EXHIBIT 10.5
CITY LOOKS SALONS INTERNATIONAL(R)
FRANCHISE AGREEMENT
BETWEEN
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
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Area Code Fax Number
FRANCHISED LOCATION:
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Street
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City State Zip Code
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Area Code Telephone
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Area Code Fax Number
DATE OF FRANCHISE AGREEMENT:
________________, _____
CITY LOOKS SALONS INTERNATIONAL(R)
FRANCHISE AGREEMENT
Article Description Page
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1 FRANCHISED LOCATION; GRANT OF FRANCHISE...............................2
2 TERM; FRANCHISEE'S OPTION TO REACQUIRE THE FRANCHISE..................3
3 CITY LOOKS'RIGHT TO LICENSE THE MARKS.................................4
4 INITIAL FEE; APPROVAL OF FRANCHISEE...................................5
5 CONTINUING FEES.......................................................6
6 ADVERTISING...........................................................7
7 QUALITY CONTROL, UNIFORMITY AND STANDARDS REQUIRED OF THE FRANCHISEE.10
8 CONFIDENTIAL OPERATIONS MANUAL AND OTHER INFORMATION.................15
9 CITY LOOKS'TERMINATION RIGHTS........................................16
10 FRANCHISEE'S TERMINATION RIGHTS......................................18
11 FRANCHISEE'S OBLIGATIONS UPON TERMINATION OR EXPIRATION..............20
12 FRANCHISEE'S COVENANTS NOT TO COMPETE................................21
13 CITY LOOKS'RIGHT OF FIRST REFUSAL TO PURCHASE........................22
14 TRAINING PROGRAM; OPENING ASSISTANCE.................................25
15 CITY LOOKS'OTHER OBLIGATIONS.........................................26
16 CITY LOOKS SALONS INTERNATIONAL SIGN.................................27
17 INSURANCE............................................................27
18 INDEPENDENT CONTRACTORS; INDEMNIFICATION.............................29
19 FINANCIAL STATEMENTS; GROSS REVENUE REPORTS; FORMS AND ACCOUNTING....29
20 ASSIGNMENT...........................................................31
21 SITE SELECTION; STANDARD STORE LAYOUTS AND PLANS.....................33
22 LEASE AS SECURITY; TERMINATION OF LEASE..............................34
23 ARBITRATION..........................................................36
24 ENFORCEMENT..........................................................38
25 NOTICES..............................................................41
26 ACKNOWLEDGMENTS......................................................41
27 DISCLAIMER; FRANCHISEE'S LEGAL COUNSEL...............................42
28 GOVERNING LAW; STATE MODIFICATIONS...................................43
29 DEFINITIONS..........................................................44
PERSONAL GUARANTY
EXHIBIT A - CONFIDENTIALITY AGREEMENT
EXHIBIT B - AUTHORIZATION FOR DIRECT PAYMENT
EXHIBIT C - LANDLORD'S CONSENT TO ASSIGNMENT OF LEASE
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CITY LOOKS SALONS INTERNATIONAL(R)
FRANCHISE AGREEMENT
THIS FRANCHISE AGREEMENT, (this "Agreement") made, entered into and effective
this _____ day of _______________, ______, by and between The Barbers,
Hairstyling for Men & Women, Inc., a Minnesota corporation ("CITY LOOKS" and
sometimes "THE BARBERS"), and _________________________________________________,
(the "FRANCHISEE");
WITNESSETH:
WHEREAS, CITY LOOKS has developed and owns a distinctive business system for
operating hairstyling businesses of a distinctive character with the name "City
Looks Salons International(R) (the "Business System" or the "City Looks Business
System") and has publicized the name "City Looks Salons International(R)" and
other trademarks, trade names, service marks, and commercial symbols to the
public as an organization of hairstyling businesses operating under the City
Looks Business System; and
WHEREAS, CITY LOOKS represents that it has the right and authority to franchise
the use of the name "City Looks Salons International(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 CITY LOOKS' uniformity requirements and quality standards; and
WHEREAS, the FRANCHISEE desires to operate a City Looks Salons International
hairstyling business at the location set forth and 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 CITY LOOKS; and
WHEREAS, CITY LOOKS is willing to provide the FRANCHISEE with marketing,
advertising, technology, operational and other business information, experience
and "know how" about the City Looks Salons International business that has been
developed over time by CITY LOOKS 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 City Looks Salons
International 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 City
Looks Salons International business subject to and under the terms and
conditions set forth in this Agreement; and
WHEREAS, the FRANCHISEE acknowledges that CITY LOOKS would not provide the
FRANCHISEE with any business information or "know how" about the City Looks
Salons International 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, National Advertising Production 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 advisor, and has had sufficient time to evaluate and investigate the
City Looks Salons International Business System, the financial investment
requirements, and the business risks associated with owning and operating a City
Looks Salons International business;
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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. CITY LOOKS grants to the FRANCHISEE a nonexclusive
personal right to operate one City Looks Salons International business (the
"City Looks" or "City Looks Salons International" business) in conformity with
the City Looks Business System and further grants the FRANCHISEE a nonexclusive
personal right to operate the business using the name "City Looks Salons
International(R)" at the following single location: ____________________________
________________________________________________________________________________
(the "Franchised Location"). This Agreement does not grant any exclusive
territorial rights to the FRANCHISEE, and CITY LOOKS will have the right to open
and operate, and to grant to other franchisees the right to open and operate,
City Looks 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 City Looks business is to be located will be
described or otherwise 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 CITY LOOKS,
relocate the Franchised Location to another location during the term of this
Agreement, if the proposed new location does not compete with any City Looks
Salons International or The Barbers business operated by CITY LOOKS or CITY
LOOKS' 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 CITY LOOKS 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 CITY LOOKS'
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 City Looks 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 hereby undertakes the obligation to
operate a City Looks Salons International hairstyling business at the Franchised
Location under the City Looks Business System using the name "City Looks Salons
International(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 CITY LOOKS under this Agreement are applicable only
to the
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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 THE 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
CITY LOOKS and the FRANCHISEE, and, if the FRANCHISEE is a corporation or
partnership, the personal guarantors; and (B) the signed Agreement is 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 CITY LOOKS 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 CITY LOOKS' material
operating and quality standards and procedures; (C) all monetary obligations
owed by the FRANCHISEE to CITY LOOKS 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 City Looks
business so that the FRANCHISEE'S business will reflect the image portrayed by
CITY LOOKS' 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 CITY LOOKS 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 CITY LOOKS under CITY LOOKS' 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, National
Advertising Production 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 CITY LOOKS' then-current standard
Franchise Agreement. The FRANCHISEE acknowledges that the terms, conditions and
economics of the then-current standard Franchise Agreement of CITY LOOKS may, at
that time, vary in substance and form from the terms, conditions and economics
of this Agreement.
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ARTICLE 3
CITY LOOKS' RIGHT TO LICENSE THE MARKS
3.1 LICENSE OF MARKS. CITY LOOKS warrants that, except as provided for herein,
it has the right to license the name "City Looks Salons International(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 CITY LOOKS 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 CITY LOOKS.
3.2 CONDITIONS TO LICENSE OF MARKS. The FRANCHISEE agrees that its nonexclusive
personal right to use the name "City Looks Salons International(R)" as the name
of the FRANCHISEE'S business, and its right to use the Marks and the Business
System, apply only to the City Looks 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 CITY LOOKS 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 CITY LOOKS. If, in the judgment of CITY LOOKS,
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 CITY LOOKS,
immediately modify its use of the Marks and the Business System in the manner
prescribed by CITY LOOKS in writing. Any and all goodwill associated with the
Marks and the Business System will inure exclusively to CITY LOOKS' 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 CITY LOOKS and if CITY LOOKS' 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 CITY LOOKS, then upon receiving written notice from CITY
LOOKS, the FRANCHISEE will, at its expense, immediately make all changes and
amendments to the Marks as may be specified by CITY LOOKS. 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 CITY LOOKS in writing. The
FRANCHISEE will not make any changes or amendments whatsoever to the Marks or
the Business System unless approved by or specified in advance by CITY LOOKS 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 CITY LOOKS prompt and 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 CITY LOOKS in any lawsuits or other
proceedings involving the Marks or the Business System. CITY LOOKS will have the
sole and absolute right to determine whether it will commence or defend any
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litigation involving the Marks or the Business System, and the cost and expense
of all litigation incurred by CITY LOOKS, including attorneys' fees,
specifically relating to the Marks or the Business System will be paid by CITY
LOOKS.
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, CITY LOOKS and
its legal counsel will control and conduct all litigation involving the Marks,
the Business System and the rights of CITY LOOKS. Except as expressly provided
for herein, CITY LOOKS 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 CITY LOOKS 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 CITY LOOKS 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 CITY LOOKS and CITY LOOKS will, at its
expense, defend the FRANCHISEE in the action provided that the FRANCHISEE has
tendered the defense of the action to CITY LOOKS within seven (7) days after
receiving service of the pleadings or Summons and Complaint relating to the
action. CITY LOOKS 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 CITY LOOKS.
ARTICLE 4
INITIAL FEE; APPROVAL OF FRANCHISEE
4.1 AMOUNT OF INITIAL FEE. The FRANCHISEE will pay CITY LOOKS an Initial Fee of
______________________________________________________ Dollars ($____________),
all of which will be due and payable on the date this Agreement is executed by
the FRANCHISEE. The Initial Fee payable by the FRANCHISEE is payment to CITY
LOOKS for costs incurred by CITY LOOKS 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 CITY LOOKS' RIGHT TO REJECT FRANCHISEE. CITY LOOKS will have the absolute,
sole and unilateral right to reject this Agreement or the FRANCHISEE if CITY
LOOKS determines that any financial, personal or other information provided by
the FRANCHISEE to CITY LOOKS 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 a City Looks
business because such person has not successfully completed CITY LOOKS' training
program or is deemed to be incapable of successfully completing CITY LOOKS'
training program.
