EXHIBIT 10.2
COST CUTTERS FAMILY HAIR CARE(R)
DEVELOPMENT AGREEMENT
BETWEEN
THE BARBERS, HAIRSTYLING FOR MEN & WOMEN, INC.
000 Xxxxxxxxxx Xxxxxxxxx X.X.
Xxxxxxxxxxx, Xxxxxxxxx 00000
(000) 000-0000
Fax: (000) 000-0000
AND
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Name(s) of FRANCHISEE
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Xxxxxx
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Xxxx Xxxxx Zip Code
( )
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Area Code Telephone
FRANCHISED AREA:
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DATE OF DEVELOPMENT AGREEMENT:
____________________, ____
COST CUTTERS FAMILY HAIR CARE(R)
DEVELOPMENT AGREEMENT
INDEX
Article Title Page
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1 FRANCHISED AREA.....................................................2
2 TERM OF DEVELOPMENT AGREEMENT; RIGHT OF FIRST REFUSAL...............2
3 EXCLUSIVE TERRITORY FEE; INITIAL FEES; DEVELOPMENT SCHEDULE.........3
4 OTHER OBLIGATIONS OF FRANCHISEE.....................................6
5 CONFIDENTIAL OPERATIONS MANUAL AND OTHER INFORMATION................8
6 COST CUTTERS'RIGHT OF TERMINATION...................................9
7 FRANCHISEE'S RIGHTS AND OBLIGATIONS UPON TERMINATION...............11
8 FRANCHISEE'S COVENANTS NOT TO COMPETE..............................11
9 INDEPENDENT CONTRACTORS; INDEMNIFICATION...........................13
10 ASSIGNMENT.........................................................14
11 ARBITRATION........................................................15
12 ENFORCEMENT........................................................17
13 NOTICES............................................................19
14 ACKNOWLEDGMENTS....................................................20
15 DISCLAIMER; FRANCHISEE'S LEGAL COUNSEL.............................21
16 GOVERNING LAW; STATE MODIFICATIONS.................................22
17 DEFINITIONS........................................................23
PERSONAL GUARANTY
i
COST CUTTERS FAMILY HAIR CARE(R)
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement"), made, entered into and effective
this _____ day of _______________, _____, by and between The Barbers,
Hairstyling for Men & Women, Inc., a Minnesota corporation ("COST CUTTERS"), and
________________________________________________________________________________
________________________________________________________________________________
(the "FRANCHISEE");
WITNESSETH:
WHEREAS, COST CUTTERS has developed and owns a distinctive business system for
operating hairstyling businesses of a distinctive character with the name "Cost
Cutters Family Hair Care(R)" (the "Business System" or the "Cost Cutters
Business System") and has publicized the name "Cost Cutters Family Hair Care(R)"
and other trademarks, trade names, service marks and commercial symbols to the
public as an organization of hairstyling businesses operating under the Cost
Cutters Business System; and
WHEREAS, COST CUTTERS represents that it has the right and authority to license
the use of the names "Cost Cutters(R)", "Cost Cutters Family Hair Care" and
certain other trademarks, trade names, service marks, logos and commercial
symbols (the "Marks") for use in connection with hairstyling businesses operated
in conformity with the Business System to selected persons or entities who will
comply with COST CUTTERS' uniformity requirements and quality standards; and
WHEREAS, the FRANCHISEE desires to operate Cost Cutters hairstyling businesses
at locations in the area designated in Article 1 of this Agreement which will
conform to the uniformity requirements and quality standards established and
promulgated from time to time by COST CUTTERS; and
WHEREAS, COST CUTTERS is willing to provide the FRANCHISEE with marketing,
advertising, technology, operational and other business information, experience
and "know how" about the Cost Cutters business that has been developed over time
by COST CUTTERS at significant cost and expense; and
WHEREAS, the FRANCHISEE acknowledges that it would take substantial capital and
human resources to develop a business similar to the Cost Cutters business and,
as a consequence, the FRANCHISEE desires to acquire the right to use the Marks
and the Business System and to own and operate Cost Cutters businesses subject
to and under the terms and conditions set forth in this Agreement; and
WHEREAS, the FRANCHISEE acknowledges that COST CUTTERS would not provide the
FRANCHISEE with any business information or "know how" about the Cost Cutters
Business System unless the FRANCHISEE agreed to comply with all of the terms and
conditions of this Agreement and to pay the Exclusive Territory Fee and the
other fees specified in this Agreement; and
WHEREAS, the FRANCHISEE has had a full and adequate opportunity to be thoroughly
advised of the terms and conditions of this Agreement by its legal counsel or
other advisor, and has had sufficient time to evaluate and investigate the Cost
Cutters Business System, the financial investment requirements, and the business
risks associated with owning and operating Cost Cutters businesses;
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth
in this Agreement and for other good and valuable consideration, the parties
hereby contract as follows:
D-1
ARTICLE 1
FRANCHISED AREA
1.1 FRANCHISED AREA. COST CUTTERS hereby grants to the FRANCHISEE, for the term
of this Agreement, the right to enter into Franchise Agreements with COST
CUTTERS for the operation of Cost Cutters hairstyling businesses (the "Cost
Cutters Businesses" or the "Businesses"), to be located only within the
following exclusive area _______________________________________________________
________________________________________________________________________________
________________________________________________________________________________
_______________________________________________________________________________,
(the "Franchised Area"). The Franchised Area may be further described and
delineated in Exhibit A attached hereto and signed by both the FRANCHISEE and
COST CUTTERS.
1.2 EXCLUSIVITY. The rights and privileges granted to the FRANCHISEE in this
Agreement are expressly limited to the Franchised Area and are expressly subject
to the terms and conditions of this Agreement. COST CUTTERS will not franchise,
license, subfranchise, develop, own or operate ("develop") any Cost Cutters
businesses in the Franchised Area while this Agreement is in effect without the
consent of the FRANCHISEE. Notwithstanding the foregoing, if COST CUTTERS
proposes to develop (either by owning, franchising or subfranchising) a Cost
Cutters business in the Franchised Area to be located in or on premises owned or
controlled by a national or regional mass merchandiser such as WalMart, Target,
Venture or Costco ("Mass Merchandiser Location"), then the FRANCHISEE will have
a right of first refusal to own or operate the Mass Merchandiser Location.
Consequently, if COST CUTTERS proposes to develop the Mass Merchandiser Location
in the Franchised Area while this Agreement is in effect, then COST CUTTERS will
give the FRANCHISEE written notice of its proposal to develop the Mass
Merchandiser Location in the Franchised Area and the FRANCHISEE will have thirty
(30) days after such notice to accept in writing COST CUTTERS' proposal to open
the Mass Merchandiser Location in the Franchised Area. The FRANCHISEE will have
the right to own and operate a Mass Merchandiser Location in the Franchised Area
according to the terms and conditions set forth in COST CUTTERS' written
proposal, which may vary in form and substance from the terms, conditions and
economics set forth in this Agreement. If the FRANCHISEE fails to accept in
writing COST CUTTERS' written proposal to open the Mass Merchandiser Location
within thirty (30) days from the date written notice of COST CUTTERS proposal to
open the Mass Merchandiser Location is given to the FRANCHISEE, then COST
CUTTERS will have the absolute right to open and develop a Mass Merchandiser
Location in the Franchised Area while this Agreement is in effect without the
consent of the FRANCHISEE.
1.3 PERSONAL RIGHTS. The FRANCHISEE will not be entitled to franchise,
subfranchise, license or sublicense other persons or entities under this
Agreement and the FRANCHISEE may open, own and operate Cost Cutters Businesses
only in the Franchised Area. The rights, privileges and franchise granted and
conveyed to the FRANCHISEE in this Agreement will be exclusively for the
Franchised Area and may not be assigned, sold or transferred by the FRANCHISEE,
except as specifically provided for in this Agreement.
ARTICLE 2
TERM OF DEVELOPMENT AGREEMENT; RIGHT OF FIRST REFUSAL
2.1 TERM. The term of this Agreement will commence on the date set forth on Page
D-1 of this Agreement (the "Commencement Date") and will continue, unless
earlier terminated in accordance with Article 6 below or other provisions of
this Agreement, until the first to occur of (A) the expiration of ____________
(___) years from the Commencement Date and (B) that date upon which ____________
(___) Cost Cutters Businesses owned by the FRANCHISEE are open and operating for
business in the
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Franchised Area. This Agreement will not be considered executed and will not be
enforceable until: (i) it has been signed by COST CUTTERS and the FRANCHISEE,
and, if the FRANCHISEE is a corporation or partnership, the Personal Guarantors;
and (ii) the signed Agreement has been delivered to the FRANCHISEE.
2.2 RIGHT OF FIRST REFUSAL. At the end of the term of this Agreement, the
FRANCHISEE'S exclusive development rights with respect to the Franchised Area
will automatically terminate, and the FRANCHISEE will not have the right to
renew or extend the term of this Agreement. If the FRANCHISEE wishes to acquire
the exclusive development rights with respect to the Franchised Area following
the end of the term of this Agreement, then the FRANCHISEE must so notify COST
CUTTERS at least one hundred twenty (120) days prior to the end of the term of
this Agreement. Upon being given such notice from the FRANCHISEE, COST CUTTERS
will have the right to reevaluate the prospects for the establishment of Cost
Cutters businesses in the Franchised Area, and COST CUTTERS may determine that
the Franchised Area may, at this time, be further developed by opening
additional Cost Cutters businesses in the Franchised Area. In the event COST
CUTTERS determines that the Franchised Area may not, at this time, be further
developed, or that the FRANCHISEE does not comply with the then-current
requirements of COST CUTTERS for area developers, then COST CUTTERS will so
notify the FRANCHISEE and all rights of the FRANCHISEE under this Article 2.2
shall terminate. In the event COST CUTTERS determines that the Franchised Area
may, at this time, be further developed, and if the FRANCHISEE meets all of the
then-current requirements of COST CUTTERS for area developers, then COST CUTTERS
will give the FRANCHISEE written notice of its proposal to develop additional
Cost Cutters businesses in the Franchised Area and the FRANCHISEE will have
sixty (60) days to (A) accept in writing COST CUTTERS' proposal to own and
operate further Cost Cutters Businesses in the Franchised Area and (B) sign the
then-current form of COST CUTTERS development agreement incorporating the terms
of such proposal. If so accepted, the FRANCHISEE will have the right to own and
operate Cost Cutters Businesses in the Franchised Area according to the terms
and conditions set forth in the development agreement, which may vary in form
and substance from the terms, conditions and economics set forth in this
Agreement. If the FRANCHISEE fails to accept in writing COST CUTTERS' written
proposal and to sign such development agreement within sixty (60) days from the
date the written notice of COST CUTTERS' proposal is given to the FRANCHISEE,
then all rights of the FRANCHISEE under this Article 2.2 shall automatically
terminate and COST CUTTERS will have the absolute right to open and develop Cost
Cutters businesses in the Franchised Area anytime after the term of this
Agreement has expired. The FRANCHISEE acknowledges that circumstances and
judgments may change and that if the FRANCHISEE'S rights under this Article 2.2
have terminated as provided above, then such rights will not be revived in the
event COST CUTTERS later determines that the Franchised Area may be further
developed.
