shall have the right, at Licensor's expense, through any accountant or auditor,
to inspect, examine and make copies of all or any of Licensee's books and
records aforesaid relating to Licensee's xxxxxxxx and Cash Receipts which
pertain to the Centers. Licensor agrees to keep all information relating to
Licensee and Licensee's Statements in strict confidence (except that such
information may be disclosed to Licensor's landlord, prospective purchasers,
mortgagees and taxing authorities, if necessary, or if required to be disclosed
pursuant to any legal proceedings, governmental requests or similar process).
Upon reasonable prior notice and during normal business hours,
Licensor may at any time (but not more frequently than twice each License Year)
have an audit made of the foregoing records of Licensee and to the extent
Licensee has or can reasonably obtain same, all records associated with the
operation of the Center, by an accountant to be selected and paid for by
Licensor. Licensee shall render all reasonable assistance to such accountant
and provide access to all such records which may be necessary to conduct a full
and complete audit of Licensee's xxxxxxxx and Cash Receipts. If it is
determined that the actual xxxxxxxx and Cash Receipts for any period covered by
a Statement exceeds the amount thereof reported in said Statement by three
percent (3%) or more, (i) Licensee shall pay all of Licensor's out-of-pocket
costs of said audit and (ii) it shall be an Event of Default pursuant to
Section 21. Licensee agrees to keep such records relating to any License Year
available for audit for a period of at least three (3) years following the
close
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of said License Year. Any sums due for such period as a result of such audit
shall constitute additional License Fees due and shall be paid by Licensee
within ten (10) days of notification of any such deficiency and, if such audit
establishes that Licensee's Statement for such License Year was understated by
three percent (3%) or more and Licensee has not shown, to Licensor's reasonable
satisfaction, that Licensee has undertaken reasonable measures to prevent the
reoccurrence of such understatement, Licensee shall also pay Licensor a charge
equal to ten percent (10%) of the additional License Fees due as liquidated
damages and not as a penalty. Failure to make an audit in any License Year
shall not prejudice Licensor's right to examine prior License Years' records
and collect additional License Fees due for such License Year. With respect to
any License Year in which the accountant conducting a Cash Receipts audit
determines in good faith that Licensee has failed to maintain the hereinabove
specified records (except for any records destroyed or lost due to events
beyond Licensee's control), Licensee agrees to pay to Licensor the cost of such
audit but such payment by Licensee shall not preclude Licensor from seeking
remedies to require specific performance from Licensee pertaining to Cash
Receipts records.
As used herein, the term "Cash Receipts" means the total amount of all
cash payments (including cash payments received as finance charges and/or
interest) received by Licensee in each License Year or partial License Year
during the term of this Agreement in respect of (i) all transactions made by
Licensee in, upon or from the Center in each month, less the total of (ii) all
checks returned unpaid from the drawee bank, or refunds made in the normal or
usual conduct of Licensee's business, provided that the transaction resulting
in such return or refund was included in Cash Receipts initially, and also,
less (iii) any sales tax, use tax, excise tax, retailer's occupational tax or
similar tax which is collected by Licensee from its customers and paid to any
State, Federal or local authority provided that said taxes are separately
charged for. In computing Cash Receipts, all transactions of any type on
credit (whether extended by Licensee or by any other party such as, without
limitation, credit card issuers) shall be included in Cash Receipts.
The License Fee shall be paid to the address set out in Section 20
hereof to the attention of the Accounts Receivable Department.
Licensor and Licensee acknowledge and agree that the License Fee is
consistent with the value of the License Area for general commercial purposes
as determined in an arm's-length transaction and that the License Fee has not
been determined in a manner that takes into account the volume or value of any
referrals or business otherwise generated between Licensor and Licensee, if
any, or reflects any additional value that any party would attribute to the
License Area as a result of its proximity or convenience to Licensor.
All costs and expenses (including telephone charges) incurred by
Licensee to operate and promote its business shall be paid in a timely manner
by Licensee except that general utility costs and routine facility maintenance
(exclusive of maintenance of the License Area which shall remain Licensee's
obligation) shall be paid by Licensor; provided, however, in the event the
Center generates any waste material which cannot be disposed of in the ordinary
course of Licensor's garbage disposal, Licensee shall be responsible for
disposal of its own waste at its sole cost and expense.
