What specific actions are considered a failure to comply with requirements concerning quality and performance for a City Wide franchise?

not participate in the National Business Development Program or is unable to fully service a National Account in its Designated Territory, CITY WIDE, an affiliate, or a third party CITY WIDE designee (including another CITY WIDE franchisee) may provide the services necessary to fulfill a National Account in Franchisee's Designated Territory and Franchisee will not be entitled to any compensation in connection with the transaction; and

SECTION 7. Standards of Operation

Franchisee shall comply with all requirements contained in this Agreement, the Operating Manual and other written policies CITY WIDE supplies to Franchisee. Mandatory specifications, standards, operating procedures and rules CITY WIDE prescribes from time to time in the Operating Manual or otherwise communicated to Franchisee in writing will constitute provisions of this Agreement as if fully outlined in this Agreement. Any required standards set forth herein, the Operating Manual exist to protect CITY WIDE's interests in the System and the Marks and not to establish any control or duty to take control over those matters that are reserved to Franchisee. All references to this Agreement will include all such mandatory specifications, standards and operating procedures and rules. Franchisee's failure to comply with requirements set forth in this Agreement concerning quality and performance will constitute a material breach of and cause for termination of this Agreement. Franchisee will comply with the entire System including, but not limited to:

• 7.1 Commencing Operations. Franchisee will commence operation of the Franchised Business not later than one hundred twenty (120) calendar days after the execution and acceptance of this Agreement. Franchisee shall apply to all appropriate government authority for such permits, licenses and/or approvals which may be required to operate Franchisee's Franchised Business within the Designated Territory for Franchisee's Franchised Business within fourteen (14) calendar days after execution and acceptance of this Agreement. Such permits, licenses, and/or approvals may include, but not be limited to, a general contractor's license. Prior to the opening of the Franchised Business, Franchisee will have complied with all CITY WIDE's pre-opening standards and specifications. If for any reason Franchisee fails to commence operation as provided in this Agreement, such failure will be considered a default and CITY WIDE may terminate this Agreement.
• 7.2 Permits and Certification. Before commencing operation of the Franchised Business, Franchisee will, at Franchisee's expense, furnish CITY WIDE, for its approval, the following:
• 7.2.1 Copies of all permits and certifications as may be required for the lawful operation of the Franchised Business, together with copies of any building inspection reports and certifications from all governmental authorities having jurisdiction over the Designated Territory and the Franchised Business showing that all necessary permits have been obtained and that all requirements for operation have been met.
• 7.3 Condition and Appearance of Office; Right of Inspection. Franchisee will maintain the condition and appearance of the Office of the Franchised Business consistent with CITY WIDE standards, as set forth in the Operating Manual and otherwise in writing. Franchisee will maintain such premises as CITY WIDE may from time to time require to maintain or improve the appearance and efficient operation of the Franchised Business, including, but not limited to, replacement of worn out or obsolete fixtures and signs, and repair of the Location. If any time in CITY WIDE's judgment the general state of repair or the appearance of the premises of the Franchised Business or its equipment, fixtures, or signs does not meet CITY WIDE's standards, CITY WIDE will so notify Franchisee and specify the action Franchisee must take to correct such deficiency. If Franchisee fails or refuses to initiate within thirty (30) calendar days after receipt of such notice, and continues to fail to implement a bona fide program to complete any required maintenance, CITY WIDE will have the right, in addition to all other remedies, to enter upon the premises of the Franchised Business and effect such repairs, painting, maintenance or replacements of equipment, fixtures or signs on Franchisee's behalf and Franchisee will repay CITY WIDE the entire costs on demand. If Franchisee fails to make any such payments or remedy operational deficiencies, such failure will constitute a material breach of this Agreement and CITY WIDE may terminate this Agreement. Except for

those repairs that would constitute a public health or safety hazard, or are required by any governmental agency, any such remodeling requirement will be imposed only in a nondiscriminatory manner upon (i) all comparably situated CITY WIDE franchisees and (ii) all comparably situated CITY WIDE-owned businesses; provided further that any capital expenditure otherwise required under this Agreement in excess of Twenty Five Thousand Dollars ($25,000) will only be required to be made by Franchisee if sufficient time remains in the Initial or any Successor Terms to fully amortize or depreciate such expenditure under the Internal Revenue Code ("Code"), as amended, and all applicable regulations under the Code.