ARTICLE 3
EXCLUSIVE TERRITORY FEE; INITIAL FEES; DEVELOPMENT SCHEDULE
3.1 EXCLUSIVE TERRITORY FEE. On the date this Agreement is executed by the
FRANCHISEE, the FRANCHISEE will pay COST CUTTERS a nonrefundable exclusive
territory fee equal to ________________________________________________________
Dollars ($_______________) (the "Exclusive Territory Fee").
3.2 INITIAL FEES. In addition to the Exclusive Territory Fee, the FRANCHISEE
will pay COST CUTTERS an Initial Fee, as defined in COST CUTTERS' then-current
standard Franchise Agreement, of ______________________________________________
Dollars ($_______________) for the first Cost Cutters Business required to be
owned and operated by the FRANCHISEE in the Franchised Area pursuant to the
development schedule contained in this Agreement. The FRANCHISEE will pay COST
CUTTERS an Initial Fee of _____________________________________________________
Dollars
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($_______________) for each subsequent Cost Cutters Business required to
be owned and operated by the FRANCHISEE in the Franchised Area pursuant to the
development schedule contained in this Agreement. The amount of each Initial Fee
payable to COST CUTTERS for each Cost Cutters Business opened in the Franchised
Area in accordance with the development schedule will be the amount as set forth
in this Article 3.2, even if the then-current standard Franchise Agreement
signed by the FRANCHISEE specifies an Initial Fee that is greater than or
different from the Initial Fee specified herein. Each such Initial Fee will be
payable to COST CUTTERS pursuant to the terms of this Agreement.
3.3 PAYMENT OF INITIAL FEES. The FRANCHISEE must pay COST CUTTERS the Initial
Fee set forth in Article 3.2 of this Agreement on or before the date the
FRANCHISEE executes the then-current standard Franchise Agreement for each Cost
Cutters Business required to be owned and operated in the Franchised Area
pursuant to this Agreement. A then-current standard Cost Cutters Franchise
Agreement must be executed by the FRANCHISEE for each Cost Cutters Business
owned and operated by the FRANCHISEE in the Franchised Area on the earlier of:
(A) at least ten (10) days prior to the date the FRANCHISEE commences initial
business operations at each of its Cost Cutters Businesses in the Franchised
Area; or (B) the date the FRANCHISEE'S furniture, fixtures and equipment are
shipped by COST CUTTERS to the FRANCHISEE.
3.4 DEVELOPMENT SCHEDULE. The FRANCHISEE acknowledges and agrees that a material
provision of this Agreement is that the following number of Cost Cutters
Businesses must be opened and continuously operating in the Franchised Area
during the term of this Agreement in accordance with the following development
schedule:
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NUMBER OF COST CUTTERS BUSINESSES REQUIRED CUMULATIVE NUMBER OF COST CUTTERS
TO BE OPENED AND CONTINUOUSLY OPERATING BUSINESSES REQUIRED TO BE OPEN AND
FOR BUSINESS IN THE FRANCHISED AREA DURING CONTINUOUSLY OPERATING FOR BUSINESS IN THE
PERIOD THE PERIOD FRANCHISED AREA AT THE END OF THE PERIOD
---------------------------- -------------------------------------------- ---------------------------------------------
-first half:
YEAR 1
-second half:
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-first half:
YEAR 2
-second half:
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-first half:
YEAR 3
-second half:
---------------------------- ------------------------------------------- ----------------------------------------------
-first half:
YEAR 4
-second half:
---------------------------- ------------------------------------------- ----------------------------------------------
-first half:
YEAR 5
-second half:
---------------------------- ------------------------------------------- ----------------------------------------------
-first half:
YEAR 6
-second half:
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---------------------------- -------------------------------------------- ---------------------------------------------
NUMBER OF COST CUTTERS BUSINESSES REQUIRED CUMULATIVE NUMBER OF COST CUTTERS
TO BE OPENED AND CONTINUOUSLY OPERATING BUSINESSES REQUIRED TO BE OPEN AND
FOR BUSINESS IN THE FRANCHISED AREA DURING CONTINUOUSLY OPERATING FOR BUSINESS IN THE
PERIOD THE PERIOD FRANCHISED AREA AT THE END OF THE PERIOD
---------------------------- -------------------------------------------- ---------------------------------------------
-first half:
YEAR 7
-second half:
---------------------------- ------------------------------------------- ----------------------------------------------
-first half:
YEAR 8
-second half:
---------------------------- ------------------------------------------- ----------------------------------------------
-first half:
YEAR 9
-second half:
---------------------------- ------------------------------------------- ----------------------------------------------
-first half:
YEAR 10
-second half:
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The half-year periods set forth above will be determined from the date of this
Agreement, so that the first half-year period of the development schedule set
forth above will end six (6) months from the date of this Agreement. For
purposes of determining compliance with the development schedule set forth in
this Article 3.4, only the FRANCHISEE'S Cost Cutters Businesses actually open
and continuously operating for business in the Franchised Area as of the end of
a given half-year period will be counted toward the number of Cost Cutters
Businesses required to be open and continuously operating for business.
3.5 REASONABLENESS OF DEVELOPMENT SCHEDULE. The FRANCHISEE represents that it
has conducted its own independent investigation and analysis of the prospects
for the establishment of Cost Cutters Businesses within the Franchised Area,
approves of the foregoing development schedule as being reasonable and viable,
and recognizes that failure to achieve the results described in the foregoing
development schedule will constitute a material breach of this Agreement.
3.6 FAILURE TO COMPLY WITH DEVELOPMENT SCHEDULE. The FRANCHISEE'S failure to
comply with the above development schedule will constitute a material breach of
this Agreement by the FRANCHISEE and, in that event, COST CUTTERS will have the
right to terminate this Agreement as provided herein. Termination of this
Agreement as a result of the FRANCHISEE'S failure to meet the development
schedule set forth above will not affect the individual Franchise Agreements
signed by the FRANCHISEE for the Cost Cutters Businesses opened and operated in
the Franchised Area pursuant to this Agreement prior to termination; however,
upon termination of this Agreement, all rights to open and operate additional
Cost Cutters Businesses in the Franchised Area and all other rights granted to
the FRANCHISEE under this Agreement will immediately revert to COST CUTTERS,
without affecting those obligations of the FRANCHISEE that continue beyond the
termination of this Agreement.
3.7 TERMINATION FOR FAILURE TO COMPLY WITH DEVELOPMENT SCHEDULE. If this
Agreement is terminated by COST CUTTERS because of the FRANCHISEE'S failure to
meet the development schedule set forth above, the rights and duties of COST
CUTTERS and the FRANCHISEE will be as follows: (A) the FRANCHISEE will have no
further rights to open and operate additional Cost Cutters Businesses within the
Franchised Area; (B) the FRANCHISEE will continue to pay all required fees and
to operate its Cost Cutters Businesses opened and operated in the Franchised
Area pursuant to the terms of the applicable Franchise Agreements signed by the
FRANCHISEE prior to the date of the
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termination of this Agreement; and (C) COST CUTTERS will have the absolute right
to develop the Franchised Area or to contract with another franchisee for future
development of the Franchised Area.
ARTICLE 4
OTHER OBLIGATIONS OF FRANCHISEE
4.1 COMPLIANCE WITH APPLICABLE LAWS. The FRANCHISEE agrees to and will, at its
expense, comply with all federal, state, city, municipal and local laws,
ordinances, rules and regulations in the Franchised Area pertaining to the
operation of its Cost Cutters Businesses, including all laws relating to
employees and to the regulation of barbers and cosmetologists and all applicable
federal and state environmental laws. The FRANCHISEE will, at its expense, be
absolutely and exclusively responsible for determining all licenses and permits
required by law for the FRANCHISEE'S Cost Cutters Businesses, for qualifying for
and obtaining all such licenses and permits, and for maintaining all such
licenses and permits in full force and effect.
4.2 DISTRICT MANAGER. The FRANCHISEE must employ at least one (1) full-time
person (a "District Manager") for each six (6) Cost Cutters Businesses opened
and operated in the Franchised Area pursuant to this Agreement to supervise the
FRANCHISEE'S Cost Cutters Businesses in the Franchised Area. Each District
Manager will be responsible for the operation and administration of up to six
(6) Cost Cutters Businesses under his or her supervision and control in the
Franchised Area, including supervision of the managers and assistant managers.
The FRANCHISEE'S District Managers must devote their full time and attention to
administering and overseeing the operations of the FRANCHISEE'S Cost Cutters
Businesses in the Franchised Area. All District Managers of the FRANCHISEE'S
Cost Cutters Businesses must attend and successfully complete the training
program required by COST CUTTERS, and be certified and approved by COST CUTTERS
in writing.
4.3 EXECUTION OF FRANCHISE AGREEMENTS. For each Cost Cutters Business opened,
owned, and operated for business by the FRANCHISEE in the Franchised Area, the
FRANCHISEE (and, if applicable, the FRANCHISEE'S shareholders and Personal
Guarantors) must execute COST CUTTERS' then-current standard Franchise Agreement
(the "Franchise Agreement") in substantially the same form as Exhibit B attached
hereto. If the FRANCHISEE fails to provide COST CUTTERS with an executed
Franchise Agreement on the earlier of: (A) at least ten (10) days prior to the
date the FRANCHISEE commences business at each of its Cost Cutters Businesses in
the Franchised Area; or (B) on the date the FRANCHISEE'S furniture, fixtures and
equipment are shipped by COST CUTTERS to the FRANCHISEE, as required by the
terms of this Agreement, it will be deemed a material breach of this Agreement
and COST CUTTERS will have the right to terminate this Agreement as provided
herein.
