For a City Publications franchise, what role must the Franchisee fulfill within the Controlled Entity?

WHEREAS, Franchisor has developed, and is continuing to develop, a System identified by the trademark, "CITY PUBLICATIONS", relating to the establishment and operation of direct mail advertising businesses referred to as "CITY PUBLICATIONS Businesses"; and

WHEREAS, the distinguishing characteristics of the System include uniform standards and procedures for business operations; distinctive processes, procedures and strategies for the sale, design, production and distribution of Card Decks; market and territory analysis; customer development and service techniques; uniform standards and specifications for Card Deck advertising copy, graphics and print quality; ongoing development of mailing data; technical assistance; and ongoing research and development; and

WHEREAS, Franchisor grants franchises to qualified persons and business entities to own and operate a single CITY PUBLICATIONS Business under the System and using the Marks; and

WHEREAS, Franchisee desires to operate a Franchised Business, has applied for a franchise and such application has been approved by Franchisor in reliance upon all of the representations made therein; and

WHEREAS, Franchisee understands and acknowledges the importance of Franchisor's high and uniform standards of quality, operations and service and the necessity of operating its Franchised Business in strict conformity with Franchisor's System.

NOW, THEREFORE, Franchisor and Franchisee, intending to be legally bound, agree as follows:

SECTION 1. DEFINITIONS

Whenever used in this Agreement, unless there is something in the subject matter or context inconsistent therewith, the following words and terms shall have the respective meanings ascribed to them as follows:

A. Grant

In consideration of the royalties paid to Franchisor by Franchisee throughout the term hereof, Franchisor hereby grants to Franchisee, and Franchisee undertakes and accepts, upon the terms and conditions herein contained, the right, license and privilege to operate one (1) CITY PUBLICATIONS Business under the System and Marks. Subject to zoning and local ordinances, the Franchised Business may be operated or administered from any location. Franchisee is not required to obtain Franchisor's approval of any site, or to obtain a store front or commercial space, for the operation of the Franchised Business. If Franchisee establishes a commercial business location, any lease for the location must contain a provision entitling Franchisor, or its nominee, to assume such lease upon Franchisee's default of said lease.

So long as this Agreement is in force and effect and Franchisee is not in default under any of the terms hereof, Franchisor will neither establish, nor license another to establish or operate, a CITY PUBLICATIONS Business within the geographic area identified in Exhibit A to this Agreement (the "Exclusive Territory"). The Exclusive Territory granted to Franchisee shall consist of approximately one hundred thousand (100,000) homes of an appropriate market value and shall be defined by zip codes. Demographics will be based upon the most recent available U.S. Census data at the time the Exclusive Territory is designated. Franchisee is required to confine its distribution of Card Packs to Franchisee's Exclusive Territory.

Franchisee may solicit for Card Pack advertisements outside of the Exclusive Territory so long as such advertisements are to be directed to consumers residing or situated within the Exclusive Territory. All activity to solicit advertising from individual business owners or other business entities having operations or sites in multiple franchise territories shall be reserved for Franchisor.

Franchisee acknowledges that the reputation and goodwill of the CITY PUBLICATIONS System is based upon offering high quality services and products and the satisfaction of its customers. Accordingly, Franchisee shall offer for sale and use at the Franchised Business only the types of services and products that Franchisor from time to time approves, and which are not thereafter disapproved, and shall not offer for sale or sell or provide any other category of services or products unless approved in writing by Franchisor. Franchisor shall notify Franchisee of services and products which are authorized in the Manual and subsequent revisions to the Manual.

The parties recognize that the success of the Franchise System is dependent upon the best efforts of each franchisee in its Exclusive Territory. Franchisee must generate one 50,000 circulation card pack in the first mailing zone as defined within the territory for the first nine months; each consecutive year thereafter, franchisee must generate at least four 50,000 circulation cards packs in each zone. Beginning of the fourth year, Franchisee must generate at least five 50,000 circulation cards packs in each zone. If franchisee fails to do the required five mailings, Franchisee owes Franchisor $2,500 per zone for each mailing missed. If Franchisee fails to pay that amount upon receipt of billing for same, Franchisor can terminate this Agreement.

Franchisee is solely responsible for the maintenance of the website for the Franchised Business. Franchisor may (but is not required to) include at the CITY PUBLICATIONS website an interior page containing information about the Franchised Business. If Franchisor includes such information on the CITY PUBLICATIONS website, Franchisor may require Franchisee to prepare all or a portion of the page, at Franchisee's expense, using a template that Franchisor provides. All such information shall be subject to Franchisor's approval prior to posting. Franchisor retains the sole right to market on the Internet, including all use of websites, domain names, URL's, linking, meta-tags, marketing, auction sites, e-commerce and co-branding arrangements. Franchisee may be requested to provide Franchisor content for Franchisor's Internet marketing and shall be required to follow Franchisor's Intranet and Internet usage rules, policies and requirements. Franchisor retains the sole right to use the Marks on the Internet, including on websites, as domain names, directory addresses, search terms, meta-tags, and in connection with linking, marketing, cobranding and other arrangements, as well as social media and any digital marketing platform, Franchisor retains the sole right to approve any linking or other use of the CITY PUBLICATIONS website. Franchisee may not establish a presence

Franchisee covenants that, except as otherwise approved in writing by Franchisor, neither Franchisee nor any partner(s), officer(s), director(s), member(s), executives, professional staff or sales staff or the spouses of any of the foregoing shall, during the term hereof, either directly or indirectly, for itself or through, on behalf of or in conjunction with, any person, persons, partnership, corporation, limited liability company or other entity:

• 1. Own an interest in, manage, operate, be employed, in a sales or management capacity, by, or act as a consultant to any Competitive Business anywhere;
• 1. Initiate any action to hire, or attempt to hire for any other employer, any person who is employed by Franchisor or employed by any other franchisee of the CITY PUBLICATIONS System, or

Franchisee acknowledges that the restrictive covenants contained in Section 17 are essential elements of this Agreement

and that without their inclusion, Franchisor would not have entered into this Agreement. Franchisee agrees that each of the terms set forth herein, including the restrictive covenants, is fair and reasonable, and are reasonably required for the protection of Franchisor and the Franchise System.

Source: Item 23 — RECEIPT (FDD pages 39–129)