EXHIBIT 10.1
FOR USE ONLY IN THE STATE OF /
FRANCHISE AGREEMENT
BETWEEN
COST CUTTERS, a division of The
Barbers, Hairstyling for Men & Women, Inc.
300 Industrial Boulevard N.E.
Minneapolis, Minnesota 55413
(612) 331-8500
Fax: (612) 331-2821
AND
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Name(s) of FRANCHISEE
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Street
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City State Zip Code
( )
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Area Code Telephone
FRANCHISED LOCATION:
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Street
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City State Zip Code
( )
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Area Code Telephone
DATE OF FRANCHISE AGREEMENT:
__________________________, 199___
COST CUTTERS(R)
FRANCHISE AGREEMENT
INDEX
ARTICLE TITLE PAGE
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1 FRANCHISED LOCATION; GRANT OF FRANCHISE............................................2
2 TERM; FRANCHISEE'S OPTION TO REACQUIRE FRANCHISE...................................3
3 COST CUTTERS' RIGHT TO LICENSE MARKS...............................................4
4 INITIAL FEE; APPROVAL OF FRANCHISEE................................................5
5 CONTINUING FEES....................................................................6
6 ADVERTISING........................................................................8
7 QUALITY CONTROL, UNIFORMITY AND STANDARDS REQUIRED OF THE FRANCHISEE..............11
8 CONFIDENTIAL OPERATIONS MANUAL AND OTHER INFORMATION..............................16
9 COST CUTTERS' TERMINATION RIGHTS..................................................17
10 FRANCHISEE'S TERMINATION RIGHTS...................................................19
11 FRANCHISEE'S OBLIGATIONS UPON TERMINATION OR EXPIRATION...........................20
12 FRANCHISEE'S COVENANTS NOT TO COMPETE.............................................21
13 COST CUTTERS' RIGHT OF FIRST REFUSAL TO PURCHASE..................................23
14 TRAINING PROGRAM; PRE-OPENING ASSISTANCE; OPENING ASSISTANCE......................26
15 COST CUTTERS' OTHER OBLIGATIONS...................................................27
16 COST CUTTERS SIGN.................................................................28
17 INSURANCE.........................................................................29
18 INDEPENDENT CONTRACTORS; INDEMNIFICATION..........................................30
19 FINANCIAL STATEMENTS; GROSS REVENUE REPORTS; FORMS AND ACCOUNTING.................31
20 ASSIGNMENT........................................................................33
21 SITE SELECTION; STANDARD STORE LAYOUTS AND PLANS..................................35
22 LEASE AS SECURITY; TERMINATION OF LEASE...........................................36
23 ARBITRATION.......................................................................38
24 ENFORCEMENT.......................................................................40
25 NOTICES...........................................................................43
26 ACKNOWLEDGMENTS...................................................................43
27 DISCLAIMER; FRANCHISEE'S LEGAL COUNSEL............................................45
28 GOVERNING LAW; STATE MODIFICATIONS................................................46
29 DEFINITIONS.......................................................................49
PERSONAL GUARANTY
CONFIDENTIALITY AGREEMENT
LANDLORD'S CONSENT TO ASSIGNMENT OF LEASE
COST CUTTERS(R)
FRANCHISE AGREEMENT
THIS FRANCHISE AGREEMENT (this "Agreement") made, entered into and effective
this _____ day of _______________, 19___, by and between Cost Cutters, a
division of 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
franchise the use of the names "Cost Cutters(R)", Cost Cutters Family Hair
Care(R)" 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 a Cost Cutters hairstyling business
at the location 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 a Cost Cutters business 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 Initial Fee, the Continuing Fees,
and the Advertising 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 legal counsel or
another adviser, 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 a Cost Cutters business;
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:
ARTICLE 1
FRANCHISED LOCATION; GRANT OF FRANCHISE
1.1 FRANCHISED LOCATION. COST CUTTERS grants to the FRANCHISEE a nonexclusive
personal right to operate one Cost Cutters business in conformity with the Cost
Cutters Business System (the "Cost Cutters Business" or the "Business") and
further grants the FRANCHISEE a nonexclusive personal right to operate the
Business using the name Cost Cutters Family Hair Care(R) at the following single
location:
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(the "Franchised Location"). This Agreement does not grant any exclusive
territorial rights to the FRANCHISEE, and COST CUTTERS will have the right to
open and operate, and to grant to other franchisees the right to open and
operate, Cost Cutters businesses in conformity with the Business System using
the Marks at locations anywhere.
1.2 FRANCHISED LOCATION NOT DETERMINED. In the event the Franchised Location has
not yet been determined as of the date of this Agreement, then the geographical
area in which the FRANCHISEE'S Cost Cutters Business is to be located will be
described or defined in an exhibit signed by the parties and attached to this
Agreement. At such time as the address of the Franchised Location is determined,
then the address will be inserted into Article 1.1 of this Agreement.
1.3 RELOCATION. Notwithstanding any provisions of this Agreement to the
contrary, the FRANCHISEE may, with the prior written approval of COST CUTTERS,
relocate the Franchised Location to another location during the term of this
Agreement if the proposed new location does not compete with any Cost Cutters
business operated by COST CUTTERS or COST CUTTERS' Franchisees and the proposed
new location is located within two (2) miles of the Franchised Location. The
failure of the FRANCHISEE to obtain the written approval of COST CUTTERS prior
to the relocation of the Franchised Location, or the failure to have the new
location open for business within ten (10) business days after the Franchised
Location is closed, will be a material breach of this Agreement. In the event
the Franchised Location is relocated pursuant to this provision, the "new"
location, including the real estate and the building, must comply with all
applicable provisions of this Agreement and with COST CUTTERS' then-current
specifications.
1.4 DESTRUCTION OF FRANCHISED LOCATION. In the event the Franchised Location is
destroyed or rendered untenantable by fire, flood or other casualty, the term of
this Agreement will be extended for a period of time equal to the period of time
that the FRANCHISEE is unable to operate its Cost Cutters Business. If the
Franchised Location is rebuilt, repaired or restored to tenantable condition by
the owner of the premises, then the FRANCHISEE must resume business operations
within twelve (12) months of the date that the premises are restored to
tenantable condition by the owner. The FRANCHISEE'S failure to resume business
operations within such twelve (12) month period will constitute abandonment of
the Business. If the premises are not restored by the owner, then the FRANCHISEE
must relocate the Franchised Location pursuant to Article 1.3.
1.5 CONDITIONS TO FRANCHISE. The FRANCHISEE undertakes the obligation to operate
a Cost Cutters hairstyling Business at the Franchised Location under the Cost
Cutters Business System
using the name Cost Cutters Family Hair Care(R) in strict compliance with the
terms and conditions of this Agreement for the entire term of this Agreement.
The rights and privileges granted to the FRANCHISEE by COST CUTTERS under this
Agreement are applicable only to the Franchised Location, are personal in
nature, and may not be used elsewhere or at any other location by the
FRANCHISEE.
1.6 PERSONAL LICENSE. The FRANCHISEE will not have the right to franchise,
subfranchise, license or sublicense its rights under this Agreement. The
FRANCHISEE will not assign or transfer its rights under this Agreement, except
as specifically provided for in this Agreement.
ARTICLE 2
TERM; FRANCHISEE'S OPTION TO REACQUIRE FRANCHISE
2.1 TERM. The term of this Agreement will be for fifteen (15) years, commencing
on the date set forth on Page F-1 of this Agreement. This Agreement will not be
considered executed and will not be enforceable until: (A) it has been signed by
COST CUTTERS and the FRANCHISEE, and, if the FRANCHISEE is a corporation or
partnership, the personal guarantors; and (B) the signed Agreement has been
delivered to the FRANCHISEE.
2.2 RIGHTS UPON EXPIRATION. At the expiration of the term of this Agreement, the
FRANCHISEE will have the option to reacquire the franchise for the Franchised
Location pursuant to Article 2.3 of this Agreement.
2.3 CONDITIONS TO OPTION. At the end of the term of this Agreement, the
FRANCHISEE will have the option to reacquire the franchise for the Franchised
Location provided that the following conditions have been met: (A) the
FRANCHISEE has given COST CUTTERS written notice at least one hundred eighty
(180) days prior to the end of the term of this Agreement of its commitment to
reacquire the franchise for the Franchised Location; (B) during the term of this
Agreement, the FRANCHISEE has complied with all of the material terms and
conditions of this Agreement and has complied with COST CUTTERS' material
operating and quality standards and procedures; (C) all monetary obligations
owed by the FRANCHISEE to COST CUTTERS have been paid or satisfied prior to the
end of the term of this Agreement, and have been timely met throughout the term
of this Agreement; (D) the FRANCHISEE has agreed, in writing, to make the
reasonable capital expenditures necessary to remodel, modernize, upgrade and
redecorate the Franchised Location and to replace and update the furniture,
fixtures, supplies, equipment and techniques used in the FRANCHISEE'S Cost
Cutters Business so that the FRANCHISEE'S Business will reflect the image
portrayed by COST CUTTERS' then-current decor and specifications; (E) the
FRANCHISEE agrees to execute and comply with the then-current standard Franchise
Agreement then being offered to new Franchisees by COST CUTTERS subject further
to the provisions of Article 2.4 of this Agreement; and (F) as of the date the
FRANCHISEE exercises its option to reacquire the franchise for the Franchised
Location, the FRANCHISEE either owns the Franchised Location or has the right to
lease the Franchised Location or a new location as set forth in Article 1.3 for
a term of at least three (3) years.
2.4 TERMS OF OPTION. The FRANCHISEE will have the option to reacquire the
franchise for the Franchised Location under the same terms and conditions then
being offered to other Franchisees by COST CUTTERS under COST CUTTERS'
then-current standard Franchise Agreement. If the FRANCHISEE exercises its right
to reacquire the franchise for the Franchised Location and executes the
then-current standard Franchise Agreement, the FRANCHISEE will not be required
to pay the Initial Fee, if any, specified in the then-current standard Franchise
Agreement. However, the FRANCHISEE will be required to pay the Continuing Fees,
Advertising Fees and any other fees or charges at the rates specified in the
then-current standard Franchise Agreement, and must comply with all other terms
and conditions of
COST CUTTERS' then-current standard Franchise Agreement. The FRANCHISEE
acknowledges that the terms, conditions and economics of the then-current
standard Franchise Agreement of COST CUTTERS may, at that time, vary in
substance and form from the terms, conditions and economics of this Agreement.
ARTICLE 3
COST CUTTERS' RIGHT TO LICENSE MARKS
3.1 LICENSE OF MARKS. COST CUTTERS warrants that, except as provided for herein,
it has the right to license the name Cost Cutters Family Hair Care(R) and the
other Marks and the Business System to the FRANCHISEE. Any and all improvements
made by the FRANCHISEE relating to the Marks or the Business System will become
the sole and absolute property of COST CUTTERS who will have the sole and
exclusive right to register and protect all such improvements in its name in
accordance with applicable law. The FRANCHISEE'S right to use and identify with
the Marks and the Business System will exist concurrently with the term of this
Agreement and such use by the FRANCHISEE will inure exclusively to the benefit
of COST CUTTERS.
3.2 CONDITIONS TO LICENSE OF MARKS. The FRANCHISEE agrees that its nonexclusive
personal right to use the name Cost Cutters Family Hair Care(R) as the name of
the FRANCHISEE'S Business, and its right to use the Marks and the Business
System, apply only to the Cost Cutters Business operated at the Franchised
Location and only so long as the FRANCHISEE will fully perform and comply with
all of the conditions, terms and covenants of this Agreement. The FRANCHISEE
will not have or acquire any rights in any of the Marks or the Business System
other than the right of use as provided herein. The FRANCHISEE will have the
right to use the Marks and the Business System only in the manner prescribed,
directed and approved by COST CUTTERS in writing and will not have the right to
use the Marks in connection with the sale of any products or services other than
those prescribed or approved by COST CUTTERS. If, in the judgment of COST
CUTTERS, the acts of the FRANCHISEE infringe upon or demean the goodwill,
standards of uniformity or quality, or business image associated with the Marks
or the Business System, then the FRANCHISEE will, upon written notice from COST
CUTTERS, immediately modify its use of the Marks and the Business System in the
manner prescribed by COST CUTTERS in writing. Any and all goodwill associated
with the Marks and the Business System will inure exclusively to COST CUTTERS'
benefit and, upon the expiration or termination of this Agreement, no monetary
amount will be assigned as attributable to any goodwill associated with the
FRANCHISEE'S use of the Marks or the Business System. The FRANCHISEE will at no
time take any action whatsoever to contest the validity or ownership of the
Marks and the goodwill associated therewith and will not allege any ownership in
the Marks.
3.3 ADVERSE CLAIMS. If there is a claim by any party that its rights to the
Marks are superior to those of COST CUTTERS and if COST CUTTERS' legal counsel
opines that such claim is legally meritorious, or if there is an adjudication by
a Court of competent jurisdiction that any party's rights to the Marks are
superior to those of COST CUTTERS, then upon receiving written notice from COST
CUTTERS, the FRANCHISEE will, at its expense, immediately make all changes and
amendments to the Marks as may be specified by COST CUTTERS. If so specified,
the FRANCHISEE will immediately cease using the Marks, and will, as soon as
reasonably possible, commence using the new trademarks, trade names, service
marks, logos and commercial symbols designated by COST CUTTERS in writing. The
FRANCHISEE will not make any changes or amendments whatsoever to the Marks or
the Business System unless approved or specified in advance by COST CUTTERS in
writing.
3.4 DEFENSE OR ENFORCEMENT OF RIGHTS TO MARKS. The FRANCHISEE will have no right
to and will not defend or enforce any rights associated with the licensed Marks
or the Business System in any Court or other proceedings for or against
imitation, infringement, prior use, or for any other claim or allegation. The
FRANCHISEE will give COST CUTTERS immediate written notice of any and all claims
or complaints made against or associated with the licensed Marks or the Business
System and will, without compensation for its time and at its expense, cooperate
in all respects with COST CUTTERS in any lawsuits or other proceedings involving
the Marks or the Business System. COST CUTTERS will have the sole and absolute
right to determine whether it will commence or defend any litigation involving
the Marks or the Business System, and the cost and expense of all litigation
incurred by COST CUTTERS, including attorneys' fees, specifically relating to
the Marks or the Business System will be paid by COST CUTTERS.
3.5 FRANCHISEE'S RIGHT TO PARTICIPATE IN LITIGATION. The FRANCHISEE may, at its
expense, retain an attorney to represent it individually in all litigation and
Court proceedings involving the Marks or the Business System, and will do so
with respect to matters involving only the FRANCHISEE; however, COST CUTTERS and
its legal counsel will control and conduct all litigation involving the Marks,
the Business System and the rights of COST CUTTERS. Except as expressly provided
for herein, COST CUTTERS will have no liability to the FRANCHISEE for any costs
that the FRANCHISEE may incur in any litigation, and the FRANCHISEE will pay for
all costs, including attorneys' fees, that it may incur in any litigation or
proceeding arising as a result of the matters referred to under this Article,
unless it tenders the defense to COST CUTTERS in a timely manner pursuant to and
in accordance with Article 3.6.
3.6 TENDER OF DEFENSE BY FRANCHISEE. If the FRANCHISEE is named as a defendant
or party in any action involving the Marks or the Business System and if the
FRANCHISEE is named as a defendant or party solely because the plaintiff is
alleging that the FRANCHISEE does not have the right to use the Marks or the
Business System licensed by COST CUTTERS to the FRANCHISEE at the Franchised
Location pursuant to this Agreement, then the FRANCHISEE will have the right to
tender the defense of the action to COST CUTTERS and COST CUTTERS will, at its
expense, defend the FRANCHISEE in the action provided that the FRANCHISEE has
tendered the defense of the action to COST CUTTERS within seven (7) days after
receiving service of the pleadings or Summons and Complaint relating to the
action. COST CUTTERS will indemnify and hold the FRANCHISEE harmless from any
damages assessed against the FRANCHISEE in any actions resulting solely from the
FRANCHISEE'S use of the Marks and the Business System at the Franchised Location
if the FRANCHISEE has timely tendered the defense of the action to COST CUTTERS.
ARTICLE 4
INITIAL FEE; APPROVAL OF FRANCHISEE
4.1 AMOUNT OF INITIAL FEE. The FRANCHISEE will pay COST CUTTERS an Initial Fee
of ________________________ Dollars ($___________ ), of which __________________
____________________________ ($_____________) will be due and payable on the
date this Agreement is executed by the FRANCHISEE, and the remaining balance of
the Initial Fee will be due and payable on the earlier of: (A) ten (10) days
prior to the date the FRANCHISEE commences initial business operations at its
Cost Cutters Business; or (B) on the date the FRANCHISEE'S furniture, fixtures
and equipment are shipped to the FRANCHISEE. The Initial Fee payable by the
FRANCHISEE is payment to COST CUTTERS for costs incurred by COST CUTTERS in
operating its business, including general sales and administrative costs,
business overhead costs, travel costs, long distance telephone calls, training,
public relations, advertising, marketing and promotion, legal and accounting
fees, compliance
with federal and state franchising and other laws, and for the initial services
and opening assistance rendered to the FRANCHISEE described in this Agreement.
4.2 COST CUTTERS' RIGHT TO REJECT FRANCHISEE. COST CUTTERS will have the
absolute, sole and unilateral right to reject this Agreement or the FRANCHISEE
if COST CUTTERS determines that any financial, personal or other information
provided by the FRANCHISEE to COST CUTTERS is materially false, misleading,
incomplete or inaccurate or the FRANCHISEE (or the FRANCHISEE'S District Manager
if one is employed) is not qualified or competent to properly operate the Cost
Cutters Business because such person has not successfully completed COST
CUTTERS' program or is deemed to be incapable of successfully completing COST
CUTTERS' training program.