4.3 REFUND OF INITIAL FEE. In the event that either this Agreement or the
FRANCHISEE is rejected by CITY LOOKS pursuant to Article 4.2 above, then the
Initial Fee will be refundable to the FRANCHISEE after deducting all reasonable
administrative and out-of-pocket expenses incurred by
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CITY LOOKS 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 CITY LOOKS in
writing if either this Agreement or the FRANCHISEE is rejected by CITY LOOKS
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 AMOUNT OF CONTINUING FEES. In addition to the Initial Fee, the FRANCHISEE
will, commencing on the date which is eighteen (18) weeks after the date that
the FRANCHISEE begins business operations pursuant to this Agreement and
continuing thereafter for the remaining term of this Agreement, pay CITY LOOKS
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 City Looks business. For the first (1st)
through the seventeenth (17th) weeks of the FRANCHISEE'S operation of its City
Looks business pursuant to this Agreement, the FRANCHISEE will not be obligated
to pay a Continuing Fee to CITY LOOKS. For the eighteenth (18th) through the
thirty-fourth (34th) weeks of the FRANCHISEE'S operation of its City Looks
business pursuant to this business, the FRANCHISEE will pay to CITY LOOKS a
weekly Continuing Fee equal to two percent (2%) of the FRANCHISEE'S Gross
Revenues. For the thirty-fifth (35th) and each subsequent week of the
FRANCHISEE'S operation of its City Looks business for the balance of the
remaining term of this Agreement, the FRANCHISEE will pay CITY LOOKS a weekly
Continuing Fee equal to four percent (4%) of the FRANCHISEE'S Gross Revenues;
provided, however, that commencing with the fifty-third (53rd) week of the
FRANCHISEE'S operation of its City Looks business and continuing throughout the
remaining term of this Agreement, the FRANCHISEE will pay CITY LOOKS a weekly
Continuing Fee equal to the greater of four percent (4%) of the FRANCHISEE'S
weekly Gross Revenues or One Hundred Dollars ($100.00) per week. The Continuing
Fees paid to CITY LOOKS will not be refundable to the FRANCHISEE under any
circumstances.
5.2 GROSS REVENUES CAP. At such time as the FRANCHISEE achieves Gross Revenues
of One Million Dollars ($1,000,000) (the "Gross Revenues Cap") within a single
calendar year (the first such year being referred to herein as the "Base Year")
in the City Looks business operated pursuant to this Agreement, the FRANCHISEE
will no longer be obligated, so long as the FRANCHISEE is in compliance with all
terms and conditions of this Agreement including, but not limited to, the
obligation to pay Continuing Fees on all Gross Revenues up to and including the
Gross Revenues Cap, to pay Continuing Fees with respect to any Gross Revenues in
excess of the Gross Revenues Cap which are achieved during the remainder of such
calendar year. Commencing on January 1 of the year following the Base Year and
on each January 1 thereafter, the FRANCHISEE will resume payment of weekly
Continuing Fees pursuant to Article 5.1 above until the FRANCHISEE has achieved
the Gross Revenues Cap for such year. For each year after the Base Year, the
Gross Revenues Cap shall be increased to an amount equal to the product obtained
by multiplying the Gross Revenues Cap for the immediately preceding calendar
year by the sum of one plus the percent of increase (but not decrease) in the
Consumer Price Index, U.S. City Average (All Items) For All Urban Consumers
(CPI-U) (1984 = 100) (the "Index") from the first day of such immediately
preceding calendar year to the last day of such immediately preceding calendar
year, as published by the U.S. Bureau of Labor Statistics ("BLS"). If the Index
is no longer published, the FRANCHISOR will select a replacement index that
will, in the FRANCHISOR's sole discretion, most closely approximate the Index.
Notwithstanding anything to the contrary contained in this Article 5.2, the
relief from paying Continuing Fees with respect to Gross Revenues in excess of
the Gross Revenues Cap granted pursuant to this Article 5.2 shall immediately
cease and terminate in the event the FRANCHISEE fails to (A) submit the weekly
Gross Revenues
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reports as required pursuant to Article 19.3 below; (B) pay weekly Continuing
Fees with respect to Gross Revenues up to and including the Gross Revenues Cap
as required under this Article 5; or (C) comply with any other term or provision
of this Agreement.
5.3 FRANCHISEE'S OBLIGATION TO PAY CONTINUING FEES. The Continuing Fees payable
to CITY LOOKS under this Article will be calculated and paid to CITY LOOKS 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 CITY LOOKS will be
a material breach of this Agreement. The FRANCHISEE'S obligation to pay CITY
LOOKS 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 CITY LOOKS under this Agreement regardless of any claims or
allegations of liability for damages or other payments that the FRANCHISEE may
allege against CITY LOOKS.
5.4 DATE PAYABLE. The weekly Continuing Fees payable by the FRANCHISEE must be
paid to and received by CITY LOOKS on or before the close of business on
Thursday of each week for the preceding week. The Weekly Continuing Fees must be
submitted with the FRANCHISEE'S weekly report of Gross Revenues required under
Article 19 of this Agreement.
5.5 INTEREST ON UNPAID CONTINUING FEES. If the FRANCHISEE fails to remit the
weekly Continuing Fees due to CITY LOOKS by Thursday of each week for the
previous week, as provided for in this Agreement, then the unpaid weekly
Continuing Fees due to CITY LOOKS will bear interest at the maximum legal rate
allowable in the state in which the FRANCHISEE'S City Looks business is located.
In no event, however, will the rate of interest payable by the FRANCHISEE on the
unpaid weekly Continuing Fees due CITY LOOKS 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 CITY LOOKS 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 CITY LOOKS for any and all
costs incurred by CITY LOOKS in the collection of unpaid and past due Continuing
Fee payments including, but not limited to, CITY LOOKS' actual attorneys' fees,
deposition costs, expert witness fees, investigation costs, accounting fees,
filing fees, and travel expenses.
ARTICLE 6
ADVERTISING
6.1 NATIONAL ADVERTISING PRODUCTION FEES. The FRANCHISEE will pay CITY LOOKS
weekly National Advertising Production Fees equal to one half of one percent
(.5%) of the FRANCHISEE'S weekly Gross Revenues for deposit in the National
Production Account ("NPA") which will be administered and controlled exclusively
by CITY LOOKS. The FRANCHISEE'S failure to pay the National Advertising
Production Fees will be a material breach of this Agreement. CITY LOOKS will
have the right to use the NPA monies, in its sole discretion, to purchase and
pay for any services or products relating to the production of advertising for
City Looks 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 costs (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 NPA (including, but not limited to, salaries,
travel expenses, office supplies, and related general and
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administrative expenses), and all other costs relating to the advertising and
promotion of all City Looks Salons International and The Barbers Franchisees and
the Business System. The use of the monies in the NPA and the administration of
the NPA will be under the absolute direction and control of CITY LOOKS. CITY
LOOKS will have the absolute right to determine, in its sole discretion, the
advertising agencies that will be retained, the type and content of the services
and products, and all other matters pertaining to the expenditures made by CITY
LOOKS from the NPA. CITY LOOKS will have no fiduciary duty to the FRANCHISEE
with respect to collection or expenditure of the National Advertising Production
Fees, and any advertising fund will not be a trust or escrow account. CITY LOOKS
will not be required to contribute to the NPA; however, all City Looks
businesses that are owned and operated by CITY LOOKS will be required to
contribute to the NPA in accordance with the terms of their respective Franchise
Agreements. The National Advertising Production Fees paid by the FRANCHISEE will
not be refundable to the FRANCHISEE under any circumstances.
6.2 DATE PAYABLE; INTEREST ON UNPAID NATIONAL ADVERTISING PRODUCTION FEES. The
weekly National Advertising Production Fees must be paid directly to and
received by CITY LOOKS on or before the close of business on Thursday of each
week for the preceding week. Any National Advertising Production 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 City Looks business is
located. In no event, however, will the rate of interest payable by the
FRANCHISEE on the unpaid balance due for National Advertising Production 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 CITY LOOKS
will have the right, in its sole discretion, to estimate the amount of the
National Advertising Production Fees payable by the FRANCHISEE, and the
estimated unpaid weekly National Advertising Production Fees will bear interest
at the rate set forth above. The FRANCHISEE will pay CITY LOOKS for any and all
costs incurred by CITY LOOKS in the collection of unpaid and past due National
Advertising Production Fees payments, including, but not limited to, CITY LOOKS'
actual attorneys' fees, deposition costs, expert witness fees, investigation
costs, accounting fees, filing fees and travel expenses. CITY LOOKS will have
the right to collect unpaid National Advertising Production Fees in its own name
or on behalf of the NPA; however, all National Advertising Production Fees
collected will be deposited in the NPA.
6.3 LOCAL ADVERTISING. In addition to payment of the National Advertising
Production Fees required by Article 6.1 above, for the first (1st) through the
thirty-fourth (34th) weeks of the FRANCHISEE'S operation of its City Looks
business, the FRANCHISEE must spend an amount equal to at least four percent
(4%) of its Gross Revenues for approved local media advertising and promotion.
For the thirty-fifth (35th) and each subsequent week of the FRANCHISEE'S
operation of its City Looks Business for the balance of the remaining term of
this Agreement, the Franchisee must spend an amount equal to three percent (3%)
of its Gross Revenues for approved local media advertising and promotion. All
local media advertising and promotions conducted by the FRANCHISEE must conform
to CITY LOOKS' standards for media advertising and promotions. On or before
March 31 and September 30 of each year throughout the term of this Agreement,
the FRANCHISEE will furnish to CITY LOOKS, in the form prescribed by CITY LOOKS,
an accurate accounting of the FRANCHISEE'S expenditures for approved local media
advertising and promotion. If the FRANCHISEE has failed to spend the required
percentage 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 CITY LOOKS the difference between the required percentage of its
Gross Revenues and what it actually spent for such advertising, and this amount
will be spent by CITY LOOKS in the FRANCHISEE'S area for any type of advertising
or promotion that CITY LOOKS deems to be in the best interests of the
FRANCHISEE'S business.