• 7.4 Cleanliness and Safety. Franchisee must maintain and operate the Franchised Business in a good, clean, and safe manner in compliance with standards prescribed by CITY WIDE.
• 7.5 No Duplication or Disclosure. Franchisee is prohibited from duplication of the CITY WIDE System and Software and will not disclose or cause to be disclosed any part of the CITY WIDE System or Operating Manual.
• 7.6 No Material Alterations. Franchisee will make no material alterations to the premises of the Franchised Business nor will Franchisee make material replacements of or alterations to the equipment, fixtures, furniture, or signs of the Franchised Business without the prior written approval by CITY WIDE.
• 7.7 Uniform Standards. Franchisee recognizes that it is essential to the proper marketing of the System and the designated service and product lines and to the preservation and promotion of their reputation and acceptance by the public at large, that uniform standards of quality of services, products and merchandise be maintained. Franchisee will promote, offer, sell and dispense all merchandise, products, trademarked product and service lines as prescribed by CITY WIDE as part of the System. Franchisee acknowledges that failure to abide by this provision will result in diffusing the CITY WIDE public image to the detriment of all franchisees using the System.
• 7.8 Pricing. CITY WIDE may, as it deems advisable from time to time, advise or offer guidance to Franchisee with respect to prices for products or services offered for sale by the Franchised Business, the charging of which, in CITY WIDE's judgment, constitutes good business practice. Franchisee is not obligated to accept any such advice or guidance, and Franchisee has the sole right to determine prices to be charged by the Franchised Business, if Franchisee's prices are consistent with the CITY WIDE concept.
• 7.9 Approved Suppliers and Approved Supplies. From time to time, CITY WIDE will provide to Franchisee either in the Operating Manual or posted on CITY WIDE'S internal website ("CW You") a list of approved manufacturers, suppliers and distributors authorized for the Franchised Business ("Approved Suppliers List") and a list of approved inventory, products, fixtures, furniture, equipment, signs, stationery, supplies, and other items or services necessary to operate the Franchised Business ("Approved Supplies List"). From time to time as set forth in the Operating Manual, CITY WIDE may designate suppliers on the Approved Suppliers List as required suppliers ("Required Suppliers") from whom you must purchase inventory, products, services or other items and services. Currently, on the list of Required Supplier is ADP Payroll Services which you are required to use for your payroll services. You may not use payroll services from any other provider. Such lists will specify the manufacturer, supplier and distributor and the inventory products, fixtures, furniture, equipment, signs, stationery, supplies and services which CITY WIDE has approved to be carried or used in the System. CITY WIDE may revise the Approved Suppliers List and Approved Supplies List from time to time at its sole and absolute right. Such approved lists will be submitted to Franchisee as CITY WIDE deems advisable. If Franchisee proposes to use at the Location any equipment or any brand of product which is not then approved by CITY WIDE as meeting its minimum specifications and quality standards, or to purchase any product from a supplier that is not then designated by CITY WIDE as an Approved Supplier on the Approved Suppliers List, Franchisee

must first notify CITY WIDE and must, upon request by CITY WIDE, submit samples and such other information as CITY WIDE requires for examination and testing or to otherwise determine whether the proposed supply or supplier meets CITY WIDE's specifications and quality standards. CITY WIDE will not consider requests by Franchisee or any affiliate of Franchisee to become Approved Suppliers. A charge not to exceed the reasonable cost of CITY WIDE's inspection and evaluation plus the actual cost of any test performed by CITY WIDE will be paid to CITY WIDE by Franchisee or the supplier. CITY WIDE shall notify Franchisee whether it approves or disapproves of the proposed supply or supplier. If CITY WIDE approves the proposed supply or supplier, Franchisee may purchase that supply or use that supplier in connection with the Franchised Business, unless CITY WIDE notifies Franchisee that such approval has been revoked. CITY WIDE reserves the right, at its option, to re-inspect the facilities and products of any supplier of an approved item and to revoke its approval of any item which fails to continue to meet any of CITY WIDE's criteria.

• 7.10 Other Products and Items.

Source: Item 22 — CONTRACTS (FDD page 65)