4.4 CONTINUING FEES. During the term of each Franchise Agreement signed by the
FRANCHISEE pursuant to this Agreement, the FRANCHISEE will pay to COST CUTTERS
weekly Continuing Fees, as defined in the Franchise Agreement, equal to a
percentage of the weekly Gross Revenues, as defined in the Franchise Agreement,
which are received, billed or generated by or from the FRANCHISEE'S Cost Cutters
Businesses in the Franchised Area. For the first (1st) through the seventeenth
(17th) weeks of the FRANCHISEE'S operation of each of the Cost Cutters
Businesses opened and operated pursuant to this Agreement, the FRANCHISEE will
not be obligated to pay a Continuing Fee to COST CUTTERS. For the eighteenth
(18th) through the thirty-fourth (34th) weeks of the FRANCHISEE'S operation of
each of its Cost Cutters Businesses, the FRANCHISEE will pay to COST CUTTERS a
weekly Continuing Fee equal to four percent (4%) of the FRANCHISEE'S Gross
Revenues. For the thirty-fifth (35th) week of the FRANCHISEE'S operation of each
of the Cost Cutters Businesses opened and operated pursuant to this Agreement,
and thereafter for the balance of the remaining term of the applicable Franchise
Agreement, the FRANCHISEE will pay COST CUTTERS a weekly Continuing Fee equal to
six percent (6%) of the FRANCHISEE'S Gross Revenues; provided,
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however, that commencing with the fifty-third (53rd) week of the FRANCHISEE'S
operation of each of its Cost Cutters Businesses, and continuing throughout the
remaining term of the Franchise Agreements for the Cost Cutters Businesses, the
FRANCHISEE will pay COST CUTTERS a weekly Continuing Fee equal to the greater of
six percent (6%) of the FRANCHISEE'S weekly Gross Revenues or One Hundred
Dollars ($100) per week. Notwithstanding the foregoing, for as long as, but only
so long as, the FRANCHISEE owns and operates eleven (11) or more Cost Cutters
Businesses, the FRANCHISEE will be obligated to pay COST CUTTERS weekly
Continuing Fees equal to four percent (4%) of the FRANCHISEE'S weekly Gross
Revenues for the eleventh (11th) and any subsequent Cost Cutters Business. This
reduction in Continuing Fees will apply only to the eleventh (11th) and any
subsequent Cost Cutters Businesses owned and operated by the FRANCHISEE and the
rates, steps and minimum set forth in the second, third and forth sentences of
this Article 4.4 shall never apply to the first ten (10) Cost Cutters Businesses
being owned and operated by the FRANCHISEE. The FRANCHISEE will pay Continuing
Fees to COST CUTTERS at the applicable rate stated in the preceding sentences,
even if the Franchise Agreements signed by the FRANCHISEE specify Continuing
Fees that are greater than or different from the Continuing Fees specified
herein. With the possible exception of the percentage of the FRANCHISEE'S Gross
Revenues which will be payable to COST CUTTERS, the Continuing Fees for each of
the FRANCHISEE'S Cost Cutters Businesses will be payable by the FRANCHISEE
according to the terms of the applicable Franchise Agreements signed by the
FRANCHISEE pursuant to this Agreement.
4.5 ADVERTISING FEES. During the term of each Franchise Agreement signed by the
FRANCHISEE pursuant to this Agreement, the FRANCHISEE will pay to COST CUTTERS
weekly Advertising Fees, as defined in the Franchise Agreement, equal to a
percentage of the weekly Gross Revenues, as defined in the Franchise Agreement,
which are received, billed or generated by or from the FRANCHISEE'S Cost Cutters
Businesses in the Franchised Area. For the first (1st) through the seventeenth
(17th) weeks of the FRANCHISEE'S operation of each of the Cost Cutters
Businesses opened and operated pursuant to this Agreement, the FRANCHISEE will
pay to COST CUTTERS a weekly Advertising Fee equal to six percent (6%) of the
FRANCHISEE'S Gross Revenues. For the eighteenth (18th) through the thirty-fourth
(34th) weeks of the FRANCHISEE'S operation of each of its Cost Cutters
Businesses, the FRANCHISEE will pay a weekly Advertising Fee equal to five
percent (5%) of the FRANCHISEE'S Gross Revenues. For the thirty-fifth (35th)
week of the FRANCHISEE'S operation of each of the Cost Cutters Businesses opened
and operated pursuant to this Agreement, and thereafter for the balance of the
remaining term of the applicable Franchise Agreement, the FRANCHISEE will pay to
COST CUTTERS a weekly Advertising Fee equal to four percent (4%) of the
FRANCHISEE'S Gross Revenues. Notwithstanding the foregoing, for as long as, but
only so long as, the FRANCHISEE owns and operates eleven (11) or more Cost
Cutters Businesses, the FRANCHISEE will be obligated to pay weekly Advertising
Fees equal to four percent (4%) of the FRANCHISEE'S weekly Gross Revenues for
the eleventh (11th) and each subsequent Cost Cutters Business. This reduction in
Advertising Fees will apply only to the eleventh (11th) and any subsequent Cost
Cutters Businesses owned and operated by the FRANCHISEE and the rates, steps and
minimum set forth in the second, third and forth sentences of this Article 4.5
shall never apply to the first ten (10) Cost Cutters Businesses being owned and
operated by the FRANCHISEE. The FRANCHISEE will pay Advertising Fees to COST
CUTTERS at the applicable rate stated in the preceding sentences, even if the
Franchise Agreements signed by the FRANCHISEE specify Advertising Fees that are
greater than or different from the Advertising Fees specified herein. With the
possible exception of the percentage of the FRANCHISEE'S Gross Revenues which
will be payable to COST CUTTERS, the Advertising Fees for each of the
FRANCHISEE'S Cost Cutters Businesses will be payable by the FRANCHISEE according
to the terms of the applicable Franchise Agreements signed by the FRANCHISEE
pursuant to this Agreement.
4.6 LOCAL ADVERTISING; OTHER PAYMENTS. During the term of each Franchise
Agreement signed by the FRANCHISEE pursuant to this Agreement, the FRANCHISEE
will be required
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to spend monies for items such as grand opening advertising and promotion, local
media advertising and promotion, local group advertising and promotion, and
other expenses. The FRANCHISEE will pay all such required advertising and
promotional fees and expenses at the rates established in, and in accordance
with the terms and conditions of, the applicable Franchise Agreement for each of
the FRANCHISEE'S Cost Cutters Businesses opened and operated by the FRANCHISEE
pursuant to this Agreement.
4.7 MODIFICATIONS TO FRANCHISE AGREEMENT. The FRANCHISEE acknowledges that the
Franchise Agreement may be modified from time to time by COST CUTTERS and that
reasonable modifications and amendments to the Franchise Agreement will not
alter the FRANCHISEE'S obligations under this Agreement.
ARTICLE 5
CONFIDENTIAL OPERATIONS MANUAL AND OTHER INFORMATION
5.1 COMPLIANCE WITH MANUAL. In order to protect the reputation and goodwill of
COST CUTTERS and to maintain uniform operating standards under the Marks and the
Business System, the FRANCHISEE will, at all times during the term of this
Agreement and the terms of the Cost Cutters Franchise Agreements signed by the
FRANCHISEE, conduct its Cost Cutters Businesses in accordance with COST CUTTERS'
confidential Operations Manual (the "Manual"). The FRANCHISEE acknowledges
having received as a loan one copy of the Manual from COST CUTTERS.
5.2 CONFIDENTIALITY OF MANUAL. The FRANCHISEE must, at all times during the term
of this Agreement and thereafter, treat the Manual, any other manuals created
for or approved for use in the operation of the FRANCHISEE'S Cost Cutters
Businesses, and the information contained therein as secret and confidential,
and the FRANCHISEE will use all reasonable means to keep such information secret
and confidential. Neither the FRANCHISEE nor its employees will make any copy,
duplication, record or reproduction of the Manual (or any portion thereof)
available to any unauthorized person.
5.3 REVISIONS TO MANUAL. The Manual will, at all times during the term of this
Agreement and thereafter, remain the sole and absolute property of COST CUTTERS.
COST CUTTERS may from time to time revise the Manual and the FRANCHISEE
expressly agrees to operate its Cost Cutters Businesses in accordance with all
such revisions. The FRANCHISEE will at all times keep its copy of the Manual
current and up-to-date, and in the event of any dispute, the terms of the master
copy of the Manual maintained by COST CUTTERS will be controlling in all
respects.
5.4 OTHER CONFIDENTIAL INFORMATION. The FRANCHISEE expressly acknowledges and
agrees that COST CUTTERS will be disclosing and providing to the FRANCHISEE
certain confidential and proprietary information concerning the Business System
and the procedures, technology, operations and data used in connection with the
Business System. Accordingly, the FRANCHISEE will not, during the term of this
Agreement or thereafter, communicate, divulge or use for the benefit of any
other person or entity any confidential information, knowledge or know-how
concerning the methods of operation of the Cost Cutters Businesses which may be
communicated to the FRANCHISEE, or of which the FRANCHISEE may be apprised, by
virtue of this Agreement. The FRANCHISEE will divulge such confidential
information only to its employees that must have access to it in order to
operate the FRANCHISEE'S Cost Cutters Businesses. Any and all information,
knowledge and know-how including, without limitation, vendor and supplier lists,
customer lists, drawings, materials, equipment, technology, methods, procedures,
specifications, techniques, computer programs, systems and other data which COST
CUTTERS designates as confidential or proprietary will be deemed confidential
and proprietary for the purposes of this Agreement.
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5.5 CONFIDENTIALITY AGREEMENTS WITH EMPLOYEES. The FRANCHISEE will require all
of the FRANCHISEE'S employees who have access to the Manual or other
confidential information execute an agreement, in the form attached as an
Exhibit to the Franchise Agreement or other form satisfactory to COST CUTTERS,
where the employees agree to maintain the confidentiality, during the course of
their employment and thereafter, of all information designated by COST CUTTERS
as confidential. Copies of all executed agreements will be submitted to COST
CUTTERS upon request.
5.6 REMEDIES. The FRANCHISEE recognizes that the provisions contained in this
Article are necessary for the protection of COST CUTTERS and all of the
franchisees who own Cost Cutters businesses. If the FRANCHISEE violates any
provisions of this Article, or if any employee of the FRANCHISEE violates his or
her confidentiality agreement executed pursuant to Article 5.5, then COST
CUTTERS will have the right to: (A) terminate this Agreement (as provided for
herein); (B) seek injunctive relief from a Court of competent jurisdiction; (C)
commence an action or lawsuit against the FRANCHISEE for damages; and (D)
enforce all other remedies against the FRANCHISEE that are available to COST
CUTTERS under common law, in equity, and pursuant to any federal and state
statutes in an action or lawsuit against the FRANCHISEE.
ARTICLE 6
COST CUTTERS' RIGHT OF TERMINATION
6.1 GROUNDS FOR TERMINATION. In addition to the other rights of termination
contained in this Agreement, COST CUTTERS will have the right and privilege to
terminate this Agreement if: (A) the FRANCHISEE violates any material provision,
term or condition of this Agreement; (B) the FRANCHISEE fails to conform to the
Business System, the standards of uniformity and quality for the goods and
services or the policies and procedures promulgated by COST CUTTERS in
connection with the Business System, or is involved in any act or conduct which
materially impairs the goodwill associated with the Marks or the Business
System; (C) the FRANCHISEE fails to timely pay any of its uncontested
obligations or liabilities due and owing COST CUTTERS, suppliers, banks,
purveyors, other creditors or any federal, state and municipal government
(including, if applicable, federal and state taxes); (D) the FRANCHISEE is
determined to be insolvent within the meaning of any state or federal law or
becomes a party to any bankruptcy proceedings, files for bankruptcy, or its
adjudicated a bankrupt under any state or federal law; (E) the FRANCHISEE makes
an assignment for the benefit of creditors or enters into any similar
arrangement for the disposition of its assets for the benefit of creditors; (F)
any check issued by the FRANCHISEE is dishonored because of insufficient funds
(except where the check is dishonored because of a bookkeeping or accounting
error) or closed accounts; (G) any Cost Cutters Franchise Agreement executed by
the FRANCHISEE is (1) terminated by COST CUTTERS or (2) wrongfully terminated by
the FRANCHISEE; (H) the FRANCHISEE fails to make, when due, any payment pursuant
to any Franchise Agreement, promissory note, other contract or other obligation
payable by the FRANCHISEE to COST CUTTERS; (I) the FRANCHISEE voluntarily or
otherwise abandons, as defined herein, the Franchised Area; or (J) the
FRANCHISEE or any of its partners, directors, officers or majority stockholders
is convicted of, or pleads guilty or no contest to, a charge of violating any
law relating to the FRANCHISEE'S Cost Cutters Businesses, or any felony.