6.4 LOCAL DMA ADVERTISING GROUP. At such time as there are two (2) or more City
Looks Salons International or The Barbers businesses (including the FRANCHISEE'S
City Looks
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business) in the FRANCHISEE'S DMA, as defined herein, CITY LOOKS 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 City
Looks business in the DMA, including the City Looks businesses owned and
operated in the DMA by CITY LOOKS. 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 on a pro rata basis,
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 local
advertising and promotional expenditures required under Article 6.3 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 three
percent (3%) 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 City Looks 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.
6.5 ADVERTISING FUND. In addition to the National Advertising Production Fees
required under Article 6.1 of this Agreement, CITY LOOKS reserves the right, in
its sole discretion, to require the FRANCHISEE to contribute a maximum of three
percent (3%) of the FRANCHISEE'S Gross Revenues into an advertising fund which
will be administered and controlled by CITY LOOKS. The requirement for the
FRANCHISEE to contribute to an advertising fund will not take effect until the
FRANCHISEE has been given not less than thirty (30) days written notice of such
requirement. In the event CITY LOOKS requires the FRANCHISEE to contribute to an
advertising fund, the FRANCHISEE'S requirement to spend an amount for local
advertising under Article 6.3 of this Agreement will be reduced by the same
percentage that the FRANCHISEE will be required to contribute to CITY LOOKS for
the advertising fund. The use of the monies in such advertising fund will be
under the absolute discretion and control of CITY LOOKS to purchase and pay for
any products or services relating to advertising for City Looks franchisees. The
advertising fees payable by the FRANCHISEE into the advertising fund will be
payable in the same fashion and under the same terms and conditions as the
National Advertising Production Fees are payable and will not be refundable to
the FRANCHISEE under any circumstances.
6.6 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 CITY LOOKS 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.
6.7 GRAND OPENING ADVERTISING. The FRANCHISEE will be required to spend between
Two Thousand Five Hundred Dollars ($2,500) and Five Thousand Dollars ($5,000) to
implement and conduct grand opening advertising, marketing, public relations and
promotional programs for its City Looks business which have been approved by
CITY LOOKS 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 6.3 of this Agreement.
6.8 LOCAL DMA RECRUITING GROUP. At such time as there are two (2) or more City
Looks Salons International or The Barbers businesses (including the FRANCHISEE'S
City Looks business) in the FRANCHISEE'S DMA, CITY LOOKS will have the right to
require that the FRANCHISEE become
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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 City Looks 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 6.4 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
CITY LOOKS will promulgate, from time to time, uniform standards of quality and
service regarding the business operations of the FRANCHISEE'S City Looks
business so as to protect and maintain (for the benefit of all City Looks Salons
International Franchisees and CITY LOOKS) the distinction, valuable goodwill and
uniformity represented and symbolized by the Marks and the Business System.
Accordingly, to insure that all City Looks Salons International 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 comply with the provisions of this Article to assure the public that
all City Looks Salons International 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 City Looks Salons International
business. However, the style and form of the words "City Looks Salons
International(R)" in any advertising, marketing, public relations, telemarketing
or promotional program must have the prior written approval of CITY LOOKS and
must conform to CITY LOOKS' standards and requirements for use of the Marks.
Whenever practical, the FRANCHISEE will use the name "City Looks Salons
International(R)" and all graphics commonly associated with the Marks which now
or hereafter may form a part of CITY LOOKS' Business System on all paper
supplies, furnishings, advertising materials, signs, stationery, business cards
and other articles in the identical combination and manner as may be prescribed
by CITY LOOKS in writing. The FRANCHISEE will, at its expense, comply with all
notices of registration required by CITY LOOKS 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 applicable law or by CITY
LOOKS.
7.2 IDENTIFICATION AS FRANCHISEE. The FRANCHISEE will not use the words "City
Looks By The Barbers, Hairstyling for Men & Women" or any or 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 City Looks business pursuant to a franchise from CITY LOOKS. 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 City Looks Salons International Franchisee.
The FRANCHISEE will display a sign, to be provided by CITY LOOKS, 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 City Looks Salons International business as an independent business
pursuant to this Agreement.
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7.3 SIGNS. The FRANCHISEE will display only the approved City Looks Sign (the
"Sign") and will not use or display any other signs of any kind or nature
without the express prior written approval of CITY LOOKS.
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 CITY LOOKS prior to
using any other advertising or promotional materials.
7.5 COMPLIANCE WITH STORE LAYOUTS AND PLANS. The Franchised Location and the
FRANCHISEE'S business premises must conform to CITY LOOKS' 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 CITY LOOKS' prior written approval. The FRANCHISEE will be
solely responsible for ascertaining and insuring that the Franchised Location
and the business premises are construed or remodeled according to all applicable
local, state and federal laws, ordinances, statutes and building codes,
including compliance with the Americans with Disabilities Act. The furniture,
fixtures, supplies and equipment used in the Franchised Location must conform to
the quality standards and uniform requirements established by CITY LOOKS from
time to time.
7.6 PERIODIC REMODELING. The FRANCHISEE will be required to periodically make
reasonable the 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 CITY LOOKS
("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 CITY LOOKS from time to time and with the prior
written approval of CITY LOOKS. All replacements for the furniture, fixtures,
supplies and equipment must conform to CITY LOOKS' then-current quality
standards and must be approved by CITY LOOKS in writing. The FRANCHISEE will
begin remodeling the Franchised Location within three (3) months from the date
that the FRANCHISEE receives written notice from CITY LOOKS 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 three (3) 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 CITY LOOKS, which may be amended and supplemented by
CITY LOOKS 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 CITY LOOKS in writing.
The FRANCHISEE will purchase and carry the full line of CITY LOOKS' exclusive
brand shampoos, conditioners, finishing products and other hair care products at
such minimum levels as may be established by CITY LOOKS. The FRANCHISEE
acknowledges and agrees that it will either: (1) execute and deliver to CITY
LOOKS such sales tax exemption certificates or other documents as may be
reasonably required by CITY LOOKS to establish that the FRANCHISEE'S purchase of
such products from CITY LOOKS is exempt from any and all sales, use or excise
taxes; or (2) pay CITY LOOKS the amount of any sales, use or excise taxes
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applicable to the FRANCHISEE'S purchase of such products. The FRANCHISEE will
conform to all customer service standards prescribed by CITY LOOKS 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 CUSTOMER RETENTION PROGRAM. The FRANCHISEE will maintain a customer
retention program in the form prescribed by CITY LOOKS. The FRANCHISEE may
either purchase the system from CITY LOOKS, or maintain its own system with the
prior approval of CITY LOOKS. After the FRANCHISEE commences business, the
FRANCHISEE will provide CITY LOOKS with the results of its customer retention
program, in the form prescribed by CITY LOOKS, every eight (8) weeks (Sunday
through Saturday) during the term of this Agreement. This report will be
furnished to CITY LOOKS by Friday of the week following each eight (8) week
period.
7.10 OPERATIONS MANUAL. CITY LOOKS will provide the FRANCHISEE with one copy of
CITY LOOKS' confidential Operations Manual (the "Manual"). The FRANCHISEE will
conform to the common image and identity created by the products and services
associated with City Looks Salons International businesses which are portrayed
and described by the Manual, and the FRANCHISEE will conform to all changes and
modifications made to the Manual by CITY LOOKS and provided to the FRANCHISEE
that are deemed by CITY LOOKS necessary 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 City Looks business; or (D) maintain the product and service
consistency required by CITY LOOKS. CITY LOOKS 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 CITY LOOKS.
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 City Looks business.
7.11 APPROVED SUPPLIERS. The FRANCHISEE will purchase from suppliers approved in
writing by CITY LOOKS 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 City Looks
business which CITY LOOKS 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
CITY LOOKS' standards and specifications. If the FRANCHISEE desires to purchase
any goods and services from other suppliers, then, if requested by CITY LOOKS,
the FRANCHISEE will submit samples, specifications, and information regarding
the manufacturer to CITY LOOKS for review to determine whether the goods and
services comply with CITY LOOKS' standards and specifications. Any expenses
incurred by CITY LOOKS in evaluating unapproved products will be paid by the
FRANCHISEE. The written approval of CITY LOOKS 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 City Looks 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 covering, wall
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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 CITY LOOKS' quality
standards. All replacement equipment must comply with CITY LOOKS' 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 CITY
LOOKS, 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. CITY LOOKS will have no liability for these or any other taxes and the
FRANCHISEE will indemnify CITY LOOKS for any such taxes that may be assessed or
levied against CITY LOOKS which arise or result from the FRANCHISEE'S City Looks
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 City Looks business.
7.16 REIMBURSEMENT OF CITY LOOKS 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 CITY LOOKS by any taxing authority, then the FRANCHISEE will
reimburse CITY LOOKS in an amount equal to the amount of such taxes and related
costs imposed upon and paid by CITY LOOKS. The FRANCHISEE will be notified in
writing when CITY LOOKS is entitled to reimbursement for the payment of such
taxes and, in that event, the FRANCHISEE will pay CITY LOOKS 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 City Looks business will be
open for business on such days and for such hours as CITY LOOKS 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 CITY LOOKS. 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) City Looks
Businesses owned and operated by the FRANCHISEE. Each District Manager will be
responsible for the operation and administration of up to six (6) City Looks
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
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FRANCHISEE'S City Looks Businesses. All District Managers must attend and
successfully complete the training program required by CITY LOOKS, and be
certified and approved by CITY LOOKS in writing.
7.18 CITY LOOKS' INSPECTION RIGHTS. CITY LOOKS 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 City Looks business, and to evaluate
the services provided by the FRANCHISEE to its customers. CITY LOOKS will have
the right to use all photographs and videotapes of the FRANCHISEE'S City Looks
business for such purposes as CITY LOOKS 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 CITY LOOKS, its advertising agencies or any other City Looks
Salons International franchisees for the use of such photographs or videotapes
for advertising, marketing, promotional, or litigation purposes.
7.19 SECURITY INTEREST. This Agreement and the franchised business 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 CITY LOOKS.