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4. PERMITS AND INDEMNITY. Upon receipt of Licensor's and any required
third party's written consent in accordance with Section 5 below, Licensee
shall, at its sole cost and expense, promptly and diligently apply for and
obtain all governmental and other applicable licenses, permits and approvals
(the "Permits") required for the construction, installation, existence, repair,
use, operation and removal of the Center and shall indemnify, defend and hold
Licensor harmless from and against any and all costs, liabilities, claims,
causes of action and expenses, including attorneys' and other professional
fees, arising wholly or in part, directly or indirectly, from (a) any failure
of Licensee to obtain such licenses, permits and approvals or (b) any violation
of any applicable law, ordinance, code, rule or regulation or directive of any
governmental authority or agreement by which the Club may be bound relating to
the construction, installation, existence, repair, removal, use or operation of
the Center. Licensee agrees to promptly provide Licensor with copies of all
such licenses, permits and approvals. In the event Licensee is unable to
obtain all Permits necessary for the construction of the License Area or
operation of the Center within ninety (90) days after the initial application
therefor, either party shall have the right to terminate the applicable License
upon notice to the other. Licensor shall reasonably cooperate with Licensee's
efforts to obtain Permits at Licensee's sole cost and expense.
5. APPROVAL OF PLANS; QUALITY AND MANNER OF WORK. Licensee shall not
commence any alteration of the License Area until final plans and
specifications therefor have been approved in writing by Licensor and all
necessary Permits have been obtained. Licensee shall provide Licensor with
plans and specifications for work it intends to do within the License Area
within thirty (30) days after the parties have agreed upon the selection of
such License Area and Licensor agrees to either approve or disapprove (with
reasons therefor) such plans within sixty (60) days after receipt thereof. In
the event any third party consent is required for the proposed alterations and
improvements, any consent given by Licensor shall be conditional upon receiving
such third party's consent and Licensor agrees to seek such consent reasonably
promptly and Licensee shall cooperate with Licensor"s efforts to obtain such
third party's consent. Upon Licensee's request, Licensor shall provide copies
of such third party consents. Licensee agrees to reimburse Licensor for its
reasonable out-ofpocket expenses incurred in having third parties review
Licensee's plans and specifications or provide consent. Promptly after
Licensor approves the plans and specifications for the Work, Licensee shall
promptly and diligently apply for and pursue all necessary Permits and upon
receipt thereof, Licensee shall promptly and diligently alter the License Area
at its sole cost and expense in accordance with the plans and specifications
approved BY Licensor and in accordance with all applicable laws, ordinances,
codes, rules and regulations, the Permits and the directives of all
governmental authorities having jurisdiction thereover and all agreements by
which the License Area may be bound. All construction work performed by or on
behalf of Licensee in connection with this Agreement (the "Work") shall be
diligently completed, shall conform in material and workmanship to that of the
Club, shall use new materials and shall be in compliance with all building
codes and regulations and all insurance requirements of Licensor's and
Licensee's respective insurance companies. Notwithstanding anything contained
herein to the contrary, all Work to the applicable License Area must be
completed by Licensee within sixty (60) days after issuance of all necessary
Permits; subject, however, to reasonable extensions necessitated by acts of
god, acts of war and labor activities unrelated to performance of Work at the
Center.
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Any additional Work shall be in accordance with the terms and
conditions of this Section 5 and must receive Licensor's prior written consent.
Licensee shall not have the right to make any improvements or alterations which
are structural in nature or which affect any portion of the Club (except the
License Area) or the exterior of the Club in which it is located without
Licensor's prior written consent which may be withheld in Licensor's sole and
absolute discretion. Licensee covenants and agrees that it shall use all
reasonable efforts to minimize any interference with the operation of the Club
and the Club's patrons use and enjoyment thereof during the performance of the
Work and shall, if directed by a Licensor representative, work only during
those hours which are less disruptive to the operation of the Club provided any
such decrease in work hours shall be added to the period of time which Licensee
has to complete the Work.
Licensee will use its best efforts to assure that all Work shall be
performed by personnel who will not, either by the conduct of their work or by
their presence on the License Area, cause or lead to, directly or indirectly,
any strike, picketing, handbilling, labor dispute, work slowdown or boycott
affecting the License Area, the Club, the building in which same is located, or
any part thereof; and Licensee shall indemnify, defend and hold Licensor
harmless from and against any and all loss, damage, cost, expense, liability,
claim and cause of action resulting from or arising out of any such strike,
picketing, handbilling, labor dispute, work slowdown or boycott. Without
limiting Licensor's rights and remedies, in the event any personnel performing
any portion of the Work shall cause or lead to, directly or indirectly, any
strike, picketing, handbilling, labor dispute, work slowdown or boycott
affecting the License Area, the Club, the building in which same is located, or
any part thereof, Licensee shall use its best efforts to cause such personnel
to permanently leave the License Area within six (6) hours after Licensor's
oral or written request therefor.