4.3 REFUND OF INITIAL FEE. In the event that the FRANCHISEE or this Agreement is
rejected by COST CUTTERS pursuant to Article 4.2, then the Initial Fee will be
refundable to the FRANCHISEE after deducting all reasonable administrative and
out-of-pocket expenses incurred by COST CUTTERS including, but not limited to,
executives' and employees' salaries, costs for the time of its employees,
salespersons' commissions, marketing costs, training costs, attorneys' fees,
accountants' fees, travel expenses and long distance telephone calls. The
FRANCHISEE will be notified by COST CUTTERS in writing if either this Agreement
or the FRANCHISEE is rejected by COST CUTTERS pursuant to Article 4.2. Except as
specifically set forth in this Article 4.3, the Initial Fee payable by the
FRANCHISEE pursuant to Article 4.1 will not be refundable to the FRANCHISEE.
ARTICLE 5
CONTINUING FEES
5.1 APPLICABLE CONTINUING FEES. The FRANCHISEE and COST CUTTERS acknowledge that
as of the date of this Agreement, and including the Business operating pursuant
to this Agreement, the FRANCHISEE owns and operates __________ Cost Cutters
Businesses. Therefore, as of the date of this Agreement (make selection):
___________ Article 5.2 applies or ___________ Article 5.3 applies. It is
understood and agreed that the foregoing selection of whether Articles 5.2 or
5.3 applies is binding only as of the date hereof and reflects the application
of Articles 5.2 or 5.3 to the facts as they exist on the date hereof, and may
change by the application of Articles 5.2 or 5.3 if the number of Businesses
owned and operated by the FRANCHISEE changes after the date hereof.
5.2 AMOUNT OF CONTINUING FEES. In addition to the Initial Fee, the FRANCHISEE
will, commencing on the day which is eighteen (18) weeks after the date that the
FRANCHISEE commences business operations pursuant to this Agreement and
continuing thereafter for the remaining term of this Agreement, pay COST CUTTERS
weekly Continuing Fees equal to a percentage of the FRANCHISEE'S weekly Gross
Revenues, as defined herein, which are received, billed or generated by, as a
result of or from the FRANCHISEE'S Cost Cutters Business. For the first (1st)
through the seventeenth (17th) weeks of the FRANCHISEE'S operation of its Cost
Cutters Business 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 its Cost
Cutters Business pursuant to this Agreement, the FRANCHISEE will pay COST
CUTTERS a weekly Continuing Fee equal to four percent (4%) of the FRANCHISEE'S
Gross Revenues. For the thirty-fifth (35th) and each subsequent week of the
FRANCHISEE'S operation of its Cost Cutters Business for the balance of the
remaining term of this Agreement, the FRANCHISEE will pay COST CUTTERS a weekly
Continuing Fee equal to six percent (6%) of the FRANCHISEE'S Gross Revenues;
provided, however, that commencing with the fifty-third (53rd) week of the
FRANCHISEE'S operation of its Cost Cutters Business and continuing throughout
the remaining term of this Agreement, 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.
The Continuing Fees paid to COST CUTTERS will not be refundable to the
FRANCHISEE under any circumstances.
5.3 MULTI-SALON CONTINUING FEES. Notwithstanding any language to the contrary
contained in Article 5.2 above, for so long as, but only so long as, the
FRANCHISEE owns and operates ten (10) or more other (not including the Cost
Cutters Business to be operated at the Franchised Location) Cost Cutters
businesses, the FRANCHISEE will, commencing on the date the FRANCHISEE commences
business operations pursuant to this Agreement and continuing thereafter for the
remaining term of this Agreement, be obligated to pay to COST CUTTERS weekly
Continuing Fees equal to four percent (4%) of the FRANCHISEE'S weekly Gross
Revenues, as defined herein, which are received, billed or generated by, as a
result of or from the FRANCHISEE'S Cost Cutters Business operated at the
Franchised Location.
5.4 FRANCHISEE'S OBLIGATION TO PAY CONTINUING FEES. The Continuing Fees payable
to COST CUTTERS under this Article will be calculated and paid to COST CUTTERS
by the FRANCHISEE on a weekly basis during the entire term of this Agreement,
and the FRANCHISEE'S failure to pay the weekly Continuing Fees to COST CUTTERS
will be a material breach of this Agreement. The FRANCHISEE'S obligation to pay
COST CUTTERS the weekly Continuing Fees under the terms of this Agreement will
be absolute and unconditional and will remain in full force and effect until the
term of this Agreement has expired. The FRANCHISEE will not have the right to
"offset" and, as a consequence, the FRANCHISEE will timely pay all weekly
Continuing Fees due COST CUTTERS under this Agreement regardless of any claims
or allegations of liability for damages or other payments that the FRANCHISEE
may allege against COST CUTTERS.
5.5 DATE PAYABLE. The weekly Continuing Fees payable by the FRANCHISEE must be
paid to and received by COST CUTTERS on or before the close of business on
Thursday of each week for the preceding week. The weekly Continuing Fees must be
paid and submitted with the FRANCHISEE'S weekly report of Gross Revenues
required under Article 19 of this Agreement.
5.6 INTEREST ON UNPAID CONTINUING FEES. If the FRANCHISEE fails to remit the
weekly Continuing Fees due to COST CUTTERS by Thursday of each week for the
previous week, as provided for in this Agreement, then the unpaid weekly
Continuing Fees due to COST CUTTERS will bear interest at the maximum legal rate
allowable in the state in which the FRANCHISEE'S Cost Cutters Business is
located. In no event, however, will the rate of interest payable by the
FRANCHISEE on the unpaid weekly Continuing Fees due COST CUTTERS under this
Article exceed eighteen percent (18%) per annum simple interest even if the laws
of that state permit a higher annual interest rate. If the FRANCHISEE does not
submit a report of Gross Revenues pursuant to Article 19, then COST CUTTERS will
have the right, in its sole discretion, to estimate the amount of the Continuing
Fees payable by the FRANCHISEE, and the estimated unpaid weekly Continuing Fees
will bear interest at the rate set forth above. The FRANCHISEE will pay COST
CUTTERS for any and all costs incurred by COST CUTTERS in the collection of
unpaid and past due Continuing Fee payments including, but not limited to, COST
CUTTERS' actual attorneys' fees, deposition costs, expert witness fees,
investigation costs, accounting fees, filing fees, and travel expenses.
ARTICLE 6
ADVERTISING
6.1 APPLICABLE ADVERTISING FEES. The FRANCHISEE and COST CUTTERS acknowledge
that as of the date of this Agreement, and including the Business operated
pursuant to this
Agreement, the FRANCHISEE owns and operates __________ Cost Cutters Businesses.
Therefore, as of the date of this Agreement (make selection): __________ Article
6.2 applies or __________ Article 6.3 applies. It is understood and agreed that
the foregoing selection of whether Articles 6.2 or 6.3 applies is binding only
as of the date hereof and reflects the application of Articles 6.2 or 6.3 to the
facts as they exist on the date hereof, and may change by the application of
Articles 6.2 or 6.3 if the number of Businesses owned and operated by the
FRANCHISEE changes after the date hereof.
6.2 ADVERTISING FEES. The FRANCHISEE will pay COST CUTTERS weekly Advertising
Fees equal to a percentage of the FRANCHISEE'S weekly Gross Revenues for deposit
in an advertising fund which will be administered and controlled exclusively by
COST CUTTERS. For the first (1st) through the seventeenth (17th) weeks of the
FRANCHISEE'S operation of its Cost Cutters Business 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 its Cost
Cutters Business pursuant to this Agreement, the FRANCHISEE will pay to COST
CUTTERS a weekly Advertising Fee equal to five percent (5%) of the FRANCHISEE'S
Gross Revenues. For the thirty-fifth (35th) and each subsequent week of the
FRANCHISEE'S operation of its Cost Cutters Business pursuant to this Agreement
for the balance of the remaining term of this Agreement, the FRANCHISEE will pay
to COST CUTTERS a weekly Advertising Fee equal to four percent (4%) of the
FRANCHISEE'S Gross Revenues. The FRANCHISEE'S failure to pay the Advertising
Fees will be a material breach of this Agreement. COST CUTTERS will have the
right to use the advertising fund monies, in its sole discretion, to purchase
and pay for any services or products relating to advertising for Cost Cutters
Franchisees, including the purchase of production materials, ad slicks,
brochures, radio and television commercials, services provided by advertising
agencies, market research and development costs, advertising and promotion
development and production (including all costs relating to media costs for
television, radio, newspaper, direct mail and point-of-purchase advertising, and
all costs of collateral materials required for such advertising), creative
costs, product research costs, all costs and expenses incurred in administering
the advertising fund (including, but not limited to, salaries, travel expenses,
office supplies, and related general and administrative expenses), and all other
costs relating to the advertising and promotion of Cost Cutters Businesses. The
use of the monies in the advertising fund and the administration of the
advertising fund will be under the absolute direction and control of COST
CUTTERS. COST CUTTERS will have the absolute right to determine, in its sole
discretion, the advertising agencies that will be retained, the type, content
and frequency of the advertising, and all other matters pertaining to the
expenditures made by COST CUTTERS from the advertising fund. COST CUTTERS will
not be required to contribute to the advertising fund; however, all Cost Cutters
businesses that are owned and operated by COST CUTTERS will be required to
contribute to the advertising fund in accordance with the terms of their
respective Franchise Agreements. The Advertising Fees paid by the FRANCHISEE
will not be refundable to the FRANCHISEE under any circumstances.
6.3 MULTI-SALON ADVERTISING FEES. Notwithstanding any language to the contrary
contained in Article 6.2 above, for so long as, but only so long as, the
FRANCHISEE owns and operates ten (10) or more other (not including the Cost
Cutters Business to be operated at the Franchised Location) Cost Cutters
businesses, the FRANCHISEE will, commencing on the date the FRANCHISEE commences
business operations pursuant to this Agreement and continuing thereafter for the
remaining term of this Agreement, pay to COST CUTTERS a weekly Advertising Fee
equal to four percent (4%) of the FRANCHISEE'S weekly Gross Revenues, as defined
herein, which are received, billed or generated by, as a result of or from the
FRANCHISEE'S Cost Cutters Business operated at the Franchised Location.
6.4 COST CUTTERS' USE OF ADVERTISING FEES IN FRANCHISEE'S DMA. Commencing on the
first day of October following the effective date of this Agreement, and
continuing each year (October 1 through September 30) for the remaining term of
this Agreement, COST CUTTERS will spend for advertising and promotion
(including, but not limited to, advertising agency fees) in the FRANCHISEE'S
Designated Market Area ("DMA"), as defined herein, at least fifty percent (50%)
of the weekly Advertising Fees paid into the advertising fund by the FRANCHISEE.
6.5 DATE PAYABLE; INTEREST ON UNPAID ADVERTISING FEES. The weekly Advertising
Fees must be paid directly to and received by COST CUTTERS on or before the
close of business on Thursday of each week for the preceding week. Any
Advertising Fees not paid by the FRANCHISEE as required herein will bear
interest at the maximum legal rate applicable in the state in which the
FRANCHISEE'S Cost Cutters Business is located. In no event, however, will the
rate of interest payable by the FRANCHISEE on the unpaid balance due for
Advertising Fees exceed eighteen percent (18%) per annum simple interest. If the
FRANCHISEE does not submit a report of Gross Revenues pursuant to Article 19,
then COST CUTTERS will have the right, in its sole discretion, to estimate the
amount of the Advertising Fees payable by the FRANCHISEE, and the estimated
unpaid weekly Advertising Fees will bear interest at the rate set forth above.
The FRANCHISEE will pay COST CUTTERS for any and all costs incurred by COST
CUTTERS in the collection of unpaid and past due Advertising Fee payments,
including, but not limited to, COST CUTTERS' actual attorneys' fees, deposition
costs, expert witness fees, investigation costs, accounting fees, filing fees
and travel expenses. COST CUTTERS will have the right to collect unpaid
Advertising Fees in its own name or on behalf of the advertising fund; however,
all Advertising Fees collected will be deposited in the advertising fund.
6.6 LOCAL ADVERTISING. In addition to payment of the Advertising Fees required
by Article 6.1 above, each quarter the FRANCHISEE must spend at least one
percent (1%) of its Gross Revenues for approved local media advertising and
promotion. All local media advertising and promotions conducted by the
FRANCHISEE must conform to COST CUTTERS' standards for media advertising and
promotions. On or before the tenth (10th) day following the end of each quarter,
the FRANCHISEE will furnish to COST CUTTERS, in the form prescribed by COST
CUTTERS, an accurate accounting of the FRANCHISEE'S previous quarter's
expenditures for approved local media advertising and promotion. If the
FRANCHISEE has failed to spend at least one percent (1%) of its Gross Revenues
for approved local media advertising and promotion as required under this
Article, then the FRANCHISEE will be required to deposit with COST CUTTERS the
difference between one percent (1%) of its Gross Revenues and what it actually
spent for such advertising, and this amount will be spent by COST CUTTERS in the
FRANCHISEE'S area for any type of advertising or promotion that COST CUTTERS
deems to be in the best interests of the FRANCHISEE'S Business.
6.7 LOCAL DMA ADVERTISING GROUP. At such time as there are two (2) or more Cost
Cutters businesses (including the FRANCHISEE'S Cost Cutters Business) in the
FRANCHISEE'S DMA, COST CUTTERS will have the right to require that the
FRANCHISEE become a member of, participate in, and contribute to a local DMA
advertising group that will conduct and administer media advertising and
promotions in the FRANCHISEE'S DMA. Each local DMA advertising group will have a
membership with equal representation for each Cost Cutters business in the DMA,
including the Cost Cutters businesses owned and operated in the DMA by COST
CUTTERS. The costs for the media advertising and promotions conducted by the
local DMA advertising group will be allocated among and paid by the members of
the local DMA advertising group, based either on a percentage of Gross Revenues
or on a pro rata basis, the selection of which method to be determined by the
majority of the members of the local DMA advertising group. Payments to the
local DMA advertising group by the FRANCHISEE for media advertising and
promotion will be applied to the quarterly media advertising and promotional
expenditures required under Article 6.6 above. However, the FRANCHISEE must
contribute its proportionate share of the costs for the local media advertising
and promotions conducted by the local DMA advertising group, as determined by
the majority of its members in accordance with the method of allocation set
forth above, even if this amount exceeds one percent (1%) of the FRANCHISEE'S
Gross Revenues. Notwithstanding the foregoing, for the first (1st) through the
thirty-fourth (34th) weeks of the FRANCHISEE'S operation of its Cost Cutters
Business pursuant to this Agreement, the FRANCHISEE will not be obligated to pay
any portion of the costs for media advertising and promotions conducted by the
local DMA advertising group.
6.8 ALTERNATE USE OF ADVERTISING FEES. If a local DMA advertising group is
established for the FRANCHISEE'S DMA, COST CUTTERS may, as an alternative to the
advertising and promotional expenditures required to be made by COST CUTTERS in
the FRANCHISEE'S DMA pursuant to Article 6.2 above, contribute this amount to
the local DMA advertising group for the FRANCHISEE'S DMA.
6.9 YELLOW PAGES ADVERTISING. The FRANCHISEE will, at its expense, be required
to advertise continually in the Yellow Pages of the local telephone directories
using trademark listings or display formats approved by COST CUTTERS under an
appropriate listing that is in compliance with the laws of the state in which
the Franchised Location is located including, but not limited to, "Barbers" or
"Beauty". Expenditures by the FRANCHISEE for Yellow Pages advertising will be in
addition to all other advertising requirements set forth in this Agreement.
6.10 GRAND OPENING ADVERTISING. The FRANCHISEE will be required to spend a
minimum of Five Thousand Dollars ($5,000) to implement and conduct grand opening
advertising, marketing, public relations and promotional programs for its Cost
Cutters Business which have been approved by COST CUTTERS in writing.
Expenditures by the FRANCHISEE for grand opening advertising may be applied to
the quarterly local media advertising and promotional expenditures required
pursuant to Article 6.4 of this Agreement.
6.11 LOCAL DMA RECRUITING GROUP. At such time as there are two (2) or more Cost
Cutters businesses (including the FRANCHISEE'S Cost Cutters Business) in the
FRANCHISEE'S DMA, COST CUTTERS will have the right to require that the
FRANCHISEE become a member of, participate in, and contribute to a local DMA
stylist recruiting group that will implement a program for the recruitment of
qualified hair stylists for all Cost Cutters businesses in the FRANCHISEE'S DMA.
Although the DMA stylist recruiting group will be separate from the local DMA
advertising group, membership in, and allocation and payment of expenses of, the
local DMA stylist recruiting group will be determined in accordance with the
guidelines applicable to the local DMA advertising group, as set forth in
Article 6.7 above. Expenditures by the FRANCHISEE for local DMA stylist
recruiting expenses will be in addition to all other advertising requirements
set forth in this Agreement.