7.20 CREDIT CARDS. The FRANCHISEE will honor all credit cards approved by CITY
LOOKS. The FRANCHISEE must obtain the written approval of CITY LOOKS prior to
honoring any previously unapproved credit cards or other credit devices.
7.21 DEFAULT NOTICES. The FRANCHISEE will immediately deliver to CITY LOOKS 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 City Looks 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 City
Looks business. Upon request from CITY LOOKS, the FRANCHISEE will provide
additional information as may be required by CITY LOOKS 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 CITY LOOKS 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 51% ownership of the issued and outstanding shares of stock of the
FRANCHISEE. CITY LOOKS 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 CITY LOOKS at least five (5)
business days prior written notice of such meetings. The FRANCHISEE will not
offer its capital stock by use of the names "City Looks(R)," "City Looks Salons
International(R)," "The Barbers(R)," "The Barbers, Hairstyling for Men & Women"
or any names 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.
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7.23 OPERATION OF CITY LOOKS BUSINESS. The FRANCHISEE will be totally and solely
responsible for the operation of its City Looks 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. CITY LOOKS will
not have any right, obligation or responsibility to control, supervise or manage
the FRANCHISEE'S employees, agents or independent contractors.
7.24 PARTICIPATION IN CERTAIN PROGRAMS AND PROMOTIONS. The FRANCHISEE must honor
all terms and conditions of any customer relations, warranty, gift certificate,
complimentary pass or similar programs established by CITY LOOKS for the City
Looks franchise system. In addition, the FRANCHISEE must participate in any
system-wide program developed by CITY LOOKS to build brand awareness and promote
customer loyalty for the City Looks franchise system.
7.25 COMPUTER SYSTEM TO BE YEAR 2000 COMPLIANT. The FRANCHISEE will be totally
and solely responsible for (A) ensuring that any computer hardware and software
utilized in its City Looks Business is "year 2000 compliant" and will function
accurately and without material interruption in the year 2000 and beyond and (B)
protecting itself from the problems that might arise in its City Looks Business
if the computer hardware and software of third parties with whom it does
business are not year 2000 compliant.
7.26 USE OF INTERNET. The FRANCHISEE'S conduct on the Internet, including
without limitation, its use of the Marks on the Internet and in domain names for
the Internet, is subject to the provisions of this Agreement. CITY LOOKS
reserves the right to establish and modify, from time to time, rules which will
govern the FRANCHISEE'S conduct and use of the Internet in connection with the
FRANCHISEE'S City Looks business, and the FRANCHISEE agrees to abide by such
rules. The FRANCHISEE'S right to use the Marks and the Business System on the
Internet will terminate when this Agreement terminates or expires.
ARTICLE 8
CONFIDENTIAL OPERATIONS MANUAL AND OTHER INFORMATION
8.1 COMPLIANCE WITH MANUAL. In order to protect the reputation and goodwill of
CITY LOOKS 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 CITY LOOKS' confidential
Operations Manual (the "Manual"). The FRANCHISEE acknowledges having received as
a loan one copy of the Manual from CITY LOOKS.
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 City Looks
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 CITY LOOKS.
CITY LOOKS may from time to time revise the Manual and the FRANCHISEE expressly
agrees to operate its City Looks business in accordance with all such revisions.
The FRANCHISEE will at all times keep the Manual current and up-
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to-date, and in the event of any dispute, the terms of the master copy of the
Manual maintained by CITY LOOKS will be controlling in all respects.
8.4 OTHER CONFIDENTIAL INFORMATION. The FRANCHISEE expressly acknowledges and
agrees that CITY LOOKS 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 City Looks 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 City Looks business. Any and all information, knowledge and
know-how including, without limitation, vendor and supplier lists, customer
lists, drawings, materials, equipment, technology, methods, procedures,
specifications, techniques, computer programs, systems and other data which CITY
LOOKS 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 of Exhibit A
attached hereto or other form satisfactory to CITY LOOKS, where the employees
agree to maintain the confidentiality during the course of their employment and
thereafter, of all information designated by CITY LOOKS as confidential. Copies
of all executed agreements will be submitted to CITY LOOKS upon request.
8.6 REMEDIES. The FRANCHISEE recognizes that the provisions contained in this
Article are necessary for the protection of CITY LOOKS and all of the
Franchisees who own City Looks 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 CITY LOOKS
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 CITY LOOKS under
common law, in equity, and pursuant to any federal and state statutes in an
action or lawsuit against the FRANCHISEE.
ARTICLE 9
CITY LOOKS' TERMINATION RIGHTS
9.1 GROUNDS FOR TERMINATION. In addition to the other rights of termination
contained in this Agreement, CITY LOOKS will have the right and privilege to
terminate this Agreement if: (A) the FRANCHISEE fails to open and commence
operations of its City Looks business within one hundred twenty (120) 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 any Continuing Fees, National Advertising Production Fees,
Advertising Fees, monetary obligations or other fees to CITY LOOKS; (C) the
FRANCHISEE fails to conform to the Business System, or is involved in any act or
conduct which materially impairs the goodwill associated with the Marks or the
Business System, the standards of uniformity and quality for the goods and
services or the policies and procedures promulgated by CITY LOOKS in connection
with the Business System; (D) the FRANCHISEE fails to timely pay any of its
uncontested obligations or liabilities due and owing to CITY LOOKS, 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
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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 City Looks 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 business or any felony;
or (K) the FRANCHISEE voluntarily or otherwise abandons, as defined herein, the
franchised business.
9.2 NOTICE OF BREACH. Except as provided in Article 9.5 and Article 9.6 of this
Agreement, CITY LOOKS 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 CITY LOOKS 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 CITY LOOKS 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 CITY LOOKS 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 CITY LOOKS 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 CITY LOOKS 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 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 CITY
LOOKS 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, CITY LOOKS may terminate this Agreement as provided for herein.
9.4 NOTICE OF TERMINATION. If CITY LOOKS 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 CITY LOOKS 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.
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9.5 GROUNDS FOR IMMEDIATE TERMINATION. CITY LOOKS 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 are convicted of, or pleads guilty or no
contest to a charge of violating any law relating to the franchised business, or
any felony; (B) the FRANCHISEE voluntarily or otherwise abandons, as defined
herein, the FRANCHISEE'S City Looks business; (C) the FRANCHISEE is involved in
any act or conduct which materially impairs the goodwill associated with CITY
LOOKS' 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 CITY
LOOKS; or (D) the FRANCHISEE fails or refuses to produce its books and financial
records for audit by CITY LOOKS in accordance with Article 19.4.
9.6 NOTICE OF IMMEDIATE TERMINATION. If this Agreement is terminated by CITY
LOOKS pursuant to Article 9.5 above, CITY LOOKS 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 CITY LOOKS 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 CITY LOOKS will be entitled to
seek recovery from the FRANCHISEE for all of the damages that CITY LOOKS 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,
National Advertising Production 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 CITY
LOOKS 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 herein, if: (A) CITY LOOKS violates any
material provision, term or condition of this Agreement; (B) CITY LOOKS fails to
timely pay any material obligations due and owing to the FRANCHISEE; or (C) CITY
LOOKS 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
CITY LOOKS 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 CITY LOOKS by the FRANCHISEE and CITY
LOOKS 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 CITY LOOKS 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
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Agreement. For the purposes of this Agreement, an alleged breach of this
Agreement by CITY LOOKS will be deemed to be "corrected" if both CITY LOOKS and
the FRANCHISEE agree in writing that the alleged breach or violation has been
corrected.
10.3 ARBITRATION. If CITY LOOKS gives notice of Arbitration, as provided for in
this Agreement, within thirty (30) days from the date CITY LOOKS 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 CITY LOOKS has breached this Agreement and CITY LOOKS fails to correct the
breach within the time limitation set forth herein. If the Arbitrator determines
that CITY LOOKS breached this Agreement as alleged by the FRANCHISEE in the
written notice given to CITY LOOKS, then CITY LOOKS 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 CITY LOOKS timely corrects
the specified breach of this Agreement, then this Agreement will remain in full
force and effect. If CITY LOOKS does not correct the specified breach of this
Agreement, then the FRANCHISEE will have the right to terminate this Agreement
by giving CITY LOOKS 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 CITY LOOKS. For the purposes of
this Agreement, any controversy or dispute on the issue of whether CITY LOOKS
has timely corrected the specified breach of this Agreement will also be subject
to Arbitration as provided herein. The time limitation set forth in this Article
within which CITY LOOKS 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 CITY LOOKS 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 CITY LOOKS 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 CITY LOOKS. If the FRANCHISEE fails to give
written notice to CITY LOOKS, 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 become 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 CITY LOOKS, then the alleged breach or violation will be
deemed to be condoned, approved and waived by the FRANCHISEE, and the alleged
breach or violation will not be deemed to be a breach or violation of this
Agreement by CITY LOOKS, and the FRANCHISEE will be barred from commencing any
legal or other action against CITY LOOKS for that alleged breach or violation.
10.5 INJUNCTIVE RELIEF AVAILABLE TO CITY LOOKS. Notwithstanding any of the
foregoing provisions, if the FRANCHISEE gives CITY LOOKS written notice of an
alleged breach or violation of this Agreement, or of any laws, that gives rise
to a claim to terminate this Agreement by the FRANCHISEE, then CITY LOOKS 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 CITY LOOKS 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 CITY LOOKS has breached this Agreement in the manner alleged by the
FRANCHISEE, and then only if CITY LOOKS fails to commence the actions necessary
to correct the breach or violation within thirty (30) days after a final
decision has been entered against CITY LOOKS and all time for appeals by CITY
LOOKS has expired. If CITY LOOKS commences any legal action against the
FRANCHISEE as contemplated by this provision, which will include actions for
injunctive
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relief against the FRANCHISEE to enjoin termination of this Agreement, then
unless applicable law provides to the contrary, CITY LOOKS will not be required
to post any bonds 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 days after
termination, pay all Continuing Fees, National Advertising Production Fees,
Advertising Fees, and other amounts due and owing to CITY LOOKS under this
Agreement or any other contract or obligation; (B) return to CITY LOOKS by first
class prepaid United States mail all Manuals, advertising materials and all
other printed materials pertaining to the FRANCHISEE'S City Looks 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 names "City
Looks(R)," "City Looks Salons International(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 City Looks Salons International 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 City Looks Salons International business. At a minimum,
such changes and modifications to the Franchised Location will include: (A)
re-painting 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 City Looks Salons International
businesses; (C) removing all exterior and interior City Looks Salons
International 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 City Looks Salons International businesses.
