Under what condition do paragraphs 3 and 4 of the City Wide non-compete agreement not apply regarding ownership of equity securities?

According to City Wide's 2025 Franchise Disclosure Document, paragraphs 3 and 4 of the non-compete agreement do not apply if a franchisee owns less than a five percent beneficial interest in the outstanding equity securities of any corporation registered under the Securities Exchange Act of 1934. This means that a franchisee can invest in publicly traded companies without violating the non-compete agreement, as long as their ownership stake remains below this threshold.

This exception allows City Wide franchisees to diversify their investments without being restricted by the non-compete clause. The Securities Exchange Act of 1934 requires companies to register with the SEC and disclose financial information, providing a level of transparency and regulation for these investments. This clause protects the franchisee's ability to participate in the stock market to a limited degree.

However, it is important to note that this exception only applies to publicly traded companies registered under the Securities Exchange Act of 1934. Ownership in private companies or other unregistered entities would still be subject to the restrictions outlined in paragraphs 3 and 4 of the non-compete agreement. Franchisees should carefully consider these limitations when making investment decisions to ensure they remain in compliance with the franchise agreement.