6. NON-INTERFERENCE. In constructing, installing, repairing,
maintaining, using, operating or removing the Center, Licensee shall not
interfere, and will not permit Licensee's clients, agents or employees to
interfere, with access to or the use and operation of the License Area or the
Club and shall cause each of them to observe all rules and regulations of each
Club.
7. MAINTENANCE AND REPAIRS. Licensee, at its sole cost and expense,
shall promptly repair any and all damage caused to the Club (including the
License Area) by the construction, installation, repair, maintenance,
existence, use or operation of the Center and shall exercise its best efforts
to keep the License Area free of all debris resulting therefrom. Licensee
shall, at its sole cost and expense, maintain the Center in a good, clean,
sightly and safe condition and shall promptly make all repairs and replacements
from time to time necessary to keep the Center in such condition. In the event
Licensor ceases operating any Club due to the making of repairs, alterations or
remodeling or for any other reason, then upon notice (and Licensor shall give
ten (10) days' prior notice if reasonably practicable), Licensee will close the
applicable Center during the time the Club is closed and the License Fee shall
xxxxx proportionally during such period when the Club is so closed.
8. PAYMENT FOR CONSTRUCTION. Licensee shall pay in full for all labor
and materials supplied or furnished in connection with the construction,
installation maintenance, repair and
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removal of the Center and in connection with repairs to the License Area
required to be made by Licensee hereunder, and shall, upon request, promptly
furnish to Licensor such evidence of the payment thereof as Licensor shall
reasonably request. Licensee shall procure performance and labor and material
payment bonds, naming Licensor as co-obligee, in an amount, form and substance
and with a company satisfactory to Licensor in its reasonable discretion, to
insure performance and completion of all construction done by Licensee at the
Club.
9. LIENS. If any mechanics or other lien shall at any time be filed
against the License Area by reason of any labor, services or materials
performed or furnished, or alleged to have been performed or furnished, to or
for the benefit of Licensee or in connection with the Center, Licensee shall
cause the same to be discharged of record or bonded to the satisfaction of
Licensor within ten (1 0) days after notice of the filing thereof. Licensee
shall indemnify, defend and save Licensor harmless from and against any and all
liability and expense, including attorneys' and other professional fees,
arising from or related to, wholly or in part, directly or indirectly, any
labor, services or materials performed or furnished or alleged to have been
performed or furnished, to or for the benefit of Licensee or in connection with
the Center, regardless of whether such work or material has improved or
increased the value of the License Area.
10. USE AND OPERATION OF THE CENTER. The Center shall be used solely
as a physical, occupational therapy, chiropractic and outpatient medical center
managed by Licensee during the business hours of the Club pursuant to the terms
of this Agreement. Licensee shall manage the Center and shall be responsible
for its day-today operations. Licensee shall operate the Center as a business
separate and distinct from the Club and shall be solely responsible for all
legal, contractual, and business obligations and operations of the Center. The
operations of the Center shall not interfere with the operation of the Club
except in a de minimus way. Clients of the Center shall have the right to use
the facilities of the Club (including the bathrooms and showers), but only when
accompanied by a Center staff member, and only to the extent such use is part
of the treatment or therapy administered by the Center. Clients of the Center
shall have no priority or preference over the members of the Club with respect
to the use of any Club facilities or equipment and shall not be permitted to
use any babysitting facilities, racquetball courts or tennis courts. Licensee
shall at all times, at its sole cost and expense, maintain its equipment and
facilities in a clean, wholesome, and sanitary condition. Licensee shall cause
each Center to be operated in each License Area during the entire term of this
Agreement with due diligence and efficiency. Licensee. shall require all of
Licensee's clients and/or invitees and the patients, clients and/or invitees of
anyone claiming through Licensee to sign a waiver of liability regarding their
use of the Club which is acceptable to Licensor.
11. RULES AND REGULATIONS. Licensee and its employees, agents,
contractors, and clients shall observe all rules and regulations of the Club
and shall park their vehicles only in those areas designated by Licensor, if
any. All clients, patients, agents, contractors, subcontractors,
representatives, employees, and invitees of Licensee, and the use and operation
of the Center, shall be subject to such rules and regulations as Licensor may
from time to time promulgate, including, but not limited to, the rules and
regulations of the Club and restrictions on the hours of use, and rules and
regulations imposed upon Licensor by its landlord or any other agreement by
which the Club may be bound so long as those rules and regulations which are
promulgated by
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Licensor do not unreasonably interfere with Licensee's use of the Center. Upon
request from Licensee, Licensor shall provide copies of all rules and
regulations then in effect at the Club.