11.4 TRANSFER OF TELEPHONE DIRECTORY LISTINGS. Upon termination or expiration of
this Agreement, CITY LOOKS 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 City Looks business or otherwise placed
under the name "City Looks Salons International(R)" and to authorize the
telephone company and all listing agencies to transfer to CITY LOOKS or its
assignee all telephone numbers and directory listings for the FRANCHISEE'S City
Looks business. The FRANCHISEE acknowledges that CITY LOOKS has the absolute
right and interest in and to all telephone numbers and directory listings
associated with the Marks and the FRANCHISEE hereby authorizes CITY LOOKS to
direct the telephone company and all listing agencies to transfer all of the
FRANCHISEE'S telephone numbers and directory listings to CITY LOOKS 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 CITY LOOKS 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 City Looks
business to CITY LOOKS and will constitute a release of the telephone company
and listing agencies by
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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 CITY LOOKS pertaining to the
Business System of a City Looks Salons International 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 respect with the provisions of this Article. CITY LOOKS has
advised the FRANCHISEE that this provision is a material provision of this
Agreement, and that CITY LOOKS will not sell a City Looks Salons International
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 City Looks
Salons International 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
CITY LOOKS or by any other City Looks, Cost Cutters 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
City Looks Salons International or The Barbers businesses operated by CITY LOOKS
or CITY LOOKS' franchisees, except with the prior written consent of CITY LOOKS.
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 CITY LOOKS or by any other City Looks
Salons International, The Barbers,, Cost Cutters 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 City Looks
Salons International or The Barbers businesses conducted by CITY LOOKS or CITY
LOOKS' franchisees, which is located within six (6) miles of either the
Franchised Location or any other City Looks Salons International or The Barbers
businesses operated by CITY LOOKS or any of CITY LOOKS' franchisees, or which is
located within any exclusive area granted by CITY LOOKS or any affiliate or area
developer of CITY LOOKS 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 CITY LOOKS and CITY LOOKS' franchisees if this Agreement expires or is
terminated for any reason, and that this covenant not to compete is necessary to
permit CITY LOOKS the opportunity to resell and/or develop a new City Looks
business at or in the area near the Franchised Location.
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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 CITY LOOKS and CITY LOOKS'
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 CITY
LOOKS and CITY LOOKS' franchisees, protection of CITY LOOKS' trade secrets and
the integrity of CITY LOOKS' 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 CITY
LOOKS if there is a violation of this Article by the FRANCHISEE and that
injunctive relief against the FRANCHISEE is essential for the protection of CITY
LOOKS and CITY LOOKS' franchisees. The FRANCHISEE, the FRANCHISEE'S shareholders
and the Personal Guarantors agree therefore, that if CITY LOOKS alleges that the
FRANCHISEE, the FRANCHISEE'S shareholders or the Personal Guarantors have
breached or violated this Article, then CITY LOOKS will have the right to
petition 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 CITY LOOKS at law or in equity. Unless applicable law
provides to the contrary, CITY LOOKS will not be required to post a bond or
other security prior to obtaining injunctive relief pursuant to this Agreement
in any action where CITY LOOKS is seeking to enjoin the FRANCHISEE, the
FRANCHISEE'S shareholders or the Personal Guarantors from violating the
provisions of this Article. In cases where CITY LOOKS 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
CITY LOOKS' 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 City Looks business, (B) the Franchised Location,
(C) the building or premises lease for the Franchised Location, (D) the
furniture, fixtures, equipment, inventory, customer list or other assets used in
the FRANCHISEE'S City Looks 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 City
Looks business, to any party without first offering the same to CITY LOOKS 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 CITY LOOKS of the FRANCHISEE'S written offer specifying
the proposed price and terms of the proposed sale, CITY LOOKS 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 CITY
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LOOKS 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 CITY LOOKS and the FRANCHISEE agree in
writing that the negotiations have terminated, whichever comes earlier. If CITY
LOOKS 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 CITY LOOKS; 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 CITY
LOOKS 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 CITY LOOKS,
then the modified offer must be recommunicated or made to CITY LOOKS by the
FRANCHISEE. CITY LOOKS 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 City Looks 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 National Advertising Production Fees, the Advertising Fees and to
operate the business as a City Looks Salons International business, will in no
way be affected or changed because of CITY LOOKS' 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. CITY LOOKS' 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 CITY LOOKS 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 City Looks 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 CITY LOOKS 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 CITY LOOKS 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
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will first offer them to CITY LOOKS in writing under the same terms and
conditions as being offered to any third party. CITY LOOKS 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 CITY LOOKS, provided that each proposed
transferee shareholder who will be involved in the operations or management of
the City Looks business has successfully completed CITY LOOKS' training program
and has been certified by CITY LOOKS and is, in CITY LOOKS' reasonable judgment,
qualified from a managerial and financial standpoint to operate the City Looks
business in an economic and businesslike manner. The FRANCHISEE and the
FRANCHISEE'S shareholders must provide CITY LOOKS 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 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 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 City Looks Business System and the Marks, as well as CITY LOOKS'
reputation and image, and are for the protection of CITY LOOKS, the FRANCHISEE
and all other Franchisees who own and operate City Looks businesses. Any
assignment or transfer permitted by Article 13 will not be effective until CITY
LOOKS receives a completely executed copy of all transfer documents and CITY
LOOKS 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 CITY LOOKS TO PURCHASE BUSINESS ASSETS. If this Agreement expires
or is terminated by either CITY LOOKS 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 City Looks Salons International
business, then CITY LOOKS 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 CITY LOOKS for a standard City Looks
Salons International business and owned by the FRANCHISEE in its business (the
"Business Assets"). CITY LOOKS will not purchase any assets from the FRANCHISEE
that are not part of the standard City Looks Salons International business. The
FRANCHISEE must give CITY LOOKS 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 City Looks Salons International business, or after this Agreement expires
or is terminated by either party, or is wrongfully terminated by the FRANCHISEE.
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13.8 DETERMINATION OF FAIR MARKET VALUE. If the FRANCHISEE fails to give CITY
LOOKS written notice of the asking price of the Business Assets, or if CITY
LOOKS 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 name "City Looks(R)" or for going concern value
in determining the fair market value of the Business Assets since the right of
purchase granted to CITY LOOKS pursuant to this provision applies only after
this Agreement expires 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 CITY LOOKS 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). CITY LOOKS 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 CITY LOOKS from enforcing the terms and conditions of
this Agreement, including the covenants not to compete contained in Article 12.
ARTICLE 14
TRAINING PROGRAM; OPENING ASSISTANCE
14.1 TRAINING PROGRAM. CITY LOOKS will provide a training program for the
FRANCHISEE (and the FRANCHISEE'S District Manager if one is employed) in
Minneapolis, Minnesota (or such other location designated by CITY LOOKS) to
educate, familiarize and acquaint them with the operations of a City Looks
Salons International business. The training program will include classroom
instruction for not less than three (3) days on basic operating skills including
preparation of gross revenue reports, basic accounting procedures, inventory
control and other topics selected by CITY LOOKS. The FRANCHISEE and the 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 CITY LOOKS after the execution of this Agreement. The
training program will be scheduled by CITY LOOKS in its sole discretion. In the
event the FRANCHISEE or its Manager fails to successfully complete CITY LOOKS'
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 City Looks business and CITY LOOKS will have the right to
reject the FRANCHISEE pursuant to Article 4.2 of this Agreement.
14.2 HIRING OF NEW DISTRICT MANAGER. The FRANCHISEE will immediately notify CITY
LOOKS in writing of any personnel changes in the management positions of the
FRANCHISEE'S City Looks Salons International business. In the event the
FRANCHISEE hires a District Manager who has not successfully completed the
training program prescribed by CITY LOOKS, and if CITY LOOKS 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 City
Looks business, then CITY LOOKS will require the individual to successfully
complete the prescribed training program prior to the time he or she will be
allowed to manage or operate the FRANCHISEE'S City Looks business, and the
FRANCHISEE will be required to pay CITY LOOKS its then-current training fee for
each such person.
14.3 PAYMENT OF SALARIES AND EXPENSES DURING TRAINING. The FRANCHISEE will
provide and pay for the room and board for all persons attending the training
program on behalf of the FRANCHISEE. The FRANCHISEE will pay the salaries,
fringe benefits, payroll taxes,
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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 CITY LOOKS' training
program.
14.4 OPENING ASSISTANCE. After the FRANCHISEE and the FRANCHISEE'S District
Manager have successfully completed CITY LOOKS' training program, CITY LOOKS
will assist the FRANCHISEE in scheduling the initial opening of the FRANCHISEE'S
City Looks business. CITY LOOKS will furnish a representative for not less than
five (5) business days at the Franchised Location, who will provide opening
assistance which will include hairstylist training, daily managerial and
operational training and other areas selected by CITY LOOKS. The FRANCHISEE will
not open and commence initial business operations until CITY LOOKS has given the
FRANCHISEE written approval to open the FRANCHISEE'S City Looks business. The
FRANCHISEE will schedule the "Grand Opening" for its City Looks business within
two (2) weeks after the FRANCHISEE commences initial business operations.