ARTICLE 7
QUALITY CONTROL, UNIFORMITY AND STANDARDS
REQUIRED OF THE FRANCHISEE
COST CUTTERS will promulgate, from time to time, uniform standards of quality
and service regarding the business operations of the FRANCHISEE'S Cost Cutters
Business so as to protect and maintain (for the benefit of all Cost Cutters
Franchisees and COST CUTTERS) the distinction, valuable goodwill and uniformity
represented and symbolized by the Marks and the Business System. Accordingly, to
insure that all Cost Cutters franchisees will maintain the uniform requirements
and quality standards for products
and services associated with the Marks and the Business System, the FRANCHISEE
agrees to maintain the uniformity and quality standards required by COST CUTTERS
for all products and services and agrees to comply with the provisions of this
Article to assure the public that all Cost Cutters businesses will be uniform in
nature and will sell and dispense quality products and services:
7.1 IDENTIFICATION OF BUSINESS. The FRANCHISEE will operate its business so that
it is clearly identified and advertised as a Cost Cutters Business. However, the
style and form of the words Cost Cutters Family Hair Care(R) in any advertising,
marketing, public relations, telemarketing or promotional program must have the
prior written approval of COST CUTTERS and must conform to COST CUTTERS'
standards and requirements for use of the Marks. The FRANCHISEE will use the
name Cost Cutters Family Hair Care(R) and all graphics commonly associated with
the Marks which now or hereafter may form a part of COST CUTTERS' Business
System on all paper supplies, furnishings, advertising materials, signs,
stationery, business cards and other articles in the identical combination and
manner prescribed by COST CUTTERS in writing. The FRANCHISEE will, at its
expense, comply with all notices of registration required by COST CUTTERS and
will, at its expense, comply with any other trademark, trade name, service mark,
copyright, patent or other notice marking requirements that are required by COST
CUTTERS or by applicable law.
7.2 IDENTIFICATION AS FRANCHISEE. The FRANCHISEE will not use the words Cost
Cutters Family Hair Care(R) or any combination of these words in its corporate,
partnership or sole proprietorship name. The FRANCHISEE will hold itself out to
the public as an independent contractor operating its Cost Cutters Business
pursuant to a franchise from COST CUTTERS. The FRANCHISEE will clearly indicate
on its business checks, stationery, purchase orders, business cards, receipts,
promotional materials and other written materials that the FRANCHISEE is a Cost
Cutters Franchisee. The FRANCHISEE will display a sign, to be provided by COST
CUTTERS, at the Franchised Location which is clearly visible to the general
public indicating that the Business is independently owned and operated as a
franchised business. The FRANCHISEE will file for a Certificate of Assumed Name
in the manner required by law so as to notify the public that the FRANCHISEE is
operating the franchised Cost Cutters Business as an independent business
pursuant to this Agreement.
7.3 SIGNS. The FRANCHISEE will display only the approved Cost Cutters Sign (the
"Sign") and will not use or display any other signs of any kind or nature
without the express prior written approval of COST CUTTERS.
7.4 ADVERTISING MATERIALS. The FRANCHISEE will use only approved advertising and
promotional materials for the advertising and promotions conducted by the
FRANCHISEE. The FRANCHISEE must obtain written approval from COST CUTTERS prior
to using any other advertising or promotional materials.
7.5 COMPLIANCE WITH STANDARD STORE LAYOUTS AND PLANS. The Franchised Location
and the FRANCHISEE'S business premises must conform to COST CUTTERS' approved
store layouts, floor plans, specifications, exterior and interior decorating
designs and color schemes. The FRANCHISEE will not make any architectural,
structural, design or decorating changes to the interior or exterior of the
Franchised Location without COST CUTTERS' prior written approval. The furniture,
fixtures, supplies and equipment used in the Franchised Location must conform to
the quality standards and uniform requirements established by COST CUTTERS from
time to time.
7.6 PERIODIC REMODELING. The FRANCHISEE will be required to periodically make
the reasonable capital expenditures necessary to remodel, modernize and
redecorate the Franchised Location
and the FRANCHISEE'S business premises, and to replace and modernize the
FRANCHISEE'S furniture, fixtures, supplies and equipment so that the Franchised
Location and the FRANCHISEE'S business premises will reflect the then-common
image intended to be portrayed by COST CUTTERS ("remodeling"). All remodeling of
the Franchised Location and the FRANCHISEE'S business premises must be done in
accordance with the standards and specifications as prescribed by COST CUTTERS
from time to time and with the prior written approval of COST CUTTERS. All
replacements for the furniture, fixtures, supplies and equipment must conform to
COST CUTTERS' then-current quality standards and must be approved by COST
CUTTERS in writing. The FRANCHISEE will begin remodeling the Franchised Location
within three (3) months from the date that the FRANCHISEE receives written
notice from COST CUTTERS specifying the required remodeling and will diligently
complete such remodeling within a reasonable time after its commencement. Except
as provided in Article 7.12 of this Agreement, the FRANCHISEE will not be
required to remodel the Franchised Location or to replace and modernize its
furniture, fixtures, supplies and equipment more than once every five (5) years
during the term of this Agreement. The FRANCHISEE'S failure to comply with the
requirements of this Article 7.6 will be a material breach of this Agreement.
7.7 USE OF MARKS AND BUSINESS SYSTEM. The FRANCHISEE will use the Marks and the
Business System in strict compliance with the quality standards, moral and
ethical standards, operating procedures, specifications, requirements and
instructions required by COST CUTTERS, which may be amended and supplemented by
COST CUTTERS from time to time.
7.8 PRODUCTS AND SERVICES. The FRANCHISEE will offer for sale all, but only
those, products and services prescribed and approved by COST CUTTERS in writing.
The FRANCHISEE will purchase and carry the full line of COST CUTTERS' exclusive
brand shampoos, conditioners, finishing products and other hair care products at
such minimum levels as may be established by COST CUTTERS. The FRANCHISEE
acknowledges and agrees that it will either: (A) execute and deliver to COST
CUTTERS such sales tax exemption certificates or other documents as may be
reasonably required by COST CUTTERS to establish that the FRANCHISEE'S purchase
of such products from COST CUTTERS is exempt from any and all sales, use or
excise taxes; or (B) pay COST CUTTERS the amount of any sales, use or excise
taxes applicable to the FRANCHISEE'S purchase of such products. The FRANCHISEE
will conform to all customer service standards prescribed by COST CUTTERS in
writing. The FRANCHISEE will have the absolute right to sell all products and
services at whatever prices and on whatever terms it deems appropriate. The
FRANCHISEE will only sell the approved products and services to the FRANCHISEE'S
retail customers at the Franchised Location and will not sell any products or
services at retail or wholesale at or from any other location.
7.9 COST CUTTERS IMAGE. The FRANCHISEE acknowledges that the image intended to
be portrayed by COST CUTTERS is that of a chain of hairstyling businesses that
cater to cost conscious, value-minded customers who are seeking reasonably
priced hair care services and products. Consequently, the FRANCHISEE will sell
only those products that comply with the image portrayed by COST CUTTERS for
Cost Cutters businesses and the FRANCHISEE will not offer for sale in its Cost
Cutter Business "expensive" (as determined by COST CUTTERS) hair care products
or other products that are inconsistent with the Cost Cutters image and that
have not been approved by COST CUTTERS in writing.
7.10 OPERATIONS MANUAL. COST CUTTERS will provide the FRANCHISEE with one copy
of COST CUTTERS' confidential Operations Manual (the "Manual"). The FRANCHISEE
will conform to the common image and identity created by the products and
services associated with Cost Cutters businesses which are portrayed and
described by the Manual, and the FRANCHISEE will conform to all
changes and modifications made to the Manual by COST CUTTERS and provided to the
FRANCHISEE that are deemed necessary by COST CUTTERS to: (A) improve the
standards of service and products offered for sale to the public under the
Business System; (B) protect the goodwill associated with the Marks; (C) improve
the operation of the FRANCHISEE'S Cost Cutters Business; or (D) maintain the
product and service consistency required by COST CUTTERS. COST CUTTERS reserves
the right to revise the Manual at any time during the term of this Agreement.
The Manual and all written supplements, changes and modifications to the Manual
are confidential in all respects and are and will remain the sole and exclusive
property of COST CUTTERS. The FRANCHISEE will not use the Manual or any
information contained therein in connection with the operation of any other
business or for any purpose other than the operation of the FRANCHISEE'S Cost
Cutters Business.
7.11 APPROVED SUPPLIERS. The FRANCHISEE will purchase from suppliers approved in
writing by COST CUTTERS all products, goods, merchandise, supplies, sundries,
toiletries, grooming aids, furniture, fixtures, equipment and services
(sometimes referred to in this Agreement as "goods and services") to be used or
sold by the FRANCHISEE in conjunction with the operation of its Cost Cutters
Business which COST CUTTERS determines meet the standards of quality and
uniformity required to protect the valuable goodwill and uniformity symbolized
by and associated with the Marks and the Business System. The FRANCHISEE will
have the right and option to purchase all goods and services from other or
outside suppliers provided that such goods and services conform in quality to
COST CUTTERS' standards and specifications. If the FRANCHISEE desires to
purchase any goods and services from other suppliers, then, if requested by COST
CUTTERS, the FRANCHISEE will submit samples, specifications, and information
regarding the manufacturer to COST CUTTERS for review to determine whether the
goods and services comply with COST CUTTERS' standards and specifications. Any
expenses incurred by COST CUTTERS in evaluating unapproved products will be paid
by the FRANCHISEE. The written approval of COST CUTTERS must be obtained by the
FRANCHISEE prior to the time that any previously unapproved goods and services
are used or sold at the FRANCHISEE'S Cost Cutters Business. All such goods and
services must be those classified as "professional" goods and services sold or
provided only in professional hair salons.
7.12 REPAIR AND MAINTENANCE. The FRANCHISEE will, at its expense, repair, paint
and keep in a clean and sanitary condition the interior, the exterior and, where
applicable, the grounds of the Franchised Location and the FRANCHISEE'S business
premises, and will replace all floor coverings, wall coverings, light fixtures,
curtains, blinds, shades, furniture, room furnishings, wall hangings, fixtures
and other decor items as such items become worn-out, soiled or are in disrepair.
All equipment will be kept in good working order by the FRANCHISEE at all times
and will meet COST CUTTERS' quality standards. All replacement equipment must
comply with COST CUTTERS' then-current standards and specifications.
7.13 COMPLIANCE WITH APPLICABLE LAWS. The FRANCHISEE will, at its expense,
comply with all applicable federal, state, city, local and municipal laws,
ordinances, rules and regulations pertaining to the operation of the
FRANCHISEE'S Business, 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 the licenses and permits required by law
for the FRANCHISEE'S Business, for qualifying for and obtaining all such
licenses and permits, and for maintaining all such licenses and permits in full
force and effect.
7.14 PAYMENT OF OBLIGATIONS. The FRANCHISEE must timely pay all of its
noncontested and liquidated obligations and liabilities due and payable to COST
CUTTERS, and to suppliers, lessors
and creditors of the FRANCHISEE. The FRANCHISEE'S failure to timely pay all such
obligations will be a material breach of this Agreement.
7.15 PAYMENT OF TAXES. The FRANCHISEE will be absolutely and exclusively
responsible and liable for filing all required tax returns and for the prompt
payment of all federal, state, city and local taxes including, but not limited
to, individual and corporate income taxes sales and use taxes, franchise taxes,
gross receipts taxes, employee withholding taxes, F.I.C.A. taxes and personal
property and real estate taxes payable in connection with the FRANCHISEE'S
Business. COST CUTTERS will have no liability for these or any other taxes and
the FRANCHISEE will indemnify COST CUTTERS for any such taxes that may be
assessed or levied against COST CUTTERS which arise or result from the
FRANCHISEE'S Cost Cutters Business. It is expressly understood and agreed by the
Personal Guarantors to this Agreement that their personal guaranty applies to
the prompt filing of all returns and the prompt payment of all taxes which arise
or result from the FRANCHISEE'S Cost Cutters Business.
7.16 REIMBURSEMENT OF COST CUTTERS FOR TAXES. In the event any "franchise" or
other tax (other than income taxes) which is based upon the Gross Revenues,
receipts, sales, business activities or operation of the FRANCHISEE'S Business
is imposed upon COST CUTTERS by any taxing authority, then the FRANCHISEE will
reimburse COST CUTTERS in an amount equal to the amount of such taxes and
related costs imposed upon and paid by COST CUTTERS. The FRANCHISEE will be
notified in writing when COST CUTTERS is entitled to reimbursement for the
payment of such taxes and, in that event, the FRANCHISEE will pay COST CUTTERS
the amount specified in the written notice within ten (10) days of receipt of
the written notice.
7.17 BUSINESS HOURS; PERSONNEL. The FRANCHISEE'S Cost Cutters Business will be
open for business on such days and for such hours as COST CUTTERS may designate.
The FRANCHISEE will, during business hours, have a salon manager on duty who is
responsible for supervising the employees and the business operations of the
FRANCHISEE'S Business. The FRANCHISEE will have a sufficient number of
adequately trained and competent personnel on duty at all times to guarantee
efficient service to the FRANCHISEE'S customers. The FRANCHISEE will require its
employees to wear the standard attire or uniforms approved by COST CUTTERS. All
persons employed by the FRANCHISEE must practice good personal hygiene and must
wear clean and neat attire or uniforms. The FRANCHISEE must employ at least one
(1) full-time person (a "District Manager") for each six (6) Cost Cutters
Businesses owned and operated by the FRANCHISEE. 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, including supervision of
the salon managers and assistant managers. The District Managers must devote
their full time and attention to administering and overseeing the operations of
the FRANCHISEE'S Cost Cutters Businesses. All District Managers must attend and
successfully complete the training program required by COST CUTTERS, and be
certified and approved by COST CUTTERS in writing.
7.18 COST CUTTERS' INSPECTION RIGHTS. COST CUTTERS will have the absolute right
to inspect and take photographs and videotapes of the interior and exterior of
the Franchised Location at all reasonable times during business hours, to
interview the FRANCHISEE'S employees, to examine representative samples of all
goods and equipment sold or used at the FRANCHISEE'S Cost Cutters Business, and
to evaluate the quality of the services provided by the FRANCHISEE to its
customers. COST CUTTERS will have the right to use all photographs and
videotapes of the FRANCHISEE'S Cost Cutters Business for such purposes as COST
CUTTERS deems appropriate including, but not limited to, use in advertising,
marketing and promotional materials, and as evidence in any court or arbitration
proceeding. The FRANCHISEE will not be entitled to, and hereby expressly waives,
any right that it may have to be compensated by COST CUTTERS, its advertising
agencies or any other Cost Cutters
franchisees for the use of such photographs or videotapes for advertising,
marketing, promotional or litigation purposes.
7.19 SECURITY INTEREST. This Agreement and the franchise granted to the
FRANCHISEE hereunder may not be the subject of a security interest, lien, levy,
attachment or execution by the FRANCHISEE'S creditors or any financial
institution, except with the prior written approval of COST CUTTERS.
7.20 CREDIT CARDS. The FRANCHISEE will honor all credit cards approved by COST
CUTTERS. The FRANCHISEE must obtain the written approval of COST CUTTERS prior
to honoring any previously unapproved credit cards or other credit devices.
7.21 DEFAULT NOTICES. The FRANCHISEE will immediately deliver to COST CUTTERS a
copy of any notice of default received from any landlord for the Franchised
Location or from any mortgagee, trustee under any deed of trust or lessor with
respect to the FRANCHISEE'S Cost Cutters Business, and copies of all
notifications of any lawsuits, contract breaches, consumer claims, federal or
state administrative or agency proceedings or investigations, or other civil or
governmental claims, actions or proceedings relating to the FRANCHISEE'S Cost
Cutters Business. Upon request from COST CUTTERS, the FRANCHISEE will provide
additional information as may be required by COST CUTTERS regarding the alleged
default, lawsuit, claim or proceeding or any subsequent action or proceeding in
connection with the alleged default, lawsuit, claim or proceeding.
7.22 SALE OF CAPITAL STOCK TO PUBLIC. If the FRANCHISEE is a corporation and
desires to sell any part of its authorized capital stock to the public, then the
FRANCHISEE will provide COST CUTTERS with a copy of the proposed offering
circular or prospectus for its review prior to the time that the offering
circular or prospectus is filed with any state securities commission or the
Securities and Exchange Commission. The shareholders of the FRANCHISEE who owned
the capital stock of the FRANCHISEE prior to the public offering will, at all
times, retain at least a fifty-one percent (51%) ownership of the issued and
outstanding shares of stock of the FRANCHISEE. COST CUTTERS will have the right
to attend all "due diligence" meetings held in preparation for the offer to sell
the FRANCHISEE'S capital stock to the public, and the FRANCHISEE will give COST
CUTTERS at least five (5) business days prior written notice of such meetings.
The FRANCHISEE will not offer its capital stock by use of the name Cost
Cutters(R), Cost Cutters Family Hair Care(R) or any name deceptively similar
thereto. The FRANCHISEE will not have the right to sell any of its capital stock
to the public or to any other person or entity until the FRANCHISEE has complied
in all respects with all applicable provisions of this Agreement, including the
applicable provisions of Articles 13 and 20.
7.23 OPERATION OF COST CUTTERS BUSINESS. The FRANCHISEE will be totally and
solely responsible for the operation of its Cost Cutters Business, and will
control, supervise and manage all the employees, agents and independent
contractors who work for or with the FRANCHISEE. The FRANCHISEE will be
responsible for the acts of its employees, agents and independent contractors,
and will take all reasonable business actions necessary to ensure that its
employees, agents and independent contractors comply with all federal, state and
local laws, rules and regulations including, but not limited to, all employment
laws, discrimination laws, sexual harassment laws and laws relating to the
disabled. COST CUTTERS will not have any right, obligation or responsibility to
control, supervise or manage the FRANCHISEE'S employees, agents or independent
contractors.
ARTICLE 8
CONFIDENTIAL OPERATIONS MANUAL AND OTHER INFORMATION
8.1 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 conduct its Business 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.
8.2 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
Business, 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.
8.3 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 Business 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.