12. ADVERTISING. Licensee may generally advertise and promote its
business within the Club, at its own cost and expense after receiving
Licensor's prior approval, which Licensor shall have no obligation to grant;
provided, however, Licensee shall have the right to install signage within the
License Area and directional signage which may be visible within the Club
subject to Licensor's reasonable consent as to size and location. Licensor
shall have the right to approve, in advance, any and all advertising or
promotion of the Center which refers to the Licensor's facility, its name, or
trademarks or service marks or which is disseminated to Licensor's members.
Licensee shall have the right to approve in advance, any and all advertising or
promotion of the Club which refers to Licensee's name, trademarks, or service
marks. Licensee and Licensor shall make all efforts to protect the other's
rights in any trademarks, service marks, or copyrighted material used in any
advertisement or promotion of the Center or the Club. Licensee shall not issue
any press release (broadcast or print) relating to this Agreement or the
License arising hereunder without the prior written approval of Licensor.
13. WAIVER OF LIABILITY. Notwithstanding anything contained herein to
the contrary, neither Licensor nor its agents, employees or representatives
shall be responsible or liable to Licensee, Licensee's or its sublicensee's
clients, patients, agents, contractors, subcontractors, representatives,
employees or invitees or to anyone claiming by, through or under Licensee, and
Licensee hereby waives all claims for damage or injury to persons or property,
loss of business and any and all other losses or damages sustained by Licensee
or any person claiming by, through or under Licensee, resulting, wholly or in
part, directly or indirectly, from the construction, installation, existence,
use, operation and/or removal of the Center except if caused by the gross
negligence or willful misconduct of Licensor, its agents or employees.
14. COMPLIANCE WITH LAWS. Licensee, at its sole cost and expense,
shall construct, develop, manage and cause the Center to be operated in a
manner that complies with (a) all federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations and ordinances
affecting the Center and the operation thereof, including, without limitation,
any of the foregoing which require the licensing or accreditation of physical
therapists and other personnel, or which relate to physical therapy or other
medical services, or the Americans with Disabilities Act, or the Occupational
Safety and Health Act, whether or not any such statutes, laws, rules, orders,
regulations or ordinances which may be hereafter enacted involve a change of
policy on the part of the governmental body enacting the same, and (b) all
rules, orders and regulations of the National Board of Fire Underwriters and
Licensor's fire insurance rating organization or other bodies exercising
similar functions in connection with the prevention of fire or the correction
of hazardous conditions.
15. INDEMNIFICATION.
(a) Licensee shall indemnify, defend and save Licensor
harmless from and against any and all claims, actions, demands, damages,
liabilities and expenses, including attorneys' and other professional fees, in
connection with loss of life, personal injury and/or damage to
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property arising from or related to, wholly or in part, directly or indirectly,
the construction, installation, existence, use, operation and/or removal of the
Center or any part thereof, and any activities of Licensee's or its
sublicensee's clients, patients, agents, contractors, subcontractors,
representatives, employees and invitees in the Club or on or about the License
Area except to the extent caused by the gross negligence or willful misconduct
of Licensor, its agents, employees or contractors.
(b) Licensor shall indemnify, defend and save Licensee
harmless from and against any and all claims, actions, damages, liabilities and
expenses, including reasonable attorneys' and other professional fees, in
connection with loss of life, personal injury and/or damage to property to the
extent caused by the gross negligence or willful misconduct of Licensor, its
agents, employees or contractors (but specifically excluding the patients,
invitees, employees, contractors and agents of Licensee or of anyone claiming
through Licensee) in the Club (exclusive of the License Area) except to the
extent caused by the acts, omissions or negligence of Licensee, its agents,
employees or contractors.
16. INSURANCE. Licensee shall obtain and keep in force, at its sole
cost and expense and shall ensure that its sublesees maintain in full force and
effect, the following: (a) comprehensive general liability insurance, including
insurance against assumed or contractual liability, with respect to the Center,
with a combined single limit of not less than One Million Dollars ($1,000,000)
per occurrence, Two Million Dollars ($2,000,000) aggregate and Three Million
Dollars ($3,000,000) in umbrella coverage with respect to bodily injury,
personal injury, death and property damage, and shall name Licensor as an
additional insured on such coverage; (b) worker's compensation insurance as
required by law; and (c) professional liability insurance coverage in such
coverage amounts and with such insurance companies as shall be acceptable to
Licensor in its reasonable discretion; provided, however, that in no event
shall such professional liability insurance coverage be less than One Million
Dollars ($ 1,000,000) per occurrence; provided, further, however, if pursuant
to the second paragraph of Section 25 below Licensee has an independent
operator provide the services described in Section 10 at the Center, such
independent operator and not Licensee shall maintain the professional liability
insurance coverage required pursuant to this subsection (c). If Licensee
obtains a claims-made professional liability insurance policy hereunder,
Licensee shall purchase and maintain, at Licensee's sole cost and expense,
extended coverage protection (commonly known as "tail coverage") insurance for
not less than a period of twenty-one (21) years after the earlier of either the
termination or expiration of this Agreement to assure protection against claims
made after Licensee's professional liability insurance coverage under this
Agreement has expired. A certificate of each such policy, together with a
photocopy of each policy, shall be deposited with Licensor prior to the
commencement of construction or operation of the Center. Such certificates
shall state that such coverages shall not be amended, modified, cancelled or
reduced without at least thirty (30) days written notice to Licensor. Prior to
the expiration or termination of any such policy, Licensee shall deliver to
Licensor a certificate of the new or renewal policy, together with a copy of
the rider covering the Center.