6.2 NOTICE OF BREACH. Except as provided for in Article 6.5 and Article 6.6 of
this Agreement, COST CUTTERS will not have the right to terminate this Agreement
unless and until written notice setting forth the alleged breach in detail has
been given to the FRANCHISEE by COST CUTTERS and after having been given such
written notice of breach the FRANCHISEE fails to correct the alleged breach
within the period of time specified by applicable law. If applicable law does
not specify a time period to correct an alleged breach, then the FRANCHISEE will
have thirty (30) days after having been given such written notice to correct the
alleged breach. If the FRANCHISEE fails to correct an alleged breach set forth
in the written notice as provided herein within the applicable period of time,
then this
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Agreement may be terminated by COST CUTTERS as provided in this Agreement. For
the purposes of this Agreement, an alleged breach of this Agreement by the
FRANCHISEE will be deemed to be "corrected" if both COST CUTTERS and the
FRANCHISEE agree in writing that the alleged breach has been corrected.
6.3 ARBITRATION. If the FRANCHISEE gives notice of Arbitration, as provided for
in this Agreement, within the time period established in Article 6.2 for
correcting the alleged breach, then COST CUTTERS will not have the right to
terminate this Agreement until the facts of the alleged breach have been
submitted to Arbitration as provided for herein, the Arbitrator determines that
the FRANCHISEE has breached this Agreement and the FRANCHISEE fails to correct
the breach within the applicable time period. If the Arbitrator determines that
the FRANCHISEE has breached this Agreement as alleged by COST CUTTERS in the
written notice given to the FRANCHISEE, then the FRANCHISEE will have thirty
(30) days from the date the Arbitrator issues a written determination on the
matter to correct the specified breach or violation of this Agreement, except
where applicable law requires a longer cure period in which event the cure
period specified by applicable law will apply. If the FRANCHISEE timely corrects
the specified breach of this Agreement, then this Agreement will remain in full
force and effect. For the purposes of this Agreement, any controversy or dispute
on the issue of whether the FRANCHISEE has timely corrected the specified breach
of this Agreement will also be subject to Arbitration as provided for herein.
The time limitations set forth in this Article within which the FRANCHISEE may
demand Arbitration of a dispute or controversy relating to the right of COST
CUTTERS to terminate this Agreement for an alleged breach will be mandatory. If
the FRANCHISEE fails to comply with the time limitations set forth in this
Article, COST CUTTERS may terminate this Agreement as provided for herein.
6.4 NOTICE OF TERMINATION. If COST CUTTERS has complied with the notice
provisions of this Article and the FRANCHISEE has not corrected the alleged
breach set forth in the written notice within the time period specified in this
Article, then COST CUTTERS will have the absolute right to terminate this
Agreement by giving the FRANCHISEE written notice stating to the FRANCHISEE that
this Agreement is terminated, and in that event, unless applicable law provides
to the contrary, the effective date of termination of this Agreement will be the
day the written notice of termination is given to the FRANCHISEE.
6.5 GROUNDS FOR IMMEDIATE TERMINATION. COST CUTTERS will have the absolute right
and privilege, unless prohibited by applicable law, to immediately terminate
this Agreement if: (A) the FRANCHISEE or any of its partners, directors,
officers or majority stockholders is convicted of, or pleads guilty or no
contest to, a charge of violating any law relating to the FRANCHISEE'S Cost
Cutters Businesses, or any felony; (B) the FRANCHISEE voluntarily or otherwise
abandons, as defined herein, the Franchised Area; or (C) the FRANCHISEE is
involved in any act or conduct which materially impairs the goodwill associated
with COST CUTTERS' Marks or Business System, and the FRANCHISEE fails to correct
such act or conduct within twenty-four (24) hours of receipt of written notice
from COST CUTTERS.
6.6 NOTICE OF IMMEDIATE TERMINATION. If this Agreement is terminated by COST
CUTTERS pursuant to Article 6.5 above, COST CUTTERS will give the FRANCHISEE
written notice that this Agreement is terminated, and in that event, unless
applicable law provides to the contrary, the effective date of termination of
this Agreement will be the day the written notice of termination is given to the
FRANCHISEE.
6.7 DAMAGES. In the event this Agreement is terminated by COST CUTTERS pursuant
to this Article, or if the FRANCHISEE breaches this Agreement by a wrongful
termination of this Agreement, then COST CUTTERS will be entitled to seek
recovery from the FRANCHISEE for all of the damages
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that COST CUTTERS has sustained and will sustain in the future as a result of
the FRANCHISEE'S breach of this Agreement, which will include damages based upon
the Initial Fees, Continuing Fees, Advertising Fees and other fees that would
have been payable by the FRANCHISEE pursuant to this Agreement.
6.8 OTHER REMEDIES. Nothing in this Article or this Agreement will preclude COST
CUTTERS from seeking other damages or remedies under common law, state or
federal laws or this Agreement against the FRANCHISEE including, but not limited
to, attorneys' fees, punitive damages and injunctive relief.
ARTICLE 7
FRANCHISEE'S RIGHTS AND OBLIGATIONS UPON TERMINATION
7.1 OBLIGATIONS UPON TERMINATION. In the event this Agreement is terminated for
any reason, then the FRANCHISEE will: (A) within five (5) days after
termination, pay all amounts due and owing to COST CUTTERS under this Agreement
or any other contract, promissory note or other obligation payable by the
FRANCHISEE to COST CUTTERS; and (B) comply with all other applicable provisions
of this Agreement, including those provisions with obligations that continue
beyond the termination of this Agreement.
7.2 REVERSION OF RIGHTS. Upon termination of this Agreement for any reason, all
rights to open and operate additional Cost Cutters businesses in the Franchised
Area and all other rights granted to the FRANCHISEE pursuant to this Agreement
will automatically revert to COST CUTTERS, and COST CUTTERS will have the right
to develop the Franchised Area or to contract with another franchisee for the
future development of the Franchised Area.
7.3 FRANCHISE AGREEMENTS NOT AFFECTED. The FRANCHISEE will continue to operate
the Cost Cutters Businesses owned and operated by the FRANCHISEE in the
Franchised Area pursuant to the terms of the applicable Franchise Agreements
signed by the FRANCHISEE and COST CUTTERS prior to the termination of this
Agreement, and the rights and obligations of the FRANCHISEE and COST CUTTERS
with respect to the FRANCHISEE'S Cost Cutters Businesses in the Franchised Area
will be governed by the terms of the applicable Franchise Agreements.
ARTICLE 8
FRANCHISEE'S COVENANTS NOT TO COMPETE
8.1 CONSIDERATION. The FRANCHISEE, the FRANCHISEE'S shareholders and the
Personal Guarantors acknowledge that the FRANCHISEE, its partners or officers,
and its employees will receive specialized training, current and future
marketing and advertising plans and strategies, business plans and strategies,
business information and procedures, research and development information,
operations information, and trade and business secrets from COST CUTTERS
pertaining to the Business System and the operation of a Cost Cutters business.
In consideration for the use and license of such valuable and confidential
information, the FRANCHISEE, the FRANCHISEE'S shareholders and the Personal
Guarantors will comply in all respects with the provisions of this Article. COST
CUTTERS has advised the FRANCHISEE that this provision is a material provision
of this Agreement, and that COST CUTTERS will not sell a Cost Cutters franchise
to any person or entity that owns or intends to own, operate or be involved in
any business that competes directly or indirectly with a Cost Cutters business.
8.2 IN-TERM COVENANT NOT TO COMPETE. The FRANCHISEE, the FRANCHISEE'S
shareholders and the Personal Guarantors will not, during the term of this
Agreement, on their own account or as an employee, agent, consultant, partner,
officer, director, member, or shareholder of any
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other person, firm, entity, partnership or corporation: (A) seek to employ any
person who is at that time employed by COST CUTTERS or by any other Cost
Cutters, City Looks or We Care Hair(R) franchisee, or induce any such employee
to terminate his or her employment; or (B) own, operate, lease, franchise,
conduct, engage in, be connected with, have any interest in, or assist any
person or entity engaged in any hairstyling, xxxxxx or other business that is in
any way competitive with or similar to the Cost Cutters businesses conducted by
COST CUTTERS or COST CUTTERS' franchisees (including, but not limited to, the
FRANCHISEE), except with the prior written consent of COST CUTTERS.
8.3 POST-TERM COVENANT NOT TO COMPETE. The FRANCHISEE, the FRANCHISEE'S
shareholders and the Personal Guarantors will not, for a period of one (1) year
after the termination or expiration of this Agreement, on their own account or
as an employee, agent, consultant, partner, officer, director, member or
shareholder of any other person, firm, entity, partnership or corporation: (A)
seek to employ any person who is at that time employed by COST CUTTERS or by any
other Cost Cutters, City Looks or We Care Hair(R) franchisee, or induce any such
employee to terminate his or her employment; or (B) own, operate, lease,
franchise, conduct, engage in, be connected with, have any interest in or assist
any person or entity engaged in any hairstyling, xxxxxx or other business that
is in any way competitive with or similar to the Cost Cutters businesses
conducted by COST CUTTERS or COST CUTTERS' franchisees which is located either
within the Franchised Area or within six (6) miles of any Cost Cutters business
operated by COST CUTTERS or any of COST CUTTERS' franchisees, or which is
located within any exclusive area granted by COST CUTTERS or any affiliate or
area developer of COST CUTTERS pursuant to any franchise, development, license
or other territorial agreement. The FRANCHISEE, the FRANCHISEE'S shareholders
and the Personal Guarantors expressly agree that the one (1) year period, the
Franchised Area and the six (6) mile limit are the reasonable and necessary time
and geographical limitations required to protect COST CUTTERS and COST CUTTERS'
franchisees if this Agreement expires or is terminated for any reason, and that
this covenant not to compete is necessary to permit COST CUTTERS the opportunity
to further develop new Cost Cutters businesses in the Franchised Area.