8.4 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 a Cost Cutters business 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 who must have access to it in order to operate
the FRANCHISEE'S Cost Cutters Business. Any and all information, knowledge and
know-how including, without limitation, 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.
8.5 CONFIDENTIALITY AGREEMENTS WITH EMPLOYEES. The FRANCHISEE will require all
of the FRANCHISEE'S employees who have access to the Manual or other
confidential information to execute an agreement, in the form attached hereto as
Exhibit "A" 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.
8.6 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 8.5, 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 9
COST CUTTERS' TERMINATION RIGHTS
9.1 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 fails to open and commence
operations of its Cost Cutters Business within one hundred eighty (180) days of
the date of this Agreement; (B) the FRANCHISEE violates any material provision,
term or condition of this Agreement including, but not limited to, failure to
timely pay the Initial Fee or any Continuing Fees, Advertising Fees, monetary
obligations or other fees to COST CUTTERS; (C) 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; (D) the FRANCHISEE fails to timely pay any of its uncontested
obligations or liabilities due and owing to COST CUTTERS, suppliers, banks,
purveyors, other creditors or any federal, state or municipal government
(including, if applicable, federal and state taxes); (E) the FRANCHISEE is
determined to be insolvent within the meaning of any state or federal law, files
for bankruptcy or is adjudicated a bankrupt under any state or federal law; (F)
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; (G) 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; (H) the FRANCHISEE fails to
finance or purchase and pay for the leasehold improvements, furniture, fixtures,
supplies and equipment required for its Cost Cutters Business prior to the
opening of the FRANCHISEE'S Business; (I) the FRANCHISEE'S lease for the
Franchised Location is terminated or canceled for nonpayment of rent or other
legal reasons; (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 Business
or any felony; or (K) the FRANCHISEE voluntarily or otherwise abandons, as
defined herein, the Cost Cutters Business.
9.2 NOTICE OF BREACH. Except as provided for in Article 9.5 and Article 9.6 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 the alleged breach set forth
in the written notice within the applicable period of time, then this Agreement
may be terminated by COST CUTTERS as provided for 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.
9.3 ARBITRATION. If the FRANCHISEE gives notice of Arbitration, as provided for
in this Agreement, within the time period established in Article 9.2 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.
9.4 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 such written notice is given.
9.5 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 Business, or any felony; (B) the FRANCHISEE voluntarily or otherwise
abandons, as defined herein, the FRANCHISEE'S Cost Cutters Business; (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; or (D) the FRANCHISEE fails or
refuses to produce its books and financial records for audit by COST CUTTERS in
accordance with Article 19.4.
9.6 NOTICE OF IMMEDIATE TERMINATION. If this Agreement is terminated by COST
CUTTERS pursuant to Article 9.5 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 such written notice is given.
9.7 DAMAGES. In the event this Agreement is terminated by COST CUTTERS pursuant
to Article 9, or if the FRANCHISEE breaches this Agreement by a wrongful
termination or a termination that is not in accordance with the terms and
conditions of Article 10 of this Agreement, then COST CUTTERS will be entitled
to seek recovery from the FRANCHISEE for all of the damages 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 Continuing
Fees, Advertising Fees and other fees that would have been payable by the
FRANCHISEE for the remaining term of this Agreement.
9.8 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 10
FRANCHISEE'S TERMINATION RIGHTS
10.1 GROUNDS FOR TERMINATION. The FRANCHISEE will have the right and privilege
to terminate this Agreement, as provided for herein, if: (A) COST CUTTERS
violates any material provision, term or condition of this Agreement; (B) COST
CUTTERS fails to timely pay any material obligations due and owing to the
FRANCHISEE; or (C) COST CUTTERS makes an assignment of its assets for the
benefit of creditors.
10.2 NOTICE OF BREACH. The FRANCHISEE will not have the right to terminate this
Agreement or to commence any Arbitration proceeding, action or lawsuit against
COST CUTTERS for breach of this Agreement, injunctive relief, violation of any
federal, state or local law, violation of common law (including allegations of
fraud and misrepresentation), rescission, general or punitive damages, or
termination, unless and until written notice setting forth the alleged breach or
violation in detail has been given to COST CUTTERS by the FRANCHISEE and COST
CUTTERS fails to commence the actions necessary to correct the alleged breach or
violation within thirty (30) days after having been given such written notice,
or to correct the alleged breach within one hundred twenty (120) days after
having been given such written notice. If COST CUTTERS fails to commence the
actions necessary to correct the alleged breach or violation as provided herein
within thirty (30) days after having been given such written notice, or to
correct the alleged breach within one hundred twenty (120) days after having
been given such written notice, then this Agreement may be terminated by the
FRANCHISEE as provided for in this Agreement. For the purposes of this
Agreement, an alleged breach of this Agreement by COST CUTTERS will be deemed to
be "corrected" if both COST CUTTERS and the FRANCHISEE agree in writing that the
alleged breach or violation has been corrected.
10.3 ARBITRATION. If COST CUTTERS gives notice of Arbitration, as provided for
in this Agreement, within thirty (30) days from the date COST CUTTERS was given
written notice of the alleged breach from the FRANCHISEE, then the FRANCHISEE
will not have the right to terminate this Agreement until the facts of the
alleged breach have been submitted to Arbitration, the Arbitrator determines
that COST CUTTERS has breached this Agreement and COST CUTTERS fails to correct
the breach within the time limitation set forth herein. If the Arbitrator
determines that COST CUTTERS breached this Agreement as alleged by the
FRANCHISEE in the written notice given to COST CUTTERS, then COST CUTTERS will
have thirty (30) days from the date the Arbitrator issues a written
determination on the matter to correct the specified breach of this Agreement.
If COST CUTTERS timely corrects the specified breach of this Agreement, then
this Agreement will remain in full force and effect. If COST CUTTERS does not
correct the specified breach of this Agreement, then the FRANCHISEE will have
the right to terminate this Agreement by giving COST CUTTERS written notice that
this Agreement is terminated and, in that event, the effective date of
termination of this Agreement will be the day the written notice of termination
is given to COST CUTTERS. For the purposes of this Agreement, any controversy or
dispute on the issue of whether COST CUTTERS has timely corrected the specified
breach of this Agreement will also be subject to Arbitration as provided for
herein. The time limitation set forth in this Article within which COST CUTTERS
may demand Arbitration of a dispute or controversy relating to the right of the
FRANCHISEE to terminate this Agreement for an alleged breach will be mandatory.
If COST CUTTERS fails to comply with the time limitation set forth in this
Article, then the FRANCHISEE may terminate this Agreement as provided for
herein.
10.4 WAIVER. The FRANCHISEE must give COST CUTTERS immediate written notice of
an alleged breach or violation of this Agreement after the FRANCHISEE has
knowledge of, determines or is of the opinion that there has been an alleged
breach or violation of this Agreement by COST CUTTERS. If the FRANCHISEE fails
to give written notice to COST CUTTERS as provided for herein of an alleged
breach or violation of this Agreement within one (1) year from the date that the
FRANCHISEE has knowledge of, determines, is of the opinion that, or becomes
aware of facts and circumstances reasonably indicating that the FRANCHISEE may
have a claim under any state law, federal law or common law because there has
been an alleged breach by COST CUTTERS, then the alleged breach or violation
will be deemed to be condoned, approved and waived by the FRANCHISEE, the
alleged breach or violation will not be deemed to be a breach or violation of
this Agreement by COST CUTTERS, and the FRANCHISEE will be barred from
commencing any legal or other action against COST CUTTERS for that alleged
breach or violation.
10.5 INJUNCTIVE RELIEF AVAILABLE TO COST CUTTERS. Notwithstanding any of the
foregoing provisions, if the FRANCHISEE gives COST CUTTERS written notice of an
alleged breach or violation of this Agreement, or of any laws that give rise to
a claim that the FRANCHISEE has the right to terminate this Agreement, then COST
CUTTERS will have the absolute right to immediately commence legal action
against the FRANCHISEE to enjoin and prevent the termination of this Agreement
without giving the FRANCHISEE any notice and without regard to any waiting
period that may be contained in this Agreement. If COST CUTTERS commences such
legal action against the FRANCHISEE, then the FRANCHISEE will not have the right
to terminate this Agreement as provided for herein unless and until it has been
determined that COST CUTTERS has breached this Agreement in the manner alleged
by the FRANCHISEE, and then only if COST CUTTERS fails to commence the actions
necessary to correct the breach or violation within thirty (30) days after a
final decision has been entered against COST CUTTERS and all time for appeals by
COST CUTTERS has expired. If COST CUTTERS commences any legal action against the
FRANCHISEE as contemplated by this provision, which will include actions for
injunctive relief against the FRANCHISEE to enjoin termination of this
Agreement, then unless applicable law provides to the contrary, COST CUTTERS
will not be required to post any bond or security whatever in such legal action.
ARTICLE 11
FRANCHISEE'S OBLIGATIONS UPON TERMINATION OR EXPIRATION
11.1 OBLIGATIONS UPON TERMINATION. In the event this Agreement expires or is
terminated for any reason, then the FRANCHISEE will: (A) within five (5) days
after termination, pay all Continuing Fees, Advertising Fees, and other 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;
(B) return to COST CUTTERS by first class prepaid United States mail all
Manuals, advertising materials and all other printed materials pertaining to the
FRANCHISEE'S Cost Cutters Business; and (C) comply with all other applicable
provisions of this Agreement.
11.2 TERMINATION OF RIGHT TO USE MARKS. Upon expiration or termination of this
Agreement for any reason, the FRANCHISEE'S right to use the name Cost Cutters
Family Hair Care(R), the other Marks and the Business System will terminate
immediately.
11.3 ALTERATION OF FRANCHISED LOCATION. If this Agreement expires or is
terminated for any reason or if the Franchised Location ever ceases to be used
as a Cost Cutters Business, then the FRANCHISEE will, at its expense, alter,
modify and change both the exterior and interior appearance of the Franchised
Location so that it will be easily distinguished from the standard appearance of
a Cost
Cutters business. At a minimum, such changes and modifications to the Franchised
Location will include: (A) repainting and, where applicable, recovering both the
exterior and interior of the Franchised Location with totally different colors,
including removing any distinctive colors and designs from the walls; (B)
removing all fixtures and other decor items and replacing them with other decor
items not of the general type and appearance customarily used only in Cost
Cutters businesses; (C) removing all exterior and interior Cost Cutters signs;
(D) immediately discontinuing use of the approved wall decor items and window
decals; and (E) refraining from using any names, slogans, designs, decor items,
colors or other items which may be confusingly similar to those customarily used
only in Cost Cutters businesses.
11.4 TRANSFER OF TELEPHONE DIRECTORY LISTINGS. Upon termination or expiration of
this Agreement, COST CUTTERS will have the absolute right to notify the
telephone company and all listing agencies of the termination or expiration of
the FRANCHISEE'S right to use all telephone numbers and all classified and other
directory listings for the FRANCHISEE'S Cost Cutters Business or otherwise
placed under the name Cost Cutters Family Hair Care(R), and to authorize the
telephone company and all listing agencies to transfer to COST CUTTERS or its
assignee all telephone numbers and directory listings for the FRANCHISEE'S Cost
Cutters Business. The FRANCHISEE acknowledges that COST CUTTERS has the absolute
right and interest in and to all telephone numbers and directory listings
associated with the Marks, and the FRANCHISEE hereby authorizes COST CUTTERS to
direct the telephone company and all listing agencies to transfer all of the
FRANCHISEE'S telephone numbers and directory listings to COST CUTTERS or its
assignee if this Agreement expires or is terminated for any reason whatever. The
telephone company and all listing agencies will accept this Agreement as
evidence of the exclusive rights of COST CUTTERS to such telephone numbers and
directory listings. This Agreement will constitute the FRANCHISEE'S
authorization for the telephone company and listing agencies to transfer the
telephone numbers and directory listings for the FRANCHISEE'S Cost Cutters
Business to COST CUTTERS, and will constitute a release of the telephone company
and listing agencies by the FRANCHISEE from any and all claims, actions and
damages that the FRANCHISEE may at any time have the right to allege against
them in connection with this Article 11.
ARTICLE 12
FRANCHISEE'S COVENANTS NOT TO COMPETE
12.1 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, 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 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.
12.2 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 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, barber or other business that is in any way
competitive with or similar to the Cost Cutters businesses operated by COST
CUTTERS or COST CUTTERS' franchisees, except with the prior written consent of
COST CUTTERS.
12.3 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 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) franchise, 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, barber 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 within six (6) miles of
either the Franchised Location or any other Cost Cutters businesses 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 and the six (6)
mile limit are the reasonable and necessary time and distances 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 resell and/or develop a new Cost
Cutters business at or in the area near the Franchised Location.
12.4 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
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 acknowledge 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 prior to
obtaining injunctive relief pursuant to this Agreement in any action where COST
CUTTERS is seeking to enjoin the FRANCHISEE, the FRANCHISEE'S shareholders or
the Personal Guarantors from violating the provisions of 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 and 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.
12.5 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 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 the 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'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 13
COST CUTTERS' RIGHT OF FIRST REFUSAL TO PURCHASE
13.1 NOTICE OF PROPOSED SALE. The FRANCHISEE will not sell, pledge, assign,
trade, transfer, lease, sublease, or otherwise dispose of any interest in or any
part of (A) the FRANCHISEE'S Cost Cutters Business, (B) the Franchised Location,
(C) the building or premises lease for the Franchised Location, (D) the
furniture, fixtures, equipment, inventory or other assets used in the
FRANCHISEE'S Cost Cutters Business (except for the sale of any of such items in
the normal course of business), (E) this Agreement, (F) any capital stock in the
FRANCHISEE, or (G) the land and building (if any) for the FRANCHISEE'S Cost
Cutters Business to any party without first offering the same to COST CUTTERS by
written notice that contains all material terms and conditions of the proposed
sale or transfer, including price and payment terms. Within ten (10) business
days after receipt by COST CUTTERS of the FRANCHISEE'S written offer specifying
the proposed price and terms of the proposed sale, COST CUTTERS will give the
FRANCHISEE written notice which will either waive its right of first refusal to
purchase or will state an interest in negotiating to purchase according to the
proposed terms. If COST CUTTERS commences negotiations to purchase the
FRANCHISEE'S Business as set forth herein, then the FRANCHISEE may not sell the
business or assets to a third party for at least sixty (60) days or until COST
CUTTERS and the FRANCHISEE agree in writing that the negotiations have
terminated, whichever comes earlier. If COST CUTTERS waives its right to
purchase, then the FRANCHISEE will have the right to complete the sale or
transfer of the Business according to the terms set forth in the written notice
to COST CUTTERS; however, any such sale, transfer or assignment to a third party
is expressly subject to the terms and conditions set forth in Article 20 of this
Agreement. If the FRANCHISEE does not consummate the sale to a third party upon
the terms and conditions previously presented to COST CUTTERS in writing, but
negotiates a sale price with a third party that is lower or on different terms
than the stated price or terms presented to COST CUTTERS, then the modified
offer must be recommunicated or made to COST CUTTERS by the FRANCHISEE. COST
CUTTERS will give the FRANCHISEE written notice within fifteen (15) business
days thereafter which will state whether or not it is interested in purchasing
the Business according to the proposed new terms. This provision will not apply
to the assignment or pledge of any of the assets described above (with the
exception of this Agreement) by the FRANCHISEE to a bank, financial institution
or other lender in connection with providing financing for the leasehold
improvements, furniture, fixtures, supplies, inventory and equipment used in, or
operating funds for, the FRANCHISEE'S Cost Cutters Business.
13.2 COMPLIANCE WITH AGREEMENT. The FRANCHISEE'S obligations under this
Agreement including, but not limited to, its obligations to pay the Continuing
Fees, the Advertising Fees and to operate as a Cost Cutters Business, will in no
way be affected or changed because of COST CUTTERS' nonacceptance of the
FRANCHISEE'S written offer to purchase the FRANCHISEE'S
Business or assets, and, as a consequence, the terms and conditions of this
Agreement will remain in full force and effect. COST CUTTERS' decision not to
exercise the rights granted to it pursuant to this Article will not, in any way,
be deemed to grant the FRANCHISEE the right to terminate this Agreement and will
not affect the term of this Agreement. Moreover, if COST CUTTERS does not
exercise the rights granted to it pursuant to this Article and if the FRANCHISEE
complies with Article 20 and sells or otherwise disposes of its Business or
assets to a third party, then both the FRANCHISEE and the third party purchaser
will be required to comply in all respects with the terms and conditions of this
Agreement, and the sale of the Business or assets will not relieve the
FRANCHISEE of its obligations under this Agreement. Any sale, transfer or
assignment of the Business or assets of the FRANCHISEE'S Cost Cutters Business
that does not include assignment of this Agreement to the transferee will
constitute a wrongful termination of this Agreement.
13.3 TRANSFER OF AGREEMENT TO CORPORATION. If the FRANCHISEE is not a
corporation, then the FRANCHISEE will have the right to assign and transfer this
Agreement to a corporation in which the FRANCHISEE owns and controls at least
fifty-one percent (51%) of the issued and outstanding capital stock of the
corporation pursuant to Article 20.2 of this Agreement. If the FRANCHISEE
transfers this Agreement to a corporation owned or controlled by the FRANCHISEE
pursuant to Article 20.2, which will not excuse or release the FRANCHISEE from
any obligations under this Agreement, then the shares of capital stock of the
FRANCHISEE'S corporation (the "capital stock") may not be sold, pledged,
assigned, traded, transferred or otherwise disposed of by the FRANCHISEE until
the capital stock has been first offered to COST CUTTERS in writing under the
same terms and conditions offered to any third party as provided for in Article
13.1.