17. TERMINATION. At Licensor's election, all alterations,
improvements and fixtures (excluding Licensee's trade fixtures, personal
property and equipment) shall become the property
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of Licensor and remain in each License Area upon the expiration or earlier
termination of the applicable License in which event they shall all be in good
condition, reasonable wear and tear excepted; provided, however, Licensor shall
have the right to notify Licensee that it will require the License Area to be
restored to the condition it was in immediately prior to the performance of
Licensee's Work in which event Licensee shall, within ten (10) days after the
expiration or termination of the applicable License, remove all items required
by Licensor to be removed, restore the License Area to its original condition,
repair any damage caused by such removal, remove all debris caused thereby and
leave the License Area broom-clean. Notwithstanding anything contained herein
to the contrary, the terms of this Section 17 shall survive the expiration or
earlier termination of this Agreement or the applicable License. At the
expiration or earlier termination of each License, Licensee shall promptly
surrender all keys for the License area to Licensor.
18. SELF-HELP. If Licensee shall fail to perform any obligation
required to be performed by Licensee pursuant to this Agreement, then, in
addition to and not in lieu of any other right or remedy available to Licensor,
Licensor may perform any such obligation, on behalf and at the sole cost and
expense of Licensee, and the reasonable cost of such performance, together with
interest thereon from the date of such expenditure, shall be payable by
Licensee to Licensor upon demand. Said interest shall be at the rate of twelve
percent (1 2%) per annum or the highest interest rate permitted by applicable
law, whichever is less.
19. SURVIVAL OF OBLIGATIONS. Notwithstanding anything to the contrary
contained herein, the expiration of the term of this Agreement, whether by
lapse of time or otherwise, shall not relieve Licensor or Licensee from their
obligations accruing prior to the expiration of the term.
20. NOTICES. Any notice, request, demand, approval or consent given
or required to be given under this Agreement shall be in writing and shall be
deemed to have been given on the third (3rd) business day following the date on
which the same shall have been mailed by United States registered or certified
mail, return receipt requested, or one (1) business day following deposit with
a nationally recognized overnight courier service, with all postal charges
prepaid, addressed as follows:
To Licensor: Bally Total Fitness Corporation
0000 X. Xxxx Xxxx Xxxxxx Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Director of Property Management
With a copy to:
Bally Total Fitness Corporation
0000 Xxxx Xxxx Xxxx
Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
11
To Licensee: Complete Wellness Centers, Inc. 000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000 Attention: President
With a copy to:
Xxxxxxx Xxxxx, Esq.
000 Xxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxx Xxxxx, XX 00000
Either party may, at any time, change its address for the above purposes by
sending a notice to the other party in accordance with the terms hereof, but
such notice of change of address shall only be effective upon receipt.
21. DEFAULT. If Licensee shall fail to pay the License Fee or any sum
of money under this Agreement within ten (10) days after notice the same is
due; or if Licensee shall fail to perform any other obligation of Licensee to
be performed under the terms of this Agreement, and such failure shall continue
for more than ten (10) days after notice thereof, then each such breach shall
be deemed an event of default hereunder ("Event of Default"). The occurrence
of each of the following shall also each be considered an Event of Default
hereunder: (a) any misrepresentation of fact made by Licensee including, but
not limited to, any misrepresentation with respect to the status of Licensee as
an independent contractor; (b) if Licensee (i) makes an assignment for the
benefit of creditors, (ii) becomes insolvent, (iii) is declared a bankrupt,
(iv) has voluntarily filed a Petition in Bankruptcy or is the subject of any
involuntary Petition in Bankruptcy, or (v) files a Petition for the appointment
of a receiver for Licensee's business, provided in the event of an involuntary
filing same is not removed within ninety (90) days; (c) if any lawsuit is
brought against Licensor by virtue of Licensee's use or occupancy of the
License Area and Licensee fails to cause such lawsuit to be dismissed within
one hundred twenty (1 20) days or fails to post a bond sufficient to protect
the interests of Licensor; (d) Licensee's (i) failure to initially open any
Center for business within one hundred twenty (1 20) days after the receipt of
all approvals, third party consents and Permits; (e) vacation, abandonment, or
desertion of any License Area; (f) failure to operate its business in any
License Area or failure or refusal to maintain the business hours as set out
herein; provided, however, it shall not be a default if such closure is due to
a fire or other casualty whereby the License Area cannot reasonably be operated
and provided, further, Licensee thereafter repairs and re-opens the License
area as diligently as possible; or (g) Licensee's understatement of the License
Fee for any License by hnore than ten percent (1 0%) in any License Year
provided it shall not be a default if Licensee shows that such understatement
was the result of obvious clerical error and reasonable measures have been
taken to prevent its reoccurrence.