8.4 INJUNCTIVE RELIEF. The FRANCHISEE, the FRANCHISEE'S shareholders and the
Personal Guarantors agree that the provisions of this Article are necessary to
protect the legitimate business interests of COST CUTTERS and COST CUTTERS'
franchisees including, without limitation, preventing damage to and/or loss of
goodwill associated with the Marks, preventing the unauthorized dissemination of
marketing, promotional and other confidential information to competitors of COST
CUTTERS and COST CUTTERS' franchisees, protection of COST CUTTERS' trade
secrets, the Business System and the integrity of COST CUTTERS' Business System,
and preventing duplication of the Business System. The FRANCHISEE, the
FRANCHISEE'S shareholders and the Personal Guarantors also agree that damages
alone cannot adequately compensate COST CUTTERS if there is a violation of this
Article by the FRANCHISEE and that injunctive relief against the FRANCHISEE is
essential for the protection of COST CUTTERS and COST CUTTERS' franchisees. The
FRANCHISEE, the FRANCHISEE'S shareholders and the Personal Guarantors agree
therefore, that if COST CUTTERS alleges that the FRANCHISEE, the FRANCHISEE'S
shareholders or the Personal Guarantors have breached or violated this Article,
then COST CUTTERS will have the right to petition a Court of competent
jurisdiction for injunctive relief against the FRANCHISEE, the FRANCHISEE'S
shareholders or the Personal Guarantors, in addition to all other remedies that
may be available to COST CUTTERS at law or in equity. Unless provided to the
contrary by applicable law, COST CUTTERS will not be required to post a bond or
other security in any action where COST CUTTERS is seeking to enjoin the
FRANCHISEE, the FRANCHISEE'S shareholders or the Personal Guarantors from
violating this Article. In cases where COST CUTTERS is granted ex parte
injunctive relief against the FRANCHISEE, the FRANCHISEE'S shareholders or the
Personal Guarantors, then the FRANCHISEE, the FRANCHISEE'S shareholders or the
Personal Guarantors will have the right to petition the court for a hearing on
the merits at the earliest time convenient to the Court.
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8.5 SEVERABILITY. It is the desire and intent of the parties to this Agreement,
including the FRANCHISEE'S shareholders and the Personal Guarantors, that the
provisions of this Article be enforced to the fullest extent permissible under
the laws and public policy applied in each jurisdiction in which enforcement is
sought. Accordingly, if any part of this Article is adjudicated to be invalid or
unenforceable, then this Article will be deemed amended to modify or delete that
portion thus adjudicated to be invalid or unenforceable, such modification or
deletion to apply only with respect to the operation of this Article and the
particular jurisdiction in which said adjudication is made. Further, to the
extent any provision of this Article is deemed unenforceable by virtue of its
scope or limitation, the parties to this Agreement including the FRANCHISEE, the
FRANCHISEE'S shareholders and the Personal Guarantors agree that the scope and
limitation provisions will, nevertheless, be enforceable to the fullest extent
permissible under the laws and public policies applied in such jurisdiction
where enforcement is sought.
ARTICLE 9
INDEPENDENT CONTRACTORS; INDEMNIFICATION
9.1 INDEPENDENT CONTRACTORS. COST CUTTERS and the FRANCHISEE are each
independent contractors and, as a consequence, there is no employer-employee or
principal-agent relationship between COST CUTTERS and the FRANCHISEE. The
FRANCHISEE will not have the right to and will not make any agreements,
representations or warranties in the name of or on behalf of COST CUTTERS or
represent that their relationship is other than that of franchisor and
franchisee. Neither COST CUTTERS nor the FRANCHISEE will be obligated by or have
any liability to the other under any agreements or representations made by the
other to any third parties.
9.2 INDEMNIFICATION. COST CUTTERS will not be obligated to any person for any
damages arising out of, from, in connection with, or as a result of the
FRANCHISEE'S negligence or the operation of the FRANCHISEE'S Cost Cutters
Businesses that are conducted by the FRANCHISEE pursuant to this Agreement. The
FRANCHISEE will indemnify and hold harmless COST CUTTERS against all claims,
lawsuits, damages, obligations, liability, actions and judgments alleged or
obtained by any person or entity against COST CUTTERS arising out of, from, as a
result of, or in connection with the FRANCHISEE'S negligence or the operation of
the FRANCHISEE'S Cost Cutters Businesses that are conducted by the FRANCHISEE
pursuant to this Agreement, including, without limitation, any claims arising
from or relating to: (A) any personal injury, property damage, commercial loss
or environmental contamination resulting from any act or omission of the
FRANCHISEE or any of its employees, agents or representatives; (B) any failure
on the part of the FRANCHISEE to comply with any requirement of any governmental
authority; (C) any failure of the FRANCHISEE to pay any of its obligations; or
(D) any failure or the FRANCHISEE to comply with any requirement or condition of
this Agreement or any other agreement with COST CUTTERS or any affiliate of COST
CUTTERS. Further, the FRANCHISEE will indemnify and reimburse COST CUTTERS for
all such obligations and damages for which COST CUTTERS is held liable and for
all costs reasonably incurred by COST CUTTERS in the defense of any such claims
brought against it or in any action arising out of the operation of the
FRANCHISEE'S Cost Cutters Businesses in which it is named as a party including,
without limitation, costs for attorneys' fees actually incurred, investigation
expenses, court costs, deposition expenses and travel and living expenses. COST
CUTTERS will have the absolute right to defend any claim made against it that
results from the FRANCHISEE'S Cost Cutters Businesses.
9.3 PAYMENT OF COSTS AND EXPENSES. The FRANCHISEE will pay all costs and
expenses, including actual attorneys' fees, incurred by COST CUTTERS in
enforcing any term, condition or provision of this Agreement or in seeking to
enjoin any violation of this Agreement by the FRANCHISEE.
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9.4 CONTINUATION OF OBLIGATIONS. The indemnification and other obligations
contained in this Article will continue in full force and effect subsequent to
and notwithstanding the expiration or termination of this Agreement.
ARTICLE 10
ASSIGNMENT
10.1 ASSIGNMENT BY FRANCHISOR. This Agreement may be unilaterally assigned and
transferred by COST CUTTERS without the FRANCHISEE'S approval or consent, and
will inure to the benefit of COST CUTTERS' successors and assigns. COST CUTTERS
will provide the FRANCHISEE with written notice of any such assignment or
transfer, and the assignee will be required to fulfill COST CUTTERS' obligations
under this Agreement.
10.2 ASSIGNMENT BY FRANCHISEE TO CORPORATION. If the FRANCHISEE is an individual
or a partnership, this Agreement may be transferred or assigned by the
FRANCHISEE to a corporation which is owned or controlled (ownership of at least
fifty-one percent (51%) of the issued and outstanding capital stock) by the
FRANCHISEE, provided that: (A) the FRANCHISEE and all of the shareholders of the
assignee corporation sign the personal guaranty and agreement to be bound by the
terms and conditions of this Agreement attached hereto: (B) the FRANCHISEE
furnishes prior written proof to COST CUTTERS substantiating that the
corporation will be financially able to perform all of the terms and conditions
of this Agreement; and (C) none of the shareholders owns, operates, franchises,
develops, manages or controls any hairstyling, xxxxxx or other business that is
in any way competitive with or similar to a Cost Cutters business. The
FRANCHISEE will give COST CUTTERS fifteen (15) days written notice prior to the
proposed date of assignment or transfer of this Agreement to an owned or
controlled corporation of the FRANCHISEE; however, the transfer or assignment of
this Agreement will not be valid or effective until COST CUTTERS has received
the legal documents which its legal counsel deems necessary to properly and
legally document the transfer or assignment of this Agreement to the corporation
as provided herein.
10.3 ASSIGNMENT UPON DEATH OR DISABILITY OF FRANCHISEE. If the FRANCHISEE is an
individual, then this Agreement may be assigned, transferred or bequeathed by
the FRANCHISEE to any designated person or beneficiary upon his or her death or
permanent disability. However, the assignment of this Agreement to the
transferee, assignee or beneficiary of the FRANCHISEE will not be valid or
effective until COST CUTTERS has received the properly executed legal documents
which its legal counsel deems necessary to properly and legally document the
transfer, assignment or bequest of this Agreement, and until the transferee,
assignee or beneficiary agrees to be unconditionally bound by the terms and
conditions of this Agreement and to personally guarantee the performance of the
FRANCHISEE'S obligations under this Agreement.
10.4 APPROVAL OF TRANSFER; CONDITIONS FOR APPROVAL. This Agreement may be
assigned or transferred by the FRANCHISEE only with the prior written approval
of COST CUTTERS. COST CUTTERS will not unreasonably withhold its consent to any
transfer of this Agreement, provided that the FRANCHISEE and the transferee
Franchisee comply with the following conditions: (A) all of the FRANCHISEE'S
monetary obligations due to COST CUTTERS have been paid in full, and the
FRANCHISEE is not otherwise in default under this Agreement; (B) the FRANCHISEE
has executed a written agreement in a form satisfactory to COST CUTTERS in which
the FRANCHISEE agrees to observe all applicable obligations and covenants
contained in this Agreement; (C) the transferee Franchisee and its shareholders
agree to be personally liable to discharge all of the FRANCHISEE'S obligations
under this Agreement and will enter into a written agreement in a form
satisfactory to COST CUTTERS assuming and agreeing to discharge all of the
FRANCHISEE'S obligations and covenants under this Agreement; (D) the transferee
Franchisee will have demonstrated to COST CUTTERS'
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satisfaction that he, she or it meets COST CUTTERS' managerial, financial, and
business standards for new area franchisees, possesses a good business
reputation and credit rating, and possesses the aptitude and ability to conduct
the Business franchised hereunder (as may be evidenced by prior related business
experience or otherwise); (E) the FRANCHISEE has paid the transfer fee required
under Article 10.6; (F) the transferee Franchisee does not own, operate,
franchise, develop, manage or control any hairstyling, xxxxxx or other business
that is in any way competitive with or similar to a Cost Cutters business; and
(G) if the transferee Franchisee does not meet COST CUTTERS' net worth
requirements for operation of the Cost Cutters Businesses, then the FRANCHISEE
and/or its shareholders and the Personal Guarantors will execute a written
agreement in a form satisfactory to COST CUTTERS agreeing to remain liable to
COST CUTTERS for the obligations of the Cost Cutters Businesses.
10.5 ACKNOWLEDGMENT OF RESTRICTIONS. The FRANCHISEE acknowledges and agrees that
the restrictions on transfer imposed herein are reasonable and are necessary to
protect the Cost Cutters Business System and the Marks, as well as COST CUTTERS'
reputation and image, and are for the protection of COST CUTTERS, the FRANCHISEE
and all other franchisees who own and operate Cost Cutters businesses. Any
assignment or transfer permitted by this Article 10 will not be effective until
COST CUTTERS receives a completely executed copy of all transfer documents and
COST CUTTERS consents to the transfer in writing, and any attempted assignment
or transfer made without complying with the requirements of this Article 10 will
be void.
10.6 TRANSFER FEE. If, pursuant to the terms of this Article, this Agreement is
assigned, transferred or bequeathed to another person or entity, or if the
FRANCHISEE'S shareholders transfer over fifty percent (50%) of their capital
stock to another person or entity, then the FRANCHISEE will pay COST CUTTERS a
transfer fee of One Thousand Dollars ($1,000). This fee is to cover the costs
incurred by COST CUTTERS for attorneys' fees, accountants' fees, out-of-pocket
expenses, long distance telephone calls, administrative expenses, and the time
of its employees and officers.