13.4 TRANSFER OF CAPITAL STOCK. If the FRANCHISEE is a corporation, then the
shares of capital stock of the FRANCHISEE owned by the FRANCHISEE'S shareholders
("capital stock") may not be sold, pledged, assigned, traded, transferred or
otherwise disposed of by the FRANCHISEE'S shareholders until the capital stock
has been first offered to COST CUTTERS in writing under the same terms and
conditions offered to any third party. In the event the FRANCHISEE'S
shareholders desire to sell, assign, trade, transfer or dispose of their shares
of capital stock, the FRANCHISEE'S shareholders will first offer them to COST
CUTTERS in writing under the same terms and conditions as being offered to any
third party. COST CUTTERS will have fifteen (15) business days within which to
accept any shareholder's offer to sell, assign, trade, transfer or dispose of
the capital stock. Notwithstanding the terms of this Article, the FRANCHISEE'S
shareholders may bequeath, sell, assign, trade or transfer their capital stock
to the other shareholders of the FRANCHISEE without first offering it to COST
CUTTERS, provided that each proposed transferee shareholder who will be involved
in the operations or management of the Cost Cutters Business has successfully
completed COST CUTTERS' training program and has been certified by COST CUTTERS
and is, in COST CUTTERS' reasonable judgment, qualified from a managerial and
financial standpoint to operate the Cost Cutters Business in an economic and
businesslike manner. The FRANCHISEE and the FRANCHISEE'S shareholders must
provide COST CUTTERS with written notice of all such transactions, and the
proposed transferee shareholders must agree to be personally liable under this
Agreement and enter into a written agreement where they agree to perform all the
terms and conditions contained in this Agreement. All shares of capital stock
issued by the FRANCHISEE to its shareholders must bear the following legend:
The shares of capital stock represented by this stock
certificate are subject to a written Franchise Agreement which grants Cost
Cutters, a division of The Barbers, Hairstyling for Men & Women, Inc., the right
of first refusal to purchase these shares of capital stock from the shareholder.
Any person acquiring the shares of capital stock represented by this stock
certificate will be subject to the terms and conditions of the Franchise
Agreement between the company specified on the face of this stock
certificate and Cost Cutters, a division of The Barbers, Hairstyling for Men &
Women, Inc., which includes provisions containing covenants not to compete that
apply to all shareholders.
13.5 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 Article 13 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.
13.6 SELLING SHAREHOLDERS SUBJECT TO COVENANT NOT TO COMPETE. Any shareholder of
the FRANCHISEE that sells or assigns his or her capital stock in the FRANCHISEE
will continue to be subject to provisions of Article 12 of this Agreement after
the sale or assignment.
13.7 RIGHT OF COST CUTTERS TO PURCHASE BUSINESS ASSETS. If this Agreement
expires or is terminated by either COST CUTTERS or the FRANCHISEE for any reason
whatsoever, or if the FRANCHISEE wrongfully terminates this Agreement by failing
to comply with Article 10 or otherwise, or if the FRANCHISEE at any time ceases
to do business at the Franchised Location as a Cost Cutters Business, then COST
CUTTERS will have the right, but not the obligation, to purchase the then-usable
furniture, supplies, inventory, fixtures and equipment, and all other assets
that are required by COST CUTTERS for a standard Cost Cutters business and owned
by the FRANCHISEE in its Cost Cutters Business (the "Business Assets"). COST
CUTTERS will not purchase any assets from the FRANCHISEE that are not part of
the standard Cost Cutters business. The FRANCHISEE must give COST CUTTERS
written notice listing the cost of each one of the Business Assets in detail and
the FRANCHISEE'S asking price for the Business Assets within twenty-four (24)
hours after the FRANCHISEE ceases to do business as a Cost Cutters Business, or
after this Agreement expires or is terminated by either party, or is wrongfully
terminated by the FRANCHISEE.
13.8 DETERMINATION OF FAIR MARKET VALUE. If the FRANCHISEE fails to give COST
CUTTERS written notice of the asking price of the Business Assets, or if COST
CUTTERS and the FRANCHISEE cannot agree on the price of the Business Assets,
then either party will have the right to demand that the price of the Business
Assets be determined by Arbitration in accordance with the Rules and Regulations
of the American Arbitration Association. The Arbitration hearing will be held as
soon as possible, but in no event later than seven (7) business days from the
date Arbitration is demanded by either party. The Arbitrator will determine the
fair market value of the Business Assets. The Arbitrator will not consider any
value for goodwill associated with the names Cost Cutters(R) or Cost Cutters
Family Hair Care(R) or for going concern value in determining the fair market
value of the Business Assets since the right of purchase granted to COST CUTTERS
pursuant to this provision applies only after this Agreement has expired or has
been terminated, or the FRANCHISEE has ceased doing business. Furthermore, the
Arbitrator will not consider any value for the Lease for the Franchised Location
if COST CUTTERS agrees to assume the Lease and pay the rental and operating
costs. If the Arbitrator is unable to determine the fair market value of any of
the Business Assets, then they will be valued at book value (cost less
depreciation). COST CUTTERS will have the right, but not the obligation, to
purchase any or all of the Business Assets from the FRANCHISEE for cash within
fifteen (15) business days after the fair market value of the Business Assets
has been established by the Arbitrator in writing. Nothing in this Article will
prohibit COST CUTTERS from enforcing the terms and conditions of this Agreement,
including the covenants not to compete contained in Article 12.
ARTICLE 14
TRAINING PROGRAM; PRE-OPENING ASSISTANCE; OPENING ASSISTANCE
14.1 TRAINING PROGRAM. COST CUTTERS will provide a training program for the
FRANCHISEE (and the FRANCHISEE'S District Manager if one is employed) in
Minneapolis, Minnesota to educate, familiarize and acquaint them with the
operations of a Cost Cutters Business. The training program will include
classroom instruction for not less than three (3) days on orientation to the
Business System and basic operating skills such as daily operational procedures,
inventory control, employee relations, scheduling and other topics selected by
COST CUTTERS. The FRANCHISEE and the FRANCHISEE'S District Manager must
successfully complete the training program either (a) prior to commencing any
business operations or (b) at the first scheduling of the training program by
COST CUTTERS after the execution of this Agreement. The training program will be
scheduled by COST CUTTERS in its sole discretion. In the event the FRANCHISEE or
its District Manager fails to successfully complete COST CUTTERS' training
program within the time period expressed in the third sentence of this Article
14.1, he or she will not be permitted or authorized to manage or operate the
FRANCHISEE'S Cost Cutters Business and COST CUTTERS will have the right to
reject the FRANCHISEE pursuant to Article 4.2 of this Agreement. If the
Franchised Location is the FRANCHISEE'S first Cost Cutters Business and there is
not a COST CUTTERS' training program scheduled after the FRANCHISEE has executed
this Agreement or a COST CUTTERS development agreement and prior to the date the
Franchised Location opens for business, then COST CUTTERS will, at COST CUTTERS'
expense, provide assistance at the Franchised Location to manage the
FRANCHISEE'S Cost Cutters Business during the time period that the FRANCHISEE
and its District Manager attend COST CUTTERS' training program, but only if the
FRANCHISEE and its District Manager attend the first training program offered by
COST CUTTERS immediately following the date the Franchised Location opens for
business.
14.2 HIRING OF NEW DISTRICT MANAGER. In the event the FRANCHISEE hires a
District Manager who has not successfully completed the training program(s)
prescribed by COST CUTTERS, and if COST CUTTERS determines, in its sole
discretion, that the new District Manager does not have sufficient knowledge or
experience relating to the management of the FRANCHISEE'S Cost Cutters Business,
then COST CUTTERS will require the individual to successfully complete the
prescribed training prior to the time he or she will be allowed to manage or
operate the FRANCHISEE'S Cost Cutters Business, and the FRANCHISEE will be
required to pay COST CUTTERS the then current training fee charged by COST
CUTTERS.
14.3 PAYMENT OF SALARIES AND EXPENSES DURING TRAINING. The FRANCHISEE will pay
the salaries, fringe benefits, payroll taxes, unemployment compensation,
workers' compensation insurance, lodging, food, automobile rental, travel costs,
and all other expenses for the FRANCHISEE, the FRANCHISEE'S District Manager and
all other persons sent to the training program by the FRANCHISEE, and the
FRANCHISEE will comply with all applicable state and federal laws pertaining to
all employees who attend COST CUTTERS' training program.
14.4 PRE-OPENING ASSISTANCE. If the Franchised Location is the FRANCHISEE'S
first Cost Cutters Business, then COST CUTTERS will provide, at its cost, a
representative for not more than five (5) business days at the Franchised
Location, who will provide pre-opening assistance to the FRANCHISEE, which will
include assisting the FRANCHISEE (and its District Manager if one is employed)
in the interviewing and hiring of employees, review of operational procedures
and facilitating the opening of the Cost Cutters Business.
14.5 OPENING ASSISTANCE. After the FRANCHISEE and the FRANCHISEE'S District
Manager have successfully completed COST CUTTERS' training program, COST CUTTERS
will assist the FRANCHISEE in scheduling the initial opening of the FRANCHISEE'S
Cost Cutters Business. COST CUTTERS will provide, at its cost, a representative
for not less than five (5) business days at the Franchised Location, who will
provide opening assistance which will include training the FRANCHISEE'S Cost
Cutters staff in daily operational procedures, customer relations, haircutting
techniques, permanent waving, product knowledge and other areas selected by COST
CUTTERS. The FRANCHISEE will not open and commence initial business operations
until COST CUTTERS has given the FRANCHISEE written approval to open the
FRANCHISEE'S Cost Cutters Business.
ARTICLE 15
COST CUTTERS' OTHER OBLIGATIONS
15.1 ADDITIONAL ASSISTANCE. Consistent with COST CUTTERS' uniform requirements
and quality standards, COST CUTTERS will, at its expense: (A) provide the
FRANCHISEE with a written schedule of all furniture, fixtures, supplies and
equipment necessary and required for the operation of the FRANCHISEE'S Cost
Cutters Business; (B) furnish a list of approved sources from whom the
FRANCHISEE can purchase furniture, fixtures, equipment, supplies, toiletries,
grooming aids, products, printed materials, items, goods and services; (C)
review and evaluate the FRANCHISEE'S Business as often as COST CUTTERS deems
necessary and render written reports to the FRANCHISEE as deemed appropriate by
COST CUTTERS; (D) protect, police and, when appropriate, enforce the Marks and
the Business System for the benefit of all Cost Cutters franchisees; (E) render
advisory services pertaining to customer service and the operation of the
FRANCHISEE'S Cost Cutters Business as frequently as COST CUTTERS deems
appropriate; (F) provide the FRANCHISEE with COST CUTTERS' standard Operations
Manual and all supplements and modifications to the Manual; and (G) provide the
FRANCHISEE with COST CUTTERS' approved standard store layouts and plans for the
Franchised Location.
15.2 ANNUAL CONVENTION. COST CUTTERS will, during the term of this Agreement,
conduct an annual convention for all Cost Cutters franchisees at such times and
at such locations as COST CUTTERS deems appropriate. The FRANCHISEE will attend
the annual convention conducted by COST CUTTERS for Cost Cutters franchisees
during each year of this Agreement. All expenses incurred by the FRANCHISEE or
any employees of the FRANCHISEE in traveling to and attending the annual
convention conducted by COST CUTTERS will be paid for by the FRANCHISEE. COST
CUTTERS will charge, and the FRANCHISEE will pay, a registration fee for the
annual convention, regardless of whether the FRANCHISEE, or any representative
of the FRANCHISEE, attends the convention, and an additional registration fee
will be charged for each person in addition to the first person attending the
annual convention on behalf of the FRANCHISEE.
15.3 OPTIONAL ADDITIONAL TRAINING. COST CUTTERS may, during the term of this
Agreement, provide optional additional training and instruction to the
FRANCHISEE on topics determined by COST CUTTERS in its sole discretion. COST
CUTTERS reserves the right to add or delete additional training topics at any
time without notice to the FRANCHISEE. The FRANCHISEE will be required to pay
COST CUTTERS the then-current training fee charged by COST CUTTERS for any
additional training attended by the FRANCHISEE or its employees. All expenses
incurred by the FRANCHISEE or any employees of the FRANCHISEE in traveling to
and attending optional additional training will be paid for by the FRANCHISEE.
ARTICLE 16
COST CUTTERS SIGN
16.1 INSTALLATION OF SIGN. The FRANCHISEE will, at its expense, purchase the
standard Cost Cutters Sign (the "Sign") which must be displayed at the
Franchised Location. The FRANCHISEE will pay for all costs incurred in
connection with the erection and installation of the Sign. The Sign must conform
exactly to COST CUTTERS' standard Sign plans and specifications and must be
installed at the Franchised Location precisely in the place, location and manner
specified by COST CUTTERS in writing. COST CUTTERS will have the absolute right
to inspect, examine, videotape and photograph the Sign at any time during the
term of this Agreement.
16.2 ADDITIONAL EXPENSES. The FRANCHISEE will, at its expense, be responsible
for any and all permits, licenses, repairs, maintenance, utilities, insurance,
taxes, assessments and levies in connection with the installation or use of the
Sign.
16.3 MODIFICATION AND REPLACEMENT. The FRANCHISEE may not alter, remove, change,
modify or redesign the Sign unless approved by COST CUTTERS in writing. COST
CUTTERS will have the unequivocal and unilateral right to redesign the Sign
plans and specifications during the term of this Agreement without the approval
or consent of the FRANCHISEE. Upon written notice from COST CUTTERS, the
FRANCHISEE will, at its expense, either modify or replace the Sign within thirty
(30) days so that the Sign displayed at the Franchised Location will comply with
COST CUTTERS' redesigned Sign plans and specifications. The FRANCHISEE will not
be required to modify or replace the Sign more than once every five (5) years
during the term of this Agreement.
16.4 INJUNCTIVE RELIEF. The FRANCHISEE agrees that COST CUTTERS will be entitled
to seek injunctive relief against the FRANCHISEE to require the FRANCHISEE, at
the FRANCHISEE'S expense, to: (A) exhibit the approved Cost Cutters Sign at the
Franchised Location during the term of this Agreement; (B) remove the Sign upon
the termination or expiration of this Agreement; or (C) remove the Sign from the
former franchised location upon the relocation of the Franchised Location.
Unless required by applicable law, COST CUTTERS will not be required to post a
bond or other security prior to obtaining injunctive relief pursuant to this
Article.
ARTICLE 17
INSURANCE
17.1 GENERAL LIABILITY. The FRANCHISEE must acquire and maintain in full force
and effect, at its sole cost and expense, a general liability insurance policy
insuring the FRANCHISEE, COST CUTTERS, and their respective officers, directors
and employees from and against any loss, liability, damage, claim or expense of
any kind whatsoever including claims for bodily injury, personal injury, death,
property damage, products liability and malpractice resulting from the
condition, operation, use, business or occupancy of the FRANCHISEE'S Cost
Cutters Business, including the surrounding premises, the parking area and the
sidewalks of the Franchised Location.
17.2 AUTOMOBILE. The FRANCHISEE must acquire and maintain in full force and
effect, at its sole cost and expense, automobile liability coverage insuring the
FRANCHISEE, COST CUTTERS, and their respective officers, directors and employees
from any and all loss, liability, damage, claim or expense of any kind
whatsoever resulting from the use, operation or maintenance of any automobile or
vehicle used by the FRANCHISEE or any of its employees in connection with the
FRANCHISEE'S Cost Cutters Business.
17.3 COVERAGE LIMITS. Liability coverages for both the general liability
insurance coverage and automobile coverage must have limits of at least Five
Hundred Thousand Dollars ($500,000) for each person and One Million Dollars
($1,000,000) for each occurrence.
17.4 PROPERTY INSURANCE. The FRANCHISEE will maintain in full force and effect,
at its sole cost and expense, "all risks" property insurance coverage for the
equipment, furnishings, fixtures, inventory and signs owned or leased by the
FRANCHISEE and used at the Franchised Location (including fire and extended
coverage) with limits equal to at least "replacement" cost.
17.5 PROFESSIONAL LIABILITY INSURANCE. The FRANCHISEE will maintain in full
force and effect, at its sole cost and expense, professional liability coverage
with coverage limits of a reasonable amount insuring the FRANCHISEE, COST
CUTTERS, and their respective officers, directors and employees from any and all
loss, liability, damage, claim or expense of any kind whatsoever resulting from
actions or omissions of the FRANCHISEE'S officers, directors or any of its
employees in connection with the FRANCHISEE'S Cost Cutters Business.
17.6 OTHER INSURANCE. The FRANCHISEE will, at its sole cost and expense, procure
and pay for all other insurance required by state or federal law, including
workers' compensation insurance for its employees, together with all insurance
required under any lease, mortgage, deed of trust or other legal contract in
connection with the Franchised Location or the operation of the FRANCHISEE'S
Cost Cutters Business.
17.7 INSURANCE COMPANIES; EVIDENCE OF COVERAGE. All insurance companies
providing coverage to the FRANCHISEE must be licensed in the state where
coverage is provided. The FRANCHISEE will provide COST CUTTERS with certificates
of insurance evidencing the required insurance coverage no later than the date
the FRANCHISEE takes possession of the Franchised Location and will provide,
immediately upon expiration, change or cancellation, new certificates of
insurance to COST CUTTERS.