Upon the occurrence of an Event of Default, Licensor shall have the
right to immediately terminate the applicable License involved in any such
Event of Default by giving written notice thereof to Licensee in which event:
(A) the term of such License shall expire and terminate with the same force and
effect as though the date of such notice was the date fixed for the expiration
of
12
such License term and all rights of Licensee pursuant to such License shall
expire and terminate and Licensor shall be entitled to recover from Licensee,
as liquidated damages and not as a penalty, a sum equal to $1 5,000 for each
defaulting License; (B) Licensor shall have the right to declare due and
payable and xxx for and recover all License Fees and all other sums due and
owing Licensor regarding such License as of such termination date; (C) Licensor
shall have the right to recover all reasonable legal fees and other expenses
incurred by Licensor in connection with the enforcement of any of Licensor's
rights and remedies hereunder; and/or (D) Licensor shall be entitled to such
other remedies as may be available to it at law or in equity.
Upon the occurrence of the greater of (1) five (5) Events of Default
or (11) Events of Default pursuant to at least five percent (5%) of the then
existing Licenses, a "Master Default" shall be deemed to have occurred and
Licensor shall have the right to any or all of the following remedies: (aa) to
immediately terminate this Agreement; (bb) to immediately terminate any or all
Licenses granted hereunder by giving written notice thereof to Licensee in
which event (X) the term thereof shall expire and terminate with the same force
and effect as though the date of such notice was the date fixed for the
expiration of such License term and all rights of Licensee pursuant to such
License shall expire and terminate and Licensor shall be entitled to recover
from Licensee, as liquidated damages and not as a penalty, a sum equal to
$10,000 for each License so terminated; (Y) Licensor shall have the right to
declare due and payable and xxx for and recover all License Fees and all other
sums due and owing Licensor as of such termination date(s); and/or (Z) recover
all reasonable legal fees and other expenses incurred by Licensor in connection
with the enforcement of any of Licensor's rights and remedies hereunder; and/or
(cc) to such other remedies as may be available to it at law or in equity.
22. NO WAIVER. No waiver of any covenant or condition or of the breach
of any covenant or condition to be performed by either party shall be taken to
constitute a waiver of any subsequent breach of such covenant or condition by
such party nor to justify or authorize the non-observance on any other occasion
of the same or of any other covenant or condition of this Agreement. The
acceptance of the License Fee by Licensor at any time when Licensee is in
default under any covenant or condition of this Agreement shall not be
construed as a waiver of such default or of Licensor's right to terminate this
Agreement on account of such default, nor shall any waiver or indulgence
granted by either party to the other party be taken as an estoppel against the
party granting such waiver or indulgence.
23. NO INTEREST IN PROPERTY: NO JOINT VENTURE. This Agreement is
intended to grant a license only and is not intended nor shall it be construed
as granting any interest or estate in the License Area or the Club. This
Agreement is not intended to create, nor shall it be construed to create, a
joint venture between Licensor and Licensee. All trademarks, trade names,
service marks and copyrights of Licensor are to remain its property and are not
at any time to be utilized, distributed, copied, or otherwise employed or
acquired by Licensee except with Licensor's prior written approval. Licensee
acknowledges that the name, reputation, and goodwill of Licensor constitute
valuable and unique assets. All trademarks, trade names, service marks and
copyrights of Licensee are to remain its property and are not at any time to be
utilized, distributed, copied, or otherwise employed or acquired by Licensor
except with Licensee's prior written approval. Licensor acknowledges that the
name, reputation, and goodwill of Licensee constitute valuable
13
and unique assets. Licensee represents and warrants that neither it nor any
individual, corporation, partnership or other entity which is controlled by, or
under common control with Licensee, or which owns 50% or more of the equity of
the Licensee, is controlled by or under common control with, or will become
controlled by or under common control with, any person who has been convicted
of or granted immunity from prosecution for any crime relating to moral
turpitude.