ARTICLE 11
ARBITRATION
11.1 DISPUTES SUBJECT TO ARBITRATION. Except as expressly provided to the
contrary in this Agreement, all disputes and controversies between the parties,
including allegations of fraud, misrepresentation or violation of any state or
federal laws or regulations, arising under, as a result of, or in connection
with this Agreement, the Franchised Area or the FRANCHISEE'S Cost Cutters
Businesses will be resolved and determined exclusively by Arbitration in
accordance with the Commercial Rules and Regulations of the American Arbitration
Association.
11.2 NOTICE OF DISPUTE. The party alleging the breach, claim, dispute or
controversy ("dispute") must give the other party written notice setting forth
the alleged dispute in detail. The party who has been given such written notice
alleging the dispute will have thirty (30) days after having been given such
written notice from the complaining party to correct or resolve the dispute
specified in the written notice.
11.3 DEMAND FOR ARBITRATION. If the dispute alleged by either party has not been
corrected, settled or compromised within the time period provided for in this
Agreement, then either party may notice Arbitration by giving the other party
written notice demanding Arbitration. Within ten (10) days after a written
demand for Arbitration has been given by the party demanding Arbitration, either
party will have the right to request the appropriate office of the American
Arbitration Association to initiate the procedures necessary to appoint an
Arbitrator. The Arbitrator will be appointed within sixty (60) days after a
written demand for Arbitration has been made in accordance with the Commercial
Rules and Regulation of the American Arbitration Association.
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11.4 VENUE AND JURISDICTION. All Arbitration hearings will take place
exclusively in Minneapolis, Minnesota. COST CUTTERS and the FRANCHISEE and their
officers, Directors and shareholders or partners and the Personal Guarantors
acknowledge that the FRANCHISEE and its officers, Directors and employees have
had substantial business and personal contacts with COST CUTTERS in Minnesota,
do hereby agree and submit to personal jurisdiction in Minnesota in connection
with any Arbitration hearings hereunder and any suits or actions brought to
enforce the decision of the Arbitrator, and do hereby waive any rights they may
have to contest venue and jurisdiction in Minnesota and any claims that venue
and jurisdiction in Minnesota are invalid.
11.5 POWERS OF ARBITRATOR. The authority of the Arbitrator will be limited to
making a finding, judgment, decision and award relating to the interpretation of
or adherence to the written provisions of this Agreement. The Federal Rules of
Evidence (the "Rules") will apply to all Arbitration hearings and the
introduction of all evidence, testimony, records, affidavits, documents and
memoranda in any Arbitration hearing must comply in all respects with the Rules
and the legal precedents interpreting the Rules. Both parties will have the
absolute right to cross-examine any person who testified against them or in
favor of the other party. The Arbitrator will not have the authority or right to
add to, delete, amend or modify in any manner the terms, conditions and
provisions of this Agreement. All findings, judgments, decisions and awards of
the Arbitrator will be limited to the dispute set forth in the written demand
for Arbitration, and the Arbitrator will not have the authority to decide any
other issues. The Arbitrator will not have the right or authority to award
punitive damages to COST CUTTERS or the FRANCHISEE or their officers, Directors,
shareholders or partners and Personal Guarantors, and COST CUTTERS and
FRANCHISEE and their officers, Directors, shareholders or partners, and Personal
Guarantors expressly waive their rights to plead or seek punitive damages. All
findings, judgments, decisions and awards by the Arbitrator will be in writing,
will be made within sixty (60) days after the Arbitration hearings have been
completed, and will be final and binding on COST CUTTERS and the FRANCHISEE,
except as provided for in Article 11.8. The written decision of the Arbitrator
will be deemed to be an order, judgment and decree and may be entered as such in
any Court of competent jurisdiction by either party.
11.6 DISPUTES NOT SUBJECT TO ARBITRATION. The disputes and controversies between
COST CUTTERS and the FRANCHISEE which are set forth in Article 12.1 and the
following disputes between COST CUTTERS and the FRANCHISEE will not be subject
to Arbitration: (A) any dispute involving the Marks; (B) any dispute involving
immediate termination of this Agreement by COST CUTTERS pursuant to Article 6.5
and Article 6.6 of this Agreement; (C) any dispute involving enforcement of the
confidentiality provisions set forth in Article 5 of this Agreement; and (D) any
dispute involving enforcement of the covenants not to compete set forth in
Article 8 of this Agreement.
11.7 NO COLLATERAL ESTOPPEL OR CLASS ACTIONS. Except as provided herein, all
Arbitration findings and awards expressly made by the Arbitrator will be final
and binding on COST CUTTERS and the FRANCHISEE and their officers, Directors,
shareholders or partners, and Personal Guarantors; however, such Arbitration
findings and awards may not be used to collaterally estop either party from
raising any like or similar issues, claims or defenses in any other or
subsequent Arbitration, litigation, court hearing or other proceeding involving
third parties or other franchisees. No party except COST CUTTERS, the
FRANCHISEE, and their officers, Directors, shareholders or partners, and
Personal Guarantors will have the right to join in any Arbitration proceeding
arising under this Agreement, and, therefore, the Arbitrator will not be
authorized to permit or approve class actions or to permit any person or entity
that is not a party to this Agreement to be involved in or to participate in any
Arbitration hearings conducted pursuant to this Agreement.
11.8 DE NOVO HEARING ON MERITS. If the Arbitrator awards either COST CUTTERS or
the FRANCHISEE damages (including actual damages, costs and attorneys' fees) in
excess of One Hundred
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Thousand Dollars ($100,000) in any Arbitration proceeding commenced pursuant to
this Agreement, then the party who has been held liable by the Arbitrator will
have the right to a de novo hearing on the merits by commencing an action in a
court of competent jurisdiction in accordance with the provisions of this
Agreement. If the party held liable by the Arbitrator commences a court action
as provided for herein, then neither party will have the right to introduce the
Arbitrator's decision or findings in any such court action and the Arbitrator's
decision and findings will be of no force and effect and will not be final or
binding on either COST CUTTERS or the FRANCHISEE. If the party who has been held
liable by the Arbitrator for over One Hundred Thousand Dollars ($100,000) in
damages fails to commence a court action within thirty (30) days after the
Arbitrator issues his or her award in writing, then the Arbitrator's findings,
judgments, decisions and awards will be final and binding on COST CUTTERS and
the FRANCHISEE.
11.9 CONFIDENTIALITY. All evidence, testimony, records, documents, findings,
decisions, judgments and awards pertaining to any Arbitration hearing between
COST CUTTERS and the FRANCHISEE will be secret and confidential in all respects.
COST CUTTERS and the FRANCHISEE will not disclose the decision or award of the
Arbitrator and will not disclose any evidence, testimony, records, documents,
findings, orders, or other matters from the Arbitration hearing to any person or
entity except as required by law.
11.10 SEVERABILITY. It is the desire and intent of the parties to this Agreement
that the provisions of this Article be enforced to the fullest extent
permissible under the laws and public policy applied in each jurisdiction in
which enforcement is sought. Accordingly, if any part of this Article is
adjudicated to be invalid or unenforceable, then this Article will be deemed
amended to delete that portion thus adjudicated to be invalid or unenforceable
to the extent required to make this Article valid and enforceable. Any such
deletion will be effective only in the particular jurisdiction in which the
adjudication is made. Further, to the extent any provision of this Article is
deemed unenforceable by virtue of its scope, the parties to this Agreement agree
that the same will, nevertheless, be enforceable to the fullest extent
permissible under the laws and public policies applied in such jurisdiction
where enforcement is sought, and the scope in such a case will be determined by
Arbitration as provided herein.
ARTICLE 12
ENFORCEMENT
12.1 INJUNCTIVE RELIEF. In addition to the provisions of Article 11, COST
CUTTERS will be entitled to petition a Court of competent jurisdiction for the
entry of temporary and permanent injunctions and orders of specific performance
enforcing the provisions of this Agreement relating to: (A) the FRANCHISEE'S
improper or unauthorized use of the Marks and the Business System; (B) the
obligations of the FRANCHISEE upon termination or expiration of this Agreement;
(C) the transfer or assignment of this Agreement, the Franchised Area or
ownership interests of the FRANCHISEE; (D) the FRANCHISEE'S violation of the
provisions of this Agreement relating to confidentiality and covenants not to
compete; and (E) any act or omission by the FRANCHISEE or the FRANCHISEE'S
employees that, (1) constitutes a violation of any applicable law, ordinance or
regulation, (2) is dishonest or misleading to customers of the FRANCHISEE'S Cost
Cutters Businesses or other Cost Cutters businesses, (3) constitutes a danger to
the employees, public or customers of the FRANCHISEE'S Cost Cutters Businesses,
or (4) may impair the goodwill associated with the Marks and the Business
System. In any action brought under this provision where COST CUTTERS prevails
against the FRANCHISEE, the FRANCHISEE will indemnify COST CUTTERS for all costs
that it incurs in any such proceedings including, without limitation, attorneys'
fees actually incurred, expert witness fees, costs of investigation, court
costs, travel and living expenses, and all other costs incurred by COST CUTTERS.
Unless provided to the contrary by applicable law, COST CUTTERS will be entitled
to obtain injunctive relief without the posting of any bond or security.
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12.2 SEVERABILITY. All provisions of this Agreement are severable and this
Agreement will be interpreted and enforced as if all completely invalid or
unenforceable provisions were not contained herein and partially valid and
enforceable provisions will be enforced to the extent valid and enforceable. If
any applicable law or rule of any jurisdiction requires a greater prior notice
of the termination of this Agreement than is required hereunder or the taking of
some other action not required hereunder, or if under any applicable and binding
laws of any jurisdiction, any provision of this Agreement or any specification,
standard or operating procedure prescribed by COST CUTTERS is invalid or
unenforceable, the prior notice or other action required by such law or rule
will be substituted for the notice requirements hereof, or such invalid or
unenforceable provision, specification, standard or operating procedure will be
modified to the extent required to be valid and enforceable. Such modifications
to this Agreement will be effective only in such jurisdiction and will be
enforced as originally made and entered into in all other jurisdictions.
12.3 WAIVER. COST CUTTERS and the FRANCHISEE may, by written instrument signed
by COST CUTTERS and the FRANCHISEE, waive any obligation of or restriction upon
the other under this Agreement. Acceptance by COST CUTTERS of any payment by the
FRANCHISEE and the failure, refusal or neglect of COST CUTTERS to exercise any
right under this Agreement or to insist upon full compliance by the FRANCHISEE
of its obligations hereunder will not constitute a waiver by COST CUTTERS of any
provision of this Agreement. COST CUTTERS will have the right to waive
obligations or restrictions for other area franchisees under their Development
Agreements without waiving those obligations or restrictions for the FRANCHISEE
and, except to the extent provided by law, COST CUTTERS will have the right to
negotiate terms and conditions, grant concessions and waive obligations for
other area franchisees of COST CUTTERS without granting those same rights to the
FRANCHISEE and without incurring any liability to the FRANCHISEE whatsoever.