17.8 COST CUTTERS' RIGHTS. All insurance policies procured and maintained by the
FRANCHISEE pursuant to this Article will name COST CUTTERS as an additional
insured, will contain endorsements by the insurance companies waiving all rights
of subrogation against COST CUTTERS, and will stipulate that COST CUTTERS will
receive copies of all notices of cancellation, nonrenewal, or coverage reduction
or elimination at least thirty (30) days prior to the effective date of such
cancellation, nonrenewal or coverage change.
17.9 DEFENSE OF CLAIMS. All liability insurance policies procured and maintained
by the FRANCHISEE will require the insurance companies to provide and pay for
legal counsel to defend any legal actions, lawsuits or claims brought against
the FRANCHISEE, COST CUTTERS, and their respective officers, directors and
employees.
17.10 NO REPRESENTATIONS; RIGHT TO ADDITIONAL COVERAGE. COST CUTTERS makes no
representations with respect to the adequacy of the types of insurance coverage
or coverage amounts set forth herein, and the FRANCHISEE will have the absolute
right to maintain additional types of coverage and higher coverage amounts than
those specified herein as minimum requirements.
ARTICLE 18
INDEPENDENT CONTRACTORS; INDEMNIFICATION
18.1 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.
18.2 INDEMNIFICATION. COST CUTTERS will not be obligated to any person or entity
for 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
Business. The FRANCHISEE will indemnify and hold COST CUTTERS harmless 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, the
operation of the FRANCHISEE'S Cost Cutters Business, the Franchised Location, or
any business 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 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 of 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 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 or arises out of the
FRANCHISEE'S Cost Cutters Business.
18.3 PAYMENT OF COSTS AND EXPENSES. The FRANCHISEE will pay all costs and
expenses, including attorneys' fees, actually 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.
18.4 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 19
FINANCIAL STATEMENTS; GROSS REVENUE REPORTS; FORMS AND ACCOUNTING
19.1 QUARTERLY AND ANNUAL FINANCIAL STATEMENTS. The FRANCHISEE will, at its
expense, provide COST CUTTERS with a quarterly balance sheet and income
statement, and annual financial statements for the FRANCHISEE'S Cost Cutters
Business which will consist of a balance sheet, income statement, statement of
cash flows and explanatory footnotes. All financial statements provided to COST
CUTTERS for the FRANCHISEE'S Cost Cutters Business will be presented in the
exact form and
format prescribed by COST CUTTERS in writing and will be categorized according
to the chart of accounts prescribed by COST CUTTERS. The FRANCHISEE'S financial
statements will be prepared in accordance with generally accepted accounting
principles applied on a consistent basis. If the FRANCHISEE'S annual financial
statements are not certified by an independent certified public accountant, then
the FRANCHISEE'S annual financial statements must be verified by the
FRANCHISEE'S President or Chief Financial Officer, or if the FRANCHISEE is not a
corporation, then by the FRANCHISEE'S Managing Partner, Chief Operating Officer
or Chief Financial Officer. The FRANCHISEE'S quarterly financial statements will
be delivered to COST CUTTERS by the FRANCHISEE within thirty (30) days after the
end of the quarter and the annual financial statements will be delivered within
ninety (90) days of the FRANCHISEE'S fiscal year end.
19.2 TAX RETURNS. Within ninety (90) days after the FRANCHISEE'S fiscal year
end, the FRANCHISEE will furnish COST CUTTERS with signed copies of the
FRANCHISEE'S annual federal, and if applicable, state income tax returns, and
copies of any other federal, state or local tax returns filed by the FRANCHISEE
including, but not limited to, any amended tax returns filed by the FRANCHISEE,
together with proof that the FRANCHISEE has paid all federal and state income
and sales taxes due.
19.3 WEEKLY STATEMENT OF GROSS REVENUES. The FRANCHISEE will maintain an
accurate written record of daily Gross Revenues for the FRANCHISEE'S Cost
Cutters Business and the FRANCHISEE will remit a signed and verified statement
of the weekly Gross Revenues generated by, at, as a result of, or from the
FRANCHISEE'S Cost Cutters Business using such forms as COST CUTTERS may
prescribe in writing. The weekly statement of Gross Revenues will accompany the
FRANCHISEE'S weekly Continuing Fees and Advertising Fees and will be provided to
COST CUTTERS on or before Thursday of each week for the preceding week.
19.4 COST CUTTERS' AUDIT RIGHTS. Within three (3) days after having been given
written notice from COST CUTTERS, the FRANCHISEE and its accountants will make
all of their books, ledgers, work papers, accounts, bank statements, tax
returns, sales tax returns, daily cash register tapes and financial records
pertaining to the FRANCHISEE'S Business ("books and financial records")
available to COST CUTTERS during all business hours for review and audit by COST
CUTTERS or its designee. The books and financial records for each fiscal year
will be kept in a secure place by the FRANCHISEE and will be available for audit
by COST CUTTERS for at least the preceding five (5) years. The FRANCHISEE will
provide COST CUTTERS with adequate facilities to conduct the audit, including a
working area with a desk and chair at either the Franchised Location or at the
FRANCHISEE'S accountants' offices. If an audit by COST CUTTERS reveals any
deficiencies, then the FRANCHISEE will, within five (5) days after receipt of an
invoice from COST CUTTERS indicating the amounts owed, pay COST CUTTERS any
deficiency in Continuing Fees or other amounts owed to COST CUTTERS, together
with interest as provided for herein. If an audit by COST CUTTERS results in a
determination that the FRANCHISEE'S Gross Revenues were understated by more than
two percent (2%), or that the FRANCHISEE has underpaid the weekly Continuing
Fees by more than Five Hundred Dollars ($500) in any twelve (12) month period,
then the FRANCHISEE will, in addition to paying any deficiency in Continuing
Fees, Advertising Fees, costs of products purchased from COST CUTTERS or other
amounts due to COST CUTTERS, reimburse COST CUTTERS for all costs and expenses
(including salaries of COST CUTTERS' employees, travel costs, room and board,
and audit fees) that COST CUTTERS has incurred as a result of the audit,
including any fees paid to its accountants to conduct the audit. The FRANCHISEE
will reimburse COST CUTTERS for such costs and expenses within ten (10) days of
receipt of an invoice from COST CUTTERS indicating the amount owed as a result
of the audit. The FRANCHISEE'S failure or refusal to produce the books and
financial records for audit by COST
CUTTERS in accordance with this Article 19.4 will constitute a material breach
of this Agreement and will be grounds for the immediate termination of this
Agreement by COST CUTTERS.
19.5 WAIVER BY FRANCHISEE. COST CUTTERS will have the right, without notice to,
or further approval of or authorization by the FRANCHISEE, to provide all
vendors that supply any products, goods or services to the FRANCHISEE with
copies of the FRANCHISEE'S: (A) initial application and all financial
information that was provided to COST CUTTERS in conjunction with such
application; (B) most recent financial information provided to COST CUTTERS; and
(C) most recent annual financial statements provided to COST CUTTERS. COST
CUTTERS will also have the right to obtain credit reports maintained by credit
reporting agencies regarding the FRANCHISEE and the right to review the books
and records maintained by the vendors or suppliers that supply products, goods
or services to the FRANCHISEE regarding the purchase made by the FRANCHISEE.
This Agreement will serve as evidence of COST CUTTERS' right to review such
information and will constitute the authority from the FRANCHISEE for credit
reporting agencies, vendors and suppliers to provide such information to COST
CUTTERS.
19.6 PAYMENT BY PRE-AUTHORIZED BANK TRANSFER. The FRANCHISEE will, from time to
time during the term of this Agreement, execute such documents as COST CUTTERS
may request to provide the FRANCHISEE'S unconditional and irrevocable authority
and direction to its bank or financial institution authorizing and directing the
FRANCHISEE'S bank or financial institution to pay and deposit directly to the
account of COST CUTTERS, and to charge to the account of the FRANCHISEE, on
Thursday of each week, the amount of the Continuing Fees, Advertising Fees and
other sums due and payable by the FRANCHISEE pursuant to this Agreement in
accordance with Article 5 and Article 6 of this Agreement. The authorizations
will be in the form prescribed by COST CUTTERS' bank. The FRANCHISEE'S
authorizations will permit COST CUTTERS to designate the amount to be debited or
drafted from the FRANCHISEE'S account and to adjust such amount from time to
time, to the amount of the Continuing Fees, Advertising Fees and other sums then
payable to COST CUTTERS from the FRANCHISEE. If the FRANCHISEE fails at any time
to provide reports of Gross Revenues as required under Article 19.3 of this
Agreement, then COST CUTTERS will have the right, in its sole discretion, to
estimate the amount of the Continuing Fees, Advertising Fees and other sums due
and payable to COST CUTTERS, and to designate such estimated amount as the
amount to be debited or drafted from the FRANCHISEE'S account. The FRANCHISEE
will, at all times during the term of this Agreement, maintain a balance in its
account at its bank or financial institution sufficient to allow the appropriate
amount to be debited from the FRANCHISEE'S account for payment of the Continuing
Fees, Advertising Fees and other sums payable by the FRANCHISEE for deposit in
the account of COST CUTTERS.
ARTICLE 20
ASSIGNMENT
20.1 ASSIGNMENT BY COST CUTTERS. 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.
20.2 ASSIGNMENT BY FRANCHISEE TO CORPORATION. If the FRANCHISEE is an individual
or a partnership, this Agreement may be transferred or assigned by the
FRANCHISEE, without first offering it to COST CUTTERS pursuant to Article 13, 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, barber 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.
20.3 ASSIGNMENT UPON DEATH OR DISABILITY OF INDIVIDUAL 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 without
first being offered to COST CUTTERS pursuant to Article 13 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.
20.4 APPROVAL OF TRANSFER; CONDITIONS FOR APPROVAL. The rights granted to the
FRANCHISEE pursuant to 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) the FRANCHISEE has complied in all respects with
Article 13 of this Agreement; (B) 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; (C) 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;
(D) 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; (E) the transferee Franchisee will have demonstrated to
COST CUTTERS' satisfaction that he, she or it meets COST CUTTERS' managerial,
financial and business standards for new Franchisees, possesses a good business
reputation and credit rating, and possesses the aptitude and ability to conduct
the franchised business (as may be evidenced by prior related business
experience or otherwise); (F) the transferee Franchisee and all parties having a
legal or beneficial interest in the transferee Franchisee including, if
applicable, the shareholders and Personal Guarantors of the transferee
Franchisee will execute COST CUTTERS' then-current standard Franchise Agreement
for a term ending on the expiration date of this Agreement and such other
ancillary agreements as COST CUTTERS may require for the transfer of the
FRANCHISEE'S Business; (G) the transferee Franchisee will not be required to pay
the Initial Fee, however, the transferee Franchisee will be required to pay the
Continuing Fees and the Advertising Fees to COST CUTTERS at the rate specified
in this Agreement; (H) the transferee Franchisee has purchased the Franchised
Location or has acquired a lease for the Franchised Location for a reasonable
term consistent with the remaining term of this Agreement; (I) the transferee
Franchisee (and its District Manager if one is employed) must
successfully complete the training program(s) prescribed by COST CUTTERS; (J)
the transferee Franchisee will pay the salaries, fringe benefits, payroll taxes,
unemployment compensation, workers' compensation insurance, hotel costs, travel
costs and other expenses for all persons sent to the training program(s), and
will pay to COST CUTTERS COST CUTTERS' then-current training fee for each person
attending COST CUTTERS' training program(s); (K) the FRANCHISEE has paid the
transfer fee required under Article 20.6; (L) the transferee Franchisee has paid
the Training Program Deposit required under Article 20.7; (M) the transferee
Franchisee does not own, operate, franchise, develop, manage or control any
hairstyling, barber or other business that is in any way competitive with or
similar to a Cost Cutters business; and (N) if the transferee Franchisee does
not meet COST CUTTERS' net worth requirements for operation of the Cost Cutters
Business, 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 Business.
20.5 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 20 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 20 will
be void.
20.6 TRANSFER FEE. If, pursuant to the terms of this Article 20, the rights
granted to the FRANCHISEE in this Agreement are 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, compliance with applicable laws,
out-of-pocket expenses, long distance telephone calls, and the time of its
employees and officers.
20.7 TRAINING PROGRAM DEPOSIT. If, pursuant to the terms of this Article 20, the
rights granted in this Agreement are 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, as
a condition (in addition to the other conditions expressed in this Article 20)
to the approval by COST CUTTERS of such assignment, transfer or bequest, the
transferee Franchisee will pay COST CUTTERS a training program deposit which
will be refunded to the transferee Franchisee in its entirety upon the
transferee Franchisee's successful completion of COST CUTTERS' training program.
The amount of the training program deposit to be paid to COST CUTTERS is Two
Thousand Dollars ($2,000) if the Franchised Location is located within ninety
(90) miles of COST CUTTERS' training facility located in Minneapolis, Minnesota.
If the Franchised Location is located more than ninety (90) miles from COST
CUTTERS' training facility, then the amount of the training program deposit to
be paid to COST CUTTERS is Three Thousand Dollars ($3,000).
ARTICLE 21
SITE SELECTION; STANDARD STORE LAYOUTS AND PLANS
21.1 SITE SELECTION. The FRANCHISEE will be solely responsible for selecting a
site for the Franchised Location and for purchasing, leasing or otherwise
acquiring possession of the site for the Franchised Location. COST CUTTERS has
strongly recommended that the FRANCHISEE should retain
an experienced commercial real estate broker or salesperson ("real estate
broker") who has at least five (5) years experience in locating and/or leasing
retail space to locate, acquire, purchase or lease a site for the FRANCHISEE'S
Cost Cutters Business. Accordingly, no provision of this Agreement may be
construed to impose any obligation or responsibility on COST CUTTERS to locate
or select a site for the Franchised Location. The FRANCHISEE will not lease,
purchase or otherwise acquire a site for the Franchised Location until the
proposed site has been reviewed in writing by COST CUTTERS to determine
accessibility, visibility, potential traffic flows and other demographic
information. The review of the site conducted by COST CUTTERS will not be deemed
to be a warranty, representation or guaranty by COST CUTTERS that if the
FRANCHISEE'S Cost Cutters Business is opened and operated at that site, it will
be a financial success. COST CUTTERS will have the right to require the
FRANCHISEE to obtain, at the FRANCHISEE'S expense, an economic feasibility and
demographics study for the proposed site of the Franchised Location. Any
feasibility and demographics study required by COST CUTTERS will be completed by
a real estate expert mutually agreed upon by COST CUTTERS and the FRANCHISEE in
writing.
21.2 STANDARD STORE LAYOUTS AND PLANS. After the Franchised Location has been
leased or acquired, the FRANCHISEE will, within sixty (60) days of the date of
this Agreement, provide COST CUTTERS with the following information for the
Franchised Location: (A) a copy of the executed lease (if applicable); (B) the
store front elevation; (C) space documentation (size and lay-out); (D) location
of the plumbing and electrical sources; (E) local signage requirements, laws and
regulations; and (F) all other pertinent information. Based upon the information
provided by the FRANCHISEE, COST CUTTERS will provide approved store layouts and
plans for the Franchised Location. The FRANCHISEE will construct or remodel the
Franchised Location in strict compliance with the store layouts and plans
provided by COST CUTTERS. Any unauthorized variance from the store layouts and
plans prepared by COST CUTTERS will be a material breach of this Agreement.
Providing store layouts and plans does not constitute a representation, warranty
or guaranty by COST CUTTERS that the site will be a financially successful
location for the FRANCHISEE'S Cost Cutters Business, and the FRANCHISEE assumes
all business and economic risks associated with the operation of the Cost
Cutters Business at this site.
21.3 INCORRECT INFORMATION. In the event any of the information provided to COST
CUTTERS by the FRANCHISEE pursuant to this Article is incorrect, inaccurate or
incomplete, then the FRANCHISEE will pay for all costs and expenses incurred by
COST CUTTERS in revising the store layouts and plans prepared by COST CUTTERS
for the Franchised Location.
21.4 FRANCHISEE RESPONSIBLE FOR CONSTRUCTION OR REMODELING. The FRANCHISEE will
be solely responsible for ascertaining and insuring that the Franchised Location
is constructed or remodeled according to the store layouts and plans provided by
COST CUTTERS in compliance with all applicable local, state and federal laws,
ordinances, statutes and building codes. Accordingly, the FRANCHISEE or its
agent will be responsible for inspecting the premises during construction or
remodeling to insure that the Franchised Location complies with the store
layouts and plans and with applicable laws and ordinances.
21.5 COST CUTTERS' OPTION TO VIEW FRANCHISED LOCATION. COST CUTTERS may, at its
expense, view the Franchised Location during construction or remodeling at such
times as it deems necessary for the purpose of determining the progress of the
construction or remodeling and to ascertain that the interior and exterior of
the Franchised Location are generally being constructed or remodeled according
to the store layouts and plans. COST CUTTERS' viewing of the Franchised Location
during construction or remodeling will not be for the purpose of determining
that the Franchised
Location is being constructed or remodeled in a workmanlike manner or in
compliance with any applicable laws or ordinances. Accordingly, COST CUTTERS
will have no responsibility or liability to the FRANCHISEE or any other person
or entity if the Franchised Location is not constructed or remodeled according
to the store layouts and plans, in a workmanlike manner or in compliance with
any applicable laws or ordinances.