24. NO OBLIGATION TO MAKE REFERRALS. Licensor shall have no
obligation to Licensee to refer any persons to Licensee or the Center for
treatment, consultation, or any otherreason. Licensee shall have no obligation
to refer any persons to Licensor for membership in the Club or any other
reason.
25. ASSIGNMENT. Licensor desires Licensee to manage the Center based
upon Licensee's reputation and marketing ability, thus Licensee shall not
assign this Agreement nor the license granted herein, in whole or in part, nor
sublicense any part or all of it without the prior written consent of Licensor,
which consent Licensor shall not unreasonably withhold. Licensee agrees that
the withholding by Licensor of its consent of such proposed assignment or
sublease will not be deemed "unreasonable" if, among other reasonable criteria
to be examined by Licensor: (a) the net worth of the proposed subtenant or
assignee is materially less than that of Licensee; (b) the proposed subtenant
or assignee does not have a business reputation or standing in the community as
good as that of Licensee (or Licensee's principals); (c) the intended use of
the License Area by subtenant or assignee is different from the use permitted
by Section 10 above; (d) the use of the License Area by the proposed subtenant
or assignee would violate any laws, ordinances or governmental regulations; (e)
the use of the License Area by the proposed subtenant or assignee would violate
any other agreements or leases affecting the Club; (f) the assignment or
sublease i@ for less than all of the License Area; or (g) an Event of Default
has occurred under this Agreement or any License. Any change in ownership or
management of Licensee, including the sale or transfer of all or a substantial
portion of the capital stock of Licensee (except that Licensee shall have the
right to "go public" and have its stock publicly traded on a U.S. stock
exchange) or all or any substantial portion of the assets of Licensee, shall
constitute an unpermitted assignment of this Agreement.
Notwithstanding the foregoing, Licensee shall have the right to assign
this Agreement or any License to any corporation, venture or entity provided
that Licensee is and remains the managing partner thereof or holds a
controlling interest therein or is a wholly-owned subsidiary of Licensee. Any
assignment or sublease shall require that the proposed assignee shall enter
into a written agreement with Licensor pursuant to which the assignee assumes
all of the obligations imposed on the Licensee under this Agreement. No
assignment or sublease shall relieve Licensee of or effectuate a release or
assignment of Licensee's liabilities under the terms of this Agreement and
Licensee shall in all events, be and remain liable to the Licensor throughout
the entire Term hereof and of the Licenses. Furthermore, Licensee has the
right to transfer certain of its duties and obligations under this Agreement to
an independent operator provided that (i) an officer of Licensee certifies in
writing to Licensor that Licensee has made an informed determination that each
such independent operator is qualified to operate a Center and has not been
convicted of (or pled nolo contendere to) any felony or any act involving moral
turpitude, and (ii) Licensee obtains
14
the prior written consent of Licensor to each such transfer, which consent
Licensor may give or withhold in its sole and absolute discretion, and (iii)
Licensee remains primarily liable to Licensor for the performance of all of its
obligations and duties under this Agreement and any License. If an approved
independent operator no longer acts as an independent operator of Licensee, for
whatever reason, Licensee will continue to be obligated to perform under all of
the terms and conditions of this Agreement. Licensee shall require that a
sufficient number of fully trained and competent personnel are employed for the
operation of each Center.
26. SUBORDINATION AND TERMINATION RIGHT.
(a) If any Club is leased or subleased to Licensor as tenant
or subtenant or if Licensor's operation of any Club is subject to any
management or other operating agreement, then this Agreement shall be subject
and subordinate to each and every term and condition of any such lease,
sublease and/or each and every other agreement which binds Licensor or pertains
to the Clubs. Upon request, Licensor shall provide to Licensee copies or an
abstract of relevant provisions of such agreement.
(b) In the event Licensor subleases or assigns its lease for
any Club after the commencement of a License for such Club, Licensor will so
notify Licensee. Licensor (or its successor, sublessee or assign) shall then
have thirty (30) days to notify Licensee that it is terminating the License for
the applicable License Area in which event Licensee shall be entitled to
receive from such terminating entity an amount equal to one hundred percent
(100%) of the then unamortized cost of that portion of Licensee's approved
alterations and improvements made hereunder (which shall not include furniture,
trade fixtures, equipment, merchandise or other personal property installed in
the License Area) for which Licensee has provided Licensor with paid invoices
plus the sum of $1,000. The cost of such approved alterations and improvements
shall be amortized on a straight line basis over the initial term of the
applicable License.