ARTICLE 15
CITY LOOKS' OTHER OBLIGATIONS
15.1 ADDITIONAL ASSISTANCE. Consistent with CITY LOOKS' uniform requirements and
quality standards, CITY LOOKS 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 City Looks
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 CITY LOOKS deems necessary and render
written reports to the FRANCHISEE as deemed appropriate by CITY LOOKS; (D)
protect, police and, when appropriate, enforce the Marks and the Business System
for the benefit of all City Looks Salons International and The Barbers
franchisees; (E) render advisory services pertaining to customer service and the
operation of the FRANCHISEE'S City Looks business as frequently as CITY LOOKS
deems appropriate; (F) provide the FRANCHISEE with CITY LOOKS' standard
Operations Manual and all supplements and modifications to the Manual; and (G)
provide the FRANCHISEE with CITY LOOKS' approved standard store layouts and
plans for the Franchised Location.
15.2 ANNUAL CONVENTION. CITY LOOKS will, during the term of this Agreement,
conduct an annual convention for all City Looks franchisees at such times and at
such locations as CITY LOOKS deems appropriate. The FRANCHISEE will attend the
annual convention conducted by CITY LOOKS for City Looks 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 CITY LOOKS will be paid for by the FRANCHISEE. CITY LOOKS 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. CITY LOOKS may, during the term of this
Agreement, provide optional additional training and instruction to the
FRANCHISEE on topics determined by CITY LOOKS in its sole discretion. CITY LOOKS
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 CITY
LOOKS the then-current training fee charged by CITY LOOKS for any additional
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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
CITY LOOKS SALONS INTERNATIONAL SIGN
16.1 INSTALLATION OF SIGN. The FRANCHISEE will, at its expense, purchase the
standard City Looks Salons International 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 CITY LOOKS' standard Sign plans and specifications and
must be installed at the Franchised Location precisely in the place, location
and manner specified by CITY LOOKS in writing. CITY LOOKS 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 CITY LOOKS in writing. CITY LOOKS
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 CITY LOOKS, 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 CITY LOOKS'
redesigned Sign plans and specifications. The FRANCHISEE will not be required to
modify or replace the Sign more than once every three (3) years during the term
of this Agreement.
16.4 INJUNCTIVE RELIEF. The FRANCHISEE agrees that CITY LOOKS will be entitled
to petition a Court of competent jurisdiction for an order of injunctive relief
against the FRANCHISEE to require the FRANCHISEE, at the FRANCHISEE'S expense,
to: (A) exhibit the approved City Looks Salons International Sign 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, CITY LOOKS 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, CITY LOOKS, 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 City Looks
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, CITY LOOKS, 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
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vehicle used by the FRANCHISEE or any of its employees in connection with the
FRANCHISEE'S City Looks 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
machinery, 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, CITY LOOKS,
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 City Looks 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
City Looks 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 CITY LOOKS 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 CITY LOOKS.
17.8 CITY LOOKS' RIGHTS. All insurance policies procured and maintained by the
FRANCHISEE pursuant to this Article will name CITY LOOKS as an additional
insured, will contain endorsements by the insurance companies waiving all rights
of subrogation against CITY LOOKS, and will stipulate that CITY LOOKS 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, CITY LOOKS, and their respective officers, directors and
employees.
17.10 NO REPRESENTATIONS; RIGHT TO ADDITIONAL COVERAGE. CITY LOOKS 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.
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ARTICLE 18
INDEPENDENT CONTRACTORS; INDEMNIFICATION
18.1 INDEPENDENT CONTRACTORS. CITY LOOKS and the FRANCHISEE are each independent
contractors and, as a consequence, there is no employer-employee or
principal-agent relationship between CITY LOOKS 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 CITY LOOKS or
represent that their relationship is other than that of Franchisor and
Franchisee. Neither CITY LOOKS 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. CITY LOOKS will not be obligated to any person 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 City Looks business. The
FRANCHISEE will indemnify and hold CITY LOOKS harmless against all claims,
lawsuits, damages, obligations, liability, actions and judgments alleged or
obtained by any person or entity against CITY LOOKS arising out of, from, as a
result of, or in connection with the FRANCHISEE'S negligence, the operation of
the FRANCHISEE'S City Looks 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
CITY LOOKS or any affiliate of CITY LOOKS. Further, the FRANCHISEE will
indemnify and will reimburse CITY LOOKS for all such obligations and damages for
which CITY LOOKS is held liable and for all costs reasonably incurred by CITY
LOOKS 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. CITY LOOKS will have the absolute right to
defend any claim made against it that results from or arises out of the
FRANCHISEE'S City Looks business.
18.3 PAYMENT OF COSTS AND EXPENSES. The FRANCHISEE will pay all costs and
expenses, including actual attorneys' fees, incurred by CITY LOOKS 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 CITY LOOKS with a quarterly balance sheet and income statement,
and annual financial statements for the FRANCHISEE'S City Looks business which
will consist of a balance sheet, income statement, statement of cash flows and
explanatory footnotes. All financial statements provided to CITY LOOKS for the
FRANCHISEE'S City Looks business will be presented in the exact form and format
prescribed by CITY LOOKS in writing and will be categorized according to the
chart of accounts
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prescribed by CITY LOOKS. 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 financial statements will be prepared in
accordance with generally accepted accounting principles applied on a consistent
basis. The FRANCHISEE'S quarterly financial statements will be delivered to CITY
LOOKS 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 CITY LOOKS 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 City Looks
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
City Looks business using such forms as CITY LOOKS may prescribe in writing. The
weekly statement of Gross Revenues will accompany the FRANCHISEE'S weekly
Continuing Fees, National Advertising Production Fees, and Advertising Fees and
will be provided to CITY LOOKS on or before Thursday of each week for the
preceding week.
19.4 CITY LOOKS' AUDIT RIGHTS. Within three (3) days after having been given
written notice from CITY LOOKS, 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 City Looks business, ("books and financial records") available
to CITY LOOKS during all business hours for review and audit by CITY LOOKS 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 CITY
LOOKS for at least the preceding five (5) years. The FRANCHISEE will provide
CITY LOOKS 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 CITY LOOKS reveals any
deficiencies, then the FRANCHISEE will, within five (5) days after receipt of an
invoice from CITY LOOKS indicating the amounts owed, pay CITY LOOKS any
deficiency in Continuing Fees or other amounts owed to CITY LOOKS, together with
interest as provided for herein. If an audit by CITY LOOKS 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 month period, then
the FRANCHISEE will, in addition to paying any deficiency in Continuing Fees,
National Advertising Production Fees, Advertising Fees, costs of products
purchased from CITY LOOKS or other amounts due to CITY LOOKS, reimburse CITY
LOOKS for all costs and expenses (including salaries of CITY LOOKS' employees,
travel costs, room and board, and audit fees) that CITY LOOKS has incurred as a
result of the audit, including any fees paid to its accountants to conduct the
audit. The FRANCHISEE will reimburse CITY LOOKS for such costs and expenses
within ten (10) days of receipt of an invoice from CITY LOOKS 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 CITY LOOKS 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 CITY LOOKS.
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19.5 WAIVER BY FRANCHISEE. CITY LOOKS 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 CITY LOOKS in conjunction with such application; (B) most recent
financial information provided to CITY LOOKS; and (C) most recent annual
financial statements provided to CITY LOOKS. CITY LOOKS 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 purchases made by the FRANCHISEE. This Agreement will serve as
evidence of CITY LOOKS' 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 CITY LOOKS.
19.6 PAYMENT BY PRE-AUTHORIZED BANK TRANSFER. The FRANCHISEE will execute an
authorization for direct payment in the form attached hereto as Exhibit "B" and
will, from time to time during the term of this Agreement, execute such other
documents as CITY LOOKS 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 CITY LOOKS, and to charge to the account
of the FRANCHISEE, on Thursday of each week, the amount of the Continuing Fees,
National Advertising Production 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 FRANCHISEE'S authorizations will permit
CITY LOOKS 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, National Advertising Production Fees, Advertising Fees
and other sums then payable to CITY LOOKS 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 CITY LOOKS will have the right, in its sole
discretion, to estimate the amount of the Continuing Fees, National Advertising
Production Fees, Advertising Fees and other sums due and payable to CITY LOOKS,
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, National Advertising
Production Fees, Advertising Fees and other sums payable by the FRANCHISEE for
deposit in the account of CITY LOOKS.
ARTICLE 20
ASSIGNMENT
20.1 ASSIGNMENT BY CITY LOOKS. This Agreement may be unilaterally assigned and
transferred by CITY LOOKS without the FRANCHISEE'S approval or consent, and will
inure to the benefit of CITY LOOKS' successors and assigns. CITY LOOKS will
provide the FRANCHISEE with written notice of any such assignment or transfer,
and the assignee will be required to fulfill CITY LOOKS' obligations under this
Agreement.
20.2 ASSIGNMENT BY FRANCHISEE TO CORPORATION. If the FRANCHISEE is an individual
or partnership, this Agreement may be transferred or assigned by the FRANCHISEE,
without first offering it to CITY LOOKS 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
CITY LOOKS
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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
City Looks Salons International business. The FRANCHISEE will give CITY LOOKS
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 CITY LOOKS 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 CITY LOOKS, 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 CITY LOOKS 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 CITY LOOKS. CITY LOOKS 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 CITY
LOOKS 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 CITY LOOKS 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 CITY LOOKS assuming and
agreeing to discharge all of the FRANCHISEE'S obligations and covenants under
this Agreement; (E) The transferee Franchisee will have demonstrated to CITY
LOOKS' satisfaction that he, she or it meets CITY LOOKS' 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
CITY LOOKS' then-current standard Franchise Agreement for a term ending on the
expiration date of this Agreement and such other ancillary agreements as CITY
LOOKS 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, the National
Advertising Production Fees, and the Advertising Fees to CITY LOOKS 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; and (I)
The transferee Franchisee and its District Manager (if one is employed) must
successfully complete the training programs prescribed by CITY LOOKS; (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 programs, and will
pay to CITY LOOKS CITY LOOKS' then-current training fee for each person
attending CITY
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LOOKS' training program(s); (K) the FRANCHISEE has paid the transfer fee
required under Article 20.6; (L) 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 City Looks Salons
International business; and (M) if the transferee Franchisee does not meet CITY
LOOKS' net worth requirements for operation of the City Looks Salons
International Business, then the FRANCHISEE and/or its shareholders and the
Personal Guarantors will execute a written agreement in a form satisfactory to
CITY LOOKS agreeing to remain liable to CITY LOOKS for the obligations of the
City Looks Salons International 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 City Looks Business System and the Marks, as well as CITY LOOKS'
reputation and image, and are for the protection of CITY LOOKS, the FRANCHISEE
and all other franchisees who own and operate City Looks businesses. Any
assignment or transfer permitted by this Article 20 will not be effective until
CITY LOOKS receives a completely executed copy of all transfer documents and
CITY LOOKS consents to the transfer in writing, 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 CITY LOOKS a transfer fee of One Thousand
Dollars ($1,000). The transfer fee is to cover the costs incurred by CITY LOOKS
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.