ARTICLE 22
LEASE AS SECURITY; TERMINATION OF LEASE
22.1 COST CUTTERS' REVIEW OF LEASE. The lease for the Franchised Location (the
"Lease") will be submitted to COST CUTTERS by the FRANCHISEE for COST CUTTERS'
review prior to execution of the Lease by the FRANCHISEE. The Lease must, at a
minimum, be conditional upon COST CUTTERS' approval of the FRANCHISEE and give
COST CUTTERS the right to enter the premises to conduct inspections at any time
during regular business hours, and the right, but not the obligation, to assume
the Lease for the remaining term, in accordance with the provisions of this
Article, if the FRANCHISEE is evicted by the Landlord or if this Agreement
expires or is terminated by either COST CUTTERS or the FRANCHISEE for any reason
prior to the expiration of the Lease. COST CUTTERS' review of the Lease prior to
its execution will not be for the purpose of approving the legal aspects,
economics or rental terms of the Lease. Accordingly, COST CUTTERS will have no
responsibility to the FRANCHISEE with regard to the economics, legality or
enforceability of the Lease.
22.2 FRANCHISEE'S ASSIGNMENT OF LEASE. The FRANCHISEE hereby assigns and
transfers all of its right, title and interest in and to the Lease (which is
incorporated herein by reference) to COST CUTTERS as security for the
FRANCHISEE'S performance of the terms and conditions of this Agreement. If this
Agreement is terminated by either COST CUTTERS or the FRANCHISEE for any reason
whatsoever, if the FRANCHISEE wrongfully terminates this Agreement by failing to
comply with Article 10 or for any other reason, if the FRANCHISEE at any time
ceases to do business at the Franchised Location as a Cost Cutters Business, or
if this Agreement expires and the FRANCHISEE does not reacquire the franchise
(an "Event of Default"), then COST CUTTERS will have the right and option, but
not the obligation, to take and assume the Lease for the remaining term under
the same terms and conditions, including rental, as originally contracted by the
FRANCHISEE. The FRANCHISEE will execute a UCC-1 Financing Statement and such
other documents as may be reasonably required by COST CUTTERS' attorneys to
perfect and record COST CUTTERS' security interest in the Lease.
22.3 PERFECTED ASSIGNMENT; NOTICE. This assignment will constitute a perfected,
absolute and present assignment of the Lease; however, COST CUTTERS will have no
right under this assignment to enforce the provisions of the Lease until an
Event of Default has occurred. After an Event of Default has occurred, COST
CUTTERS will have the right, but not the obligation, to enforce the provisions
of this assignment and to take possession of the Franchised Location by giving
the FRANCHISEE and the Landlord written notice that it has affirmatively
exercised its rights under this assignment. The written notice will state: (A)
that COST CUTTERS is taking and assuming the Lease from the FRANCHISEE; (B) the
date that COST CUTTERS will take physical possession of the Franchised Location;
and (C) that COST CUTTERS agrees to be bound by the terms and conditions of the
Lease being assumed. COST CUTTERS will execute an assignment form at the time it
gives written notice to the FRANCHISEE and the Landlord of its assumption of the
Lease.
22.4 NO PRIOR ASSIGNMENTS. The FRANCHISEE represents and warrants that there
have been no prior assignments of the Lease by the FRANCHISEE, that it has good
right to assign and transfer the Lease, that the Lease is a valid and
enforceable agreement, that neither party is in default to the other
thereunder and that all covenants, conditions and agreements have been performed
as required therein, except those not due to be performed until after the date
hereof. No change in the terms of the Lease will be valid without the written
approval of COST CUTTERS. The FRANCHISEE agrees not to assign, sell, pledge or
otherwise transfer or encumber its interest in the Lease so long as this
assignment is in effect. During the term of this Agreement, the FRANCHISEE will
not lease or sublease all or any part of the Franchised Location without COST
CUTTERS' prior written consent.
22.5 ENFORCEMENT OF FRANCHISEE'S RIGHTS. The FRANCHISEE hereby irrevocably
constitutes and appoints COST CUTTERS as its attorney-in-fact to demand, receive
and enforce the FRANCHISEE'S rights with respect to the Lease, to make payments
under the Lease and give appropriate receipts, releases and satisfactions for
and on behalf of and in the name of the FRANCHISEE or, at the option of COST
CUTTERS, in the name of COST CUTTERS, with the same force and effect as the
FRANCHISEE could do if this assignment had not been made.
22.6 COST CUTTERS' RIGHTS AND REMEDIES. Upon taking physical possession of the
Franchised Location, COST CUTTERS may, without affecting any of its rights or
remedies against the FRANCHISEE under any other instrument, document or
agreement, exercise its rights under this assignment as the FRANCHISEE'S
attorney-in-fact in any manner permitted by law and, in addition, COST CUTTERS
will have and possess, without limitation, any and all rights and remedies of a
secured party under the Uniform Commercial Code, as enacted in the jurisdiction
in which enforcement is sought or as provided by law.
22.7 PRORATION OF RENTS AND EXPENSES. At the time COST CUTTERS takes physical
possession of the Franchised Location, all charges, real estate taxes, utilities
and rentals will be prorated between COST CUTTERS and the FRANCHISEE. COST
CUTTERS will have no obligation to pay any past due obligations or arrearages of
the FRANCHISEE to any person or entity, including the Landlord.
22.8 POSSESSION; OBLIGATIONS OF COST CUTTERS AND FRANCHISEE. COST CUTTERS will
hold the FRANCHISEE harmless from any and all obligations to the Landlord,
including rental payments, arising out of the use of the Franchised Location
from the date that COST CUTTERS takes physical possession of the Franchised
Location. The FRANCHISEE will pay all amounts due to the Landlord and other
parties under the Lease including, but not limited to, rentals, insurance,
rental overrides, real estate taxes, repairs, and maintenance, up to and
including the date that COST CUTTERS takes physical possession of the Franchised
Location. With the specific and limited exception of rental payments and other
obligations to the Landlord arising from COST CUTTERS' use of the Franchised
Location after taking physical possession of the premises, the FRANCHISEE will
indemnify and hold COST CUTTERS harmless from and against any and all claims,
demands, liabilities, losses, lawsuits, judgments, costs and expenses, including
attorneys' fees, to which COST CUTTERS may become exposed, or which COST CUTTERS
may incur, in exercising any of its rights under this assignment.
22.9 LANDLORD'S CONSENT TO ASSIGNMENT OF LEASE AS SECURITY. The FRANCHISEE will
secure the Landlord's written consent to the provisions contained in this
Article in the form of consent attached as Exhibit "B" to this Agreement.
22.10 ASSIGNMENT BY COST CUTTERS. COST CUTTERS will have the right to reassign
its right, title and interest in the Lease to any person or entity upon giving
written notice to the FRANCHISEE and the Landlord without any consent whatever
from the FRANCHISEE or the Landlord, and any such reassignment will be valid and
binding upon the FRANCHISEE and the Landlord as fully as if each had expressly
approved the same. Subject to the limitation on further assignment by the
FRANCHISEE contained in Article 22.4, this assignment will be binding upon and
inure to the benefit of the heirs, legal representatives, assigns, and
successors in interest of the FRANCHISEE, COST CUTTERS and the Landlord.
22.11 LEASE NOT YET EXECUTED. In the event that the FRANCHISEE has not yet
entered into a premises lease for the Franchised Location at the time this
Agreement is executed, the provisions of Article 22.2, 22.3 and 22.5 of this
Agreement will take effect immediately upon the execution of the Lease. The
representations of the FRANCHISEE contained in Article 22.4 will be true and
complete as of, and will be deemed to have been made at, the time the Lease is
executed. The FRANCHISEE agrees to execute any additional documents as may be
required by COST CUTTERS' attorneys to perfect the assignment of the Lease.
ARTICLE 23
ARBITRATION
23.1 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 Location or the FRANCHISEE'S Cost Cutters
Business will be resolved and determined exclusively by Arbitration in
accordance with the Commercial Rules and Regulations of the American Arbitration
Association.
23.2 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 is 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.
23.3 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 office of the American Arbitration
Association in Minneapolis, Minnesota 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
Rules and Regulation of the American Arbitration Association.
23.4 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.
23.5 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 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 23.8. 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.
23.6 NO COLLATERAL ESTOPPEL OR CLASS ACTIONS. Except as provided herein, all
Arbitration findings, conclusions, orders and awards 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, conclusions, orders 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.
23.7 DISPUTES NOT SUBJECT TO ARBITRATION. The disputes and controversies between
COST CUTTERS and the FRANCHISEE which are set forth in Article 24.1 and the
following disputes and controversies between COST CUTTERS and the FRANCHISEE
will not be subject to Arbitration: (A) any dispute involving the Marks or which
arises under or as a result of Article 3 of this Agreement; (B) any dispute
involving immediate termination of this Agreement pursuant to Article 9.5 and
9.6 of this Agreement; (C) any dispute involving enforcement of the
confidentiality provisions set forth in Article 8 of this Agreement; and (D) any
dispute involving enforcement of the covenants not to compete set forth in
Article 12 of this Agreement.
23.8 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 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.
23.9 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.
23.10 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 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 24
ENFORCEMENT
24.1 INJUNCTIVE RELIEF. In addition to the provisions of Article 23.7, COST
CUTTERS will have the right 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
Business or substantially all of the assets employed in the franchised Business,
or the 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 Business or other Cost Cutters businesses, (3) constitutes a danger to
the employees, public or customers of the FRANCHISEE'S Cost Cutters Business, 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.
24.2 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 or refusal to renew this Agreement than is required
hereunder or the taking of some other action not required hereunder, or if under
any applicable and binding law 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.
24.3 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 including, without limitation, any mandatory
specification, standard or operating procedure, 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 franchisees under their
Franchise 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 franchisees of COST CUTTERS without granting those same rights to the
FRANCHISEE and without incurring any liability to the FRANCHISEE whatsoever.
24.4 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 Continuing Fees, Advertising Fees or any other
fees or payments 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" or withhold any liquidated or
unliquidated amounts allegedly due to the FRANCHISEE from COST CUTTERS against
the Continuing Fees, the Advertising Fees or any other payments due to COST
CUTTERS under this Agreement or any other contract, promissory note or other
obligation payable by the FRANCHISEE to COST CUTTERS.
24.5 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.
24.6 VENUE AND JURISDICTION. Unless otherwise required under 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 Location or the FRANCHISEE'S Cost Cutters Business; 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.
24.7 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.
24.8 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.
24.9 ENTIRE AGREEMENT. This FRANCHISE AGREEMENT supersedes and terminates all
prior agreements relating to the operation of a Cost Cutters Business by the
FRANCHISEE at the Franchised Location, 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 or Franchise Agreement(s) executed prior to the date of
this Agreement relating to other Cost Cutters franchises 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.
24.10 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," "assignee" and "transferee" which are applicable to
an individual or individuals will mean the principal owner or owners of the
equity or operating control of the FRANCHISEE or any such assignee or transferee
if the FRANCHISEE or such assignee or transferee 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.
24.11 NO ORAL MODIFICATION. No modification, change, addition, rescission,
release, amendment or waiver of this Agreement 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.
24.12 EFFECT OF WRONGFUL TERMINATION. If either COST CUTTERS or the FRANCHISEE
takes any action to terminate this Agreement or to convert the FRANCHISEE'S Cost
Cutters Business to another business, and if such action was taken without first
complying with the applicable terms and conditions (including the notice and
opportunity to cure provisions) of this Agreement, then such action will not
relieve either party of, or release either party from, any of its obligations
under this Agreement, and the terms and conditions of this Agreement will remain
in full force and effect and the parties will be obligated to perform all terms
until such time as this Agreement expires or is terminated in accordance with
the provisions of this Agreement and applicable law, as determined by an
Arbitrator or a Court of competent jurisdiction.
ARTICLE 25
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 300
Industrial Boulevard N.E., Minneapolis, Minnesota 55413 with a copy to John
W. Fitzgerald, Esq, Gray, Plant, Mooty, Mooty & Bennett, P.A., 3400 City Center,
33 South Sixth Street, Minneapolis, Minnesota 55402-3796. All notices to the
FRANCHISEE will be by personal service upon the FRANCHISEE, District Manager or
a salon manager or assistant manager, (or, if applicable, an officer or Director
of the FRANCHISEE), or sent by prepaid registered or certified United States
mail addressed to the FRANCHISEE at the Franchised Location 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 delivery service.
ARTICLE 26
ACKNOWLEDGMENTS
26.1 BUSINESS RISKS; NO FINANCIAL PROJECTIONS. The FRANCHISEE acknowledges that
it has conducted an independent investigation of the Cost Cutters Business
franchised hereunder, and recognizes that the business venture contemplated by
this Agreement involves business and economic risks and that the financial and
business success of the Business 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 Business, except as expressly set forth
in writing in COST CUTTERS' Uniform Franchise Offering Circular, receipt of
which is acknowledged by the FRANCHISEE.
26.2 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 Business or that COST
CUTTERS will refund all or part of the Initial Fee or the price paid for the
FRANCHISEE'S Cost Cutters Business 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 Business.
26.3 TERMS OF OTHER FRANCHISES MAY DIFFER. The FRANCHISEE acknowledges that
other Franchisees of COST CUTTERS have or will be granted franchises at
different times and in different situations, and further acknowledges that the
terms and conditions of such franchises and the resulting Franchise Agreements
may vary substantially in economics, form and in substance from those contained
in this Agreement.
26.4 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.
26.5 CITY LOOKS(R) AND HAIR PERFORMERS(R) BUSINESSES. The FRANCHISEE agrees and
acknowledges that the "City Looks(R)," "City Looks Salons International(R),"
"City Looks(R) By The Barbers(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 that the "Hair
Performers(R)" businesses serviced by Hair Performers International, Inc., a
wholly-owned subsidiary of The Barbers, are
full service hair salons that address different markets and, thus, are not
competitive with Cost Cutters businesses. Further, the FRANCHISEE acknowledges
and agrees that The Barbers and Hair Performers International, Inc. 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) business that may be near, adjacent or contiguous to the
FRANCHISEE'S Cost Cutters Business.
26.6 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 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) and Family
Haircut(R) businesses, including those We Care Hair(R) or Family Haircut(R)
business that may be near, adjacent or contiguous to the FRANCHISEE'S Cost
Cutters Business.
ARTICLE 27
DISCLAIMER; FRANCHISEE'S LEGAL COUNSEL
27.1 DISCLAIMER BY COST CUTTERS. 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 Business, except those expressly set forth in Item 19
of the Cost Cutters Uniform Franchise Offering Circular received by the
FRANCHISEE.
27.2 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 Business or any other matters pertaining to the Cost Cutters
Business 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 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.
27.3 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 and this Agreement in
detail, to review the economics, operations and other business aspects of the
Cost Cutters Business, 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
Business 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: ( )
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ARTICLE 28
GOVERNING LAW; STATE MODIFICATIONS
28.1 GOVERNING LAW. Except to the extent governed by the United States Trademark
Act of 1946 (Lanham 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 Location is located. 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.
28.2 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. 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. If the Franchised Location is located
in any one of the states specifically indicated below in this Article 28.2, or
if the laws of any such state are otherwise applicable, then the designated
provisions of this Agreement will be amended and revised as follows:
CALIFORNIA. If this Agreement is governed by the laws of the State of
California, then the covenant not to compete upon termination or
expiration of this Agreement contained in Article 12.3 may be
unenforceable, except in certain circumstances provided by law.
ILLINOIS. If this Agreement is governed by the laws of the State of
Illinois, then: (1) the consent by the FRANCHISEE to jurisdiction and
venue in Hennepin County, Minnesota contained in Article 24.6 may be
inapplicable; provided, however, that such inapplicability in the State
of Illinois will not be construed to mean that venue in Hennepin
County, Minnesota is improper, or that the FRANCHISEE and its officers,
Directors and shareholders are not subject to jurisdiction in Hennepin
County, Minnesota, or in any other state; and (2) Section 41 of the
Illinois Franchise Disclosure Act states that "any condition,
stipulation or provision purporting to bind any person acquiring any
franchise to waive compliance with any provision of this Act is void",
accordingly any acknowledgments contained in Article 26.2, Article
26.4, Article 27.2, and the second sentence of Article 26.1 will be
unenforceable against the FRANCHISEE.