12.4 NO RIGHT TO OFFSET. The FRANCHISEE will not, on grounds of the alleged
nonperformance by COST CUTTERS of any of its obligations under this Agreement,
any other contract between COST CUTTERS and the FRANCHISEE, or for any other
reason, withhold payment of any amounts due COST CUTTERS under this Agreement or
any other contract, promissory note or other obligation payable by the
FRANCHISEE to COST CUTTERS. The FRANCHISEE will not have the right to "offset"
any liquidated or unliquidated amounts allegedly due to the FRANCHISEE from COST
CUTTERS against any payments due to COST CUTTERS under this Agreement or any
other contract, promissory note or other obligation payable by the FRANCHISEE to
COST CUTTERS.
12.5 COST CUTTERS' RIGHTS CUMULATIVE. The rights of COST CUTTERS hereunder are
cumulative and no exercise or enforcement by COST CUTTERS of any right or remedy
hereunder will preclude the exercise or enforcement by COST CUTTERS of any other
right or remedy hereunder or which COST CUTTERS is entitled by law to enforce.
12.6 VENUE AND JURISDICTION. Unless otherwise required by applicable law, all
Arbitration hearings, litigation, court hearings or other hearings initiated by
either party against the other party must and will be venued exclusively in
Hennepin County, Minnesota. The FRANCHISEE, each of its officers, Directors and
shareholders, and the Personal Guarantors: (A) acknowledge that Minneapolis,
Minnesota is a mutually convenient location for the venue and conduct of any
legal or enforcement proceedings; (B) do hereby agree and submit to personal
jurisdiction in the State of Minnesota for the purposes of any Arbitration
hearings, litigation, court hearings or other hearings brought to enforce or
construe the terms of this Agreement or to resolve any dispute or controversy
arising under, as a result of, or in connection with this Agreement, the
Franchised Area or the FRANCHISEE'S Cost Cutters Businesses; and (C) do hereby
agree and stipulate that any Arbitration hearings, litigation, court hearings
and other hearings will be venued and held exclusively in Hennepin County,
Minnesota, and waive any rights to contest such venue and jurisdiction and any
claims that such venue and jurisdiction are invalid.
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12.7 AGREEMENT BINDING ON HEIRS AND ASSIGNS. This Agreement is binding upon the
parties hereto and their respective executors, administrators, heirs, assigns
and successors in interest.
12.8 JOINT AND SEVERAL LIABILITY. If the FRANCHISEE consists of more than one
person, their liability under this Agreement will be deemed to be joint and
several.
12.9 ENTIRE AGREEMENT. This Agreement supersedes and terminates all prior
agreements relating to the rights granted herein, either oral or in writing,
between the parties and therefore, any representations, inducements, promises or
agreements between the parties not contained in this Agreement or not in writing
signed by the President or a Vice President of COST CUTTERS and the FRANCHISEE
will not be enforceable. This Agreement will not supersede or terminate any
written Development Agreement relating to another Franchised Area or Franchise
Agreement(s) executed prior to the date of this Agreement relating to other Cost
Cutters franchises operated by the FRANCHISEE that are or will be owned and
operated by the FRANCHISEE. The preambles are a part of this Agreement, which
constitutes the entire agreement of the parties, and there are no other oral or
written understandings or agreements between COST CUTTERS and the FRANCHISEE
relating to the subject matter of this Agreement.
12.10 CONTROLLING AGREEMENT. The rights and obligations of the FRANCHISEE and
COST CUTTERS with respect to the operation of each Cost Cutters Business opened
in the Franchised Area by the FRANCHISEE will be governed by the terms and
conditions of each Cost Cutters Franchise Agreement executed by the FRANCHISEE.
In the event there is a conflict between the terms of this Agreement and the
terms of any Cost Cutters Franchise Agreement executed by the FRANCHISEE, then
unless specified otherwise herein, the terms of this Agreement will control.
12.11 HEADINGS; TERMS. The headings of the Articles and the provisions thereof
are for convenience only and do not define, limit or construe the contents of
such Articles. The term "FRANCHISEE" as used herein is applicable to one or more
individuals, a corporation or a partnership, as the case may be, and the
singular usage includes the plural, and the masculine usage includes the neuter
and the feminine and the neuter usage includes the masculine and the feminine.
References to "FRANCHISEE" which are applicable to an individual or individuals
will mean the principal owner or owners of the equity or operating control of
the FRANCHISEE if the FRANCHISEE is a corporation or partnership. If the
FRANCHISEE consists of more than one individual, then all individuals will be
bound jointly and severally by the terms and conditions of this Agreement.
12.12 NO ORAL MODIFICATION. No modification, change, addition, rescission,
release, amendment or waiver of, and no approval, consent or authorization
required by any provision of this Agreement may be made except by a written
agreement subscribed to by duly authorized officers or partners of the
FRANCHISEE and the President or a Vice President of COST CUTTERS. COST CUTTERS
and the FRANCHISEE will not have the right to amend or modify this Agreement
orally or verbally, and any attempt to do so will be void in all respects.
ARTICLE 13
NOTICES
All notices to COST CUTTERS will be in writing and will be made by personal
service upon an officer or Director of COST CUTTERS or sent by prepaid
registered or certified United States mail addressed to COST CUTTERS at 000
Xxxxxxxxxx Xxxxxxxxx X.X., Xxxxxxxxxxx, Xxxxxxxxx 00000 with a copy to Xxxx X.
Xxxxxxxxxx, Esq., Xxxx, Plant, Xxxxx, Xxxxx & Xxxxxxx, P.A., 3400 City Center,
00 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000-0000. All notices to the
FRANCHISEE will be by personal service upon the FRANCHISEE, a District Manager
or a salon manager or assistant manager, (or, if applicable, an
D-19
officer or Director of the FRANCHISEE), or sent by prepaid registered or
certified United States mail addressed to the FRANCHISEE at the first Cost
Cutters Business opened by the FRANCHISEE in the Franchised Area or such other
address as the FRANCHISEE may designate in writing, or by delivery to any
employee of the FRANCHISEE by a recognized overnight delivery service (such as
Federal Express or UPS) which requires a written receipt of delivery from the
addressee. Notice by mail is effective upon depositing the same in the mail in
the manner provided above, notice by personal service is effective upon
obtaining service and notice by overnight delivery service is effective upon
delivery by such overnight delivery service.
ARTICLE 14
ACKNOWLEDGMENTS
14.1 BUSINESS RISKS; NO FINANCIAL PROJECTIONS. The FRANCHISEE acknowledges that
it has conducted an independent investigation of the prospects for the
establishment of Cost Cutters Businesses within the Franchised Area, and
recognizes that the business venture contemplated by this Agreement involves
business and economic risks and that its financial and business success will be
primarily dependent upon the personal efforts of the FRANCHISEE, its management
and employees. COST CUTTERS expressly disclaims the making of, and the
FRANCHISEE acknowledges that it has not received, any estimates, projections,
warranties or guaranties, express or implied, regarding potential Gross
Revenues, profits, earnings or the financial success of the FRANCHISEE'S Cost
Cutters Businesses, except as expressly set forth in writing in COST CUTTERS'
Uniform Franchise Offering Circular, receipt of which is acknowledged by the
FRANCHISEE.
14.2 NO INCOME OR REFUND WARRANTIES. The FRANCHISEE acknowledges that COST
CUTTERS does not warrant or guarantee to the FRANCHISEE that the FRANCHISEE will
derive income or profit from the FRANCHISEE'S Cost Cutters Businesses or that
COST CUTTERS will refund all or part of the Exclusive Territory Fee or the price
paid for the FRANCHISEE'S Cost Cutters Businesses or repurchase any of the
products, merchandise, furniture, fixtures, equipment, supplies or chattels
supplied by COST CUTTERS or an approved supplier if the FRANCHISEE is
unsatisfied with its Cost Cutters Businesses.
14.3 TERMS OF OTHER DEVELOPMENT AGREEMENTS MAY DIFFER. The FRANCHISEE
acknowledges that other area franchisees of COST CUTTERS have or will be granted
Development Agreements at different times and in different situations, and
further acknowledges that the terms and conditions of such Development
Agreements may vary substantially in form and substance from those contained in
this Agreement.
14.4 RECEIPT OF UNIFORM FRANCHISE OFFERING CIRCULAR. The FRANCHISEE acknowledges
that it received a copy of this Agreement with all material blanks fully
completed at least five (5) business days prior to the date that this Agreement
was executed. The FRANCHISEE further acknowledges that it received a Cost
Cutters Uniform Franchise Offering Circular at least ten (10) business days
prior to the date on which this Agreement was executed.
14.5 POTENTIAL INCREASES IN INVESTMENT REQUIREMENTS. The FRANCHISEE recognizes
and acknowledges that this Agreement requires it to open additional Cost Cutters
Businesses in the future pursuant to the development schedule set forth in
Article 3. The FRANCHISEE further acknowledges that the estimated expenses and
investment requirements set forth in Items 6 and 7 of COST CUTTERS' Uniform
Franchise Offering Circular are subject to increase over time, and that future
Cost Cutters Businesses opened and operated by the FRANCHISEE may involve
greater initial investment and operating capital requirements than those stated
in the Uniform Franchise Offering Circular provided to the FRANCHISEE prior to
the execution of this Agreement.
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14.6 CITY LOOKS(R) AND HAIR PERFORMERS(R) BUSINESSES. The FRANCHISEE agrees and
acknowledges that the "City Looks(R)," "City Looks Salons International(R)" and
"The Barbers(R)" businesses ("City Looks(R) businesses") which are operated and
franchised by The Barbers, Hairstyling for Men & Women, Inc. ("The Barbers") and
the "Hair Performers(R) businesses which are serviced by The Barbers, are full
service hair care salons that address different markets and, thus, are not
competitive with Cost Cutters businesses. Further, the FRANCHISEE acknowledges
and agrees that The Barbers will have the absolute right to develop, own,
manage, license or franchise City Looks(R) and Hair Performers(R) businesses at
any location in the world, and the FRANCHISEE hereby waives any and all rights
that it may have or allege against COST CUTTERS or any affiliate of COST CUTTERS
resulting from the opening of any City Looks(R) or Hair Performers(R) business,
including those City Looks(R) or Hair Performers(R) businesses that may be
located in the Franchised Area or near, adjacent or contiguous to any of the
FRANCHISEE'S Cost Cutters Businesses.