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. CITY LOOKS has
strongly recommended that the FRANCHISEE should retain an experienced commercial
real estate broker or salesperson ("real estate broker") who has at least five
years experience in locating and/or leasing retail space to locate, acquire,
purchase or lease a site for the FRANCHISEE'S City Looks business. Accordingly,
no provision of this Agreement may be construed to impose any obligation or
responsibility on CITY LOOKS to locate or select a site for the Franchised
Location. The FRANCHISE will not lease, purchase or otherwise acquire a site for
the Franchised Location until the proposed site has been reviewed in writing by
CITY LOOKS to determine accessibility, visibility, potential traffic flows and
other demographic information. The review of the site conducted by CITY LOOKS
will not be deemed to be a warranty, representation or guaranty by CITY LOOKS
that if the FRANCHISEE'S City Looks business is opened and operated at that
site, it will be a financial success. CITY LOOKS 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 for the Franchised Location. Any
feasibility and demographics study required by CITY LOOKS will be completed by a
real estate expert mutually agreed upon by CITY LOOKS 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 CITY LOOKS 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) the
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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, CITY LOOKS 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 CITY LOOKS. Any unauthorized variance from the store layouts
and plans provided by CITY LOOKS will be a material breach of this Agreement.
Providing store layouts and plans does not constitute a representation, warranty
or guaranty by CITY LOOKS that the site will be a financially successful
location for the FRANCHISEE'S City Looks business, and the FRANCHISEE assumes
all business and economic risks associated with the operation of the City Looks
business at this site.
21.3 INCORRECT INFORMATION. In the event any of the information provided to CITY
LOOKS by the FRANCHISEE pursuant to this Article 21 is incorrect, inaccurate or
incomplete, then the FRANCHISEE will pay for all costs and expenses incurred by
CITY LOOKS in revising the store layouts and plans prepared by CITY LOOKS 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
CITY LOOKS and is in compliance with all applicable local, state and federal
laws, ordinances, statutes and building codes, including compliance with the
Americans with Disabilities Act. 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 CITY LOOKS' OPTION TO VIEW FRANCHISED LOCATION. CITY LOOKS 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. CITY LOOKS' viewing of the Franchised Location
during construction or remodeling will not be for the purpose of determining
that the Franchised Location are being constructed or remodeled in a workmanlike
manner or in compliance with any applicable laws or ordinances. Accordingly,
CITY LOOKS 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 CITY LOOKS' REVIEW OF LEASE. The lease for the Franchised Location (the
"Lease") will be submitted to CITY LOOKS by the FRANCHISEE for CITY LOOKS'
review prior to execution of the Lease by the FRANCHISEE. The Lease must, at a
minimum, be conditional upon CITY LOOKS' approval of the FRANCHISEE and give
CITY LOOKS 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 CITY LOOKS or the FRANCHISEE for any reason
prior to the expiration of the Lease. CITY LOOKS' 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, CITY LOOKS will have no
responsibility to the FRANCHISEE with regard to the economics, legality or
enforceability of the provisions of the Lease.
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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 CITY LOOKS as security for the FRANCHISEE'S
performance of the terms and conditions of this Agreement. If this Agreement is
terminated by either CITY LOOKS 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 City Looks business, or if this
Agreement expires and the FRANCHISEE does not reacquire the franchise (an "Event
of Default"), then CITY LOOKS 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 other
documents as may be reasonably required by CITY LOOKS' attorneys to perfect and
record CITY LOOKS' security interest in the Lease.
22.3 PERFECTED ASSIGNMENT; NOTICE. This assignment will constitute a perfected,
absolute and present assignment of the Lease; provided, however, CITY LOOKS 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, CITY
LOOKS 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 CITY
LOOKS is taking and assuming the Lease from the FRANCHISEE; (B) the date that
CITY LOOKS will take physical possession of the Franchised Location; and (C)
that CITY LOOKS agrees to be bound by the terms and conditions of the Lease
being assumed. CITY LOOKS 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 CITY LOOKS. 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 CITY
LOOKS' prior written consent.
22.5 ENFORCEMENT OF FRANCHISEE'S RIGHTS. The FRANCHISEE hereby irrevocably
constitutes and appoints CITY LOOKS 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 CITY
LOOKS, in the name of CITY LOOKS, with the same force and effect as the
FRANCHISEE could do if this assignment had not been made.
22.6 CITY LOOKS' RIGHTS AND REMEDIES. Upon taking physical possession of the
Franchised Location, CITY LOOKS 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, CITY LOOKS
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.
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22.7 PRORATION OF RENTS AND EXPENSES. At the time CITY LOOKS takes physical
possession of the Franchised Location, all charges, real estate taxes, utilities
and rentals will be prorated between CITY LOOKS and the FRANCHISEE. CITY LOOKS
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 CITY LOOKS AND FRANCHISEE. CITY LOOKS 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 CITY LOOKS 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 CITY
LOOKS takes physical possession of the Franchised Location. With the specific
and limited exception of rental payments and other obligations to the Landlord
arising from CITY LOOKS' use of the Franchised Location after taking physical
possession of the premises, the FRANCHISEE will indemnify and hold CITY LOOKS
harmless from and against any and all claims, demands, liabilities, losses,
lawsuits, judgments, costs and expenses, including attorneys' fees, to which
CITY LOOKS may become exposed, or which CITY LOOKS 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 "C" to this Agreement.
22.10 ASSIGNMENT BY CITY LOOKS. CITY LOOKS 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, CITY LOOKS 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 CITY LOOKS' 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 City Looks
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
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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 appropriate office of the American
Arbitration Association to initiate the procedures necessary to appoint an
Arbitrator. The Arbitrator will be appointed within sixty (60) days after a
written demand for Arbitration has been made in accordance with the Rules and
Regulation of the American Arbitration Association.
23.4 VENUE AND JURISDICTION. All Arbitration hearings will take place
exclusively in Minneapolis, Minnesota. CITY LOOKS 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 CITY LOOKS 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
CITY LOOKS or the FRANCHISEE or their officers, directors, shareholders or
partners and Personal Guarantors, and CITY LOOKS 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 CITY LOOKS 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 DISPUTES NOT SUBJECT TO ARBITRATION. The disputes and controversies between
CITY LOOKS and the FRANCHISEE which are set forth in Article 24.1 and the
following disputes and controversies between CITY LOOKS 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 by CITY LOOKS 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.
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23.7 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 CITY LOOKS 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
CITY LOOKS, 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.
23.8 DE NOVO HEARING ON THE MERITS. If the Arbitrator awards either CITY LOOKS
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 and findings
will be of no force and effect and will not be final or binding on either CITY
LOOKS or 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 CITY LOOKS and the FRANCHISEE.
23.9 CONFIDENTIALITY. All evidence, testimony, records, documents, findings,
decisions, judgments and awards pertaining to any Arbitration hearing between
CITY LOOKS and FRANCHISEE will be secret and confidential in all respects. CITY
LOOKS and FRANCHISEE will not disclose any evidence, testimony, records,
documents, findings, orders, or other matters from the Arbitration hearing to
any person or entity except as provided 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 23.6, CITY
LOOKS 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
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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 City Looks business or other City Looks Salons
International or The Barbers businesses, (3) constitutes a danger to the
employees, public or customers of the FRANCHISEE'S City Looks business, or (4)
may impair the goodwill associated with the Marks and the Business System. In
any action brought under this provision where CITY LOOKS prevails over the
FRANCHISEE, the FRANCHISEE will indemnify CITY LOOKS 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 CITY LOOKS.
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
CITY LOOKS 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. CITY LOOKS and the FRANCHISEE may, by written instrument signed by
CITY LOOKS and the FRANCHISEE, waive any obligation of or restriction upon the
other under this Agreement. Acceptance by CITY LOOKS of any payment by the
FRANCHISEE and the failure, refusal or neglect of CITY LOOKS 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
CITY LOOKS of any provision of this Agreement. CITY LOOKS 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, CITY LOOKS will have the right to
negotiate terms and conditions, grant concessions and waive obligations for
other franchisees of CITY LOOKS 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 CITY LOOKS of any of its obligations under this Agreement, any
other contract between CITY LOOKS and FRANCHISEE, or for any other reason,
withhold payment of any Continuing Fees, National Advertising Production Fees,
Advertising Fees or any other fees or payments due CITY LOOKS under this
Agreement or any other contract or obligation. The FRANCHISEE will not have the
right to "offset" or withhold any liquidated or unliquidated amounts allegedly
due to the FRANCHISEE from CITY LOOKS against the Continuing Fees, the National
Advertising Production Fees, the Advertising Fees or any other payments due to
CITY LOOKS under this Agreement or any other contract or obligation.
24.5 CITY LOOKS' RIGHTS CUMULATIVE. The rights of CITY LOOKS hereunder are
cumulative and no exercise or enforcement by CITY LOOKS of any right or remedy
hereunder will
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preclude the exercise or enforcement by CITY LOOKS of any other right or remedy
hereunder or which CITY LOOKS 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 City Looks 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 Agreement supersedes and terminates all prior
agreements relating to the operation of a City Looks 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 CITY LOOKS 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 City Looks 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 CITY LOOKS 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 CITY LOOKS respectively.
CITY LOOKS 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.