INDIANA. If this Agreement is governed by the laws of the State of
Indiana, then: (1) the geographical limitation contained in Article
12.3 will be limited to the exclusive area granted to the FRANCHISEE or
an area of reasonable size; (2) the consent by the FRANCHISEE to
jurisdiction and venue in Hennepin County, Minnesota contained in
Article 24.6 and the Personal Guaranty attached to this Agreement may
be inapplicable; provided, however, that such inapplicability in the
State of Indiana will not be construed to mean that venue in Hennepin
County, Minnesota is improper, or that the FRANCHISEE and its officers,
Directors, shareholders and Personal Guarantors are not subject to
jurisdiction in Hennepin County, Minnesota, or in any other state; (3)
notwithstanding any provisions of this Agreement to the contrary, a
Court of competent jurisdiction will determine the adequacy of money
damages, whether COST CUTTERS will be required to post a bond or other
security, and the amount of such bond or other security, in any
injunctive proceeding commenced by COST CUTTERS against the FRANCHISEE
or the FRANCHISEE'S shareholders; (4) nothing in Article 10.4 will be
construed to act as a waiver of the FRANCHISEE'S right, under Section 7
of the Indiana Deceptive Franchise Practices Act, Ind. Code 23-2-2.7,
ss.ss. 1 through 7, to bring an action against COST CUTTERS for
violation of the Indiana Deceptive Franchise Practices Act at any time
within two (2) years after the occurrence of such violation; (5)
nothing in Article 10.4 will be construed to act as a waiver of the
FRANCHISEE'S right, under Section 30 of the Indiana Franchise
Disclosure Law, Ind. Code 23-2-2.5, to bring an action against COST
CUTTERS for violation of the Indiana Franchise Disclosure Law at any
time within three (3) years after discovery of the facts constituting
the violation; (6) the provisions of Article 23 requiring Arbitration
hearings to take place in Minneapolis, Minnesota will be inapplicable
and in the event of Arbitration between COST CUTTERS and the
FRANCHISEE, such Arbitration will be conducted in Indianapolis, Indiana
or at a mutually agreed upon location; (7) the parties' waiver of their
right to claim punitive damages, as set forth in Article 23.5, will be
inapplicable; (8) notwithstanding any provisions of this Agreement to
the contrary, the FRANCHISEE will have the right to petition a Court of
competent jurisdiction for injunctive relief relating to COST CUTTERS'
improper termination of this Agreement or COST CUTTERS' unreasonable
refusal to consent to transfer or assignment by the FRANCHISEE pursuant
to Article 20 of this Agreement; (9) Article 18.2 is hereby amended to
provide that the FRANCHISEE will not be required to indemnify COST
CUTTERS for any liability imposed upon COST CUTTERS as a result of the
FRANCHISEE'S reliance upon or use of procedures or products which were
required by COST CUTTERS, if such procedures or products were utilized
by the FRANCHISEE in the manner prescribed by COST CUTTERS; (10)
Article 6.5 is hereby amended to provide that the FRANCHISEE will not
be required to
contribute more than five percent (5%) of the FRANCHISEE'S Gross
Revenues to the local DMA advertising group; (11) Article 6.3 and
Article 18.3 are hereby amended to state that COST CUTTERS has the
right to seek recovery of all costs and expenses, including but not
limited to actual attorneys' fees, deposition costs, expert witness
fees, investigation costs, accounting fees, filing fees and travel
expenses incurred by COST CUTTERS (a) in enforcing any term, condition
or provision of this Agreement, (b) in seeking to enjoin any violation
of this Agreement by the FRANCHISEE, or (c) in the collection of unpaid
and past due Advertising Fee payments from the FRANCHISEE; and (12)
notwithstanding anything to the contrary in Article 24.9, the
FRANCHISEE does not waive any right under the Indiana statutes with
regard to prior representations made in the Indiana Uniform Franchise
Offering Circular.
MARYLAND. If this Agreement is governed by the laws of the State of
Maryland, then: (1) the acknowledgments made by the FRANCHISEE
contained in Article 26 and Article 27 of this Agreement and any
written instrument executed by the FRANCHISEE pursuant to Article 24.3
of this Agreement will not be construed to act as a waiver of the
FRANCHISEE'S rights under the Maryland Franchise Registration and
Disclosure Law, Md. Ann. Code, Article 56, ss.345 et seq.; (2) the one
year limitation period set forth in Article 10.4 will not apply to
claims arising under the Maryland Franchise Registration and Disclosure
Law; and (3) the consent by the Franchisee to jurisdiction and venue in
Hennepin County, Minnesota contained in Article 23.4 and 24.6 will be
inapplicable and the FRANCHISEE will be permitted to commence
litigation in Maryland; provided, however, that such inapplicability in
the State of Maryland will not be construed to mean that venue in
Hennepin County, Minnesota is improper, or that the Franchisee, its
officers, Directors and shareholders and the Personal Guarantors are
not subject to jurisdiction in Hennepin County, Minnesota, or in any
other state.
MINNESOTA. If this Agreement is governed by the laws of the State of
Minnesota, then: (1) Article 2 of this Agreement will be amended to
provide that, except in certain circumstances specified by law, COST
CUTTERS must provide the FRANCHISEE with at least one hundred eighty
(180) days prior written notice of nonrenewal of the franchise; (2)
Article 9.2 will be amended to require that, except as set forth in
Article 9.5 and 9.6, in the event COST CUTTERS gives the FRANCHISEE
written notice that the FRANCHISEE has breached this Agreement, such
written notice will be given to the FRANCHISEE at least ninety (90)
days prior to the date this Agreement is terminated by COST CUTTERS,
and the FRANCHISEE will have sixty (60) days after having been given
such written notice within which to correct the breach specified in the
written notice; and (3) notwithstanding any provisions of this
Agreement to the contrary, a Court of competent jurisdiction will
determine whether COST CUTTERS will be required to post a bond or other
security, and the amount of such bond or other security, in any
injunctive proceeding commenced by COST CUTTERS against the FRANCHISEE
or the FRANCHISEE'S shareholders.
NEW YORK. If this Agreement is governed by the laws of the State of New
York, then Article 20.1 will be amended to reflect that COST CUTTERS
may not assign this Agreement unless in its reasonable judgment the
assignee is able to perform the franchisor's obligations under this
Agreement.
NORTH DAKOTA. If this Agreement is governed by the laws of the State of
North Dakota, then: (1) the covenant not to compete upon termination or
expiration of this Agreement contained in Article 12.3 may be
unenforceable, except in certain circumstances provided by law; (2) the
consent by the FRANCHISEE to jurisdiction and venue in Hennepin County,
Minnesota contained in Article 24.6 may be inapplicable; provided,
however, that such inapplicability in the State of North Dakota will
not be construed to mean that venue in Hennepin County, Minnesota is
improper, or that the FRANCHISEE and its officers, Directors and
shareholders are not subject to jurisdiction in Hennepin County,
Minnesota, or in any other state; (3) the provisions of Article 23
requiring Arbitration hearings to take place in Minneapolis, Minnesota
will be inapplicable and in the event of Arbitration between COST
CUTTERS and the FRANCHISEE, such Arbitration will be conducted in
Fargo, North Dakota or at a mutually agreed upon location; and (4) the
parties' waiver of their right to claim punitive damages, as set forth
in Article 23.5, may not be enforceable under North Dakota law.
RHODE ISLAND. If this Agreement is governed by the laws of the State of
Rhode Island, then any provision of this Agreement which restricts
jurisdiction or venue to a forum outside the State of Rhode Island is
void with respect to a claim otherwise enforceable under the Rhode
Island Franchise Investment Act.
SOUTH DAKOTA. If this Agreement is governed by the laws of the State of
South Dakota, then: (1) the covenant not to compete upon termination or
expiration of this Agreement contained in Article 12.3 may be
unenforceable, except in certain circumstances provided by law; (2) any
provision of this Agreement which designates jurisdiction or venue
outside of the State of South Dakota or requires the FRANCHISEE to
agree to jurisdiction or venue in a forum outside of the State of South
Dakota is void with respect to any cause of action which is otherwise
enforceable in the State of South Dakota; (3) the provisions of Article
23 requiring Arbitration hearings to take place in Minneapolis,
Minnesota will be inapplicable and in the event of Arbitration between
COST CUTTERS and the FRANCHISEE, such Arbitration will be conducted in
Sioux Falls, South Dakota or at a mutually agreed upon location; and
(4) pursuant to SDCL ss.37-5A-86, any acknowledgment provision,
disclaimer, integration clause or a provision having a similar effect
in this Agreement will not negate or act to remove from judicial review
any statement, misrepresentation or action that violates Chapter 37-5A
or a rule or order under Chapter 37-5A.
WASHINGTON. If this Agreement is governed by the laws of the State of
Washington, then: (1) in any Arbitration involving a franchise
purchased in Washington, the Arbitration site will be either in the
State of Washington, in a place mutually agreed upon at the time of the
Arbitration, or as determined by the Arbitrator; (2) in the event of a
conflict of laws, the provisions of the Washington Franchise Investment
Protection Act, Chapter 19.100 RCW, will prevail; (3) a release or
waiver of rights executed by the FRANCHISEE will not include rights
under the Washington Franchise Investment Protection Act, except when
executed pursuant to a negotiated settlement after this Agreement is in
effect and where the parties are represented by independent counsel;
(4) provisions of this Agreement which unreasonably restrict or limit
the statute of limitations period for claims under the Washington
Franchise Investment Protection Act, rights or remedies under the
Washington Franchise Investment Act such as a right to a jury trial may
not be enforceable; and (5) transfer fees are collectible by COST
CUTTERS to the
extent that they reflect COST CUTTERS' reasonable estimated or actual
costs in effecting a transfer.
WISCONSIN. If this Agreement is governed by the laws of the State of
Wisconsin, then the provisions of the Wisconsin Fair Dealership Law,
Wis. Stat. Chapter 135, will supersede any conflicting terms of this
Agreement.
28.3 SEVERABILITY. The severability provisions of this Agreement contained in
Article 12.5, Article 23.10 and Article 24.2 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 28.2 above.
ARTICLE 29
DEFINITIONS
For purposes of this Agreement, the following words will have the following
definitions:
29.1 ABANDON. "Abandon" 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 operating the franchised Business in accordance
with the quality standards, uniform requirements and the Business System set
forth in this Agreement and the Manual.
29.2 DESIGNATED MARKET AREA. "Designated Market Area" or "DMA" will mean each
television market exclusive of another based upon a preponderance of television
viewing hours as defined by the ratings service currently being utilized by COST
CUTTERS or its designated advertising agency.
29.3 BUSINESS SYSTEM. "Business System" will mean the distinctive services and
products which are associated with COST CUTTERS' trademarks, trade names,
service marks, copyrights, interior and exterior building designs, slogans,
signs, logos, commercial symbols and color combinations. "Business System" will
include all of the uniform requirements, standards of quality and consistency,
procedures, specifications, training, advertising and instructions promulgated
by COST CUTTERS.
29.4 FINANCIAL STATEMENTS. "Financial statements" will mean a balance sheet,
income statement, statement of cash flows and footnotes prepared in accordance
with generally accepted accounting principles applied on a consistent basis and
any other schedules or forms that may be required by COST CUTTERS.
29.5 GROSS REVENUES. "Gross Revenues" will mean the gross total dollar income of
the FRANCHISEE'S Cost Cutters Business from all cash, credit or charge sales of
all merchandise, products and services sold or rendered in, upon, about or
resulting from, in connection with or as a result of the FRANCHISEE'S Cost
Cutters Business, and will include all sales, receipts and revenues, in any form
and from any and all sources whatsoever, including sales made to employees of
the FRANCHISEE. This definition will be applicable regardless of whether such
sales, receipts or revenues are produced or received by the FRANCHISEE, by any
permitted sublicensee, tenant, agent, employee, concessionaire, vending machine,
coin-operated machine or vendor of the FRANCHISEE, or by any other business
associate of the FRANCHISEE who or which is associated with the FRANCHISEE in
order to receive the benefits of the rights granted hereunder to the FRANCHISEE.
"Gross Revenues" will include all sales made by the FRANCHISEE whether made for
cash or on credit including, but not limited to, those sales charged or made for
orders placed or deliveries from the Business franchised hereunder, including
orders
placed or filled, or services provided at a location other than the Franchised
Location, including mail order. "Gross Revenues" will not include any sales, use
or gross receipts tax imposed by any federal, state, municipal or governmental
authority directly upon sales, if: (A) the amount of the tax is added to the
selling price and is expressly charged to the customer; (B) a specific record is
made at the time of each sale of the amount of such tax; and (C) the amount
thereof is paid over to the appropriate taxing authority by the FRANCHISEE.
29.6 QUARTERLY. "Quarterly" or "Quarter" will mean three (3) consecutive
calendar months commencing on the first day of the FRANCHISEE'S fiscal or
calendar year.
IN WITNESS WHEREOF, COST CUTTERS, the FRANCHISEE and the shareholders of the
FRANCHISEE have respectively signed this Agreement effective as of the day and
year first above written.
In the Presence of: "COST CUTTERS"
Cost Cutters, a division of The Barbers,
- ----------------------------------- Hairstyling for Men & Women, Inc.
By
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Its
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In the Presence of: "FRANCHISEE"
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----------------------------------------
----------------------------------------
The undersigned individual shareholders 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
PERSONAL GUARANTY AND AGREEMENT TO BE BOUND
PERSONALLY BY THE TERMS AND CONDITIONS
OF THIS FRANCHISE 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 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,
rent 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 and 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
- ------------------------------------- ---------------------------------------
INDIVIDUALLY INDIVIDUALLY
- ------------------------------------- ---------------------------------------
Address Address
- ------------------------------------- ---------------------------------------
City State Zip Code City State Zip Code
- ------------------------------------- ---------------------------------------
Telephone Telephone
- ------------------------------------- ---------------------------------------
INDIVIDUALLY INDIVIDUALLY
- ------------------------------------- ---------------------------------------
Address Address
- ------------------------------------- ---------------------------------------
City State Zip Code City State Zip Code
- ------------------------------------- ---------------------------------------
Telephone Telephone
- ------------------------------------- ---------------------------------------
INDIVIDUALLY INDIVIDUALLY
- ------------------------------------- ---------------------------------------
Address Address
- ------------------------------------- ---------------------------------------
City State Zip Code City State Zip Code
- ------------------------------------- ---------------------------------------
Telephone Telephone
EXHIBIT A
CONFIDENTIALITY AGREEMENT
Effective this _______day of _______________, 19___, in consideration of
employment with ___________________________________________ (the "Employer"), a
franchisee of Cost Cutters, a division of The Barbers, Hairstyling for Men &
Women, Inc. ("Cost Cutters"), it is hereby agreed that the undersigned employee
(the "Employee") will, at all times during the term of his or her employment and
thereafter, treat the Operations Manual and any other materials (including, but
not limited to, videotapes, films, drawings, diagrams and computer programs)
created for or approved for use in the operation of the Cost Cutters Business,
and the information contained therein, as secret and confidential and as the
sole and absolute property of Cost Cutters, and will use all reasonable means to
keep them secret and confidential. The Employee will not:
(a) Communicate, divulge or use for the benefit of himself/herself personally or
any other person or entity, any information contained in the Operations Manual
or other materials deemed confidential by Cost Cutters.
(b) Copy, duplicate, videotape, photograph, record or otherwise reproduce the
Manual or any other materials, in whole or in part. Neither the Manual nor other
materials created for or used in the Cost Cutters Business will be borrowed or
removed from the Cost Cutters location or business premises without the express
written approval of the Employer. The Employee will not make any Cost Cutters
materials available to any unauthorized person or entity, or allow them access
to the Manual or other materials.
(c) Use any Cost Cutters materials or any information, knowledge, methods or
techniques contained or described herein for any purpose other than the
performance of his or her duties as a Cost Cutters employee. The Employee will
respect the confidentiality of the Manual and all other materials as it relates
to concurrent and future employment.
The Employee and the Employer acknowledge and agree: (1) that Cost Cutters is a
third-party beneficiary of the rights and obligations set forth in this
Agreement; (2) that Cost Cutters will suffer irreparable harm in the event of
any breach or violation of this Agreement; (3) that Cost Cutters shall have the
right to enforce the provisions of this Agreement in its own name in the event
of any breach or violation, or threatened breach or violation, of this
Agreement; and (4) that Cost Cutters shall have the right to obtain specific
performance, temporary restraining orders, preliminary injunctions, injunctions
and other equitable relief to the extent reasonably necessary to protect its
interests in the ownership and confidentiality of the Manual or any other
confidential information from any court of competent jurisdiction or Arbitrator,
subject to and in accordance with the confidentiality and enforcement provisions
of the Franchise Agreement between the Employer and Cost Cutters.
The undersigned Employer and Employee understand and accept the obligations set
forth herein and agree to be bound by them.
Dated: , 199 EMPLOYEE:
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EMPLOYER:
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By
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Its
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EXHIBIT B
LANDLORD'S CONSENT TO ASSIGNMENT OF LEASE
___________________________________ (the Landlord) hereby consents to the
Assignment by ___________________________________ (the Franchisee) of its right,
title and interest in the premises lease dated ____________________, 19___,
between the Landlord and the Franchisee, (the Premises Lease), to Cost Cutters,
a division of The Barbers, Hairstyling for Men & Women, Inc. (COST CUTTERS),
pursuant to a franchise agreement between COST CUTTERS and the Franchisee dated
_______________, 19___, (the Franchise Agreement), and as an inducement to COST
CUTTERS to enter into the Franchise Agreement with the Franchisee, agrees with
COST CUTTERS as follows:
In the event of default by the Franchisee under the Franchise
Agreement, COST CUTTERS or its designee may assume, enforce and perform the
obligations of the Premises Lease with the same force and effect as if assumed,
enforced and performed by the Franchisee. The Landlord will accept COST
CUTTERS's (or its designee's) performance in lieu of performance by the
Franchisee in satisfaction of the FRANCHISEE'S future obligations under the
Premises Lease.
The Landlord will not terminate the Premises Lease on account
of any default of the Franchisee thereunder without written notice to COST
CUTTERS and first providing to COST CUTTERS a reasonable opportunity, but not
less than thirty (30) days, to: (i) cause the Franchisee to cure the default; or
(ii) declare the Franchisee in default under the Franchise Agreement and
exercise its rights under the Assignment of Lease provisions of the Franchise
Agreement. In the event COST CUTTERS so elects to exercise its rights under the
Assignment, the Landlord agrees not to terminate the Premises Lease so long as
COST CUTTERS or its designee agrees, within thirty (30) days from the date COST
CUTTERS gives written notice to the Landlord of its election to exercise its
rights under this Assignment, to perform the future obligations of the
Franchisee under the Premises Lease. However, nothing herein will require COST
CUTTERS to cure any default of the Franchisee under the Premises Lease, but only
gives it the option to assume the FRANCHISEE'S future rights and obligations
under the Premises Lease.
The Landlord hereby represents and warrants to COST CUTTERS
that (i) the Premises Lease is a valid and enforceable agreement, (ii) there has
been no prior assignment of the Premises Lease of which the Landlord has notice
or is aware, (iii) neither the Landlord nor the Franchisee is in default under
the Premises Lease, and (iv) all covenants, conditions and agreements have been
performed as required therein except those not due to be performed until after
the date hereof.
Dated: , 199 "LANDLORD"
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By
-----------------------------------
Its
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