14.7 WE CARE HAIR(R) AND FAMILY HAIRCUT(R) BUSINESSES. The FRANCHISEE agrees and
acknowledges that the "We Care Hair(R)" businesses which are franchised by WCH,
Inc., a wholly-owned subsidiary of The Barbers and the Family Haircut(R)
business serviced by The Barbers ("We Care Hair(R) and Family Haircut(R)
businesses"), are hair care salons that address similar markets and, thus, may
be competitive with Cost Cutters businesses. Further, the FRANCHISEE
acknowledges and agrees that WCH, Inc. and The Barbers will have the absolute
right to develop, own, manage, license or franchise We Care Hair(R) and Family
Haircut(R) businesses at any location in the world, and the FRANCHISEE hereby
waives any and all rights that it may have or allege against COST CUTTERS or any
affiliate of COST CUTTERS resulting from the opening of any We Care Hair(R) or
Family Haircut(R) business, including those We Care Hair(R) and Family
Haircut(R) businesses that may be located in the Franchised Area or near,
adjacent or contiguous to any of the FRANCHISEE'S Cost Cutters Businesses.
14.8 OTHER HAIR CARE BUSINESSES. Except as expressly provided to the contrary in
Articles 1.2 and 2.2 of this Agreement with respect to the development of Cost
Cutters Businesses in the Franchised Area, the FRANCHISEE acknowledges and
agrees that The Barbers, WCH, Inc., and any affiliate of either organization
will have the absolute right to develop, own, manage, license or franchise hair
care or product businesses under any trademark, service xxxx or trade name at
any location or through any channel of distribution anywhere in the world, and
the FRANCHISEE hereby waives any and all rights that it may have or allege
against The Barbers, WCH, Inc. or any affiliate of either organization resulting
from the opening of any such hair care or product business, including those hair
care or product businesses that may be located in the Franchised Area or near,
adjacent or contiguous to any of the FRANCHISEE'S Cost Cutters Businesses.
ARTICLE 15
DISCLAIMER; FRANCHISEE'S LEGAL COUNSEL
15.1 DISCLAIMER BY FRANCHISOR. COST CUTTERS expressly disclaims the making of
any express or implied representations or warranties regarding the sales,
earnings, income, profits, Gross Revenues, business or financial success, or
value of the FRANCHISEE'S Businesses, except those expressly set forth in Item
19 of the Cost Cutters Uniform Franchise Offering Circular received by the
FRANCHISEE.
15.2 ACKNOWLEDGMENTS BY FRANCHISEE. The FRANCHISEE acknowledges that it has not
received any express or implied representations or warranties regarding the
sales, earnings, income, profits, Gross Revenues, business or financial success,
value of the Businesses or any other matters pertaining to the Cost Cutters
Businesses from COST CUTTERS or any of COST CUTTERS' officers, employees or
agents that were not contained in writing in the Uniform Franchise Offering
Circular (including this Agreement) received by the FRANCHISEE ("representations
or warranties"). The
D-21
FRANCHISEE further acknowledges that if it had received any representations or
warranties not contained in COST CUTTERS' Uniform Franchise Offering Circular,
it would not have executed this Agreement, and the FRANCHISEE would have: (A)
promptly notified the President of COST CUTTERS in writing of the person or
persons making such representations or warranties; and (B) provided to COST
CUTTERS a specific written statement detailing the representations or warranties
made that were not contained in the Uniform Franchise Offering Circular received
by the FRANCHISEE.
15.3 LEGAL REPRESENTATION. The FRANCHISEE acknowledges that this Agreement
constitutes a legal document which grants certain rights to and imposes certain
obligations upon the FRANCHISEE. The FRANCHISEE was advised by COST CUTTERS to
consult an attorney or other advisor prior to the execution of this Agreement to
review COST CUTTERS' Uniform Franchise Offering Circular, to review this
Agreement in detail, to review the economics, operations and other business
aspects of the Cost Cutters Businesses, to determine compliance with franchising
and other applicable laws, to advise the FRANCHISEE about all federal, state and
local laws, rules, ordinances, special regulations and statutes that apply to
the FRANCHISEE'S Cost Cutters Businesses and to advise the FRANCHISEE about the
economic risks, liabilities, obligations and rights under this Agreement. The
name of the FRANCHISEE'S attorney or other advisor is:
Name:
-------------------------------------------------------
Name of Firm:
-----------------------------------------------
Address:
----------------------------------------------------
City, State, Zip Code:
--------------------------------------
Telephone Number: ( )
-------------------------------------------
Fax Number: ( )
-------------------------------------------------
ARTICLE 16
GOVERNING LAW; STATE MODIFICATIONS
16.1 GOVERNING LAW. Except to the extent governed by the United States Trademark
Act of 1946 (Xxxxxx Act, 15 U.S.C. ss.1051 et seq.), this Agreement and the
relationship between COST CUTTERS and the FRANCHISEE will be governed by the
laws of the state in which the Franchised Area is located. If the Franchised
Area contains more than one state, then the laws of the state in which the
FRANCHISEE'S principal place of business is located will govern. The provisions
of this Agreement which conflict with or are inconsistent with applicable
governing law will be superseded and/or modified by such applicable law only to
the extent such provisions are inconsistent. All other provisions of this
Agreement will be enforceable as originally made and entered into upon the
execution of this Agreement by the FRANCHISEE and COST CUTTERS.
16.2 STATE MODIFICATIONS. The following states have statutes which may supersede
the provisions of this Agreement in the FRANCHISEE'S relationship with COST
CUTTERS including the areas of termination and renewal of the Franchise:
ARKANSAS [Stat. Section 70-807], CALIFORNIA [Bus. & Prof. Code Sections
20000-20043], CONNECTICUT [Gen. Stat. Section 42-133e et seq.], DELAWARE [Code
Section 2552], HAWAII [Rev. Stat. Section 482E-1], ILLINOIS [815 ILCS 705/19 and
705/20], INDIANA [Stat. Section 23-2-2.7], IOWA [Code 523H.1-523H.17], MICHIGAN
[Stat. Section 19.854(27)], MINNESOTA [Stat. Section 80C14], MISSISSIPPI [Code
Section 75-24-51], MISSOURI [Stat. Section 407.400], NEBRASKA [Rev. Stat.
Section 87-401], NEW JERSEY [Stat.
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Section 56:10-1], SOUTH DAKOTA [Codified Laws Section 37-5A-51], VIRGINIA [Code
13.1-557-574-13.1-564], WASHINGTON [Code Section 19.100.180], WISCONSIN [Stat.
Section 135.03]. These and other states may have court decisions which may
supersede the provisions of this Agreement in the FRANCHISEE'S relationship with
COST CUTTERS including the areas of termination and renewal of the Franchise.
16.3 SEVERABILITY. The severability provisions of this Agreement contained in
Article 8.5, Article 11.10 and Article 12.2 of this Agreement will pertain to
all of the applicable laws which conflict with or modify the provisions of this
Agreement including, but not limited to, the provisions of this Agreement
specifically addressed in Article 16.2 above.
ARTICLE 17
DEFINITIONS
17.1 ABANDON. "Abandon" as used in this Agreement will mean the conduct of the
FRANCHISEE, including acts of omission as well as commission, indicating the
willingness, desire or intent of the FRANCHISEE to discontinue the opening and
operating of Cost Cutters Businesses in the Franchised Area in accordance with
the terms of this Agreement.
17.2 TERMS DEFINED IN FRANCHISE AGREEMENT. Capitalized terms used but not
defined in this Agreement will, if defined in the Franchise Agreement, have the
meanings ascribed to such terms in the Franchise Agreement.
IN WITNESS WHEREOF, COST CUTTERS, the FRANCHISEE, and the shareholders or
partners of the FRANCHISEE have executed this Agreement effective as of the day
and year first above written.
"FRANCHISOR"
In the Presence of: The Barbers, Hairstyling for Men & Women,
Inc.
----------------------------------- ----------------------------------------
By
-------------------------------------
Its
-----------------------------------
In the Presence of: "FRANCHISEE"
----------------------------------- ----------------------------------------
----------------------------------- ----------------------------------------
----------------------------------- ----------------------------------------
----------------------------------- ----------------------------------------
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The undersigned individual shareholders or partners of the FRANCHISEE
hereby agree to be bound by the terms and conditions of this Agreement.
Percentage of
In the Presence of: SHAREHOLDERS Ownership
%
------------------------------ --------------------------- -----------------
%
------------------------------ --------------------------- -----------------
%
------------------------------ --------------------------- -----------------
%
------------------------------ --------------------------- -----------------
The undersigned spouse(s) of the individual FRANCHISEE(S) hereby agree to be
bound by the terms and conditions of this Agreement regarding confidentiality of
information and covenants not to compete.
----------------------------------- ----------------------------------------
----------------------------------- ----------------------------------------
Print Name Print Name
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PERSONAL GUARANTY AND AGREEMENT TO BE BOUND
PERSONALLY BY THE TERMS AND CONDITIONS
OF THE DEVELOPMENT AGREEMENT
In consideration of the execution of this Agreement by COST CUTTERS,
and for other good and valuable consideration, the undersigned, for themselves,
their heirs, successors, and assigns, do jointly, individually and severally
hereby become surety and guaranty for the payment of all amounts and the
performance of the covenants, terms and conditions in this Agreement, to be
paid, kept and performed by the FRANCHISEE.
Further, the undersigned, individually and jointly, hereby agree to
be personally bound by each and every condition and term contained in this
Agreement and agree that this PERSONAL GUARANTY will be construed as though the
undersigned and each of them executed an Agreement containing the identical
terms and conditions of this Agreement.
If the FRANCHISEE breaches the terms and conditions of this
Agreement, then the undersigned, their heirs, successors and assigns, do hereby,
individually, jointly and severally, promise and agree to pay to COST CUTTERS
all monies due and payable to COST CUTTERS under the terms and conditions of
this Agreement.
In addition, if the FRANCHISEE fails to comply with any other terms
and conditions of this Agreement, then the undersigned, their heirs, successors
and assigns, do hereby, individually, jointly and severally, promise and agree
to comply with the terms and conditions of this Agreement for and on behalf of
the FRANCHISEE.
In addition, should the FRANCHISEE at any time be in default on any
obligation to pay monies to COST CUTTERS or any subsidiary or affiliate of COST
CUTTERS, whether for merchandise, products, supplies, furniture, fixtures,
equipment or other goods purchased by the FRANCHISEE from COST CUTTERS or any
subsidiary or affiliate of COST CUTTERS or for any other indebtedness of the
FRANCHISEE to COST CUTTERS or any subsidiary or affiliate of COST CUTTERS, then
the undersigned, their heirs, successors and assigns, do hereby, individually,
jointly and severally, promise and agree to pay all such monies due and payable
from the FRANCHISEE to COST CUTTERS or any subsidiary or affiliate of COST
CUTTERS.
It is further understood and agreed by the undersigned that the
provisions, covenants and conditions of this GUARANTY will inure to the benefit
of the successors and assigns of COST CUTTERS. Each of the undersigned hereby
submits to personal jurisdiction in the state or federal courts of Minnesota
with respect to any litigation pertaining to this GUARANTY, and agrees that all
litigation pertaining to this GUARANTY will and must be venued exclusively in
Hennepin County, Minnesota.
PERSONAL GUARANTORS
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