(c) If after the second full License Year, Licensee's Cash
Receipts for any Center is less than $250,000 for any six (6)-month period
covered by two of Licensee's consecutive quarterly financial statements,
Licensor shall have the right to terminate the License for such Center;
provided, however, Licensor agrees that it shall not exercise such termination
right so long as Licensee shall pay License Fees for such Center in an amount
equal to the License Fees that would be owed if the Cash Receipts for such
Center for such two (2) consecutive quarters were at least $250,000. The right
to terminate the License for such Center shall be exercised by Licensor giving
written notice to Licensee within sixty (60) days after Licensor's receipt of
Licensee's quarterly financial statement setting forth the Cash Receipts for
such quarter, and shall be effective ninety (90) days after such notice. In
the event any Club is closed pursuant to Paragraph 7 above, the $250,000 amount
specified in this paragraph shall be prorated based upon the duration of such
closure.
27. CONFIDENTIALITY. During the term of this Agreement, Licensee may
receive, have access to, or learn of documents, records and information of a
confidential and proprietary nature to Licensor, all of which would not be
otherwise readily available to Licensee except for the licenses created by this
Agreement. Licensee acknowledges that such information and similar data
15
is not generally known to the trade, is of a confidential nature, and is an
asset of Licensor. Any information or data which becomes known to the public
through no fault of Licensee, is disclosed to Licensee by a third party who is
not under any obligation of confidentiality to Licensor, or which Licensee has
knowledge of through no fault of its own prior to disclosure by Licensor of
such information or data to it, shall not be considered confidential under this
section. Licensee agrees, on behalf of itself and its directors, officers,
shareholders, employees and operators that it shall not disclose, give, sell or
otherwise transfer or make available, directly or indirectly, such confidential
information and data to any third party. Licensee shall limit the
dissemination of such confidential information or data within its organization
to those individuals whose duties justify the need to know such information and
shall require those individuals to protect and preserve the confidential and
proprietary nature of such information and data in accordance with this
section. Upon request of Licensor at any time, and upon the termination or
expiration of this Agreement for any reason, Licensee shall promptly return all
such confidential information and data, and any copies or Reproductions
thereof, and work papers containing portions thereof, to Licensor at Licensee's
expense, and Licensee agrees to make no further use of such confidential
information and data. Licensee agrees that, if its agreements in this section
are breached, a remedy in law may be inadequate and, therefore, without
limiting any other remedy available at law or in equity, an injunction,
specific performance or other forms of equitable relief or money damages or any
combination thereof shall be available to Licensor.
28. GOVERNING LAW. This Agreement shall be governed by and
interpreted according to the laws of the State of Illinois with respect to
contracts entered into therein and to be performed therein.
29. XXXXXXXX'X CONSENT. Licensor and Licensee agree that the
effectiveness of a License is contingent upon obtaining the consent thereto of
Licensor's landlord or sublandlord, if required, pursuant to Licensor's lease
or other agreement by which the License Area may be bound. Licensor shall
exercise reasonable diligence to obtain the consent of such landlord.
30. CAPTIONS. The paragraph captions and headings of this Agreement
are for convenience of reference only and in no way shall be used to construe
or modify the provisions of this Agreement.
31. BINDING EFFECT. By its execution hereof, the individual executing
this Agreement on behalf of the parties hereof represents that he or she is
duly authorized to do so and that all proceedings required to authorize the
execution hereof have been duly and properly taken and that this Agreement
constitutes a legal, valid, binding, and enforceable obligation of such party.
This Agreement and the covenants and conditions herein contained shall inure to
the benefit of and be binding upon the parties hereto, their respective heirs,
executors, personal representatives, successors and assigns.
32. WHOLE AGREEMENT. This Agreement shall constitute the entire
agreement between the parties and supersedes all prior and contemporaneous
negotiations and/or representations by either party hereto. This Agreement may
not be varied, modified or amended except by an agreement in writing duly
signed by the parties.
16
33. JOINT AND SEVERAL. If Licensee is a partnership or other business
organization, the members of which are subject to personal liability or if
Licensee is two (2) or more individuals or entities, the liability of each such
member, individual or entity, shall be deemed joint and several.
IN WITNESS WHEREOF, the parties hereto have executed this Li6ense as
of the date first above written.
LICENSOR:
BALLY TOTAL FITNESS CORPORATION
By:
-----------------------------------------------
Its: Senior Vice President
Date: , 1996
----------------------------------
LICENSEE:
COMPLETE WELLNESS CENTERS, INC.
By:
------------------------------------------------
Its:
Date: , 1996
-------------------------------------
17
EXHIBIT A
Location of License
Club License Area Grant Date
---- ------------ ----------
19