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24.12 EFFECT OF WRONGFUL TERMINATION. If either CITY LOOKS or the FRANCHISEE
takes any action to terminate this Agreement or to convert the FRANCHISEE'S City
Looks 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 CITY LOOKS will be in writing and will be made by personal
service upon an officer or Director of CITY LOOKS or sent by prepaid registered
or certified United States mail addressed to CITY LOOKS 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 City Looks Salons
International 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. CITY LOOKS 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 City Looks business,
except as may be expressly set forth in writing in CITY LOOKS' Uniform Franchise
Offering Circular, receipt of which is acknowledged by the FRANCHISEE.
26.2 NO INCOME OR REFUND WARRANTIES. The FRANCHISEE acknowledges that CITY LOOKS
does not warrant or guarantee to the FRANCHISEE that the FRANCHISEE will derive
income or profit from the FRANCHISEE'S City Looks business or that CITY LOOKS
will refund all or part of the Initial Fee or the price paid for the
FRANCHISEE'S City Looks business or repurchase any of the products, merchandise,
furniture, fixtures, equipment, supplies or chattels supplied by CITY LOOKS or
an approved supplier if the FRANCHISEE is unsatisfied with its City Looks
business.
26.3 TERMS OF OTHER FRANCHISES MAY DIFFER. The FRANCHISEE acknowledges that
other Franchisees of CITY LOOKS 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
F-41
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 copy of
CITY LOOKS' Uniform Franchise Offering Circular at least ten (10) business days
prior to the date on which this Agreement was executed.
26.5 HAIR PERFORMERS(R) BUSINESSES. The FRANCHISEE agrees and acknowledges that
the "Hair Performers(R)" businesses serviced by THE BARBERS are hair salons that
address similar markets and, thus, may be competitive with City Looks
businesses. Further, the FRANCHISEE acknowledges and agrees that THE BARBERS
will have the absolute right to develop, own, manage, license or franchise 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 THE BARBERS or any
affiliate of THE BARBERS resulting from the opening of any Hair Performers(R)
business, including those Hair Performers(R) businesses that may be near,
adjacent or contiguous to the FRANCHISEE'S City Looks Business.
26.6 COST CUTTERS(R), WE CARE HAIR(R) AND FAMILY HAIRCUT(R) BUSINESSES. The
FRANCHISEE agrees and acknowledges that the "Cost Cutters Family Hair Care(R)"
businesses which are franchised by THE BARBERS, 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 ("Cost Cutters(R), We
Care Hair(R) and Family Haircut(R) businesses") are hair salons that address
different markets and, thus, are not competitive with City Looks Salons
International 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 Cost Cutters(R), 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 THE BARBERS or any affiliate
of THE BARBERS resulting from the opening of any Cost Cutters(R), We Care
Hair(R) or Family Haircut(R) businesses, including those Cost Cutters(R), We
Care Hair(R) or Family Haircut(R) businesses that may be near, adjacent or
contiguous to the FRANCHISEE'S City Looks Business.
ARTICLE 27
DISCLAIMER; FRANCHISEE'S LEGAL COUNSEL
27.1 DISCLAIMER BY CITY LOOKS. CITY LOOKS 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 as may be expressly set forth in Item 19 of the
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 City Looks Salons
International business from CITY LOOKS or any of CITY LOOKS' 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 CITY LOOKS' Uniform Franchise
Offering Circular, it would not have executed this Agreement, and the FRANCHISEE
would have: (A) promptly notified the President of CITY LOOKS in writing of the
person or persons making such representations or warranties; and (B) provided to
CITY
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LOOKS 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 CITY LOOKS to
consult an attorney or other advisor prior to the execution of this Agreement to
review CITY LOOKS' Uniform Franchise Offering Circular, to review this Agreement
in detail, to review the economics, operations and other business aspects of the
City Looks Salons International 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 City Looks 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: ( )
-------------------------------------------------
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 CITY LOOKS 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 CITY LOOKS.
28.2 STATE MODIFICATIONS. The following states have statutes which may supersede
the provisions of this Agreement in the FRANCHISEE'S relationship with CITY
LOOKS 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 CITY LOOKS including the areas of termination and
renewal of the Franchise.
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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 CITY
LOOKS or its designated advertising agency.
29.3 BUSINESS SYSTEM. "Business System" will mean the distinctive services and
products which are associated with CITY LOOKS' 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 CITY LOOKS.
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 CITY LOOKS.
29.5 GROSS REVENUES. "Gross Revenues" will mean the gross total dollar income of
the FRANCHISEE'S City Looks 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 City
Looks 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.
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IN WITNESS WHEREOF, CITY LOOKS, the FRANCHISEE and the shareholders of the
FRANCHISEE have respectively signed this Agreement effective as of the day and
year first above written.
"CITY LOOKS"
In the Presence of: THE BARBERS, HAIRSTYLING FOR
MEN & WOMEN, INC.
- ----------------------------------- ----------------------------------------
By
-------------------------------------
Its
-----------------------------------
In the Presence of: "FRANCHISEE"
- ----------------------------------- ----------------------------------------
- ----------------------------------- ----------------------------------------
- ----------------------------------- ----------------------------------------
- ----------------------------------- ----------------------------------------
The undersigned shareholders or partners of the FRANCHISEE hereby agree to be
bound by the terms and conditions of this Agreement.
PERCENTAGE OF
In the Presence of: SHAREHOLDERS/PARTNERS 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
F-45
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 CITY LOOKS, 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 CITY LOOKS all monies due and
payable to CITY LOOKS 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 CITY LOOKS or any subsidiary or affiliate of CITY LOOKS,
whether for merchandise, products, supplies, furniture, fixtures, equipment,
rent or other goods purchased by the FRANCHISEE from CITY LOOKS or any
subsidiary or affiliate of CITY LOOKS, or for any other indebtedness of the
FRANCHISEE to CITY LOOKS or any subsidiary or affiliate of CITY LOOKS, 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 CITY LOOKS or any subsidiary or affiliate of CITY LOOKS.
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 CITY LOOKS. 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.
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PERSONAL GUARANTORS
- ------------------------------------- ---------------------------------------
INDIVIDUALLY INDIVIDUALLY
- ------------------------------------- ---------------------------------------
Print Name Print Name
- ------------------------------------- ---------------------------------------
Address Address
- ------------------------------------- ---------------------------------------
City State Zip Code City State Zip Code
- ------------------------------------- ---------------------------------------
Telephone Telephone
- ------------------------------------- ---------------------------------------
INDIVIDUALLY INDIVIDUALLY
- ------------------------------------- ---------------------------------------
Print Name Print Name
- ------------------------------------- ---------------------------------------
Address Address
- ------------------------------------- ---------------------------------------
City State Zip Code City State Zip Code
- ------------------------------------- ---------------------------------------
Telephone Telephone
- ------------------------------------- ---------------------------------------
INDIVIDUALLY INDIVIDUALLY
- ------------------------------------- ---------------------------------------
Print Name Print Name
- ------------------------------------- ---------------------------------------
Address Address
- ------------------------------------- ---------------------------------------
City State Zip Code City State Zip Code
- ------------------------------------- ---------------------------------------
Telephone Telephone
F-47
EXHIBIT A
CONFIDENTIALITY AGREEMENT
Effective this _____ day of _______________, 19___, in consideration of
employment with (the "Employer"), a franchisee of The Barbers, Hairstyling for
Men & Women, Inc. ("The Barbers"), it is 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, supplier and vendor lists, customer lists, videotapes, films,
drawings, diagrams and computer programs) created for or approved for use in the
operation of the City Looks Salons International business, and the information
contained therein, as secret and confidential and as the sole and absolute
property of The Barbers, and will use all reasonable means to keep them secret
and confidential. The Employee will not:
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 The Barbers.
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 City Looks Salons
International business will be borrowed or removed from the City Looks Salons
International location or business premises by the Employee without the express
written approval of the Employer. The Employee will not make any City Looks
materials available to any unauthorized person or entity, or allow them access
to the Manual or other materials.
Use any City Looks 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 City Looks Salons International 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 The Barbers is a
third-party beneficiary of the rights and obligations set forth in this
Agreement; (2) that The Barbers will suffer irreparable harm in the event of any
breach or violation of this Agreement; (3) that The Barbers 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 The Barbers 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 The Barbers.
The undersigned Employer and Employee understand and accept the obligations set
forth herein and agree to be bound by them.
EMPLOYER: EMPLOYEE:
- ------------------------------------- --------------------------------------
By
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Its Signature
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Print Name
F-48
EXHIBIT B
AUTHORIZATION FOR DIRECT PAYMENT
I hereby authorize The Barbers, Hairstyling for Men & Women, Inc. to
initiate DRAFTS, Electronic Funds Transfer (EFT) or Automated Clearing House
(ACH) transactions against my checking/savings account and I instruct the
financial institution named below to honor said transactions. This authorization
shall remain in force until revocation in writing is received by you.
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Name of Franchisee (please print)
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Cost Cutters store location & number*
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Signature of Franchisee
- ---------------------------
Date
- --------------------------------------------------------------------------------
Name of Financial Institution
- --------------------------------------------------------------------------------
Street Address
- --------------------------------------------------------------------------------
City/State/Zip Code
Account Number: Checking Savings
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STAPLE VOIDED CHECK HERE:
* Please submit one form per store. Make additional copies
of this form if necessary.
F-49
EXHIBIT C
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 The
Barbers, Hairstyling for Men & Women, Inc. (the Franchisor), pursuant to a
franchise agreement between the Franchisor and the Franchisee dated
_______________, 19___, (the Franchise Agreement), and as an inducement to the
Franchisor to enter into the Franchise Agreement with the Franchisee, agrees
with the Franchisor as follows:
In the event of default by the Franchisee under the Franchise
Agreement, the Franchisor 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 CITY LOOKS'
(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 the Franchisor
and first providing to the Franchisor 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 the Franchisor so elects to exercise its rights under the Assignment,
the Landlord agrees not to terminate the Premises Lease so long as the
Franchisor or its designee agrees, within thirty (30) days from the date the
Franchisor 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 the
Franchisor 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 the Franchisor 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: , "Landlord"
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By
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Its
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F-50